UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 2, 1999
Delaware 0-71735 06-1453896
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
15170 North Hayden Road, Suite One, Scottsdale, Arizona 85260
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(602) 627-0200
Item 5. Other Events.
On February 2, 1999, Coyote Sports, Inc. ("Coyote Sports") and Royal
Precision, Inc. ("Royal Precision") issued a joint press release announcing that
they had executed an Agreement and Plan of Merger dated as of January 31, 1999
among Royal Precision, Coyote Sports and RP Acquisition Corp. (the "Merger
Agreement") for the combination of the two companies unanimously approved by
their respective Boards of Directors and that shareholders representing 53% of
Royal's common stock and 69% of Coyote's common stock have agreed to vote their
shares in favor of the transaction pursuant to voting agreements entered into by
such parties (the "Voting Agreements").
Under the terms of the Merger Agreement, Royal Precision shareholders will
receive, in exchange for each share of Royal Precision common stock,
approximately 1.00 share of a new class of Coyote 6% Convertible Preferred Stock
with a per share liquidation preference of approximately $6.00. The new Coyote
Convertible Preferred Stock will be convertible on a share-for-share basis into
Coyote Sports common stock representing, in the aggregate, 50% of the Coyote
Sports common stock outstanding on the closing date of the transaction (after
giving effect to such conversion). The Convertible Preferred Stock will be
redeemable at Coyote Sports' option and carry with it a quarterly cumulative
dividend at an annual rate of 6% of the liquidation preference. Under the terms
of the Merger Agreement, the exchange ratio pursuant to which shares of Royal
Precision common stock will be converted into shares of Coyote Convertible
Preferred Stock and the liquidation preference of such Convertible Preferred
Stock will be adjusted at the closing date of the merger based on the ratio of
the number of shares of Coyote Sports common stock outstanding to the number of
shares of Royal Precision common stock outstanding. As of the date of the Merger
Agreement, Coyote Sports had approximately 5.68 million shares of common stock
outstanding and Royal Precision had approximately 5.67 million shares of common
stock outstanding.
Coyote Sports shareholders James M. Probst, Mel S. Stonebraker and Paragon
Coyote Texas, Ltd. have each entered into a Voting Agreement (each a "Coyote
Sports Voting Agreement") pursuant to which each such shareholder has agreed (x)
not to transfer or otherwise dispose of its shares of Coyote Sports capital
stock or any Coyote Sports stock acquired prior to the termination of the Merger
Agreement, (y) to vote such stock so as to approve an increase in the number of
authorized shares of Coyote Convertible Preferred Stock and the issuance of
Coyote Convertible Preferred Stock and to approve and adopt the Merger Agreement
and approve the Merger, and (z) to grant Raymond J. Minella and Tom Schneider a
proxy with respect to its shares of Coyote Sports capital stock to vote such
shares in accordance with its Coyote Sports Voting Agreement. Royal Precision
shareholders Lawrence Bain, Berenson Minella & Company, L.P., Ronald L.
Chalmers, Danny Edwards, David E. Johnston, Richard P. Johnston and Jayne A.
Johnston Charitable Remainder Trust #3 (Richard P. Johnston, Trustee) and
Kenneth J. Warren have each entered into a Voting Agreement (each a "Royal
Precision Voting Agreement") pursuant to which each such shareholder has agreed
(x) not to transfer or otherwise dispose of its shares of Royal Precision
capital stock or any Royal Precision stock acquired prior to the termination of
the Merger Agreement, (y) to vote such stock to approve and adopt the Merger
Agreement and approve the Merger, and (z) to grant James M. Probst and John P.
McNeil a proxy with respect to its shares of Royal Precision capital stock to
vote such shares in accordance with its Royal Precision Voting Agreement. Each
of the Voting Agreements terminates upon the earlier to occur of the effective
date and time of the Merger and the termination of the Merger Agreement in
accordance with its terms.
In connection with entering into the Merger Agreement, Royal Precision and
certain of its shareholders entered into an amendment to Royal Precision's
existing stockholder agreement, Amendment No. 1 ("Amendment No. 1") to the
Stockholder Agreement, dated as of May 12, 1997 (the "Stockholder Agreement"),
among Danny Edwards, Drew M. Brown, DMB Property Ventures Limited Partnership,
Mark N. Sklar, Bennett Dorrance, Trustee of the Bennett Dorrance Trust dated
April 21, 1989, as amended, Christopher A. Johnston, Richard P. Johnston and
Jayne A. Johnston Charitable Remainder Trust #3 (Richard P. Johnston, Trustee)
as successor to RPJ/JAJ Partners, Ltd., David E. Johnston, Berenson Minella &
Company, L.P., Kenneth J. Warren and Royal Precision. Pursuant to Amendment No.
1, Mr. Christopher A. Johnston ceased to be a party to the Stockholder Agreement
and certain other amendments were entered into to permit the entry into voting
agreements by certain Royal Precision shareholders.
Completion of the transaction is still subject to required approvals of
shareholders of both companies, the receipt of financing commitments sufficient
to refinance the existing indebtedness of both companies, registration of the
shares of Coyote Sports' preferred stock issuable in the transaction under the
securities laws, and other customary closing conditions. The transaction is
anticipated to close in the second quarter of 1999.
A copy of the text of the joint press release is attached as Exhibit 99.1
and is incorporated herein by reference. A copy of the Merger Agreement is
attached as Exhibit 99.2 and is incorporated herein by reference. A copy of the
Form of Certificate of Designation of the Series C Preferred Stock is attached
as Exhibit 99.3 and is incorporated herein by reference. A copy of Amendment No.
1 is attached as Exhibit 99.4 and is incorporated herein by reference. A copy of
the Form of Coyote Sports Voting Agreement is attached as Exhibit 99.5 and is
incorporated herein by reference. A copy of the Form of Royal Precision Voting
Agreement is attached as Exhibit 99.6 and is incorporated herein by reference.
The foregoing description is qualified in its entirety by reference to such
exhibits.
Royal Precision believes that certain statements it has made herein
constitute "forward looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward looking statements
involve numerous assumptions, known and unknown risks, uncertainties and other
factors which may cause actual and future performance or achievements of Royal
Precision, including with respect to the proposed combination, to be materially
different from any future results, performance or achievements expressed or
implied by such forward looking statements. Such factors include, among other
things, the following: achieving sales levels to fulfill revenue expectations;
the absence of presently unexpected costs or charges, certain of which may be
outside the control of Royal Precision; uncertainties involved in integrating
the operations of Coyote Sports and Royal Precision; general economic and
business conditions; and industry competition. Additional factors are detailed
in Royal Precision's public filings with the Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits
(a) None.
(b) None.
(c) Exhibits.
99.1 Text of press release issued by Coyote Sports, Inc. and Royal
Precision, Inc. on February 2, 1999
99.2 Agreement and Plan of Merger dated as of January 31, 1999 among
Royal Precision, Inc., Coyote Sports, Inc. and RP Acquisition
Corp.
99.3 Form of Certificate of Designation of the Series C Preferred
Stock
<PAGE>
99.4 Amendment No. 1 to the Stockholder Agreement, dated as of May 12,
1997, among Danny Edwards, Drew M. Brown, DMB Property Ventures
Limited Partnership, Mark N. Sklar, Bennett Dorrance, Trustee of
the Bennett Dorrance Trust dated April 21, 1989, as amended,
Christopher A. Johnston, Richard P. Johnston and Jayne A.
Johnston Charitable Remainder Trust #3 (Richard P. Johnston,
Trustee), as successor to RPJ/JAJ Partners, Ltd., a Wyoming
partnership, David E. Johnston, Berenson Minella & Company, L.P.,
Kenneth J. Warren and Royal Precision
99.5 Form of Coyote Sports Voting Agreement
99.6 Form of Royal Precision Voting Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROYAL PRECISION, INC.
Dated: February 3, 1999 By: /s/ Raymond J. Minella
--------------------------------
Name: Raymond J. Minella
Title: Chairman
<PAGE>
EXHIBIT INDEX
Exhibit 99.1 Text of joint press release issued by Coyote Sports, Inc. and
Royal Precision, Inc. on February 2, 1999
Exhibit 99.2 Agreement and Plan of Merger dated as of January 31, 1999 among
Royal Precision, Inc., Coyote Sports, Inc. and RP Acquisition
Corp.
Exhibit 99.3 Form of Certificate of Designation of the Series C Preferred
Stock
Exhibit 99.4 Amendment No. 1 to the Stockholder Agreement, dated as of May 12,
1997, among Danny Edwards, Drew M. Brown, DMB Property Ventures
Limited Partnership, Mark N. Sklar, Bennett Dorrance, Trustee of
the Bennett Dorrance Trust dated April 21, 1989, as amended,
Christopher A. Johnston, Richard P. Johnston and Jayne A.
Johnston Charitable Remainder Trust #3 (Richard P. Johnston,
Trustee), as successor to RPJ/JAJ Partners, Ltd., a Wyoming
partnership, David E. Johnston, Berenson Minella & Company, L.P.,
Kenneth J. Warren and Royal Precision
Exhibit 99.5 Form of Coyote Sports Voting Agreement
Exhibit 99.6 Form of Royal Precision Voting Agreement
FOR IMMEDIATE RELEASE Contact Information:
Coyote Sports, Inc.
James M. Probst
(303) 932-8794
Royal Precision, Inc.
Raymond J. Minella
(602) 627-0200
Coyote Sports and Royal Precision Execute Definitive Agreement to
Create the Golf Industry's Second Largest Golf Shaft Manufacturer
Boulder, Colorado and Scottsdale, Arizona
February 2, 1999
Coyote Sports, Inc. (NASDAQ: COYT) and Royal Precision, Inc. (NASDAQ: RIFL)
jointly announced that they have executed a definitive merger agreement for the
combination of the two companies unanimously approved by their respective Boards
of Directors and that shareholders representing 53% of Royal's common stock and
69% of Coyote's common stock have agreed to vote their shares in favor of the
transaction. With combined annual sales of approximately $65 million in 1998,
the transaction joins two global leaders in the design and manufacture of steel
and graphite golf shafts.
As previously announced, under the terms of the transaction, Royal
Precision shareholders will receive, in exchange for each share of Royal
Precision common stock, approximately 1.00 share of a new class of Coyote 6%
Convertible Preferred Stock with a per share liquidation preference of
approximately $6.00. The new Coyote Convertible Preferred Stock will be
convertible on a share-for-share basis into Coyote Sports common stock
representing, in the aggregate, 50% of the Coyote Sports common stock
outstanding on the closing date of the transaction (after giving effect to such
conversion). The Convertible Preferred Stock will be redeemable at Coyote
Sports' option and carry with it a quarterly cumulative dividend at an annual
rate of 6% of the liquidation preference. Under the terms of the merger
agreement, the exchange ratio pursuant to which shares of Royal Precision common
stock will be converted into shares of Coyote Convertible Preferred Stock and
the liquidation preference of such Convertible Preferred Stock will be adjusted
at the closing date of the merger based on the ratio of the number of shares of
Coyote Sports common stock outstanding to the number of shares of Royal
Precision common stock outstanding. As of the date of the merger agreement,
Coyote Sports had approximately 5.68 million shares of common stock outstanding
and Royal Precision had approximately 5.67 million shares of common stock
outstanding.
James M. Probst, President and Chief Executive Officer of Coyote Sports,
said: "The combination of Coyote Sports and Royal Precision creates a unique
platform in the golf shaft equipment market. I am excited about the strategic
benefits of the combination to both our customers and shareholders. With this
combination, we will be capable of supplying complete lines of steel shafts,
graphite shafts, and golf grips to both the pro grade and commercial grade
markets. Additionally, the combined company will have the resources to better
provide our customers with innovative, state-of-the-art shafts which will
enhance all of our customers' product offerings."
Raymond J. Minella, Chairman of Royal Precision, added: "Combining Royal
Precision with Coyote Sports is a historic opportunity for both of us. Together,
we expect the combination of our two companies will result in a financially
stronger company with leadership positions in the steel and composite shaft
markets. We will continue to offer our customers a full range of high quality
golf shaft products, including our flagship Rifle(TM) family of steel shafts,
building on the combined company's strong brand equity and long-standing
customer relationships with virtually every major golf club manufacturer. In
addition, we expect there to be significant synergies between our two
businesses, which we believe will create value for our customers and
shareholders."
Completion of the transaction is still subject to required approvals of
shareholders of both companies, the receipt of financing commitments sufficient
to refinance the existing indebtedness of both companies, registration of the
shares of Coyote Sports' preferred stock issuable in the transaction under the
securities laws, and other customary closing conditions. The transaction is
anticipated to close in the second quarter of 1999.
Lehman Brothers, Inc. acted as financial advisor and provided a fairness
opinion to the Board of Directors of Coyote Sports. Berenson Minella & Company
acted as financial advisor and NatCity Investments, Inc. provided a fairness
opinion to the Board of Directors of Royal Precision.
Coyote Sports, Inc. is a diversified sports manufacturing company that
specializes in golf shafts (APOLLO(R) and Unifiber(R)), cycling (Reynolds(R)
premium cycle tubing), and the manufacture of advanced compositE materials used
for sporting goods products.
Royal Precision, Inc. is the designer and manufacturer of the high-quality
and innovative Rifle(TM) golf club shaft, featuring the company's Frequency
Coefficient Matching(R) technology (FCM), designed to providE consistent flex
characteristics to all clubs in a golfer's bag. Royal Precision is also the
designer and distributor of Royal Grip(R) golf club grips, offering a wide
variety of standard and custom models, all of which feature a distinctive feel,
appearance and durability; and the manufacturer and distributor of the
high-quality Roxxi(R) athletic headwear product line.
Certain statements contained herein constitute "forward looking" statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements involve numerous assumptions, known and unknown
risks, uncertainties and other factors which may cause actual and future
performance or achievements of Coyote Sports or Royal Precision, including with
respect to the proposed combination, to be materially different from any future
results, performance or achievements expressed or implied by such forward
looking statements. Such factors include, among other things, the following:
achieving sales levels to fulfill revenue expectations; the absence of presently
unexpected costs or charges, certain of which may be outside the control of
Coyote Sports and Royal Precision; uncertainties involved in integrating the
operations of Coyote Sports and Royal Precision; general economic and business
conditions; and industry competition. Additional factors are detailed in Coyote
Sports' and Royal Precision's public filings with the Securities and Exchange
Commission. Coyote Sports and Royal Precision disclaim any responsibility to
update any forward-looking statement provided in this press release.
This release is neither an offer to sell nor a solicitation of an offer to
buy securities of Coyote Sports, Inc. or Royal Precision, Inc., nor a
solicitation of a proxy from any holder of securities of Coyote Sports, Inc. or
Royal Precision, Inc. Any such offer or solicitation will only be made in
compliance with applicable securities laws.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of
February 2, 1999 among ROYAL PRECISION, INC., a Delaware corporation ("RP"),
COYOTE SPORTS, INC., a Nevada corporation ("CSI") and RP ACQUISITION CORP., a
Delaware corporation and a wholly owned subsidiary of CSI ("Merger Sub"),
evidences that, for and in consideration of the mutual covenants set forth
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
RECITALS
A. The Boards of Directors of CSI and Merger Sub and the Board of
Directors of and RP have approved the merger of Merger Sub into RP upon the
terms and subject to the conditions set forth herein (the "Merger") and have
determined that the Merger is advisable, fair to, and in the best interests of,
their respective shareholders.
B. For U.S. federal income tax purposes, it is intended that the Merger
shall qualify as a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
C. Concurrently herewith, certain holders of voting stock of RP and
CSI, respectively, have entered into agreements ("Shareholder Agreements")
pursuant to which they agree to vote such stock beneficially owned by them in
favor of the transactions contemplated by this Agreement.
ARTICLE 1. THE TRANSACTION.
1.1. THE MERGER. Upon the terms and subject to the conditions hereof,
on the Effective Date (as defined in Section 1.2), Merger Sub shall be merged
with and into RP which shall be the surviving corporation in the Merger (the
"Surviving Corporation"), the separate existence of Merger Sub shall thereupon
cease, and the name of the Surviving Corporation shall by virtue of the Merger
remain "Royal Precision, Inc."
1.2. EFFECTIVE DATE OF THE MERGER. The Merger shall become effective
when a properly executed Certificate of Merger is duly filed with the Secretary
of State of the State of Delaware, which filing shall be made concurrently with
the closing of the transaction contemplated by this Agreement in accordance with
Section 1.12. When used in this Agreement, the term "Effective Date" shall mean
the date and time at which such Certificate of Merger is so filed or at such
time thereafter as is provided in such Certificate of Merger.
1.3. TAX-FREE REORGANIZATION. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of the
Code. In this regard, CSI represents that it presently intends, and that at the
Effective Date it will intend, to continue RP's historic business or use a
significant portion of RP's business assets in a business.
1.4. CONVERSION OF SECURITIES.
1.4.1. As of the Effective Date, by virtue of the Merger and
without any action on the part of any holder of any shares of RP's
Common Stock, $.001 par value ("RP Shares" or "RP Common Stock"):
(a) All shares of RP Common Stock which are held by
RP or any Subsidiary (as defined in Section 8.13) of RP shall
be canceled.
(b) Subject to Section 1.7, each remaining
outstanding share of RP Common Stock shall be converted into
that number of fully paid and nonassessable shares of the
Convertible Preferred Stock, $.001 par value, of CSI ("CSI
Preferred Stock"), having the rights and preferences set forth
in Exhibit 1.4.1 hereto, determined by dividing (i) the number
of shares of CSI's Common Stock, par value $.001 per share
("CSI Common Stock"), actually issued and outstanding as of
the Effective Date by (ii) the number of shares of RP Common
Stock actually issued and outstanding as of the Effective
Date, carried to four decimal places (the "Exchange Ratio").
(c) Each issued and outstanding share of Common
Stock, without par value, of Merger Sub ("Merger Sub Common
Stock") shall be converted into and become one fully paid and
nonassessable share of Common Stock, $.001 par value, of the
Surviving Corporation.
1.5. TERMS OF EXCHANGE. The manner of exchanging RP Common Stock for
CSI Preferred Stock in the Merger shall be as follows:
1.5.1. On the Effective Date, CSI shall make available to such
United States federally or state chartered commercial bank or trust
company having net capital of not less than $100,000,000 (or a
subsidiary thereof) as may be selected as exchange agent by CSI (the
"Exchange Agent"), for the benefit of each holder of RP Common Stock, a
sufficient number of certificates representing CSI Preferred Stock to
effect the delivery of CSI Preferred Stock required to be issued
pursuant to Section 1.4. CSI shall enter into an agreement (the
"Exchange Agent Agreement") with the Exchange Agent pursuant to which
the Exchange Agent shall be obligated to provide the services set forth
in Section 1.5.2.
1.5.2. The Exchange Agent Agreement shall provide that promptly
after the Effective Date, the Exchange Agent shall mail to each holder
of record (as shown on the books of RP's transfer agent as of the
Effective Date) of a certificate or certificates which immediately
prior to the Effective Date represented outstanding shares of RP
Common Stock (individually, a "Certificate" and collectively, the
"Certificates") (a) a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (b) instructions for use in
effecting the surrender of the Certificates for exchange. Upon
surrender of Certificates for cancellation to the Exchange Agent,
together with such letter of transmittal duly executed and any other
required documents, the holder of such Certificates shall be entitled
to receive for each of the shares of RP Common Stock represented by
such Certificates the number of shares of CSI Preferred Stock into
which such shares of RP Common Stock are converted in the Merger and
the Certificates so surrendered shall forthwith be canceled. Until so
surrendered, Certificates shall represent solely the right to receive
the number of shares of CSI Preferred Stock into which such shares of
RP Common Stock are converted in the Merger and any cash in lieu of
fractional shares of CSI Preferred Stock as contemplated by Section
1.7 with respect to each of the shares of RP Common Stock represented
thereby. The Exchange Agent shall not be entitled to vote or exercise
any rights of ownership with respect to the CSI Preferred Stock held
by it from time to time hereunder, except that it shall receive and
hold all dividends or other distributions paid or distributed with
respect to such CSI Preferred Stock for the account of the persons
entitled thereto.
1.5.3. Certificates surrendered for exchange by any Affiliate
(as defined in Section 5.9.1) shall not be exchanged for certificates
representing shares of CSI Preferred Stock until CSI has received the
written agreements from such Affiliate as provided in Section 5.9.2.
1.6. DIVIDENDS; TRANSFER TAXES. No dividends or other distributions
that are declared or made on CSI Preferred Stock will be paid to persons
entitled to receive certificates representing CSI Preferred Stock pursuant to
this Agreement until such persons surrender their Certificates representing RP
Common Stock. Upon such surrender, there shall be paid to the person in whose
name the certificates representing such CSI Preferred Stock shall be issued any
dividends or other distributions which shall have become payable with respect to
such CSI Preferred Stock in respect of a record date after the Effective Date.
In no event shall the person entitled to receive such dividends be entitled to
receive interest on such dividends. If any cash in lieu of fractional shares or
any certificate representing CSI Preferred Stock is to be paid to or issued in a
name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates for
such CSI Preferred Stock in a name other than that of the registered holder of
the Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto shall be liable
to a holder of shares of RP Common Stock for any shares of CSI Preferred Stock
or dividends thereon properly delivered to a public official pursuant to any
applicable escheat laws.
1.7. NO FRACTIONAL SHARES. No certificates or scrip representing less
than one share of CSI Preferred Stock shall be issued upon the surrender for
exchange of Certificates representing RP Common Stock pursuant to Section 1.5.2.
In lieu of any such fractional share, each holder of RP Common Stock who would
otherwise have been entitled to a fraction of a share of CSI Preferred Stock
upon surrender of Certificates for exchange pursuant to Section 1.5.2 shall be
paid upon such surrender cash (without interest) in an amount equal to (x) such
fractional interest multiplied by (y) the product of $6.00 multiplied by the
reciprocal of the Exchange Ratio. As soon as practicable after the determination
of the amount of cash to be paid to former stockholders of RP in lieu of any
fractional interests, CSI shall make available to the Exchange Agent, which
shall in turn make available in accordance with this Agreement, such amounts to
such former stockholders.
1.8. STOCK OPTIONS.
1.8.1. Each option or warrant to purchase RP Common Stock
issued pursuant to the Royal Precision, Inc. Stock Option Plan and the
FM Precision Golf Corp. 1997 Stock Option Plan, or otherwise which is
(a) set forth in the RP Disclosure Schedule (as hereinafter defined),
and (b) outstanding as of the Effective Date (individually, an "RP
Option" and, collectively, the "RP Options") shall be assumed by CSI
and converted into an option or warrant (or a substitute option shall
be granted) to purchase the number of shares of CSI Common Stock
(rounded to the nearest whole share) equal to the number of shares of
CSI Preferred Stock into which the number of shares of RP Common Stock
subject to such RP Option would have been converted pursuant to the
Merger (that is, the number of shares of RP Common Stock subject to
such RP Option multiplied by the Exchange Ratio), at an exercise price
per share of CSI Preferred Stock (rounded to the nearest penny) equal
to the former exercise price per share of RP Common Stock under the RP
Option immediately prior to the Effective Date multiplied by the
reciprocal of the Exchange Ratio; provided, however, that in the case
of any RP Option to which Section 421 of the Code applies by reason of
its qualification under Section 422 of the Code, the conversion formula
shall be adjusted, if necessary, to comply with Section 424(a) of the
Code and the regulations issued thereunder. Except as otherwise
provided in the applicable plan or agreement granting the RP Options,
the duration, vesting and other terms of each new option to purchase
shares of CSI Common Stock shall be the same as the original RP Option
except that all references in the option agreement to RP shall be
deemed to be references to CSI. CSI and RP agree to take such action as
may be necessary to effectuate the foregoing provisions.
1.8.2. As soon as practicable after the Effective Date, CSI
shall deliver to each holder of an option to purchase CSI Common Stock
a notice that accurately reflects the changes to such option
contemplated by this Section 1.8.
1.9. STOCKHOLDER APPROVAL. Each of RP and CSI shall take all action
reasonably necessary, in accordance with applicable law and their respective
certificate or articles of incorporation and by-laws, to convene a special
meeting of the holders of RP Common Stock (the "RP Meeting") and a special
meeting of the holders of CSI Common Stock (the "CSI Meeting") as promptly as
practicable for the purpose of considering and taking action upon this
Agreement. Subject to Section 5.1, the Board of Directors of RP will recommend
that holders of RP Common Stock vote to approve the Merger and to adopt this
Agreement at the RP Meeting and the Board of Directors of CSI will recommend
that holders of CSI Common Stock vote to approve an increase in the number of
authorized shares of the CSI Preferred Stock and the issuance of CSI Preferred
Stock pursuant to the Merger at the CSI Meeting.
1.10. CLOSING OF RP'S TRANSFER BOOKS. At the Effective Date, the stock
transfer books of RP shall be closed and no transfer of shares of RP Common
Stock shall be made thereafter. In the event that, after the Effective Date,
Certificates are presented to the Surviving Corporation, they shall be canceled
and exchanged for CSI Preferred Stock and/or cash as provided in Sections 1.4,
1.5, 1.6 and 1.7.
1.11. ASSISTANCE IN CONSUMMATION OF THE MERGER. Each of CSI, Merger Sub
and RP shall provide all reasonable assistance to, and shall cooperate with,
each other to bring about the consummation of the Merger as soon as practicable
in accordance with the terms and conditions of this Agreement. CSI shall cause
Merger Sub to perform all of its obligations in connection with this Agreement.
1.12. CLOSING. The closing of the transaction contemplated by this
Agreement shall take place (a) at the offices of Kramer Levin Naftalis & Frankel
LLP, New York, New York at 10:00 A.M. local time on the day which is not more
than one business day after the day on which the last of the conditions set
forth in Article 6 (other than those requiring an exchange of a certificate,
opinion or other document, or the taking of other action, at the closing) is
fulfilled or waived or (b) at such other time and place as CSI and RP shall
agree in writing.
1.13. ILLUSTRATIVE COMPUTATION. For the avoidance of doubt, if the
Exchange Ratio for purposes of Section 1.4.1(b) were to be determined on the
basis of the number of shares of CSI Common Stock and RP Common Stock stated to
be outstanding in Sections 3.4 and 4.4 hereof, the Exchange Ratio would be
1.0018 (that is, 5,677,692 divided by 5,667,375) and the reciprocal of the
Exchange Ratio would be .9982.
ARTICLE 2. SURVIVING CORPORATION.
2.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
RP as of the Effective Date shall be the Certificate of Incorporation of the
Surviving Corporation until duly amended by the stockholder of the Surviving
Corporation subsequent to the Effective Date.
2.2. BY-LAWS. The By-Laws of Merger Sub as in effect immediately prior
to the Effective Date shall be the By-Laws of the Surviving Corporation, and
thereafter may be amended in accordance with their terms and as provided by law.
2.3. OFFICERS; BOARD OF DIRECTORS.
2.3.1. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the
Surviving Corporation until their successors have been duly elected or
appointed or until their earlier death, resignation or removal, in
accordance with the Surviving Corporation's Certificate of
Incorporation and ByLaws.
2.3.2. The officers of RP at the Effective Time and such other
persons as may be designated by CSI shall, from and after the Effective
Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed or until their earlier
death, resignation or removal, in accordance with the Surviving
Corporation's Certificate of Incorporation and By-Laws.
2.4. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the Delaware General Corporation Law ("DGCL").
ARTICLE 3. REPRESENTATIONS OF CSI. CSI hereby represents and warrants to RP
that:
3.1. CSI DISCLOSURE SCHEDULE
3.1.1. The CSI Disclosure Schedule sets forth all of the
information concerning CSI, its Subsidiaries and the CSI Shares
required in this Article 3. To the extent any statement in this Article
3 is untrue, the CSI Disclosure Schedule sets forth the statements
necessary to make the statements in this Article 3 true. All
information and statements set forth in the CSI Disclosure Schedule
shall be deemed to supersede and correct the statements made in this
Article 3 and to be additional representations and warranties of CSI.
The CSI Disclosure Schedule sets forth all of the information and
statements required in numbered sections bearing the number of the
Section of this Agreement calling for such information and in the order
of such numbers in this Agreement.
3.1.2. CSI has delivered to RP complete and accurate copies of
(a) any written contract or other document referred to in the CSI
Disclosure Schedule or herein and (b) the CSI Reports referred to in
Section 3.7 of this Agreement.
3.2. EXISTENCE AND GOOD STANDING OF CSI. CSI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has all requisite corporate power and corporate authority to own,
lease and operate its properties and to carry on its business as now being
conducted. CSI is duly qualified or licensed as a foreign corporation to do
business, and is in good standing in each jurisdiction in which the character or
location of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so duly qualified or licensed would not reasonably be expected to
have a material adverse effect on the consolidated business, financial condition
or results of operations of CSI and its Subsidiaries (a "CSI Material Adverse
Effect"). Each of CSI's Subsidiaries is a corporation or limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its incorporation or formation, has the corporate or other power
and corporate or other authority to own its properties and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such qualification, except
for jurisdictions in which such failure to be so licensed or qualified or to be
in good standing would not reasonably be expected to have, individually or in
the aggregate, a CSI Material Adverse Effect. Neither CSI nor any of its
Subsidiaries is in violation of any order of any court, governmental authority
or arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which CSI or any CSI Subsidiary or any of their respective
properties or assets is subject, except where such violation would not have,
individually or in the aggregate, a CSI Material Adverse Effect. CSI and its
Subsidiaries have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental regulations in
connection with their business as now conducted, where the failure to obtain any
such items or to take any such action would reasonably be expected to have a CSI
Material Adverse Effect. The copies of the certificate or articles of
incorporation and By-Laws of CSI, Merger Sub and each other CSI Subsidiary
previously delivered to RP are true and correct. Neither CSI nor any of the CSI
Subsidiaries is in violation of any of the provisions of their restated articles
of incorporation or By-Laws.
3.3. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. Each of CSI and
Merger Sub has the requisite corporate power and corporate authority to execute
and deliver this Agreement and all agreements and documents contemplated hereby
and consummate the transactions contemplated hereby and thereby. Subject only to
the approval of the amendment of CSI's articles of incorporation and the
issuance of the CSI Preferred Stock pursuant to this Agreement and the
transaction contemplated hereby by the holders of a majority of the outstanding
CSI Shares, the consummation by CSI of the transaction contemplated hereby has
been duly authorized by all requisite corporate action. This Agreement
constitutes, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of CSI, enforceable in accordance with their
respective terms subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
3.4. CAPITAL STOCK. CSI has an authorized capitalization consisting of
25,000,000 shares of Common Stock, par value $.001 per share, of which 5,677,692
shares are issued and outstanding, and 4,000,000 shares of preferred stock, par
value $.001 per share, of which 75,000 shares are issued and outstanding. On or
immediately prior to the Effective Date, CSI will have authorized capitalization
as set forth in Exhibit 3.4.1 (including the CSI Preferred Stock to be issued
pursuant to the Merger). Except as set forth in the CSI Disclosure Schedule, CSI
has no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of CSI on any matter.
All such outstanding shares have been and will be duly authorized and validly
issued and are and will be fully paid and non-assessable. Except as set forth in
the CSI Disclosure Schedule, there are, and at the Effective Date, there will be
no outstanding subscriptions, options, warrants, rights, calls, commitments,
conversion rights, convertible securities, rights of exchange, plans or other
agreements providing for the purchase, issuance or sale of any shares of the
capital stock of CSI by or to CSI, other than as contemplated by this Agreement.
3.5. SUBSIDIARIES. Except as set forth in the CSI Disclosure Schedule,
CSI owns each of the outstanding shares of capital stock of each of CSI's
Subsidiaries. Each of the outstanding shares of capital stock of each of CSI's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and except as set forth in the CSI Disclosure Schedule, is owned by CSI free and
clear of all liens, pledges, security interests, claims or other encumbrances.
The CSI Disclosure Schedule sets forth with respect to each CSI Subsidiary (a)
its name and jurisdiction of incorporation, (b) its authorized capital stock,
and (c) the number of issued and outstanding shares of capital stock. Except for
interests in the CSI Subsidiaries, neither CSI nor any CSI Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, limited liability company,
business, trust or entity.
3.6. NO VIOLATIONS. The execution and delivery of this Agreement by
CSI and the consummation of the transaction contemplated hereby (a) will not
violate any provision of the articles of incorporation or by-laws of CSI or its
Subsidiaries, (b) will not violate or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of CSI or its Subsidiaries under, or result
in being declared void, voidable, or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any material license, franchise, permit, lease, contract, agreement or
other instrument, commitment or obligation to which CSI or any of its
Subsidiaries is a party, or by which CSI or any of its Subsidiaries or any of
their properties is bound or affected, except for any of the foregoing matters
which would not reasonably be expected to have, individually or in the
aggregate, a CSI Material Adverse Effect; (c) will not violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to CSI or any of
its Subsidiaries or any of their respective properties or assets (assuming
completion of the Regulatory Filings as defined in (d) below), except for
violations which would not reasonably be expected to have, individually or in
the aggregate, a CSI Material Adverse Effect, or (d) other than the filings
provided for in Section 1, filings under the Securities Exchange Act of 1934
(the "Exchange Act"), the Securities Act of 1933, as amended (the "Securities
Act") or applicable state securities and "Blue Sky" laws or filings in
connection with the maintenance of qualification to do business in other
jurisdictions (collectively, the "Regulatory Filings"), will not require any
material consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which would reasonably be expected to have,
individually or in the aggregate, a CSI Material Adverse Effect.
3.7. SEC DOCUMENTS.
3.7.1. CSI has furnished RP with each registration statement,
Quarterly Report on Form 10-QSB, Report on Form 8-KSB, report, proxy
statement or information statement, including all exhibits thereto,
prepared by CSI since September 18, 1997, including, without
limitation, (a) its Annual Report on Form 10-KSB for its fiscal year
ended December 31, 1997 (the "CSI Balance Sheet Date") which includes
the consolidated balance sheets of CSI and its Subsidiaries (the "CSI
Balance Sheet") as of such date (the "CSI Balance Sheet Date") and
CSI's Quarterly Reports on Form 10- QSB, and Reports on Form 8-K filed
since the filing of such Annual Report and (b) its proxy statement for
its annual meeting of Stockholders held on May 9, 1998, each of (a)
and (b) in the form (including exhibits and any amendments thereto)
filed with the Securities and Exchange Commission (the "SEC") and the
items in (a) and (b), the "CSI Reports." As of their respective dates,
the CSI Reports (including, without limitation, any financial
statement or schedules included or incorporated by reference therein)
(i) were prepared in all material respects in accordance with the
applicable requirements of the Exchange Act, and the respective rules
and regulations thereunder, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading. The 1996 and 1997 consolidated financial statements of CSI
included in or incorporated by reference into the CSI Reports
(including the related notes and schedules) present fairly, in all
material respects the consolidated financial position of CSI and its
Subsidiaries as of December 31, 1997 and 1996 and the consolidated
results of their operations and their cash flows for such fiscal
periods, in conformity with generally accepted accounting principles
("GAAP"), consistently applied during the periods involved. Except as
and to the extent set forth on the CSI Balance Sheet, including all
notes thereto, or as set forth in the CSI Reports or the CSI
Disclosure Schedule, neither CSI nor any of its Subsidiaries has any
material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) whether or not required to be
reflected on, or reserved against in, a consolidated balance sheet of
CSI, prepared in accordance with GAAP, consistently applied, except
liabilities arising in the ordinary course of business since such date
which would not reasonably be expected to have, individually or in the
aggregate, a CSI Material Adverse Effect.
3.8. LITIGATION. There is no action, suit or proceeding pending
against CSI or the CSI Subsidiaries, or, to the knowledge of CSI, overtly
threatened against CSI or its Subsidiaries or any of their respective properties
or assets, at law or in equity, or before or by any federal or state commission,
board, bureau, agency or instrumentality which would reasonably be expected to
have, individually or in the aggregate, a CSI Material Adverse Effect, or would
prevent or delay the consummation of the transaction contemplated by this
Agreement. Neither CSI nor any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably foreseen,
individually or in the aggregate, in the future would have a CSI Material
Adverse Effect or would prevent or delay the consummation of the transaction
contemplated hereby.
3.9. ABSENCE OF CERTAIN CHANGES. Since the CSI Balance Sheet Date,
each of CSI and its Subsidiaries has conducted its business only in the ordinary
course of such business and there has not been (a) any event or changes with
respect to CSI and its Subsidiaries (other than events or changes in general
economic conditions or developments affecting the industry generally) having,
individually or in the aggregate, a CSI Material Adverse Effect, (b) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock, (c) any material change in its accounting
principles, practices or methods, (d) any amendments or changes in the Amended
and Restated Articles of Incorporation or By-Laws of CSI, (e) any material
revaluation by CSI of any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business, (f) any sale of a material amount of property of CSI or its
Subsidiaries, except in the ordinary course of business, or (g) any increase in
the compensation or benefits or establishment of any bonus, insurance, severance
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of CSI or
any of the CSI Subsidiaries except in the ordinary course of business consistent
with past practice or except as required by applicable law.
3.10. TAX MATTERS.
Except as set forth in the CSI Disclosure Schedule:
3.10.1. For purposes of this Agreement "Taxes" shall mean all
taxes, assessments, charges, duties, fees, levies or other governmental
charges, including, without limitation, all federal, state, local,
foreign and other income, franchise, profits, capital gains, capital
stock, transfer, sales, use, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental
charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring the filing of a Return), and
all estimated taxes, deficiency assessments, additions to tax,
penalties and interest and shall include any liability for such amounts
as a result either of being a member of a combined, consolidated,
unitary or affiliated group or of a contractual obligation to indemnify
any person or other entity.
3.10.2. Each of CSI and its Subsidiaries has timely filed or
caused to be timely filed all returns, statements, forms, declarations
and reports for Taxes ("Returns") which are required to be filed by, or
with respect to, any of them on or prior to the Effective Date (taking
into account all applicable extensions). The Returns have accurately
reflected and will accurately reflect all liability for Taxes of CSI
and its Subsidiaries for the periods covered thereby.
3.10.3. All Taxes and Tax liabilities of CSI and its
Subsidiaries for all taxable years or periods that end on or before the
Effective Date and, with respect to any taxable year or period
beginning before and ending after the Effective Date, the portion of
such taxable year or period ending on and including the Effective Date,
have been timely paid or will be timely paid in full on or prior to the
Effective Date or accrued and adequately disclosed and fully provided
for on the books and records of CSI in accordance with GAAP.
3.10.4. Complete and accurate copies of all CSI federal, state
and local income tax returns have been made available to RP.
3.10.5. Neither CSI nor any of its Subsidiaries has been the
subject of an audit or other examination of Taxes by the tax
authorities of any nation, state or locality nor has CSI or any of its
Subsidiaries received any notices from any taxing authority relating to
any issue which could affect the Tax liability of CSI or any of its
Subsidiaries. Neither CSI nor any of its Subsidiaries, as of the
Effective Date, (A) has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of CSI or
any of its Subsidiaries or (B) is presently contesting the Tax
liability of CSI or any of its Subsidiaries before any court, tribunal
or agency. Neither CSI nor any of its Subsidiaries has granted a
power-of-attorney relating to Tax matters to any person. All final
adjustments made by the Internal Revenue Service ("IRS") with respect
to any federal tax return of CSI or its Subsidiaries have been reported
for state and local income tax purposes to the relevant state or local
taxing authorities.
3.10.6. Neither CSI nor any of its Subsidiaries has been
included in any "consolidated," "unitary" or "combined" Return provided
for under the law of the United States, any foreign jurisdiction or any
state or locality with respect to Taxes for any taxable period for
which the statute of limitations has not expired (other than a Return
with respect to which CSI was the common parent).
3.10.7. All Taxes which CSI or any of its Subsidiaries is (or
was) required by law to withhold or collect have been duly withheld or
collected and have been timely paid over to the proper authorities to
the extent due and payable.
3.10.8. There are no Tax sharing, allocation, indemnification
or similar agreements in effect as between CSI or any predecessor or
affiliate thereof and any other party under which CSI or any of its
Subsidiaries could be liable for any Taxes or other claims of any party
other than of CSI and its Subsidiaries.
3.10.9. No requests for ruling or determination letters
relating to federal, state or local income taxes paid or payable by CSI
or any of its Subsidiaries are pending with any taxing authority.
3.10.10. (a) Neither CSI nor any CSI Subsidiary has agreed to
or is required to make any adjustment pursuant to Section 481 of the
Code or the corresponding tax laws of any nation, state or locality by
reason of a change in accounting method initiated by CSI or its
Subsidiaries or required by law, (b) CSI has no knowledge that the IRS
or any other taxing authority has proposed or purported to require any
such adjustment or change in accounting method and (c) CSI has no
knowledge or belief that any such adjustment under Section 481 of the
Code or the corresponding tax laws of any nation, state or locality
will be required of CSI or its Subsidiaries upon the completion of, or
by reason of, the transaction contemplated by this Agreement.
3.10.11. (a) There are no deferred intercompany transactions
between CSI and any of its Subsidiaries or between its Subsidiaries
which will or may result in the recognition of income upon the
consummation of the transaction contemplated by this Agreement, and (b)
there are no other transactions or facts existing with respect to CSI
and/or its Subsidiaries which by reason of the consummation of the
transaction contemplated by this Agreement will result in CSI and/or
its Subsidiaries recognizing income.
3.10.12. There are no Tax liens on any of the assets or
property of CSI or its Subsidiaries.
3.10.13. There are no contracts, agreements or plans entered
into by CSI or its Subsidiaries covering any person that individually
or collectively would require CSI or any of its Subsidiaries to make
any payments of any amount which would not be deductible by reason of
the provisions of Section 162(m) or Section 280G of the Code.
3.10.14. Neither CSI nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f) of the Code) owned
by it.
3.11. CERTAIN EMPLOYEE PLANS.
3.11.1. (a) "Benefit Plan" means any "employee benefit plan"
as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), any fringe benefit plan, any equity
compensation plan or arrangement (including without limitation, stock
option, restricted stock and stock purchase plans), any plan, policy or
arrangement for the provision of executive compensation, incentive
benefits, bonuses or severance benefits, any employment contract,
collective bargaining agreement, deferred compensation agreement, Code
section 125 cafeteria plan or split dollar arrangement, any
participation or similar agreement with a multi-employer pension fund,
or any other plan, policy, arrangement or scheme for the provision or
funding of employee benefits with respect to which an CSI or RP
Controlled Group Member in the past or present, directly or indirectly
maintained or maintains, sponsored or sponsors, or had or has any
liability or obligation.
(b) "CSI Controlled Group Member" means CSI and each other
person or entity required to be aggregated with CSI under Code section
414(b), (c), (m) or (o).
(c) "RP Controlled Group Member" means RP and each other
person or entity required to be aggregated with RP under Code section
414(b), (c), (m) or (o).
3.11.2. Each Benefit Plan maintained by any CSI Controlled
Group Member (the "CSI Benefit Plans") complies with, and has been
administered in accordance with, in all material respects, all
applicable requirements of law, except for instances of non-compliance
that would not reasonably be expected to have caused, individually or
in the aggregate, a CSI Material Adverse Effect. The CSI Benefit Plans
are listed in the CSI Disclosure Schedule and copies or descriptions of
all material Plans have previously been provided to RP.
3.11.3. With respect to each CSI Benefit Plan intended to
qualify under section 401(a) of the Code, (a) a favorable determination
letter has been issued by or an application is pending with the IRS
with respect to the qualification of each CSI Benefit Plan, and (b) no
"reportable event" or "prohibited transaction" (as such terms are
defined in ERISA and the Code) or termination has occurred under
circumstances which present a risk of material liability by any CSI
Controlled Group Member to any governmental entity or other person,
including an CSI Benefit Plan. Each CSI Benefit Plan which is subject
to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code
has been maintained in compliance with the minimum funding standards of
ERISA and the Code and no such CSI Benefit Plan has incurred any
"accumulated funding deficiency" (as defined in Section 412 of the Code
and Section 302 of ERISA), whether or not waived. No CSI Controlled
Group Member directly or indirectly contributes to, has an obligation
to contribute to or has, or could be reasonably expected to have,
liability with respect to, and has not directly or indirectly
maintained, sponsored, contributed to or had an obligation to
contribute to at any time within the 10 year period ending on the date
of the Closing, any employee benefit plan which is a multi-employer
plan subject to the requirements of Subtitle E of Title IV of ERISA.
3.11.4. Except as required by Code section 4980B or 162 or
Part 6 of Subtitle B of Title I of ERISA, no CSI Controlled Group
Member provides any health, welfare or life insurance benefits to any
of its former or retired employees, which benefits would be material
either individually or in the aggregate to CSI.
3.12. LABOR MATTERS.
3.12.1. Except as set forth in the CSI Disclosure Schedule,
neither CSI nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to
the knowledge of CSI, overtly threatened against CSI or its
Subsidiaries relating to their business, except for any such proceeding
which would not reasonably be expected to have, individually or in the
aggregate, a CSI Material Adverse Effect. To the knowledge of CSI,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or overtly threatened
involving employees of CSI or any of its Subsidiaries.
3.12.2. CSI has delivered to RP copies of all employment
agreements, consulting agreements, severance agreements, bonus and
incentive plans, profit-sharing plans and other material agreements,
plans or arrangements with respect to compensation of the employees of
CSI and its Subsidiaries (the "CSI Compensation Arrangements"). The
Merger will not accelerate or otherwise give rise to payments pursuant
to the CSI Compensation Arrangements.
3.13. ENVIRONMENTAL LAWS AND REGULATIONS.
3.13.1. CSI and each of its Subsidiaries is in compliance in
all material respects with all applicable federal, state and local laws
and regulations of the United States and national and local laws and
regulations of the United Kingdom relating to pollution, hazardous
substances, or protection of human health or the environment
(collectively, "Environmental Laws") which compliance includes, but is
not limited to, the possession by CSI and its Subsidiaries of all
material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and
conditions thereof. Neither CSI nor any of its Subsidiaries has
received written notice of, or, to the knowledge of CSI, is the subject
of, any action, cause of action, claim, investigation, demand or
notice, including without limitation, non-compliance orders, warning
letters, or notices of violation, by any person or entity alleging
liability under or non-compliance with any Environmental Law (an "CSI
Environmental Claim"), nor to the knowledge of CSI is there any basis
for any CSI Environmental Claim that would reasonably be expected to
have, individually or in the aggregate, a CSI Material Adverse Effect.
To the knowledge of CSI there are no circumstances that are reasonably
likely to prevent or interfere with such material compliance or give
rise to such liability in the future.
3.13.2. There are no CSI Environmental Claims, which would
reasonably be expected to have, individually or in the aggregate, a CSI
Material Adverse Effect, that are pending or, to the knowledge of CSI,
overtly threatened against CSI or any of its Subsidiaries or, to the
knowledge of CSI, against any person or entity whose liability for any
CSI Environmental Claim CSI or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law.
3.13.3. Neither CSI nor any CSI Subsidiary (a) has handled or
discharged, nor has it allowed or arranged for any third party to
handle or discharge, any hazardous substances to, at or upon: (i) any
location other than a site lawfully permitted to receive such hazardous
substances, (ii) any parcel of real property owned or leased by CSI or
any CSI Subsidiary, except in compliance with applicable Environmental
Laws; (iii) any site which, pursuant to CERCLA or any similar state law
or law of the U.K. (x) has been placed on the National Priorities List
or its state or U.K. equivalent, or (y) the Environmental Protection
Agency or any equivalent agency in the U.K. or the relevant state
agency has notified CSI that it has proposed or is proposing to place
on the National Priorities List or its state equivalent or equivalent
in the U.K.; or (b) has any knowledge that there has occurred or is
presently occurring a discharge, or threatened discharge, of any
hazardous substance on, into or beneath the surface of, or adjacent to,
any real property owned or leased by CSI or any CSI Subsidiary.
3.13.4. The CSI Disclosure Schedule identifies (a) all
environmental audits, assessments, or occupational health studies
undertaken by CSI or its agents on its behalf, or, to the knowledge of
CSI, undertaken by any governmental authority, or any third party,
relating to or affecting any real property owned or leased by CSI or
any CSI Subsidiary; (b) the results of any ground, water, soil, air or
asbestos monitoring undertaken by CSI or its agents on its behalf, or,
to the knowledge of CSI, undertaken by any governmental authority or
any third party, relating to or affecting any real property owned or
leased by CSI or any CSI Subsidiary; (c) all material written
communications between CSI and any governmental authority arising under
or related to Environmental Laws; and (d) all outstanding citations
issued under OSHA, or similar state or local statutes, laws,
ordinances, codes, rules, regulations, orders, rulings or decrees
relating to or affecting any real property owned or leased by CSI or
any CSI Subsidiary.
3.14. REAL PROPERTY.
3.14.1. CSI has delivered to RP either copies or fair and
accurate summaries (the "CSI Property Documents") of each of its
leases, subleases, deeds, material licenses or other material
agreements or instruments (and any amendments thereto) under which CSI
or any of its Subsidiaries owns, uses or occupies or has the right to
use or occupy, now or in the future, any real property (the "CSI Real
Estate Agreements"). Each CSI Real Estate Agreement is valid, binding
and in full force and effect, all rent and other sums and charges
payable by CSI and its Subsidiaries as tenants thereunder are current,
no termination event or condition or uncured default of a material
nature on the part of CSI or any such Subsidiary or, to the knowledge
of CSI, as to a landlord, exists under any CSI Real Estate Agreement,
except for any of the foregoing matters which would not reasonably be
expected to have, individually or in the aggregate, a CSI Material
Adverse Effect. The information contained in the CSI Property Documents
is true and correct in all material respects.
3.14.2. Except for any of the following matters which would
not reasonably be expected to have, individually or in the aggregate, a
CSI Material Adverse Effect:
(a) CSI has not granted, and to the best of CSI's
knowledge, no other person has granted, any leases, subleases,
licenses or other agreements granting to any person other than
CSI any right to possession, use, occupancy or enjoyment of
the property covered by the CSI Real Estate Agreements, or any
portion thereof, and
(b) CSI is not obligated under any option, right of
first refusal or any contractual right to purchase, acquire,
sell or dispose of any real property covered by the CSI Real
Estate Agreements.
3.14.3. None of the CSI Real Estate Agreements contains
continuous operating covenants, radius restrictions or provisions
requiring the consent of the landlord to the Merger or the assumption
of CSI's obligations under the CSI Real Estate Agreements in the manner
contemplated by this Agreement, except for any of the foregoing matters
which would not reasonably be expected to have, individually or in the
aggregate, a CSI Material Adverse Effect.
3.15. LIMITATION ON BUSINESS CONDUCT. Neither CSI nor any of the CSI
Subsidiaries is a party to, or has any obligation under, any contract or
agreement, written or oral, which contains any covenants currently or
prospectively limiting in any material respect the freedom of CSI or any of the
CSI Subsidiaries to engage in any line of business or to compete with any entity
or which would prohibit the business of RP, CSI or any of their respective
Subsidiaries from being conducted in substantially the same manner as it was
conducted prior to the Merger.
3.16. TITLE TO PROPERTY. Each of CSI and each of the CSI Subsidiaries
owns the material properties and assets that it purports to own free and clear
of all liens, security interests, charges or encumbrances, except for any liens,
security interests, charges or encumbrances which arise in the ordinary course
of business (including mechanics' liens and other similar statutory liens) and
do not materially impair CSI's or any CSI Subsidiary's ownership or use of any
such properties or assets, or liens for taxes not yet due. The rights,
properties and assets presently owned, leased or licensed by CSI include all
rights, properties and assets necessary to permit CSI and the CSI Subsidiaries
to conduct their business in all material respects in the same manner as their
businesses have been conducted prior to the date hereof.
3.17. INSURANCE. CSI and its Subsidiaries maintain with respect to
their operations and their assets, in full force and effect, policies of
insurance in the ordinary course of business as is usual and customary for
businesses similarly situated to CSI. CSI has provided RP copies of all
insurance policies so maintained and all claims associated with its operations
and the operations of its Subsidiaries for the past 18 months.
3.18. INTELLECTUAL PROPERTY. Every material trade secret (including
know-how, inventions, designs and processes), patent, patent right, trademark,
trademark right, logo, service mark, trade name or copyright, or application
thereof, and licenses and rights with respect to the foregoing, used in
connection with the business of CSI and its Subsidiaries (the "CSI Intellectual
Property"), is protected by CSI in a manner which, under the circumstances, is
prudent and commercially reasonable, and owned by CSI or its Subsidiaries free
and clear of any liens, encumbrances, claims or restrictions whatsoever which
would have a CSI Material Adverse Effect, direct or indirect. There are no valid
grounds for any bona fide claims (i) to the effect that the business of CSI or
any of the CSI Subsidiaries infringes on any copyright, patent, trademark,
service mark or trade secret; (ii) against the use by CSI or any of the CSI
Subsidiaries, of any patents, patent rights, trademarks, trademark rights,
logos, trade names, service marks, trade secrets, copyrights, technology,
know-how or computer software programs and applications used in the business of
CSI or any of the CSI Subsidiaries as currently conducted or as proposed to be
conducted; (iii) challenging the ownership, validity or effectiveness of any of
the patents, patent rights, registered and material unregistered trademarks,
logos and service marks, registered copyrights, trade names and any applications
therefor owned by CSI or any of the CSI Subsidiaries or other trade secret
material to CSI or any of the CSI Subsidiaries; or (iv) challenging the license
or legally enforceable right to use of any third-party patents, patent rights,
trademarks, trademark rights, logos, service marks, trade names and copyrights
by CSI or any of the CSI Subsidiaries, except, in each case, for claims that, if
determined adversely to CSI, would not reasonably be expected to have,
individually or in the aggregate, a CSI Material Adverse Effect. Neither CSI nor
any of its Subsidiaries has granted to any other person the right to use the CSI
Intellectual Property, or any part thereof. CSI is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner of, licensor of, or other claimant to, any patent, patent rights,
trademark, trademark rights, logo, service mark, trade name, trade name rights,
copyright or other intangible assets, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
3.19. CERTAIN CONTRACTS. CSI has delivered copies of each contract to
which CSI or any of its Subsidiaries is a party (i) calling for payments in
excess of $100,000 in the case of any contract or series of related contracts or
(ii) otherwise material to CSI or any of its Subsidiaries, or by which any of
their respective properties or assets are bound. CSI and its Subsidiaries, and
to CSI's knowledge the other parties thereto, are in compliance in all material
respects with all material terms of such contracts.
3.20. NO BROKERS. Neither CSI nor any CSI Subsidiary has entered into
any contract, arrangement or understanding with any person or firm which may
result in the obligation of CSI or RP or Merger Sub to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transaction
contemplated hereby, except that CSI has retained Lehman Brothers as its
financial advisor and to render a fairness opinion as set forth herein. The
arrangements with Lehman Brothers have been disclosed in writing to RP prior to
the date hereof.
3.21. CONFLICTS OF INTEREST. No officer, or director, or, to the
knowledge of CSI, no significant shareholder, employee or consultant of CSI or
any CSI Subsidiary, or any affiliate of such person has any direct or indirect
interest (except a passive investment in less than 5% of the publicly traded
stock of a public company) (a) in any corporation, partnership, proprietorship,
association, or other person or entity which does business with CSI or any CSI
Subsidiary, (b) in any property, asset or right which is used by CSI or any CSI
Subsidiary in the conduct of its business, or (c) in any contract to which CSI
is a party or by which CSI or any CSI Subsidiary may be bound nor are any
amounts owing to any such person by, or due to any such person from, CSI or any
CSI Subsidiary.
3.22. PERSONAL PROPERTY. CSI owns all of its material personal
property, including, without limitation, the material personal property
reflected in the CSI Balance Sheet, except for personal property disposed of in
the ordinary course of business since the CSI Balance Sheet Date, subject to no
mortgage, pledge, lien, charge, security interest, encumbrance or restriction,
except those which are shown and described in the CSI Balance Sheet or the notes
thereto. All personal properties purported to be leased by CSI are subject to
valid and effective leases.
3.23. TAKEOVER STATUTE. The Board of Directors of CSI has taken all
appropriate action so that no former shareholder of RP will be an "interested
stockholder" of CSI subject to Sections 78.438 and 78.439 of the Nevada General
Corporation Law (the "NGCL") by virtue of the transactions contemplated by this
Agreement.
3.24. DISCLOSURE. Neither CSI nor any CSI Subsidiary has knowingly
withheld from RP any material facts relating to CSI's and any CSI Subsidiary's
assets, business, operations, financial conditions, or prospects. No
representation or warranty in this Agreement contains any untrue statement of a
material fact.
3.25. STATUS AS REORGANIZATION.
3.25.1. CSI has no plan or intent to:
(a) Liquidate RP;
(b) Merge RP with or into another corporation;
(c) Sell or otherwise dispose of the stock of RP
except for transfers of stock to corporations "controlled"
(within the meaning of Section 368(c) of the Code) by CSI;
(d) Reacquire any of its stock issued in connection
with the Merger;
(e) Cause RP to issue additional shares of stock of
RP that would result in CSI losing "control" (within the
meaning of Section 368(c) of the Code) of RP;
(f) Cause RP to sell or otherwise dispose of any of
its assets or any assets of Merger Sub acquired in the Merger
except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C) of the
Code or described in Treasury Regulation Section
1.368-2(k)(2); or
(g) Take any other action that might otherwise cause
the Merger not to be treated as a reorganization within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
3.25.2. Except as provided in this Agreement, each of CSI and
its stockholders will pay their respective expenses, if any, incurred
in connection with the Merger.
3.25.3. There is no intercorporate indebtedness existing
between CSI and RP, or between Merger Sub and RP, that was issued,
acquired or will be settled at a discount.
3.25.4. CSI and any of the major stockholders of CSI do not
own, nor have they owned during the past five years, any shares of
stock of RP.
3.25.5. Neither CSI nor Merger Sub is an "investment
company" (within the meaning of Sections 368(a)(2)(F)(iii) and (iv) of
the Code);
3.25.6. Merger Sub is being formed solely for the purpose of
merging with and into RP and, as of the Effective Date, will not have
had any existing operation, assets or liabilities (other than
liabilities for franchise taxes, if applicable, and liabilities under
this Agreement); and
3.25.7. CSI will, as of the Effective Date, own all of the
stock of Merger Sub.
ARTICLE 4. REPRESENTATIONS OF RP. RP hereby represents and warrants to CSI that:
4.1. RP DISCLOSURE SCHEDULE.
4.1.1. The RP Disclosure Schedule sets forth all of the
information concerning RP and its Subsidiaries and the RP Shares
required in this Article 4. To the extent any statement in this Article
4 is untrue, the RP Disclosure Schedule sets forth the statements
necessary to make the statements in this Article 4 true. All
information and statements set forth in the RP Disclosure Schedule
shall be deemed to supersede and correct the statements made in this
Article 4 and to be additional representations and warranties of RP.
The RP Disclosure Schedule sets forth all of the information and
statements required in numbered sections bearing the number of the
Section of this Agreement calling for such information and in the order
of such numbers in this Agreement.
4.1.2. RP has delivered to CSI complete and accurate copies of
(a) any written contract or other document referred to in the RP
Disclosure Schedule or herein and (b) the RP Reports referred to in
Section 4.7 of this Agreement.
4.2. EXISTENCE AND GOOD STANDING OF RP. RP is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and corporate authority to own,
lease and operate its properties and to carry on its business as now being
conducted. RP is duly qualified or licensed as a foreign corporation to do
business, and is in good standing in each jurisdiction in which the character or
location of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so duly qualified or licensed would not reasonably be expected to
have a material adverse effect on the consolidated business, financial condition
or results of operations of RP and its Subsidiaries (an "RP Material Adverse
Effect"). Each of RP's Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
has the corporate power and corporate authority to own its properties and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so licensed
or qualified or to be in good standing would not reasonably be expected to have,
individually or in the aggregate, an RP Material Adverse Effect. Neither RP nor
any of its Subsidiaries is in violation of any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, governmental
rule or regulation to which RP or any RP Subsidiary or any of their respective
properties or assets is subject, except where such violation would not have,
individually or in the aggregate, an RP Material Adverse Effect. RP and its
Subsidiaries have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental regulations in
connection with their business as now conducted, where the failure to obtain any
such items or to take any such action would reasonably be expected to have an RP
Material Adverse Effect. The copies of the articles of incorporation and by-laws
of RP and each other RP Subsidiary previously delivered to CSI are true and
correct. Neither RP nor any of the RP Subsidiaries is in violation of any of the
provisions of its Amended and Restated Certificate of Incorporation or By-Laws.
4.3. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. RP has the
requisite corporate power and corporate authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby and consummate
the transactions contemplated hereby and thereby. Subject only to the approval
of this Agreement and the transaction contemplated hereby by the holders of a
majority of the outstanding RP Shares, the consummation by RP of the transaction
contemplated hereby has been duly authorized by all requisite corporate action.
This Agreement constitutes, and all agreements and documents contemplated hereby
(when executed and delivered pursuant hereto for value received) will
constitute, the valid and legally binding obligations of RP, enforceable in
accordance with their respective terms subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
4.4. CAPITAL STOCK. The authorized capital stock of RP consists of
50,000,000 shares of common stock and 5,000,000 shares of preferred stock, par
value $.001 per share. As of December 31, 1998, there were 5,667,375 shares of
common stock issued and outstanding none of which is held by RP or any
Subsidiary of RP and no shares of preferred stock issued and outstanding. Since
such date, no additional shares of capital stock of RP have been issued. RP has
no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of RP on any matter.
All such issued and outstanding RP Shares are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Other than as
contemplated by this Agreement or the RP Option Plans, there are not at the date
of this Agreement any outstanding subscriptions, options, warrants, rights,
calls, commitments, conversion rights, convertible securities, rights of
exchange, plans or other agreements providing for the purchase, issuance or sale
of any of the shares of the capital stock of RP by or to RP. As of December 31,
1998, 602,433 RP Shares were reserved for issuance and are issuable upon or
otherwise deliverable in connection with the exercise of outstanding options;
since that date, no options have been granted under the RP Option Plans or
otherwise and no new option plans have been authorized or adopted.
4.5. SUBSIDIARIES. Except as set forth in the RP Disclosure Schedules,
RP owns each of the outstanding shares of capital stock of each of RP's
Subsidiaries. All of the outstanding shares of capital stock of the RP
Subsidiaries are duly authorized, validly issued, fully paid and nonassessable,
and are owned by RP free and clear of all liens, pledges, security interests,
claims or other encumbrances. The RP Disclosure Schedule sets forth with respect
to each RP Subsidiary (a) its name and jurisdiction of incorporation, (b) its
authorized capital stock, and (c) the number of issued and outstanding shares of
capital stock. Except for interests in the RP Subsidiaries, neither RP nor any
RP Subsidiary owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, limited
liability company, business, trust or entity.
4.6. NO VIOLATIONS. The execution and delivery of this Agreement by RP
and the consummation of the transaction contemplated hereby (a) will not violate
any provision of the articles of incorporation or by-laws of RP or its
subsidiaries, (b) will not violate or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of RP or its Subsidiaries under, or result
in being declared void, voidable, or without further binding effect, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust or any material license, franchise, permit, lease, contract, agreement or
other instrument, commitment or obligation to which RP or any of its
subsidiaries is a party, or by which RP or any of its subsidiaries or any of
their properties is bound or affected, except for any of the foregoing matters
which would not reasonably be expected to have, individually or in the
aggregate, an RP Material Adverse Effect; (c) will not violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to RP or any of
its subsidiaries or any of their respective properties or assets (assuming
completion of the Regulatory Filings), except for violations which would not
reasonably be expected to have, individually or in the aggregate, an RP Material
Adverse Effect, or (d) other than the Regulatory Filings, will not require any
material consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which would reasonably be expected to have,
individually or in the aggregate, an RP Material Adverse Effect.
4.7. SEC DOCUMENTS. RP has furnished CSI each registration statement,
proxy statement or information statement, including all exhibits thereto,
prepared by RP since August 29, 1997, including, without limitation, (a) its
Annual Report on Form 10-K for its fiscal year ended May 31, 1998 (the "RP
Balance Sheet Date"), which includes the consolidated balance sheet for RP as of
such date (the "RP Balance Sheet") and RP's Quarterly Reports on Form 10-Q and
Reports on Form 8-K filed since the filing of such Annual Report and (b) its
proxy statement for its annual meeting of Stockholders held on October 1, 1998,
each of (a) and (b) in the form (including exhibits and any amendments thereto)
filed with the SEC and the items in (a) and (b), the "RP Reports." As of their
respective dates, the RP Reports (including, without limitation, any financial
statements or schedules included or incorporated by reference therein) (i) were
prepared in all material respects in accordance with the applicable requirements
of the Exchange Act, and the respective rules and regulations thereunder, and
(ii) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The 1997 and 1998 consolidated financial statements of RP and its
Subsidiaries included in or incorporated by reference into the RP Reports
(including the related notes and schedules) present fairly, in all material
respects, the consolidated financial position of RP at May 31, 1997 and 1998,
and the consolidated results of their operations and their cash flows such
fiscal years in conformity with GAAP. Except as and to the extent set forth on
the RP Balance Sheet, including all notes thereto, or as set forth in the RP
Reports or the RP Disclosure Schedule, neither RP nor any of its Subsidiaries
has any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) whether or not required to be reflected on,
or reserved against in, a consolidated balance sheet of RP prepared in
accordance with GAAP, except liabilities arising in the ordinary course of
business since such date which would not reasonably be expected to have,
individually or in the aggregate, an RP Material Adverse Effect.
4.8. LITIGATION. There is no action, suit or proceeding pending against
RP or the RP Subsidiaries, or, to the knowledge of RP, overtly threatened
against RP or its Subsidiaries or any of their respective properties or assets,
at law or in equity, or before or by any federal or state commission, board,
bureau, agency or instrumentality which would reasonably be expected to have,
individually or in the aggregate, an RP Material Adverse Effect, or would
prevent or delay the consummation of the transaction contemplated by this
Agreement. Neither RP nor any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably foreseen,
individually or in the aggregate, in the future would have an RP Material
Adverse Effect or would prevent or delay the consummation of the transaction
contemplated hereby.
4.9. ABSENCE OF CERTAIN CHANGES. Since the RP Balance Sheet Date, each
of RP and the RP Subsidiaries has conducted its business only in the ordinary
course of such business and there has not been (a) any event or changes with
respect to RP and the RP Subsidiaries (other than events or changes in general
economic conditions or developments affecting the industry generally) having,
individually or in the aggregate, an RP Material Adverse Effect, (b) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock, (c) any material change in its accounting
principles, practices or methods, (d) any amendments or changes in the Amended
and Restated Certificate of Incorporation or By-Laws of RP, (e) any material
revaluation by RP of any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business, (f) any sale of a material amount of property of RP or its
Subsidiaries, except in the ordinary course of business, or (g) any increase in
the compensation or benefits or establishment of any bonus, insurance, severance
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of RP or any
of the RP Subsidiaries except in the ordinary course of business consistent with
past practice or except as required by applicable law.
4.10. TAX MATTERS.
Except as set forth in the RP Disclosure Schedule:
4.10.1. Each of RP and its Subsidiaries has timely filed or
caused to be timely filed all Returns which are required to be filed
by, or with respect to, any of them on or prior to the Effective Date
(taking into account all applicable extensions). The Returns have
accurately reflected and will accurately reflect all liability for
Taxes of RP and its Subsidiaries for the periods covered thereby.
4.10.2. All Taxes and Tax liabilities of RP and its
Subsidiaries for all taxable years or periods that end on or before the
Effective Date and, with respect to any taxable year or period
beginning before and ending after the Effective Date, the portion of
such taxable year or period ending on and including the Effective Date,
have been timely paid or will be timely paid in full on or prior to the
Effective Date or accrued and adequately disclosed and fully provided
for on the books and records of RP in accordance with GAAP.
4.10.3. Complete and accurate copies of all RP federal, state
and local income tax returns have been made available to CSI.
4.10.4. Neither RP nor any of its Subsidiaries has been the
subject of an audit or other examination of Taxes by the tax
authorities of any nation, state or locality nor has RP or any of its
Subsidiaries received any notices from any taxing authority relating to
any issue which could affect the Tax liability of RP or any of its
Subsidiaries. Neither RP nor any of its Subsidiaries, as of the
Effective Date, (A) has entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of RP or any
of its Subsidiaries or (B) is presently contesting the Tax liability of
RP or any of its Subsidiaries before any court, tribunal or agency.
Neither RP nor any of its Subsidiaries has granted a power-of-attorney
relating to Tax matters to any person. All final adjustments made by
the IRS with respect to any federal tax return of RP or its
Subsidiaries have been reported for state and local income tax purposes
to the relevant state or local taxing authorities.
4.10.5. Neither RP nor any of its Subsidiaries has been
included in any "consolidated," "unitary" or "combined" Return provided
for under the law of the United States, any foreign jurisdiction or any
state or locality with respect to Taxes for any taxable period for
which the statute of limitations has not expired (other than a Return
with respect to which RP was the common parent).
4.10.6. All Taxes which RP or any of its Subsidiaries is (or
was) required by law to withhold or collect have been duly withheld or
collected and have been timely paid over to the proper authorities to
the extent due and payable.
4.10.7. There are no Tax sharing, allocation, indemnification
or similar agreements in effect as between RP or any predecessor or
affiliate thereof and any other party under which RP or any of its
Subsidiaries could be liable for any Taxes or other claims of any party
other than of RP and its Subsidiaries.
4.10.8. No requests for ruling or determination letters
relating to federal, state or local income taxes paid or payable by RP
or any of its Subsidiaries are pending with any taxing authority.
4.10.9. (a) Neither RP nor any RP Subsidiary has agreed to or
is required to make any adjustment pursuant to Section 481 of the Code
or the corresponding tax laws of any nation, state or locality by
reason of a change in accounting method initiated by RP or its
Subsidiaries or required by law, (b) RP has no knowledge that the IRS
or any other taxing authority has proposed or purported to require any
such adjustment or change in accounting method and (c) RP has no
knowledge or belief that any such adjustment under Section 481 of the
Code or the corresponding tax laws of any nation, state or locality
will be required of RP or its Subsidiaries upon the completion of, or
by reason of, the transaction contemplated by this Agreement.
4.10.10. (a) There are no deferred intercompany transactions
between RP and any of its Subsidiaries or between its Subsidiaries
which will or may result in the recognition of income upon the
consummation of the transaction contemplated by this Agreement, and (b)
there are no other transactions or facts existing with respect to RP
and/or its Subsidiaries which by reason of the consummation of the
transaction contemplated by this Agreement will result in RP and/or its
Subsidiaries recognizing income.
4.10.11. There are no Tax liens on any of the assets or
property of RP or its Subsidiaries.
4.10.12. There are no contracts, agreements or plans entered
into by RP or its Subsidiaries covering any person that individually or
collectively would require RP or any of its Subsidiaries to make any
payments of any amount which would not be deductible by reason of the
provisions of Section 162(m) or Section 280G of the Code.
4.10.13. Neither RP nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f) of the Code) owned
by it.
4.11. CERTAIN EMPLOYEE PLANS.
4.11.1. Each Benefit Plan maintained by any RP Controlled
Group Member (the "RP Benefit Plans") complies with, and has been
administered in accordance with, in all material respects, all
applicable requirements of law, except for instances of non-compliance
that would not reasonably be expected to have caused, individually or
in the aggregate, an RP Material Adverse Effect. The RP Benefit Plans
are listed in the RP Disclosure Schedule and copies or descriptions of
all material Plans have previously been provided to CSI.
4.11.2. With respect to each RP Benefit Plan intended to
qualify under Section 401(a) of the Code, (a) a favorable determination
letter has been issued by or an application is pending with the IRS
with respect to the qualification of each RP Benefit Plan and (b) no
"reportable event" or "prohibited transaction" (as such terms are
defined in ERISA and the Code) or termination has occurred under
circumstances which present a risk of material liability by any RP
Controlled Group Member to any governmental entity or other person,
including an RP Benefit Plan. Each RP Benefit Plan which is subject to
Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code has
been maintained in compliance with the minimum funding standards of
ERISA and the Code and no such RP Benefit Plan has incurred any
"accumulated funding deficiency" (as defined in Section 412 of the Code
and Section 302 of ERISA), whether or not waived. No RP Controlled
Group Member directly or indirectly contributes to, has an obligation
to contribute to or has or could be reasonably expected to have
liability with respect to, and has not directly or indirectly
maintained, sponsored, contributed to or had an obligation to
contribute to at any time within the 10 year period ending on the date
of the Closing, any employee benefit plan which is a multi-employer
plan subject to the requirements of Subtitle E of Title IV of ERISA.
4.11.3. Except as required by Code section 4980B or 162 or
Part 6 of Subtitle B of Title I of ERISA, no RP Controlled Group Member
provides any health, welfare or life insurance benefits to any of its
former or retired employees, which benefits would be material either
individually or in the aggregate to RP.
4.12. LABOR MATTERS.
4.12.1. Except as set forth in the RP Disclosure Schedule,
neither RP nor any of its Subsidiary is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to
the knowledge of RP, overtly threatened against RP or its Subsidiaries
relating to their business, except for any such proceeding which would
not reasonably be expected to have, individually or in the aggregate,
an RP Material Adverse Effect. To the knowledge of RP, there are no
organizational efforts with respect to the formation of a collective
bargaining unit presently being made or overtly threatened involving
employees of RP or any of its Subsidiaries.
4.12.2. RP has delivered to CSI copies of all employment
agreements, consulting agreements, severance agreements, bonus and
incentive plans, profit-sharing plans and other material agreements,
plans or arrangements with respect to compensation of the employees of
RP and its Subsidiaries (the "RP Compensation Arrangements"). The
Merger will not accelerate or otherwise give rise to payments pursuant
to the RP Compensation Arrangements.
4.13. ENVIRONMENTAL LAWS AND REGULATIONS.
4.13.1. RP and each of its Subsidiaries is in compliance in
all material respects with all applicable Environmental Laws which
compliance includes, but is not limited to, the possession by RP and
the RP Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Neither RP nor any of
its Subsidiaries has received written notice of, or, to the knowledge
of RP, is the subject of, any action, cause of action, claim,
investigation, demand or notice, including without limitation,
non-compliance orders, warning letters or notices of violation, by any
person or entity alleging liability under or non-compliance with any
Environmental Law (an "RP Environmental Claim"), nor to the knowledge
of RP is there any basis for any RP Environmental Claim that would
reasonably be expected to have, individually or in the aggregate, an RP
Material Adverse Effect. To the knowledge of RP there are no
circumstances that are reasonably likely to prevent or interfere with
such material compliance or give rise to such liability in the future.
4.13.2. There are no RP Environmental Claims which would
reasonably be expected to have, individually or in the aggregate, an RP
Material Adverse Effect that are pending or, to the knowledge of RP,
overtly threatened against RP or any of its Subsidiaries or, to the
knowledge of RP, against any person or entity whose liability for any
RP Environmental Claim RP or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law.
4.13.3. Neither RP nor any RP Subsidiary (a) has handled or
discharged, nor has it allowed or arranged for any third party to
handle or discharge, any hazardous substances to, at or upon: (i) any
location other than a site lawfully permitted to receive such hazardous
substances, (ii) any parcel of real property owned or leased by RP or
any of its Subsidiaries, except in compliance with applicable
Environmental Laws; (iii) any site which, pursuant to CERCLA or any
similar state law (x) has been placed on the National Priorities List
or its state equivalent, or (y) the Environmental Protection Agency or
the relevant state agency has notified RP that it has proposed or is
proposing to place on the National Priorities List or its state
equivalent; or (b) has any knowledge that there has occurred or is
presently occurring a discharge, or threatened discharge, of any
hazardous substance on, into or beneath the surface of, or adjacent to,
any real property owned or leased by RP or the RP Subsidiaries.
4.13.4. The RP Disclosure Schedule identifies (a) all
environmental audits, assessments, or occupational health studies
undertaken by RP or its agents on its behalf, or, to the knowledge of
RP, undertaken by any governmental authority, or any third party,
relating to or affecting any real property owned or leased by RP or any
RP Subsidiary; (b) the results of any ground, water, soil, air or
asbestos monitoring undertaken by RP or its agents on its behalf, or,
to the knowledge of RP, undertaken by any governmental authority or any
third party, relating to or affecting any real property owned or leased
by RP or any RP Subsidiary; (c) all material written communications
between RP and any governmental authority arising under or related to
Environmental Laws; and (d) all outstanding citations issued under
OSHA, or similar state or local statutes, laws, ordinances, codes,
rules, regulations, orders, rulings or decrees relating to or affecting
any real property owned or leased by RP or the RP Subsidiaries.
4.14. REAL PROPERTY.
4.14.1. RP has delivered to CSI either copies or fair and
accurate summaries (the "RP Property Documents") of each of its leases,
subleases, deeds, material licenses or other material agreements or
instruments (and any amendments thereto) under which RP or any of its
Subsidiaries owns, uses or occupies or has the right to use or occupy,
now or in the future, any real property (the "RP Real Estate
Agreements"). Each RP Real Estate Agreement is valid, binding and in
full force and effect, all rent and other sums and charges payable by
RP and its Subsidiaries as tenants thereunder are current, no
termination event or condition or uncured default of a material nature
on the part of RP or any RP Subsidiary or, to the knowledge of RP, as
to a landlord, exists under any RP Real Estate Agreement, except for
any of the foregoing matters which would not reasonably be expected to
have, individually or in the aggregate, an RP Material Adverse Effect.
The information contained in the RP Property Documents is true and
correct in all material respects.
4.14.2. Except for any of the following matters which would
not reasonably be expected to have, individually or in the aggregate,
an RP Material Adverse Effect:
(a) RP has not granted, and to the best of RP's
knowledge, no other person has granted, any leases, subleases,
licenses or other agreements granting to any person other than
RP any right to possession, use, occupancy or enjoyment of the
property covered by the RP Real Estate Agreements, or any
portion thereof, and
(b) RP is not obligated under any option, right of
first refusal or any contractual right to purchase, acquire,
sell or dispose of any real property covered by the RP Real
Estate Agreements.
4.14.3. None of the RP Real Estate Agreements contains
continuous operating covenants, radius restrictions or provisions
requiring the consent of the landlord to the Merger or the assumption
of RP's obligations under the RP Real Estate Agreements in the manner
contemplated by this Agreement, except for any of the foregoing matters
which would not reasonably be expected to have, individually or in the
aggregate, an RP Material Adverse Effect.
4.15. LIMITATION ON BUSINESS CONDUCT. Neither RP nor any of the RP
Subsidiaries is a party to, or has any obligation under, any contract or
agreement, written or oral, which contains any covenants currently or
prospectively limiting in any material respect the freedom of RP or any of the
RP Subsidiaries to engage in any line of business or to compete with any entity
or which would prohibit the business of RP, CSI or any of their respective
Subsidiaries from being conducted in substantially the same manner as it was
conducted prior to the Merger.
4.16. TITLE TO PROPERTY. Each of RP and each of the RP Subsidiaries
owns the material properties and assets that it purports to own free and clear
of all liens, security interests, charges or encumbrances, except for any liens,
security interests, charges or encumbrances which arise in the ordinary course
of business (including mechanics' liens and other similar statutory liens) and
do not materially impair RP's or any RP Subsidiary's ownership or use of any
such properties or assets, or liens for taxes not yet due. The rights,
properties and assets presently owned, leased or licensed by RP include all
rights, properties and assets necessary to permit RP and the RP Subsidiaries to
conduct their business in all material respects in the same manner as their
businesses have been conducted prior to the date hereof.
4.17. INSURANCE. RP and the RP Subsidiaries maintain with respect to
their operations and their assets, in full force and effect, policies of
insurance in the ordinary course of business as is usual and customary for
businesses similarly situated to RP. RP has provided CSI copies of all insurance
policies so maintained and all claims associated with its operations and the
operations of its Subsidiaries since their incorporation.
4.18. INTELLECTUAL PROPERTY. Every material trade secret (including
know-how, inventions, designs and processes), patent, patent right, trademark,
trademark right, logo, service mark, trade name or copyright, or application
thereof, and licenses and rights with respect to the foregoing, used in
connection with the business of RP and its Subsidiaries, (the "RP Intellectual
Property"), is protected by RP in a manner which, under the circumstances, is
prudent and commercially reasonable and owned by RP or its Subsidiaries free and
clear of any liens, encumbrances, claims or restrictions whatsoever which would
have an RP Material Adverse Effect, direct or indirect. There are no valid
grounds for any bona fide claims (i) to the effect that the business of RP or
any of the RP Subsidiaries infringes on any copyright, patent, trademark,
service mark or trade secret; (ii) against the use by RP or any of the RP
Subsidiaries, of any patents, patent rights, trademarks, trademark rights,
logos, trade names, service marks, trade secrets, copyrights, technology,
know-how or computer software programs and applications used in the business of
RP or any of the RP Subsidiaries as currently conducted or as proposed to be
conducted; (iii) challenging the ownership, validity or effectiveness of any of
the patents, patent rights, registered and material unregistered trademarks,
logos and service marks, registered copyrights, trade names and any applications
therefor owned by RP or any of the RP Subsidiaries or other trade secret
material to RP or any of the RP Subsidiaries; or (iv) challenging the license or
legally enforceable right to use of any third-party patents, patent rights,
trademarks, trademark rights, logos, service marks, trade names and copyrights
by RP or any of the RP Subsidiaries, except, in each case, for claims that, if
determined adversely to RP, would not reasonably be expected to have,
individually or in the aggregate, an RP Material Adverse Effect. Neither RP nor
any of its Subsidiaries has granted to any other person the right to use the RP
Intellectual Property, or any part thereof. RP is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner of, licensor of, or other claimant to, any patent, patent rights,
trademark, trademark rights, logo, service mark, trade name, trade name rights,
copyright or other intangible assets, with respect to the use thereof or in
connection with the conduct of its business or otherwise.
4.19. CERTAIN CONTRACTS. RP has delivered copies of each contract to
which RP or any of its Subsidiaries is a party (i) calling for payments in
excess of $100,000 in the case of any contract or series of related contracts or
(ii) otherwise material to RP or any of its Subsidiaries, or by which any of
their respective properties or assets are bound. RP and its Subsidiaries, and to
RP's knowledge the other parties thereto, are in compliance in all material
respects with all material terms of such contracts.
4.20. NO BROKERS. Neither RP nor any RP Subsidiary has entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of RP or CSI or Merger Sub to pay any finder's fees, brokerage
or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transaction
contemplated hereby, except that RP has retained NatCity Investments, Inc. and
Berenson Minella & Company, L.P. as its financial advisors and NatCity
Investments, Inc. to render a fairness opinion as set forth herein. The
arrangements with NatCity Investments, Inc. and Berenson Minella & Company, L.P.
have been disclosed in writing to CSI prior to the date hereof.
4.21. CONFLICTS OF INTEREST. No officer, or director, or, to the
knowledge of RP, no significant shareholder, employee or consultant of RP or any
RP Subsidiary, or any affiliate of such person has any direct or indirect
interest (except a passive investment in less than 5% of the publicly traded
stock of a public company) (a) in any corporation, partnership, proprietorship,
association, or other person or entity which does business with RP or any RP
Subsidiary, (b) in any property, asset or right which is used by RP or any RP
Subsidiary in the conduct of its business, or (c) in any contract to which RP is
a party or by which RP may or any RP Subsidiary be bound, nor are any amounts
owing to any such person by, or due to such person from, RP or any RP
Subsidiary.
4.22. PERSONAL PROPERTY. RP owns all of its material personal property,
including, without limitation, the material personal property reflected in the
RP Balance Sheet, except for personal property disposed of in the ordinary
course of business since the RP Balance Sheet Date, subject to no mortgage,
pledge, lien, charge, security interest, encumbrance or restriction, except
those which are shown and described in the RP Balance Sheet or the notes
thereto. All personal properties purported to be leased by RP are subject to
valid and effective leases.
4.23. TAKEOVER STATUTE. The Board of Directors of RP has taken all
appropriate action so that neither CSI nor Merger Sub will be an "interested
stockholder" of RP within the meaning of or subject to Section 203 of the DGCL.
4.24. DISCLOSURE. Neither RP nor any RP Subsidiary has knowingly
withheld from CSI any material facts relating to RP's and any RP Subsidiary's
assets, business, operations, financial conditions, or prospects. No
representation or warranty in this Agreement contains any untrue statement of a
material fact.
4.25. ADDITIONAL DISCLOSURE. Prior to and in connection with the
Merger, RP has no intention to redeem any RP Common Stock or make any
extraordinary distributions with respect thereto, and the persons that are
related to RP within the meaning of Temporary Treasury Regulation ss.
1.368-1T(e)(2)(ii) have not and will not acquire any RP Common Stock from any
holder thereof with consideration other than RP Common Stock.
(a) Following the Merger, RP intends to hold at least 90 percent of
the fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets held immediately prior to the Effective Date.
For purposes of this representation, amounts paid by RP to stockholders who
receive cash or other property pursuant to the Merger, amounts paid by RP to pay
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by RP immediately preceding the Effective Date,
will be included as assets of RP held immediately prior to the Effective Date.
(b) RP has no plan or intention to issue additional shares of its
stock (or securities, options, warrants or instruments giving the holder thereof
the right to acquire RP stock) that would (or if exercised would) result in CSI
losing control of RP within the meaning of Section 368(c) of the Code.
(c) RP will not assume any liabilities of Merger Sub (other than those
liabilities, if any, incurred by Merger Sub in the ordinary course of its
business) or acquire any assets of Merger Sub that are subject to liabilities
(other than those liabilities, if any, incurred by Merger Sub in the ordinary
course of its business).
(d) Following the Merger, RP intends to continue its historic business
or use a significant portion of its historic business assets in a business.
(e) Except as provided in this Agreement, each of RP and its
stockholders
will pay their respective expenses, if any, incurred in connection with the
Merger.
(f) There is no intercorporate indebtedness existing between CSI and
RP, or between Merger Sub and RP, that was issued, acquired or will be settled
at a discount.
(g) RP is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(h) On the date of the Merger, the fair market value of the assets of
RP will exceed the sum of its liabilities, plus the amount of liabilities, if
any, to which the assets are subject.
(i) RP is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
(j) RP will not take any action that might otherwise cause the Merger
not to be treated as a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code.
ARTICLE 5. COVENANTS.
5.1. NO SOLICITATION BY RP. (a) RP shall not, directly or indirectly,
through any officer, director, employee, representative or agent of RP or any of
the RP Subsidiaries, solicit or encourage the initiation of (including by way of
furnishing information) any inquiries or proposals regarding any merger, sale of
assets, sale of shares of capital stock (including without limitation by way of
a tender offer) or similar transactions involving RP or any of the RP
Subsidiaries that if consummated would constitute an RP Alternative Transaction
(as defined in Section 7.4.2) (any of the foregoing inquiries or proposals being
referred to herein as an "RP Acquisition Proposal"). In addition, subject to the
other provisions of this Section 5.1(a) (including the following sentence), from
and after the date of this Agreement until the earlier of the Effective Time or
termination of this Agreement pursuant to its terms, RP and its subsidiaries
will not, and will instruct their officers, directors, employees,
representatives and agents not to, directly or indirectly, make or authorize any
public statement, recommendation or solicitation in support of, or commenting
positively regarding, any RP Acquisition Proposal made by any Person or group of
Persons (other than the Merger provided, that nothing in this Section 5.1 shall
prevent the Board of Directors of RP from taking and disclosing to RP's
stockholders a position contemplated by Rule 14d-9 and Rule 14e-2 promulgated
under the Exchange Act, with respect to any tender offer or from making such
disclosure to RP's stockholders (not constituting a recommendation or
solicitation), upon the advice of its independent outside legal counsel, as is
necessary to make under applicable law. Nothing contained in this Agreement
shall prevent the Board of Directors of RP from (i) furnishing information to a
third party which has made a bona fide RP Acquisition Proposal that the RP Board
of Directors reasonably determines in good faith contains the material terms of
an RP Superior Proposal (as defined below) not solicited in violation of this
Agreement, provided that such third party has executed an agreement with
confidentiality provisions substantially similar to those then in effect between
RP and CSI, or (ii) subject to compliance with the other terms of this Section
5.1, including Section 5.1(c), (A) considering and negotiating a bona fide RP
Acquisition Proposal that the RP Board of Directors has reasonably determined in
good faith is likely to constitute an RP Superior Proposal not solicited in
violation of this Agreement, or (B) recommending to its stockholders an RP
Acquisition Proposal that the RP Board of Directors reasonably determines in
good faith is a Superior Proposal and, in connection therewith, withdrawing or
modifying its recommendation of the Merger and the transactions contemplated
thereby (which action shall entitle CSI to terminate this Agreement pursuant to
Section 7.4.2 and to receive the CSI Expenses and CSI Fee, if applicable, as
defined in Section 5.13.2); provided that, as to each of clauses (i) and (ii),
(x) such actions occur at a time prior to approval of the Merger and this
Agreement at the RP Stockholders Meeting, and (y) the Board of Directors of RP
reasonably determines in good faith upon the advice of independent counsel that
it is required to do so in order to discharge properly its fiduciary duties. For
purposes of this Agreement, a "RP Superior Proposal" means any proposal made by
a third party to acquire, directly or indirectly, for consideration consisting
of cash and/or securities, all or a majority of the equity securities of RP
entitled to vote generally in the election of directors or all or substantially
all the assets of RP, on terms which the Board of Directors of RP reasonably
believes (i) (upon the advice of an independent financial advisor) to be more
favorable from a financial point of view to its stockholders than the Merger and
the transactions contemplated by this Agreement taking into account at the time
of determination any changes to the financial terms of this Agreement proposed
by CSI and (ii) to be more favorable to RP than the Merger and the transactions
contemplated by this Agreement after taking into account all pertinent factors
deemed relevant by the Board of Directors of RP under the laws of the State of
Delaware.
(b) RP shall immediately notify CSI after receipt of any RP
Acquisition Proposal, or any material modification of or amendment to any RP
Acquisition Proposal, or any request for nonpublic information relating to RP or
any of its subsidiaries in connection with an RP Acquisition Proposal or for
access to the properties, books or records of RP or any RP Subsidiary by any
person or entity that informs the Board of Directors of RP or such RP Subsidiary
that it is considering making, or has made, an RP Acquisition Proposal. Such
notice to CSI shall be made as soon as practicable orally and confirmed in
writing, if requested, and shall indicate the identity of the person making the
RP Acquisition Proposal or intending to make an RP Acquisition Proposal or
requesting non-public information or access to the books and records of RP, the
terms of any such RP Acquisition Proposal or material modification or amendment
to an RP Acquisition Proposal, and whether RP is providing or intends to provide
the person making the RP Acquisition Proposal with access to information
concerning RP as provided in Section 5.1(a). RP shall also immediately notify
CSI, as soon as practicable orally and confirmed in writing, if requested, if it
enters into negotiations concerning any RP Acquisition Proposal. In each case,
the notice to CSI required by this clause (b) may be limited to the extent that
the Board of Directors of RP reasonably determines in good faith upon the advice
of independent counsel that it is prohibited from giving such notice in order to
properly discharge its fiduciary duties.
(c) Unless this Agreement shall have been terminated in accordance
with its terms, neither RP nor the Board of Directors of RP shall withdraw or
modify, or propose to withdraw or modify, in a manner adverse to CSI, the
approval by such Board of Directors of this Agreement or the Merger.
(d) Without the prior written consent of CSI, RP and the Board of
Directors of RP shall not enter into any agreement with respect to, or otherwise
approve or recommend, or propose to approve or recommend, any RP Acquisition
Proposal or RP Alternative Transaction, unless the Merger Agreement is
terminated prior to or substantially simultaneously with such time pursuant to
Sections 7.1 or 7.2 or is terminated prior to such time by RP pursuant to
Section 7.3.
(e) RP shall immediately cease and cause to be terminated any existing
discussions or negotiations with any persons (other than CSI and Merger Sub)
conducted heretofore with respect to any of the foregoing. RP agrees not to
release any third party from the confidentiality and standstill provisions of
any agreement to which RP is a party.
(f) RP shall ensure that the officers and directors of RP and the RP
Subsidiaries and any investment banker or other advisor or representative
retained by RP are aware of the restrictions described in this Section 5.1.
(g) No action by the Board of Directors of RP expressly permitted by
this Section 5.1 shall constitute a breach or violation of any other provision
of this Agreement, provided that nothing in this Section 5.1 shall narrow the
obligations of RP under Section 5.4.1.
5.2 NO SOLICITATION BY CSI. (a) CSI shall not, directly or indirectly,
through any officer, director, employee, representative or agent of CSI or any
of the CSI Subsidiaries, solicit or encourage the initiation of (including by
way of furnishing information) any inquiries or proposals regarding any merger,
sale of assets, sale of shares of capital stock (including without limitation by
way of a tender offer) or similar transactions involving CSI or any of the CSI
Subsidiaries that if consummated would constitute a CSI Alternative Transaction
(as defined in Section 7.3.2) (any of the foregoing inquiries or proposals being
referred to herein as "CSI Acquisition Proposal"). In addition, subject to the
other provisions of this Section 5.2(a) (including the following sentence), from
and after the date of this Agreement until the earlier of the Effective Time or
termination of this Agreement pursuant to its terms, CSI and its subsidiaries
will not, and will instruct their officers, directors, employees,
representatives and agents not to, directly or indirectly, make or authorize any
public statement, recommendation or solicitation in support of or commenting
positively regarding, any CSI Acquisition Proposal made by any Person or group
of Persons (other than the Merger), provided, that nothing in this Section 5.2
shall prevent the Board of Directors of CSI from taking and disclosing to CSI's
stockholders a position contemplated by Rule 14d-9 and Rule 14e-2 promulgated
under the Exchange Act with respect to any tender offer or from making such
disclosure to stockholders (not constituting a recommendation or solicitation)
upon the advice of its independent outside legal counsel, as is necessary to
make under applicable law. Nothing contained in this Agreement shall prevent the
Board of Directors of CSI from (i) furnishing information to a third party which
has made a bona fide CSI Acquisition Proposal that the CSI Board of Directors
reasonably determines in good faith contains the material terms of a CSI
Superior Proposal (as defined below) not solicited in violation of this
Agreement, provided that such third party has executed an agreement with
confidentiality provisions substantially similar to those then in effect between
RP and CSI, or (ii) subject to compliance with the other terms of this Section
5.2 including Section 5.2 (c), (A) considering and negotiating a bona fide CSI
Acquisition Proposal that the CSI Board of Directors has reasonably determined
in good faith is likely to constitute a CSI Superior Proposal not solicited in
violation of this Agreement, or (B) or recommending to its stockholders a CSI
Acquisition Proposal that the CSI Board of Directors reasonably determines in
good faith is a Superior Proposal and, in connection therewith, withdrawing or
modifying its recommendation of the Merger and the transactions contemplated
thereby (which action shall entitle RP to terminate this Agreement pursuant to
Section 7.3.2 and to receive the RP Expenses and RP Fee, if applicable, as
defined in Section 5.13.3); provided that, as to each of clauses (i) and (ii),
(x) such actions occur at a time prior to approval of the Merger and this
Agreement at the CSI Stockholders Meeting, and (y) the Board of Directors of CSI
reasonably determines in good faith upon the advice of independent counsel that
it is required to do so in order to discharge properly its fiduciary duties. For
purposes of this Agreement, a "CSI Superior Proposal" means any proposal made by
a third party to acquire, directly or indirectly, for consideration consisting
of cash and/or securities, all or a majority of, the equity securities of CSI
entitled to vote generally in the election of directors or all or substantially
all the assets of CSI, on terms which the Board of Directors of CSI reasonably
believes (i) (upon the advice of an independent financial advisor) to be more
favorable from a financial point of view to its stockholders that the Merger and
the transactions contemplated by this Agreement taking into account at the time
of determination any changes to the financial terms of this Agreement proposed
by CSI and (ii) to be more favorable to CSI than the Merger and the transactions
contemplated by this Agreement after taking into account all pertinent factors
deemed relevant by the Board of Directors of CSI under the laws of the State of
Nevada.
(b) CSI shall immediately notify RP after receipt of any CSI
Acquisition Proposal, or any material modification of or amendment to any CSI
Acquisition Proposal, or any request for nonpublic information relating to RP or
any of its subsidiaries in connection with a CSI Acquisition Proposal or for
access to the properties, books or records of CSI or any CSI Subsidiary by any
person or entity that informs the Board of Directors of CSI or such CSI
Subsidiary that it is considering making, or has made, a CSI Acquisition
Proposal. Such notice to RP shall be made as soon as practicable orally and
confirmed in writing, if requested, and shall indicate the identity of the
person making the CSI Acquisition Proposal or intending to make a CSI
Acquisition Proposal or requesting non-public information or access to the books
and records of CSI, the terms of any such CSI Acquisition Proposal or material
modification or amendment to an CSI Acquisition Proposal, and whether CSI is
providing or intends to provide the person making the CSI Acquisition Proposal
with access to information concerning CSI as provided in Section 5.2(a). CSI
shall also immediately notify RP, as soon as practicable orally and confirmed in
writing, if requested, if it enters into negotiations concerning any CSI
Acquisition Proposal. In each case, the notice to RP required by this clause (b)
may be limited to the extent that the Board of Directors of CSI reasonably
determines in good faith upon the advice of independent counsel that it is
prohibited from giving such notice in order to properly discharge its fiduciary
duties.
(c) Unless this Agreement shall have been terminated in accordance
with its terms, neither CSI nor the Board of Directors of CSI shall withdraw or
modify, or propose to withdraw or modify, in a manner adverse to RP, the
approval by such Board of Directors of this Agreement or the Merger.
(d) Without the prior written consent of RP, CSI and the Board of
Directors of CSI shall not enter into any agreement with respect to, or
otherwise approve or recommend, or propose to approve or recommend, any CSI
Acquisition Proposal or CSI Alternative Transaction, unless the Merger Agreement
is terminated prior to or substantially simultaneously with such time pursuant
to Sections 7.1 or 7.2 or is terminated prior to such time by CSI pursuant to
Section 7.4.
(e) CSI shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than RP) conducted
heretofore with respect to any of the foregoing. CSI agrees not to release any
third party from the confidentiality and standstill provisions of any agreement
to which CSI is a party.
(f) CSI shall ensure that the officers and directors of CSI and the
CSI Subsidiaries and any investment banker or other advisor or representative
retained by CSI are aware of the restrictions described in this Section 5.2.
(g) No action by the Board of Directors of CSI expressly permitted by
this Section 5.2 shall constitute a breach or violation of any other provision
of this Agreement, provided that nothing in this Section 5.2 shall narrow the
obligations of CSI under Section 5.4.2.
5.3 CONDUCT OF BUSINESSES. Prior to the Effective Date, except as set
forth in the CSI Disclosure Schedule, the RP Disclosure Schedule or as
contemplated by any other portion of this Agreement, unless both parties have
consented in writing thereto, which consent will not be unreasonably withheld,
each party:
5.3.1 Shall, and shall cause each of its Subsidiaries to,
conduct its operations according to its usual, regular and ordinary
course in substantially the same manner as heretofore conducted;
5.3.2 Shall use its reasonable efforts, and shall cause each
of its Subsidiaries to use its reasonable efforts, to preserve intact
its business organization and goodwill, keep available the services of
its officers and employees and maintain satisfactory relationships with
those persons having business relationships with it;
5.3.3 Except to the extent, if any, prohibited by applicable
law or binding confidentiality agreements with third parties, shall
confer on a regular basis with one or more representatives of the other
party to report operational matters of materiality and any proposals to
engage in material transactions;
5.3.4 Shall not amend its articles or certificate of
incorporation or by-laws (except to the extent the Articles of
Incorporation of CSI are amended to authorize the CSI Preferred Stock);
5.3.5 Shall promptly notify the other party of (a) any
material emergency or other material change in the condition (financial
or otherwise), of such party's or any Subsidiary's business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties, (b) any material
litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be
contemplated), or (c) the breach in any material respect of any
representation or warranty or covenant contained herein;
5.3.6 Shall promptly deliver to the other party true and
correct copies of any report, statement or schedule filed by such party
with the SEC subsequent to the date of this Agreement;
5.3.7 Shall not (a) except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this Agreement,
issue any shares of its capital stock, effect any stock split or
otherwise change its capitalization as it exists on the date hereof,
(b) grant, confer or award any option, warrant, conversion right or
other right not existing on the date hereof to acquire any shares of
its capital stock, (c) increase any compensation or enter into or amend
any employment severance, termination or similar agreement with any of
its present or future officers or directors, except for normal
increases in compensation to employees not earning more than $50,000 in
annual base compensation, consistent with past practice, and the
payment of cash bonuses to employees pursuant to and consistent with
existing plans or programs, nor (d) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or
amend any existing employee benefit plan in any material respect,
except for changes which are less favorable to participants in such
plans or as may be required by applicable law;
5.3.8 Shall not (a) declare, set aside or pay any dividend or
make any other distribution or payment with respect to any shares of
its capital stock, (b) except in connection with the use of shares of
capital stock to pay the exercise price or tax withholding in
connection with stock-based RP Benefit Plans or as required or
otherwise contemplated by this Agreement (including any refinancing in
connection therewith), directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of
any of its Subsidiaries, or make any commitment for any such action,
nor (c) split, combine or reclassify any of its capital stock;
5.3.9 Shall not, and shall not permit any of its Subsidiaries
to sell, lease or otherwise dispose of any of its assets (including
capital stock of Subsidiaries) which are material, individually or in
the aggregate, except in the ordinary course of business;
5.3.10 Shall not (a) incur or assume any long-term or
short-term debt or issue any debt securities except for borrowings
under existing lines of credit and indebtedness for working capital in
the ordinary course of business and refinancing of existing
indebtedness in the same amount and on substantially the same terms
(and except that either party may incur indebtedness for the payment of
expenses related to the transactions contemplated by this Agreement and
any financing therefor, provided such indebtedness does not include any
material prepayment penalty or equity component), (b) except for
obligations of wholly-owned Subsidiaries; assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any other person
except in the ordinary course of business consistent with past
practices in an amount not material to such party, taken as a whole,
(c) other than to wholly-owned Subsidiaries, make any loans, advances
or capital contributions to or investments in, any other person, (d)
pledge or otherwise encumber shares of capital stock of such party or
its Subsidiaries, nor (e) mortgage or pledge any of its material
assets, tangible or intangible, or create or suffer to create any
material mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect to such asset;
5.3.11 Shall not acquire, sell, lease or dispose of any assets
outside the ordinary course of business or any assets which in the
aggregate are material to such party taken as a whole, or enter into
any commitment or transaction outside the ordinary course of business
consistent with past practice which would be material to such party
taken as a whole;
5.3.12 Except as may be required as a result of a change in
law or in GAAP, shall not change any of the accounting principles or
practices used by such party;
5.3.13 Shall not (a) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership, limited
liability company or other business organization or division thereof
or any equity interest therein, (b) enter into any contract or
agreement other than in the ordinary course of business consistent
with past practice which would be material to such party taken as a
whole, (c) authorize any new capital expenditure or expenditures
which, individually, is in excess of $25,000 or, in the aggregate, is
in excess of $150,000; provided, that none of the foregoing shall
limit any capital expenditure within the aggregate amount previously
authorized by such party's Board of Directors for capital expenditures
and written evidence thereof has been previously provided to the other
party, nor (d) enter into or amend any contract, agreement, commitment
or arrangement providing for the taking of any action which would be
prohibited hereunder;
5.3.14 Shall not (a) make any Tax election with respect to
such party or its Subsidiaries or settle or compromise any Tax
liability material to such party or its Subsidiaries taken as a whole
or (b) file or cause to be filed any amended Return or claims for
refund with respect to such party or its Subsidiaries;
5.3.15 Shall not pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction of business liabilities reflected or reserved against in,
and contemplated by, the financial statements (or the notes thereto) of
such party or incurred in the ordinary course of business consistent
with past practice;
5.3.16 Shall not settle or compromise any pending or
threatened suit, action or claim relating to the transaction
contemplated hereby;
5.3.17 Shall not adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or reorganization; or
5.3.18 Shall not take, or agree in writing or otherwise to
take, any of the actions described in Section 5.3.1 through 5.3.17 or
any action that would make any of the representations and warranties of
a party hereto contained in this Agreement untrue or incorrect as of
the date when made.
5.4 MEETINGS OF STOCKHOLDERS.
5.4.1 RP has received from NatCity Investments, Inc. its
opinion on the fairness to the holders of RP Shares, from a financial
point of view, of the terms of the Merger, pursuant to the terms of an
engagement letter presented to CSI. RP will take all action reasonably
necessary in accordance with applicable law and its Certificate of
Incorporation and By-laws to convene a meeting of its stockholders as
promptly as practicable to consider and vote upon the approval of this
Agreement and the transaction contemplated hereby. The Board of
Directors of RP shall recommend such approval and RP shall take all
reasonable lawful action to solicit such approval, including, without
limitation, timely mailing the Proxy Statement (as defined in Section
5.11); provided, however, that the Board of Directors of RP shall not
be required to make such recommendation if the Board of Directors of RP
reasonably determines in good faith, based as to legal matters on the
advice of outside legal counsel, that such action would violate its
fiduciary duties. CSI shall coordinate and cooperate with RP with
respect to the timing of such meeting and RP shall use its best efforts
to hold such meeting as soon as is practicable.
5.4.2 CSI has received from Lehman Brothers its opinion on the
fairness to the holders of CSI Shares, from a financial point of view,
of the terms of the Merger, pursuant to the terms of an engagement
letter presented to RP. CSI will take all action reasonably necessary
in accordance with applicable law and its Articles of Incorporation and
By-laws to convene a meeting of its stockholders as promptly as
practicable to consider and vote upon the approval of this Agreement
and the transaction contemplated hereby. The Board of Directors of CSI
shall recommend such approval and CSI shall take all reasonable lawful
action to solicit such approval, including, without limitation, timely
mailing the Proxy Statement (as defined in Section 5.11); provided,
however, that the Board of Directors of CSI shall not be required to
make such recommendation if the Board of Directors of CSI reasonably
determines in good faith, based as to legal matters on the advice of
outside legal counsel, that such action would violate its fiduciary
duties. RP shall coordinate and cooperate with CSI with respect to the
timing of such meeting and CSI shall use its best efforts to hold such
meeting as soon as is practicable.
5.4.3 The Board of Directors of either CSI or RP may delay the
meeting of such party's stockholders required by this Section 5.4 for
no more than 30 days to the extent such Board of Directors reasonably
determines in good faith, based on the advice of outside legal counsel,
that it is required by its fiduciary duties to delay such meeting to
consider a bona fide Acquisition Proposal that such Board of Directors
reasonably determines in good faith contains the material terms of a
Superior Proposal received without violation of this Agreement
(provided that in such event the party which has so delayed such
meeting may not terminate this Agreement pursuant to Section 7.2(a)
until at least 5 days after the date on which such meeting is actually
held).
5.5 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, each party shall: (a) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Date with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Date from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transaction contemplated hereby, and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; and (b) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transaction
contemplated by this Agreement. If, at any time after the Effective Date, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of each party shall take all such
necessary action.
5.6 INSPECTION OF RECORDS; ACCESS. Except to the extent, if any,
prohibited by applicable law or binding confidentiality agreements with third
parties, from the date hereof to the Effective Date, each party shall allow all
designated officers, attorneys, accountants and other representatives of the
other party (the "Other Party's Representatives") access at all reasonable times
to all employees, stores, offices, warehouses, and other facilities and to the
records and files, correspondence, audits and properties, as well as to all
information relating to commitments, contracts, titles and financial position,
or otherwise pertaining to the business and affairs, of such party and its
Subsidiaries; provided, however, the Other Party's Representatives shall use
their reasonable best efforts to avoid interfering with, hindering or otherwise
disrupting the employees of such party in the execution of their employment
duties during any visit to, or inspection of, such party's facilities.
5.7 PUBLICITY. The initial press release relating to this Agreement
shall be a joint press release and thereafter each party shall, subject to its
respective legal obligations (including requirements of stock exchanges and
other similar regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before issuing any such
press release or otherwise making public statements with respect to the
transaction contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities exchange
with respect thereto.
5.8 REGISTRATION STATEMENT/PROXY STATEMENT.
5.8.1 As promptly as practicable after the execution of this
Agreement, CSI and RP shall prepare and file with the SEC preliminary
proxy materials which shall constitute the preliminary Proxy Statement
(as defined in Section 5.11) and a preliminary prospectus with respect
to the CSI Preferred Stock to be issued in connection with the Merger.
As promptly as practicable after comments are received from the SEC
with respect to the preliminary proxy materials and after the
furnishing by RP and CSI of all information required to be contained
therein, RP shall file with the Commission the definitive Proxy
Statement and CSI shall file with the Commission the definitive Proxy
Statement and Registration Statement (as defined in Section 5.11) and
CSI and RP shall use all reasonable efforts to cause the Registration
Statement to become effective as soon thereafter as practicable.
5.8.2 CSI and RP shall make all necessary filings with respect
to the Merger under the Securities Act and the Exchange Act and the
rules and regulations thereunder, under applicable Blue Sky or similar
securities laws, and shall use all reasonable efforts to obtain
required approvals and clearances with respect thereto.
5.9 COMPLIANCE WITH THE SECURITIES ACT; RESALE PROSPECTUS
5.9.1 Prior to the Effective Date, RP shall deliver to CSI a
letter setting forth a true and complete list of persons whom the
Company believes may be deemed to be "affiliates" of RP as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act
(the "Affiliates").
5.9.2 RP shall use its reasonable best efforts to obtain as
promptly as practicable a written agreement from each person who is
identified as an Affiliate in the letter referred to in Section 5.9.1
above, in the form previously approved by the parties, that he or she
will not offer to sell, sell or otherwise dispose of any of the CSI
Preferred Stock (or CSI Common Stock issuable upon conversion thereof)
issued to him or her pursuant to the Merger, except in compliance with
Rule 145 under the Securities Act or another exemption from the
registration requirements of the Securities Act. RP shall deliver all
such written agreements obtained by it to CSI on or prior to the
Effective Date.
5.9.3 CSI shall use its reasonable best efforts to file with
the SEC as promptly as practicable following the Effective Date, and
cause to become effective, a registration statement for the purpose of
permitting the CSI Preferred Stock (or CSI Common Stock issuable upon
conversion thereof) issued to any such Affiliate to be resold by such
Affiliate, and to maintain such registration statement in effect until
such time as such Affiliates may resell such stock pursuant to an
applicable exemption therefrom.
5.10. TAKEOVER PROVISIONS INAPPLICABLE. RP agrees that it will not take
any action to render Section 203 of the DGCL applicable to the Merger and the
other transactions contemplated hereby, and CSI agrees that it will not take any
action to render Sections 78.438 and 78.439 the NGCL applicable to (x) the
acquisition of CSI Preferred Stock pursuant to the Merger or (y) the conversion
of the CSI Preferred Stock into the CSI Common Stock.
5.11. INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENTS,
ETC. Each of CSI, Merger Sub and RP agree that none of the information supplied
by it for inclusion in (a) the Registration Statement to be filed with the SEC
by CSI on Form S-4 under the Securities Act for the purpose of registering
shares of CSI Preferred Stock to be issued in the Merger (the "Registration
Statement") and all other documents required to be filed by CSI with the SEC and
(b) the prospectus/proxy statement of RP and CSI (the "Proxy Statement") to be
mailed to the stockholders of RP and CSI in connection with the Merger will, in
the case of the Proxy Statement or any amendments or supplements thereto, at the
time of mailing of the Proxy Statement or any amendments or supplements thereto,
and at the time of the RP Meeting to be held in connection with the Merger and
the CSI meeting to be held in connection with the Merger, or, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Date, 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. CSI and Merger Sub agree that the Registration Statement will comply
as to form in all material respects with the provisions of the Securities Act
and the rules and regulations promulgated thereunder. RP and CSI agree that the
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder. Each of
CSI and RP agrees to make all reasonable representations and covenants in
connection with the opinions of counsel, if any, required to be attached to the
Registration Statement and Proxy Statement with respect to the correctness of
the discussion therein as to the material federal income tax consequences of the
Merger.
5.12. FURTHER ACTION. Each party hereto shall, subject to the
fulfillment at or before the Effective Date of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
5.13. FEES AND EXPENSES.
5.13.1 Except as provided below in this Section 5.13, if the
Merger is not effected, all costs and expenses incurred in connection
with this Agreement and in the transaction contemplated hereby shall be
paid by the party incurring such expense except that (a) to the extent
that the RP Fee or the CSI Fee (each as defined below) is not payable,
RP and CSI each agree to pay 50% of all printing expenses incurred by
either party in connection with the Registration Statement and the
Proxy Statement and (b) as provided in Section 5.13.2 or 5.13.3, as
applicable, below.
5.13.2 If this Agreement is terminated by RP pursuant to
Section 7.3.3 or this Agreement is terminated by CSI pursuant to
Section 7.4.2, RP shall pay to CSI an amount equal to CSI's and Merger
Sub's actual, reasonable and documented expenses (including without
limitation financing therefor) incurred after January 18, 1999 and on
or prior to the termination date of this Agreement relating to the
transactions contemplated by this Agreement (the "CSI Expenses"),
provided that RP shall not be responsible for any CSI Expenses in
excess of $1,000,000 in the aggregate. If during the 365 day period
immediately following the termination of this Agreement, RP shall enter
into a transaction which would constitute an RP Alternative Transaction
with or involving an RP Third Party who directly or indirectly
initiated or otherwise had any contact with RP with respect to any such
transaction prior to the termination of this Agreement, RP will pay to
CSI, in addition to the CSI Expenses, a fee equal to $750,000 (the "CSI
Fee"), and, if RP enters into such a transaction following a
termination of this Agreement pursuant to Section 7.2(b), RP shall also
then pay to CSI the CSI Expenses to the extent, if any, that such CSI
Expenses were not otherwise due and payable at the time of such
termination.
5.13.3 If this Agreement is terminated by CSI pursuant to
Section 7.4.3 or this Agreement is terminated by RP pursuant to Section
7.3.2, CSI shall pay to RP an amount equal to RP's actual, reasonable
and documented expenses (including without limitation financing
therefor) incurred after January 18, 1999 and on or prior to the
termination date of this Agreement relating to the transactions
contemplated by this Agreement (the "RP Expenses"), provided that CSI
shall not be responsible for any RP Expenses in excess of $1,000,000 in
the aggregate. If during the 365 day period immediately following the
termination of this Agreement, CSI shall enter into a transaction which
would constitute an CSI Alternative Transaction with or involving a CSI
Third Party who directly or indirectly initiated or otherwise had any
contact with CSI with respect to any such transaction prior to the
termination of this Agreement, CSI will pay to RP, in addition to the
RP Expenses, a fee equal to $750,000 (the "RP Fee"), and, if CSI enters
into such a transaction following a termination of this Agreement
pursuant to Section 7.2(c), CSI shall also then pay to RP the RP
Expenses to the extent, if any, that such RP Expenses were not
otherwise due and payable at the time of such termination.
5.13.4 If this Agreement is terminated pursuant to Section
7.2(a) because the condition set forth in Section 6.1.7 has not been
satisfied despite the reasonable best efforts of RP to cooperate in
satisfying such condition, CSI shall pay the RP Expenses to the extent
incurred prior to notice from CSI to RP that such condition will not
be, or is not likely to be, satisfied.
5.13.5 Any CSI or RP Fee and/or CSI or RP Expenses payable
pursuant to Section 5.13.2, 5.13.3 or 5.13.4 as the case may be, shall
be paid in immediately available funds within five business days after
a demand for payment following the first to occur of any of the events
described in Section 5.13.2, 5.13.3 or 5.13.4, as the case may be, and
entitling a party to payment; provided that, in no event shall RP or
CSI, as the case may be, be required to pay such Fee and/or Expenses
to the entities entitled thereto, if, immediately prior to the
termination of this Agreement, the entity entitled to receive such Fee
and/or Expenses was in material breach of its obligations under this
Agreement (and such breach, if curable, was not cured within 30 days
after written notice of such breach is given to such entity by the
other party).
5.14 STOCKHOLDERS' AGREEMENT; VOTING AGREEMENTS. (a) Simultaneously
with the execution of this Agreement CSI is entering into (i) a Stockholder
Agreement with certain stockholders or prospective stockholders of CSI
identified in Exhibit 5.14(a)(i) hereto providing for the election of directors
of CSI and (ii) Voting Agreements pursuant to which certain stockholders of RP
identified in Exhibit 5.14(a)(ii) hereto agree to vote all shares of RP Common
Stock over which they have voting power in favor of the Merger and the
transactions contemplated hereby. (b) Simultaneously with the execution of this
Agreement, RP is entering into Voting Agreements pursuant to which certain
stockholders of CSI identified in Exhibit 5.14(b) hereto agree to vote all
shares of CSI Common Stock over which they have power in favor of the Merger and
the transactions contemplated hereby.
5.15 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. CSI
agrees that at all times after the Effective Date, it will and shall cause the
Surviving Corporation to, for not less than six years, indemnify each person who
is a director or officer of RP on the date hereof (individually an "Indemnified
Party" and collectively the "Indemnified Parties"), with respect to any claim,
liability, loss, damage, judgment, fine, penalty, amount paid in settlement or
compromise, cost or expense, including reasonable fees and expenses of legal
counsel ("Indemnified Liability"), to the extent such Indemnified Party would
have been indemnified pursuant to RP's articles of incorporation or by-laws as
in effect as of the date hereof, based in whole or in part on, or arising in
whole or in part out of, any matter existing or occurring at or prior to the
Effective Date whether commenced, asserted or claimed before or after the
Effective Date, and shall advance expenses to such Indemnified Party to the
extent such Indemnified Party would have been advanced expenses pursuant to RP's
articles of incorporation or by-laws as in effect as of the date hereof. CSI
shall, and shall cause the Surviving Corporation to, maintain in effect for not
less than six years after the Effective Date, the current policies of directors'
and officers' liability insurance maintained by RP on the date hereof (provided
that CSI may substitute therefor policies having at least the same coverage and
containing terms and conditions which are no less advantageous to the persons
currently covered by such policies as insured) with respect to matters existing
or occurring on or prior to the Effective Date.
5.16 RP STOCK PLANS. CSI agrees to file a registration statement with
respect to any RP stock option plan, to the extent that such filings are
required to enable holders of options granted under Section 1.8.1 to freely
exercise such options and (except for holders who may be deemed to be affiliates
of CSI) to freely sell shares acquired by the exercise of such options (assuming
such shares would be freely salable pursuant to an effective registration
statement covering such plans). Nothing set forth herein shall require CSI to
register such exercises on any form other than Form S-8. On and after the
Effective Date, CSI will assume and discharge all obligations of RP with respect
to registration rights agreements disclosed on the RP Disclosure Schedule.
5.17 REORGANIZATION. The parties hereto intend to adopt this Agreement
and the transactions contemplated hereby as a plan of reorganization under
Section 368(a) of the Code. No party hereto, without the consent of the other
parties hereto, will take any action that could reasonably be expected to cause
the Merger to fail to qualify as a reorganization within the meaning of Section
368(a) of the Code. Each of the parties shall report the Merger for income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
(and any comparable state or local statute).
ARTICLE 6. CONDITIONS.
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of the following conditions:
6.1.1. This Agreement and the transaction contemplated hereby
shall have been approved in the manner required by applicable law or by
applicable regulations of any stock exchange or other regulatory body
and by the holders of the issued and outstanding shares of capital
stock of each of RP and CSI entitled to vote thereon.
6.1.2. None of the parties hereto shall be subject to any
order or injunction of a court of competent jurisdiction which
prohibits the consummation of the transaction contemplated by this
Agreement or has a material adverse effect on a party hereto (including
the requirement that either party divest any material portion of its
assets). In the event any such order or injunction shall have been
issued, each party agrees to use its reasonable efforts to have any
such injunction lifted.
6.1.3. All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board
or other regulatory body required in connection with the execution,
delivery and performance of this Agreement shall have been obtained or
made, except for filings in connection with the Merger and any other
documents required to be filed after the Effective Date and except
where the failure to have obtained or made any such consent
authorization, order, approval, filing or registration would not have a
CSI Material Adverse Effect or an RP Material Adverse Effect following
the Effective Date.
6.1.4. The CSI Common Stock issuable upon conversion of the
CSI Preferred Stock shall have been listed or approved for listing upon
notice of issuance on the NASDAQ National Market System, if qualified,
or otherwise quoted on NASDAQ.
6.1.5. The Registration Statement shall have been declared
effective.
6.1.6. All applicable Blue Sky laws shall have been complied
with.
6.1.7. CSI shall have received sufficient financing to satisfy
ongoing working capital needs of CSI and RP following the Transaction
and to refinance existing indebtedness of both companies (and their
respective Subsidiaries to the extent applicable) on terms
substantially no less favorable than the terms of the most current
proposals therefor furnished by CSI to RP prior to the date of this
Agreement, or otherwise reviewed and approved by each party in good
faith.
6.2. CONDITIONS TO OBLIGATION OF RP TO EFFECT THE MERGER. The
obligation of RP to effect the Merger shall be subject to the fulfillment at or
prior to the Closing of the following conditions:
6.2.1. CSI shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or
prior to the Closing and the representations and warranties of CSI
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct in all material respects (or, to the
extent any such representation is qualified by reference to materiality
or to a CSI Material Adverse Effect, is entirely true and correct) as
of the Closing Date, and RP shall have received a certificate of the
President or a Vice President of CSI, dated the Closing Date,
certifying to such effect.
6.2.2. From the date of this Agreement through the Effective
Date, there shall not have occurred any change in the financial
condition, business, operations or prospects of CSI and its
Subsidiaries, taken as a whole, that would reasonably be expected to
have a CSI Material Adverse Effect.
6.2.3 RP shall have received a certificate from the Secretary
of CSI and Merger Sub, in form and substance reasonably satisfactory to
RP certifying the adoption of resolutions by the Board of Directors and
stockholders of CSI in favor of this Agreement, the Merger and the
transactions contemplated by this Agreement.
6.2.4 There shall have been no change of applicable law after
the date hereof as a result of which the Merger will fail to qualify as
a tax-free reorganization within the meaning of Section 368(a) of the
Code.
6.3. CONDITIONS TO OBLIGATION OF CSI TO EFFECT THE MERGER. The
obligations of CSI to effect the Merger shall be subject to the fulfillment at
or prior to the Closing of the following conditions:
6.3.1. RP shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or
prior to the Closing and the representations and warranties of RP
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct in all material respects (or, to the
extent any such representation is qualified by reference to materiality
or to an RP Material Adverse Effect, is entirely true and correct) as
of the Closing Date, and CSI shall have received a certificate of the
President or a Vice President of RP, dated the Closing Date, certifying
to such effect;
6.3.2. From the date of this Agreement through the Effective
Date, there shall not have occurred any change in the financial
condition, business, operations or prospects of RP and the RP
Subsidiaries, taken as a whole, that would reasonably be likely to have
an RP Material Adverse Effect.
6.3.3 CSI shall have received a certificate from the Secretary
of RP, in form and substance reasonably satisfactory to CSI certifying
the adoption of resolutions by the RP Board of Directors and
stockholders in favor of this Agreement, the Merger and the
transactions contemplated by this Agreement.
6.3.4 RP shall take all actions necessary to amend the FM
Precision Golf Manufacturing Corp 401(k) Plan (the "401(k) Plan") to
restrict eligibility to participate in the 401(k) Plan, effective no
later than the Closing Date, to employees of RP, by replacing the
standardized prototype form of plan with a non-standardized prototype
form of plan, in form and substance reasonably satisfactory to CSI.
ARTICLE 7. TERMINATION.
7.1. TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Date, before
or after the approval of this Agreement by the stockholders of RP and CSI, by
the mutual consent of the parties hereto.
7.2. TERMINATION BY EITHER RP OR CSI. This Agreement may be terminated
and the Merger may be abandoned by action of the Board of Directors of either RP
or CSI if: (a) the Merger shall not have been consummated on or before 120 days
after the date of this Agreement; (b) RP's stockholders have voted against the
approval required by Section 6.1.1 at a meeting duly convened therefor or at an
adjournment thereof; (c) CSI's shareholders have voted against the approval
required by Section 6.1.1 at a meeting duly convened therefor or at an
adjournment thereof; (d) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action permanently restraining, enjoining or otherwise
prohibiting the transaction contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and non-appealable;
provided, that the party seeking to terminate this Agreement pursuant to this
clause (d) shall have used all reasonable efforts to remove such injunction,
order or decree; and provided, in the case of a termination pursuant to clause
(a) above, that the terminating party shall not have breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately contributed to the occurrence of the failure referred to in said
clause.
7.3. TERMINATION BY RP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Date, before or after
the adoption and approval by the stockholders of RP referred to in Section
6.1.1, by action of the Board of Directors of RP, if :
7.3.1 (a) There has been a breach by CSI of any
representation or warranty contained in this Agreement which would
reasonably be expected to have a CSI Material Adverse Effect, or (b)
there has been a material breach of any of the covenants or agreements
set forth in this Agreement on the part of CSI, which breach is not
curable or, if curable, is not cured within 30 days after written
notice of such breach is given by RP to CSI.
7.3.2 Whether or not permitted to do so by this Agreement,
the Board of Directors of CSI or CSI shall (i) withdraw, modify or
change its approval or recommendation of this Agreement or the Merger
in a manner adverse to RP, (ii) approve or recommend to the
stockholders of CSI a CSI Acquisition Proposal or CSI Alternative
Transaction, (iii) approve or recommend that the stockholders of CSI
tender their shares in any tender or exchange offer that is a CSI
Alternative Transaction or (iv) take any position or make any
disclosures to CSI's stockholders permitted pursuant to Section 5.2
which has the effect of any of the foregoing. As used herein, "CSI
Alternative Transaction" means any of (i) a transaction pursuant to
which any person (or group of persons) other than CSI or its
affiliates (a "CSI Third Party") acquires or would acquire beneficial
ownership or the right to acquire beneficial ownership of more than
50% of the outstanding shares of any class of equity securities of
CSI, whether from CSI or pursuant to a tender offer or exchange offer
or otherwise, (ii) a merger or other business combination involving
CSI pursuant to which any CSI Third Party acquires more than 50% of
the outstanding equity securities of CSI or the entity surviving such
merger or business combination (iii) any transaction pursuant to which
any CSI Third Party acquires control of assets of CSI (including for
this purpose the outstanding equity securities of any of the CSI
Subsidiaries and securities of the entity surviving any merger or
business combination to which any of the CSI Subsidiaries is a party)
or any of the CSI Subsidiaries having a fair market value (as
determined by the Board of Directors of CSI in good faith) equal to
more than 20% of the fair market value of all the assets of CSI and
the CSI Subsidiaries, taken as a whole, immediately prior to such
transaction or (iv) any other consolidation, business combination,
recapitalization or similar transaction involving CSI or any of the
CSI Subsidiaries, other than the transactions contemplated by this
Agreement; provided, however, that the term CSI Alternative
Transaction shall not include any acquisition of securities by a
broker dealer in connection with a bona fide public offering of such
securities.
7.3.3 The Board of Directors of RP has received an RP
Superior Proposal and the Board of Directors of RP reasonably
determines in good faith (upon the advice of independent outside
counsel) that a failure to terminate this Agreement and enter into an
agreement to effect such RP Superior Proposal would constitute a
breach of its fiduciary duties; provided that this Agreement shall not
be terminated pursuant to this Section 7.3.3 unless simultaneously
with such termination, RP enters into a definitive acquisition, merger
or similar agreement to effect the RP Superior Proposal.
7.4. TERMINATION BY CSI. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Date by action of the
Board of Directors of CSI, if:
7.4.1. (a) There has been a breach by RP of any
representation or warranty contained in this Agreement which would
have or would be reasonably likely to have an RP Material Adverse
Effect, or (b) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of RP,
which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by CSI to RP
7.4.2. Whether or not permitted to do so by this Agreement,
the Board of Directors of RP or RP shall (i) withdraw, modify or
change its approval or recommen dation of this Agreement or the Merger
in a manner adverse to CSI, (ii) approve or recommend to the
stockholders of RP an RP Acquisition Proposal or RP Alternative
Transaction, (iii) approve or recommend that the stockholders of RP
tender their shares in any tender or exchange offer that is an RP
Alternative Transaction or (iv) take any position or make any
disclosures to RP's stockholders permitted pursuant to Section 5.1
which has the effect of any of the foregoing. As used herein, "RP
Alternative Transaction" means any of (i) a transaction pursuant to
which any person (or group of persons) other than CSI or its
affiliates (an "RP Third Party") acquires or would acquire beneficial
ownership or the right to acquire beneficial ownership of more than
50% of the outstanding shares of any class of equity securities of RP,
whether from RP or pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving RP
pursuant to which any RP Third Party acquires more than 50% of the
outstanding equity securities of RP or the entity surviving such
merger or business combination (iii) any transaction pursuant to which
any RP Third Party acquires or would acquire control of assets of RP
(including for this purpose the outstanding equity securities of any
of the RP Subsidiaries and securities of the entity surviving any
merger or business combination to which any of the RP Subsidiaries is
a party) or any of the RP Subsidiaries having a fair market value (as
determined by the Board of Directors of RP in good faith) equal to
more than 20% of the fair market value of all the assets of RP and the
RP Subsidiaries, taken as a whole, immediately prior to such
transaction, or (iv) any other consolidation, business combination,
recapitalization or similar transaction involving RP or any of the RP
Subsidiaries, other than the transactions contemplated by this
Agreement; provided, however, that the term RP Alternative Transaction
shall not include any acquisition of securities by a broker dealer in
connection with a bona fide public offering of such securities.
7.4.3 The Board of Directors of CSI has received a CSI
Superior Proposal and the Board of Directors of CSI reasonably
determines in good faith (upon the advice of independent outside
counsel) that a failure to terminate this Agreement and enter into an
agreement to effect CSI Superior Proposal would constitute a breach of
its fiduciary duties; provided that this agreement shall not be
terminated pursuant to this Section 7.4.3 unless simultaneously with
such termination CSI enters into a definitive acquisition, merger or
similar agreement to effect the CSI Superior Proposal.
7.5. EFFECT OF TERMINATION AND ABANDONMENT. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article 7, all obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to Sections 5.11, 5.13, and this 7.5 and
Article 8 and the Confidentiality Agreement referred to in Section 8.4.
Moreover, in the event of termination of this Agreement pursuant to Section 7.3
or 7.4, nothing herein shall prejudice the ability of the non-breaching party
from seeking damages from the other party for any breach of this Agreement,
including without limitation, attorneys' fees and the right to pursue any remedy
at law or in equity.
7.6. EXTENSION; WAIVER. At any time prior to the Effective Date, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties made to such party contained herein or in
any document to be delivered pursuant hereto, and (c) waive compliance with any
of the agreements or conditions for the benefit of such party contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by or on
behalf of the party granting such extension or waiver.
ARTICLE 8. GENERAL PROVISIONS.
8.1. NONSURVIVAL, REPRESENTATIONS AND WARRANTIES. All representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall be deemed to the extent expressly provided herein to be
conditions to the Merger and shall not survive the Merger.
8.2. NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to RP: If to CSI:
Royal Precision, Inc. Coyote Sports, Inc.
15170 North Hayden Road 2291 Arapahoe Avenue
Scottsdale, Arizona 89260 Boulder, Colorado 80302
Telecopier No.: (602) 627-0206 Telecopier No.: (303) 818-4626
Telephone No.: (602) 627-0270 Telephone No.: (303) 933-6609
Attn: Chairman of the Board Attn: President
or to such other address as any party shall specify by written notice so given
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3. ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective successors, and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
8.4. ENTIRE AGREEMENT. This Agreement, the Exhibits, the CSI
Disclosure Schedule, the RP Disclosure Schedule, the Confidentiality Agreement
dated November 16, 1997, between RP and CSI and any documents delivered by the
parties in connection herewith constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings (oral and written) among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
During the term of this Agreement, the Confidentiality Agreement may not be
terminated by either party thereto.
8.5. AMENDMENT. This Agreement may be amended by the parties hereto,
by action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the RP Merger by the
stockholders of RP and CSI, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed by or on behalf of each of the
parties hereto.
8.6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.
8.7. COUNTERPARTS. This Agreement may be executed by the parties
hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies of this
Agreement, each of which may be signed by less than all of the parties hereto,
but together all such copies are signed by all of the parties hereto.
8.8. HEADINGS. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
8.9. INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
8.10. WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
giving such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or otherwise affecting the validity or enforceability of any of the
terms or provisions of this Agreement in any other jurisdiction. If any
provision of this Agreement is so broad as to be unenforceable, the provision
shall be interpreted to be only so broad as is enforceable.
8.12. ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any provision of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court having jurisdiction of
the matter, this being in addition to any other remedy to which they may be
entitled at law or in equity.
8.13. SUBSIDIARIES. As used in this Agreement, the word "Subsidiary"
when used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is a
general partner.
8.14 KNOWLEDGE. When references are made in this Agreement to any
representation or warranty being "to the knowledge" of CSI or RP, or similar
language, "knowledge" shall mean (a) the actual knowledge of any director or
senior executive officer of such party or (b) such knowledge as any director or
senior executive officer of such party could reasonably be expected to have
following a reasonably comprehensive investigation of the matter subject to such
representation or warranty.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf as of the day and year first
written above.
COYOTE SPORTS, INC.
By: /s/ James M. Probst
----------------------------
Name: James M. Probst
Title: President and CEO
RP ACQUISITION CORP.
By: /s/ James M. Probst
----------------------------
Name: James M. Probst
Title:
ROYAL PRECISION, INC.
By: /s/ Raymond J. Minella
----------------------------
Name: Raymond J. Minella
Title: Chairman of the Board
<PAGE>
Exhibit 1.4.1
Certificate of Designation
<PAGE>
Exhibit 3.4.1
Capital Stock of CSI
25,000,000 shares of Common Stock, par value $.001 per share
_______ shares of CSI Preferred Stock, par value $.001 per share*
* Subject to the Exchange Ratio in the Merger.
<PAGE>
Exhibit 5.14(a)(i)
Stockholder Agreement Signatories
James M. Probst
Mel S. Stonebraker
Paragon Coyote Texas, Ltd.
Richard P. Johnston and Jayne A. Johnston Charitable Remainder Trust #3
David E. Johnston
Berenson Minella & Company, L.P.
Kenneth J. Warren
<PAGE>
Exhibit 5.14(a)(ii)
RP Voting Agreement Signatories
Kenneth J. Warren
Lawrence Bain
Richard P. Johnston and Jayne A. Johnston Charitable Remainder Trust #3
Berenson Minella & Company, L.P.
David E. Johnston
Danny Edwards
Ronald L. Chambers
<PAGE>
Exhibit 5.14(b)
CSI Voting Agreement Signatories
Paragon Coyote Texas, Ltd.
James M. Probst
Mel S. Stonebraker
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. THE TRANSACTION....................................................1
1.1. THE MERGER...............................................................1
1.2. EFFECTIVE DATE OF THE MERGER.............................................1
1.3. TAX-FREE REORGANIZATION .................................................1
1.4. CONVERSION OF SECURITIES ................................................2
1.5. TERMS OF EXCHANGE .......................................................2
1.6. DIVIDENDS; TRANSFER TAXES ...............................................3
1.7. NO FRACTIONAL SHARES ....................................................3
1.8. STOCK OPTIONS ...........................................................4
1.9. STOCKHOLDER APPROVAL ....................................................4
1.10. CLOSING OF RP'S TRANSFER BOOKS .........................................4
1.11. ASSISTANCE IN CONSUMMATION OF THE MERGER ...............................5
1.12. CLOSING ................................................................5
1.13. ILLUSTRATIVE COMPUTATION ...............................................5
ARTICLE 2. SURVIVING CORPORATION..............................................5
2.1. CERTIFICATE OF INCORPORATION ............................................5
2.2. BY-LAWS .................................................................5
2.3. OFFICERS; BOARD OF DIRECTORS ............................................5
2.4. EFFECTS OF THE MERGER ...................................................5
ARTICLE 3. REPRESENTATIONS OF CSI.............................................6
3.1. CSI DISCLOSURE SCHEDULE .................................................6
3.2. EXISTENCE AND GOOD STANDING OF CSI ......................................6
3.3. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT .........................7
3.4. CAPITAL STOCK ...........................................................7
3.5. SUBSIDIARIES ............................................................7
3.6. NO VIOLATIONS ...........................................................7
3.7. SEC DOCUMENTS ...........................................................8
3.8. LITIGATION ..............................................................9
3.9. ABSENCE OF CERTAIN CHANGES ..............................................9
3.10. TAX MATTERS ...........................................................10
3.11. CERTAIN EMPLOYEE PLANS ................................................12
3.12. LABOR MATTERS .........................................................13
3.13. ENVIRONMENTAL LAWS AND REGULATIONS ....................................13
3.14. REAL PROPERTY .........................................................14
3.15. LIMITATION ON BUSINESS CONDUCT ........................................15
3.16. TITLE TO PROPERTY .....................................................15
3.17. INSURANCE .............................................................16
3.18. INTELLECTUAL PROPERTY .................................................16
3.19. CERTAIN CONTRACTS .....................................................16
3.20. NO BROKERS ............................................................16
3.21. CONFLICTS OF INTEREST .................................................17
3.22. PERSONAL PROPERTY .....................................................17
3.23. TAKEOVER STATUTE ......................................................17
3.24. DISCLOSURE ............................................................17
3.25. STATUS AS REORGANIZATION ..............................................17
ARTICLE 4. REPRESENTATIONS OF RP.............................................18
4.1. RP DISCLOSURE SCHEDULE .................................................18
4.2. EXISTENCE AND GOOD STANDING OF RP ......................................19
4.3. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT ........................19
4.4. CAPITAL STOCK ..........................................................20
4.5. SUBSIDIARIES ...........................................................20
4.6. NO VIOLATIONS ..........................................................20
4.7. SEC DOCUMENTS ..........................................................21
4.8. LITIGATION .............................................................21
4.9. ABSENCE OF CERTAIN CHANGES .............................................22
4.10. TAX MATTERS ...........................................................22
4.11. CERTAIN EMPLOYEE PLANS ................................................24
4.12. LABOR MATTERS .........................................................25
4.13. ENVIRONMENTAL LAWS AND REGULATIONS ....................................25
4.14. REAL PROPERTY .........................................................26
4.15. LIMITATION ON BUSINESS CONDUCT ........................................27
4.16. TITLE TO PROPERTY .....................................................27
4.17. INSURANCE .............................................................27
4.18. INTELLECTUAL PROPERTY .................................................27
4.19. CERTAIN CONTRACTS .....................................................28
4.20. NO BROKERS ............................................................28
4.21. CONFLICTS OF INTEREST .................................................28
4.22. PERSONAL PROPERTY .....................................................29
4.23. TAKEOVER STATUTE ......................................................29
4.24. DISCLOSURE ............................................................29
4.25. ADDITIONAL DISCLOSURE .................................................29
ARTICLE 5. COVENANTS.........................................................30
5.1. NO SOLICITATION BY RP ..................................................30
5.2 NO SOLICITATION BY CSI .................................................32
5.3 CONDUCT OF BUSINESSES ..................................................34
5.4 MEETINGS OF STOCKHOLDERS ...............................................37
5.5 FILINGS; OTHER ACTION ..................................................38
5.6 INSPECTION OF RECORDS; ACCESS ..........................................38
5.7 PUBLICITY ..............................................................38
5.8 REGISTRATION STATEMENT/PROXY STATEMENT .................................39
5.9 COMPLIANCE WITH THE SECURITIES ACT; RESALE PROSPECTUS ..................39
5.10. TAKEOVER PROVISIONS INAPPLICABLE ......................................41
5.11. INFORMATION IN DISCLOSURE DOCUMENTS, REGISTRATION STATEMENTS, ETC. ....41
5.12. FURTHER ACTION ........................................................41
5.13. FEES AND EXPENSES .....................................................41
5.14. STOCKHOLDERS' AGREEMENT; VOTING AGREEMENTS ............................43
5.15. DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION ................43
5.16. RP STOCK PLANS ........................................................43
5.17. REORGANIZATION ........................................................43
ARTICLE 6. CONDITIONS........................................................44
6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER .............44
6.2. CONDITIONS TO OBLIGATION OF RP TO EFFECT THE MERGER ....................45
6.3. CONDITIONS TO OBLIGATION OF CSI TO EFFECT THE MERGER ...................45
ARTICLE 7. TERMINATION.......................................................46
7.1. TERMINATION BY MUTUAL CONSENT ..........................................46
7.2. TERMINATION BY EITHER RP OR CSI ........................................46
7.3. TERMINATION BY RP ......................................................46
7.4. TERMINATION BY CSI .....................................................47
7.5. EFFECT OF TERMINATION AND ABANDONMENT ..................................48
7.6. EXTENSION; WAIVER ......................................................49
ARTICLE 8. GENERAL PROVISIONS................................................49
8.1. NONSURVIVAL, REPRESENTATIONS AND WARRANTIES ............................49
8.2. NOTICES ................................................................49
8.3. ASSIGNMENT; BINDING EFFECT; BENEFIT ....................................49
8.4. ENTIRE AGREEMENT .......................................................50
8.5. AMENDMENT ..............................................................50
8.6. GOVERNING LAW ..........................................................50
8.7. COUNTERPARTS ...........................................................50
8.8. HEADINGS ...............................................................50
8.9. INTERPRETATION .........................................................50
8.10. WAIVERS ...............................................................50
8.11. SEVERABILITY ..........................................................51
8.12. ENFORCEMENT OF AGREEMENT ..............................................51
8.13. SUBSIDIARIES ..........................................................51
8.14. KNOWLEDGE .............................................................51
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
ROYAL PRECISION, INC.,
COYOTE SPORTS, INC. AND
RP ACQUISITION CORP.
Dated as of February 2, 1999
FORM OF
CERTIFICATE OF DESIGNATION
(Pursuant to the provisions of Section 78.1955
of the General Corporation Law of the State of Nevada)
It is hereby certified that:
1. The name of the corporation (the "Corporation") is Coyote Sports, Inc.
2. Set forth hereinafter is a copy of a resolution, containing a statement
of the voting powers, preferences, limitations, restrictions, and relative
rights of the Series C Preferred Stock hereinafter designated, adopted by the
Board of Directors of the Corporation, pursuant to a provision of the Amended
and Restated Articles of Incorporation relating to the issuance of said Series C
Preferred Stock by resolution of the Board of Directors:
RESOLVED, that a series of the authorized preferred stock, par value $.001
per share, of the Corporation be created hereby, and that the designations and
amounts thereof and the voting powers, preferences, and relative, participating,
optional and other special rights, of the shares of such series, and the
qualifications, limitations, or restrictions thereof, are as follows:
1. Designations and Numbers of Shares. _____________________________
(________) shares of the Series C Convertible Redeemable Preferred Stock of the
Corporation are hereby constituted as a series of preferred stock, $.001 par
value per share, stated value $_______<F1> per share (the "Stated Value") and
designated as "Series C Convertible Redeemable Preferred Stock" (hereinafter
called the "Series C Preferred Stock").
2. Dividends and Distributions.
(a) The holders of the Series C Preferred Stock shall be entitled to
preferential cash dividends with respect thereto at the rate of 6% of the Stated
Value thereof per annum, payable ratably per share of Series C Preferred Stock
outstanding if, as and when declared by the board of directors of the
Corporation or any duly authorized committee of that board (the "Board of
Directors") out of funds legally available for the payment thereof. Such
preferential dividends shall accrue daily from the date of issuance of the
applicable preferred share (the "Issuance Date") and shall be payable on the 1st
day of January, April, July, and October, or if any such dividend payment date
is a Saturday, Sunday or legal holiday, then on the next day which is not a
Saturday, Sunday or legal holiday.
- --------
1. Stated value to be set at (x) $6.00 multiplied by (y) the reciprocal of the
final merger exchange ratio of shares of Series C Preferred Stock to shares of
Royal Precision, Inc. Common Stock in the merger pursuant to which the Series C
Preferred Stock is to be issued. (For the avoidance of doubt, based on the
shares of common stock of the Corporation and Royal Precision, Inc. stated to be
outstanding in the Agreement and Plan of Merger with respect to such merger,
such exchange ratio would be 1.0018, such reciprocal would be .9982, and such
Stated Value would be $5.9892.)
(b) Dividends on the Series C Preferred Stock shall be cumulative so that
if, for any dividend accrual period, cash dividends in the amount specified in
paragraph (a) of this Section 2 are not declared and paid or set aside for
payment, the amount of accrued but unpaid dividends shall accumulate, and such
accrued but unpaid dividends shall be added to the preferential cash dividends
payable for subsequent dividend accrual periods. Accrued but unpaid dividends
shall bear interest at the rate of 6% per annum until paid.
(c) Whenever dividends or distributions payable on the Series C Preferred
Stock, as provided in this Section 2, are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series C Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on or make any other
distributions on any shares of stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred
Stock; or
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C
Preferred Stock except dividends or distributions
paid ratably on the Series C Preferred Stock and all
such parity stock on which dividends or
distributions are payable or in arrears in
proportion to the total amounts to which the holders
of all such shares are then entitled.
3. Redemption.
3.1 Redemption at Option of the Corporation. The Corporation may, by
resolution of its Board of Directors (excluding any director who is, or is
designated by, any holder of the Series C Preferred Stock or any Affiliate of
such a holder) subject to any applicable law, at any time, or from time to time,
in whole or in part, on a pro-rata basis among the holders of Series C Preferred
Stock in proportion to the number of shares of Series C Preferred Stock held by
them, redeem the shares of Series C Preferred Stock from each holder thereof
(each date set for redemption being referred to herein as a "Redemption Date")
at a price per share of Series C Preferred Stock payable in cash equivalent to
(i) the Stated Value plus (ii) all accrued and unpaid dividends (whether or not
declared or due) to the Redemption Date fixed for the redemption of such shares
of Series C Preferred Stock (the "Redemption Price").
3.2 Procedures Applicable to Redemptions.
(a) Redemption Notice. At least thirty (30) days but not more than
sixty (60) days prior to a Redemption Date, written notice (a "Redemption
Notice") shall be delivered by the Corporation to each holder of Series C
Preferred Stock which the Corporation seeks to redeem on such Redemption Date
(in each case, a "Redeeming Holder"). The Redemption Notice shall state:
(i) the number of shares of Series C Preferred Stock to be
redeemed from such Redeeming Holder;
(ii) the Redemption Date and the Redemption Price; and
(iii)the manner and place designated for the Redeeming Holders to
surrender to the Corporation their certificates representing
the shares of Series C Preferred Stock to be redeemed in
exchange for the Redemption Price.
(b) Deliveries of Stock Certificates. On or before the Redemption
Date, each Redeeming Holder shall surrender to the Corporation the certificate
or certificates representing the shares of Series C Preferred Stock to be
redeemed, in the manner and the place designated in the Redemption Notice and
thereupon the Redemption Price for those shares shall be payable on the
Redemption Date to the order of the person whose name appears on that
certificate or certificates, and each surrendered certificate shall be canceled
and retired. In the event that less than all of the shares of Series C Preferred
Stock represented by a certificate surrendered for redemption are redeemed as
aforesaid, a new certificate or certificates shall be issued representing the
unredeemed shares. The Redemption Notice shall not be given effect in the case
of any shares of Series C Preferred Stock as to which a proper notice of
conversion, specifying an effective date prior to the Redemption Date, has been
duly received by the Corporation prior to the Redemption Date, which shares
shall be converted into Common Stock in accordance with such notice of
conversion pursuant to the terms hereof.
(c) Cessation of Dividend Accrual, etc. If on the Redemption Date the
Redemption Price is either paid or made available for payment through the
deposit arrangement specified in clause (d) below, then notwithstanding that
certificates evidencing any of the shares of Series C Preferred Stock so elected
to be redeemed shall not have been surrendered, dividends on such shares shall
cease to accrue after the Redemption Date and all rights with respect to the
redeemed shares of Series C Preferred Stock shall forthwith after the Redemption
Date terminate, except only the right of the Redeeming Holders to receive the
Redemption Price without interest upon surrender of their certificate or
certificates representing the shares of Series C Preferred Stock that have been
redeemed, subject to applicable law. If the Corporation shall default in the
payment of the Redemption Price, then, with respect to all shares of Series C
Preferred Stock for which the Redemption Price shall not have been paid,
dividends shall continue to accrue on such redeemed shares of Series C Preferred
Stock and all other rights shall remain in effect with respect to such shares
until the Corporation shall pay the Redemption Price on such shares.
(d) Deposit of Funds for Redemption. On or prior to the Redemption
Date, the Corporation shall deposit in a segregated trust account with any
United States federally or state chartered commercial bank or trust company
having net capital of not less than $100,000,000 (or a subsidiary thereof) a sum
equal to the aggregate Redemption Price (either in cash or certificates
representing shares of Common Stock) of all shares of Series C Preferred Stock
to be redeemed, with irrevocable instructions and authority to the bank or trust
company to pay, or deliver on or after the Redemption Date or prior thereto, the
Redemption Price to the respective holders upon the surrender of their share
certificates. From and after the Redemption Date if such deposit shall have been
made, the shares so called for redemption shall be redeemed and shall after such
redemption be canceled and no longer be available for issuance as shares of
Series C Preferred Stock by the Corporation but shall have the status of
authorized but unissued shares of Preferred Stock of the Corporation without
designation as to rights, preferences, limitations or series until such shares
are once more designated as part of a particular series with particular rights,
preferences or limitations by the Board of Directors of the Corporation. The
deposit shall constitute full payment of the redeemed shares of Series C
Preferred Stock to their holders, and from and after the Redemption Date the
shares shall be deemed to be no longer outstanding, and the holders thereof
shall cease to be stockholders with respect thereto except for the right to
receive from the bank or trust company payment or delivery of the Redemption
Price of the shares, without interest, upon surrender of their certificates
therefor. Any funds so deposited and unclaimed at the end of one year from the
Redemption Date shall be released or repaid to the Corporation, after which time
the holders of shares redeemed shall be entitled to receive payment of the
Redemption Price only from the Corporation. No sinking fund shall be established
in relation to the redemption of Series C Preferred Stock.
4. Conversion Rights; Certain Issuances to Affiliates. (a) All holders of
record of shares of Series C Preferred Stock shall have the option, upon notice
to the Corporation, to convert any or all of their shares of Series C Preferred
Stock in the ratio of one share of Common Stock for each share of Series C
Preferred Stock (the "Conversion") effective on the date specified in each such
holder's notice to the Corporation, which shall be at least three (3) days but
not more than twenty (20) days after the date such notice is given. Upon the
giving of such notice, such holder of shares of Series C Preferred Stock shall
surrender his or its certificate or certificates for all such shares to the
Corporation and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled pursuant to this Section 4. On
the effective date of the Conversion, all rights with respect to the Series C
Preferred Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common Stock into which such Series C Preferred
Stock has been converted, and payment of any declared or accrued but unpaid
dividends thereon. If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or by his or its attorney duly authorized in writing.
As soon as practicable after the effective date of the Conversion and the
surrender of the certificate or certificates for Series C Preferred Stock, the
Corporation shall cause to be issued and delivered to such holder, or on his or
its written order, a certificate or certificates for the number of shares of
Common Stock issuable on such conversion in accordance with the provisions
hereof.
(b) In the event the Corporation shall, at any time after the issuance
of any share of Series C Preferred Stock, declare or pay any dividend or make
any distribution on Common Stock payable in shares of Common Stock, or effect a
subdivision or split or a combina tion, consolidation or reverse split of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock, then in each such case a provision shall be made, as applicable,
for either (i) delivery upon conversion of the Series C Preferred Stock of, on a
per share basis, the number of shares of Common Stock paid on each share of
Common Stock into which such Series C Preferred Stock is converted, or (ii) a
subdivision or split or a combination, consolidation or reverse split of the
Common Stock into which the Series C Preferred Stock is convertible.
(c) If and whenever on or after the Issuance Date of the Series C
Preferred Stock (except pursuant to the exercise, in accordance with their
terms, of any rights, options or warrants, or other securities convertible into
or exercisable or exchangeable for Common Stock, outstanding as of such Issuance
Date), the Corporation issues or sells any shares of Common Stock to any
Affiliate of the Corporation for a consideration per share less than the average
closing market price for such Common Stock for the thirty (30) consecutive
trading days ending three (3) trading days immediately preceding the date of
such issuance or sale (the "Market Price"), then forthwith upon such issuance or
sale, the number of shares of Common Stock issuable upon conversion in respect
of each share of Series C Preferred Stock shall be adjusted so that such number
of shares shall equal (A) the number of shares of Common Stock issuable upon
conversion in respect of a share of Series C Preferred Stock immediately prior
to the date of such issuance or sale multiplied by (B) a fraction, (x) the
numerator of which shall be (i) the number of shares of Common Stock outstanding
on the date of such issuance or sale, plus (ii) the number of additional shares
of Common Stock issued or sold, and (y) the denominator of which shall be (i)
the number of shares of Common Stock outstanding on the date of such issuance or
sale, plus (ii) the number of additional shares of Common Stock which the
aggregate consideration received by the Corporation upon such issuance or sale
would purchase at such Market Price per share of Common Stock. Notwithstanding
the foregoing, no such adjustment shall be required by this Section 4(c) or
otherwise in respect of (x) the issuance or exercise of any warrants issued in
connection with any financing transaction involving an Affiliate of the
Corporation on terms substantially equivalent to those customary in transactions
of a similar nature as determined in good faith by, and reflected in written
resolutions of, the Corporation's Board of Directors, or (y) the issuance or
exercise of any options issued to officers or employees of the Corporation as
approved by the Corporation's Board of Directors. In case any shares of Common
Stock are issued for consideration consisting of securities or other property
other than cash, the value of such consideration shall be as determined in good
faith by, and reflected in written resolutions of, the Corporation's Board of
Directors. In the case of the issuance or sale of Common Stock pursuant to the
exercise of any rights, options or warrants, or other securities convertible
into or exercisable or exchangeable for Common Stock, the date as of which the
"Market Price" of Common Stock shall be determined for purposes of this Section
4(c) shall be the initial date of issuance of such rights, options or warrants
or other securities, and not, for example, the date of such exercise.
(d) Except as specifically provided in Section 4(b) or (c), the number
of shares of Common Stock issuable upon conversion of a share of Series C
Preferred Stock shall not be adjusted by reason of any issuance or sale of
Common Stock by the Corporation regardless of the consideration received
therefor.
5. Liquidation. Upon any voluntary or involuntary dissolution, liquidation,
or winding up of the Corporation (a "Liquidation"), the holder of each share of
Series C Preferred Stock then outstanding shall be entitled to be paid out of
the assets of the Corporation available for distribution to its stockholders,
before any distribution of assets shall be made to the holders of Common Stock
of the Corporation or to the holders of other stock of the Corporation that
ranks junior to such series of the Series C Preferred Stock in respect to
distributions upon a Liquidation of the Corporation ("Junior Stock"), an amount
equal to the Stated Value of such Series C Preferred Stock, plus an amount equal
to all dividends accrued and unpaid on such share on the date fixed for
distribution of assets of the Corporation to the holders of the Series C
Preferred Stock. Neither a consolidation or merger of the Corporation with or
into any other entity, nor a merger of any other entity with or into the
Corporation, nor a sale or transfer of all or any part of the Corporation's
assets for cash or securities or any other property, shall be considered a
Liquidation. Written notice of any Liquidation shall be given to the holders of
the Series C Preferred Stock not less than thirty (30) days prior to any payment
date stated therein.
6. Voting Rights. The holder of each share of Series C Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series C Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share), and with respect to such vote, such holder shall have full voting rights
and powers equal to the voting rights and powers of the holders of Common Stock,
and shall be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting or any action by written consent of the shareholders in
accordance with the Bylaws of this Corporation, and shall vote separately as a
class to the extent, if any, required by applicable law.
7. Protective Provisions. So long as shares of Series C Preferred Stock are
outstanding, this Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of two-thirds of the
then outstanding shares of Series C Preferred Stock, voting together as a single
class:
(a) designate or issue any additional shares of Series C Preferred
Stock or in any manner authorize, create, designate, issue or sell any class or
series of capital stock (including any shares of treasury stock) or rights,
options, warrants or other securities convertible into or exercisable or
exchangeable for capital stock or any debt security which by its terms is
convertible into or exchangeable for any equity security or has any other equity
feature or any security that is a combination of debt and equity, which, in each
case, as to the payment of dividends or distribution of assets, including,
without limitation, distributions to be made upon the liquidation, dissolution
or winding up of the Corporation, is senior to or on a parity with the Series C
Preferred Stock;
(b) in any manner alter or change the terms, designations, powers,
preferences or relative, participating, optional or other special rights, or the
qualifications, limitations or restrictions, of the Series C Preferred Stock;
(c) reclassify the shares of any class or series of Junior Stock into
shares of any class or series of capital stock ranking, either as to payment of
dividends, distributions of assets or redemptions, including, without
limitation, distributions to be made upon the liquidation, dissolution or
winding up of the Corporation senior to or on a parity with the Series C
Preferred Stock;
(d) take any action to voluntarily dissolve, liquidate or wind up the
Corporation; or
(e) take any action to cause any amendment, alteration or repeal of
any of the provisions of (i) the Amended and Restated Articles of Incorporation
or (ii) the By-laws, if such amendment, alteration or repeal would adversely
affect in any material respect the rights of the holders of the Series C
Preferred Stock in their capacity as such.
8. Affirmative Covenants of the Corporation.
(a) The Corporation shall at all times preserve, renew and keep in
full force and effect its legal existence and material rights and franchises
with respect thereto, provided, however, that the Corporation shall not be
required to preserve any such right or franchise, if the Board of Directors of
the Corporation shall determine in its good faith judgment that the preservation
thereof is no longer desirable in the conduct of the business of the Corporation
and its subsidiaries, taken as a whole.
(b) The Corporation shall comply in all material respects with all
applicable requirements of law, the necessity of compliance therewith in good
faith by appropriate proceedings diligently pursued, except where the failure to
so comply or contest would not reasonably be expected to have a material adverse
effect on the Corporation and its subsidiaries, taken as a whole.
(c) The Corporation shall deliver to each holder of Series C Preferred
Stock:
(i) as soon as available and in any event within one hundred
(100) days after the end of each Fiscal Year of the
Corporation, an audited or reviewed consolidated balance
sheet of the Corporation and its subsidiaries as of the end
of such Fiscal Year and the related audited or reviewed
consolidated statements of income and cash flows for such
Fiscal Year, setting forth in each case in comparative form
the figures for the previous Fiscal Year;
(ii) as soon as available and in any event within fifty five (55)
days after the end of each fiscal quarter of each Fiscal
Year of the Corporation, a consolidated balance sheet of the
Corporation and its subsidiaries as of the end of such
fiscal quarter and related consolidated statements of income
for such quarter and for the portion of the Corporation's
Fiscal Year then ended, setting forth in each case in
comparative form the figures for the corresponding fiscal
quarter and the corresponding portion of the Corporations's
previous Fiscal Year;
(d) The Corporation shall file all material tax returns applicable to
the Corporation in a timely manner.
9. Holder; Notices. The term "holder" or "holders" wherever used herein
with respect to a holder or holders of shares of Series C Preferred Stock shall
mean the holder or holders of record of such shares as set forth on the stock
transfer records of the Corporation. Whenever any notice is required to be given
under this Certificate of Designation, such notice may be given personally or by
mail. Any notice given to a holder of any share of Series C Preferred Stock
shall be sufficient if given to the holder of record of such share at the last
address set forth for such holder on the stock transfer records of the
Corporation. Any notice given by mail shall be deemed to have been given when
deposited in the United States mail with postage thereon prepaid. The
Corporation shall send to the holders of the Series C Preferred Stock copies of
any notices, statements, or other communications sent to the holders of the
Common Stock and of the setting of a record date for the holders of the Common
Stock for any purpose.
10. Affiliate. The term "Affiliate" wherever used herein shall mean, as to
any person, any other person directly or indirectly controlling, controlled by
or under common control with such person (for which purpose "control" of any
person shall mean the power to direct the management of such person, whether by
ownership of securities or by contract or otherwise), including without
limitation any person who is the beneficial owner (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended) of 10% or more of
any class of voting securities of such person.
IN WITNESS WHEREOF, Coyote Sports, Inc. has caused this Certificate of
Designation of the Series C Preferred Stock to be executed by its duly
authorized officers this ___ day of ____________, 1999.
COYOTE SPORTS, INC.
By:________________________
Name:
Title:
By:________________________
Name:
Title:
STATE OF )
) SS.:
COUNTY OF )
On __________________, 1999, personally appeared before me, a Notary
Public, for the State and County aforesaid, __________________________________,
as _______ of Coyote Sports, Inc., who acknowledged that he executed the above
instrument.
------------------------------
Notary Public
[Notarial Seal]
AMENDMENT NO. 1 TO STOCKHOLDER AGREEMENT
AMENDMENT NO. 1 (this "Agreement") to the Stockholder Agreement, dated
as of May 12, 1997 (the "Stockholder Agreement"), among Danny Edwards, an
individual residing at 6724 North Whispering Hills Road, Paradise Valley,
Arizona 85253, Drew M. Brown, an individual whose address is 4201 North 24TH
Street, Suite 120, Phoenix, Arizona 85016, DMB Property Ventures Limited
Partnership, a Delaware limited partnership having an office at 4201 North 24TH
Street, Suite 120, Phoenix, Arizona 85016, Mark N. Sklar, an individual whose
address is 4201 North 24TH Street, Suite 120, Phoenix, Arizona 85016 and Bennett
Dorrance, Trustee of the Bennett Dorrance Trust dated April 21, 1989, as
amended, whose address is 4201 North 24TH Street, Suite 120, Phoenix, Arizona
85016 (Messrs. Edwards, Brown, Sklar and Dorrance, and DMB Property Ventures
Limited Partnership collectively referred to as the "Edwards Group"),
Christopher A. Johnston, an individual residing at 2784 Teton Pines Drive,
Jackson, Wyoming 83001, Richard P. Johnston and Jayne A. Johnston Charitable
Remainder Trust #3 (Richard P. Johnston, Trustee) ("Johnston CRT #3"), having an
office at Teton Pines, 4350 Greens Place, Wilson, Wyoming 83014 as successor to
RPJ/JAJ Partners, Ltd., a Wyoming partnership, David E. Johnston, an individual
residing at 1935 W. Muirhead Loop, Oro Valley, Arizona 85737, Berenson Minella &
Company, L.P. ("Berenson Minella"), a New York limited partnership having an
office at 667 Madison Avenue, New York, New York 10021, Kenneth J. Warren, an
individual residing at 5567 Caplestone Lane, Dublin, Ohio 43017 (Messrs.
Christopher A. Johnston, David E. Johnston and Kenneth J. Warren, and Johnston
CRT #3 and Berenson Minella collectively referred to as the "Johnston Group" and
each member of the Edwards Group and the Johnston Group individually referred to
as a "Stockholder" and collectively as "Stockholders"), and Royal Precision,
Inc. (f/k/a FM Precision Golf Corp.), a Delaware corporation ("RP"). Capitalized
terms used herein and not otherwise referred to herein shall have the meaning
ascribed thereto in the Stockholder Agreement
WHEREAS, RP, Coyote Sports, Inc., a Nevada corporation ("CSI"), and RP
Acquisition Corp. ("Sub"), a Delaware propose to enter into an Agreement and
Plan of Merger dated as of even date herewith (the "Merger Agreement"),
providing for the merger of Sub with and into RP (the "Merger") pursuant to the
terms and conditions of the Merger Agreement, and setting forth certain
representations, warranties and agreements which each of the parties thereto is
making thereby in connection with the Merger; and
WHEREAS, in connection with the Merger, certain Stockholders of the
Company have agreed to enter into Voting Agreements in favor of CSI (the "Voting
Agreements") pursuant which, subject to the terms and conditions of such Voting
Agreements, such Stockholders have agreed to vote their shares of Common Stock
in favor of the adoption and approval of the Merger Agreement and the approval
of the Merger and against certain transactions which might delay, impede or
oppose the Merger and, concurrently therewith, grant to CSI a proxy to vote such
shares in favor of the adoption and approval of the Merger Agreement and the
approval of the Merger and against certain transactions which might delay,
impede or oppose the Merger; and
WHEREAS, the parties hereto wish to effect certain Amendments to the
Stockholders Agreement in connection with the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendments to Stockholder Agreement. (a) Section 4 of the
Stockholders Agreement is hereby amended by deleting such Section in its
entirety and substituting in lieu thereof the following:
"SECTION 4. No Voting Trusts. Each Stockholder agrees that it will not,
and will not permit any entity under any Stockholder's control to,
deposit any of its Shares in a voting trust or subject any of his
Shares to any arrangement or agreement with respect to the voting of
such Shares, other than this Agreement and any Voting Agreement entered
into in connection with the Merger.
(b) A new Section 12 to the Stockholder Agreement is hereby inserted
immediately following Section 11.5 of the Stockholders Agreement to read as
follows:
Notwithstanding anything to the contrary contained herein, nothing in
this Stockholders Agreement shall be deemed to prohibit any part hereto
from executing and delivering the Merger Agreement or any Voting
Agreement, and performing his respective obligations thereunder.
(c) Christopher A. Johnston is hereby deleted as a party to the
Stockholders Agreement shall no longer have any rights or obligations hereunder
and, hereafter, (x) all references to the Johnston Group shall be deemed to be
references solely to Messrs. David E. Johnston and Kenneth J. Warren, and
Johnston CRT #3 and Berenson Minella and (y) for all purposes of the Stockholder
Agreement, Mr. Christopher A. Johnston shall not be deemed to be a Stockholder
for purposes of the Stockholder Agreement, as amended hereby.
SECTION 2. Miscellaneous.
2.1. The parties, being concerned that either party may obtain some
advantage by having the law of the jurisdiction of its principal place of
business apply, and agreeing in concept to have this Agreement subject to the
laws of a neutral jurisdiction, whose laws are perceived as being fair in
general to the business community at large, have determined and agreed as
follows: THIS AGREEMENT SHALL BE GOVERNED BY AND CONTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS. EACH OF THE PARTIES AGREES THAT ANY LEGAL ACTION BETWEEN
THE PARTIES RELATING TO THE ENTRY INTO OR PERFORMANCE OF THIS AGREEMENT, OR THE
INTERPRETATION OR ENFORCEMENT OF TERMS HEREOF, SHALL BE BROUGHT IN A FEDERAL OR
STATE COURT LOCATED IN NEW CASTLE COUNTY, DELAWARE, HAVING JURISDICTION OF THE
SUBJECT MATTER THEREOF, AND EACH PARTY IRREVOCABLY CONSENTS TO PERSONAL
JURISDICTION IN ANY SUCH FEDERAL OR STATE COURT, WAIVES ANY RIGHT TO OBJECT TO
SUCH VENUE OR TO ASSERT THE DEFENSE OF FORUM NON-CONVENIENS, AND AGREES THAT
SERVICE OF PROCESS MAY BE MADE BY CERTIFIED OR REGISTERED MAIL ADDRESSED TO SUCH
PARTY AT ITS ADDRESS SET FORTH IN, OR DETERMINED IN ACCORDANCE WITH, SECTION
11.5 OF THE STOCKHOLDERS AGREEMENT.
2.2. If any provision of this Agreement or the application of any such
provision to any person or circumstances shall be held invalid by a court of
competent jurisdiction, the remainder of this Agreement, including the remainder
of the provision held invalid, or the application of such provision to persons
or circumstances other than those as to which it is held invalid, shall not be
affected.
2.3. This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
2.4. All Section headings herein are for convenience of reference only
and are not part of this Agreement and no construction or inference shall be
derived therefrom.
2.5 From and after the date first written above, all references tot he
Stockholder Agreement (whether in the Stockholder Agreement or in any other
agreement or document making reference thereto shall be deemed to be references
to the Stockholder Agreement as amended by this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
ROYAL PRECISION, INC.
By: /s/ Raymond J. Minella
--------------------------------
Raymond J. Minella, Chairman
STOCKHOLDERS:
Signature of Stockholder: /s/ Danny Edwards
-----------------------------------
Danny Edwards
Signature of Stockholder: /s/ Drew M. Brown
-----------------------------------
Drew M. Brown
Signature of Stockholder: DMB PROPERTY VENTURES
LIMITED PARTNERSHIP
By: /s/ Drew M. Brown
--------------------------------
Name: Drew M. Brown
Signature of Stockholder: /s/ Mark N. Sklar
-----------------------------------
Mark N. Sklar
<PAGE>
/s/ Bennett Dorrance
Signature of Stockholder: -----------------------------------
Bennett Dorrance, Trustee of the
Bennett Dorrance Trust dated April 21,
1989, as amended
/s/ Christopher A. Johnston
Signature of Stockholder: -----------------------------------
Christopher A. Johnston
Signature of Stockholder: P. JOHNSTON AND JAYNE A.
JOHNSTON CHARITABLE REMAINDER
TRUST #3
By: /s/ Richard P. Johnston (Trustee)
--------------------------------
Richard P. Johnston, Trustee
/s/ David E. Johnston
Signature of Stockholder: -----------------------------------
David E. Johnston
Signature of Stockholder: BERENSON MINELLA & COMPANY, L.P.
By: /s/ Raymond J. Minella
--------------------------------
Raymond J. Minella, General Partner
/s/ Kenneth J. Warren
Signature of Stockholder: -----------------------------------
Kenneth J. Warren
FORM OF
COYOTE SPORTS, INC.
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into as of
February __, 1999, by and between Royal Precision, Inc., a Delaware corporation
("Royal"), and _________________ (the "Stockholder").
RECITALS
A. Concurrently with the execution of this Agreement, Coyote Sports,
Inc., a Nevada corporation ("Coyote"), RP Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Coyote ("Coyote Sub"), and Royal
are entering into an Agreement and Plan of Merger (the "Merger Agreement") which
provides for the merger (the "Merger") of Coyote Sub with and into Royal.
Pursuant to the Merger, each share of capital stock of Royal will be converted
into the right to receive one share of a new class of Coyote Convertible
Preferred Stock, authorized by Coyote, on the basis described in the Merger
Agreement.
B. The Stockholder is the record holder and beneficial owner (as
defined in Rule 13d- 3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of such number of shares of the outstanding capital stock
of Coyote as is indicated on the signature page of this Agreement (the
"Shares").
C. As an inducement to Royal to enter into the Merger Agreement, the
Stockholder is willing to enter into and be bound by this Agreement pursuant to
which the Stockholder agrees not to transfer or otherwise dispose of any of the
Shares, or any other shares of capital stock of Coyote acquired hereafter and
prior to the Expiration Date (as defined in Section 1.1 below, except as
otherwise permitted hereby), to vote the Shares and any other such shares of
capital stock of Coyote so as to approve an increase in the number of authorized
shares of Coyote Preferred Stock and the issuance of Coyote Convertible
Preferred Stock and to facilitate consummation of the Merger and to grant Royal
a proxy with respect to the Shares upon the terms set forth herein.
D. All terms not otherwise defined herein shall have their respective
meanings set forth in the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereby agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. The Stockholder agrees not to
transfer (except as may be specifically required by court order),
sell, exchange, pledge or otherwise dispose of or encumber any of the
Shares or any New Shares, as defined in Section 1.2 below, or to make
any offer or agreement relating to any such action, at any time prior
to the Expiration Date. As used herein, the term "Expiration Date"
shall mean the earlier to occur of (i) such date and time as the
Merger shall become effective in accordance with the terms and
provisions of the Merger Agreement and (ii) such date and time as the
Merger Agreement shall be validly terminated pursuant to the terms
thereof.
1.2 Additional Purchases. The Stockholder agrees that any
shares of capital stock of Coyote (or securities convertible into,
exchangeable for or constituting the right to acquire, capital stock
of Coyote) that the Stockholder purchases or with respect to which the
Stockholder otherwise acquires beneficial ownership after the
execution of this Agreement and prior to the Expiration Date
(including, without limitation, in the event of any stock split, stock
dividend, merger, reorganization, recapitalization or other change in
the capital structure of Coyote affecting the Shares, or pursuant to
the exercise of any option) ("New Shares") shall be subject to the
terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Agreement to Vote Shares. At every meeting of the stockholders of
Coyote called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of Coyote with respect to any of the following, the Stockholder shall vote
(including any class vote) the Shares: (i) in favor of approval of the Merger
Agreement and the Merger, the terms thereof and each of the transactions
contemplated thereby, and any matter necessary to facilitate the Merger; (ii)
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other agreement or obligation of Coyote under
the Merger Agreement; (iii) against (x) any extraordinary corporate transaction,
such as a merger, consolidation or any other business combination involving
Coyote or its subsidiaries, (y) a sale, lease or transfer of a material amount
of assets by Coyote or its subsidiaries (other than in the ordinary course of
business) or (z) any reorganization, recapitalization, dissolution or
liquidation of Coyote, in each case other than the Merger and the transactions
contemplated by the Merger Agreement); or (iv) any other action involving Coyote
or its subsidiaries which is intended or which reasonably could be expected to
impede, interfere with, delay, postpone or materially adversely affect the
Merger and the transactions contemplated by the Merger Agreement (each of the
matters referred to in clauses (i) through (iv), a "Subject Matter"). This
Agreement is intended to bind the Stockholder only with respect to the specific
matters set forth herein.
3. Representations, Warranties and Covenants of the Stockholder. The
Stockholder hereby represents, warrants and covenants to Royal as follows:
3.1 Ownership of Shares. The Stockholder (i) is the record
holder and beneficial owner of the Shares, which at the date hereof
and at all times up until the Expiration Date will be free and clear
of any liens, claims, options, charges, voting trusts or agreements,
proxies or other encumbrances; (ii) does not beneficially own any
shares of capital stock of Coyote (or securities convertible into,
exchangeable for or constituting the right to acquire, capital stock
of Coyote), other than the Shares (and other than options to purchase
the number of shares of the common stock of Coyote, if any, indicated
on the signature page of this Agreement); and (iii) has full power and
authority to make, enter into and carry out the terms of this
Agreement.
3.2 Stockholder Authority; No Conflict. This Agreement has
been duly authorized (to the extent that the Stockholder is not a
natural person), executed and delivered by the Stockholder and
constitutes the legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with
its terms, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding
in equity or at law. Neither the execution and delivery of this
Agreement nor the consummation by the Stockholder of the transactions
contemplated hereby will result in a violation of, or a default under,
or conflict with, any contract, trust, commitment, agreement,
understanding, arrangement or restriction of any kind to which the
Stockholder is a party or bound or to which the Stockholder's Shares
are subject. Consummation by the Stockholder of the transactions
contemplated hereby will not violate, or require any consent,
approval, or notice under (except for any notice which may be required
pursuant to the Exchange Act), any provision of any judgment, order,
decree, statute, law, rule or regulation applicable to the Stockholder
or the Stockholder's Shares.
3.3 No Proxy Solicitations. The Stockholder will not, and
will not permit any entity under the Stockholder's control to: (i)
solicit proxies or become participants in a solicitation with respect
to a CSI Acquisition Proposal or CSI Alternative Transaction or
otherwise encourage or assist any party in taking or planning any
action that would compete with, restrain or otherwise serve to
interfere with or inhibit the timely consummation of the Merger in
accordance with the terms of the Merger Agreement; (ii) initiate a
stockholders' vote or action by consent of Coyote stockholders with
respect to an Acquisition Proposal or Alternative Transaction; or
(iii) become members of a "group" (as such term is used in Section
13(d) of the Exchange Act) with respect to any voting securities of
Coyote with respect to an Acquisition Proposal or Alternative
Transaction. Notwithstanding the above, the Stockholder may take any
actions in the Stockholder's role as a director of Coyote permitted
under the Merger Agreement.
3.4 Royal Reliance. The Stockholder understands and
acknowledges that Royal is entering into the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this
Agreement. The Stockholder acknowledges that the irrevocable proxy set
forth in Section 4 is granted in consideration for the execution and
delivery of the Merger Agreement by Royal.
3.5 No Solicitation. Upon execution of this Agreement, the
Stockholder shall not have, or shall immediately terminate any
discussions with, any third party concerning an Alternative
Transaction. From and after the date of this Agreement until the
earlier of the Effective Time (as defined in the Merger Agreement) or
the termination of this Agreement in accordance with its terms, the
Stockholder shall not, and shall not permit any officer, director,
employee, controlled Affiliate, investment banker or other agent (in
such agency capacity) of the Stockholder to, directly or indirectly,
(i) solicit, engage in discussions or negotiate with any Person
(whether such discussions or negotiations are initiated by the
Stockholder or otherwise) or take any other action intended or
designed to facilitate the efforts of any Person, other than Royal,
relating to an Alternative Transaction, (ii) provide information with
respect to Coyote or any of its Subsidiaries to any Person, other than
Royal, relating to a possible Alternative Transaction by any Person,
other than Royal, (iii) enter into an agreement with any person, other
than Royal, providing for a possible Alternative Transaction, or (iv)
make or authorize any statement, recommendation or solicitation in
support of any possible Alternative Transaction by any Person, other
than by Royal. Notwithstanding the above, the Stockholder may take any
actions in the Stockholder's role as a director of Coyote permitted
under the Merger Agreement.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
4.1 The Stockholder hereby irrevocably grants to, and
appoints, each of Raymond J. Minella and Tom Schneider or either of
them, the Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of the
Stockholder, to vote such Stockholder's Shares, or grant or not grant
a consent or approval in respect of such Shares, at any meeting of
shareholders of Coyote or at any adjournment thereof or in any other
circumstances, including, without limitation, a solicitation of
stockholder consents to action without a meeting, upon which the
Stockholder's vote, consent or other approval is sought, in respect of
any Subject Matter.
4.2 Revocation of Any Other Proxies. The Stockholder
represents that any proxies heretofore given in respect of the
Stockholder's Shares are not irrevocable, and that any such proxies
are hereby revoked.
4.3 Proxy Granted to Royal Irrevocable. The Stockholder
hereby affirms that the irrevocable proxy set forth in this Section
4.1 is given in connection with the execution of the Merger Agreement,
and that such irrevocable proxy is given to secure the performance of
the duties of the Stockholder under this Agreement. The Stockholder
hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked, except, that this
proxy shall expire on the Expiration Date. The Stockholder hereby
ratifies and confirms all that such irrevocable proxy may lawfully do
or cause to be done by virtue hereof. Such irrevocable proxy (expiring
on the Expiration Date) is executed and intended to be irrevocable in
accordance with the provisions of the Nevada General Corporation Law
(the "NGCL").
5. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation the Stockholder's constituent partners or its successors.
6. Additional Documents. The Stockholder hereby covenants and agrees
to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Royal, to carry out the intent of this Agreement.
7. Consent and Waiver. The Stockholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Merger under
the terms of any agreements to which the Stockholder is a party or pursuant to
any rights the Stockholder may have.
8. Termination. This Agreement shall terminate and shall have no
further force or effect as of the Expiration Date.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder
of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted
assigns, but, except as otherwise specifically provided herein,
neither this Agreement nor any of the rights, interests or obligations
of the Stockholder may be assigned by the Stockholder without the
prior written consent of Royal.
9.3 Amendments and Modification. This Agreement may not be
modified, amended, altered or supplemented except upon the execution
and delivery of a written agreement executed by the party against whom
enforcement is sought.
9.4 Specific Performance; Injunctive Relief. The parties
hereto acknowledge that Royal will be irreparably harmed and that
there will be no adequate remedy at law for a violation of any of the
covenants or agreements of the Stockholder set forth herein.
Therefore, it is agreed that, in addition to any other remedy or
remedies that may be available to Royal upon any such violation, Royal
shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means
available to Royal at law or in equity without posting any bond and
without proving that monetary damages would be inadequate.
9.5 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and sufficient if
delivered in person, by cable, telegram or telex, or sent by mail
(registered or certified mail, postage prepaid, return receipt
requested) or overnight courier (prepaid) to the respective parties as
follows:
If to Royal: Royal Precision, Inc.
15170 North Hayden Road
Scottsdale, Arizona 89260
Telecopier No.: (602) 627-0206
Telephone No.: (602) 627-0270
Attn:
With a copy to: White & Case
1155 Avenue of the Americas
New York, New York 10036
Telecopier No.: (212) 819-8200
Telephone No.: (212) 819-8331
Attn: Ward Atterbury, Esq.
If to the Stockholder:
Telecopier No.:
Telephone No.:
Attn.:
With a copy to:
Telecopier No.:
Telephone No.:
Attn:
or to such other address or person's attention as any party may have
furnished to the other in writing in accordance herewith, except that
notices of change of address shall only be effective upon receipt.
9.6 Governing Law. The laws of the State of New York
(irrespective of its choice of laws, rules or principles) will govern
the validity of this Agreement, the construction of its terms and the
interpretation and enforcement of the rights and duties of the parties
hereto.
9.7 Entire Agreement. This Agreement and the Merger
Agreement contain the entire understanding of the parties with respect
to the subject matter hereof, and supersede all prior negotiations and
understandings between the parties with respect to such subject
matter.
9.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but which together
shall constitute one and the same agreement.
9.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or
interpretation of this Agreement.
9.10 Waiver of Jury Trial. ROYAL AND THE STOCKHOLDER EACH
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to
be duly executed on the day and year first above written.
ROYAL PRECISION, INC.
By: _____________________________
Title: __________________________
_____________________________
______ shares of Common Stock
______ shares of Common Stock
subject to options
FORM OF
ROYAL PRECISION, INC.
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into as of
February __, 1999, by and between Coyote Sports, Inc., a Nevada corporation
("Coyote"), and ______________ (the "Stockholder").
RECITALS
A. Concurrently with the execution of this Agreement, Coyote, RP
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Coyote ("Coyote Sub"), and Royal Precision, Inc., a Delaware corporation
("Royal"), are entering into an Agreement and Plan of Merger (the "Merger
Agreement") which provides for the merger (the "Merger") of Coyote Sub with and
into Royal. Pursuant to the Merger, each share of capital stock of Royal will be
converted into the right to receive one share of a new class of Coyote
Convertible Preferred Stock on the basis described in the Merger Agreement.
B. The Stockholder is the record holder and beneficial owner (as
defined in Rule 13d- 3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of such number of shares of the outstanding capital stock
of Royal as is indicated on the signature page of this Agreement (the "Shares").
C. As an inducement to Coyote to enter into the Merger Agreement, the
Stockholder is willing to enter into and be bound by this Agreement pursuant to
which the Stockholder agrees not to transfer or otherwise dispose of any of the
Shares, or any other shares of capital stock of Royal acquired hereafter and
prior to the Expiration Date (as defined in Section 1.1 below, except as
otherwise permitted hereby), to vote the Shares and any other such shares of
capital stock of Royal so as to facilitate consummation of the Merger and to
grant Coyote a proxy with respect to the Shares upon the terms set forth herein.
D. All terms not otherwise defined herein shall have their respective
meanings set forth in the Merger Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties hereby agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. The Stockholder agrees not to transfer
(except as may be specifically required by court order), sell, exchange,
pledge or otherwise dispose of or encumber any of the Shares or any New
Shares, as defined in Section 1.2 below, or to make any offer or agreement
relating to any such action, at any time prior to the Expiration Date. As
used herein, the term "Expiration Date" shall mean the earlier to occur of
(i) such date and time as the Merger shall become effective in accordance
with the terms and provisions of the Merger Agreement and (ii) such date
and time as the Merger Agreement shall be validly terminated pursuant to
the terms thereof.
1.2 Additional Purchases. The Stockholder agrees that any shares of
capital stock of Royal (or securities convertible into, exchangeable for or
constituting the right to acquire, capital stock of Royal) that the
Stockholder purchases or with respect to which the Stockholder otherwise
acquires beneficial ownership after the execution of this Agreement and
prior to the Expiration Date (including, without limitation, in the event
of any stock split, stock dividend, merger, reorganization,
recapitalization or other change in the capital structure of Royal
affecting the Shares, or pursuant to the exercise of any option) ("New
Shares") shall be subject to the terms and conditions of this Agreement to
the same extent as if they constituted Shares.
2. Agreement to Vote Shares. At every meeting of the stockholders of Royal
called with respect to any of the following, and at every adjournment thereof,
and on every action or approval by written consent of the stockholders of Royal
with respect to any of the following, the Stockholder shall vote (including any
class vote) the Shares: (i) in favor of approval of the Merger Agreement and the
Merger, the terms thereof and each of the transactions contemplated thereby, and
any matter necessary to facilitate the Merger; (ii) against any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other agreement or obligation of Royal under the Merger
Agreement; (iii) against (x) any extraordinary corporate transaction, such as a
merger, consolidation or any other business combination involving Royal or its
subsidiaries, (y) a sale, lease or transfer of a material amount of assets by
Royal or its subsidiaries (other than in the ordinary course of business) or (z)
any reorganization, recapitalization, dissolution or liquidation of Royal, in
each case other than the Merger and the transactions contemplated by the Merger
Agreement); or (iv) any other action involving Royal or its subsidiaries which
is intended or which reasonably could be expected to impede, interfere with,
delay, postpone or materially adversely affect the Merger and the transactions
contemplated by the Merger Agreement (each of the matters referred to in clauses
(i) through (iv), a "Subject Matter"). This Agreement is intended to bind the
Stockholder only with respect to the specific matters set forth herein.
3. Representations, Warranties and Covenants of the Stockholder. The
Stockholder hereby represents, warrants and covenants to Coyote as follows:
3.1 Ownership of Shares. The Stockholder (i) is the record holder and
beneficial owner of the Shares, which at the date hereof and at all times
up until the Expiration Date will be free and clear of any liens, claims,
options, charges, voting trusts or agreements, proxies or other
encumbrances; (ii) does not beneficially own any shares of capital stock of
Royal (or securities convertible into, exchangeable for or constituting the
right to acquire, capital stock of Royal), other than the Shares (and other
than options to purchase the number of shares of the common stock of Royal,
if any, indicated on the signature page of this Agreement); and (iii) has
full power and authority to make, enter into and carry out the terms of
this Agreement.
3.2 Stockholder Authority; No Conflict. This Agreement has been duly
authorized (to the extent that the Stockholder is not a natural person),
executed and delivered by the Stockholder and constitutes the legal, valid
and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms, except as limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law. Neither the execution and
delivery of this Agreement nor the consummation by the Stockholder of the
transactions contemplated hereby will result in a violation of, or a
default under, or conflict with, any contract, trust, commitment,
agreement, understanding, arrangement or restriction of any kind to which
the Stockholder is a party or bound or to which the Stockholder's Shares
are subject. Consummation by the Stockholder of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under (except for any notice which may be required pursuant to the
Exchange Act), any provision of any judgment, order, decree, statute, law,
rule or regulation applicable to the Stockholder or the Stockholder's
Shares.
3.3 No Proxy Solicitations. The Stockholder will not, and will not
permit any entity under the Stockholder's control to: (i) solicit proxies
or become participants in a solicitation with respect to an RP Acquisition
Proposal or RP Alternative Transaction or otherwise encourage or assist any
party in taking or planning any action that would compete with, restrain or
otherwise serve to interfere with or inhibit the timely consummation of the
Merger in accordance with the terms of the Merger Agreement; (ii) initiate
a stockholders' vote or action by consent of Royal stockholders with
respect to an Acquisition Proposal or Alternative Transaction; or (iii)
become members of a "group" (as such term is used in Section 13(d) of the
Exchange Act) with respect to any voting securities of Royal with respect
to an Acquisition Proposal or Alternative Transaction. Notwithstanding the
above, the Stockholder may take any actions in the Stockholder's role as a
director of Royal permitted under the Merger Agreement.
3.4 Coyote Reliance. The Stockholder understands and acknowledges that
Coyote is entering into, and causing Coyote Sub to enter into, the Merger
Agreement in reliance upon the Stockholder's execution and delivery of this
Agreement. The Stockholder acknowledges that the irrevocable proxy set
forth in Section 4 is granted in consideration for the execution and
delivery of the Merger Agreement by Coyote and Coyote Sub.
3.5 No Solicitation. Upon execution of this Agreement, the Stockholder
shall not have, or shall immediately terminate any discussions with, any
third party concerning an Alternative Transaction. From and after the date
of this Agreement until the earlier of the Effective Time (as defined in
the Merger Agreement) or the termination of this Agreement in accordance
with its terms, the Stockholder shall not, and shall not permit any
officer, director, employee, controlled Affiliate, investment banker or
other agent (in such agency capacity) of the Stockholder to, directly or
indirectly, (i) solicit, engage in discussions or negotiate with any Person
(whether such discussions or negotiations are initiated by the Stockholder
or otherwise) or take any other action intended or designed to facilitate
the efforts of any Person, other than Coyote, relating to an Alternative
Transaction, (ii) provide information with respect to Royal or any of its
Subsidiaries to any Person, other than Coyote, relating to a possible
Alternative Transaction by any Person, other than Coyote, (iii) enter into
an agreement with any person, other than Coyote, providing for a possible
Alternative Transaction, or (iv) make or authorize any statement,
recommendation or solicitation in support of any possible Alternative
Transaction by any Person, other than by Coyote. Notwithstanding the above,
the Stockholder may take any actions in the Stockholder's role as a
director of Royal permitted under the Merger Agreement.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
4.1 The Stockholder hereby irrevocably grants to, and appoints, each
of Jim Probst and J.P. McNeill or either of them, the Stockholder's proxy
and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of the Stockholder, to vote such Stockholder's
Shares, or grant or not grant a consent or approval in respect of such
Shares, at any meeting of shareholders of Royal or at any adjournment
thereof or in any other circumstances, including, without limitation, a
solicitation of stockholder consents to action without a meeting, upon
which the Stockholder's vote, consent or other approval is sought, in
respect of any Subject Matter.
4.2 Revocation of Any Other Proxies. The Stockholder represents that
any proxies heretofore given in respect of the Stockholder's Shares are not
irrevocable, and that any such proxies are hereby revoked.
4.3 Proxy Granted to Coyote Irrevocable. The Stockholder hereby
affirms that the irrevocable proxy set forth in this Section 4.1 is given
in connection with the execution of the Merger Agreement, and that such
irrevocable proxy is given to secure the performance of the duties of the
Stockholder under this Agreement. The Stockholder hereby further affirms
that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked, except, that this proxy shall expire on the
Expiration Date. The Stockholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof.
Such irrevocable proxy (expiring on the Expiration Date) is executed and
intended to be irrevocable in accordance with the provisions of the
Delaware General Corporation Law (the "DGCL").
5. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including without
limitation the Stockholder's constituent partners or its successors.
6. Additional Documents. The Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Coyote, to carry out the intent of this Agreement.
7. Consent and Waiver. The Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which the Stockholder is a party or pursuant to any rights
the Stockholder may have.
8. Termination. This Agreement shall terminate and shall have no further
force or effect as of the Expiration Date.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement
nor any of the rights, interests or obligations of the Stockholder may be
assigned by the Stockholder without the prior written consent of Coyote.
9.3 Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of
a written agreement executed by the party against whom enforcement is
sought.
9.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Coyote will be irreparably harmed and that there will be
no adequate remedy at law for a violation of any of the covenants or
agreements of the Stockholder set forth herein. Therefore, it is agreed
that, in addition to any other remedy or remedies that may be available to
Coyote upon any such violation, Coyote shall have the right to enforce such
covenants and agreements by specific performance, injunctive relief or by
any other means available to Coyote at law or in equity without posting any
bond and without proving that monetary damages would be inadequate.
9.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or telex, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight
courier (prepaid) to the respective parties as follows:
If to Coyote: Coyote Sports, Inc.
2291 Arapahoe Avenue
Boulder, Colorado 80302
Telecopier No.: (303) 933-6609
Telephone No.: (303) 818-4626
Attn: James Probst
With a copy to: Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Telecopier No.: (212) 715-8000
Telephone No.: (212) 715-9100
Attn: Peter G. Smith, Esq.
If to the Stockholder:
Telecopier No.:
Telephone No.:
Attn.:
With a copy to:
Telecopier No.:
Telephone No.:
Attn:
or to such other address or person's attention as any party may have
furnished to the other in writing in accordance herewith, except that
notices of change of address shall only be effective upon receipt.
9.6 Governing Law. The laws of the State of New York (irrespective of
its choice of laws, rules or principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the parties hereto.
9.7 Entire Agreement. This Agreement and the Merger Agreement contain
the entire understanding of the parties with respect to the subject matter
hereof, and supersede all prior negotiations and understandings between the
parties with respect to such subject matter.
9.8 Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, but which together shall constitute one and
the same agreement.
9.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
9.10 Waiver of Jury Trial. COYOTE AND THE STOCKHOLDER EACH HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the day and year first above written.
COYOTE SPORTS, INC.
By: ____________________________
Title: __________________________
_________________________________
______ shares of Common Stock
______ shares of Common Stock
subject to options
