<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted
|X| Definitive Proxy Statement by Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GOLDEN GENESIS COMPANY
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|_| Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
|X| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------
(2) Form, Schedule or Registration Statement No.:
----------
(3) Filing Party:
------------------------------------------
(4) Date Filed:
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<PAGE>
[GOLDEN GENESIS COMPANY LOGO]
4545 MCINTYRE ST.
GOLDEN, CO 80403
To Our Stockholders:
On behalf of the Board of Directors of Golden Genesis Company (the
"Company" or "Golden Genesis"), I cordially invite you to attend the Special
Meeting of Stockholders of Golden Genesis (the "Special Meeting") to be held
at 10:00 a.m., local time, on July 21, 1999, at 7812 East Acoma Drive,
Scottsdale, Arizona 85260.
At the Special Meeting, you will be asked to adopt the Agreement and
Plan of Merger, dated as of May 26, 1999 (the "Merger Agreement"), among
Kyocera International, Inc. ("Buyer"), GGC Acquisition Company ("Buyer Sub")
and Golden Genesis, as well as the merger of Buyer Sub with and into Golden
Genesis (the "Merger"). The Merger Agreement provides for Golden Genesis to
become a wholly owned subsidiary of Buyer in a transaction valuing Golden
Genesis' equity (not including the assumption of approximately $10,744,888.93
of debt) at approximately $39,966,368.84. Pursuant to the Merger, among other
things, each share (other than shares held by stockholders who perfect their
statutory appraisal rights) of Golden Genesis Common Stock will convert into
the right to receive $2.33.
The Denver, Colorado-based investment banking firm of Hanifen, Imhoff
Inc. has rendered a written opinion to the Board of Directors that, as of May
26, 1999, the consideration to be received by the holders of Common Stock
pursuant to the Merger Agreement was fair from a financial point of view to
such holders. As part of its investment banking business, Hanifen, Imhoff Inc.
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive bidding, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. The Company selected Hanifen, Imhoff Inc. as its financial advisor
because it is a nationally recognized investment banking firm that has
substantial expertise in transactions similar to the Merger. Hanifen, Imhoff
Inc. is familiar with the Company in having acted as its financial advisor in
connection with certain acquisitions by the Company.
In an effort to maximize stockholder value, management of the
Company, at the approval of the Board of Directors, held discussions with
several potential buyers of the Company in late 1998 and early 1999. By early
March, three prospective buyers had made definitive offers for the acquisition
of the Company, contingent upon full due diligence and Board of Director
approval.
In light of the offers received and considering the other strategic
alternatives, your Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby and determined that they
are advisable, fair to and in the best interests of the stockholders of Golden
Genesis. Your Board of Directors unanimously recommends that you vote FOR
adoption of the Merger Agreement.
Adoption of the Merger Agreement will require the affirmative vote of
the holders of a majority of the voting power of all shares of Golden Genesis
Common Stock outstanding on June 24, 1999, the record date, with each share of
Common Stock entitled to one vote.
ACX Technologies, Inc. ("ACX") and Golden Technologies Company, Inc.
("GTC") beneficially own shares of Common Stock representing approximately 55%
of the voting power of the Common Stock. In the non-binding letter of intent
executed by Buyer and the Company on April 13, 1999, Buyer indicated that its
willingness to enter into the Merger Agreement would be subject to and
conditioned upon the execution of voting agreements by ACX and GTC. After
negotiations with Buyer, ACX and GTC agreed to vote all of their shares of
capital stock
<PAGE>
of Golden Genesis in favor of adoption of the Merger Agreement. Accordingly,
passage of the proposal to adopt the Merger Agreement is assured.
Details of the proposed Merger appear in the accompanying Proxy
Statement. Please give this material your careful attention.
Holders of record of shares of common stock of Golden Genesis
("Common Stock") who do not wish to accept the $2.33 cash payment per share
provided in the Merger have the right to seek an appraisal of the "fair value"
of their shares provided that they comply with the conditions established by
Section 262 of the Delaware General Corporation Law (the "DGCL"). For a
discussion of the rights of holders of Common Stock to seek appraisal of their
shares, see "The Merger--Rights of Dissenting Stockholders" in the
accompanying Proxy Statement. A copy of Section 262 of the DGCL is attached
to the Proxy Statement as Exhibit C. Holders of Common Stock who are
considering seeking appraisal should be aware that the fair value of their
shares as determined by Section 262 of the DGCL could be more than, the same
as or less than the value of the merger consideration that they would
otherwise receive if they did not seek appraisal of their shares. In addition,
stockholders should be aware that the Board of Directors of Golden Genesis has
determined that the Merger Agreement and the transactions contemplated thereby
are advisable, fair to and in the best interests of the stockholders of Golden
Genesis and that Hanifen, Imhoff Inc. rendered an opinion to the Board of
Directors on May 26, 1999 (confirming its oral opinion given to the Board of
Directors on May 18, 1999) that, as of May 26, 1999, the consideration to be
received by the holders of Common Stock pursuant to the Merger Agreement was
fair from a financial point of view to such holders. A holder of Common Stock
wishing to exercise appraisal rights must deliver to Golden Genesis, before
the vote on adoption of the Merger Agreement at the Special Meeting, a written
demand for appraisal of the holder's shares and must comply with the other
requirements of Section 262 of the DGCL.
Whether or not you plan to attend the Special Meeting, please
complete, sign and date the accompanying proxy and return it in the enclosed
prepaid envelope. If you hold shares of Common Stock and attend the Special
Meeting, you may vote in person even if you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
Sincerely,
J. Michael Davis
President and Chief Executive Office
<PAGE>
[GOLDEN GENESIS COMPANY LOGO]
4545 MCINTYRE ST.
GOLDEN, CO 80403
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held July 21, 1999
To the stockholders of Golden Genesis Company:
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders
of Golden Genesis Company, a Delaware corporation ("Golden Genesis"),
will be held at 10:00 a.m., local time, on July 21, 1999, at 7812 East
Acoma Drive, Scottsdale, Arizona 85260, for the following purposes:
1. To vote on a proposal to adopt the Agreement and Plan of
Merger, dated as of May 26, 1999 (the "Merger Agreement"), among Kyocera
International, Inc., a California corporation ("Buyer"), GGC Acquisition
Company, a Delaware corporation and a wholly owned subsidiary of Buyer
("Buyer Sub"), and Golden Genesis pursuant to which Buyer Sub will merge
with and into Golden Genesis (the "Merger"). Pursuant to the Merger,
Golden Genesis will become a wholly owned subsidiary of Buyer and, among
other things, holders of Golden Genesis Common Stock will receive $2.33
per share in accordance with the terms of the Merger Agreement, which is
described in the accompanying Proxy Statement and attached thereto as
Exhibit A.
2. To transact any other business that may properly come
before the Special Meeting and any adjournments or postponements
thereof.
3. Only holders of record of shares of Common Stock of Golden
Genesis outstanding on June 24, 1999 (the "Record Date"), will be
entitled to vote at the Special Meeting and any adjournments or
postponements thereof. Such shares will vote together as a single
class, with each share of Common Stock entitled to one vote.
Holders of record of shares of common stock of Golden Genesis
("Common Stock") who do not wish to accept the $2.33 cash payment per
share provided in the Merger have the right to seek an appraisal of the
"fair value" of their shares provided that they comply with the
conditions established by Section 262 of the Delaware General
Corporation Law (the "DGCL"). For a discussion of the rights of holders
of Common Stock to seek appraisal of their shares, see "The Merger--
Rights of Dissenting Stockholders" in the accompanying Proxy Statement.
A copy of Section 262 of the DGCL is attached to the Proxy Statement as
Exhibit C. Holders of Common Stock who are considering seeking appraisal
should be aware that the fair value of their shares as determined by
Section 262 of the DGCL could be more than, the same as or less than the
value of the merger consideration that they would otherwise receive if
they did not seek appraisal of their shares. In addition, stockholders
should be aware that the Board of Directors of Golden Genesis has
determined that the Merger Agreement and the transactions contemplated
thereby are advisable, fair to and in the best interests of the
stockholders of Golden Genesis and that Hanifen, Imhoff Inc. rendered an
opinion to the Board of Directors on May 26, 1999 (confirming its oral
opinion given to the Board of Directors on May 18, 1999) that, as of May
26, 1999, the consideration to be received by the holders of Common
Stock pursuant to the Merger Agreement was fair from a financial point
of view to such holders. A holder of Common Stock wishing to exercise
appraisal rights must deliver to Golden Genesis, before the vote on
<PAGE>
adoption of the Merger Agreement at the Special Meeting, a written
demand for appraisal of the holder's shares and must comply with the
other requirements of Section 262 of the DGCL.
By Order of the Board of Directors
Jeffrey C. Brines
Secretary
Golden, Colorado
June 30, 1999
All stockholders are cordially invited to attend the Special
Meeting. To ensure your representation at the Special Meeting, however,
you are urged to mark, sign, date and return the enclosed proxy card in
the accompanying envelope, whether or not you expect to attend the
Special Meeting. No postage is required if mailed in the United States.
Any holder of Common Stock attending the Special Meeting may vote in
person even if that stockholder has returned a proxy card.
- ------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
WE HAVE SENT PROXY CARDS TO HOLDERS OF COMMON STOCK.
TO VOTE YOUR SHARES, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
PLEASE DO NOT SEND US YOUR GOLDEN GENESIS
STOCK CERTIFICATES.
- ------------------------------------------------------------------------
<PAGE> i
This Proxy Statement (the "Proxy Statement") is being furnished
to stockholders of Golden Genesis Company, a Delaware corporation
("Golden Genesis" or the "Company"), in connection with the solicitation
of proxies by the Company's Board of Directors for use at a Special
Meeting of Stockholders (the "Special Meeting") to be held at 7812 East
Acoma Drive, Scottsdale, Arizona 85260, at 10:00 a.m. local time, on
July 21, 1999 , or at any adjournments or postponements thereof, for the
purposes set forth in the accompanying Notice of Special Meeting of
Stockholders. This Proxy Statement and the related proxy cards and
Voting Instruction Cards are first being mailed to the Company's
stockholders on or about June 30, 1999. Proxy cards have been sent to
holders of the Company's Common Stock, par value $.10 per share (the
"Common Stock"). At the Special Meeting, the holders of record on June
24, 1999 (the "Record Date") of shares of Common Stock will be asked:
1. to vote on a proposal to adopt the Agreement and Plan of
Merger, dated as of May 26, 1999 (the "Merger Agreement") among Kyocera
International, Inc., a California corporation ("Buyer"), GGC Acquisition
Company, a Delaware corporation and a wholly-owned subsidiary of Buyer
("Buyer Sub"), and Golden Genesis, and the merger of Buyer Sub with and
into Golden Genesis (the "Merger"), whereby Golden Genesis will become a
wholly-owned subsidiary of Buyer; and
2. to transact any other business that may properly come
before the Special Meeting or any adjournments or postponements thereof.
When a Certificate of Merger relating to the Merger is filed
with the Secretary of State of the State of Delaware or as otherwise
specified in such Certificate of Merger (the "Effective Time"), Buyer
Sub will merge with and into Golden Genesis, with Golden Genesis as the
surviving corporation (the "Surviving Corporation"). At the Effective
Time, each outstanding share of the Company's Common Stock, par value
$.10 per share (the "Common Stock") (other than any shares held in the
treasury of the Company or by any wholly owned subsidiary of the
Company, which shares, by virtue of the Merger and without any action on
the part of the holder thereof, will be canceled and will cease to exist
with no payment being made with respect thereto, and other than any
shares of holders who perfect and exercise dissenters' appraisal rights)
will be converted into the right to receive $2.33 (the "Merger
Consideration"). The Merger Consideration will be payable in cash
without interest. Pursuant to the Merger Agreement, a holder of an
option to purchase Common Stock, upon delivery by such holder of a Stock
Option Cancellation Agreement (each, an "Option Cancellation
Agreement"), the form of which is attached to the Merger Agreement which
is attached hereto as Exhibit A, will be able to receive an amount in
respect of such option which is equal to the product of: (i) the
difference between $2.33 and the exercise price of such option, and (ii)
the number of shares of Common Stock subject to such option. See "The
Merger Agreement."
The Merger will be a taxable transaction to the Company's
stockholders for federal income tax purposes. See "Certain Federal
Income Tax Consequences of the Merger."
A conformed copy of the Merger Agreement is included as Exhibit
A to this Proxy Statement. The summaries of portions of the Merger
Agreement set forth in this Proxy Statement do not purport to be
complete; they are subject to, and are qualified in their entirety by
reference to, the text of the Merger Agreement.
The Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby and determined that
they are advisable, fair to and in the best interests of the
stockholders of the Company. The Board of Directors unanimously
recommends that the Company's stockholders adopt the Merger Agreement.
The Denver, Colorado-based investment banking firm Hanifen,
Imhoff Inc. has acted as financial advisor to the Company in connection
with the Merger. Hanifen, Imhoff Inc. rendered a written opinion to the
Board of Directors on May 26, 1999 (confirming its oral opinion given to
the Board of Directors on May 18, 1999) that, as of May 26, 1999, the
consideration to be received by the holders of Common Stock pursuant to
the Merger Agreement was fair from a financial point of view to such
holders. A copy of the full text of that written opinion is attached
hereto as Exhibit B and should be read in its entirety by the
stockholders of the Company.
<PAGE> ii
As of the Record Date, there were outstanding 17,155,948 shares
of Common Stock. In addition, as of the Record Date, the Company had
outstanding certain stock options, none of which entitle the holders
thereof to vote at the Special Meeting. The holders of such stock
options are not entitled to exercise dissenters' appraisal rights. The
holders of such options are entitled under the Merger Agreement to
receive payment of the amount by which the exercise price of their
options exceeds $2.33 upon delivery by such holders of an Option
Cancellation Agreement. See "The Merger Agreement--Treatment of
Options."
Adoption of the Merger Agreement will require the affirmative
vote of the holders of a majority of the voting power of all outstanding
shares of Common Stock with each share entitled to one vote.
ACX Technologies, Inc. ("ACX") and Golden Technologies Company,
Inc. ("GTC") have agreed to vote all of their shares of Common Stock in
favor of the adoption of the Merger Agreement. ACX and GTC collectively
own beneficially approximately 55% of the voting power of the Common
Stock. Accordingly, passage of the proposal to adopt the Merger
Agreement is assured. See "Principal Stockholders--Option and Voting
Agreement."
HOLDERS OF COMMON STOCK WHO DO NOT WISH TO ACCEPT THE $2.33
CASH PAYMENT PER SHARE PROVIDED IN THE MERGER HAVE THE RIGHT TO SEEK AN
APPRAISAL OF THE "FAIR VALUE" OF THEIR SHARES PROVIDED THAT THEY COMPLY
WITH THE CONDITIONS ESTABLISHED BY SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW (the "DGCL"). FOR A DISCUSSION OF THE RIGHTS OF HOLDERS
OF COMMON STOCK TO SEEK APPRAISAL OF THEIR SHARES, SEE "THE MERGER--
RIGHTS OF DISSENTING STOCKHOLDERS."
Although it is possible that the Merger may not occur for
several months after the Special Meeting, and that the information
regarding the Company will change materially from that contained or
incorporated by reference herein, the Company's stockholders will not be
entitled to another vote on the proposal to adopt the Merger Agreement.
The Company anticipates that the Common Stock will trade on The Nasdaq
SmallCap Market until the consummation of the Merger.
The proxy cards to be used by holders of Common Stock are being
solicited on behalf of the Board of Directors. The execution of a proxy
card does not preclude a holder of Common Stock from voting in person if
he or she so desires. A holder of Common Stock may revoke or change such
holder's proxy card at any time prior to its use at the Special Meeting
by giving Golden Genesis or its proxy tabulator a written direction to
revoke the proxy card, giving Golden Genesis a new proxy card or
attending the Special Meeting and voting in person. See "The Special
Meeting."
Golden Genesis' principal executive office is located at 4545
McIntyre St., Golden, Colorado 80403, and its telephone number is (303)
271-7465.
<PAGE> i
TABLE OF CONTENTS
PAGE
SUMMARY..............................................................1
Matters to Be Considered........................................1
Parties to the Merger Agreement.................................1
The Special Meeting.............................................2
Option and Voting Agreement.....................................3
The Merger......................................................5
Termination; Expenses and Fees..................................6
Certain Federal Income Tax Consequences.........................8
Certain Legal Proceedings.......................................8
THE SPECIAL MEETING..................................................8
Date, Time and Place; Matters to Be
Considered..................................................8
Record Date; Quorum; Voting at the Special
Meeting.....................................................9
Voting of Proxies..............................................10
Revocation of Proxies and Voting
Instructions...............................................10
Proxy Solicitation.............................................10
THE MERGER..........................................................11
Background of the Merger.......................................11
Reasons for the Merger; Recommendation
of the Board of Directors..................................13
Opinion of Hanifen, Imhoff Inc.................................14
Effective Time.................................................16
Certain Effects of the Merger..................................16
Regulatory Matters.............................................16
Rights of Dissenting Stockholders..............................17
Accounting Treatment...........................................19
Certain Legal Proceedings......................................19
THE MERGER AGREEMENT................................................20
The Merger.....................................................20
Treatment of Options...........................................21
Representations and Warranties.................................21
Covenants......................................................21
No Solicitation................................................22
Conditions.....................................................22
Termination; Fees and Expenses.................................23
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER.....................................24
PRINCIPAL STOCKHOLDERS..............................................25
Option and Voting Agreement....................................26
SELECTED CONSOLIDATED FINANCIAL DATA................................28
MARKET PRICES AND DIVIDEND POLICY...................................28
FORWARD-LOOKING STATEMENTS..........................................28
INDEPENDENT AUDITORS................................................29
<PAGE> ii
OTHER MATTERS.......................................................29
AVAILABLE INFORMATION...............................................29
ATTACHED DOCUMENTS..................................................29
STOCKHOLDER PROPOSALS...............................................29
EXHIBIT A -- Merger Agreement
EXHIBIT B -- Opinion of Hanifen, Imhoff Inc.
EXHIBIT C -- Section 262 of the General
Corporation Law of Delaware
EXHIBIT D -- Option and Voting Agreement
EXHIBIT E -- Annual Report on Form 10-K
for the year ended December 31, 1998
EXHIBIT F -- Quarterly report on Form 10-Q
for the quarter ended March 31, 1999
<PAGE> 1
SUMMARY
This Proxy Statement contains all material information relating
to the Merger. However, the following summary does not purport to be
complete. It is qualified in its entirety by, and should be read in
conjunction with, the more detailed information contained elsewhere in
this Proxy Statement, including the Exhibits attached hereto and
incorporated by reference herein and the financial statements and notes
thereto included therein. See "Incorporation of Certain Documents by
Reference." Stockholders are urged to read this Proxy Statement,
including the financial statements and notes thereto in the Exhibits
hereto, and the documents referred to herein in their entirety.
MATTERS TO BE CONSIDERED
At the Special Meeting, holders of Common Stock will consider
the adoption of the Merger Agreement. As a result of the Merger, Golden
Genesis will become a wholly-owned subsidiary of Buyer and, among other
things, each issued and outstanding share of Common Stock (other than
any shares held in the treasury of the Company or by any wholly owned
subsidiary of the Company, which shares, by virtue of the Merger and
without any action on the part of the holder thereof, will be canceled
and will cease to exist with no payment being made with respect thereto,
and other than any shares of holders who perfect and exercise
dissenters' appraisal rights) will be converted into the right to
receive $2.33. In addition, each holder of an option to purchase Common
Stock, upon delivery of an Option Cancellation Agreement, will be able
to receive an amount in respect of such option which is equal to the
product of: (i) the difference between $2.33 and the exercise price of
such option, and (ii) the number of shares of Common Stock subject to
such option.
Interest will not be paid on amounts to be received in the
Merger by holders of shares or options in respect of the period between
the time of the Merger and the time that payment is actually made.
If the Merger had occurred on April 30, 1999, and assuming no
holder of Common Stock exercises appraisal rights and each holder of an
option to purchase shares of Common Stock had delivered an executed
Option Cancellation Agreement, then (a) the 17,152,948 outstanding
shares of Common Stock would have converted into the right to receive an
aggregate of $39,966,368.84, and (b) the holders of "in-the-money"
options to purchase 1,986,272 shares of Common Stock would have been
entitled to receive (net of the payment of the exercise prices) an
aggregate of approximately $1,783,318.14.
In the non-binding letter of intent with respect to the Merger
entered into by Buyer and the Company on April 13, 1999 (the "Letter of
Intent"), Buyer indicated that its willingness to enter into the Merger
Agreement would be subject to and conditioned upon the execution of
voting agreements by ACX and GTC, who collectively own beneficially as
of the Record Date shares of Common Stock which represent approximately
55% of the voting power of the Common Stock. After negotiations with
Buyer, ACX and GTC executed agreements pursuant to which they have
agreed to vote all of their shares of capital stock of Golden Genesis in
favor of the adoption of the Merger Agreement. Accordingly, adoption of
the Merger Agreement is assured. See "Principal Stockholders--Option and
Voting Agreement."
PARTIES TO THE MERGER AGREEMENT
The parties to the Merger Agreement are Golden Genesis, Buyer
and Buyer Sub.
Golden Genesis Company.
Golden Genesis markets, engineers, manufactures and distributes
solar electric systems utilized primarily in remote areas. Areas
generally include those where electric power is needed but access to
electricity is inconvenient, not available or costs are relatively high.
Three primary markets compose the majority of Golden Genesis' results
from operations: the industrial market, the distribution market and the
international market.
<PAGE> 2
Golden Genesis services a variety of customers in the
industrial market. These customers have power generation needs for
communication systems, traffic signal systems and remote monitoring
systems. In addition, the industrial market includes customers that use
solar electric systems connected directly into power grids.
The Company's distribution market includes more than 1,000
solar energy dealers, which are predominantly located in North and South
America. The Company delivers a wide range of solar modules and related
hardware to the dealer network. The distribution market also includes
retail sales through a system integration and mail-order design
division, and direct sales to end users of pre-packaged solar systems
for recreational vehicles and boats and water pumping systems for small
residential customers or large agricultural and village applications.
The Company operates subsidiaries internationally in Australia,
Brazil and Argentina. These subsidiaries service customers in the
industrial and distribution market segments within their respective
countries.
The mailing address of Golden Genesis' principal executive
office is 4545 McIntyre St., Golden, Colorado 80403, and its telephone
number is (303) 271-7465.
Additional information regarding Golden Genesis is included in
its Annual Report on Form 10-K for the year ended December 31, 1998
which is incorporated herein by reference.
Kyocera International, Inc.
Buyer is the wholly-owned, non-operating North American holding
company for Kyocera Corporation of Japan, a manufacturer and seller of
high-performance ceramic-related products, electronic equipment and
optical instruments. Buyer is the parent of wholly-owned operating
subsidiaries involved both in the manufacture and sale of ceramic-
related products and in the marketing, sale and service of electronic
equipment and optical instruments. Two of the Buyer's operating units
are competitors to ACX and GTC.
The mailing address of Buyer's principal executive offices is
8611 Balboa Avenue, San Diego, California 92123, and its telephone
number is (619) 576-2600.
GGC Acquisition Company. Buyer Sub, a Delaware corporation, was
recently formed by Buyer to effect the transactions contemplated by the
Merger Agreement and related agreements. At the Effective Time, Buyer
Sub will be merged with and into Golden Genesis, with Golden Genesis
continuing as the surviving corporation and a wholly-owned subsidiary of
Buyer. Buyer Sub has not conducted any substantial business activities
to date other than entering into, and performing its obligations under,
the Merger Agreement and related agreements. The mailing address of
Buyer Sub's principal executive offices is 8611 Balboa Avenue, San
Diego, California 92123, and its telephone number is (619) 576-2600.
THE SPECIAL MEETING
The Special Meeting
The Special Meeting will be held at 10:00 a.m., local time, on
July 21, 1999 at 7812 East Acoma Drive, Scottsdale, Arizona 85260.
Purpose of the Special Meeting
At the Special Meeting, the stockholders of Golden Genesis will
be asked to adopt the Merger Agreement and transact any other business
that may properly come before the Special Meeting or any adjournments or
postponements thereof. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS OF GOLDEN GENESIS VOTE FOR THE ADOPTION OF THE
MERGER AGREEMENT.
<PAGE> 3
Record Date; Shares Outstanding; Quorum
The Board of Directors has fixed the close of business on June
24, 1999 as the Record Date for the determination of the stockholders of
record entitled to notice of, and to vote at, the Special Meeting and
any adjournments or postponements thereof. Only holders of record of
shares of Common Stock will be entitled to vote at the Special Meeting.
Holders of stock options are not entitled to vote on the Merger.
As of the Record Date, there were issued and outstanding
17,155,948 shares of Common Stock. The presence in person or by proxy of
holders of record of a majority of the voting power of the shares of
Common Stock will constitute a quorum at the Special Meeting for
purposes of adopting the Merger Agreement. See "The Special Meeting--
Record Date; Quorum; Voting at the Special Meeting."
Votes Per Share
Each share of Common Stock will be entitled to one vote in all
matters upon which they vote at the Special Meeting or any adjournments
or postponements thereof.
Votes Required
In accordance with the DGCL and the Bylaws of the Company, the
affirmative vote of the holders of a majority of the voting power of all
outstanding shares of the Common Stock is required to adopt the Merger
Agreement. Accordingly, the affirmative vote of holders of Common Stock
holding at least 8,577,975 shares of Common Stock is required to adopt
the Merger Agreement.
In the Letter of Intent, Buyer indicated that its willingness
to enter into the Merger Agreement would be subject to and conditioned
upon the execution of voting agreements by ACX and GTC, who collectively
own beneficially as of the Record Date shares of Common Stock which
represent approximately 55% of the voting power of the Common Stock.
After negotiations with Buyer, ACX and GTC executed agreements pursuant
to which they have agreed to vote all of their shares of capital stock
of Golden Genesis in favor of the adoption of the Merger Agreement.
Such holders collectively possess the right to cast 9,429,379 of the
17,155,948 votes entitled to be cast at the Special Meeting.
Accordingly, passage of the proposal to adopt the Merger Agreement is
assured. See "Principal Stockholders--Option and Voting Agreement."
OPTION AND VOTING AGREEMENT
Concurrently with the execution of the Merger Agreement and as
a condition to Buyer entering into the Merger Agreement, ACX and GTC
agreed in that certain Option, Voting and Indemnification Agreement
among ACX, GTC and Buyer, dated May 26, 1999 (the "Option and Voting
Agreement"), a copy of which is attached as Exhibit D hereto, to vote
all of the capital stock of Golden Genesis owned beneficially by them
(i) in favor of the Merger and for each of the other actions
contemplated by the Merger Agreement, (ii) against any action or
agreement that would result in a breach in any material respect of any
representation, warranty or covenant of Golden Genesis in the Merger
Agreement and (iii) against any action or agreement that would impede,
interfere with, delay, postpone, attempt to discourage the Merger or
otherwise materially adversely affect the Merger, including without
limitation, any action or agreement with respect to an acquisition
proposal with any person other than Buyer and Buyer Sub.
ACX and GTC have granted to Buyer an unconditional, irrevocable
option (the "Option") to purchase on one occasion, all (but not less
than all) securities of the Company consisting of Common Stock and all
or any part of any other securities of the Company not consisting of
Common Stock (including all options, warrants and other rights to
acquire shares of Common Stock) beneficially owned by ACX and GTC
(excluding securities with respect to which they merely hold voting
power). The shares of Common 'Stock subject to the Option constitute
approximately 52% of the issued and outstanding Common Stock. The Option
may be exercised at any time prior to the earlier of (x) the date upon
which the Merger becomes effective, (y) the date upon which the Merger
Agreement is validly terminated pursuant to a mutual agreement of Buyer,
Buyer Sub and the Company or the entry
<PAGE> 4
of a final order permanently enjoining the consummation of the Merger or
(z) January 31, 2000, if an event occurs giving Buyer the right to
terminate the Merger Agreement based upon the Company's Board of
Directors' (i) (A) withdrawal of its recommendation or approval in
respect of the Merger Agreement or the Merger or (B) modification or
change of its recommendation or approval in respect of the Merger
Agreement or the Merger in a manner materially adverse to Buyer or Buyer
Sub or (C) failure to publicly oppose a Tender Offer or Exchange Offer
within 10 business days after commencement of such Tender Offer or
Exchange Offer, (ii) approval of any proposal other than by Buyer and
Buyer Sub in respect of a merger, consolidation or other business
combination involving the Company or its subsidiaries or acquisition of
more than 50% of the assets of the Company and its subsidiaries taken as
a whole or the issuance, sale, disposition of (including by way of
merger, consolidation, share exchange or similar transaction) securities
representing 50% or more voting control of the Company (other than
securities issued pursuant to existing stock options) (an "Acquisition
Transaction"), or (iii) waiver of the Company's right of first refusal,
under the Stock Purchase Agreement, dated November 15, 1996, among GTC,
New World Power Corporation and the Company, to purchase all shares of
Common Stock that GTC and its subsidiaries may from time to time propose
to sell (the "Company Right of First Refusal"). In the event Common
Stock of Golden Genesis is purchased pursuant to the Option, the price
per share at which Buyer may exercise the Option is equal to $2.33, and
in the case of all other securities of Golden Genesis purchased pursuant
to the Option, the Options." HOLDERS OF OPTIONS SHOULD NOT SEND IN THEIR
AGREEMENTS REPRESENTING SUCH SECURITIES.
Pursuant to the Option and Voting Agreement, ACX and GTC have
irrevocably and unconditionally waived and agreed to cause to be waived
and to prevent the exercise of, any rights of appraisal, any dissenters'
rights and any similar rights that may be available to ACX or GTC
relating to the Merger or any related transaction.
During the period from May 26, 1999, up to and until the
earlier to occur of (i) the date upon which the Merger becomes
effective, (ii) the Option Closing Date, (iii) the date upon which the
Merger Agreement is validly terminated pursuant to a mutual agreement of
Buyer, Buyer Sub and the Company or the entry of a final order
permanently enjoining the consummation of the Merger or (iv) January 31,
2000 (the period described in items (i) through (iv) is referred to
herein as the "Restricted Period"), ACX and GTC (and their respective
officers, directors, employees, representatives and agents) cannot
solicit, initiate, encourage, inquire or discuss with any parties other
than Buyer and Buyer Sub any inquiries or the making of any proposal
with respect to any Acquisition Transaction.
In addition, during the Restricted Period, ACX and GTC cannot
request that Golden Genesis waive the Company Right of First Refusal,
nor can either authorize or permit any of its directors, officers,
employees, agents or representatives to do so.
The Option and Voting Agreement provides that ACX indemnify,
defend and hold harmless, subject to certain limitations, (i) Golden
Genesis and (ii) each of Golden Genesis' stockholders, directors,
officers, employees and agents from and against liability which may be
incurred by any of them resulting from (A) any breach of any
representations or warranties contained in the Option and Voting
Agreement or the failure of ACX and GTC to observe, perform or abide by,
or any other breach of, any restriction, covenant, obligation or other
provision contained in the Option and Voting Agreement, (B) any breach
by Golden Genesis of any representation or warranty contained in the
Merger Agreement solely to the extent any such representation or
warranty applies to certain wholly owned foreign subsidiaries of the
Company, (C) any breach by ACX or GTC of any representation or warranty
contained in that certain Share Purchase Agreement, dated as of
September 4, 1998, among ACX, GTC and the Company, or (D) certain
matters relating to the Company's 401(k) Plan.
The Option and Voting Agreement provides that ACX and GTC shall
jointly and severally release and discharge Golden Genesis and its
subsidiaries, and each of their respective shareholders, affiliates,
officers, directors, employees and agents from any and all claims,
obligations or liabilities of any nature (whether known or unknown)
against any such persons by reason of any matter done or omitted to be
done prior to the Effective Time other than the obligation of Golden
Genesis to pay all indebtedness owed to ACX and GTC prior to the
Effective Time. See "Principal Stockholders--Option and Voting
Agreement."
<PAGE> 5
THE MERGER
Recommendations of the Board; Reasons for the Merger
The Board of Directors has unanimously approved the Merger
Agreement and the transactions contemplated thereby and determined that
they are advisable, fair to and in the best interests of the
stockholders of Golden Genesis. The Board of Directors unanimously
recommends that Golden Genesis' stockholders adopt the Merger Agreement.
The Board of Directors, in reaching its conclusion, considered a number
of factors. See "The Merger--Background of the Merger" and "--Reasons
for the Merger; Recommendation of the Board of Directors."
Opinion of Hanifen, Imhoff Inc.
The Company retained Hanifen, Imhoff Inc. to act as its
financial advisor in connection with the sale of Golden Genesis.
Hanifen, Imhoff Inc. rendered an opinion to the Board of Directors on
May 26, 1999 (confirming its oral opinion given to the Board of
Directors on May 18, 1999) that, as of May 26, 1999, the consideration
to be received by the holders of the Common Stock pursuant to the terms
of the Merger Agreement was fair from a financial point of view to such
holders. See "The Merger--Background to the Merger" and "--Reasons for
the Merger; Recommendation of the Board of Directors." A copy of the
opinion of Hanifen, Imhoff Inc. is attached to this Proxy Statement as
Exhibit C and should be read in its entirety by the stockholders of the
Company. See "The Merger--Opinion of Hanifen, Imhoff."
Effective Time
The Effective Time of the Merger will be the time of filing of
a Certificate of Merger relating to the Merger with the Secretary of
State of the State of Delaware in accordance with the provisions of the
DGCL or as otherwise provided in such Certificate of Merger. Subject to
the satisfaction or waiver of the closing conditions set forth in the
Merger Agreement, the Merger will be consummated (the "Closing") on or
before the 22nd business day following the mailing of the definitive
Proxy Statement (subject to extension under certain circumstances, as
provided in the Merger Agreement). It is anticipated that the Effective
Time of the Merger will occur during the third calendar quarter of 1999,
although there can be no assurance to such effect. See "The Merger--
Effective Time."
Surrender of Stock Certificates; Payment for Shares
Promptly after the Effective Time, a transmittal form will be
mailed to each record holder of shares of Common Stock. The transmittal
form will set forth the procedure for surrendering to a bank or trust
company mutually acceptable to Golden Genesis and Buyer (the "Paying
Agent") certificates previously representing Common Stock. In order to
receive the consideration to which the holder will be entitled as a
result of the Merger, the holder will be required, following the
Effective Time, to surrender the holder's stock certificate(s), together
with a duly executed and properly completed transmittal form (and any
other required documents), to the Paying Agent. STOCKHOLDERS SHOULD NOT
SEND IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
Thereafter, the holder will receive as promptly as practicable, in
exchange for the surrendered certificate(s), cash in an amount equal to
$2.33 per share of Common Stock, subject to reduction only for any
applicable federal back-up withholding or transfer taxes. See "The
Merger Agreement--The Merger."
Holders of options issued by Golden Genesis will be entitled to
receive the amounts described in "The Merger Agreement--Treatment of
Options." HOLDERS OF OPTIONS SHOULD NOT SEND IN THEIR AGREEMENTS
REPRESENTING SUCH SECURITIES.
Conditions to the Merger
The parties' obligations to consummate the Merger are subject
to the satisfaction or waiver of certain conditions, including, among
others, the adoption of the Merger Agreement by the stockholders of
Golden Genesis, the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
<PAGE> 6
as amended (the "HSR Act"), and the absence of any injunction or other
legal restraint prohibiting the Merger. Buyer's and Buyer Sub's
obligations to consummate the Merger are subject to the satisfaction or
waiver of certain additional conditions, including, among others, the
accuracy of Golden Genesis' representations and warranties in the Merger
Agreement and the performance by Golden Genesis of its obligations under
the Merger Agreement. Golden Genesis' obligations to consummate the
Merger are subject to the satisfaction or waiver of certain additional
conditions. See "The Merger--Regulatory Matters" and "The Merger
Agreement--Conditions."
No Solicitation
Golden Genesis has agreed, prior to the Effective Time, that it
shall not, and shall not authorize or permit any of its subsidiaries or
any of its or its subsidiaries' directors, officers, agents or
representatives to, with any parties other than the Buyer or the Buyer
Sub, solicit, initiate or encourage any inquiries or the making of any
proposal with respect to an Acquisition Transaction, or (b) initiate,
negotiate, explore or otherwise engage in substantive communications
regarding any Acquisition Transaction.
The Merger Agreement does not, however, prevent the Company
from furnishing non-public information to, entering into discussions
with, or recommending a transaction with respect to, any person who
makes an unsolicited bona fide written proposal for an Acquisition
Transaction, if (a) the Board of Directors believes in good faith that
the proposal, if consummated, would be financially more favorable to the
Company's stockholders than the transaction contemplated by the Merger
Agreement, and (b) prior to furnishing any non-public information to, or
entering into discussions with, the relevant party, the Board of
Directors receives a confidentiality agreement from the relevant party
which is no more favorable to such party than the confidentiality
agreement, dated February 5, 1999, between the Buyer and the Company.
See "The Merger Agreement--No Solicitation."
TERMINATION; EXPENSES AND FEES
The Merger Agreement may be terminated:
(a) by mutual written consent of the Company, Buyer and Buyer
Sub;
(b) by the Company, Buyer or Buyer Sub: (i) if the Merger shall
not have occurred on or before the 22nd business day after the date when
this Proxy Statement is mailed to the Company's stockholders (the
"Merger Deadline"), subject to extension in certain circumstances, or
(ii) if the Merger is permanently enjoined or prohibited.
(c) by Buyer or Buyer Sub if (i) the Company has breached any
representation or warranty contained in the Merger Agreement; (ii) the
Company has failed to comply with any of its agreements or covenants
under the Merger Agreement in all material respects; (iii) certain
conditions to closing have not been satisfied by the Company or waived
by Buyer and Buyer Sub prior to the Merger Deadline; (iv) the Board of
Directors shall (A) withdraw its recommendation or approval in respect
of the Agreement or the Merger or (B) modify or change its
recommendation or approval in respect of the Merger Agreement or the
Merger in a manner materially adverse to Buyer or Buyer Sub or (C) fail
to publicly oppose a Tender Offer or Exchange Offer (each as defined
below) within 10 business days after commencement of such Tender Offer
or Exchange Offer; or (v) the Board of Directors shall have approved any
proposal other than by Buyer and Buyer Sub in respect of an Acquisition
Transaction or shall have approved the waiver of the Company Right of
First Refusal. As used herein, "Tender Offer" shall mean the
commencement (as such term is defined in Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") of a tender offer
or the filing by any person of a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with respect
to a tender offer to purchase any shares of Common Stock of the Company
such that upon consummation of such offer, such person would own or
control 15% or more of the then outstanding shares of Common Stock of
the Company. As used herein, "Exchange Offer" shall mean the
commencement (as such term is defined in Rule 14d-2 under the Exchange
Act) of an exchange offer or the filing by any person of a registration
statement under the Securities Act with respect to an exchange offer to
purchase any shares of Common Stock of the Company such that upon
consummation of such offer, such person would own or control 25% or more
of the then outstanding shares of Common Stock of the Company.
<PAGE> 7
(d) by the Company notwithstanding approval thereof by the
stockholders of the Company at any time prior to the Effective Time if:
(i) Buyer or Buyer Sub has breached any representation and warranty of
Buyer or Buyer Sub contained in the Merger Agreement; (ii) Buyer or
Buyer Sub has failed to comply in all material respects with any of its
agreements or covenants under the Merger Agreement; (iii) certain
conditions to closing have not been satisfied by Buyer or Buyer Sub or
waived by the Company prior to the Merger Deadline; or (iv) the Board of
Directors shall have approved any proposal other than by Buyer and Buyer
Sub in respect of an Acquisition Transaction or shall have approved the
waiver by the Company of the Company Right of First Refusal.
If the Merger Agreement is terminated by Buyer or Buyer Sub due
to the fact that either (i) the Company has breached any representation
or warranty contained in the Merger Agreement, or (ii) the Company has
failed to comply with any of its agreements or covenants under the
Merger Agreement in all material respects, where the breach or failure
giving rise to such right of termination shall have been caused in whole
or in part by any action or inaction within the control of the Company
or any of its subsidiaries, the Company will be required to pay to Buyer
or Buyer Sub an amount equal to their out-of-pocket fees and expenses
not to exceed $750,000. Buyer and Buyer Sub shall not be able to
collect such payment if they are entitled to the payment of a Topping
Fee (as described below).
If the Merger Agreement is terminated by the Company due to the
fact that either (i) Buyer or Buyer Sub has breached any representation
and warranty of Buyer or Buyer Sub contained in the Merger Agreement, or
(ii) Buyer or Buyer Sub has failed to comply in all material respects
with any of its agreements or covenants under the Merger Agreement,
where the breach or failure giving rise to such right of termination
shall have been caused in whole or in part by any action or inaction
within the control of Buyer or Buyer Sub, Buyer shall be required to pay
to the Company an amount equal to $500,000 as compensation for lost
opportunities and reimbursement of out-of-pocket fees and expenses.
If the Merger Agreement is terminated (i) by Buyer or Buyer Sub
due to the fact that (A) the Board of Directors has (1) withdrawn its
recommendation or approval in respect of the Agreement or the Merger or
(2) modified or changed its recommendation or approval in respect of the
Merger Agreement or the Merger in a manner materially adverse to Buyer
or Buyer Sub or (3) failed to publicly oppose a Tender Offer or Exchange
Offer within 10 business days after commencement of such Tender Offer or
Exchange Offer, or (B) the Board of Directors has approved any proposal
other than by Buyer and Buyer Sub in respect of an Acquisition
Transaction or has approved the waiver by the Company of the Company
Right of First Refusal, or (ii.) by the Company due to the fact that the
Board of Directors has approved any proposal other than by Buyer and
Buyer Sub in respect of an Acquisition Transaction or has approved the
waiver by the Company of the Company Right of First Refusal, the Company
shall be required to pay to Buyer for the termination of this Agreement
$2,000,000 as compensation for lost opportunities and reimbursement of
out-of-pocket fees and expenses incurred in connection with the Merger
and the transactions contemplated by the Merger Agreement (the "Topping
Fee").
If the Merger Agreement is terminated by Buyer or Buyer Sub due
to the fact that either (i) the Company has breached any representation
or warranty contained in the Merger Agreement, or (ii) the Company has
failed to comply with any of its agreements or covenants under the
Merger Agreement in all material respects, where the breach or failure
giving rise to such right of termination shall have been caused in whole
or in part by any action or inaction within the control of the Company
or any Subsidiary, the Company shall pay to Buyer the Topping Fee if (i)
after the date of the Merger Agreement and before the termination of the
Merger Agreement, a proposal for an Acquisition Transaction shall have
been made and publicly announced by any person (other than Buyer, Buyer
Sub and their directors, officers, employees, agents and
representatives), and (ii) after the date of the Merger Agreement and at
or prior to January 31, 2000, the Company shall have effected such
Acquisition Transaction with such person or an affiliate thereof. The
Topping Fee described in this paragraph shall be payable as a condition
to the consummation of the foregoing Acquisition Transaction.
Rights of Dissenting Stockholders
Holders of Common Stock who do not wish to accept the $2.33
cash payment per share provided in the Merger have the right to seek an
appraisal of the "fair value" of their shares provided that they comply
with the
<PAGE> 8
conditions established by Section 262 of the DGCL. For a discussion of
the rights of holders of Common Stock to seek appraisal rights of their
shares, see "The Merger--Rights of Dissenting Stockholders."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In general, the receipt of cash by a stockholder pursuant to
the Merger or the exercise of appraisal rights will be a taxable event
for the stockholder for federal income tax purposes and may also be
taxable events under applicable local, state and foreign tax laws. The
tax consequences for a particular stockholder will depend upon the facts
and circumstances applicable to that stockholder. Accordingly, each
stockholder should consult the holder's own tax advisor with respect to
the federal, state, local or foreign tax consequences of the Merger. See
"Certain Federal Income Tax Consequences."
CERTAIN LEGAL PROCEEDINGS
On February 18, 1998, Golden Genesis was named as one of two
dozen defendants in a lawsuit brought in the U.S. District Court for the
District of New Hampshire. The suit alleged various violations of
securities laws and breaches of fiduciary duties, among other things.
The Company was subsequently dismissed as a defendant from the lawsuit.
In July 1997, the Company agreed to a settle a pending dispute
with its former executive officers Robert R. Kauffman and Thomas LaVoy.
In connection with the settlement, the Company paid Messrs. Kauffman and
LaVoy certain severance amounts, benefits and attorneys' fees. As a part
of the settlement, two of the Company's directors at the time, Donald
Anderson and Walter M. Baker (and an entity controlled by them), agreed
to purchase all outstanding stock options held by Mr. Kauffman. Messrs.
Anderson and Baker have questioned the treatment of these options in the
Merger. Additionally, Mr. Anderson made a request to inspect the list of
stockholders of the Company, as is the right of any stockholder of the
Company under Section 220 of the DGCL. The Company has agreed to honor
Mr. Anderson's request and will provide him and his representatives
access to the stockholder list at the offices of the Company on or after
June 28, 1999. The Company does not believe that it has any liability
with respect to the stock options purchased by Messrs. Anderson and
Baker other than those otherwise available to all holders of options
under the Merger Agreement. See "The Merger--Certain Legal Proceedings."
THE SPECIAL MEETING
DATE, TIME AND PLACE; MATTERS TO BE CONSIDERED
This Proxy Statement is being furnished to the holders of
Common Stock in connection with the solicitation of proxies by the Board
of Directors for use at the Special Meeting and any adjournments or
postponements thereof. The Special Meeting will be held at 10:00 a.m.,
local time, on July 21, 1999, at 7812 East Acoma Drive, Scottsdale,
Arizona 85260. At the Special Meeting, the holders of Common Stock will
be asked to vote on a proposal to adopt the Merger Agreement and
transact any other business that may properly come before the Special
Meeting or any adjournments or postponements thereof.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT
THEY ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF THE
STOCKHOLDERS OF GOLDEN GENESIS. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT GOLDEN GENESIS' STOCKHOLDERS ADOPT THE MERGER AGREEMENT.
As a result of the Merger, Golden Genesis will become a wholly-
owned subsidiary of Buyer and, among other things, each issued and
outstanding share of Common Stock (other than any shares held in the
treasury of the Company or by any wholly owned subsidiary of the
Company, which shares, by virtue of the Merger and without any action on
the part of the holder thereof, will be canceled and will cease to exist
with no payment being made with respect thereto, and other than any
shares of holders who perfect and exercise dissenters' appraisal rights)
will be converted into the right to receive $2.33. In addition, each
holder of an option to purchase Common Stock, upon
<PAGE> 9
delivery of an Option Cancellation Agreement, will be able to receive an
amount in respect of such option which is equal to the product of: (i)
the difference between $2.33 and the exercise price of such option, and
(ii) the number of shares of Common Stock subject to such option. See
"The Merger Agreement--The Merger" and "--Treatment of Options."
Interest will not be paid on amounts to be received in the
Merger by holders of shares of Common Stock or stock options issued by
the Company in respect of the period between the time of the Merger and
the time that payment is actually made.
If the Merger had occurred on April 30, 1999, and assuming no
holder of Common Stock exercises appraisal rights and each holder of
options to purchase shares of Common Stock had delivered an executed
Option Cancellation Agreement, then (a) the 17,152,948 outstanding
shares of Common Stock would have converted into the right to receive an
aggregate of $39,966,368.84, and (b) the holders of "in-the-money"
options to purchase 1,986,272 shares of Common Stock would have been
entitled to receive (net of the payment of the exercise prices) an
aggregate of approximately $1,783,318.14.
RECORD DATE; QUORUM; VOTING AT THE SPECIAL MEETING
The Board of Directors has fixed the close of business on June
24, 1999 as the Record Date for determining the holders of Common Stock
entitled to notice of and to vote at the Special Meeting. As of the
Record Date, there were issued and outstanding 17,155,948 shares of
Common Stock. Golden Genesis also has outstanding stock options. The
holders of stock options have no voting rights with respect to the
Merger Agreement.
A quorum is necessary in order for a vote on the proposals
presented at the Special Meeting. The presence in person or by proxy of
the holders of record of a majority of the voting power of the
outstanding shares of Common Stock is necessary for there to be a quorum
for purposes of voting on the Merger Agreement.
Abstentions (i.e., votes withheld by stockholders who are
present and entitled to vote) and broker non-votes (i.e., shares held by
a broker for its customers that are not voted because the broker does
not receive instructions from the customer or because the broker does
not have discretionary voting power with respect to the item under
consideration) will be counted as present for purposes of determining
whether there is a quorum for the transaction of business.
The affirmative vote of the holders of a majority of the voting
power of all outstanding shares of the Common Stock, with each share of
Common Stock entitled to one vote, is required to adopt the Merger
Agreement. Accordingly, abstention and broker non-votes will have the
effect of votes against the adoption of the Merger Agreement.
Golden Genesis will appoint one or more inspectors, who may be
employees of Golden Genesis, to determine, among other things, the
number of shares of Common Stock represented at the Special Meeting and
the validity of the proxies submitted for voting at the Special Meeting.
Golden Genesis has retained Norwest Bank Minnesota, N.A. Shareowner
Services, its transfer agent for the Common Stock, as proxy tabulator to
assist the inspectors in the performance of their duties. Norwest Bank
Minnesota, N.A. Shareowner Services can be reached at 161 North Concord
Exchange Street, South St. Paul, Minnesota 55075-1139, facsimile no.
(651) 450-4078, Attention: Barb Novak.
ACX and GTC own beneficially as of the Record Date shares of
Common Stock which represent approximately 55% of the voting power of
the outstanding Common Stock. Pursuant to the Option and Voting
Agreement, ACX and GTC have agreed to vote all shares of capital stock
of Golden Genesis owned beneficially by them in favor of adoption of the
Merger Agreement at the Special Meeting. Such holders collectively
possess the right to cast 9,429,379 of the 17,152,948 votes entitled to
be cast at the Annual Meeting. Accordingly, passage of the proposal to
adopt the Merger Agreement is assured. See "Principal Stockholders--
Option and Voting Agreement."
<PAGE> 10
VOTING OF PROXIES
All shares of Common Stock that are entitled to vote and are
represented at the Special Meeting by properly executed proxy cards
received prior to or at the Special Meeting, and not duly and timely
revoked, will be voted at the Special Meeting (or any adjournment or
postponement thereof) in accordance with the instructions indicated on
the proxy cards. If no instructions are indicated, the proxies will be
voted FOR adoption of the Merger Agreement. Abstentions and broker non-
votes will have the effect of votes against adoption of the Merger
Agreement.
In the event that there is a motion to adjourn or postpone the
Special Meeting to another time and/or place (including for the purpose
of soliciting additional votes in favor of the adoption of the Merger
Agreement), then (i) proxies of holders of Common Stock who vote in
favor of adoption of the Merger Agreement and proxies of holders of
Common Stock which contain no voting instructions will be voted in favor
of the motion to adjourn or postpone the Special Meeting, (ii) proxies
of holders of Common Stock who vote against the adoption of the Merger
Agreement will be voted against the motion to adjourn or postpone the
Special Meeting, and (iii) proxies of holders of Common Stock who
abstain from voting on the adoption of the Merger Agreement will abstain
on the vote on adjournment or postponement, which will have the effect
of a vote against adjournment or postponement. If any other matters are
properly presented for consideration at the Special Meeting, then J.
Michael Davis and Tom Dyer (the persons named in the enclosed proxy card
as the proxies for the Common Stock) will have discretion to vote on
these matters in accordance with their best judgment.
REVOCATION OF PROXIES AND VOTING INSTRUCTIONS
A holder of Common Stock may revoke a proxy card given pursuant
to this solicitation at any time before the proxy card is voted by
submitting a written revocation to the tabulation agent (Norwest Bank
Minnesota, N.A. Shareowner Services), by returning a subsequently dated
proxy card to the proxy tabulator or to the Secretary of Golden Genesis,
by filing an instrument in writing with the Secretary of Golden Genesis
revoking the proxy card, or by voting in person at the Special Meeting.
Attendance at the Special Meeting will not in and of itself revoke a
proxy card.
Holders of Common Stock who are entitled to revoke their proxy
card may do so via facsimile at the number set forth above in "--Record
Date; Quorum; Voting at the Special Meeting." Any beneficial owner of
Common Stock whose shares are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes
to revoke should contact the registered holder promptly and instruct the
registered holder to revoke on his behalf. There can be no assurance
that the registered holder will have sufficient time prior to the
Special Meeting to deliver a revocation upon instruction by the
beneficial owner.
PROXY SOLICITATION
Golden Genesis will pay its own expenses incurred in
connection with this Proxy Statement and the Special Meeting, including
the disbursements of legal counsel and accountants. In addition to
solicitation by mail, proxies may be solicited by directors, officers
and employees of Golden Genesis in person or by telephone, facsimile or
other means of communication. The directors, officers and employees will
not be additionally compensated, but will be reimbursed for reasonable
out-of-pocket expenses, in connection with their solicitation.
Arrangements will also be made with custodians, nominees and fiduciaries
for forwarding of proxy solicitation materials to beneficial owners of
shares held of record by the custodians, nominees and fiduciaries, and
Golden Genesis will reimburse the custodians, nominees and fiduciaries
for reasonable expenses incurred in connection therewith.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS.
<PAGE> 11
THE MERGER
BACKGROUND OF THE MERGER
Golden Genesis Company, formerly Photocomm, Inc. ("Photocomm"),
was formed by Don Anderson in 1981 in Scottsdale, Arizona, as one of the
first solar electric distributors in the United States. Photocomm's
strategy was to develop markets in the western United States utilizing
products from the emerging solar module suppliers within the industry.
As the product matured and costs declined, management developed new
strategies to capture markets utilizing distributed power with solar
modules as the key component.
In September 1988, Photocomm became a public company through a
reverse merger reorganization with Sunland Industries, Inc. The primary
strategy of the merger was to capture synergies of existing operations
and products within the renewable energy industry. Although the merger
did not result in additional capital to fund growth, the public stock
was a catalyst as it provided currency for carrying out acquisitions of
other targeted companies.
On March 28, 1990, the Company entered into a long term
financial and strategic partnership with Westinghouse. The agreement
included the sale of 1,000,000 shares of unregistered Common Stock at
$1.00 per share and a $625,000 subordinated convertible debenture
(convertible to 500,000 common shares), providing a total cash
contribution of $1,625,000 to the Company. This new relationship
provided the framework for the Company to take advantage of the
accelerated growth in the solar electric industry.
On November 9, 1993, in cooperation with its strategic partner
Westinghouse, a major financing and strategic partnership agreement with
The New World Power Corporation ("NWP") was executed, including NWP
buying a 29% stake in the Company. NWP purchased 1.6 million newly
issued shares from the Company for $2,000,000, and acquired options to
purchase an additional 4.1 million shares through 1996 at a price range
of $2.50 to $3.00 per share. NWP also purchased 500,000 shares from a
private corporate shareholder for $625,000, and acquired an option to
purchase an additional 2.0 million shares through 1994 at $2.00 per
share. The Company saw this new partnership as critical from the
standpoint of dramatically improving the financial position of the
Company, as well as providing a substantial boost to the Company's
international market development activities in conjunction with NWP's
established worldwide network in the renewable energy industry.
In August, 1994, the Company entered into an Exchange Agreement
with Westinghouse and NWP. Pursuant to the Exchange Agreement, NWP
acquired from Westinghouse 1,800,000 shares of the Company's common
stock, 8,690 shares of the Series B Convertible Preferred Stock, the
remaining $250,000 Subordinated Convertible Debenture in exchange for
465,780 shares of NWP unregistered common stock.
On November 21, 1996, ACX, through its wholly-owned subsidiary
GTC, purchased a total of 8.6 million shares of the Company's common
stock for an approximate 52% majority interest. ACX acquired 6.6 million
shares from NWP and Programmed Land, Inc., and 1,550,000 newly issued
shares, which included 550,000 shares from officer stock option
exercises. This transaction improved the Company's financial position,
providing new equity capital to the Company totaling $3,383,000.
From February, 1997 through 1998, the Company aggressively
expanded the business under the leadership of newly appointed President
and CEO, John K. Coors. The focus of management had been to grow the
business through a combined strategy of growing markets, developing new
market applications and acquiring companies, which, were synergistic
with the Company. Several acquisitions were completed during this
period. In chronological order the purchases included: Integrated Power
Company from Westinghouse in July of 1997; Utility Power Group, Inc. in
January of 1998; Remote Power Inc. in July of 1998; Solartec of
Argentina; and Golden Genesis do Brazil from majority shareholder GTC in
September, 1998. The specifics of each of these acquisitions have been
disclosed in periodic filings with the Commission. Over this period,
revenues have grown from $21 million in 1996 to $43 million in 1998.
<PAGE> 12
Over the last several years, the industry has seen new interest
and significant investment from large multinational companies, including
British Petroleum, Enron and Amoco, through a joint venture named
Solarex, Kyocera, Siemens, Royal Dutch Shell, Idaho Power Company and
Total. As a result, there is currently an oversupply of solar module
production capacity and there has been vertical integration of these
companies into the industrial markets of the Company. The specific
impact on the Company has been reduced margins due to increased
competition, which will not improve until the imbalance of supply and
demand corrects to the actual market. This financial reality coupled
with a strong willingness of the multinational oil companies which
desire to gain market share and for public relations motives
specifically aimed at creating alternative green energy has created a
difficult business environment for the Company to operate on a stand-
alone basis. In addition, the small solar distributors who were once
potential candidates for acquisition have become more costly due to the
willingness of large companies to vertically integrate and acquire
distribution outlets to reduce their production capacity problem.
In October of 1998, John K. Coors resigned as President and CEO
of the Company. Shortly thereafter, management received several
unsolicited inquires about the willingness of the majority stockholders
ACX and GTC to sell their majority interest in the Company. While none
of ACX, GTC or the Board of Directors had instructed or encouraged
management to "shop" the Company, management recognized that this new
interest along with the factors outlined above might present
opportunities for the Company to maximize stockholder value through a
sale of the Company.
After discussion with ACX, GTC and the Board of Directors in
December of 1998, management of the Company was given the approval by
the Board of Directors to actively explore alternatives to maximize
stockholder value, including a sale of the Company. In that same month
and in the first quarter of 1999, management held both formal and
informal discussions with a number of potential suitors of the Company.
Three suitors approached the Company indicating an interest in
purchasing the Company and newly-appointed President and Chief Executive
Officer of the Company, J. Michael Davis, and Chief Financial Officer
Jeffrey C. Brines contacted other potential buyers within the industry.
On February 22, 1999, a Board of Directors meeting was held to
review the interest of the prospective buyers. Management of the
Company was given direction by the Board of Directors to pursue the
prospects and solicit all other qualified prospects within the industry.
During the winter and early spring of 1999, management of the
Company held multiple meetings with three potential buyers and made
numerous telephone contacts with representatives of other industry
members. By early March, three prospective buyers had made either
written or oral offers, contingent upon full due diligence and Board of
Director approval. The first offer was simply to purchase the majority
control from ACX and GTC at $2.10 per share of Common Stock. A second
suitor expressed a desire to purchase all outstanding shares of Common
Stock and buy-out all vested stock options at $2.19 per share of Common
Stock and take the Company private in a reverse triangular merger
transaction. The final offer was to purchase all outstanding shares of
Common Stock and buy-out all vested stock options at $2.33 per share of
Common Stock and take the Company private in a reverse triangular merger
transaction.
In addition to these aforementioned offers, during the same
time period, management contacted by telephone the President and CEO of
Solarex/BP to solicit the potential business combination between the two
companies. After additional telephone conversations, management
determined that Solarex/BP had concluded the required investment to
consummate the transaction was cost prohibitive and management
terminated additional efforts to pursue this potential transaction.
Mr. Davis next contacted by telephone the Chief Operating
Officer of Siemens Solar in December of 1998. Mr. Davis explained the
purpose of the call was to solicit the interest of Siemens Solar in
purchasing Golden Genesis. As a result of this conversation, the
proposed transaction was discussed with the President and CEO of Siemens
Solar of Germany. Several weeks after the initial conversation, Siemens
communicated by telephone to Mr. Davis that Siemens Solar management had
determined that a purchase of Golden Genesis by Siemens was not a
strategic direction that it wished to pursue.
<PAGE> 13
In light of the fact that all major industry members (other
than Total of France) had either made bona fide offers for the purchase
of either a majority or all of the Company's shares, or had decided not
to pursue a strategic alliance with the Company, the Company entered
into the Letter of Intent with Buyer, which has significant interests in
the solar module industry, on April 13, 1999. The Letter of Intent was
subject to negotiation of a definitive merger agreement, completion of
due diligence and indicated that Buyer's willingness to enter into any
merger agreement was subject to and conditioned upon Buyer entering into
a voting agreement with ACX and GTC. The transaction outlined indicated
that all holders of Common Stock would receive $2.33 in cash per share
and that the Merger would be free of financing contingencies. The
Letter of Intent established an exclusivity period through May 15, 1999,
during which the Company agreed not to entertain any other proposals for
its sale. During the exclusivity period, the parties worked to negotiate
the definitive merger agreement and completed exhaustive due diligence
and meetings. On May 13, 1999, the parties extended the exclusivity
period through May 29, 1999.
The Board of Directors determined that, since there was to be
no premium paid to ACX and GTC for their majority position in the
Company under the offer presented by Buyer and that all shareholders
would receive the same cash consideration for their shares of Common
Stock, there was not a need to establish an independent committee of the
Board of Directors to evaluate the proposal presented by Buyer.
On May 18, 1999 the Board of Directors met with its legal and
financial advisors in order to discuss the proposed Merger at $2.33 per
share and to review the relevant agreements, including the proposed
Merger Agreement and the proposed Option and Voting Agreement between
Buyer, ACX and GTC, under which ACX and GTC would agree to vote in favor
of the Agreement and to give Buyer an option until January 31, 2000 to
acquire the shares of Common Stock owned by them at $2.33 per share if
the Company's Board of Directors withdraws or changes its recommendation
or approval of the Merger Agreement with Buyer, fails to oppose a
competing tender or exchange offer, or approves any acquisition
transaction with another buyer. See "Principal Stockholders--Option and
Voting Agreement." The Board of Directors reviewed management's
discussions with other potential buyers and concluded that the proposed
merger with Buyer was the best available transaction for the Company's
stockholders. The Board of Directors then discussed the consideration to
be paid to the holders of Common Stock and stock option holders. At this
meeting, Hanifen, Imhoff Inc. discussed the transaction from a financial
point of view and provided a comparative review of the value of other
companies with securities with similar attributes in similar
transactions. Hanifen, Imhoff Inc. indicated orally to the Board of
Directors that it was of the opinion that the consideration to be
received by the holders of Common Stock in the Merger was fair from a
financial point of view to such holders. Such opinion was subsequently
confirmed in writing on May 26, 1999, prior to the execution of the
Merger Agreement, and is set forth in its entirety as Exhibit B.
At the May 18, 1999 meeting, the Board of Directors unanimously
adopted a resolution to approve the Merger and the transactions
contemplated thereby, as fair and in the best interests of the
stockholders of the Company. Also at the May 18, 1999 meeting, the
Board of Directors, in order to make inapplicable the restrictions on
"business combinations" imposed by Section 203 of the DGCL, resolved to
approve the transactions contemplated under the proposed Option and
Voting Agreement between Buyer, ACX and GTC. Finally, on May 26, 1999,
and after receipt of the written opinion of Hanifen, Imhoff Inc., the
Board of Directors adopted resolutions approving the terms of the
definitive Merger Agreement as fair and in the best interest of the
stockholders of the Company and declaring the merger advisable and
recommending the Merger Agreement to the stockholders of the Company.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The Board of Directors believes that the terms of the Merger
Agreement and the Merger contemplated thereby are advisable, fair to,
and in the best interests of the stockholders of the Company, and that,
based on the Company's discussions with other potential buyers, the
Merger is the best transaction available for the Company's stockholders.
Accordingly, the Board of Directors has unanimously approved the Merger
Agreement and the Merger and has recommended that the Company's
stockholders adopt the Merger Agreement. In reaching its conclusion to
approve the Merger Agreement and the Merger, the Board of Directors
consulted with the Company's management as well as the Company's legal
and financial advisors, and considered a number of factors, including
the following:
<PAGE> 14
(a) The Board of Directors' familiarity with the solar
industry generally, its awareness of the trend towards consolidation in
the industry and its review and analysis of the Company's existing
business, financial condition, results of operations and prospects and
the competitive environment facing the Company.
(b) The recent change within the industry including
consolidation and investment from large multinational companies,
including Solarex, Kyocera, Siemens, Royal Dutch Shell, Idaho Power
Company and Total. As a result, there is currently an oversupply of
solar module production capacity and there has been vertical integration
of these companies into the industrial markets of the Company. The
specific impact on the Company has been reduced margins due to increased
competition, which will not improve until the imbalance of supply and
demand corrects to the actual market. This financial reality coupled
with the willingness on the part of the multinational oil companies to
create alternative green energy in efforts to gain market share and for
public relations motives has created a difficult business environment
for the Company to operate on a stand-alone basis. In addition, the
Company believes that the small solar distributors who were once
potential candidates for acquisition have become more costly due to the
willingness of other large companies to vertically integrate and acquire
distribution outlets to reduce their production capacity problem.
Finally, in April of 1999, British Petroleum and Amoco merged their
solar assets, including Solarex, after an agreement was reached to buy
out the ownership of Enron. The Company believes that the combined
Solarex/BP, after the merger and buyout of Enron, represents the largest
solar company in the world.
(c) The value of the Merger Consideration to be received by
the holders of the Common Stock in the Merger. The Board of Directors
considered the historical market prices and trading information with
respect to the Common Stock, the price per share offered by the Buyer,
the certainty of the value provided by the cash consideration and the
fact that such price represents a premium over the market prices at
which of the Common Stock had previously been traded. The consideration
of $2.33 per share represents a 47.4% premium over average per share
trading price of the Common Stock as reported by the Nasdaq SmallCap
Market for the three months prior to May 26, 1999.
(d) The prospects of continuing to operate the Company and the
possibility that its future performance might not in the foreseeable
future lead to a trading price for the shares of Common Stock having a
higher present value than the Merger Consideration.
(e) The presentation and oral opinion of Hanifen, Imhoff Inc.
(including a consideration of the assumptions and methodologies
underlying its analyses) made to the Board of Directors of the Company
on May 18, 1999 and the written opinion of Hanifen, Imhoff Inc. given to
the Board of Directors on May 26, 1999 (confirming its May 18, 1999 oral
opinion) that, as of May 26, 1999, the consideration to be received by
the holders of Common Stock pursuant to the Merger Agreement was fair
from a financial point of view to such holders. See "-- Opinion of
Hanifen, Imhoff Inc."
The discussion contained herein of the information and factors
considered by the Board of Directors in not intended to be exhaustive.
In view of the wide variety of factors considered in connection with its
evaluation of the proposed Merger, the Board of Directors did not find
it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to any of the factors discussed herein. In addition,
individual members of the Board of Directors may have given different
weights to different factors.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT
THEY ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF THE
STOCKHOLDERS OF THE COMPANY. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ADOPT THE MERGER AGREEMENT.
OPINION OF HANIFEN, IMHOFF INC.
On May 26, 1999, Hanifen, Imhoff Inc. delivered its written
opinion to the Board of Directors (confirming its oral opinion given to
the Board of Directors on May 18, 1999) that, as of the date of such
opinion, the $2.33 per
<PAGE> 15
share of Common Stock to be received by the holders of Common Stock
pursuant to the Merger Agreement was fair from a financial point of view
to such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF HANIFEN, IMHOFF INC.
DATE MAY 26, 1999, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH
THE OPINION, IS ATTACHED HERETO AS EXHIBIT B TO THIS PROXY STATEMENT AND
IS INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS OF THE COMPANY ARE
URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Hanifen, Imhoff Inc. reviewed,
among other things, (i) the Merger Agreement; (ii) contain publicly
available business and financial information relating to the Company;
and (iii) certain financial forecasts and other data for the Company
prepared by its management. Hanifen, Imhoff Inc. also held discussions
with members of senior management of the Company regarding the Company's
past and current business operations, financial condition and future
prospects. In addition, Hanifen, Imhoff Inc. reviewed the reported price
and trading activity for the Common Stock, compared certain financial
and stock market information for the Company with similar information
for certain other companies whose operations Hanifen, Imhoff Inc.
considered related to the Company, and reviewed the financial terms of
certain recent business combinations involving such companies.
Hanifen, Imhoff Inc. relied upon the accuracy and completeness
of all of the financial and other information reviewed by it and assumed
such accuracy and completeness for purposes of rendering its opinion. In
addition, Hanifen, Imhoff Inc. did not make any independent evaluation
or appraisal of the assets and liabilities of the Company or any of its
subsidiaries and Hanifen, Imhoff Inc. was not furnished with any such
evaluation or appraisal. The opinion of Hanifen, Imhoff Inc. referred to
herein was provided for the information and assistance of the Board of
Directors of the Company in connection with its consideration of the
transaction contemplated by the Merger Agreement, and such opinion does
not constitute a recommendation as to how any holder of Common Stock
should vote with respect to such transaction.
The following is a summary of certain of the financial and
comparative analyses which Hanifen, Imhoff Inc. presented to the Board
of Directors of the Company on May 18, 1999, and which provided the
basis for Hanifen, Imhoff Inc.'s May 26, 1999 written opinion.
(a) Historical Stock Trading Analysis. Hanifen, Imhoff Inc.
reviewed the historical trading prices and volumes for shares of Common
Stock and analyzed the consideration to be received by holders of shares
of Common Stock pursuant to the Merger Agreement in relation to the
closing market price of such shares during the time periods referenced
below.
(b) Market Valuation of Selected Companies. Hanifen, Imhoff
Inc. performed a market valuation analysis of companies with operations
similar to the Company's.
(c) Present Value of Potential Future Share Prices. Hanifen,
Imhoff Inc. performed analysis of the present value.
(d) Selected Transaction Analysis. Hanifen, Imhoff Inc.
reviewed selected transactions in similar industry segments, although
direct industry comparatives were not possible.
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set
forth above, without considering the analyses as a whole, could create
an incomplete view of the processes underlying Hanifen, Imhoff Inc.'s
opinion. In arriving at its fairness determination, Hanifen, Imhoff Inc.
considered the results of all such analyses. No company or transaction
used in the above analyses as a comparison is directly comparable to the
Company or the contemplated transaction. The analyses were prepared
solely for the purpose of Hanifen, Imhoff Inc.'s providing its opinion
to the Board of Directors of the Company as to the fairness from a
financial point of view of the $2.33 per share cash consideration to be
received by the holders of Common Stock pursuant to the
<PAGE> 16
Merger Agreement and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be
sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses.
Because such analyses are inherently subject to uncertainty, being based
upon numerous factors or events beyond the control of the parties or
their respective advisors, none of the Company, Hanifen, Imhoff Inc. or
any other person assumes responsibility if future results are materially
different from those forecast. As described above, Hanifen, Imhoff
Inc.'s opinion to the Board of Directors of the Company was one of many
factors taken into consideration by the Board of Directors of the
Company in making its determination to approve the Merger Agreement. The
foregoing summary does not purport to be a complete description of the
analysis performed by Hanifen, Imhoff Inc. and is qualified by reference
to the written opinion of Hanifen, Imhoff Inc. set forth in Exhibit B
hereto.
Hanifen, Imhoff Inc., as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bidding, secondary distributions of listed
and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. The Company selected Hanifen, Imhoff Inc.
as its financial advisor because it is a nationally recognized
investment banking firm that has substantial expertise in transactions
similar to the Merger. Hanifen, Imhoff Inc. is familiar with the Company
in having acted as its financial advisor in connection with certain
acquisitions by the Company and other prospective transactions which
were not carried out.
Pursuant to a letter agreement dated May 14, 1999 (the
"Engagement Letter"), the Company engaged Hanifen, Imhoff Inc. to render
an opinion as to the fairness (the "Opinion") from a financial point of
view of the proposed Merger Agreement and the consideration to be paid
to the holders of Common Stock. Pursuant to the terms of the Engagement
Letter, the Company paid Hanifen, Imhoff Inc. a fee of $25,000 upon the
execution of the Engagement Letter, with the remaining $50,000 fee paid
upon the delivery of the opinion to the Company.
EFFECTIVE TIME
The Effective Time of the Merger will be the time of filing of
a Certificate of Merger relating to the Merger with the Secretary of
State of the State of Delaware in accordance with the provisions of the
DGCL or as otherwise provided in such Certificate of Merger. Subject to
the satisfaction or waiver of the closing conditions set forth in the
Merger Agreement, the Merger will be consummated (the "Closing") on or
before the 22nd business day after the mailing of the definitive Proxy
Statement (subject to extension under certain circumstances, as provided
in the Merger Agreement). It is anticipated that the Effective Time of
the Merger will occur during the third calendar quarter of 1999,
although there can be no assurance to such effect.
CERTAIN EFFECTS OF THE MERGER
If the Merger is consummated, the Company's stockholders will
not have an opportunity to continue their equity interest in the
Company's operations and, therefore, will not share in future earnings
and growth, if any, of those operations. The Company anticipates that
the shares of Common Stock will trade on the Nasdaq SmallCap Market
until the consummation of the Merger. If the Merger is consummated,
public trading of the shares of Common Stock (the only publicly traded
securities of the Company) will cease, the shares of Common Stock will
cease to be quoted on the Nasdaq SmallCap Market, and the registration
of the shares of Common Stock under the Exchange Act will be terminated.
As a result, the Surviving Corporation will be relieved of the duty to
file informational reports under the Exchange Act.
For information concerning the federal income tax consequences
of the Merger, see "Certain Federal Income Tax Consequences of the
Merger."
REGULATORY MATTERS
The Merger is subject to antitrust review by the United States
Department of Justice (the "DOJ") and the Federal Trade Commission (the
"FTC"). Under the HSR Act, certain transactions, including the Merger,
may not be consummated until the parties have filed a notice with the
DOJ and the FTC and certain waiting period
<PAGE> 17
requirements have been satisfied. On June 4, 1999, ACX and Buyer filed
their respective Premerger Notification and Report Forms in compliance
with the HSR Act. At any time before the Effective Time, the DOJ, which
is the primary agency that exercises antitrust enforcement jurisdiction,
could take action under the antitrust laws seeking to enjoin the Merger.
In addition, a state Attorney General in any state in which the combined
companies will operate could take an enforcement action to enjoin
consummation of the Merger.
RIGHTS OF DISSENTING STOCKHOLDERS
If the Merger is consummated, holders of shares of Common Stock
are entitled to appraisal rights under Section 262 of the DGCL ("Section
262"), provided that they comply with the conditions established by
Section 262.
Section 262 is reprinted in its entirety as Exhibit C to this
Proxy Statement. The following discussion is not a complete statement of
the law relating to appraisal rights and is qualified in its entirety by
reference to Exhibit C. This discussion and Exhibit C should be reviewed
carefully by any holder who wishes to exercise statutory appraisal rights
or who wishes to preserve the right to do so, as failure to comply with
the procedures set forth herein or therein will result in the loss of
appraisal rights.
A record holder of shares of Common Stock who makes the demand
described below with respect to such shares, who continuously is the
record holder of such shares through the effective time of the Merger
(the "Effective Time"), who otherwise complies with the statutory
requirements of Section 262 and who neither votes in favor of the Merger
nor consents thereto in writing will be entitled to an appraisal by the
Delaware Court of Chancery (the "Delaware Court") of the fair value of
his or her shares of Common Stock. All references in this summary of
appraisal rights to a "stockholder" or "holders of shares of Common
Stock" are to the record holder or holders of shares of Common Stock.
Except as set forth herein, stockholders of the Company will not be
entitled to appraisal rights in connection with the Merger.
Under Section 262, where a merger is to be submitted for
approval at a meeting of stockholders, such as the Special Meeting, not
less than 20 days prior to the meeting a constituent corporation must
notify each of the holders of its stock for whom appraisal rights are
available that such appraisal rights are available and include in each
such notice a copy of Section 262. This Proxy Statement shall constitute
such notice to the record holders of Common Stock.
Holders of shares of Common Stock who desire to exercise their
appraisal rights must not vote in favor the Merger and must deliver a
separate written demand for appraisal to the Company prior to the vote by
the stockholders of the Company on the Merger. A demand for appraisal
must be executed by or on behalf of the stockholder of record and must
reasonably inform the Company of the identity of the stockholder of
record and that such stockholder intends thereby to demand appraisal of
the Common Stock. A proxy or vote against the Merger will not by itself
constitute such a demand. Within ten days after the Effective Time the
Company must provide notice of the Effective Time to all stockholders who
have complied with Section 262.
A stockholder who elects to exercise appraisal rights should
mail or deliver his or her written demand to:
4545 McIntyre St.
Golden, Colorado 80403
Attn: Secretary
A person having a beneficial interest in shares of Common Stock
that are held of record in the name of another person, such as a broker,
fiduciary, depositary or other nominee, must act promptly to cause the
record holder to follow the steps summarized herein properly and in a
timely manner to perfect appraisal rights. If the shares of Common Stock
are owned of record by a person other than the beneficial owner,
including a broker, fiduciary (such as a trustee, guardian or custodian),
depositary or other nominee, such demand must be executed by or for the
record owner. If the shares of Common Stock are owned of record by more
than one person, as in a joint tenancy or tenancy in common, such demand
must be executed by or for all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand
for appraisal for a stockholder of record; however, the agent must
identify the record owner and expressly disclose the fact that, in
exercising the demand, such person is acting as agent for the record
<PAGE> 18
owner. If a stockholder holds shares of Common Stock through a broker
who in turn holds the shares through a central securities depository
nominee such as Cede & Co., a demand for appraisal of such shares must be
made by or on behalf of the depository nominee and must identify the
depository nominee as record holder.
A record holder, such as a broker, fiduciary, depositary or
other nominee, who holds shares of Common Stock as a nominee for others,
may exercise appraisal rights with respect to the shares held for all or
less than all beneficial owners of shares as to which such person is the
record owner. In such case, the written demand must set forth the number
of shares covered by such demand. Where the number of shares is not
expressly stated, the demand will be presumed to cover all shares of
Common Stock outstanding in the name of such record owner.
Within 120 days after the Effective Time, either the Company or
any stockholder who has complied with the required conditions of Section
262 may file a petition in the Delaware Court, with a copy served on the
Company in the case of a petition filed by a stockholder, demanding a
determination of the fair value of the shares of all dissenting
stockholders. There is no present intent on the part of the Company to
file an appraisal petition and stockholders seeking to exercise appraisal
rights should not assume that the Company will file such a petition or
that the Company will initiate any negotiations with respect to the fair
value of such shares. Accordingly, holders of Common Stock who desire to
have their shares appraised should initiate any petitions necessary for
the perfection of their appraisal rights within the time periods and in
the manner prescribed in Section 262. Within 120 days after the
Effective Time, any stockholder who has theretofore complied with the
applicable provisions of Section 262 will be entitled, upon written
request, to receive from the Company a statement setting forth the
aggregate number of shares of Common Stock not voting in favor of the
Merger and with respect to which demands for appraisal were received by
the Company and the number of holders of such shares. Such statement
must be mailed (i) within 10 days after the written request therefor has
been received by the Company or (ii) within 10 days after the expiration
of the period for the delivery of demands as described above, whichever
is later.
If a petition for an appraisal is timely filed, at the hearing
on such petition, the Delaware Court will determine which stockholders
are entitled to appraisal rights. The Delaware Court may require the
stockholders who have demanded an appraisal for their shares and who hold
stock represented by certificates to submit their certificates of stock
to the Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any stockholder fails to comply with such
direction, the Delaware Court may dismiss the proceedings as to such
stockholder. Where proceedings are not dismissed, the Delaware Court
will appraise the shares of Common Stock owned by such stockholders,
determining the fair value of such shares exclusive of any element of
value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest, if any, to be paid upon the amount
determined to be the fair value.
Although the Company believes that the Merger Consideration is
fair, no representation is made as to the outcome of the appraisal of
fair value as determined by the Delaware Court and stockholders should
recognize that such an appraisal could result in a determination of a
value higher or lower than, or the same as, the Merger Consideration.
Moreover, the Company does not anticipate offering more than the Merger
Consideration to any stockholder exercising appraisal rights and reserves
the right to assert, in any appraisal proceeding, that, for purposes of
Section 262, the "fair value" of a share of Common Stock is less than the
Merger Consideration. In determining "fair value," the Delaware Court is
required to take into account all relevant factors. In Weinberger v.
UOP, Inc., the Delaware Supreme Court discussed the factors that could be
considered in determining fair value in an appraisal proceeding, stating
that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible
in court" should be considered and that "[f]air price obviously requires
consideration of all relevant factors involving the value of a company."
The Delaware Supreme Court has stated that in making this determination
of fair value the court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other
facts which could be ascertained as of the date of the merger which throw
any light on future prospects of the merged corporation. Section 262
provides that fair value is to be "exclusive of any element of value
arising from the accomplishment or expectation of the merger." In Cede &
Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such
exclusion is a "narrow exclusion [that] does not encompass known elements
of value," but which rather applies only to the speculative elements of
value arising from such accomplishment or expectation. In Weinberger,
the Delaware Supreme Court construed Section 262 to mean that "elements
of future
<PAGE> 19
value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered."
Holders of shares of Common Stock considering seeking appraisal
should recognize that the fair value of their shares determined under
Section 262 could be more than, the same as or less than the
consideration they are entitled to receive pursuant to the Merger
Agreement if they do not seek appraisal of their shares. The cost of the
appraisal proceeding may be determined by the Delaware Court and taxed
against the parties as the Delaware Court deems equitable in the
circumstances. However, costs do not include attorneys' and expert
witness fees. Each dissenting stockholder is responsible for his or her
attorneys' and expert witness expenses, although, upon application of a
dissenting stockholder of the Company, the Delaware Court may order that
all or a portion of the expenses incurred by any dissenting stockholder
in connection with the appraisal proceeding, including without
limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of stock
entitled to appraisal.
Any holder of shares of Common Stock who has duly demanded
appraisal in compliance with Section 262 will not, after the Effective
Time, be entitled to vote for any purpose any shares subject to such
demand or to receive payment of dividends or other distributions on such
shares, except for dividends or distributions payable to stockholders of
record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any
stockholder will have the right to withdraw such demand for appraisal and
to accept the terms offered in the Merger; after this period, the
stockholder may withdraw such demand for appraisal only with the consent
of the Company. If no petition for appraisal is filed with the Delaware
Court within 120 days after the Effective Time, stockholders' rights to
appraisal shall cease, and all holders of shares of Common Stock will be
entitled to receive the consideration offered pursuant to the Merger
Agreement. Inasmuch as the Company has no obligation to file such a
petition, and the Company has no present intention to do so, any holder
of shares of Common Stock who desires such a petition to be filed is
advised to file it on a timely basis. Any stockholder may withdraw such
stockholder's demand for appraisal by delivering to the Company a written
withdrawal of his or her demand for appraisal and acceptance of the
Merger Consideration, except (i) that any such attempt to withdraw made
more than 60 days after the Effective Time will require written approval
of the Company and (ii) that no appraisal proceeding in the Delaware
Court shall be dismissed as to any stockholder without the approval of
the Delaware Court, and such approval may be conditioned upon such terms
as the Delaware Court deems just.
ACCOUNTING TREATMENT
The Merger will be treated by Buyer as a "purchase," as that
term is used under United States generally accepted accounting
principles, for accounting and financial reporting purposes.
CERTAIN LEGAL PROCEEDINGS
On February 18, 1998, Golden Genesis was named as one of two
dozen defendants in a lawsuit brought in the U.S. District Court for the
District of New Hampshire. The suit alleged various violations of
securities laws and breaches of fiduciary duties, among other things.
The Company was subsequently dismissed as a defendant from the lawsuit.
In July 1997, the Company agreed to a settle a pending dispute
with its former executive officers Robert R. Kauffman and Thomas LaVoy.
In connection with the settlement, the Company paid Messrs. Kauffman and
LaVoy certain severance amounts, benefits and attorneys' fees. As a part
of the settlement, two of the Company's directors at the time, Donald
Anderson and Walter M. Baker (and an entity controlled by them), agreed
to purchase all outstanding stock options held by Mr. Kauffman. On May
27, 1999, after the public announcement of the Merger, an attorney
representing Messrs. Anderson and Baker questioned the treatment of
these options in the Merger. Under the Merger Agreement, all holders of
options (whether such options are vested or non-vested) will be entitled
to receive an amount in cash equal to the product of (i) the excess, if
any, by which $2.33 exceeds the per share exercise price for their
respective options, and (ii) the number of shares of Common Stock
subject to such options. See "The Merger Agreement--Treatment of
Options." Subsequently, on June 14, 1999, Mr. Anderson made a
<PAGE> 20
request to inspect the list of stockholders of the Company, as is the
right of any stockholder of the Company under Section 220 of the DGCL.
The Company has agreed to honor Mr. Anderson's request and will provide
him and his representatives access to the stockholder list at the
offices of the Company on or after June 28, 1999. The Company does not
believe that it has any liability with respect to the stock options
purchased by Messrs. Anderson and Baker other than those otherwise
available to all holders of options under the Merger Agreement.
Additionally, Messrs. Anderson and Baker, as stockholders of the
Company, shall have the rights to appraisal available to all
stockholders of the Company as are set forth in Section 262 of the DGCL
and described in "The Merger--Rights of Dissenting Stockholders".
THE MERGER AGREEMENT
The following is a summary of the material provisions of the
Merger Agreement, a copy of which is attached hereto as Exhibit A and
incorporated herein by reference. This summary does not purport to be a
complete description of the Merger Agreement and is qualified in its
entirety by reference to the full text of the Merger Agreement.
STOCKHOLDERS ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY FOR
A COMPLETE DESCRIPTION OF THE MERGER.
THE MERGER
If Golden Genesis' stockholders adopt the Merger Agreement,
and if the other conditions to the Merger are satisfied or waived, then,
at the Effective Time, Buyer Sub will be merged with and into Golden
Genesis, with Golden Genesis continuing as the Surviving Corporation and
a wholly-owned subsidiary of Buyer.
Upon the consummation of the Merger, pursuant to the Merger
Agreement, except for (a) shares held in the treasury of Golden Genesis
or owned by any of its wholly owned subsidiaries, all of which will be
canceled, and (b) shares held by persons who exercise dissenters'
appraisal rights, each issued and outstanding share of Golden Genesis'
Common Stock will convert into the right to receive $2.33 in cash,
without interest. All amounts payable to Golden Genesis' stockholders in
accordance with this paragraph will be net of any applicable withholding
taxes.
ACX and GTC, who beneficially own 9,429,379 shares of Common
Stock, or approximately 55% of the voting power of the Common Stock,
have agreed to vote in favor of the Merger. These holders will have
sufficient voting power under the DGCL to adopt the Merger Agreement.
See "The Merger--Option and Voting Agreement."
Stockholders who do not vote in favor of the Merger, and who
comply with the provisions of the DGCL regarding the exercise of
statutory dissenters' appraisal rights, have the right to seek a
determination and payment of the fair value of their shares in lieu of
the consideration set forth in the Merger Agreement. See "The Merger--
Rights of Dissenting Stockholders."
Promptly after the Effective Time, Buyer shall cause a bank or
trust company designated by Buyer and approved by Golden Genesis (the
"Paying Agent") to mail transmittal forms to each holder of record of
shares of Common Stock. The transmittal forms should be used in
forwarding the holder's stock certificates for surrender and exchange
for cash pursuant to the Merger Agreement. After receipt of a
transmittal form, each holder of certificates formerly representing
shares of Common Stock should surrender the certificates to the Paying
Agent and will receive from the Paying Agent cash as set forth above.
Instructions specifying other details of the exchange will accompany the
transmittal forms. After the Effective Time, each certificate previously
evidencing shares of Common Stock will be deemed for all purposes to
evidence only the right to receive the consideration set forth in the
Merger Agreement.
STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE A TRANSMITTAL FORM.
<PAGE> 21
TREATMENT OF OPTIONS
The Company has agreed to take all actions necessary to cause
each option to purchase shares of Common Stock (each, a "Company
Option") that is outstanding immediately before the Effective Time,
whether or not presently exercisable, to be canceled at the Effective
Time by virtue of the Merger. Upon delivery to Buyer on the business
day prior to the date of the Effective Time of an Option Cancellation
Agreement, a holder of a Company Option outstanding immediately before
the Effective Time will receive from the Company an amount equal to the
product of (i) the excess, if any, by which $2.33 exceeds the exercise
price of the Company Option, and (ii) the number of shares subject to
the Company Option, such amount to be paid to the holder by bank check
at the Effective Time, which amount will be subject to applicable
withholding taxes.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and
warranties by Golden Genesis relating to, among other things, (a) the
organization and good standing of Golden Genesis and its subsidiaries,
(b) the capitalization of Golden Genesis and its subsidiaries, (c) the
corporate authority of Golden Genesis to perform its obligations under
the Merger Agreement, (d) the lack of conflict between the Merger
Agreement and related documents with (i) the organizational documents of
Golden Genesis or its subsidiaries, or (ii) certain agreements,
nongovernmental self-regulatory agency rules, judgments, statutes and
regulations, (e) due filing of required documents with the Securities
and Exchange Commission (the "SEC"), (f) the financial statements of
Golden Genesis, (g) absence of undisclosed liabilities, (h) litigation,
(i) compliance with applicable laws, (j) taxes, (k) employment and
severance agreements, (l) employee benefits and ERISA matters, (m)
environmental matters, (n) assets, real property and intellectual
property, (o) systems, software and Year 2000 compliance, (p) labor
matters, (q) material contracts, (r) insurance, (s) suppliers and
customers, (t) books and records of Golden Genesis and its subsidiaries,
(u) the banking facilities of Golden Genesis, (v) the non-applicability
of Section 203 of the DGCL,(w) the absence of broker's fees in
connection with the Merger, and (x) the accuracy of the foregoing.
The Merger Agreement contains representations and warranties of
Buyer and Buyer Sub relating to, among other things, (a) the
organization and good standing of Buyer and Buyer Sub, (b) the corporate
authority of Buyer and Buyer Sub to perform the obligations under the
Merger Agreement, (c) the lack of conflict between the Merger Agreement
and related documents with (i) the organizational documents of Buyer or
Buyer Sub, or (ii) certain agreements, nongovernmental self-regulatory
agency rules, judgments, statutes and regulations, (d) the absence of
certain filing requirements with federal agencies, (e) the absence of
broker's fees in connection with the Merger, and (f) the accuracy of the
foregoing.
COVENANTS
Golden Genesis has agreed that, until the Effective Time (a)
except as contemplated by the Merger Agreement, it will, and will cause
its subsidiaries to, conduct their respective businesses in the ordinary
course consistent with past practice, and (b) it will, and will cause
each subsidiary to, use best efforts to (i) preserve its business and
organization intact, (ii) keep available to Buyer and Buyer Sub the
services of its present officers, employees, agents and independent
contractors, and (iii) preserve for the benefit of Buyer and Buyer Sub
the goodwill of its suppliers, customers, landlords, and others having
business relations with it.
Golden Genesis has also agreed that, except as otherwise
provided in the Merger Agreement, it will not, without the prior written
consent of Buyer, permit Golden Genesis or any of its subsidiaries to
(a) amend its organizational documents, (b) authorize, issue, sell,
deliver or agree or commit to do any of the foregoing with respect to
any stock or other securities or equity equivalents, except with respect
to Company Options outstanding as of the date of the Merger Agreement,
or amend the terms of any such securities agreements, (c) split, combine
or reclassify any shares of its capital stock, declare, set aside or pay
any dividend or other distribution in respect of capital stock, or
redeem or otherwise acquire any of the securities of Golden Genesis or
its subsidiaries, (d) with certain exceptions, incur any long-term or
short-term indebtedness, assume any third party obligations, pledge or
encumber shares of the capital stock of Golden Genesis or its
subsidiaries, or mortgage or pledge any Company assets, (e) except as
required by law, as contemplated by the Merger Agreement or in the
ordinary course of
<PAGE> 22
business consistent with past practice which would not be material,
enter into certain employee benefit arrangements for the benefit of any
officer, employee or director, or increase any compensation or benefits
thereof, (f) other than in the ordinary course of business consistent
with past practice, lease, sell or dispose any assets or enter any
commitments to do the same which would have a material impact, (g)
except as required as a result of a change in the law, change its fiscal
year or accounting practices, (h) acquire any other company, enter into
any material contract except in the ordinary course of business
consistent with past practice, or enter into any contract that would be
prohibited by the Merger Agreement, (i) revalue in any material respect
any assets except in accordance with generally accepted accounting
principles or Regulation S-X, (j) make any tax election or settle or
compromise any tax liability, (k) discharge any liabilities or
obligations, subject to exceptions, (l) settle or compromise any pending
or threatened litigation which is material or relates to the
transactions contemplated by the Merger Agreement, (m) authorize or make
any undisclosed capital expenditure, other than in the ordinary course
of business, in excess of $100,000 (individually) or $500,000 (in the
aggregate), (n) take or agree to take any of the foregoing actions or
take or omit to take any action which would make any of the
representations or warranties incorrect in any material respect as of
the date made.
NO SOLICITATION
Golden Genesis has agreed, prior to the Effective Time, that it
shall not, and shall not authorize or permit any of its subsidiaries or
any of its or its subsidiaries' directors, officers, agents or
representatives to, with any parties other than Buyer or Buyer Sub,
solicit, initiate or encourage any inquiries or the making of any
proposals with respect to any Acquisition Transaction, or provide any
non-public information to any party other than Buyer or Buyer Sub in
connection with the foregoing.
Golden Genesis has also agreed that it shall waive its right of
first refusal, under the Stock Purchase Agreement, dated November 15,
1996, among ACX, New World Power and the Company, to purchase all shares
of Common Stock that ACX and its subsidiaries may from time to time
propose to sell.
Golden Genesis has further agreed that it shall not, and shall
not authorize or permit any of its subsidiaries or any of its or its
subsidiaries directors, officers, agents or representatives to enter
into any agreement requiring it to abandon or fail to consummate the
Merger or any transactions contemplated by the Merger Agreement.
Notwithstanding the foregoing, the Merger Agreement does not
prohibit the Company from furnishing non-public information to, entering
into discussions with, or recommending a transaction with respect to,
any person who makes an unsolicited bona fide written proposal for an
Acquisition Transaction, if (a) the Company's board of directors
believes in good faith that the proposal, if consummated, would be
financially more favorable to the Company's stockholders than the
transaction contemplated by the Merger Agreement, and (b) prior to
furnishing any non-public information, the board of directors receives a
confidentiality agreement from the relevant party which is no more
favorable to such party than the confidentiality agreement, dated
February 5, 1999, between Buyer and the Company.
Golden Genesis has agreed to advise Buyer and Buyer Sub in
writing of the receipt and status of any additional inquiries or
proposals related to any Acquisition Transaction, and shall provide to
same additional non-public information that is provided to the person
making such inquiry or proposal.
CONDITIONS
The obligations of each party to consummate the Merger are
subject to the satisfaction or, if permissible, waiver, of certain
conditions, including (a) the approval of the Merger Agreement by the
stockholders of Golden Genesis in accordance with the DGCL and the rules
and regulations of the Nasdaq SmallCap Market, (b) the absence of any
injunction or legal restraint prohibiting the Merger, (c) the lapse of a
specified time period since the mailing of this Proxy Statement to
holders of Common Stock, (d) the expiration of all waiting periods under
the HSR Act, and (e) the execution of an agreement under which the
Company, GTC and Coors Ceramics agree to continue the lease by Coors
Ceramics to the Company and the sublease by the Company to GTC of
certain real property in Golden, Colorado for 90 days following the
Closing.
<PAGE> 23
The obligations of Buyer and Buyer Sub to consummate the Merger
are subject to the satisfaction or, if permissible, waiver, of certain
conditions, including (a) the representations and warranties of Golden
Genesis and its subsidiaries are true in all material respects, (b)
there is no material adverse change in the Company's condition prior to
closing, (c) the Company has delivered certain documents and instruments
required by the Merger Agreement to Buyer and Buyer Sub, (d) the number
of shares of Common Stock for which appraisal rights are sought prior to
any vote of the stockholders of the Company with respect to the Merger
shall not exceed 30% of the outstanding shares of Common Stock, (e)
Golden Genesis and its subsidiaries shall be in compliance with the
covenants set forth in the Merger Agreement in all material respects,
and (f) all required third party approvals have been obtained.
The obligations of the Company are subject to the satisfaction
or, if permissible, waiver, of certain conditions, including (a) the
representations and warranties of Buyer and Buyer Sub are true in all
material respects, (b) each of Buyer and Buyer Sub shall be in
compliance with the covenants set forth in the Merger Agreement in all
material respects, and (c) Buyer and Buyer Sub have delivered certain
documents and instruments required by the Merger Agreement to the
Company.
TERMINATION; EXPENSES AND FEES
The Merger Agreement may be terminated:
(a) by mutual written consent of the Company, Buyer and Buyer
Sub:
(b) by the Company, Buyer or Buyer Sub: (i) if the Merger shall
not have occurred on or before the Merger Deadline (subject to extension
under certain circumstances, as provided in the Merger Agreement), or
(ii) if the Merger is permanently enjoined or prohibited.
(c) by Buyer or Buyer Sub if (i) the Company has breached any
representation or warranty contained in the Merger Agreement; (ii) the
Company has failed to comply with any of its agreements or covenants
under the Merger Agreement in all material respects; (iii) certain
conditions to closing have not been satisfied by the Company or waived
by Buyer and Buyer Sub prior to the Merger Deadline; (iv) the Board of
Directors shall (A) withdraw its recommendation or approval in respect
of the Agreement or the Merger or (B) modify or change its
recommendation or approval in respect of the Merger Agreement or the
Merger in a manner materially adverse to Buyer or Buyer Sub or (C) fail
to publicly oppose a Tender Offer or Exchange Offer within 10 business
days after commencement of such Tender Offer or Exchange Offer; or (v)
the Board of Directors shall have approved any proposal other than by
Buyer and Buyer Sub in respect of an Acquisition Transaction or shall
have approved the waiver of the Company Right of First Refusal.
(d) by the Company notwithstanding approval thereof by the
stockholders of the Company at any time prior to the Effective Time if:
(i) Buyer or Buyer Sub has breached any representation and warranty of
Buyer or Buyer Sub contained in the Merger Agreement; (ii) Buyer or
Buyer Sub has failed to comply in all material respects with any of its
agreements or covenants under the Merger Agreement; (iii) certain
conditions to closing have not been satisfied by Buyer or Buyer Sub or
waived by the Company prior to the Merger Deadline; or (iv) the Board of
Directors shall have approved any proposal other than by Buyer and Buyer
Sub in respect of an Acquisition Transaction or shall have approved the
waiver by the Company of the Company Right of First Refusal.
If the Merger Agreement is terminated by Buyer or Buyer Sub in
accordance with subsections (c)(i) or (ii) above, where the failure
giving rise to such right of termination shall have been caused in whole
or in part by any action or inaction within the control of the Company
or any of its subsidiaries, the Company will be required to pay to Buyer
or Buyer Sub an amount equal to their out-of-pocket fees and expenses
not to exceed $750,000. Buyer and Buyer Sub shall not be able to
collect such payment if they are entitled to the payment of a Topping
Fee (as described below).
If the Merger Agreement is terminated by the Company in
accordance with subsections (d)(i) and (ii) above, where the failure
giving rise to such right of termination shall have been caused in whole
or in part by any
<PAGE> 24
action or inaction within the control of Buyer or Buyer Sub, Buyer shall
be required to pay to the Company an amount equal to $500,000 as
compensation for lost opportunities and reimbursement of out-of-pocket
fees and expenses.
If the Merger Agreement is terminated by Buyer or Buyer Sub in
accordance with subsections (c)(iv) and (v) above, or by the Company in
accordance with subsection (d)(iv) above, the Company shall be required
to pay to Buyer for the termination of this Agreement $2,000,000 as
compensation for lost opportunities and reimbursement of out-of-pocket
fees and expenses incurred in connection with the Merger and the
transactions contemplated by the Merger Agreement (the "Topping Fee").
If the Merger Agreement is terminated by Buyer or Buyer Sub
pursuant to subsection (c)(i) or (ii), where the failure giving rise to
such right of termination shall have been caused in whole or in part by
any action or inaction within the control of the Company or any
Subsidiary, the Company shall pay to Buyer the Topping Fee if (i) after
the date of the Merger Agreement and before the termination of the
Merger Agreement, a proposal for an Acquisition Transaction shall have
been made and publicly announced by any person (other than Buyer, Buyer
Sub and their directors, officers, employees, agents and
representatives), and (ii) after the date of the Merger Agreement and at
or prior to January 31, 2000, the Company shall have effected such
Acquisition Transaction with such person or an affiliate thereof. The
Topping Fee described in this paragraph shall be payable as a condition
to the consummation of the foregoing Acquisition Transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion sets forth certain federal income tax
consequences of the Merger applicable to stockholders that hold their
shares as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"). However, the
discussion does not address all federal income tax considerations that
may be relevant to particular stockholders in light of their specific
circumstances, such as stockholders who are dealers in securities,
foreign persons or stockholders who acquired their shares in connection
with stock options. Each stockholder is urged to consult the holder's
own tax advisor to determine the tax consequences to the holder of the
Merger in light of the holder's particular circumstances, including the
applicability and effect of federal, state, local and foreign income and
other tax laws and possible changes in those tax laws (which may have
retroactive effect).
The receipt by a Golden Genesis stockholder of cash pursuant to
the Merger (or cash pursuant to the exercise of dissenters' rights of
appraisal) will be a taxable event for the stockholder. A stockholder
will generally recognize capital gain or loss for federal income tax
purposes equal to the difference between (a) the amount of cash received
and (b) the tax basis in the shares of Golden Genesis stock surrendered
in exchange therefor (generally, the amount paid for the shares of
Golden Genesis). The gain or loss will be long-term capital gain or loss
if the stockholder's holding period for the surrendered shares is more
than one year at the Effective Time. Under recently enacted legislation,
individuals whose holding period for shares of Golden Genesis stock
exceeds one year will, in general, be subject to no more than a 20%
federal tax on any gain. If a Golden Genesis stockholder owns more than
one block of shares of Golden Genesis stock, the cash received must be
allocated ratably among the blocks in the proportion that the number of
shares of Golden Genesis stock in a particular block bears to the total
number of shares of Golden Genesis stock owned by the stockholder.
A stockholder may be subject to information reporting and to
backup withholding at a rate of 31% of amounts paid to the stockholder,
unless the stockholder provides proof of an applicable exemption or a
correct taxpayer identification number, and otherwise complies with
applicable requirements of the backup withholding rules.
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH
ABOVE IS BASED ON EXISTING LAW AS OF THE DATE OF THIS PROXY STATEMENT.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER (INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS).
<PAGE> 25
PRINCIPAL STOCKHOLDERS
The following table gives information concerning the beneficial
ownership of Common Stock as of June 24, 1999, the record date, by: (i)
each person known to the Company to own more than 5% of Common Stock of
the Company, (ii) the Chief Executive Officer and each of the directors
and (iii) all directors and executive officers of the Company as a
group.
Beneficial Ownership(1)(2)
Number of
Name of Beneficial Owner Shares Percent
Directors and Executive Officers:
J. Michael Davis 260,000(3)(5) 1.5%
Jeffrey C. Brines 255,000(3)(6) 1.5%
John K. Coors 216,000(3)(4)(7) 1.2%
Joseph Coors, Jr. 10,000(4)(8) *
Jed J. Burnham 13,000(9) *
Norman E. Miller 16,000(10) *
Gerrit J. Wolfaardt 13,000(11) *
John Markle 10,000(12) *
Directors and executive officers
as a group (13 persons) 3,299,533(13) 17.1%
Others:
ACX Technologies, Inc. 9,429,379(14) 55.0%
Donald E. Anderson 1,772,525(15) 9.9%
* Less than one percent.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is
deemed to be a "beneficial owner" of a security if he or she has or
shares the power to vote or direct the voting of such security or the
power to dispose or direct the disposition of such security. A person is
also deemed to be a beneficial owner of any securities of which that
person has the right to acquire beneficial ownership within 60 days of
June 24, 1999. More than one person may be deemed to be a beneficial
owner of the same securities. The percentage ownership of each
stockholder is calculated based on the total number of outstanding
shares of Common Stock as of the Record Date and those shares of Common
Stock that may be acquired by such stockholder within 60 days of June
24, 1999. Consequently, the denominator for calculating such percentage
may be different for each stockholder.
(2) This table is based upon information supplied by directors and
executive officers of the Company. Unless otherwise indicated in the
footnotes to this table, each of the stockholders named in this table
has sole voting and investment power with respect to the shares shown as
beneficially owned.
(3) During 1998 Mr. Davis, Mr. Brines and Mr. Coors without
consideration forfeited options to purchase shares of common stock of
125,000, 125,000 and 250,000, respectively.
(4) Does not include shares of Common Stock beneficially owned by ACX.
Joseph Coors, Jr. and John K. Coors are both directors of ACX, and John
K. Coors is a President, of Coors Ceramics, a wholly owned subsidiary of
ACX. In addition, Joseph Coors, Jr. is a co-trustee of one or more
family trusts that collectively own approximately 46 percent of the
outstanding common stock of ACX. As of June 24, 1999, ACX beneficially
owned 9,429,379 shares of Common Stock of the Company, representing
approximately 55% of the voting power of the Common Stock outstanding at
that date.
<PAGE> 26
(5) Includes 250,000 shares of Common Stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
(6) Includes 250,000 shares of Common Stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
(7) Includes 210,000 shares of Common Stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
(8) Includes 10,000 shares of Common Stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
(9) Does not include shares of Common Stock beneficially owned by ACX.
Mr. Burnham is Chief Financial Officer and Treasurer of ACX. Includes
13,000 shares of Common Stock that may be purchased pursuant to options
exercisable within 60 days of June 24, 1999.
(10) Includes 10,000 shares of Common Stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
(11) Includes 13,000 shares of Common Stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
(12) Includes 10,000 shares of Common Stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
(13) Includes shares beneficially owned by Donald E. Anderson who is
also identified as a 5% or greater shareholder.
(14) Includes the voting rights to 500,000 shares pledged to ACX as a
part of ACX's loan agreement with Mr. Kauffman.
(15) Includes 312,500 shares of Common stock that may be purchased
pursuant to options exercisable within 60 days of June 24, 1999.
Includes 500,000 shares of Common Stock that may be purchased by
Programmed Land Incorporated pursuant to options exercisable within 60
days of June 24, 1999. Donald Anderson is the owner of Programmed Land
Incorporated. Includes 930,000 shares in the Donald E. and Rebecca E.
Anderson Trust. Donald Anderson a co trustee for the trust. Includes
30,000 shares of Common Stock owned by John Anderson (a minor child of
Donald Anderson) for which Donald Anderson is the custodian. Does not
include 90,000 shares owned by Donald Anderson's adult children.
John K. Coors, the Chairman of the Board of Directors of the
Company, is also a director of ACX. Joseph Coors, Jr., a director of
the Company, is also the President and a director of ACX. Jed J.
Burnham, a director of the Company, is also the Chief Financial Officer
and Treasurer of ACX. The remaining three members of the Company's Board
of Directors, Norman E. Miller, Gerrit J. Wolfaardt and John Markle are
not otherwise affiliated with ACX, GTC or the Company.
OPTION AND VOTING AGREEMENT
Concurrently with the execution of the Merger Agreement and as
a condition to Buyer entering into the Merger Agreement, ACX and GTC
agreed in the Option and Voting Agreement to vote all of the capital
stock of Golden Genesis owned beneficially by them (i) in favor of the
Merger and for each of the other actions contemplated by the Merger
Agreement, (ii) against any action or agreement that would result in a
breach in any material respect of any representation, warranty or
covenant of Golden Genesis in the Merger Agreement and (iii) against any
action or agreement that would impede, interfere with, delay, postpone,
attempt to discourage the
<PAGE> 27
Merger or otherwise materially adversely affect the Merger, including
without limitation, any action or agreement with respect to an
acquisition proposal with any person other than Buyer and Buyer Sub.
ACX and GTC have granted to Buyer an unconditional, irrevocable
option (the "Option") to purchase on one occasion, all (but not less
than all) securities of the Company consisting of Common Stock and all
or any part of any other securities of the Company not consisting of
Common Stock (including all options, warrants and other rights to
acquire shares of Common Stock) beneficially owned by ACX and GTC
(excluding securities with respect to which they merely hold voting
power). The shares of Common Stock subject to the Option constitute
approximately 52% of the issued and outstanding Common Stock. The
Option may be exercised at any time prior to the earlier of (x) the date
upon which the Merger becomes effective, (y) the date upon which the
Merger Agreement is validly terminated pursuant to a mutual agreement of
Buyer, Buyer Sub and the Company or the entry of a final order
permanently enjoining the consummation of the Merger or (z) January 31,
2000, if an event occurs giving Buyer the right to terminate the Merger
Agreement based upon the Company's Board of Directors' (i) (A)
withdrawal of its recommendation or approval in respect of the Merger
Agreement or the Merger or (B) modification or change of its
recommendation or approval in respect of the Merger Agreement or the
Merger in a manner materially adverse to Buyer or Buyer Sub or (C)
failure to publicly oppose a Tender Offer or Exchange Offer within 10
business days after commencement of such Tender Offer or Exchange Offer,
(ii) approval of any Acquisition Transaction or (iii) waiver of the
Company Right of First Refusal. In the event Common Stock of Golden
Genesis is purchased pursuant to the Option, the price per share at
which Buyer may exercise the Option is equal to $2.33, and in the case
of all other securities of Golden Genesis purchased pursuant to the
Option, the purchase price shall equal the price paid by ACX or GTC for
such securities.
Pursuant to the Option and Voting Agreement, ACX and GTC have
irrevocably and unconditionally waived and agreed to cause to be waived
and to prevent the exercise of, any rights of appraisal, any dissenters'
rights and any similar rights relating to the Merger or any related
transaction.
During the Restricted Period, ACX and GTC (and their respective
officers, directors, employees, representatives and agents) cannot
solicit, initiate, encourage, inquire or discuss with any parties other
than Buyer and Buyer Sub any inquiries or the making of any proposal
with respect to any Acquisition Transaction.
In addition, during the Restricted Period, ACX and GTC cannot,
nor authorize or permit any of their directors, officers, employees,
agents or representatives to, request that Golden Genesis waive the
Company Right of First Refusal.
The Option and Voting Agreement provides that ACX indemnify,
defend and hold harmless (i) Golden Genesis and (ii) each of Golden
Genesis' stockholders, directors, officers, employees and agents from
and against liability which may be incurred by any of them resulting
from (A) any breach of any representations or warranties contained in
the Option and Voting Agreement or the failure of ACX and GTC to
observe, perform or abide by, or any other breach of, any restriction,
covenant, obligation or other provision contained in the Option and
Voting Agreement, (B) any breach by Golden Genesis of any representation
or warranty contained in the Merger Agreement solely to the extent any
such representation or warranty applies to certain wholly owned foreign
subsidiaries of the Company, (C) any breach by the ACX or GTC of any
representation or warranty contained in that certain Share Purchase
Agreement, dated as of September 4, 1998, among the ACX, GTC and the
Company, or (D) certain matters relating to the Company's 401(k) Plan.
The Option and Voting Agreement provides that ACX and GTC shall
jointly and severally release and discharge Golden Genesis and its
subsidiaries, and each of their respective shareholders, affiliates,
officers, directors, employees and agents from any and all claims,
obligations or liabilities of any nature (whether known or unknown)
against any such persons by reason of any matter done or omitted to be
done prior to the Effective Time other than the obligation of Golden
Genesis to pay all indebtedness owed to ACX and GTC prior to the
Effective Time.
<PAGE> 28
SELECTED CONSOLIDATED FINANCIAL DATA
Selected financial data for the years ended December 31, 1998
and 1997 the four months ended December 31, 1996, and the years ended
August 31, 1996 and 1997 is included in Item 6 of the Company's Annual
Report on Form 10-K for December 31, 1998 which is attached hereto as
Exhibit E. Financial data for the three months ended March 31, 1999 is
included in Item 1 of the Company's Quarterly Report of Form 10-Q on
March 31, 1999 which is attached hereto as Exhibit F.
MARKET PRICE AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on the Nasdaq SmallCap Market
system under the symbol GGGO. The following information sets forth the
high and low bid quotations in dollars per share for the Company's
common stock as reported by the Nasdaq SmallCap Market.
Low High
1997
First Quarter (through March 31, 1997) $2.06 $3.13
Second Quarter (through June 30, 1997) 1.88 2.50
Third Quarter (through September 30, 1997) 1.50 2.31
Fourth Quarter (through December 31, 1997) 1.38 2.03
1998
First Quarter (through March 31, 1998) $1.53 $2.38
Second Quarter (through June 30, 1998) 1.88 2.81
Third Quarter (through September 30, 1998) 1.13 2.72
Fourth Quarter (through December 31, 1998) 1.13 1.81
1999
First Quarter (through March 31, 1999) $0.78 $1.75
Second Quarter (through June 24, 1999) $1.25 $2.25
On June 24, 1999 there were 788 stockholders of record for the
Company's common stock. The Company estimates that there are
approximately 3,800 beneficial owners of the Company's common stock.
No dividends have been declared or paid on the Common Stock
since the Company's incorporation.
On May 24, 1999, the last trading day preceding the public
announcement that Buyer had reached an agreement with the Company, ACX
and GTC to acquire 100% of the Common Stock, the high and low sale
prices of the Common Stock as reported by the Nasdaq SmallCap Market
were $2.0312 and $1.875. On June 23, 1999, the last trading day prior
to the date of this Proxy Statement, the high and low sale prices of the
Common Stock, as reported by the Nasdaq SmallCap Market, were $2.25 and
$2.188. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE QUOTATION FOR
THE COMMON STOCK.
FORWARD LOOKING STATEMENTS
This Proxy Statement, including the Exhibits attached hereto,
contains forward-looking statements. Future events and actual results,
financial or otherwise, may differ materially from the results set forth
in or implied in the forward-looking statements. Factors that might
cause such a difference include the risks and uncertainties involved in
the Company's business, including, but not limited to, the possible
inability to obtain regulatory approvals required to consummate the
Merger, the effect of economic and market conditions, the level and
volatility of interest rates, the impact of current or pending
legislation and regulation and the other risks and uncertainties
<PAGE> 29
discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998, which is
incorporated by reference to this Proxy Statement.
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP serves as the Company's independent
auditors. A representative of PricewaterhouseCoopers will be at the
Special Meeting to answer questions by stockholders and will have the
opportunity to make a statement if so desired.
OTHER MATTERS
The Board of Directors knows of no other matter to be acted
upon at the Special Meeting. However, if any other matters are properly
brought before the Special Meeting, the persons named in the
accompanying form of proxy card as proxies by the holders of Common
Stock will vote thereon in accordance with their best judgment.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Exchange Act, and in accordance therewith files reports, proxy
statements and other information with the SEC. The reports, proxy
statements and other information filed by the Company with the SEC can
be inspected and copied at the public reference facilities maintained by
the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the following Regional Offices of the
SEC: Seven World Trade Center, 13th Floor, New York, New York 10048 and
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of the material also can be obtained from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Golden Genesis is an electronic filer
under the EDGAR (Electronic Data Gathering, Analysis and Retrieval)
system maintained by the SEC. The SEC maintains a Web Site
(http://www.sec.gov) on the Internet that contains reports, proxy and
information statements and other information regarding companies that
file electronically with the SEC. In addition, material filed by Golden
Genesis can be inspected at the offices of The Nasdaq Stock Market,
Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
ATTACHED DOCUMENTS
The Company's Annual Report on Form 10-K for the year ended
December 31, 1998 and the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999 are attached hereto as exhibits E and
F, respectively. Stockholders are encouraged to read such reports as
they form a part of this Proxy Statement.
STOCKHOLDER PROPOSALS
Under the rules of the SEC, any Company stockholder who wishes
to submit a proposal for presentation at the Company's 1999 Annual
Meeting of Stockholders (if the Merger has not been consummated prior to
the date that Meeting is to be held) must submit the proposal to the
Company at its principal executive offices, Attention: Secretary. The
proposal must be received no later than September 30, 1999 for
inclusion, if appropriate, in the Company's proxy statement and form of
proxy card relating to the 1999 Annual Meeting. Proposals which the
Company's stockholders intend to present at the 1999 Annual Meeting of
Stockholders (if such a meeting is held) pursuant to Rule 14a-8
promulgated under the Exchange Act and wish to have included in the
Company's proxy materials relating to that meeting must be received by
the Company a reasonable time prior to the date that the Company
distributes the proxy materials to its stockholders. Under the rules of
the SEC, if a stockholder fails to notify the Company of its intention
to bring a non-Rule 14a-8 proposal before the 1999 Annual Meeting within
a
<PAGE> 30
reasonable time prior to the date that the Company distributes the proxy
materials relating to such meeting to its stockholders, then the proxy
card solicited by the Board of Directors of Golden Genesis may grant
discretionary voting authority to the proxies named in the proxy card
with respect to the non-Rule 14a-8 proposal.
BY ORDER OF THE BOARD OF DIRECTORS
Jeffrey C. Brines
Secretary
<PAGE> A
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
by and among
GOLDEN GENESIS COMPANY
GGC ACQUISITION COMPANY
and
KYOCERA INTERNATIONAL, INC.
Dated as of May 26, 1999
<PAGE> A-i
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 3
1.1. THE MERGER. 3
1.2. EFFECTIVE TIME. 3
1.3. CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION. 3
1.4. DIRECTORS OF SURVIVING CORPORATION. 3
1.5. COMPANY DELIVERIES. 3
1.6. PARENT AND BUYER CLOSING DELIVERIES. 4
ARTICLE II CONVERSION OF COMPANY COMMON STOCK 5
2.1. EFFECT ON COMPANY COMMON STOCK AND BUYER'S CAPITAL STOCK. 5
2.2. COMPANY OPTION PLANS 5
2.3. CONSUMMATION OF THE MERGER. 5
ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES 6
3.1. DISSENTING SHARES. 6
3.2. PAYMENT FOR SHARES. 6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY 8
4.1. ORGANIZATION. 8
4.2. CAPITALIZATION. 8
4.3. AUTHORITY. 9
4.4. SEC DOCUMENTS; FINANCIAL STATEMENTS. 10
4.5. FINANCIAL CONDITION. 10
4.6. LITIGATION. 11
4.7. COMPLIANCE WITH APPLICABLE LAW. 11
4.8. TAXES. 11
4.9. TERMINATION, SEVERANCE AND EMPLOYMENT AGREEMENTS. 12
4.10. EMPLOYEE BENEFIT PLANS; ERISA. 12
4.11. ENVIRONMENTAL MATTERS. 14
4.12. ASSETS; REAL PROPERTY; INTELLECTUAL PROPERTY. 15
4.13. SYSTEMS AND SOFTWARE; YEAR 2000. 17
4.14. LABOR MATTERS. 17
4.15. AGREEMENTS. 18
4.16. INSURANCE. 19
4.17. SUPPLIERS AND CUSTOMERS. 19
4.18. BOOKS AND RECORDS. 19
4.19. BANKING FACILITIES. 19
4.20. DELAWARE SECTION 203. 20
4.21. BROKER'S FEES. 20
4.22. REPRESENTATIONS AND WARRANTIES. 20
<PAGE> A-ii
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER 20
5.1. ORGANIZATION. 20
5.2. AUTHORITY. 20
5.3. NO VIOLATIONS; CONSENTS AND APPROVALS 21
5.4. BROKER'S FEES. 21
5.5. REPRESENTATIONS AND WARRANTIES. 21
ARTICLE VI COVENANTS 21
6.1. CONDUCT OF BUSINESS OF THE COMPANY. 21
6.2. NO SOLICITATION. 24
6.3. ACCESS TO INFORMATION; CONFIDENTIALITY. 25
6.4. REASONABLE BEST EFFORTS; OTHER ACTIONS. 25
6.5. PUBLIC ANNOUNCEMENTS AND OTHER COMMUNICATIONS. 26
6.6. NOTIFICATION OF CERTAIN MATTERS; REPORTING. 26
6.7. EXPENSES. 27
6.8. HSR ACT FILINGS. 27
6.9. STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT. 28
6.10. INFORMATION. 28
6.11. ENVIRONMENTAL ASSESSMENTS. 29
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE COMPANY, PARENT AND BUYER 30
7.1. STOCKHOLDER APPROVAL. 30
7.2. NO ACTION OR PROCEEDING. 30
7.3. MAILING OF PROXY STATEMENT. 30
7.4. HSR ACT. 30
7.5. GOLDEN, COLORADO OFFICE 30
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF PARENT AND BUYER 31
8.1. REPRESENTATIONS AND WARRANTIES. 31
8.2. MATERIAL ADVERSE CHANGE. 31
8.3. SATISFACTION OF CLOSING OBLIGATIONS. 31
8.4. DISSENTING SHARES. 31
8.5. COMPLIANCE WITH COVENANTS. 31
8.6. THIRD PARTY CONSENTS. 31
ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF THE COMPANY 32
9.1. REPRESENTATIONS AND WARRANTIES. 32
9.2. COMPLIANCE WITH COVENANTS. 32
9.3. SATISFACTION OF CLOSING OBLIGATIONS. 32
<PAGE> A-iii
ARTICLE X TERMINATION AND ABANDONMENT 32
10.1. TERMINATION. 32
10.2. TERMINATION BY PARENT OR BUYER. 33
10.3. TERMINATION BY THE COMPANY. 34
10.4. PROCEDURE FOR TERMINATION. 34
10.5. EFFECT OF TERMINATION. 34
10.6. TERMINATION FEE. 34
10.7. TOPPING FEE. 35
10.8. REMEDIES. 35
ARTICLE XI MISCELLANEOUS 36
11.1. AMENDMENT AND MODIFICATION. 36
11.2. WAIVER. 36
11.3. SURVIVABILITY. 36
11.4. NOTICES. 36
11.5. ASSIGNMENT. 37
11.6. GOVERNING LAW. 37
11.7. COUNTERPARTS. 37
11.8. INTERPRETATION. 37
11.9. ENTIRE AGREEMENT. 38
Exhibits
Exhibit A Certificate of Incorporation of Surviving Corporation
Exhibit B Stock Option Cancellation Agreement
<PAGE> A-1
AGREEMENT AND PLAN OF MERGER
Preamble AGREEMENT AND PLAN OF MERGER, dated as of May 26, 1999 (the
"Agreement"), by and among GOLDEN GENESIS COMPANY, a Delaware corporation (the
"Company"), GGC ACQUISITION COMPANY, a Delaware corporation ("Buyer"), and
KYOCERA INTERNATIONAL, INC., a California corporation ("Parent").
RECITALS:
WHEREAS, Buyer is a wholly owned subsidiary of Parent;
WHEREAS, the Boards of Directors of Buyer, Parent and the Company have each
approved the merger of Buyer with and into the Company in accordance with the
terms of this Agreement and the General Corporation Law of the State of Delaware
(the "DGCL");
WHEREAS, Hanifen, Imhoff Inc., the Company's financial advisor, has rendered to
the Board of Directors of the Company (the "Board") its written opinion that the
Merger Price to be received by the stockholders of the Company pursuant to the
Merger (as such terms are hereinafter defined) is fair to such stockholders from
a financial point of view; and
WHEREAS, the Board has, in light of and subject to the terms and conditions set
forth herein, (i) determined that the Merger is in the best interests of the
stockholders of the Company, and (ii) resolved to approve and adopt this
Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants, agreements and conditions contained herein, the parties
hereto agree as follows:
DEFINITIONS. The following terms used herein shall have the meanings ascribed
in the indicated sections:
Acquisition Transaction 6.2(a)
Advisors 6.7
Agreement Preamble
Board RECITALS
Buyer Preamble
Certificate of Merger 1.2
Certificates 3.2(a)
Closing 1.2
Code 4.8
Company Preamble
Company Agreements 1.5(b)(i)
Company Balance Sheet 4.5(b)
Company Common Stock 2.1(a)
Company Material Contracts 4.15
Company Permits 4.7
Company Preferred Stock 4.2
<PAGE> A-2
Company Right of First Refusal 6.2(a)
Contracts 4.15
Delaware Secretary of State 1.2
DOJ 4.3(b)
DGCL RECITALS
Disclosure Letter ARTICLE IV
Dissenting Shares 3.1
Effective Time 1.2
Employee Benefit Plan 4.10(a)
Environmental Laws 4.11
ERISA 4.10(a)
ERISA Affiliate 4.10(b)
Exchange Act 4.3(b)
Exchange Offer 10.2
FTC 4.3(b)
Financial Statements 4.5(a)
Hazardous Substances 4.11
HSR Act 4.3(b)
Intellectual Property 4.12(c)
Majority Shareholder 3.2(b)
Material Adverse Effect 11.8
Merger 1.1
Merger Deadline 10.1
Merger Price 2.1(a)
Multi-employer Plan 4.10(a)
Option 2.2(a)
Option Plans 2.2(a)
Order 4.3(b)
Parent Preamble
Paying Agent 3.2(a)
Pension Plan 4.10(a)
Permitted Liens 4.12(a)
Plans 4.10(a)
Proxy Statement 6.9(b)
Real Property 4.12(b)
RPI Purchase Agreement 1.5(b)(vii)
SEC 4.3(b)
SEC Documents 4.4
Securities Act 10.2
Site Assessments 6.11(a)
Subsidiary 11.8
Surviving Corporation 1.1
Systems 4.13(a)
Tax 4.8
Tender Offer 10.2
<PAGE> A-3
Welfare Plan 4.10(a)
Year 2000 Compliance 4.13(b)
ARTICLE I
THE MERGER
1.1. THE MERGER. In accordance with the provisions of this Agreement and the
DGCL, at the Effective Time, Buyer shall be merged with and into the Company
(the "Merger"), and the Company shall be the surviving corporation (hereinafter
sometimes called the "Surviving Corporation") and shall continue its corporate
existence under the laws of the State of Delaware. The Merger shall have the
effects on the Company and Buyer as provided under the DGCL. At the Effective
Time, the separate existence of Buyer shall cease, and the name of the Surviving
Corporation shall be Golden Genesis Company, until thereafter changed as
provided by law.
1.2. EFFECTIVE TIME. As promptly as practicable after the satisfaction or, if
permissible, waiver of the conditions set forth in ARTICLE VII, ARTICLE VIII and
ARTICLE IX hereof, the parties hereto shall cause the Merger to be consummated
by filing a certificate of merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State"),
in such form as required by, and executed in accordance with the relevant
provisions of, the DGCL (the date and time of the filing of the Certificate of
Merger or the time specified therein being the "Effective Time"). Prior to such
filing, a closing (the "Closing") shall be held at the offices of Loeb & Loeb
LLP, 1000 Wilshire Boulevard, Suite 1800, Los Angeles, California, or such other
place as the Company and Parent shall agree, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
ARTICLE VII, ARTICLE VIII and ARTICLE IX hereof.
1.3. CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING CORPORATION. The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended and restated as of the Effective Time to
read as set forth in Exhibit A hereto, and, as so amended, such amended and
restated Certificate of Incorporation shall be the Certificate of Incorporation
of the Surviving Corporation effective as of the Effective Time until thereafter
amended as provided by law. The Bylaws of Buyer in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation in effect
immediately prior to the Effective Time until thereafter amended as provided by
law.
1.4. DIRECTORS OF SURVIVING CORPORATION. Subject to applicable law, the initial
directors of the Surviving Corporation upon the effectiveness of the Merger at
the Effective Time shall be those persons who are the directors of Buyer
immediately prior to the Effective Time, to hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal.
1.5. COMPANY DELIVERIES.
(a) Signing Deliveries. On the date hereof, the Company has or has caused to be
delivered to Parent and Buyer (i) the Disclosure Letter, and (ii) a Bill of Sale
and Assignment, among the Company and the other parties thereto.
<PAGE> A-4
(b) Closing Deliveries. At the Closing and subject to the terms and conditions
of this Agreement, the Company shall deliver or otherwise make available to
Parent and Buyer:
(i) certified resolutions of the Board approving the Merger, this Agreement, all
other agreements and instruments executed and delivered by the Company pursuant
to the terms hereof (the "Company Agreements"), and the transactions
contemplated hereby and thereby;
(ii) certified resolutions duly adopted by the holders of a majority of the
outstanding shares of Company Common Stock approving the Merger and this
Agreement;
(iii) a certificate of the secretary of the Company certifying as to the
Company's and the Subsidiaries' respective certificates of incorporation, bylaws
and incumbency of officers immediately prior to the Effective Time;
(iv) resignations by each current member of the Board, each effective as of the
Effective Time;
(v) the minute books of the Company;
(vi) stock certificates representing all issued and outstanding shares of
capital stock of the Subsidiaries and the stock ledger and other stock records
(including all cancelled stock certificates) and minute books of each
Subsidiary;
(vii) the stock certificates representing 150,000 shares of Company Common Stock
pledged by the sellers (the "Pledged Shares") named in that certain Share
Purchase Agreement dated July 21, 1998, among the Company, Remote Power, Inc.
and such sellers (the "RPI Purchase Agreement") as security for performance of
such sellers' indemnification obligations, and any stock assignments or stock
powers previously delivered to the Company with respect to the Pledged Shares,
subject, however, to any prior release thereof in accordance with the terms of
the RPI Purchase Agreement and the respective Security Agreement and Collateral
Assignment related to such Pledged Shares; and
(viii) a good standing certificate issued by the Maryland Secretary of State,
including tax good standing, for Integrated Power Corporation.
1.6. PARENT AND BUYER CLOSING DELIVERIES. At the Closing and subject to the
terms and conditions of this Agreement, Parent and Buyer shall each deliver to
the Company: (i) certified resolutions of its respective board of directors and
certified resolutions of the sole stockholder of Buyer, each approving the
Merger, this Agreement and the transactions contemplated hereby; and (ii) a
certificate of its respective secretary certifying as to its respective
incumbency of officers as of the Effective Time.
<PAGE> A-5
ARTICLE II
CONVERSION OF COMPANY COMMON STOCK
2.1. EFFECT ON COMPANY COMMON STOCK AND BUYER'S CAPITAL STOCK.
(a) As of the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, each share of the Company's common stock, par
value $.10 per share (the "Company Common Stock"), issued and outstanding
immediately prior to the Effective Time (other than any shares held in the
treasury of the Company or by any wholly owned Subsidiary of the Company, which
shares, by virtue of the Merger and without any action on the part of the holder
thereof, shall be canceled and shall cease to exist with no payment being made
with respect thereto, and other than any Dissenting Shares (as defined in
Section 3.1 hereof)) shall be converted into the right to receive $2.33 net to
the holder in cash (the "Merger Price"), payable to the holder thereof, without
interest thereon, as set forth in Section 3.2 hereof.
(b) As of the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, each share of capital stock of Buyer issued and
outstanding immediately prior to the Effective Time shall be converted into
17,152,948 fully paid and nonassessable shares of common stock, par value $0.001
per share, of the Surviving Corporation.
2.2. COMPANY OPTION PLANS
(a) The Company and the Board shall take all actions necessary to cause (a) each
option to purchase shares of Company Common Stock (an "Option") that is
outstanding immediately before the Effective Time, whether or not presently
exercisable, to be canceled at the Effective Time by virtue of the Merger, and
(b) the plans of the Company and the Subsidiaries providing for Options ("Option
Plans") to terminate as of the Effective Time and the provisions in any other
plan, program or arrangement, providing for the issuance or grant by the Company
or any of the Subsidiaries of any interest in respect of the capital stock of
the Company or any of the Subsidiaries to be terminated as of the Effective
Time. Without limiting the generality of the foregoing, the Company and the
Board shall have given all requisite notices under all Option Plans and any
agreements with respect to any Option, accelerated the vesting of Options and
given holders of Options the requisite opportunity to exercise as is required,
in each case, such that following the Effective Time no holder of Options or any
participant in the Option Plans or any other such plans, programs or
arrangements shall have any right thereunder to acquire any equity securities of
the Company or any Subsidiary.
(b) Upon delivery to Parent on the business day prior to the date of the
Effective Time of an executed Stock Option Cancellation Agreement, in the form
of Exhibit B hereto, a holder of an Option outstanding immediately before the
Effective Time shall receive from the Company an amount equal to the product of
(i) the excess, if any, by which the Merger Price exceeds the exercise price of
the Option and (ii) the number of Shares subject to the Option, such amount to
be paid to the holder by bank check at the Effective Time.
2.3. CONSUMMATION OF THE MERGER. As soon as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in ARTICLE VII, ARTICLE
VIII and ARTICLE IX hereof, (a) the Surviving Corporation shall execute in the
manner required by the
<PAGE> A-6
DGCL and file with the Delaware Secretary of State the
Certificate of Merger and (b) the parties shall take such other and further
actions as may be required by law to make the Merger effective.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
3.1. DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such shares in
accordance with Section 262 of the DGCL, if such Section 262 provides for
appraisal rights for such shares in the Merger ("Dissenting Shares"), shall not
be converted into the right to receive the Merger Price, as provided in Section
2.1 hereof, unless and until such holder fails to perfect or withdraws or
otherwise loses such holder's right to appraisal and payment under the DGCL.
If, after the Effective Time, any such holder fails to perfect or withdraws or
loses such holder's right to appraisal, such Dissenting Shares shall thereupon
be treated as if they had been converted as of the Effective Time into the right
to receive the Merger Price to which such holder is entitled, without interest
or dividends thereon. The Company shall give Parent prompt notice of any
demands received by the Company for appraisal of shares of Company Common Stock
and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. The Company shall not, except with
the prior written consent of Parent, make any voluntary payment with respect to,
or settle or offer to settle, any such demands.
3.2. PAYMENT FOR SHARES.
(a) From and after the Effective Time, a bank or trust company designated by
Parent and approved by the Company in its reasonable discretion shall act as
paying agent (the "Paying Agent") in effecting the payment of the Merger Price
for certificates formerly representing shares of Company Common Stock and
entitled to payment of the Merger Price pursuant to Section 2.1 hereof (the
"Certificates"). At the Effective Time, Parent shall deposit, or cause to be
deposited, in trust with the Paying Agent sufficient funds to permit the Paying
Agent to make the payments contemplated by this Section 3.2 and Section 2.1
hereof.
(b) Promptly after the Effective Time, Parent shall cause the Paying Agent to
mail to each record holder of Certificates (other than Certificates representing
shares held in the treasury of the Company or by any wholly-owned Subsidiary of
the Company) 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 Paying Agent and
instructions for use in surrendering such Certificates and receiving the Merger
Price therefor. Upon the surrender of each such Certificate, the Paying Agent
shall promptly pay the holder of such Certificate in exchange therefor cash in
an amount equal to the Merger Price multiplied by the number of shares of
Company Common Stock formerly represented by such Certificate, and such
Certificate shall forthwith be canceled. Said payment (i) if requested by Golden
Technologies Company, Inc., a Colorado corporation ("Majority Shareholder"), at
least one (1) business day prior to the Closing, shall, upon delivery of
Majority Shareholder's Certificate(s) at the Closing, be paid to Majority
Shareholder on the date of the Closing, by wire transfer in immediately
available funds, subject to Section 3.2(d) below and (ii) if requested by any
holder
<PAGE> A-7
of a Certificate who is an officer or director of the Company at least
two (2) business days prior to the Closing, shall, upon delivery of such
holder's Certificate(s) at the Closing, be paid to such holder at the Closing by
delivery to such holder of a cashier's check subject to Section 3.2(d) below.
Until so surrendered, each such Certificate (other than Certificates
representing Dissenting Shares and Certificates representing shares held in the
treasury of the Company or by any wholly-owned Subsidiary of the Company) shall
represent solely the right to receive the aggregate Merger Price relating
thereto. No interest shall be paid or accrued on such Merger Price.
(c) After the Effective Time, there shall be no transfers on the stock transfer
books of the Surviving Corporation of any shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates formerly representing a share or shares of Company
Common Stock (other than Certificates representing shares held in the treasury
of the Company or by any wholly-owned Subsidiary of the Company) are presented
to the Surviving Corporation or the Paying Agent, they shall be surrendered and
canceled in return for the payment of the aggregate Merger Price relating
thereto, without interest, as provided in this ARTICLE III hereof subject to
applicable law in the case of Dissenting Shares.
(d) The Merger Price shall be net to each holder of Certificates in cash,
subject to reduction only for any applicable federal back-up withholding or, as
set forth in Section 3.2(e) hereof, stock transfer taxes payable by such holder.
(e) If payment of cash in respect of any Certificate is to be made to a person
other than the person in whose name such Certificate is registered, it shall be
a condition to such payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of such payment in a name other than that of the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of Parent or the Paying Agent that such tax either has been paid or
is not payable.
(f) Promptly following the date which is one hundred eighty (180) days after the
Effective Time, the Paying Agent shall deliver to Parent all cash, Certificates
and other documents in its possession relating to the transactions described in
this Agreement, and the Paying Agent's duties shall terminate. Thereafter, each
holder of a Certificate formerly representing a share or shares of Company
Common Stock (other than Certificates representing Dissenting Shares and
Certificates representing shares held in the treasury of the Company or by any
wholly-owned Subsidiary of the Company) may surrender such Certificate to Parent
and (subject to applicable abandoned property, escheat and similar laws) receive
in consideration therefor the aggregate Merger Price relating thereto, without
any interest or dividends thereon. Neither Parent nor the Surviving Corporation
shall be liable to any holder of shares of Company Common Stock for any amount
paid to a public official in accordance with applicable abandoned property,
escheat or similar laws.
<PAGE> A-8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Buyer as follows, except as
disclosed by the Company to Parent and Buyer in a Disclosure Letter dated of
even date herewith (the "Disclosure Letter"):
4.1. ORGANIZATION. The Company and each of the Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and the Company and each of the
Subsidiaries has all requisite corporate power and authority to own, lease and
operate its respective properties and to carry on its respective business as now
being conducted. The Company and each of the Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary except for such jurisdictions where the
failure to so qualify or be licensed would not have any Material Adverse Effect
(as defined in Section 11.8) on the Company or any of the Subsidiaries. Section
4.1(a) of the Disclosure Letter lists (a) the names of all of the Company's
Subsidiaries, and (b) the jurisdiction of incorporation or formation (as
applicable) of each such Subsidiary. Section 4.1(b) of the Disclosure Letter
sets forth all of the jurisdictions in which the Company and the Subsidiaries
are qualified to do business as foreign corporations. Copies of the Certificate
of Incorporation and Bylaws of the Company and the articles or certificate of
incorporation and bylaws of each of the Subsidiaries, including all amendments,
have been made available to Parent and such copies are accurate and complete.
4.2. CAPITALIZATION. The authorized capital stock of the Company consists of
30,000,000 shares, of which 25,000,000 are shares of common stock, each par
value $.10 per share, and 5,000,000 are shares of preferred stock ("Company
Preferred Stock"), each par value $.001 per share. Section 4.2(a) of the
Disclosure Letter lists the following information as of the date hereof: the
capitalization of each Subsidiary and the number of shares of each Subsidiary's
capital stock owned by the Company. The Company owns directly all of the
outstanding capital stock of each Subsidiary (except that 1 share (or quota) of
Golden Genesis do Brasil Energia Renovavel, Ltda. is owned by an individual who
is a citizen of Brazil, the laws of which require that a citizen of that country
be the holder of at least 1 quota of each corporation formed under the laws
thereof), free and clear of any lien, claim or encumbrance and neither the
Company nor any Subsidiary is a partner or member of any partnership, joint
venture, limited liability company or similar entity. As of April 30, 1999,
there were 17,152,948 shares of Company Common Stock issued and outstanding
(excluding shares held in the Company's treasury) and no shares of Company
Preferred Stock issued and outstanding, and as of the date hereof, an aggregate
of 1,169 shares of Company Common Stock and no shares of Company Preferred Stock
are held in the Company's treasury. All issued and outstanding shares of Company
Common Stock and all issued and outstanding shares of capital stock of each
Subsidiary, are duly authorized and validly issued, fully paid, nonassessable
and, except as set forth in Section 4.2(b) of the Disclosure Letter, free of
preemptive rights with respect thereto. As of the date hereof, there were
outstanding options to purchase 3,190,697 shares of Company Common Stock under
the Option Plans and no options to purchase shares of Company Common Stock not
subject to any Option Plan and the Company has provided to Parent complete and
accurate copies of each Option Plan and copies of all stock option agreements
entered into by the Company. There is no restricted
<PAGE> A-9
stock outstanding or
available under the Option Plans. Section 4.2(c) of the Disclosure Letter
contains a list of all Options outstanding, indicating for each: (a) the name
of the grantee, (b) the grant date, (c) whether it was issued under an Option
Plan, and if so, which Option Plan, and (d) the exercise price. Except for
Options listed in Section 4.2(c) of the Disclosure Letter (which shall be
canceled as provided in Section 2.2 hereof) and any shares of Company Common
Stock issued upon exercise of such Options, the foregoing 17,152,948 shares of
Company Common Stock (excluding shares held in the Company's treasury), and the
shares of capital stock of each Subsidiary listed in Section 4.2(a) of the
Disclosure Letter, there are not as of the date hereof, and at all times
hereafter through the Effective Time there will not be (i) any shares of capital
stock or other securities or other equity interests of the Company or any
Subsidiary issued or outstanding, (ii) any options, warrants, calls,
subscriptions, or other rights or other agreements or commitments obligating the
Company or any of the Subsidiaries to issue, transfer, sell or vote any shares
of its capital stock or (iii) any other securities convertible into or
evidencing the right to subscribe for any such shares.
4.3. AUTHORITY.
(a) The Company has full corporate power and authority to execute and deliver
this Agreement and, subject to the approval of its stockholders, to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the Company Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized and
approved by the Board, and, other than approval by the Company's stockholders,
no other corporate proceedings are necessary to authorize this Agreement or the
Company Agreements or the consummation of the transactions contemplated hereby
and thereby. This Agreement and each of the Company Agreements have been duly
and validly executed and delivered by the Company and constitute the legal,
valid and binding agreements of the Company, enforceable against it in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar applicable laws
affecting creditors' rights generally or by general equitable principles
affecting the enforcement of contracts.
(b) Except as otherwise disclosed in Section 4.3(b) of the Disclosure Letter
and except for: (i) the compliance with the provisions of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (ii) the filing of
Notification and Report forms under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as the same may hereafter be amended from time to time (the "HSR
Act") with the Federal Trade Commission (the "FTC") and the Antitrust Division
of the Department of Justice (the "DOJ") with respect to the transactions
contemplated herein, (iii) the obtaining of the requisite approval of the
stockholders of the Company, (iv) the filing of the Certificate of Merger with
the Delaware Secretary of State, (v) the filing with, and approval of, the
Nasdaq Stock Market and the Securities and Exchange Commission (the "SEC") with
respect to the delisting and deregistration of the Company Common Stock, the
execution and delivery by the Company of this Agreement and the Company
Agreements and the consummation by the Company of the transactions contemplated
hereby and thereby will not: (a) violate any provision of the Certificate or
Articles of Incorporation or Bylaws of the Company or any Subsidiary; (b)
violate in any material respect any applicable law or order, writ, injunction or
decree (each, and "Order") or the rules or regulations of any nongovernmental
self-regulatory agency by which the Company or any Subsidiary or any of their
respective properties
<PAGE> A-10
or assets may be bound; (c) require any filing by the
Company with or permit, consent, or approval to be obtained by the Company from
any governmental authority or any nongovernmental self-regulatory agency by
which the Company or any of their respective properties or assets may be bound;
or (d) result in any violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, result in the loss of any
material benefit under, or give rise to any right of termination, cancellation,
increased payments, or acceleration under, or result in the creation of any lien
or other encumbrance on any of the properties or assets of the Company or any
Subsidiary under, any of the terms, conditions, or provisions of any Contract or
Company License, except, in the case of clauses (b), (c) and (d), for any such
filings, permits, consents or approvals or violations, breaches, defaults, or
other occurrences that could not reasonably be expected to prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect or otherwise prevent the Company from performing its obligations under
this Agreement in any material respect, and would not have a Material Adverse
Effect.
4.4. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 1995, the Company
has filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, copies of which have been
provided or made available, except to the extent prohibited by law, that were
required to be filed with the SEC. All such reports, registrations and filings
are collectively referred to as the "SEC Documents". As of their respective
filing dates, each of the SEC Documents (a) was true and complete in all
material respects (or was amended so as to be so promptly following discovery of
any discrepancy); and (b) complied in all material respects with all of the
statutes, rules and regulations enforced or promulgated by the SEC (or was
amended so as to be so promptly following discovery of any such noncompliance)
and none of such SEC Documents (as the same may have been so amended) contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.5. FINANCIAL CONDITION.
(a) Financial Statements. The Company has provided or made available to Parent
complete and accurate copies of (i) the audited consolidated balance sheets of
the Company and the Subsidiaries as of December 31, 1998, December 31, 1997, and
August 31, 1996, the related consolidated statements of operations,
stockholders' equity and cash flows for the fiscal years then ended, certified
by the Company's independent certified public accountants, whose reports thereon
are included therewith (collectively, the "Financial Statements"). The
Financial Statements (i) were prepared in accordance with the books and records
of the Company and the Subsidiaries; (ii) were prepared in accordance with
United States generally accepted accounting principles; and (iii) fairly present
the Company's consolidated financial condition and the results of its operations
as of the relevant dates thereof and for the periods covered thereby.
(b) Undisclosed Liabilities. Except (i) as reflected or reserved against on the
audited consolidated balance sheet of the Company as of December 31, 1998 (the
"Company Balance Sheet"), (ii) as disclosed or reflected in the SEC Documents,
(iii) as disclosed in Section 4.5(b) of the Disclosure Letter, and (iv) for
current liabilities for trade or business obligations incurred since December
31, 1998 in connection with the purchase of goods or services in the ordinary
<PAGE> A-11
course of business and consistent with past practice, neither the Company nor
any Subsidiary has (a) incurred any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, (b)
made any changes in accounting methods, principles or practices or (c) declared,
set aside or paid any dividend or other distribution with respect to its capital
stock. Since December 31, 1998, each of the Company and the Subsidiaries has
conducted its operations according to its ordinary course of business consistent
with past practice.
4.6. LITIGATION. Except as disclosed by the Company in the SEC Documents or in
Section 4.6 of the Disclosure Letter, there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of the Subsidiaries or any of their
respective properties or assets before any court or governmental authority, nor,
to the knowledge of the Company, are there any facts that are reasonably likely
to give rise to any such suit, claim, action, proceeding or investigation.
Except as disclosed in Section 4.6 of the Disclosure Letter, neither the Company
nor any of the Subsidiaries is subject to any outstanding Order.
4.7. COMPLIANCE WITH APPLICABLE LAW. Except as disclosed by the Company in the
SEC Documents or in Section 4.7 of the Disclosure Letter, the Company and the
Subsidiaries hold all material permits, licenses, variances, exemptions, orders
and approvals of all governmental entities necessary for the lawful conduct of
their respective businesses (including, without limitation, all of those
required under Environmental Laws) (the "Company Permits"). Except as disclosed
by the Company in the SEC Documents or in Section 4.7 of the Disclosure Letter,
the Company and the Subsidiaries have in all material respects complied with and
are in all material respects in compliance with the terms of the Company Permits
and all applicable laws, ordinances, regulations or Orders, and no material
capital expenditures will be required in order to insure continued compliance
therewith. Except as disclosed by the Company in the SEC Documents, no
investigation by any governmental authority with respect to the Company or any
of the Subsidiaries is pending or, to the Company's knowledge, threatened nor
has any governmental authority indicated an intention to conduct the same, and
except as disclosed in Section 4.7 of the Disclosure Letter, there are no
pending or, to the knowledge of the Company, threatened proceedings by or before
any governmental authority which involve new special assessments, assessment
districts, bonds, taxes, condemnation actions, applicable laws or Orders or
similar matters which, if instituted, could reasonably be expected to have a
Material Adverse Effect.
4.8. TAXES. Each of the Company and the Subsidiaries has filed, or caused to be
filed, all material federal, state, local and foreign income and other material
tax returns required to be filed by it, has paid or withheld, or caused to be
paid or withheld, all taxes of any nature whatsoever, with any related
penalties, interest and liabilities (any of the foregoing being referred to
herein as a "Tax"), that are shown on such tax returns as due and payable, other
than such Taxes as are being contested in good faith and for which adequate
reserves have been established. Each such tax return filed by the Company and
each Subsidiary fully and accurately reflects its liability for Taxes for such
year or period and accurately sets forth all items (to the extent required to be
included or reflected in such returns) relevant to its future liabilities for
material Taxes, including the Tax bases of its properties and assets. Except as
disclosed in Section 4.8 of the Disclosure Letter, the Company and each of the
Subsidiaries has paid or will
<PAGE> A-12
timely pay all Taxes due with respect to any
period ending at or prior to the Effective Time, or where the payment of Taxes
is not yet due, has established, or with respect to Taxes incurred after the
date hereof will timely establish in accordance with past practices, an adequate
accrual in accordance with generally accepted accounting practices. Except as
disclosed in Section 4.8 of the Disclosure Letter, there are no claims,
assessments or audits pending, or to the Company's knowledge threatened, against
the Company or the Subsidiaries for any alleged deficiency in any Tax. Neither
the Company nor any Subsidiary has waived or extended any applicable statute of
limitations to assess any Taxes. There are no outstanding requests for any
extension of time within which to file any return or within which to pay any
Taxes shown to be due on any return. There are no liens for any Taxes upon the
assets of the Company or any of the Subsidiaries (other than statutory liens for
Taxes not yet due and payable and liens for real estate taxes being contested in
good faith). Neither the Company nor any of the Subsidiaries is a party to, is
bound by or has any obligation under, a tax sharing or tax allocation agreement
or arrangement for the allocation, apportionment, sharing, indemnification or
payment of taxes. Neither the Company nor any of the Subsidiaries has filed a
consent pursuant to Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code") nor has any such corporation agreed to have Section
341(f)(2) of the Code applied to any disposition of a Subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code). The Company has
delivered to Parent true and correct copies of all federal and state income tax
returns of the Company and the Subsidiaries for the last five complete fiscal
years.
4.9. TERMINATION, SEVERANCE AND EMPLOYMENT AGREEMENTS. Section 4.9 of the
Disclosure Letter contains a complete and accurate list of each (a) written
employment or severance agreement to which the Company or any Subsidiary is a
party; and (b) written agreement, plan or arrangement to which the Company or
any Subsidiary is a party under which any person may receive payments that may
be subject to tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Code. Except as set forth in Section 4.9 of the Disclosure Letter, since
December 31, 1998, neither the Company nor any of the Subsidiaries has entered
into or amended any written employment or severance agreement with any director,
officer or other employee of the Company or any of the Subsidiaries or granted
any severance or termination pay to any director, officer or employee of the
Company or any of the Subsidiaries.
4.10. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Neither the Company nor any Subsidiary maintains, administers, contributes
to or has any liability under, and has not maintained, administered, contributed
to or had any liability under any: employee pension benefit plan (as defined in
Section 3(2) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA")) ("Pension Plan") (including any multiemployer plan as defined
in Section 3(37) or 4001(a)(3) of ERISA ("Multiemployer Plan")); employee
welfare benefit plan (as defined in Section 3(1) of ERISA) ("Welfare Plan"); or
bonus, stock, stock purchase, or stock option plan, deferred compensation plan,
severance plan, salary continuation, vacation, sick leave, fringe benefit,
incentive, insurance, welfare or similar plan or arrangement ("Employee Benefit
Plan") other than those Pension Plans, Welfare Plans and Employee Benefit Plans
described in Section 4.10(a) of the Disclosure Letter. The Pension Plans,
Welfare Plans and Employee Benefit Plans (whether or not listed in any part of
the Disclosure Letter) shall be collectively referred to herein as the "Plans".
<PAGE> A-13
(b) None of (i) the Company, (ii) any Subsidiary or (iii) any other corporation
or business which is now or at the relevant time was an affiliate of the Company
or a Subsidiary, as determined under Section 414(b), (c), (m) or (o) of the Code
(an "ERISA Affiliate"), (i) maintains, administers, contributes to or has any
liability under any Pension Plan subject to the minimum funding standards set
forth in Section 412 of the Code or subject to Title IV of ERISA; or (ii) has
ever maintained, administered, contributed to or had any liability under any
Pension Plan subject to either the Code Section 412 minimum funding standards or
Title IV of ERISA, other than a terminated Pension Plan as to which all
liabilities have been satisfied in full.
(c) Except as set forth in Section 4.10(c) of the Disclosure Letter, all Plans
and related trusts, insurance contracts or other funding arrangements have been
maintained and administered in all material respects in compliance with each
applicable provision of ERISA, the Code, other federal statutes, state law
(including, without limitation, state insurance law) and the regulations and
rules promulgated pursuant thereto or in connection therewith. Without limiting
the generality of the preceding sentence, no Plan fiduciary who is or was an
officer or employee of the Company or who is or was otherwise affiliated with
the Company has engaged in a prohibited transaction or other wrongdoing in
respect of any Plan. Each Pension Plan which is intended to be qualified under
Code Section 401(a) has been administered in material compliance with such
requirements and has received a post-Tax Reform Act of 1986 determination letter
from the IRS that such Pension Plan satisfies the requirements of Section 401(a)
of the Code.
(d) All contributions to Plans (including both employee and employer
contributions) which are required to have been made, whether by virtue of the
terms of the particular plan or arrangement or by operation of law, have been
made by the due date thereof (including all applicable extensions). Without
limiting the foregoing, contributions with respect to all current Plan years
(i.e., from the first day of the current plan year to the Closing Date) shall be
made or accrued prior to the Closing Date by Company and/or the Subsidiaries, as
applicable, with respect to each Pension Plan. With respect to all other
Welfare Plans and Employee Benefit Plans, all required (in accordance with plan
terms and past practice) payments, premiums, contributions, reimbursements or
accruals for all periods ending prior to or as of the Closing Date shall have
been made or properly accrued on the financial statements. None of the Plans
has any material unfunded liabilities which are not reflected on the financial
statements of the Company. Except as set forth in Section 4.10(d) of the
Disclosure Letter, neither the Company nor any of the Subsidiaries has any
plans, programs, arrangements or made any other commitments to its employees,
former employees or their beneficiaries under which it has any obligation to
provide any retiree or other employee benefit payments which are not adequately
funded through a trust, insurance or other funding arrangement. There have been
no changes in the operation or interpretation of any of the Plans since the most
recent annual report which would have any material effect on the cost of
operating or maintaining such Plans.
(e) The Company has provided to Parent true and complete copies of: (i) the
plan documents and any related trusts or funding vehicles, policies or contracts
and the related summary plan descriptions with respect to each Plan; (ii) any
pending applications, filings or notices with respect to any of the Plans with
the IRS, the pension Benefit Guaranty Corporation, the Department of Labor or
any other governmental agency; (iii) the last two financial statements and
annual reports for each of the Plans and related trusts or funding vehicles,
policies or
<PAGE> A-14
contracts as of the end of the most recent plan year with respect to
which the filing date for such information has passed; and (iv) all corporate
resolutions or other documents pertaining to the adoption of the Plans or any
amendments thereto. As to each Plan which provides health or medical benefits or
which provides uninsured benefits not prefunded through a trust, the Company has
provided true and complete information to Parent regarding the following: (i)
the amount of annual claims under each Plan for the past three (3) fiscal years,
(ii) pending claims under each Plan, (iii) anticipated claims with respect to
events which have occurred prior to the date hereof and with respect to which
the Company has received notice from third parties or otherwise is aware of and
any other information known to the Company which the Company could reasonably
provide to Parent to enable Parent to evaluate the Company's or a Subsidiary's
potential liability under each Plan.
(f) There are no pending or, to the Company's or any Subsidiary's knowledge,
threatened claims, lawsuits or arbitration asserted or instituted against any of
the Plans (or against the Company or any Subsidiary with respect to a Plan) by
any employee or beneficiary covered under any Plans or otherwise involving any
Plans (other than routine claims for benefits); and the Company and the
Subsidiaries have no knowledge of any facts which would give rise to or could
reasonably be expected to give rise to any such claims, lawsuits or
arbitrations.
(g) Except as provided for in this Agreement or as disclosed in Section 4.9 or
4.10(g) of the Disclosure Letter, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
director, officer or employee of the Company, any Subsidiary or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment or
increased benefit, or (ii) accelerate the time of payment or vesting or increase
the amount of compensation or benefit due any such director, employee or
officer.
(h) No governmental agency has initiated an examination, audit or investigation
of a Plan which has not been completed without a finding of Company liability
and without a Company obligation to take corrective action(s).
(i) No Pension Plan provides for any optional form of benefit protected under
Section 411(d)(6) of the Code and the regulations thereunder which is not
expressly set forth in the current plan document.
(j) Neither the Company nor any Subsidiary maintains any plan or arrangement
which provides for retiree health or other welfare benefits, except as required
by COBRA.
(k) Neither the Company nor any Subsidiary currently or in the past participated
in a Multiemployer Plan.
4.11. ENVIRONMENTAL MATTERS. Except as set forth in the SEC Documents, each of
the Company and the Subsidiaries has been and presently is in compliance in all
material respects with all applicable Environmental Laws (as hereinafter
defined). No asbestos in a friable condition, equipment containing
polychlorinated biphenyls, or leaking underground or above-ground storage tanks
are contained in
<PAGE> A-15
or located at any facility currently owned, leased or
controlled by the Company or any of the Subsidiaries, nor was any of the
foregoing contained in or located at any facility previously owned, leased or
controlled by the Company or any of the Subsidiaries during the period of such
ownership, tenancy or control. Neither the Company nor any Subsidiary has
released, discharged or disposed of on, under or about any facility currently or
previously owned, leased or controlled by the Company or any of the
Subsidiaries, any Hazardous Substances, and to the Company's knowledge, no third
party has released, discharged or disposed of on, under or about any facility
currently or previously owned, leased or controlled by the Company or any of the
Subsidiaries, any Hazardous Substances, except in each case for quantities of
cleaning, pest control and office supplies and other chemicals used in the
ordinary course of business and used and stored in compliance with applicable
Environmental Laws, or ordinary rubbish, debris and non-hazardous solid waste
stored in garbage cans or bins for regular disposal off-site, or petroleum
contained in, and de minimis quantities discharged from, motor vehicles in their
ordinary operation on real property owned, used or leased by the Company and the
Subsidiaries. Neither the Company nor any of the Subsidiaries has received
notice of any past or present events, conditions, circumstances, activities,
practices, incidents, actions or plans of the Company or the Subsidiaries that
have resulted in or could reasonably be expected to result in any common law or
legal liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation under, any applicable Environmental Laws
and there is no pending civil or criminal litigation, notice of violation or
administrative proceeding involving the Company or any of the Subsidiaries and
relating in any way to any Environmental Law. For purposes of this Section
4.11, (a) "Environmental Laws" mean applicable federal, state, local and foreign
laws, regulations and codes relating in any respect to pollution or protection
of the environment and (b) "Hazardous Substances" means any toxic, caustic, or
other substance listed or regulated under federal, state or local environmental
statutes, rules, ordinances, or Orders, including (i) "hazardous substance" as
defined in 42 U.S.C. Section 9601, and (ii) petroleum products, derivatives,
byproducts and other hydrocarbons.
4.12. ASSETS; REAL PROPERTY; INTELLECTUAL PROPERTY.
(a) Each of the Company and each Subsidiary owns or has rights to use all assets
(tangible and intangible) necessary to permit it to conduct its business as it
is currently being conducted. Except as disclosed in Section 4.12(a) of the
Disclosure Letter, the Company and each Subsidiary has good and marketable title
to each item of its property (other than Real Property) owned by it, free and
clear of all liens, other than Permitted Liens. The term "Permitted Liens" shall
mean (i) liens or encumbrances for water, sewage and similar charges and current
taxes and assessments not yet due and payable or being contested in good faith,
(ii) mechanics', carriers', workers', repairers', materialmen's, warehousemen's
and other similar liens or encumbrances arising or incurred in the ordinary
course of business, (iii) liens, encumbrances, mortgages and security interests
arising or resulting from any action taken by Parent or Buyer, (iv) liens,
encumbrances, mortgages and security interests of record or securing
indebtedness described in the SEC Documents and (v) easements, rights of way,
restrictions and other similar charges or encumbrances that do not materially
interfere with the ordinary conduct of the business or the Company or any of the
Subsidiaries.
(b) Section 4.12(b) of the Disclosure Letter contains an accurate list and
general description of all real property owned or leased by the Company or any
of the Subsidiaries ("Real Property"), together with a list of all leases or
other agreements, and all amendments thereto, under which the Company or any
Subsidiary has any interest or estate in real property.
<PAGE> A-16
The Company and the
Subsidiaries have good and marketable title to the Real Property they
respectively own, free and clear of all mortgages, covenants, conditions,
restrictions, easements, liens, security interests, charges, claims, assessments
and encumbrances, except for (i) rights of lessors, lessees or sublessees in
such matters that are reflected in a written lease; (ii) current taxes
(including assessments collected with taxes) not yet due and payable; (iii)
encumbrances, if any, that are not substantial in character, amount or extent or
that do not materially detract from the value, or interfere with present use of
the property subject thereto or affected thereby; and (iv) other matters as
described in Section 4.12(b) of the Disclosure Letter. The Company and the
Subsidiaries have valid leasehold interests in the Real Property they
respectively lease, free and clear of all mortgages, liens, security interest,
charges, claims, assessments and encumbrances, except for (i) claims of lessors,
co-lessees or sublessees in such matters as are reflected in a written lease;
(ii) title exceptions affecting the fee estate of the lessor under such leases;
and (iii) other matters as described in Section 4.12(b) of the Disclosure
Letter. Except as set forth in Section 4.12(b) of the Disclosure Letter, the
Company and the Subsidiaries enjoy quiet possession under all leases to which
either is the lessee and all of such leases are valid and in full force and
effect. The Company has not received notice of and does not otherwise have
knowledge of any condemnation, requisition or taking by any public authority of
all or any portion of the Real Property. All of the buildings, fixtures and
other improvements constituting a part of any Real Property are in good
operating condition and repair, normal wear and tear excepted.
(c) As used herein, "Intellectual Property" shall mean all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions and reexaminations thereof, trademarks, service
marks, trade dress, logos, trade names and corporate names, together with all
translations, adaptations, derivations and combinations thereof and including
all goodwill associated therewith, and all applications, registrations and
renewals in connection therewith, copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, mask works and
all applications, registrations and renewals in connection therewith, trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), proprietary software, proprietary rights and
copies and tangible embodiments thereof (in whatever form or medium). Except as
set forth on Section 4.12(c) of the Disclosure Letter, neither the Company nor
any Subsidiary has licensed or encumbered any of its Intellectual Property to
any third-party, nor have any other distribution rights been granted by the
Company or any Subsidiary to a third-party. Except as set forth on Section
4.12(c) of the Disclosure Letter, the Company has not entered into any agreement
which restricts or affects the use and/or location of use of any of its
Intellectual Property.
(d) Except as identified in Section 4.12(d) of the Disclosure Letter (i) each
trademark registration included in the Intellectual Property exists and is owned
by the Company or the Subsidiaries and has been maintained in good standing;
(ii) each patent and application included in the Intellectual Property exists,
is owned by or licensed to the Company or one of the Subsidiaries, and has been
maintained in good standing; (iii) each copyright registration included
<PAGE> A-17
in the Intellectual Property exists and is owned by the Company or the
Subsidiaries; or(iv) to the Company's knowledge, no other firm, corporation,
association or person claims the right to use in connection with similar or
related goods and in any geographic area, any mark, logo, name, symbol, device,
or slogan which is identical or confusingly similar to any of the trademarks
included in the Intellectual Property or which could serve to dilute the
distinctiveness of such trademarks.
4.13. SYSTEMS AND SOFTWARE; YEAR 2000.
(a) Each of the Company and the Subsidiaries owns or has the right to use
pursuant to lease, license, sublicense, agreement, or permission all computer
hardware, software and information systems necessary for the operation of the
businesses of the Company and the Subsidiaries as presently conducted
(collectively, "Systems"). To the Company's knowledge, each System owned or
used by the Company or the Subsidiaries immediately prior to the Effective Time
will be owned or available for use by the Company or the Subsidiaries on
identical terms and conditions immediately subsequent to the Effective Time.
With respect to each System owned by a third party and used by the Company or
the Subsidiaries pursuant to lease, license, sublicense, agreement or
permission, to the Company's knowledge: (a) the lease, license, sublicense,
agreement, or permission covering the System is legal, valid, binding,
enforceable, and in full force and effect; (b) the lease, license, sublicense,
agreement, or permission will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the Effective Time;
(c) no party to any such lease, license, sublicense, agreement, or permission is
in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default or permit termination, modification,
or acceleration thereunder; and (d) no party to any such lease, license,
sublicense, agreement, or permission has repudiated any provision thereof.
(b) To the Company's knowledge, the Company and the Subsidiaries have taken
reasonable and practicable steps to identify, address and remediate problems of
(a) all software, hardware and Systems material to the business of the Company
and each Subsidiary and (b) software and systems of all customers, suppliers and
vendors that are material to the business of the Company and each Subsidiary
(including systems and equipment with which each such person's systems
interface) relating to Year 2000 Compliance (as hereinafter defined). Except
for such remediation as may be necessary, the cost of which will not result in
any Material Adverse Effect, the computer and management information systems of
the Company and each Subsidiary are and, with ordinary course upgrading and
maintenance, will continue to be sufficient to permit the Company and each
Subsidiary to conduct its respective businesses in a manner consistent with past
practice. As used herein, the term "Year 2000 Compliance" means, with respect
to a person, that all software, hardware, and systems utilized by or material to
the business operations or financial condition of that person will properly
perform date sensitive functions before, during and after the year 2000.
4.14. LABOR MATTERS. The Company has provided or made available to Parent a
true and complete list of all current employees of the Company and the
Subsidiaries together with each employee's age, tenure with the Company or
Subsidiary, title or job classification, and the current annual rate of
compensation anticipated to be paid to each such employee. Section 4.14(b) of
the Disclosure Letter sets forth the names of all employees subject to
<PAGE> A-18
employment agreements with the Company whose employment with the Company has
terminated either voluntarily or involuntarily since January 1, 1996. Except as
set forth in Section 4.14(b) of the Disclosure Letter, there are no unfair labor
practice complaints, strikes, slowdowns, stoppages or other controversies
pending or, to the knowledge of Company attempts to unionize or controversies
threatened between Company or any Subsidiary, or relating to, any of their
employees that are likely to have a Material Adverse Effect. None of the
Company or any Subsidiary is a party to any collective bargaining agreement with
respect to any of their employees. The Company and the Subsidiaries have
complied in all material respects with all applicable federal and state statutes
and regulations which govern the employment of labor, workers' compensation,
equal employment opportunity and equal pay, including, but not limited to, all
civil rights laws, Presidential Executive Order 1124, and the Fair Labor
Standards Act of 1938, as amended and the Americans with Disabilities Act.
4.15. AGREEMENTS. Section 4.15 of the Disclosure Letter sets forth a true and
correct list of all contracts, agreements, warranties, guaranties, indentures,
bonds, options, leases, subleases, easements, mortgages, plans, licenses,
commitments or binding arrangements of any nature whatsoever, express or
implied, written or unwritten, and all amendments thereto ("Contracts"), entered
into or binding upon the Company or any Subsidiary or to which any property of
the Company or any Subsidiary may be subject now in effect except (i) any
Contract which is required by any other Section of this Agreement to be
specifically identified anywhere in the Disclosure Letter or which would be
required to be disclosed therein but for specific exemptions contained in those
other Sections; (ii) purchase or sales orders made in the ordinary course of
their business and not involving a commitment for a duration greater than six
months or an aggregate amount in excess of $250,000; (iii) any other Contract
made in the ordinary course of their business and not providing for a duration
in excess of six months or involving aggregate payments or potential liabilities
in excess of $250,000, and (iv) any other Contract filed as an Exhibit to any
SEC Document. Except as disclosed in Section 4.15 of the Disclosure Letter, as
of the date hereof: (i) each Contract which is required to be identified
anywhere in the Disclosure Letter by the terms and provisions of this Agreement
("Company Material Contracts") is to the knowledge of the Company the valid and
binding obligation of the other contracting party enforceable in all material
respects in accordance with its terms against the other contracting party and is
in full force and effect except as is not reasonably likely, individually or in
the aggregate to have a Material Adverse Effect, (ii) the Company or the
relevant Subsidiary has fulfilled all material obligations required pursuant to
each Company Material Contract to have been performed by it prior to the date
hereof, and to the knowledge of the Company, the Company or the relevant
Subsidiary will be able to fulfill, when due, all of its obligations under each
Company Material Contract which remain to be performed after the date hereof,
(iii) no other contracting party to any Company Material Contract is now in
material breach thereof or has breached the same in any material respect within
the twelve-month period prior to the date hereof; to the knowledge of the
Company, there are not now, nor have there been in the twelve-month period prior
to the date hereof, any material disagreements or disputes between the Company
or its relevant Subsidiary and any other party to any Company Material Contract
relating to the validity or interpretation of such Company Material Contract or
to the performance by any party thereunder, (iv) neither the Company nor any
Subsidiary is a party to, nor bound by, any Contract, or any provision of its
Articles or Certificate of Incorporation or bylaws which restricts the conduct
of its business anywhere in the world, and neither the Company nor any
Subsidiary is under any material liability or obligation with respect to the
<PAGE> A-19
return of inventory or products sold by the Company or any Subsidiary which are
in the possession of distributors, wholesalers, retailers or customers. To the
Company's knowledge, no event has occurred which gives rise to any
indemnification claim by the Company under the RPI Purchase Agreement or that
certain Merger Agreement, dated January 23, 1998, among the Company, Silicon
Energy Corporation and the sellers named therein.
4.16. INSURANCE. Section 4.16 of the Disclosure Letter sets forth a true and
correct list of all policies or binders of fire, liability, workers'
compensation, vehicular or other insurance held by or on behalf of the Company
or any of the Subsidiaries specifying the insurer, the policy number or covering
note number with respect to binders, and describing each pending claim
thereunder of more than $50,000. Such policies and binders are in full force
and effect and are in all material respects in accordance with the customary
insurance requirements for the industry of the Company and each of the
Subsidiaries and in compliance with all applicable laws and Orders. Neither the
Company nor any of the Subsidiaries is in any material respect in default, nor
since January 31, 1997 has it ever been in any material respect in default, with
respect to any provision contained in any such policy or binder or has failed to
give any notice or present any claim under any such policy or binder in due and
timely fashion. There are no outstanding unpaid claims under any such policy or
binder. Since January 31, 1997, neither the Company nor any of the Subsidiaries
has received a notice of cancellation or non-renewal of any such policy or
binder. Since January 31, 1997, neither the Company nor any of the Subsidiaries
has been refused any insurance with respect to its properties or operations, nor
has its insurance coverage ever been limited.
4.17. SUPPLIERS AND CUSTOMERS. Section 4.17 of the Disclosure Letter is a
correct and current list of all suppliers and customers of the Company or any of
the Subsidiaries from whom such corporation purchased or who purchased more than
$250,000 of products or services from the Company or such Subsidiary during the
last fiscal year, together with summaries of the sales made to each such
customer during the Company's and such Subsidiary's last fiscal year. Except as
disclosed in Section 4.17 of the Disclosure Letter, no single supplier or
customer of the Company or any of the Subsidiaries is of material importance to
the Company or such Subsidiaries.
4.18. BOOKS AND RECORDS. The Company has heretofore furnished or made available
Parent for its examination the following, each of which is accurate and complete
in all material respects: (i) the minute books of the Company and each of its
corporate Subsidiaries containing all proceedings, consents, actions and
meetings of their respective stockholders and Boards of Directors, (ii) copies
of all agreements and documents referred to in the Disclosure Letter, and all
other books and records of the Company and each of the Subsidiaries. Section
4.18 of the Disclosure Letter contains an accurate list of all of the incumbent
officers and directors of the Company and each Subsidiary.
4.19. BANKING FACILITIES. Section 4.19 of the Disclosure Letter contains a true
and complete list of: (i) each bank, savings and loan or similar financial
institution in which the Company or any of the Subsidiaries has an account or
safety deposit box and the numbers of the accounts or safety deposit boxes
maintained by the Company or such Subsidiary thereat, and (ii) the names of all
persons authorized to draw on each such account or to have access to any such
<PAGE> A-20
safety deposit box facility, together with a description of the authority (and
conditions thereof, if any) of each such person with respect thereto.
4.20. DELAWARE SECTION 203. The provisions of Section 203 of the DGCL will not
apply to this Agreement, as it may be amended from time, to time or any of the
transactions contemplated hereby. The Company has heretofore delivered to
Parent a complete and correct copy of the resolutions of the Board of Directors
of the Company to the effect that pursuant to Section 203(a)(1) of the DGCL, the
restrictions contained in Section 203 of the DGCL are and shall be inapplicable
to the Merger and the transactions contemplated by this Agreement, as it may be
amended from time to time.
4.21. BROKER'S FEES. Neither the Company, nor any of the Subsidiaries nor any
of their respective directors or officers has incurred any direct or indirect
liability for any broker's fees, commissions, or financial advisory or finder's
fees in connection with any of the transactions contemplated by this Agreement,
and neither the Company, any of the Subsidiaries nor any of their respective
directors or officers has employed any other broker, finder or financial advisor
in connection with any of the transactions contemplated by this Agreement.
4.22. REPRESENTATIONS AND WARRANTIES. None of the information contained in the
representations and warranties of the Company set forth in this Agreement or in
any certificate delivered to Parent or Buyer as contemplated by this Agreement
contains any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
Each of Parent and Buyer, jointly and severally, represents and warrants to the
Company, as to itself, as follows:
5.1. ORGANIZATION. It is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and it has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. True and complete copies
of the Certificate of Incorporation and Bylaws of Buyer have been made available
to the Company.
5.2. AUTHORITY. It has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized and
approved by its Board of Directors and its stockholders to the extent required
by applicable law and its certificate of incorporation and no other corporate
proceedings are necessary to authorize this Agreement or the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by it and constitutes its legal, valid and binding
agreement, enforceable against it in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar applicable laws affecting creditors' rights generally or
by general equitable principles affecting the enforcement of contracts.
<PAGE> A-21
5.3. NO VIOLATIONS; CONSENTS AND APPROVALS
(a) Neither the execution nor delivery by it of this Agreement nor the
consummation by it of the transactions contemplated herein or therein will: (i)
violate any provision of its Certificate or Articles of Incorporation, bylaws or
other charter documents; (ii) violate in any material respect any applicable law
or Order; or (iii) constitute a violation of or a default under any Contract to
which it is a party, excluding from the foregoing clauses (i) through (iii),
violations, defaults, rights and losses which would not, individually or in the
aggregate, prevent the consummation of any of the transactions contemplated
hereby.
(b) No filing or registration with, notification to, or authorization, consent
or approval of, any governmental authority is required by it in connection with
the execution and delivery of this Agreement, or the consummation by it of the
transactions contemplated hereby, except (i) in connection, or in compliance,
with the provisions of the Exchange Act, (ii) the filing of the Certificate of
Merger with the Delaware Secretary of State, (iii) the filing of Notification
and Report forms under the HSR Act with the FTC and the DOJ with respect to the
transactions contemplated herein and (iv) such filings and consents as may be
required under any Environmental Law pertaining to any notification, disclosure
or required approval triggered by the Merger or the transactions contemplated by
this Agreement.
5.4. BROKER'S FEES. It does not have any direct or indirect liability for any
broker's fees, commissions, or financial advisory or finder's fees in connection
with any of the transactions contemplated by this Agreement which will have the
effect of reducing the Merger Price.
5.5. REPRESENTATIONS AND WARRANTIES. None of the information contained in its
representations and warranties set forth in this Agreement or in any certificate
delivered to the Company as contemplated by this Agreement contains any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
ARTICLE VI
COVENANTS
6.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this
Agreement or as expressly agreed to in writing by Parent, during the period from
the date hereof to the Effective Time, the Company shall conduct its business
and shall cause the businesses of the Subsidiaries to be conducted, only in, and
the Company and the Subsidiaries shall not take any action except in, the
ordinary course of business consistent with past practice; and the Company
shall, and shall cause each Subsidiary, to use its best commercial efforts (i)
to preserve its business and organization intact, (ii) to keep available to
Parent and Buyer the services of its present officers, employees, agents and
independent contractors and (iii) to preserve for the benefit of Parent and
Buyer the goodwill of its suppliers, customers, landlords and others having
business relations with it. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement, prior to the
Effective Time, the Board will not, without the prior written consent of Parent,
permit the Company or any of the Subsidiaries to:
<PAGE> A-22
(a) amend its certificate or articles of incorporation or bylaws (or similar
constituent documents);
(b) authorize for issuance, issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for shares
of Company Common Stock issued upon exercise of Options outstanding as of the
date of this Agreement (in accordance with their respective terms), or amend any
of the terms of any such securities or agreements outstanding as of the date
hereof, except as specifically contemplated by this Agreement;
(c) split, combine or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or redeem
or otherwise acquire any of its securities or any securities of the
Subsidiaries;
(d) (i) incur, assume or prepay any long-term or short-term debt (except for
the intercompany indebtedness set forth on Section 6.1(d) of the Disclosure
Letter or short-term indebtedness not to exceed $500,000 in the aggregate) or
issue any debt securities; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for any
obligations of any other person; (iii) make any loans, advances or capital
contributions to, or investments in, any other entity (other than customary
loans or advances to employees in the ordinary course of business consistent
with past practice); (iv) pledge or otherwise encumber shares of capital stock
of the Company or any of the Subsidiaries; or (v) mortgage or pledge any of its
assets, tangible or intangible, or create or suffer to exist any lien or other
encumbrance thereupon, excluding Permitted Liens and liens and other
encumbrances existing on the date hereof;
(e) except as may be required by law or as contemplated by this Agreement, enter
into, adopt or amend or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, stock
ownership plan, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner, or (except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company, and as
required under existing agreements) increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit or make
any special or extraordinary payment to any person not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock options, stock appreciation rights or performance units);
(f) lease any assets (other than in the ordinary course of business and
consistent with past practice) or acquire, sell, or dispose of any assets
outside the ordinary course of business or any assets which in the aggregate are
material to the Company or the Subsidiaries, or enter into any commitments,
contracts, agreements or transactions outside the ordinary course of business
<PAGE> A-23
consistent with past practice or which would, individually or in the aggregate,
be material to the Company or the Subsidiaries, or modify, amend, terminate or
waive any material rights under any contract or agreement;
(g) except as may be required as a result of a change in law or in generally
accepted accounting principles, change its fiscal year or any of the accounting
principles or practices used by it;
(h) (i) acquire (by merger, consolidation, or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof
or any equity interest therein; (ii) except as contemplated by this Agreement,
enter into any contract or agreement other than in the ordinary course of
business consistent with past practice which would be material to the Company or
the Subsidiaries; or (iii) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would be
prohibited hereunder;
(i) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business or in accordance with
United States generally accepted accounting principles or Regulation S-X;
(j) make any tax election or settle or compromise any federal, state or local
tax liability or assent to the extension of time for collection or assessment of
any federal, state or local tax;
(k) pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in, or contemplated by, the Financial
Statements (or the notes thereto) or incurred in the ordinary course of business
consistent with past practice;
(l) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated hereby or material to the Company or
any of the Subsidiaries;
(m) authorize or make any capital expenditure other than those described in
Section 6.1(m) of the Disclosure Letter or those made in the ordinary course of
business, which expenditures shall not, in any event, individually exceed
$100,000 or in the aggregate exceed $500,000; or
(n) take, or agree in writing or otherwise to take, any of the actions described
in Sections 6.1(a) through 6.1(m) hereof or, except as contemplated by this
Agreement, take, or omit to take, any action which would make any of the
representations or warranties of the Company contained in this Agreement untrue
or incorrect in any material respect as of the date when made.
<PAGE> A-24
6.2. NO SOLICITATION.
(a) The Company shall, and shall direct its officers, directors, employees,
representatives and agents (including, without limitation, its attorneys,
investment bankers and accountants) to, refrain from any discussions and
negotiations with any parties other than Parent and Buyer with respect to any
proposal relating to an Acquisition Transaction. The Company agrees that, prior
to the Effective Time, it shall not, and shall not authorize or permit any of
the Subsidiaries or any of its or the Subsidiaries' directors, officers,
employees, agents or representatives (including, without limitation, its
attorneys, investment bankers and accountants), directly or indirectly, to
solicit, initiate or encourage (including by way of furnishing or disclosing
non-public information) any inquiries or the making of any proposal with respect
to a merger, consolidation or other business combination involving the Company
or the Subsidiaries or acquisition of more than 50% of the assets of the Company
and the Subsidiaries taken as a whole or the issuance, sale, disposition of
(including by way of merger, consolidation, share exchange or similar
transaction) securities representing 50% or more voting control of the Company
(other than securities issued pursuant to Options existing as of the date
hereof) (an "Acquisition Transaction") or initiate, negotiate, explore or
otherwise engage in substantive communications in any way with any person (other
than Buyer, Parent and their directors, officers, employees, agents and
representatives) with respect to any Acquisition Transaction, including, without
limitation, waiving its right of first refusal, under the Stock Purchase
Agreement, dated November 15, 1996, among Majority Shareholder, New World Power
Corporation and the Company, to purchase all shares of Company Common Stock that
Majority Shareholder and its subsidiaries may from time to time propose to sell
(the "Company Right of First Refusal"), or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement.
Notwithstanding the foregoing, nothing contained in this Agreement shall prevent
the Company or the Board from furnishing non-public information to, or entering
into discussions or negotiations with, any person in connection with an
unsolicited bona fide written proposal for an Acquisition Transaction by such
person or recommending an unsolicited bona fide written proposal for an
Acquisition Transaction to the stockholders of the Company, if and only to the
extent that (A) the Board believes in good faith (after consultation with its
financial adviser) that such proposal for an Acquisition Transaction would, if
consummated, result in a transaction more favorable to the Company's
stockholders from a financial point of view than the transactions contemplated
by this Agreement (a "Superior Proposal"), and (B) prior to furnishing such non-
public information to, or entering into discussions with, such person, the Board
receives from such person an executed confidentiality agreement, with terms no
more favorable to such party than those contained in the Letter Agreement re
Confidentiality, dated February 5, 1999, between Parent and the Company. Nothing
in this Agreement shall prevent the Company from complying with the provisions
of Rule 14e-2 promulgated under the Exchange Act with respect to an Acquisition
Transaction.
(b) The Company shall immediately advise Parent and Buyer in writing of the
receipt of any inquiries or proposals relating to an Acquisition Transaction,
including the terms of any such inquiries or proposals, and the actions taken by
the Company or its agents or representatives with respect thereto, and the
Company shall provide Parent with all non-public information to be provided to
the person making such inquiry or proposal which Parent has not previously
received
<PAGE> A-25
from the Company, and the Company shall keep Parent informed, on a
daily or more regular basis if the context requires or Parent so requests, of
the status of such inquiries and proposals.
6.3. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) From the date of this Agreement until the Effective Time, the Company will
give Parent and Buyer and their authorized representatives (including counsel,
consultants, financial advisors, accountants, banks, financial institutions and
auditors), full access during normal business hours to all properties,
facilities, personnel and operations and to all books and records of the Company
and the Subsidiaries, will permit Parent and Buyer and their authorized
representatives to make such inspections as it may reasonably request and will
cause its officers and those of the Subsidiaries to furnish Parent and Buyer and
their authorized representatives with such financial and operating data and
other information with respect to its business and properties as Parent and
Buyer or such representatives may from time to time request; provided, that, any
such inspections and examinations shall be conducted at reasonable times and
under reasonable circumstances in a manner not disruptive to the Company's day-
to-day operations. The Company shall give Parent and Buyer and their authorized
representatives full and reasonable access to the Company's management and the
Company shall permit Parent and Buyer to approach and negotiate with any or all
employees of the Company and each Subsidiary, including, but not limited to,
managerial staff, in an effort to persuade them to continue in the employ of the
Company and each Subsidiary pending the Closing and thereafter, and the Company
shall use commercially reasonable efforts to assist Parent and Buyer in such
negotiations. No investigation by Parent or Buyer shall, however, diminish or
obviate in any way, or affect the right of Parent or Buyer to rely upon, any of
the representations, warranties, covenants or agreements of the Company
contained in this Agreement or in any other Company Agreement.
(b) Each of Parent and Buyer agrees to keep confidential and not divulge to any
other party or person (other than to the employees, attorneys, accountants and
consultants of each who have a need to receive such information and other than
as may be required by law or the rules of the Nasdaq Market) any information
received from the Company, unless and until such documents and other information
otherwise becomes publicly available. In the event of termination of this
Agreement for any reason, each of Parent and Buyer shall promptly return, or at
the election of the Company, destroy all non-public documents obtained from the
Company and any copies or notes of such documents (except as otherwise required
by law) and, upon the request of the Company, confirm such destruction to the
Company in writing.
6.4. REASONABLE BEST EFFORTS; OTHER ACTIONS. Subject to the terms and
conditions herein provided and applicable law, each of the Company, Parent and
Buyer shall use its reasonable best efforts promptly to take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate under applicable laws and regulations to
consummate and make effective the Merger and all other transactions contemplated
by this Agreement, including, without limitation, using such reasonable best
efforts to (a) obtain and file, as applicable, all consents, permits and
approvals from and filings with any governmental authorities, nongovernmental
self-regulatory agencies and from parties to any Company Material Contract which
may be required in connection with the lawful consummation of the transactions
contemplated hereby or the continuance of such Company Material Contract
<PAGE> A-26
after the Closing Date, (b) substitute Parent as guarantor in the place and
stead of Majority Shareholder or Majority Shareholder's sole shareholder, as the
case may be, under the guaranties set forth in Section 6.4(b) of the Disclosure
Letter, and (c) lift any legal bar to the Merger. If any "fair price,"
"moratorium," "control share acquisition" or other form of antitakeover statute,
regulation, charter provision or contract is or becomes applicable to the
transactions contemplated by this Agreement, the Company will use its reasonable
best efforts to grant such approvals and take such actions as are necessary
under such laws, provisions or contracts so that the transactions contemplated
by this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise act to eliminate or minimize the
effects of such statute, regulation, provision or contract on the transactions
contemplated by this Agreement.
6.5. PUBLIC ANNOUNCEMENTS AND OTHER COMMUNICATIONS.
(a) Neither the Company, on the one hand, nor Parent or Buyer, on the other,
shall issue any press release or otherwise make any public statements with
respect to this Agreement or the Merger without the prior written consent of the
other, which consent shall not be unreasonably withheld; provided, that the
foregoing shall not preclude any press release or public statement by the
Company, on the one hand, or Parent or Buyer, on the other, required by
applicable law or any obligations pursuant to any listing agreement with any
national securities exchange so long as the party issuing a press release or
making a public statement uses its best efforts to allow the other party to
review and comment on such release or statement prior to publication or
dissemination and further uses its best efforts to cause such comments to be
effected.
(b) The Company shall, prior to distributing or otherwise circulating any
notices, directives, or other communications directed to all or groups of
customers, vendors, employees, distributors, or others associated with its
business relating to the transactions contemplated by this Agreement or to the
operation of business after consummation of such transactions, consult with
Parent and give Parent reasonable opportunity to comment thereon.
6.6. NOTIFICATION OF CERTAIN MATTERS; REPORTING.
(a) Each of the Company, Parent and Buyer shall give prompt notice to the other
party of (i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause either (x) any representation
or warranty of any party contained in this Agreement to be untrue or inaccurate
in any material respect at any time from the date hereof to the Effective Time,
or (y) any condition set forth in ARTICLE VII, ARTICLE VIII or ARTICLE IX hereof
to be unsatisfied at any time from the date hereof to the Effective Time, and
(ii) any material failure of the Company, Parent or Buyer, as the case may be,
or any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.6 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice. Without limiting the generality of the
foregoing, the Company shall promptly notify Parent of the filing of any
litigation, or the filing of any governmental or regulatory action, including
any investigation or notice of investigation,
<PAGE> A-27
or similar proceeding or notice of any material claim against the Company or any
Subsidiary of which the Company becomes aware.
(b) The Company shall furnish to Parent as soon as practicable and in any event
within fifteen (15) days after it is prepared, (i) a copy of any report
submitted to the Board, provided, however, that the Company need not furnish
Parent any materials relating to the Company's rights and obligations under this
Agreement or any agreement or instrument delivered pursuant to this Agreement,
including, without limitation, communications of the Company's legal counsel
regarding the Company's rights against and obligations to Parent or Buyer under
this Agreement or books, records and documents covered by the attorney-client
privilege, or which are attorneys' work product, (ii) copies of all material
reports, renewals, filings, certificates, statements, correspondence and other
documents specific to the Company or filed with or received from the SEC or any
governmental authority; (iii) monthly unaudited balance sheets, statements of
income and changes in stockholders' equity for the Company and the Subsidiaries
and quarterly unaudited consolidated and consolidating balance sheets,
statements of income and changes in stockholders' equity for the Company, in
each case prepared on a basis consistent with past practice, and (iv) such other
reports as Parent may reasonably request (which are otherwise deliverable under
this Section 6.6(b)) relating to the Company. Each of the financial statements
of the Company delivered pursuant to this Subsection 6.6(b) shall be accompanied
by a certificate of the Chief Financial Officer of the Company to the effect
that such financial statements fairly present the financial condition of the
Company, for the periods covered, subject to recurring adjustments normal in
nature and amount, necessary for a fair presentation and are prepared on a basis
consistent with past practice. Additionally, at the request of Parent (which
shall not be made more than once a week), the Company shall advise Parent of the
approximate total amount of expenses incurred by the Company as of the date of
such request in connection with this Agreement and the Merger.
6.7. EXPENSES. Except as set forth in Sections 6.8, 10.6 and 10.7 hereof,
Parent, Buyer and the Company shall each bear their respective expenses incurred
in connection with this Agreement and the Merger, including, without limitation,
the preparation, execution and performance of this Agreement and the
transactions contemplated hereby, and all fees and expenses of investment
bankers, finders, brokers, agents, representatives, financial printers, counsel
and accountants, and their counsel (collectively, "Advisors"). The Company
shall ensure that its Advisors engaged in connection with the transactions
contemplated by this Agreement submit full and final bills on or before the
Closing Date and that all such expenses are paid or properly accrued on or prior
to the Closing Date.
6.8. HSR ACT FILINGS. The parties shall, as soon as practicable after the date
hereof, file Notification and Report forms under the HSR Act with the FTC and
the DOJ with respect to the transactions contemplated herein, shall file
requests for early termination and shall use reasonable efforts to respond as
promptly as practicable to all inquiries received from the FTC or the DOJ for
additional information or documentation. Parent or Buyer, on the one hand, and
the Company, on the other hand, shall share equally the cost of all filing fees
related to the Notification and Report forms. To the extent permitted by
applicable law, the parties shall request such governmental agencies to treat as
confidential all such information submitted to them.
<PAGE> A-28
6.9. STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT.
(a) As promptly as practicable after the execution of this Agreement, the
Company shall duly call, give notice of, convene and hold a special meeting of
its stockholders to consider and vote upon this Agreement and the Merger (the
"Company Stockholders Meeting"), on a date to be agreed upon between the Company
and Parent, which date shall be set taking into account the status of pending
regulatory matters pertaining to the transactions contemplated hereby.
(b) As promptly as practicable after the execution of this Agreement, the
Company shall prepare and file with the SEC a Proxy Statement relating to this
Agreement and the Merger (the "Proxy Statement"). The Company shall use its
reasonable best commercial efforts to cause the Proxy Statement to be "cleared"
by the SEC for mailing to the stockholders of the Company as promptly as
practicable and shall mail the Proxy Statement to its stockholders as promptly
as practicable thereafter. Parent and Buyer shall furnish all information
concerning it and the holders of its capital stock as the Company may reasonably
request for inclusion in such Proxy Statement. Subject to receipt by the
Company of a proposal for a Superior Transaction, the Proxy Statement shall
include the recommendation of the Board in favor of approval and adoption of
this Agreement and the Merger. Parent and Buyer shall have the right to review
the Proxy Statement before it is filed with the SEC. The Company shall notify
Parent immediately of the receipt of comments from the SEC and provide Parent
immediately with a copy of such comments. Parent and Buyer shall have the right
to review all revisions to preliminary drafts of the Proxy Statement before
filed with the SEC. Whenever any event occurs that should be described in an
amendment of or supplement to the definitive Proxy Statement, the Company shall,
upon learning of such event, promptly notify and consult with Parent, and the
parties shall cooperate with each other in connection with the preparation of a
mutually acceptable amendment or supplement. The Company shall promptly file
each such amendment or supplement with the SEC and mail such amendment or
supplement as soon as practicable after it is cleared by the SEC. No amendment
or supplement to the definitive Proxy Statement will be made by the Company
without the approval of Parent, which approval shall not be unreasonably
withheld or delayed.
6.10. INFORMATION.
(a) The Company covenants and agrees that neither the Proxy Statement, nor any
other document filed or to be filed by or on behalf of the Company with the SEC,
the FTC, the DOJ or any other governmental authority or stock exchange in
connection with the transactions contemplated by this Agreement shall contain at
the respective times filed (whether concurrently herewith or hereafter) with the
SEC, the FTC, the DOJ or other governmental authority or stock exchange 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 made therein,
in light of the circumstances under which they were made, not misleading;
provided, that the foregoing shall not apply to information supplied by Parent
or Buyer specifically for inclusion or incorporation by reference in any such
document. The Company further covenants and agrees that neither the Proxy
Statement nor any amendment or supplement thereto shall, when mailed to the
Company's stockholders and at the time of the Company Stockholders Meeting,
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
made therein, in light of the circumstances under which they were
<PAGE> A-29
made, not misleading; provided, that the foregoing shall not apply to
information supplied by Parent or Buyer specifically for inclusion or
incorporation by reference therein. The Company covenants and agrees that the
Proxy Statement shall comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder and the rules and
regulations of the NASDAQ Smallcap Market. The Company represents and warrants
to Parent and Buyer that none of the information supplied by the Company
specifically for inclusion or incorporation by reference in any document filed
or to be filed by or on behalf of Parent or Buyer with the SEC, the FTC, the DOJ
or any other governmental authority or stock exchange in connection with the
transactions contemplated by this Agreement shall contain, any untrue statement
of a material fact or omits, or will omit, to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(b) Each of Parent and Buyer covenants and agrees that no document filed or to
be filed by or on behalf of it with the SEC, the FTC, the DOJ or any other
governmental authority or stock exchange in connection with the transactions
contemplated by this Agreement shall contain at the respective times filed
(whether concurrently herewith or hereafter) with the SEC, the FTC, the DOJ or
other governmental authority or stock exchange 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 made therein, in light of the
circumstances under which they were made, not misleading; provided, that the
foregoing shall not apply to information supplied by the Company specifically
for inclusion or incorporation by reference in any such document. Each of Parent
and Buyer represents and warrants to the Company that none of the information
supplied by it specifically for inclusion or incorporation by reference in the
Proxy Statement or any other document filed or to be filed by or on behalf of
the Company with the SEC, the FTC, the DOJ or any other governmental authority
or stock exchange in connection with the transactions contemplated by this
Agreement shall contain, any untrue statement of a material fact or omits, or
will omit, to state any material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
6.11. ENVIRONMENTAL ASSESSMENTS.
(a) Parent and Buyer shall have the right (to the extent allowable by the
current owner of such property) to conduct before the Closing Date, at their
sole expense, environmental site investigations and assessments ("Site
Assessments") covering any real property owned or leased by the Company, for the
purpose of determining whether there exists on such real property any
environmental condition which could result in any liability, cost or expense to
Parent, Buyer or the Surviving Corporation relating to Hazardous Substances or
other adverse environmental conditions. Such Site Assessment may include both
above and below the ground testing for environmental damage or the presence of
Hazardous Substances on such property as may be reasonably necessary to conduct
the Site Assessment in the opinion of the persons conducting such Site
Assessment and the Company shall allow such persons access to such property
during normal business hours and upon reasonable prior notice in order to permit
them to conduct the Site Assessment and shall otherwise cooperate with such
persons in connection therewith. In exercising its rights hereunder, Parent
shall coordinate with the Company to avoid unduly interfering with the conduct
of business by the Company and the Subsidiaries. For
<PAGE> A-30
invasive testing (exclusive of asbestos sampling) (e.g., soil and
soil boring testing), Parent will first present to the Company the
plan or testing that is contemplated by Parent and Parent may not
conduct such testing without the Company's prior written consent,
which shall not be unreasonably withheld or delayed. In connection
with such inspection and testing, Parent shall obtain at its sole
cost and expense all permits and licenses required in connection with the
performance of such work. Parent shall repair any damages caused by its tests
or inspections. Parent hereby agrees to defend and indemnify the Company for
all injuries and damages to persons or property caused by such surveys and
testing and for the cost of removing all mechanics' or materialmen's liens on
the inspected property resulting from such surveys and testing ordered by
Parent.
(b) Parent and Buyer shall not provide any such Site Assessment, or any non-
public information contained therein, to any third party, including any
governmental authority, unless otherwise required to do so by court order or
order of a regulatory agency, in which case, Parent or Buyer shall first notify
the Company and afford the Company the right to seek a protective order or other
appropriate remedy. In the event that such protective order or other remedy is
not obtained in a timely fashion so as to preclude the violation of any law or
order, Parent or Buyer (as the case may be) shall furnish only that portion of
such non-public information which it is advised by written opinion of counsel is
legally required and shall exercise its best commercial efforts to obtain
assurances that confidential treatment shall be accorded such non-public
information.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY, PARENT AND BUYER
The obligations of the parties to effect the Merger shall be subject to the
satisfaction or, if permissible, waiver at or prior to the Effective Time of
each of the following conditions:
7.1. STOCKHOLDER APPROVAL. The holders of a majority of the shares of Company
Common Stock entitled to vote thereon shall have approved and adopted this
Agreement in accordance with the DGCL and the rules and regulations of the
Nasdaq Small Cap Market.
7.2. NO ACTION OR PROCEEDING. No temporary restraining order, preliminary or
permanent injunction, cease and desist order or other legal restraint preventing
the consummation of the transactions contemplated herein, or imposing material
damages in respect thereof, shall be in effect.
7.3. MAILING OF PROXY STATEMENT. At least twenty (20) business days shall have
elapsed since the mailing of the Proxy Statement to Company stockholders.
7.4. HSR ACT. All waiting periods under the HSR Act shall have expired.
7.5. GOLDEN, COLORADO OFFICE. The Company, Majority Shareholder and Coors
Ceramics shall have entered into an agreement agreeing to continue the lease by
Coors Ceramics to the Company and the sublease by the Company to Majority
Shareholder of premises located in Golden, Colorado for a period of ninety (90)
days following the Closing upon such terms as such premises have been leased and
subleased to date.
<PAGE> A-31
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS
OF PARENT AND BUYER
The obligations of Parent and Buyer to effect the Merger shall be subject to the
satisfaction by the Company or, if permissible, waiver by Parent and Buyer at or
prior to the Effective Time of each of the following conditions:
8.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the
Company and each Subsidiary contained in this Agreement and in any Company
Agreement shall have been true and correct in all material respects (except to
the extent the representation or warranty is already qualified by materiality or
Material Adverse Effect, in which case it shall have been true in all respects)
when made and shall be true and correct in all material respects (except to the
extent the representation or warranty is already qualified by materiality or
Material Adverse Effect, in which case it shall have been true in all respects)
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date, other than such representations and warranties as
are made as of another specified date, which shall have been true and correct in
all material respects (except to the extent the representation or warranty is
already qualified by materiality or Material Adverse Effect, in which case it
shall have been true in all respects) as of such date.
8.2. MATERIAL ADVERSE CHANGE. There shall not have occurred between the date
hereof and the Closing Date any event which had a Material Adverse Effect, or
which has affected the ability of the Company to consummate the transactions
contemplated herein, nor shall there have occurred any event, development or
state of facts or circumstances (other than a change in general economic
conditions) which could reasonably be expected to result in any of the
foregoing, either alone or together with other such occurrences.
8.3. SATISFACTION OF CLOSING OBLIGATIONS. The Company shall have delivered
and/or satisfied each of its obligations set forth in Section 1.5.
8.4. DISSENTING SHARES. The number of shares of Company Common Stock for which
appraisal rights are sought prior to any vote of the stockholders of the Company
with respect to the Merger shall not exceed thirty percent (30%) of the
outstanding shares of Company Common Stock.
8.5. COMPLIANCE WITH COVENANTS. The Company and each Subsidiary shall have
performed or complied in all material respects (except to the extent the
agreement or covenant is already qualified by materiality or Material Adverse
Effect, in which case it shall have been performed or complied with in all
respects) with all agreements and covenants required by this Agreement or any
Company Agreement to be performed or complied with by it on or prior to the
Effective Time.
8.6. THIRD PARTY CONSENTS. All consents, permits and approvals from and filings
with any governmental authorities, nongovernmental self-regulatory agencies and
from parties to any Company Material Contract which may be required in
connection with the lawful consummation of the transactions contemplated hereby
or the continuance of such Company Material Contract
<PAGE> A-32
after the Closing Date, including without limitation all consents, permits,
approvals and filings referenced in Section 4.3(b) of this Agreement, Section
4.3(b) of the Disclosure Letter and Section 4.15 of the Disclosure Letter, shall
have been obtained upon terms and conditions reasonably satisfactory to Parent.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger shall be subject to the
satisfaction by Parent and/or Buyer, as the case may be, or, if permissible,
waiver by the Company at or prior to the Effective Time of each of the following
conditions:
9.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent and Buyer contained in this Agreement shall have been true and correct in
all material respects (except to the extent the representation or warranty is
already qualified by materiality, in which case it shall have been true in all
respects) when made and shall be true and correct in all material respects
(except to the extent the representation or warranty is already qualified by
materiality, in which case it shall have been true in all respects) on and as of
the Closing Date with the same force and effect as though made on and as of the
Closing Date, other than such representations and warranties as are made as of
another specified date, which shall have been true and correct in all material
respects (except to the extent the agreement or covenant is already qualified by
materiality, in which case it shall have been performed or complied with in all
respects) as of such date.
9.2. COMPLIANCE WITH COVENANTS. Each of Parent and Buyer shall have performed
or complied in all material respects (except to the extent the agreement or
covenant is already qualified by materiality, in which case it shall have been
performed or complied with in all respects) with all agreements and covenants
required by this Agreement or any Company Agreement to which it is a party to be
performed or complied with by it on or prior to the Effective Time.
9.3. SATISFACTION OF CLOSING OBLIGATIONS. Parent and Buyer shall have delivered
and/or satisfied each of their respective obligations set forth in Section 1.6.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1. TERMINATION. This Agreement may be terminated (and the Merger
contemplated hereby may be abandoned) notwithstanding approval thereof by the
stockholders of the Company at any time prior to the Effective Time: (a) by
mutual written consent of Parent, Buyer and the Company; (b) by any party if,
without any material breach by such terminating party of its obligations under
this Agreement, the Merger shall not have occurred on or before 5:00 p.m. (Los
Angeles time) on the twenty-second (22nd) business day after the date when the
Proxy Statement is mailed to the Company's stockholders (the "Merger Deadline"),
which date may be extended by mutual written consent of the parties hereto;
provided, however, that if a request for additional information is received from
the FTC or the DOJ pursuant to the HSR Act, such date shall be extended to the
fourteenth (14th) calendar day following acknowledgment by the FTC or
<PAGE> A-33
DOJ, as applicable, that the parties have complied with such request, but in any
event not later than July 31, 1999; or (c) by Parent, Buyer or the Company if
any court of competent jurisdiction in the United States or other governmental
body in the United States shall have issued an order (other than a temporary
restraining order), decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger, and such order, decree, ruling or
other action shall have become final and nonappealable; provided that the party
seeking to terminate this Agreement shall have used its reasonable best efforts
to remove or lift such order, decree or ruling.
10.2. TERMINATION BY PARENT OR BUYER. This Agreement may be terminated and the
Merger may be abandoned by Parent or Buyer prior to the Effective Time if (a)
any representation or warranty of the Company or any Subsidiary contained in
this Agreement or in any Company Agreement is not true and correct in all
material respects (or in all respects if the representation or warranty is
already qualified by materiality or Material Adverse Effect) at and as of any
date prior to the Effective Time as if made at and as of such time, except for
(i) failures to comply as are capable of being and are cured (other than by the
Company merely disclosing the breach to Parent or Buyer) within ten (10) days
after written notice from Parent or Buyer to the Company of such failure, or
(ii) any representation or warranty which speaks as of a specified date which
was true and correct in all material respects (or in all respects if the
representation or warranty is already qualified by materiality or Material
Adverse Effect) as of such specified date; (b) the Company or any Subsidiary has
failed to comply with any of its agreements or covenants under this Agreement or
any Company Agreement in all material respects (or in all respects if the
agreement or covenant is already qualified by materiality or Material Adverse
Effect), except for failures to comply as are capable of being and are cured
within ten (10) days after written notice from Parent or Buyer to the Company of
such failure; (c) the conditions specified in ARTICLE VII and ARTICLE VIII to be
satisfied by the Company shall not have been satisfied by the Company or waived
by Parent and Buyer prior to the Merger Deadline; (d) the Board shall (i)
withdraw its recommendation or approval in respect of this Agreement or the
Merger or (ii) modify or change its recommendation or approval in respect of
this Agreement or the Merger in a manner materially adverse to Parent or Buyer
or (iii) fail to publicly oppose a Tender Offer or Exchange Offer (each as
hereinafter defined) within ten (10) business days after commencement of such
Tender Offer or Exchange Offer; or (e) the Board shall have approved any
proposal other than by Parent and Buyer in respect of an Acquisition Transaction
or shall have approved the waiver of the Company Right of First Refusal. As
used herein, "Tender Offer" shall mean the commencement (as such term is defined
in Rule 14d-2 under the Exchange Act) of a tender offer or the filing by any
person of a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") with respect to a tender offer to purchase any shares of
Company Common Stock such that upon consummation of such offer, such person
would own or control 15% or more of the then outstanding shares of Company
Common Stock. As used herein, "Exchange Offer" shall mean the commencement (as
such term is defined in Rule 14d-2 under the Exchange Act) of an exchange offer
or the filing by any person of a registration statement under the Securities Act
with respect to an exchange offer to purchase any shares of Company Common Stock
such that upon consummation of such offer, such person would own or control 25%
or more of the then outstanding shares of Company Common Stock.
<PAGE> A-34
10.3. TERMINATION BY THE COMPANY. This Agreement may be terminated and the
Merger may be abandoned by the Company notwithstanding approval thereof by the
stockholders of the Company at any time prior to the Effective Time if (a) any
representation and warranty of Parent or Buyer contained in this Agreement or
any Company Agreement to which it is a party is not true and correct in all
material respects (or in all respects if the representation or warranty is
already qualified by materiality) at and as of any date prior to the Effective
Time as if made at and as of such time, except for (i) failures to comply as are
capable of being and are cured (other than by Parent or Buyer, as the case may
be, merely disclosing the breach to the Company) within ten (10) days after
written notice from the Company to Parent or Buyer of such failure, or (ii) any
representation or warranty which speaks as of a specified date which were true
and correct in all material respects (or in all respects if the representation
or warranty is already qualified by materiality) as of such specified date; (b)
Parent or Buyer has failed to comply in all material respects (or in all
respects if the agreement or covenant is already qualified by materiality) with
any of its agreements or covenants under this Agreement or any Company Agreement
to which it is a party, except for failures to comply as are capable of being
and are cured within ten (10) days after written notice from the Company to
Parent or Buyer of such failure; (c) the conditions in ARTICLE VII and ARTICLE
IX to be satisfied by the Buyer or Parent shall not have been satisfied by the
Buyer or Parent or waived by the Company prior to the Merger Deadline; or (d)
the Board shall have approved any proposal other than by Parent and Buyer in
respect of an Acquisition Transaction or shall have approved the waiver of the
Company Right of First Refusal.
10.4. PROCEDURE FOR TERMINATION. In the event of termination and abandonment of
the Merger by Parent, Buyer or the Company pursuant to this ARTICLE X, written
notice thereof shall be given by the terminating party to the other parties.
10.5. EFFECT OF TERMINATION. In the event of termination of this Agreement
pursuant to and in accordance with this ARTICLE X, the Merger shall be deemed
abandoned and this Agreement shall forthwith become void, except as provided in
Sections 6.3(b) and 6.7 hereof (which Sections shall survive any termination of
this Agreement), without liability on the part of any party hereto or its
affiliates, directors, officers or stockholders except as provided in Sections
10.6 and 10.7 hereof, and each of the parties hereto hereby waives and releases
any other claim which may otherwise exist upon such termination.
10.6. TERMINATION FEE.
(a) Termination by Parent or Buyer. In the event this Agreement is terminated
by Parent or Buyer pursuant to Section 10.2(a) or 10.2(b) hereof, where the
failure giving rise to such right of termination shall have been caused in whole
or in part by any action or inaction within the control of the Company or any
Subsidiary (it being understood that any action or inaction outside the control
of the Company or any Subsidiary such as, by way of example only, the filing of
a lawsuit against them, shall not come within this Section 10.6(a)), the Company
shall within five (5) business days following the termination of this Agreement
pay to the terminating party an amount equal to the actual out-of-pocket fees
and expenses reasonably incurred and paid by such terminating party in
connection with the Merger and the transactions contemplated by this Agreement,
such amount not to exceed $750,000. Notwithstanding anything to the contrary
set forth in this Section 10.6(a): (i) in the event that Parent is entitled to
<PAGE> A-35
a fee pursuant to Section 10.7 hereof, neither Parent nor Buyer shall be
entitled to any fee under this Section 10.6(a), and (ii) under no circumstances
shall both Parent and Buyer be entitled to a fee pursuant to this Section
10.6(a).
(b) Termination by Company. In the event this Agreement is terminated by the
Company pursuant to Section 10.3(a) or 10.3(b) hereof, where the failure giving
rise to such right of termination shall have been caused in whole or in part by
any action or inaction within the control of Buyer or Parent (it being
understood that any action or inaction outside the control of Buyer or Parent
shall not come within this Section 10.6(b)), Parent shall within five (5)
business days following the termination of this Agreement pay to the Company an
amount equal to $500,000 as compensation for lost opportunities and
reimbursement of out-of-pocket fees and expenses incurred by the Company in
connection with the Merger and the transactions contemplated by this Agreement.
10.7. TOPPING FEE.
(a) In the event this Agreement is terminated by Parent or Buyer pursuant to
Section 10.2(d) or 10.2(e) hereof, or by the Company pursuant to Section 10.3(d)
hereof, the Company shall within five (5) business days following the
termination of this Agreement pay to Parent Two Million Dollars ($2,000,000) as
compensation for lost opportunities and reimbursement of out-of-pocket fees and
expenses incurred in connection with the Merger and the transactions
contemplated by this Agreement (the "Topping Fee").
(b) In the event this Agreement is terminated by Parent or Buyer pursuant to
Section 10.2(a) or Section 10.2(b), where the failure giving rise to such right
of termination shall have been caused in whole or in part by any action or
inaction within the control of the Company or any Subsidiary (it being
understood that any action or inaction outside the control of the Company or any
Subsidiary such as, by way of example only, the filing of a lawsuit against
them, shall not come within this Section 10.7(b)), the Company shall also pay to
Parent the Topping Fee if (A) after the date hereof and before the termination
of this Agreement, a proposal for an Acquisition Transaction shall have been
made and publicly announced by any person (other than Parent, Buyer and their
directors, officers, employees, agents and representatives), and (B) after the
date hereof and at or prior to January 31, 2000, the Company shall have effected
such Acquisition Transaction with such person or an affiliate thereof. The
Topping Fee payable under this Section 10.7(b) shall be payable as a condition
to the consummation of the foregoing Acquisition Transaction.
(c) If any party fails to pay promptly the fees, costs or expenses due to
another party pursuant to Sections 10.6 or 10.7, the party failing to make such
payment shall also pay the other party's costs and expenses (including legal
fees and expenses) in connection with any action, including the filing of any
lawsuit or other legal action, taken to collect payment, together with interest
on the amount of the unpaid fees, costs and/or expenses under said Sections,
accruing from their due date, at an interest rate per annum equal to two
percentage points in excess of the prime commercial lending or reference rate
quoted by Bank of America.
10.8. REMEDIES. Each party hereto hereby agrees that the sole and exclusive
remedy of such party arising out of, resulting from, in connection with or
relating to, directly or indirectly,
<PAGE> A-36
another party's breach, default or failure
in performance of any of such other party's covenants, agreements,
representations or warranties occurring prior to the Effective Time, shall be
termination of this Agreement pursuant to this ARTICLE X, and receipt of a
payment pursuant to Section 10.6 or 10.7 hereof, if applicable.
ARTICLE XI
MISCELLANEOUS
11.1. AMENDMENT AND MODIFICATION. At any time prior to the Effective Time,
subject to applicable law, this Agreement may be amended, modified or
supplemented only by written agreement (referring specifically to this
Agreement) of Parent, Buyer and the Company with respect to any of the terms
contained herein.
11.2. WAIVER. At any time prior to the Effective Time, Parent and Buyer, on the
one hand, and the Company, on the other hand, may (i) extend the time for the
performance of any of the obligations or other acts of the other, (ii) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any documents delivered pursuant hereto and (iii) waive compliance by the
other with any of the agreements or conditions contained herein which may
legally be waived. Any such extension or waiver shall be valid only if set forth
in an instrument in writing specifically referring to this Agreement and signed
on behalf of each party.
11.3. SURVIVABILITY. The respective representations and warranties of Parent,
Buyer and the Company contained herein or in any certificates or other documents
delivered prior to or as of the Effective Time shall not survive beyond the
Effective Time. The covenants and agreements of the parties hereto (including
the Surviving Corporation after the Merger) shall survive the Effective Time
without limitation (except for those which, by their terms, contemplate a
shorter survival period).
11.4. NOTICES. All notices and other communications hereunder shall be in
writing and shall be delivered personally, by FedEx or other nationally
recognized next-day courier, telecopied with confirmation of receipt, or mailed
first class, postage prepaid, by certified mail, return receipt requested, to
the parties at the addresses specified below (or at such other address for a
party as shall be specified by like notice; provided that notices of a change of
address shall be effective only upon receipt thereof) All notices, requests and
other communications shall be deemed given on the date of actual receipt or
delivery as evidenced by written receipt, acknowledgement or other evidence of
actual receipt or delivery to the address specified below. In case of service
by telecopy, a copy of such notice shall be personally delivered or sent by
certified mail, in the manner set forth above, within three (3) business days
thereafter.
(a) if to the Company,
to: Golden Genesis Company
4585 McIntyre Street
Golden, Colorado 80403
Attention: J. Michael Davis
Fax No.: (303) 271-7193
<PAGE> A-37
with a copy to: Hogan & Hartson L.L.P.
1200 17th Street
Suite 1500
Denver, Colorado 80202
Attention: Steven A. Cohen, Esq.
Fax No.: (303) 899-7333
(b) if to Parent
or Buyer, to: Kyocera International, Inc.
8611 Balboa Avenue
San Diego, California 92123-1580
Attention: President
Fax No.: (619) 492-1456
with a copy to: Loeb & Loeb LLP
1000 Wilshire Blvd., Suite 1800
Los Angeles, California 90017
Attention: Kenneth R. Benbassat, Esq.
Fax No.: (213) 688-3460
11.5. ASSIGNMENT. This Agreement and all of the provisions hereto shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto without the prior written consent of the other parties, provided that
Buyer may assign its rights and obligations under this Agreement to any direct
or indirect wholly-owned Subsidiary of Parent, but no such assignment will
relieve any party of its obligations under this Agreement. This Agreement,
except for the provisions of Sections 2.2 and 3.2 hereof (which are intended to
be for the benefit of the persons identified therein, and may be enforced by
such persons), is not intended to confer any rights or remedies hereunder upon
any other person except the parties hereto.
11.6. GOVERNING LAW. This Agreement shall be governed by the laws of the State
of Delaware (regardless of the laws that might otherwise govern under applicable
Delaware principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
11.7. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
11.8. INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. Where the context or construction requires, all words applied
in the plural shall be deemed to have been used in the singular, and vice versa;
and the masculine shall include the feminine and neuter, and vice versa. As
used in this Agreement, (i) the term "person" shall mean and include an
individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a
<PAGE> A-38
government or any department or agency
thereof; (ii) the term "Subsidiary" shall mean each corporation, limited
liability company, partnership, joint venture, trust or other entity in which
the Company has, directly or indirectly, an equity interest representing 50% or
more of the capital stock thereof or other equity interest therein having
ordinary voting power to elect a majority of the board of directors or other
governing body of such entity; (iii) the term "including" and words of similar
import shall mean "including, without limitation," unless the context otherwise
requires or unless otherwise specified; (iv) the term "to the Company's
knowledge" (or words of similar import) shall mean to the knowledge of the Board
or any senior officer of the Company; and (v) the term "Material Adverse Effect"
or other similar phrase including the word "material" shall mean (i) with
respect to the Company and the Subsidiaries, taken as a whole, any adverse
change or effect or potential adverse change or effect, or any series thereof,
involving more than Five Hundred Thousand Dollars ($500,000) in the aggregate,
or (ii) an effect that is, or at the time of such effect it is probable that the
effect will be, materially adverse to the ability of the Surviving Corporation
to conduct the business of the Company and the Subsidiaries, taken as a whole,
as presently conducted, following the Effective Time.
11.9. ENTIRE AGREEMENT. This Agreement and the Disclosure Letter and the
exhibits and schedules hereto (which are incorporated herein by this reference)
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein and therein and supersede all prior
agreements and understandings among the parties with respect to such subject
matter, including, without limitation, that certain letter agreement, dated
April 13, 1999, between the Company and Parent. There are no representations,
promises, warranties, covenants or undertakings in respect of such subject
matter, other than those expressly set forth or referred to herein and therein.
*****
<PAGE> A-39
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
COMPANY:
GOLDEN GENESIS COMPANY
By:___________________________
J. Michael Davis
President
BUYER:
GGC ACQUISITION COMPANY
By:___________________________
Rodney N. Lanthorne
President
PARENT:
KYOCERA INTERNATIONAL, INC.
By:___________________________
Rodney N. Lanthorne
President
<PAGE> A-40
EXHIBIT A (to the Agreement and Plan of Merger)
Certificate of Incorporation
of
Golden Genesis Company
First: The name of the corporation is Golden Genesis Company.
Second: The address of the registered office of the corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of the registered agent of the corporation at such address is
The Corporation Trust Company.
Third: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
Fourth: The total number of shares of stock which the corporation is
authorized to issue is 17,153,000 shares of common stock with a par value of
$.001 per share.
Fifth: The business and affairs of the corporation shall be managed by the
board of directors, and the directors need not be elected by ballot unless
required by the bylaws of the corporation.
Sixth: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the board of directors is expressly authorized to
adopt, amend or repeal the bylaws.
Seventh: The corporation reserves the right to amend and repeal any
provision contained in this certificate of incorporation in the manner
prescribed by the laws of the State of Delaware. All rights herein conferred
are granted subject to this reservation.
Eighth: A Director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
<PAGE> A-41
Ninth: The name and mailing address of the incorporator (the "Incorporator")
are E.L. Kinsler, 1209 Orange Street, Wilmington, Delaware 19801. The powers of
the Incorporator shall terminate upon the filing of this Certificate of
Incorporation.
Tenth: The following persons, having the following mailing addresses, shall
serve as the directors of the corporation until the first annual meeting of the
stockholders of the corporation or until their successors are elected and
qualified:
Name Mailing Address
Jed J. Burnham 4584 McIntyre Street
Golden, Colorado 80403
John K. Coors 4584 McIntyre Street
Golden, Colorado 80403
Joseph Coors, Jr. 4584 McIntyre Street
Golden, Colorado 80403
John Markle 4584 McIntyre Street
Golden, Colorado 80403
Norman E. Miller 4584 McIntyre Street
Golden, Colorado 80403
Gerrit J. Wolfaardt 4584 McIntyre Street
Golden, Colorado 80403
Any repeal or modification of the foregoing paragraph by the stockholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification.
<PAGE> A-42
EXHIBIT B (to the Agreement and Plan of Merger)
STOCK OPTION CANCELLATION AGREEMENT
This STOCK OPTION CANCELLATION AGREEMENT is made this ____ day of __________,
1999 ("Agreement"), by and between Golden Genesis Company, a Delaware
corporation (the "Company"), and __________ (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Company has previously established a 1998 Stock Option and
Incentive Plan, a 1996 Stock Option Plan, a 1990 Stock Option Plan and a Non-
Employee Directors Stock Option Plan (hereinafter collectively referred to as
the "Plans"); and
WHEREAS, the Company has, pursuant to one or more Stock Option Agreements (the
"Stock Option Agreements") between the Company and the Optionee, previously
issued to Optionee under one or more of the Plans one or more options to
purchase shares of the Company's Common Stock, par value $.10 per share (the
"Shares"), which options, as of the date hereof, have not been exercised, and
which options are described in Schedule A attached hereto (the "Options"); and
WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as
of May 26, 1999, by and among the Company, GGC Acquisition Company, and Kyocera
International, Inc.(the "Merger Agreement"); and
WHEREAS, upon consummation of the transactions contemplated by the Merger
Agreement (i) all of the Shares then issued and outstanding shall be cancelled
and the Company's existing stockholders shall cease to be stockholders of the
Company or any successor entity and shall receive a cash payment in the amount
of $2.33 per share in consideration for cancellation of all of such Shares then
owned by them; and (ii) the Shares shall cease to be listed on the NASDAQ
Smallcap market and shall no longer be publicly traded on that or any other
exchange or otherwise; and
WHEREAS, the parties hereto hereby agree that it is in their mutual interests to
cancel the Options.
NOW, THEREFORE, in consideration of the premises and the mutual covenants set
forth below and for good and valuable consideration, the parties hereto have
agreed as follows:
1. Effective as of the Effective Time (as hereinafter defined), the Options
shall be cancelled. Such cancellation shall be self-effectuating, requiring no
further action on Company's part other than Company's compliance with its
obligations hereunder. Upon cancellation of the Options, the Stock Option
Agreements shall be null and void in their entirety. Furthermore, in
consideration of the payment to be made to Optionee pursuant to this Agreement,
Optionee hereby waives all notice requirements contained in the Plans and in the
Stock Option Agreements.
<PAGE> A-43
2. In full consideration of the cancellation of the Options, the Company shall
pay Optionee at the Effective Time an amount equal to the product of (a) the
excess, if any, by which the Merger Price (as hereinafter defined) exceeds the
exercise price of the Option and (b) the number of Shares subject thereto.
3. Subject to all applicable federal, state and local laws, rules and
regulations with regard to the withholding of taxes, the Company shall pay the
amount specified in Section 2 above by bank check, in a single lump sum payment,
at the Effective Time.
4. Notwithstanding Section 2, no amount shall be paid to Optionee with respect
to an Option (or the portion thereof) which is exercised after the date hereof,
but prior to the date of the Effective Time.
5. The rights and obligations of the parties hereunder shall not be assignable.
6. For purposes of this Agreement, the following definitions shall apply:
(i) "Effective Time" means the date and time of the filing of the Certificate
of Merger (or the time specified therein) pursuant to the Merger Agreement; and
(ii) "Merger Price" means $2.33.
7. The terms and provisions of this Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto, their personal representatives,
administrators, executors, heirs, successors and assigns.
8. All sections, clauses and covenants contained in this Agreement are
severable, and in the event any of them shall be held to be invalid by any
court, this Agreement shall be interpreted as if such invalid sections, clauses
or covenants were not contained herein.
9. This Agreement shall be governed by and construed in accordance with the
laws of the State of California applicable to contracts made and to be performed
wholly within such State, and without regard to the conflicts of laws principles
thereof.
<PAGE> A-44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed the day and year first written above.
The Company:
GOLDEN GENESIS COMPANY
By:
Name: J. Michael Davis
Title: President
Optionee:
Signature
Print Name:
<PAGE> A-45
SCHEDULE A (to the Stock Option Cancellation Agreement)
[Instructions: List all unexercised options issued to the Optionee. With
respect to each Option specify: (i) date of issuance, (ii) number of shares
subject to the Option and (iii) option exercise price. With respect to any
Option which has been partially exercised, specify the number of shares as to
which the Option has not been exercised.]
<PAGE> B-1
EXHIBIT B
OPINION OF HANIFEN, IMHOFF INC.
Hanifen, Imhoff Inc.
1125 17th Street, Suite 1500
Denver, CO 80202
May 26, 1999
The Board of Directors
Golden Genesis Company
4585 McIntyre Street
Golden, CO 80403
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Golden Genesis Company ("GGC") of
the consideration to be received by such stockholders pursuant to the terms of
and subject to the conditions set forth in the Agreement and Plan of Merger
dated May 26, 1999, (the "Merger Agreement"), by and among Kyocera Solar
Corporation / Kyocera International ("Kyocera") and GGC. As more fully
described in the Merger Agreement: (i) Kyocera will be merged with and into GGC
(the "Merger"); and (ii) each outstanding share of the common stock, par value
$0.01 per share, of GGC (the "GGC Common Stock") will be converted into the
right to receive $2.33 net to the holder in cash.
In arriving at our opinion: (i) we reviewed the financial terms of the Merger as
set forth in the Merger Agreement; (ii) we held discussions with senior
management of GGC concerning the businesses, operations and prospects of GGC and
Kyocera; (iii) we examined certain publicly available business and financial
information relating to GGC, as well as certain financial forecasts and other
data for GGC which were provided to us by GGC's management; (iv) we examined the
terms of other relevant transactions that had certain characteristics in common
with the Merger; and (v) we analyzed certain financial, market and other
publicly available information relating to the businesses of other companies
whose operations we considered related to those of GGC. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other financial, economic and market criteria as we deemed necessary to arrive
at our opinion.
In rendering our opinion, we have relied upon and assumed, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to, or otherwise reviewed by or
discussed with, us. With respect to financial forecasts relating to GGC, we
have assumed that such forecasts and other information were reasonably prepared
on bases reflecting the best currently available estimates and judgments of
management as to the future financial performance of GGC. We did not receive
from Kyocera's management, nor did we review, financial forecasts for Kyocera.
Our opinion, as set forth herein, relates to the purchase price paid to the
holders of GGC Common Stock by Kyocera. We have not made, or been provided
with, an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of GGC or Kyocera.
We were not requested to and did not provide advice concerning the structure,
the specific amount of the consideration, or any other aspects of the Merger, or
to provide services other than the
<PAGE> B-2
delivery of this opinion. We were not authorized to, and did not, solicit third
party indications of interest in acquiring all or any part of GGC, and we were
not asked to consider, and our opinion does not address, the relative merits of
the Merger as compared to any alternative business strategies that might exist
for GGC, or the effect of any other transaction in which GGC might engage. We
did not participate in negotiations with respect to the terms of the Merger.
Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
Hanifen, Imhoff Inc. ("Hanifen"), as part of its investment banking services, is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the ordinary course of our business, we may actively trade the
securities of GGC for our own account or for the accounts of our customers and,
accordingly, may at any time hold long or short positions in such securities.
For our services in rendering this opinion, GGC will pay us a fee and indemnify
us against certain liabilities; the fee is not contingent upon consummation of
the Merger.
The opinion expressed herein is provided solely for the use of the Board of
Directors of GGC in connection with and for the purposes of its evaluation of
the proposed Merger, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger. Our opinion may not be published or otherwise used
or referred to, nor shall any public reference to Hanifen be made, without our
prior written consent, except that it may appear in any proxy statement or
similar document related to the proposed Merger.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the consideration to be received in the
Merger is fair, from a financial point of view, to the holders of GGC Common
Stock.
Very truly yours,
HANIFEN, IMHOFF INC.
<PAGE> C-1
EXHIBIT C
SECTION 262 OF THE DELAWARE
GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS - (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to s228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of
a nonstock corporation; and the words "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to s251 (other than a merger effected pursuant to s251(g) of
this title), s252, s254, s257, s258, s263 or s264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
s251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms
of an agreement of merger or consolidation pursuant to ss251, 252, 254, 257,
258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger
or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under s253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its
<PAGE> C-2
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially
all of the assets of the corporation. If the certificate of incorporation
contains such a provision, the procedures of this section, including those set
forth in subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to s228 or s253 of
this title, each constituent corporation, either before the effective date of
the merger or consolidation or within ten days thereafter, shall notify each
of the holders of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or all shares of
such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such
notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective date
of the merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the sending of
the first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the corporation
that is required to give either notice that such notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
For purposes of determining the stockholders entitled to receive either
notice, each constituent corporation may fix, in advance, a record date that
shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day
on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
<PAGE> C-3
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after such stockholder's written request for such a statement
is received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof shall
be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be fair value. In determining such fair value,
the Court shall take into account all relevant factors. In determining the
fair rate of interest, the Court may consider all relevant factors, including
the rate of interest which the surviving or resulting corporation would have
had to pay to borrow money during the pendency of the proceeding. Upon
application by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court may, in its
discretion, permit discovery or other pretrial proceedings and may proceed to
trial upon the appraisal prior to the final determination of the stockholder
entitled to an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to subsection (f) of
this section and who has submitted such stockholder's certificates of stock to
the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
<PAGE> C-4
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
<PAGE> D-1
EXHIBIT D
OPTION, VOTING AND INDEMNIFICATION AGREEMENT
This Option, Voting and Indemnification Agreement ("Agreement") is made
as of May 26, 1999, by and among ACX Technologies, Inc., a Colorado
corporation ("ACX"), Golden Technologies Company, Inc., a Colorado
corporation ("Stockholder," and together with ACX, collectively referred to
as the "Selling Parties," and individually, a "Selling Party") and Kyocera
International, Inc., a California corporation ("Parent"). All terms not
otherwise defined in this Agreement shall have the meanings ascribed to them
in the Merger Agreement (as that term is defined below).
RECITALS
A. Kyocera, GGC Acquisition Company, a Delaware corporation ("Merger
Sub") and Golden Genesis Company, a Delaware corporation (the "Company") have
entered into an Agreement and Plan of Merger (as amended from time to time,
the "Merger Agreement"), of even date herewith, pursuant to which Merger Sub,
a wholly-owned subsidiary of Parent, will be merged with and into the Company
(the "Merger").
B. The Board of Directors of the Company has adopted resolutions
approving the Merger pursuant to the Merger Agreement and this Agreement for
purposes of making inapplicable the restrictions on "business combinations"
imposed by Section 203 of the Delaware General Corporation Law.
C. In order to induce Parent to enter into the Merger Agreement, the
Selling Parties have agreed to take certain actions and to refrain from
taking other actions in connection with the Merger.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "COMPANY COMMON STOCK" shall mean the common stock, par
value $.10 per share, of the Company.
(b) An "EXERCISE EVENT" shall be deemed to have occurred if
Parent shall have the right to terminate the Merger Agreement pursuant to
Section 10.2(d) or 10.2(e) of the Merger Agreement.
(c) "EXPIRATION DATE" shall mean the earlier of (i) the date
upon which the Merger becomes effective (the "Effective Date"), (ii) the date
upon which the Option Closing occurs, (iii) the date upon which the Merger
Agreement is validly terminated pursuant to Section 10.1(a) or 10.1(c) of the
Merger Agreement, and (iv) January 31, 2000 (the "Expiration Date").
<PAGE> D-2
(d) Each Selling Party shall be deemed to "OWN" or to have
acquired "OWNERSHIP" of a security if it: (i) is the record owner of such
security; or (ii) is the "beneficial owner" (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934) of such security.
(e) "PERSON" shall mean any (i) individual, (ii) corporation,
limited liability company, partnership, trust or other entity, or (iii)
governmental authority.
(f) "RESTRICTED PERIOD" shall mean the period from the date of
this Agreement through the Expiration Date.
(g) "SUBJECT SECURITIES" shall mean: (i) all securities of the
Company (including all shares of Company Common Stock and all options,
warrants and other rights to acquire shares of Company Common Stock) Owned by
the Selling Parties as of the date of this Agreement; and (ii) all additional
securities of the Company (including all additional shares of Company Common
Stock and all additional options, warrants and other rights to acquire shares
of Company Common Stock) of which each Selling Party acquires Ownership
during the Restricted Period.
(h) A Person shall be deemed to have effected a "TRANSFER" of a
security if such Person directly or indirectly: (i) sells, pledges,
encumbers, grants an option with respect to, transfers, distributes or
disposes of such security or any interest in such security; or (ii) enters
into an agreement or commitment contemplating the possible sale of, pledge
of, encumbrance of, grant of an option with respect to, transfer of or
disposition of such security or any interest therein.
SECTION 2. TRANSFER OF SUBJECT SECURITIES.
2.1 NO TRANSFER OF SUBJECT SECURITIES. During the Restricted Period,
neither Selling Party shall cause or permit any Transfer of any of the
Subject Securities to be effected. Any Transfer in violation of this Section
2.1 shall be null and void ab initio.
2.2 NO TRANSFER OF VOTING RIGHTS. Each Selling Party shall ensure
that, during the Restricted Period: (a) none of the Subject Securities is
deposited into a voting trust; and (b) no proxy is granted other than to
Parent pursuant to this Agreement, and no voting agreement or similar
agreement is entered into, with respect to any of the Subject Securities.
SECTION 3. VOTING OF SHARES.
3.1 VOTING AGREEMENT. Each Selling Party agrees that, during the
Restricted Period:
(a) at any meeting of stockholders of the Company, however
called, and at every adjournment or postponement thereof, it shall (unless
otherwise directed in writing by Parent) cause all outstanding shares of
Company Common Stock (and any other Subject Securities having voting rights)
that are Owned by such Selling Party as of the record date fixed for such
meeting to be voted (i) FOR the approval and adoption of the Merger
<PAGE> D-3
Agreement and the approval of the Merger, and FOR each of the other actions
contemplated by the Merger Agreement, and (ii) AGAINST any action or
agreement that would result in a breach in any material respect of any
representation, warranty or covenant of the Company in the Merger Agreement,
and AGAINST any action or agreement that would impede, interfere with, delay,
postpone, attempt to discourage the Merger or otherwise materially adversely
affect the Merger, including, without limitation, any action or agreement
with respect to an Acquisition Transaction with any Person (other than Parent
or Merger Sub); and
(b) in the event written consents are solicited or otherwise
sought from stockholders of the Company with respect to the approval or
adoption of the Merger Agreement, with respect to the approval of the Merger
or with respect to any of the other actions contemplated by the Merger
Agreement, it shall (unless otherwise directed in writing by Parent) cause to
be validly executed, with respect to all outstanding shares of Company Common
Stock (and any other Subject Securities having voting rights) that are Owned
by such Selling Party as of the record date fixed for the consent to the
proposed action, a written consent or written consents (i) FOR the approval
and adoption of the Merger Agreement and the approval of the Merger, and FOR
each of the other actions contemplated by the Merger Agreement, and
(ii) AGAINST any action or agreement that would result in a breach in any
material respect of any representation, warranty or covenant of the Company
in the Merger Agreement, and AGAINST any action or agreement that would
impede, interfere with, delay, postpone, attempt to discourage the Merger or
otherwise materially adversely affect the Merger, including, without
limitation, any action or agreement with respect to an Acquisition
Transaction with any Person (other than Parent or Merger Sub).
3.2 PROXY; ADDITIONAL PURCHASES; FURTHER ASSURANCES.
(a) Contemporaneously with the execution of this Agreement: (i)
each Selling Party shall deliver to Parent a proxy in the form attached to
this Agreement as Exhibit A, which shall be irrevocable to the fullest extent
permitted by law, with respect to the shares referred to therein
(individually, a "Proxy," and collectively, the "Proxies"); and (ii) each
Selling Party shall cause to be delivered to Parent an additional proxy (in
the form attached hereto as Exhibit A) executed on behalf of the record owner
of any outstanding shares of Company Common Stock that are owned beneficially
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934),
but not of record, by such Selling Party.
(b) Each Selling Party shall, at its own expense, perform such
further acts and execute such further documents and instruments as may
reasonably be required to vest in Parent the power to carry out and give
effect to the provisions of this Agreement.
SECTION 4. THE OPTION
4.1 Each Selling Party hereby grants to Parent an unconditional,
irrevocable option (the "Option") to purchase on one occasion, subject to the
terms hereof, all of the Subject Securities Owned by such Selling Party
(other than the 500,000 shares of Company Common Stock Owned by Robert
Kaufmann with respect to which ACX has voting power) at any time on or prior
to the Expiration Date if after the date of this Agreement an Exercise Event
occurs. Following the occurrence of an Exercise Event, Parent may purchase:
(i) all (but not less than all) Subject Securities consisting of Company
Common Stock at a purchase price of $2.33 per
<PAGE> D-4
share (as adjusted pursuant to Section 4.2 below, the "Standard Option Price"),
and (ii) all or any part of any other Subject Securities at a purchase price
equal to that paid by such Selling Party for such Subject Securities (the "Other
Option Price"). If Parent wishes to exercise the Option, it shall send to the
Selling Parties a written notice (the date of which is referred to herein as the
"Notice Date") on or prior to the Expiration Date specifying (i) which Subject
Securities not consisting of Company Common Stock Parent will purchase, if any,
and (ii) a place and date not later than the later of (A) five (5) business days
from the Notice Date and (B) notwithstanding the Expiration Deadline (but in
any event not later than March 15, 2000), two (2) business days following the
expiration or earlier termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, for the
closing of such purchase (the "Option Closing"). At the Option Closing,
Parent shall pay to each Selling Party the aggregate purchase price for the
Subject Securities sold by such Selling Party in immediately available funds
by a wire transfer to a bank account designated by such Selling Party;
provided that failure or refusal of such Selling Party to designate such a
bank account shall not preclude Parent from exercising the Option. At the
Option Closing, simultaneously with the payment of the aggregate Standard
Option Price and the Other Option Price, if applicable, by Parent, each
Selling Party shall deliver to Parent a certificate or certificates
representing the Subject Securities accompanied by duly executed stock
powers. If prior notification to or approval of any governmental authority is
required (or if any waiting period must expire or be terminated) in
connection with the exercise of the Option, the Selling Parties shall
promptly cause to be filed, if applicable, the required notice or application
for approval and shall expeditiously process the same (and the Selling
Parties shall cooperate with Parent in the filing of any such notice or
application required to be filed by Parent and the obtaining of any such
approval required to be obtained by Parent), and notwithstanding anything to
the contrary set forth in this Agreement, the Expiration Deadline may be
extended by Parent to a date not more than three (3) business days after the
date on which any required notification has been made, approval has been
obtained or waiting period has expired or been terminated; provided, however,
that in no event may the Expiration Deadline be extended beyond March 15,
2000.
4.2 If at any time the Company shall (i) pay a dividend (other than
regular cash dividends) or otherwise make a distribution to the holders of
Company Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a larger number of shares of Common Stock or combine its outstanding
shares of Company Common Stock into a smaller number of shares of Company
Common Stock, (iii) reorganize its capital, reclassify its capital stock,
consolidate or merge with or into another entity or sell, transfer or
otherwise dispose of all or substantially all of its property, assets or
business to another entity or (iv) engage in any similar dilutive
transaction, the parties agree to adjust the Standard Option Price and/or the
number of shares of Company Common Stock (or Company Common Stock obtainable
upon conversion of other Subject Securities, if applicable) subject to the
Option as necessary and equitable in order to ensure that Parent shall
receive, upon exercise of the Option, the number of shares of Company Common
Stock (or Company Common Stock obtainable upon conversion of other Subject
Securities, if applicable) which Parent would have received in connection
with or as a result of such dividend, distribution or other transaction, if
it had exercised the Option immediately prior to (i) the record date for any
such dividend or other distribution or (ii) the effective time of any such
other transaction.
<PAGE> D-5
4.3 Until exercise of the Option, all rights, ownership and economic
benefits of and relating to the Subject Securities shall remain vested in and
belong to the Selling Parties, and Parent shall have no authority to manage,
direct, superintend, restrict, regulate, govern, or administer any of the
policies or operations of the Company or exercise any power or authority to
direct either Selling Party in the voting of any of the Subject Securities,
except as otherwise provided herein and in the Proxies, or the performance of
either Selling Party's duties or responsibilities as a stockholder of the
Company.
SECTION 5. WAIVER OF APPRAISAL RIGHTS.
Each Selling Party hereby irrevocably and unconditionally waives, and
agrees to cause to be waived and to prevent the exercise of, any rights of
appraisal, any dissenters' rights and any similar rights relating to the
Merger or any related transaction that such Selling Party or any other Person
may have by virtue of the ownership of any Subject Securities.
SECTION 6. NO SOLICITATION.
6.1 During the Restricted Period, each Selling Party shall, and shall
direct its officers, directors, employees, representatives and agents
(including, without limitation, its attorneys, investment bankers and
accountants) to, refrain from any discussions and negotiations with any
parties other than Parent and Merger Sub with respect to any proposal
relating to an Acquisition Transaction, and agrees that it shall not, and
shall not authorize or permit any of its directors, officers, employees,
agents or representatives (including, without limitation, its attorneys,
investment bankers and accountants), directly or indirectly, to solicit,
initiate or encourage (including by way of furnishing or disclosing
non-public information) any inquiries or the making of any proposal with
respect to an Acquisition Transaction or initiate, negotiate, explore or
otherwise engage in substantive communications in any way with any Person
(other than Merger Sub, Parent and their directors, officers, employees,
agents and representatives) with respect to any Acquisition Transaction.
Without limiting the generality of the foregoing, each Selling Party agrees
that during the Restricted Period, it shall not, and shall not authorize or
permit any of its directors, officers, employees, agents or representatives
(including, without limitation, its attorneys, investment bankers and
accountants) to request that the Company waive its right of first refusal,
under the Stock Purchase Agreement, dated November 15, 1996, among
Stockholder, New World Power Corporation and the Company, to purchase all
shares of Company Common Stock that Stockholder and its subsidiaries may from
time to time propose to sell.
6.2 ACX agrees that if either J. Michael Davis or Jeffrey C. Brines
(each, a "Company Employee") becomes an employee of ACX or any of its
affiliates, ACX shall, for a period 18 months after such employment
commences, not permit such Company Employee to do either of the following for
the benefit of ACX or such affiliate, as the case may be: (a) cause or
attempt to cause any employee, agent or contractor of the Company, to
terminate his or her employment, agency or contractor relationship with the
Company; interfere or attempt to interfere with the relationship between the
Company and any employee, contractor or agent of the Company; hire or attempt
to hire any employee, agent or contractor of the Company; or conduct business
of any kind with any Company contractor; or (b) solicit business from or
conduct business with any customer or client served by the Company while he
was an employee
<PAGE> D-6
of the Company; or interfere or attempt to interfere with any transaction,
agreement or business relationship in which the Company or any affiliate was
involved while he was an employee of the Company.
SECTION 7. ASSIGNMENT OF SOLAR ELECTRIC ASSETS.
Contemporaneously with the execution of this Agreement, the Selling
Parties and Golden International, Inc., a Colorado corporation (or any
successor-in-interest to Golden International, Inc., "Photon Subsidiary")
shall execute and deliver to Parent, an Assignment and Bill of Sale in the
form of Exhibit B hereto (the "Assignment"), assigning, as of the Effective
Time, to the Company, all of their right, title and interest in and to the
following (collectively, the "Solar Electric Assets"): all Intellectual
Property owned by them (whether or not developed by them) for use in (a)
solar electric applications and (b) the manufacture of CdTe thin film modules
(or otherwise relating thereto) other than any such Intellectual Property in
which PE Limited Liability Company has an interest. The Solar Electric
Assets shall be assigned to the Company on an as-is, where-is basis, without
any representation or warranty except as set forth in Section 9.
SECTION 8. REPAYMENT OF CERTAIN COMPANY INDEBTEDNESS.
Parent agrees that if the indebtedness of the Company owing to the
Selling Parties listed on Schedule 1 hereto (the "Intercompany Indebtedness")
is not paid in full as of the Effective Time, Parent shall cause the
Intercompany Indebtedness to be paid in full immediately after the Effective
Time but no later than twenty-four (24) hours thereafter. Additionally, to
the extent Stockholder and/or ACX, as the case may be, attempt to obtain
releases from the guaranties of obligations of the Company listed on Exhibit
D hereto (the "Guaranties"), Parent shall offer to be substituted as
guarantor under the Guaranties, in the place and stead of Stockholder or ACX,
as the case may be, and shall use best commercial efforts to effect such
substitution.
SECTION 9. REPRESENTATIONS AND WARRANTIES OF EACH SELLING PARTY.
Each Selling Party hereby represents and warrants to Parent as to
itself (and as to Photon Subsidiary) as follows:
9.1 AUTHORIZATION, ETC. It has the absolute and unrestricted right,
power, authority and capacity to execute and deliver this Agreement, the
Assignment and its Proxy and to perform its obligations hereunder and
thereunder. The execution and delivery of this Agreement, the Assignment and
its Proxy have been duly and validly authorized and approved by its Board of
Directors and its stockholders to the extent required by applicable law and
its Certificate or Articles of Incorporation, bylaws or other charter
documents and no other corporate proceedings are necessary to authorize this
Agreement, the Assignment or its Proxy. This Agreement, the Assignment and
its Proxy have been duly and validly executed and delivered by it and
constitute its legal, valid and binding obligations, enforceable against it
in accordance with their terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules
of law governing specific performance, injunctive relief and other equitable
remedies. Photon Subsidiary has the absolute and unrestricted right, power,
authority and capacity to execute and deliver the Assignment and to
<PAGE> D-7
perform its obligations thereunder. The execution and delivery of the
Assignment has been duly and validly authorized and approved by Photon
Subsidiary's Board of Directors and its stockholders to the extent required by
applicable law. The Assignment has been duly and validly executed and delivered
by Photon Subsidiary and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
9.2 NO CONFLICTS OR CONSENTS.
(a) The execution and delivery of this Agreement, the
Assignment and its Proxy by it do not, and the performance of this Agreement,
the Assignment and its Proxy by it will not: (i) conflict with or violate any
law, rule, regulation, order, decree or judgment applicable to it or by which
it or its properties is or may be bound or affected; or (ii) result in or
constitute (with or without notice or lapse of time) any breach of or default
under, or give to any other Person (with or without notice or lapse of time)
any right of termination, amendment, acceleration or cancellation of, or
result (with or without notice or lapse of time) in the creation of any
encumbrance or restriction on any of the Subject Securities or the Solar
Electric Assets pursuant to, any contract to which it is a party or by which
it or any of its affiliates or properties is or may be bound or affected,
except in the case of clause (i) or (ii) above where any of such events would
not have a material adverse effect on it or otherwise impair its ability to
satisfy its obligations hereunder.
(b) The execution and delivery of the Assignment by Photon
Subsidiary do not, and the performance of the Assignment by it will not: (i)
conflict with or violate any law, rule, regulation, order, decree or judgment
applicable to it or by which it or its properties is or may be bound or
affected; or (ii) result in or constitute (with or without notice or lapse of
time) any breach of or default under, or give to any other Person (with or
without notice or lapse of time) any right of termination, amendment,
acceleration or cancellation of, or result (with or without notice or lapse
of time) in the creation of any encumbrance or restriction on any of the
Solar Electric Assets pursuant to, any contract to which it is a party or by
which it or any of its affiliates or properties is or may be bound or
affected, except in the case of clause (i) or (ii) above where any of such
events would not have a material adverse effect on it or otherwise impair its
ability to satisfy its obligations hereunder.
(c) The execution and delivery of this Agreement, the
Assignment and its Proxy by it do not, and the performance of this Agreement,
the Assignment and its Proxy by it will not, require any consent or approval
of any Person.
(d) The execution and delivery of the Assignment by Photon
Subsidiary will not when executed, and the performance of the Assignment by
it will not, require any consent or approval of any Person.
9.3 TITLE TO SECURITIES. As of the date of this Agreement: (a)
Stockholder holds of record 8,399,327 shares of Company Common Stock, free
and clear of all liens, pledges, claims, charges, security interests,
options, rights of first refusal, agreements, limitations on the
Stockholder's voting rights, or other encumbrances of any kind and
Stockholder is not the
<PAGE> D-8
"beneficial owner" (as such term is used in Section 1(d)) of any additional
shares of Company Common Stock; (b) ACX holds of record 530,052 shares of
Company Common Stock and is the "beneficial owner" (as such term is used in
Section 1(d)) of an additional 500,000 shares of Company Common Stock, free and
clear of all liens, pledges, claims, charges, security interests, options,
rights of first refusal, agreements, limitations on ACX's voting rights, or
other encumbrances of any kind; (c) neither Selling Party owns any options,
warrants or other rights to acquire shares of Company Common Stock (by purchase,
conversion or otherwise); and (d) neither Selling Party directly or indirectly
Owns any shares of capital stock or other securities of the Company other than
the those specified in this Section 9.3.
9.4 TITLE TO SOLAR ELECTRIC ASSETS. Each Selling Party and Photon
Subsidiary will have good and marketable title to those Solar Electric Assets
which it is assigning to the Company pursuant to the Assignment when those
Solar Electric Assets are assigned, free and clear of all liens, other than
Permitted Liens, and it has not granted any license or distribution rights
with respect to any of its Solar Electric Assets to any third-party which
will be in existence at the time of the assignment of such Solar Electric
Assets.
9.5 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Agreement are accurate in all material respects as of the
date of this Agreement, will be accurate in all material respects at all
times through the Expiration Date and will be accurate in all material
respects as of the date of the consummation of the Merger as if made on that
date.
SECTION 10. INDEMNIFICATION AND RELEASE.
10.1 Subject to the limitations set forth in Sections 10.4 and 10.5
below, ACX shall, from and after the Effective Time, indemnify, defend and
hold harmless (a) the Company, (b) each of the Company's stockholders,
directors, officers, employees, agents, attorneys and representatives, and
(c) solely as to clause (iv) below, the persons currently serving as trustees
of the Company's 401(k) Plan, from and against any and all Losses (as
hereinafter defined) which may be incurred or suffered by any such party and
which may arise out of or result from (i) any breach of any representation or
warranty contained in this Agreement, or the failure of any of the Selling
Parties or Photon Subsidiary to observe, perform or abide by, or any other
breach of, any restriction, covenant, obligation or other provision contained
this Agreement, the Assignment or in the Proxies, (ii) any breach by the
Company of any representation or warranty contained in the Merger Agreement
or in any other Company Document solely to the extent any such representation
or warranty applies to either Solartec Sociedad Anonima, a corporation
organized under the laws of the Republic of Argentina and a wholly owned
subsidiary of the Company (the "Argentinean Sub") or Golden Genesis do Brasil
Energia Renovavel, Ltda., a corporation organized under the laws of the
Federative Republic of Brazil and a wholly owned subsidiary of the Company
(the "Brazilian Sub"), (iii) any breach by the Selling Parties of any
representation or warranty contained in that certain Share Purchase
Agreement, dated as of September 4, 1998, among the Selling Parties and the
Company (the "1998 Share Purchase Agreement"), or (iv) the failure of the
Company's 401(k) Plan to satisfy the qualification requirements of Sections
401(a) and 501(a) of the Internal Revenue Code of 1986, as amended, and any
remedial action required to satisfy such requirements (whether or not
initiated by the Internal Revenue Service or the Company). As used herein,
"Losses" shall mean all damages, awards, judgments, assessments,
<PAGE> D-9
fines, sanctions, penalties, charges, costs, expenses, payments, diminutions in
value and other losses, however suffered or characterized, all interest
thereon, all costs and expenses of investigating any claim, lawsuit or
arbitration and any appeal therefrom, all actual attorneys', accountants'
investment bankers' and expert witness' fees incurred in connection
therewith, whether or not such claim, lawsuit or arbitration is ultimately
defeated and, subject to the other provisions of this Section 10, all amounts
paid incident to any compromise or settlement of any such claim, lawsuit or
arbitration.
10.2 If any party (the "Indemnified Party") receives notice of any
claim or other commencement of any action or proceeding with respect to which
ACX is obligated to provide indemnification pursuant to Section 10.1, the
Indemnified Party shall promptly give the ACX written notice thereof, which
notice shall specify in reasonable detail, if known, the amount or an
estimate of the amount of the liability arising therefrom and the basis of
the claim. Such notice shall be a condition precedent to any liability of
the ACX for indemnification hereunder, but the failure of the Indemnified
Party to give prompt notice of a claim shall not adversely affect the
Indemnified Party's right to indemnification hereunder unless the defense of
that claim is materially prejudiced by such failure. The Indemnified Party
shall not settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written consent of
the ACX (which shall not be unreasonably withheld or delayed) unless suit
shall have been instituted against it and the ACX shall not have taken
control of such suit after notification thereof as provided in Section 10.3.
10.3 In connection with any claim giving rise to indemnity hereunder
resulting from or arising out of any claim or legal proceeding by a Person
who is not a party to this Agreement, the ACX at its sole cost and expense
may, upon written notice to the Indemnified Party, assume the defense of any
such claim or legal proceeding if it provides assurances, reasonably
satisfactory to the Indemnified Party, that it will be financially able to
satisfy such claims in full if the same are decided adversely. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense;
provided, however, that if the Indemnified Party, in its sole discretion,
determines that there exists a conflict of interest between the ACX (or any
constituent party thereof) and the Indemnified Party, the Indemnified Party
(or any constituent party thereof) shall have the right to engage separate
counsel, the reasonable costs and expenses of which shall be paid by the ACX,
but in no event shall ACX be liable for the costs and expenses of more than
one such separate counsel. If the ACX assumes the defense of any such claim
or legal proceeding, the ACX shall take all steps necessary to pursue the
resolution thereof in a prompt and diligent manner. The ACX shall be
entitled to consent to a settlement of, or the stipulation of any judgment
arising from, any such claim or legal proceeding, with the consent of the
Indemnified Party, which consent shall not be unreasonably withheld or
delayed; provided, however, that no such consent shall be required from the
Indemnified Party if (i) the ACX pays or causes to be paid all Losses arising
out of such settlement or judgment concurrently with the effectiveness
thereof (as well as all other Losses theretofore incurred by the Indemnified
Party which then remain unpaid or unreimbursed), (ii) in the case of a
settlement, the settlement is conditioned upon a complete release by the
claimant of the Indemnified Party and (iii) such settlement or judgment does
not require the encumbrance of any asset of the Indemnified Party or impose
any restriction upon its conduct of business
<PAGE> D-10
10.4 Notwithstanding anything to the contrary stated in the Merger
Agreement or the 1998 Share Purchase Agreement, each of the following
representations and warranties (the "Specified Representations and
Warranties")
and the covenant to indemnify with respect to the matters set
forth in clause (iv) of Section 10.1 shall survive the Closing and shall
thereafter terminate and expire on the first (1st) anniversary of the Closing
Date, unless before such date, an Indemnified Party has delivered to ACX a
written notice of a claim with respect thereto: (i) the representations and
warranties of the Selling Parties contained in this Agreement, (ii) the
representations and warranties of the Company contained in the Merger
Agreement or any Company Document, in any case, relating to either the
Argentinean Sub or the Brazilian Sub, and (iii) the representations and
warranties of the Selling Parties in the 1998 Share Purchase Agreement.
10.5 The aggregate amount of all claims arising under clauses (ii),
(iii) and (iv) of Section 10.1 hereof shall not exceed $250,000.
10.6 In consideration of the payment to each Selling Party at the
Closing, effective as of the Effective Time, the Selling Parties jointly and
severally release and discharge the Company and each of the Subsidiaries, and
each of their respective shareholders, affiliates, officers, directors,
employees, agents and attorneys, from any and all claims, contentions,
demands, causes of action at law or in equity, debts, liens, agreements,
notes, obligations or liabilities of any nature, character or description
whatsoever, whether known or unknown, which they or either of them may now or
hereafter have against any such Persons by reason of any matter, event, thing
or state of facts occurring, arising, done, omitted or suffered to be done
prior to the Effective Time, other than any obligations of the Company to
either of them with respect to any Intercompany Indebtedness not paid in full
as of the Effective Time.
SECTION 11. ADDITIONAL COVENANTS OF THE SELLING PARTIES.
11.1 FURTHER ASSURANCES. From time to time and without additional
consideration, each of the Selling Parties shall (at its sole expense)
execute and deliver, or cause to be executed and delivered, such additional
transfers, assignments, endorsements, proxies, consents and other
instruments, and shall (at its sole expense) take such further actions, as
Parent may reasonably request for the purpose of carrying out and furthering
the intent of this Agreement.
11.2 LEGEND. Immediately after the execution of this Agreement (and
from time to time upon the acquisition by either Selling Party of Ownership
of any shares of Company Common Stock prior to the Expiration Date), each
Selling Party shall ensure that each certificate evidencing any outstanding
shares of Company Common Stock or other securities of the Company Owned by
such Selling Party and which are held in certificated form bears a legend in
the following form:
THE SECURITY OR SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE
WITH THE PROVISIONS OF THE OPTION, VOTING AND INDEMNIFICATION AGREEMENT DATED
AS OF MAY 26, 1999, AMONG ACX TECHNOLOGIES, INC., GOLDEN TECHNOLOGIES
COMPANY, INC. AND KYOCERA
<PAGE> D-11
INTERNATIONAL, INC., A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF GOLDEN GENESIS COMPANY.
SECTION 12. MISCELLANEOUS.
12.1 EXPENSES. Each party will pay that party's costs and expenses,
including attorney and accountant fees, in connection with this Agreement and
the transactions contemplated by this Agreement.
12.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Subject
to Section 10.4, all representations, warranties, covenants and obligations
of each Selling Party contained in this Agreement shall survive the
Expiration Date and the Closing.
12.3 INDEPENDENCE OF OBLIGATIONS. The covenants and obligations of
the Selling Parties set forth in this Agreement shall be construed as
independent of any other agreement or arrangement between any Selling Party,
on the one hand, and the Company or Parent, on the other. The existence of
any claim or cause of action by any Selling Party against the Company or
Parent shall not constitute a defense to the enforcement of any of such
covenants or obligations against such Selling Party.
12.4 SPECIFIC PERFORMANCE. Each Selling Party agrees that in the
event of any breach or threatened breach by it of any covenant, obligation or
other provision contained in this Agreement, Parent shall be entitled (in
addition to any other remedy that may be available to Parent) to: (a) a
decree or order of specific performance or mandamus to enforce the observance
and performance of such covenant, obligation or other provision; and (b) an
injunction restraining such breach or threatened breach. Each Selling Party
further agrees that neither Parent nor any other Person shall be required to
obtain, furnish or post any bond or similar instrument in connection with or
as a condition to obtaining any remedy referred to in this Section 12.4, and
it irrevocably waives any right it may have to require the obtaining,
furnishing or posting of any such bond or similar instrument.
12.5 NOTICES. All notices and other communications hereunder shall be
in writing and shall be delivered personally, by FedEx or other nationally
recognized next-day courier, telecopied with confirmation of receipt, or
mailed first class, postage prepaid, by certified mail, return receipt
requested, to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice; provided that
notices of a change of address shall be effective only upon receipt thereof)
All notices, requests and other communications shall be deemed given on the
date of actual receipt or delivery as evidenced by written receipt,
acknowledgement or other evidence of actual receipt or delivery to the
address specified below. In case of service by telecopy, a copy of such
notice shall be personally delivered or sent by certified mail, in the manner
set forth above, within three (3) business days thereafter.
<PAGE> D-12
If to Parent:
Kyocera International, Inc.
8611 Balboa Avenue
San Diego, California 92123-1580
Attention: President
Fax No.: (619) 492-1456
With a copy to:
Loeb & Loeb LLP
1000 Wilshire Boulevard, Suite 1800
Los Angeles, California 90017
Attention: Kenneth R. Benbassat, Esq.
Fax No.: (213) 688-3460
If to Stockholder or ACX, to:
ACX Technologies, Inc.
16000 Table Mountain Parkway
Golden, Colorado 80403
Attention: Jed Burnham
Fax No.: (303) 271-7055
With a copy to:
ACX Technologies, Inc.
16000 Table Mountain Parkway
Golden, Colorado 80403
Attention: Jill B.W. Sisson, Esq.
Fax No.: (303) 271-7055
12.6 SEVERABILITY. If any provision of this Agreement or any part of
any such provision is held under any circumstances to be invalid or
unenforceable in any jurisdiction, then (a) such provision or part thereof
shall, with respect to such circumstances and in such jurisdiction, be deemed
amended to conform to applicable laws so as to be valid and enforceable to
the fullest possible extent, (b) the invalidity or unenforceability of such
provision or part thereof under such circumstances and in such jurisdiction
shall not affect the validity or enforceability of such provision or part
thereof under any other circumstances or in any other jurisdiction, and (c)
the invalidity or unenforceability of such provision or part thereof shall
not affect the validity or enforceability of the remainder of such provision
or the validity or enforceability of any other provision of this Agreement.
Each provision of this Agreement is separable from every other provision of
this Agreement, and each part of each provision of this Agreement is
separable from every other part of such provision.
12.7 APPLICABLE LAW; JURISDICTION. THIS AGREEMENT IS MADE UNDER, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN,
WITHOUT GIVING EFFECT TO
<PAGE> D-13
PRINCIPLES OF CONFLICTS OF LAW. In any action between the parties hereto,
whether arising out of this Agreement or otherwise: (a) each of the parties
irrevocably and unconditionally consents and submits to the exclusive
jurisdiction and venue of the state and federal courts located in the State of
Delaware; (b) if any such action is commenced in a state court, then, subject to
applicable law, no party shall object to the removal of such action to any
federal court located in Delaware; (c) each of the parties irrevocably waives
the right to trial by jury; and (d) each of the parties irrevocably consents to
service of process by first class certified mail, return receipt requested,
postage prepaid, to the address at which such party is to receive notice in
accordance with Section 12.5.
12.8 WAIVER. No failure on the part of Parent to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of Parent in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy. Parent shall not be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of Parent;
and any such waiver shall not be applicable or have any effect except in the
specific instance in which it is given.
12.9 ATTORNEYS' FEES. If any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement is brought against any Selling Party, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
12.10 CAPTIONS. The captions contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
12.11 ENTIRE AGREEMENT. This Agreement, the Assignment and the Proxies
set forth the entire understanding of Parent and the Selling Parties relating
to the subject matter hereof and thereof and supersede all other prior
agreements and understandings between Parent and any Selling Party relating
to the subject matter hereof and thereof.
12.12 NON-EXCLUSIVITY. The rights and remedies of Parent under this
Agreement are not exclusive of or limited by any other rights or remedies
which it may have, whether at law, in equity, by contract or otherwise, all
of which shall be cumulative (and not alternative). Without limiting the
generality of the foregoing, the rights and remedies of Parent under this
Agreement, and the obligations and liabilities of each Selling Party under
this Agreement, are in addition to their respective rights, remedies,
obligations and liabilities under common law requirements and under all
applicable statutes, rules and regulations. Nothing in this Agreement shall
limit any Selling Party's obligations, or the rights or remedies of Parent,
under the Assignment or any Proxy; and nothing in the Assignment or any Proxy
shall limit any Selling Party's obligations, or any of the rights or remedies
of Parent, under this Agreement.
<PAGE> D-14
12.13 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of Parent and the Selling Parties.
12.14 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of
the interests or obligations hereunder may be assigned or delegated by any
Selling Party, and any attempted or purported assignment or delegation of any
of such interests or obligations shall be void. Subject to the preceding
sentence, this Agreement shall be binding upon each Selling Party and its
successors and assigns, and shall inure to the benefit of Parent and its
successors and assigns. Nothing in this Agreement is intended to confer on
any Person (other than Parent and its successors and assigns) any rights or
remedies of any nature.
12.15 THIRD-PARTY BENEFICIARY. The Company and the trustees of the
Company's 401(k) Plan are intended to be a third-party beneficiary of the
agreements of the parties hereto set forth in Sections 7 and 10 hereof.
12.16 COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument.
12.17 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."
(d) Except as otherwise indicated, all references in this
Agreement to "Sections" and "Exhibits" are intended to refer to Sections of
this Agreement and Exhibits to this Agreement.
<PAGE> D-15
IN WITNESS WHEREOF, Parent and the Selling Parties have caused this
Agreement to be executed as of the date first written above.
PARENT:
Kyocera International, Inc.
By:
Name: Rodney N. Lanthorne
Title: President
STOCKHOLDER:
Golden Technologies Company, Inc.
By:
Name:
Title:
ACX Technologies, Inc.
By:
Name:
Title:
<PAGE> D-16
EXHIBIT A (to the Option, Voting and Indemnification Agreement)
FORM OF IRREVOCABLE PROXY
The undersigned stockholder of Golden Genesis Company, a Delaware
corporation (the "Company"), hereby irrevocably (to the fullest extent
permitted by law) appoints and constitutes Kyocera International, Inc., a
California corporation ("Parent"), the attorney and proxy of the undersigned
with full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to (i) the ______________ shares of common
stock of the Company owned of record by the undersigned as of the date of
this proxy, and (ii) any and all other shares of capital stock (whether
common or preferred) of the Company which the undersigned may acquire on or
after the date hereof. (The shares of the capital stock of the Company
referred to in clauses "(i)" and "(ii)" of the immediately preceding sentence
are collectively referred to as the "Shares.") Upon the execution hereof,
all prior proxies given by the undersigned with respect to any of the Shares
are hereby revoked, and the undersigned agrees that no subsequent proxies
will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest, is granted in
connection with the execution and delivery of the Voting and Indemnification
Agreement, of even date herewith, among Parent, [ACX Technologies, Inc.]
[Golden Technologies Company, Inc.] and the undersigned (the "Voting
Agreement") and is granted in consideration of Parent entering into the
Agreement and Plan of Merger, of even date herewith, among Parent, GGC
Acquisition Company ("Merger Sub") and the Company (the "Merger Agreement").
The attorney and proxy named above (and its successors) will be
empowered, and may exercise this proxy, to vote the Shares at any meeting of
the stockholders of the Company, however called, and at every adjournment or
postponement thereof, or in connection with any solicitation of written
consents from stockholders of the Company (i) FOR the approval and adoption
of the Merger Agreement and the approval of the merger contemplated thereby
(the "Merger"), and FOR each of the other actions contemplated by the Merger
Agreement, and (ii) AGAINST any action or agreement that would result in a
breach in any material respect of any representation, warranty or covenant of
the Company in the Merger Agreement, and AGAINST any action or agreement that
would impede, interfere with, delay, postpone, attempt to discourage the
Merger or otherwise materially adversely affect the Merger, including,
without limitation, any action or agreement with respect to an Acquisition
Transaction (as defined in the Merger Agreement) with any person or entity
(other than Parent or Merger Sub). The undersigned may vote the Shares on
all other matters.
This proxy shall be binding upon the permitted successors and assigns
of the undersigned.
If any provision of this proxy or any part of any such provision is
held under any circumstances to be invalid or unenforceable in any
jurisdiction, then (a) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part
thereof under such circumstances and in
<PAGE> D-17
such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction, and (c) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the remainder of
such provision or the validity or enforceability of any other provision of this
proxy. Each provision of this proxy is separable from every other provision of
this proxy, and each part of each provision of this proxy is separable from
every other part of such provision.
This proxy shall terminate upon the valid termination of the Voting
Agreement.
Dated: _______________, 1999
[Golden Technologies Company, Inc.]
[ACX Technologies, Inc.]
By:
Name:
Title:
<PAGE> D-18
EXHIBIT B
FORM OF BILL OF SALE AND ASSIGNMENT
This Bill of Sale and Assignment is made and entered into this ____ day
of ______________, 1999, by and among ACX Technologies, Inc., a Colorado
corporation ("ACX"), Golden Technologies Company, Inc., a Colorado
corporation ("GTC"), Golden International, Inc. a Colorado corporation
(collectively "Assignors") and Golden Genesis Company, a Delaware corporation
(hereinafter "Assignee") and is made with reference to the following:
A. Concurrently herewith, Kyocera International, Inc., a California
corporation ("Parent"), GGC Acquisition Company, a Delaware corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Assignee, more than
fifty percent of whose outstanding shares of capital stock are held by GTC,
are entering into an Agreement and Plan of Merger (as amended from time to
time, the "Merger Agreement"), pursuant to which Merger Sub will be merged
with and into Assignee (the "Merger").
B. In order to induce Parent to enter into the Merger Agreement,
concurrently herewith, ACX, GTC and Parent are entering into an Option,
Voting and Indemnification Agreement (the "Subject Agreement"), which
provides, among other things, for the assignment by Assignors to Assignee of
certain assets of Assignors hereinbelow described.
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
ASSIGNMENT
For valuable consideration, the receipt and sufficiency of which
Assignors hereby acknowledge, each Assignor, pursuant to and in compliance
with the Subject Agreement, does, effective as of the Effective Time, hereby
sell, convey, transfer, assign and deliver to Assignee, and Assignee does,
effective as of the Effective Time, hereby accept from each Assignor, all of
such Assignor's right, title and interest in and to all of the following
interests and assets (the "Transferred Assets"):
All Intellectual Property (as defined below) owned by such Assignor
(whether or not developed by such Assignor) for use in (a) solar electric
applications, and (b) the manufacture of CdTe thin film modules (or otherwise
relating thereto) other than any such Intellectual Property in which PE
Limited Liability Company has an interest. As used herein, "Intellectual
Property" shall mean all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all
patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, trademarks, service marks, trade dress, logos, trade
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, copyrightable works, all copyrights and all applications,
registrations and
<PAGE> D-19
renewals in connection therewith, mask works and all applications, registrations
and renewals in connection therewith, trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals),
proprietary software, proprietary rights and copies and tangible embodiments
thereof (in whatever form or medium).TO HAVE AND TO HOLD all such interests and
assets hereby assigned, transferred and conveyed unto Assignee, its successors
and assigns, to its and their own use and behalf forever.
ARTICLE 2
FURTHER ASSURANCES
Assignors shall, as promptly as practicable after the date hereof,
prepare a list describing in detail all Transferred Assets (including,
without limitation, all registrations thereof or applications to register
such Transferred Assets). Additionally, at any time and from time to time
after the date hereof, upon the request of Assignee, execute, acknowledge and
deliver all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances, and take all such further actions, as
shall be necessary or desirable to give effect to the transactions hereby
consummated and to collect and reduce to the possession of Assignee any and
all of the interests and assets hereby transferred to Assignee. Without
limiting the generality of the foregoing, each Assignor hereby appoints
Assignee, and its successors and assigns, the true and lawful attorney of
such Assignor, in the name of Assignee or in the name of such Assignor but
for the benefit and at the expense of Assignee, to demand and receive any and
all interests and assets hereby transferred; to give releases and
acquittances for or in respect of the same or any part thereof; to endorse,
collect and deposit any checks, drafts or other instruments payable to such
Assignor which constitute accounts receivable hereby assigned or relate to
payments for goods and/or services provided by such Assignor or Assignee in
connection with the accounts or rights under contract hereby assigned; to
institute and prosecute, in the name of such Assignor or otherwise, any and
all proceedings at law, in equity or otherwise, which Assignee, or its
successors and assigns, may deem necessary or advisable to collect, assert or
enforce any claim, right, title, debt or account hereby assigned; and to
defend and compromise any and all actions, suits or proceedings in respect of
any of the interests and assets hereby assigned that Assignee, or its
successors or assigns, shall deem necessary or advisable. Assignor hereby
declares that the foregoing powers are coupled with an interest and shall be
irrevocable.
ARTICLE 3
TERMINATION
This Bill of Sale and Assignment shall automatically terminate and be
of no further force or effect upon the valid termination of the Merger
Agreement.
<PAGE> D-20
ARTICLE 4
SUCCESSORS AND ASSIGNS
This Instrument and the covenants and agreements herein contained shall
inure to the benefit of Assignee and shall bind each Assignor and their
respective successors and assigns.
<PAGE> D-21
IN WITNESS WHEREOF, the parties hereto have executed this Bill of Sale
and Assignment as of the day and year first hereinabove written.
"Assignors"
ACX Technologies, Inc.
By:
Its:
Golden Technologies Company, Inc.
By:
Its:
Golden International, Inc.
By:
Its:
"Assignee"
Golden Genesis Company
By:
Its:
<PAGE> E
EXHIBIT E
Annual Report on Form 10-K the year ended December 31, 1998
<PAGE> E-i
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to SECTION 13 OR 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
OR
[ ] Transition Report Under Section 13 OR 15(d)
of the Securities Exchange Act of 1934
Commission File No. 0-12807
Golden Genesis Company
(Exact name of registrant as specified in its charter)
Delaware 86-0411983
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4585 McIntyre St. Golden, Colorado 80403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303)271-7465
Securities Registered under Section 12(b) of the Exchange Act:
Not Applicable
Securities Registered under Section 12(g) of the Exchange Act:
common stock, $0.10 par value
Title of Class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months and (2) has been
subject to such filing requirements for the past 90 days. Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
As of March 5, 1999, the aggregate market value of the 8,223,569 shares of
Common Stock of the Registrant issued and outstanding on such date based on the
average of the bid and ask prices as represented by the Nasdaq SmallCap Market,
excluding shares held by all affiliates of the Registrant, was approximately
$11,948,846.
Number of shares of Common Stock outstanding at March 5, 1999: 17,152,948.
<PAGE> E-ii
TABLE OF CONTENTS
PART I Page
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of
Security Holders 7
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 7a. Quantitative and Qualitative Disclosure About
Market Risk 15
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure 42
PART III
Item 10. Directors and Executive Officers of the Registrant 42
Item 11. Executive Compensation 45
Item 12. Security Ownership of Certain Beneficial
Owners and Management 47
Item 13. Certain Relationships and Related Transactions 49
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 51
<PAGE> E-1
PART I
Item 1. Business
Company Background
Golden Genesis Company, directly and through its wholly owned subsidiaries
(collectively, the "Company"), is engaged primarily in the development,
manufacturing and marketing of photovoltaic (solar electric) power systems and
related products.
The Company was incorporated as Photocomm, Inc. in 1981 under the laws of the
State of Arizona. On April 1, 1998, Photocomm, Inc. began doing business as
("dba") Golden Genesis Company. On May 27, 1998, the Company's shareholders
voted to reincorporate in Delaware under the name Golden Genesis Company.
On November 21, 1996, the Company entered into a new financial and strategic
agreement with Golden Technologies, Inc. ("GTC"), a wholly owned subsidiary of
ACX Technologies, Inc. ("ACX"), and New World Power Corporation ("NWP") (the
"Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, GTC
acquired NWP's 44% interest in the Company, and NWP and the Company terminated
all of their respective rights and options pursuant to prior agreements. GTC
also acquired from the Company 1,000,000 shares of newly issued common stock,
par value $0.10 per share (the "Common Stock"), at a purchase price of $2.75
per share.
In conjunction with the Stock Purchase Agreement, GTC also acquired 450,000
shares of common stock from Programmed Land, Inc., 450,000 shares of common
stock from Robert R. Kauffman, the Company's former President, 50,000 shares of
common stock from Myron Anduri, one of the Company's Vice Presidents, and
50,000 shares of common stock from Thomas LaVoy, the Company's former Chief
Financial Officer, in each case at a purchase price of $2.75 per share. As a
result of the Stock Purchase Agreement and the transactions contemplated
thereby, at March 5, 1999 GTC held approximately 52% of the outstanding common
stock and had the voting rights to an additional 3% of the outstanding common
stock. The Company granted demand registration rights to GTC covering the
shares purchased from NWP, the Company and all other shares they may own,
provided that GTC shall pay 50% of the costs of any demand registration.
In addition, the Stock Purchase Agreement granted GTC the preemptive right to
purchase its proportionate share of all future equity offerings of the Company
provided that GTC owns at least 20% of the shares of the issued and outstanding
stock of the Company or at least 6,000,000 shares. The Stock Purchase
Agreement also permits GTC to designate three members of the Company's six
member Board of Directors.
In accordance with the designation rights granted to GTC pursuant to the Stock
Purchase Agreement, Jeff Coors, John Coors and Jed Burnham were appointed to
the Board of Directors of the Company on November 21, 1996, replacing three
incumbent directors. On January 31, 1997 the Company's Board of Directors
terminated Robert R. Kauffman, President and Thomas LaVoy, Chief Financial
Officer. The Board replaced these executives with John Coors, President and
Jeffrey Brines, Chief Financial Officer.
On February 3, 1997, upon recommendation of the Audit Committee, the Company's
Board of Directors changed its fiscal year end to December 31 from August 31.
On July 2, 1997, the Company acquired certain assets, customer contracts and
sales representative agreements of Integrated Power Corporation, Inc. ("IPC").
IPC specializes in highly engineered alternative power systems incorporating
solar, wind and diesel generators. IPC has historically focused on the
industrial markets in Northern Africa and the Middle East. The Company believes
the addition of these distribution channels will better enable it to penetrate
these active markets. The Company paid $450,000 in cash to acquire these
assets.
On January 23, 1998 the Company acquired Silicon Energy Corporation, a
California corporation doing business as Utility Power Group. Utility Power
Group functions as a value added systems integrator of solar electric products,
specializing in on-grid and off-grid solar and hybrid power systems,
headquartered in Chatsworth, California. The acquisition was structured as a
merger, with Utility Power Group, Inc. ("UPG"), a wholly owned subsidiary of
the Company, as the surviving corporation. The aggregate consideration paid by
the Company in connection with this merger was $1,250,000. The Company issued
400,000 shares of its common stock valued at $650,000 and paid $600,000 in
cash.
<PAGE> E-2
On July 21, 1998 the Company acquired Remote Power, Inc. ("RPI"), a Colorado
corporation. RPI, headquartered in Westminster, Colorado, is a distributor and
systems integrator of solar electric systems for customers primarily within the
oil and gas and railroad industries. The aggregate consideration paid by the
Company in connection with this purchase was $490,000. The Company issued
150,000 shares of its common stock valued at $370,000 and paid $120,000 in
cash.
On September 4, 1998 the Company acquired Golden Genesis do Brazil Energy
Renovavel, Ltda. ("GGB"), a corporation organized under the laws of the
Federative Republic of Brazil. GGB is a leader in solar water pumping and
remote power applications in Brazil. The acquisition was structured as a stock
purchase with GGB becoming a wholly owned subsidiary of the Company. GGB was
purchased from GTC, the Company's majority shareholder and ACX, GTC's parent
corporation. The purchase was accounted for as a transfer of the assets and
liabilities of GGB from GTC and ACX to the Company. At the date of transfer
GGB had net liabilities of approximately $120,000. The aggregate consideration
paid, in addition to net liabilities assumed, by the Company in connection with
this purchase was $5,000.
On September 4, 1998 the Company acquired Solartec Sociedad Anonima
("Solartec"), a corporation organized under the laws of the Republic of
Argentina. Solartec is Argentina's leading manufacturer, system integrator, and
wholesaler of solar electric systems and related equipment. The acquisition was
structured as a stock purchase with Solartec becoming a wholly owned subsidiary
of the Company. Solartec was purchased from GTC and ACX. The purchase was
accounted for as a transfer of the net assets and liabilities of Solartec from
GTC and ACX to the Company. The aggregate consideration paid by the Company in
connection with this purchase was a one-year note payable to GTC in the amount
of $3,600,000. On September 22, 1998 the Board of Directors of the Company
received an opinion from Hanifen, Imhoff Inc., Investment Bankers stating that
the total consideration paid by the Company for Solartec was fair to the
holders of GGC common stock.
During 1998 the Company completed plans to centralize operations, warehousing
and administration in Scottsdale, Arizona and reorganize manufacturing by
moving specialty module manufacturing to Argentina and pump manufacturing to
the new Scottsdale facility. This reorganization was possible due to the
capabilities of Solartec (the new subsidiary in Argentina) to manufacture the
specialty modules. The main objective of the plans is to reduce costs and
become more efficient. The less efficient or higher cost locations were closed
(Texas, Tucson and Safford) and their operations moved to the Scottsdale
facility. As a result of the plan, the Company's former Scottsdale facility did
not have enough space to support the continued growth of the Company.
Therefore, the Company moved its Scottsdale operation to a new leased facility
on April 1, 1998 and sold the former facility, on September 16, 1998. The
Company has committed to a lease on the new facility with a lease term through
February 2008.
Solar Electric Industry - Background
Solar electric power generation is a high technology industry using advanced
semiconductor devices that convert sunlight directly to electricity.
The first applications of solar electric technology were in space satellite
power systems in the 1950's. These early solar electric systems utilized in
the United States space program were extremely expensive, but their reliability
and elimination of conventional fuel proved ideal for this remote application.
As a potential earth-based alternative energy source, solar electric systems
offered the additional benefits of silent, pollution-free power generation,
requiring no power lines and virtually no maintenance. Although prohibitively
expensive for commercial use when first developed, the potential of solar
electric technology as an ideal energy alternative generated worldwide interest
and increasing levels of research and development investments, particularly in
the U.S. and Japan. In the early 1970's, the dramatic increases in oil prices
and the accelerated search for energy alternatives spurred investment in solar
electric technologies, particularly by the large oil companies. By the early
1980's, dramatic cost reductions and greatly improved system performance set
the stage for the commencement of the market development phase of this emerging
technology in a wide range of commercial applications throughout the world.
Technology
The fundamental element of a solar electric system is the semiconductor device,
or cell, which generates a variable electric current that is directly
proportionate to the quantity of
<PAGE> E-3
sunlight energy absorbed. Solar cells are
electrically interconnected to form a module unit in which the cell groupings
are formatted to achieve desired module electrical power specifications, such
as voltage and current. The solar module is the power-generating component of
a complete solar electric system. Additional components of these systems are
collectively termed balance of system items, and typically comprise such
products as electronic controllers, batteries for energy storage, electrical
fuses, switches, wiring and metal structures for the modules, and the actual
device to be powered such as lights, motors and other electrical devices.
Since the initial use of expensive solar electric power systems in the space
program, the major obstacle to broader commercial application has been the high
cost of the solar cells or modules. During the last decade an estimated one
billion dollars has been invested worldwide by governments and corporations in
various research and development efforts targeted to achieve cost reductions in
manufacturing solar electric modules. These continuing efforts have resulted
in current module prices that are approximately 30% of the pricing level of ten
years ago.
Industry Structure
As a result of the extensive capital requirements and research expenditures
necessary to design, develop and produce solar electric modules, the
manufacturing side of the market has been dominated by large, multi-national
oil and electronics companies in the United States, Japan and Europe. Three
companies are the acknowledged world leaders in module manufacturing technology
and market share: Siemens Solar Industries ("Siemens Solar"), a division of
Siemens A.G.; Solarex Corporation ("Solarex"), a jointly held venture of Amoco
Corporation/BP Solar International ("BP Solar"), a subsidiary of British
Petroleum Company p.l.c. and Enron Corp.; and Kyocera Corporation ("Kyocera")
in Japan. Other major international module manufacturers are Sharp
Corporation, Sanyo Corporation, and United Solar Systems Corp. ("United
Solar"). British Petroleum Company and Amoco Corporation merged in 1998,
bringing BP Solar into the Solarex joint venture with Enron Corp.
The major module manufacturers primarily market their product lines through a
network of distributors and dealers who resell modules, with complementary
components, to the end-user. The larger distributors in this marketing channel
are known as systems integrators who provide design, engineering and technical
service to their customers. In the past two years the module manufacturers
have begun to provide systems integration directly for end users.
Markets and Products
The market for the Company's solar electric systems is primarily in remote area
applications, generally defined as those electric power applications where
access to utility power is relatively expensive, inconvenient or not available.
The Company develops, engineers and distributes fully integrated systems to
service a variety of industrial customers' needs, including:
* Communication systems where conventional utility power is not available or
the cost to extend a line to these sites is prohibitive.
* Traffic signal systems used in urban and remote areas where solar electric
applications can frequently be more cost-effective than conventional electric
systems that require installing a transformer and underground cable.
* Railroad traffic signaling where the investment in conventional utility lines
is often the more expensive option.
* Remote monitoring systems used in production, consumption and scientific data
collection where solar electric systems provide reliable power to customers who
require monitoring of such diverse facilities or physical locations as well
heads, oil and gas pipelines, remotely located weather stations or water
tables. Generally, only a small amount of power is needed to operate a
transmitter sending a signal over a phone line, a radio transmitter or via
satellite.
* Backup power systems in urban areas.
The Company's products within these markets include complete solar electric
power systems, system components and certain accessory products. Complete
systems consist of one or more solar modules; controllers to monitor, regulate
and control the output; and, in most systems, batteries to store the energy
generated by the solar modules. Occasionally, backup generators or inverters,
which convert DC electric power to AC power, are included
<PAGE> E-4
as integral
components of a system. The Company markets standard prepackaged systems for a
wide range of applications. Each system contains the basic components as well
as related wiring and connections, mounting devices, and other installation
components as appropriate. Grid interconnected systems consist of many solar
modules, controllers, inverters and support structures which are connected to a
utility's power grid.
The Company designs and installs solar electric systems used by utility power
providers who connect arrays of modules directly to their power grid. These are
known as grid interconnected systems. A growing number of homeowners in the
U.S., Europe, and Asia are expressing a desire for "green electricity." Surveys
have shown that a growing percentage of U.S. homeowners will pay a premium for
energy produced by clean, renewable sources, such as solar energy. Although
this form of electrical power generation continues to cost much more than
conventional sources, or fossil fuels, it is anticipated that as restructuring
in the U.S. electric utility industry accelerates, and the electric service
monopolies are opened up to competition, solar will become more desirable based
on real economics as compared to alternative sources.
The Company's distribution market includes a wide range of customers. Today,
more than 800 solar energy dealers, predominantly located in North and South
America, are part of this service family. The Company delivers both products
and services as described below:
* Dealers are supported by delivery of a wide range of solar modules and
related hardware. These dealers and their customers are supported by the
Company's extensive dealer program, which includes product catalogs, expert
application assistance, advertising support to promote their businesses and
training to introduce new applications and products at the new corporate
training facility.
* The distribution market is also supported by the Company at the retail level
by concentrating in system integration and mail-order system design. An
extensive catalog is maintained by the Company to provide information about
sizing and installation of remote solar energy systems and a web site with a
shopping cart feature has been introduced to reach a broader customer base.
* Direct sales of solar electric systems to owners of recreational vehicles and
boats are an emerging market. Prepackaged solar energy systems provide the
customer with a new source of electricity when conventional sources are
unavailable.
* The water pumping system market is another market within the distribution
group. The Company manufactures solar electric pumps and designs complete
systems for deployment anywhere in the world. With the sun as the energy
source, water can be delivered at rates from .5 gallons per minute for small
residential customers to over 120 gallons a minute for agricultural or village
applications.
Products offered by the Company in these markets include solar modules,
inverters, controllers, batteries, battery chargers, switches, metering
devices, mounting hardware, water pumps, light fixtures and high efficiency
appliances, most of which are either integral to, or used in conjunction with,
solar electric power systems.
The Company's international market includes Australia, Argentina and Brazil.
The Company offers products to industrial and distribution customers within
this market. The dealer network includes over 200 dealers in Argentina and
Australia. The international industrial market includes government and private
systems for water pumping, rural electrification, and telecommunications in
Brazil and Argentina.
The Company manufactures a wide range of products used in solar systems and
sold in all segments. Products manufactured by the Company to be used in
industrial systems include modules (both Duravolttm and other types),
controllers, inverters, and module structures. Products manufactured by the
Company to be sold in its distribution network include specialty modules,
controllers, inverters and water pump motors. The Company's manufactured
products account for less than 10% of the Company's sales.
Suppliers
The photovoltaic module is the most critical element comprising a solar
electric power system.
The Company has a photovoltaic module distribution agreement with United Solar.
The Company has the exclusive rights to distribute United Solar's Unisolar
brand module in the United States and Canada. United Solar is believed to be
the world's largest producer of thin film solar modules. The unique Unisolar
modules are lightweight durable modules
<PAGE> E-5
which are less expensive but also less efficient than traditional modules.
The Company also has a solar module distribution arrangement with Kyocera's
United States subsidiary Kyocera America, Inc. The Company represents Kyocera
solar electric modules in the United States, Canada, Latin America and South
America. Kyocera, the world's largest manufacturer of solar electric modules,
offers the Company competitive terms and the opportunity to develop and
establish a Western Hemisphere dealer organization.
The Company's requirements for other solar electric systems components and
related equipment are purchased from numerous vendors, and the Company believes
that such components and equipment are generally available from other sources
at competitive prices. Suppliers for sales in markets outside North America are
generally the same as those for sales in North America except when specific
contracts require specific components.
Certain key systems components, electronic controllers and Solarjack water
pumps are manufactured by the Company and considered to be proprietary. Solar
cells are the key raw material used in the Company's manufacturing process.
The Company can use solar cells from any of the major module manufacturers but
the majority of the solar cells used in its modules are from Kyocera. All
other raw materials required in the Company's manufacturing are available from
a variety of sources at competitive prices.
Company Marketing Organization
The Company markets its products to a broad range of customers in its
distribution and industrial markets domestically and in the international
market. Within the North and South American distribution market, Company sales
are through a network of over 800 dealers who purchase products from the
Company for resale to their own customer accounts, and through direct retail
customers primarily accessed by the Company's Sunelco mail-order operation. The
distribution segment's sales accounted for approximately 41%, 42%, 33% and 54%
of the Company's sales for the years ended December 31, 1998 and 1997, the four
months ended December 31, 1996, and the year ended August 31, 1996,
respectively. The Company has aggressively expanded its distribution markets
through certain dealers in Central and South America. No single customer within
the distribution market accounted for more than 10% of the Company's annual
sales for any of the reported periods.
Industrial sales, in which the Company develops, engineers and distributes
fully integrated systems, for a diverse array of industrial customers are made
either through direct sales employees of the Company or through independent
sales representatives. Industrial sales represented approximately 45%, 47%, 60%
and 44% of the Company's sales for the years ended December 31, 1998 and 1997,
the four months ended December 31, 1996 and the year ended August 31, 1996,
respectively. During the years ended December 31, 1998 and 1997 no single
customer accounted for more than 10% of the Company's sales. During the four
months ended December 31, 1996 Motorola Indonesia represented approximately 27%
of the Company's sales and no other customer accounted for more than 10% of the
Company's sales. During the year ended August 31, 1996, no single customer
accounted for more than 10% of the Company's sales.
International sales through the Company's wholly owned subsidiaries in
Australia, Brazil and Argentina are to customers in both distribution and
industrial markets. There are an additional 200 dealers in these subsidiaries'
dealer networks. Large projects have been completed for a variety of
industrial customers. International sales represented approximately 14% and
11% of the Company's sales for the years ended December 31, 1998 and 1997,
respectively. No single customer within the international market accounted for
more than 10% of the Company's annual sales for any of the reported periods.
Competition
The Company's principal competition in the distribution markets consists of
numerous regional distributors who purchase solar electric modules from the
major manufacturers and resell modules and other system components to dealers
or end-users. The major competitive factors are product price, service,
technical capability and delivery. The Company has an advantage over the small
regional distributors by having the resources to provide better service,
technical capability and delivery.
In the industrial markets the Company's competition consists principally of the
major international module manufacturers and distributors who have technical
capabilities to deliver fully integrated systems. Manufacturers that market
integrated systems include
<PAGE> E-6
U.S.-based Siemens Solar and Solarex, U.K.-based BP
Solar and Japan-based Kyocera. The most serious competition of the reporting
period has been from BP Solar who has demonstrated the most capability with
respect to vertical integration (system integration and manufacturing). Module
pricing, technical ability and service are the important competitive factors
internationally. The major module manufacturers have an advantage in module
pricing but the Company is able to compete evenly in service and technical
capability.
Backlog
The Company's products are generally shipped within one to two months after
receipt of an order. The Company's backlog as of December 31, 1998 was
approximately $4,900,000. The comparable backorder level as of December 31,
1997 was approximately $4,500,000. All backlogged sales are expected to be
filled within the next fiscal year.
Subsidiary Operations
Golden Genesis Australia ("Australia"), UPG, RPI, Solartec, and GGB operate as
wholly subsidiaries of the Company from the day they were opened or purchased.
Balance of Systems Specialists, Inc. ("BOSS"), Photocomm Credit Corporation
and Photocomm of Texas, Inc. operated as wholly owned subsidiaries of the
Company until December 31, 1997 when they were merged into Photocomm, Inc. The
merger was done to reduce administrative costs of the Company.
Employees
On March 1, 1999, the Company employed a total of 146 persons, 47 of whom are
management and marketing personnel, 32 of whom are engaged principally in
sales, 15 of whom provide administrative, engineering and secretarial services,
and 52 of whom are manufacturing personnel. No employee is subject to a
collective bargaining agreement. The Company believes it has favorable
relations with its employees.
Patents, Copyrights, Trade Secrets and Trademarks
The Company has certain copyright and trademark rights relating to its
products, and claims rights to various trade secrets and proprietary rights.
However, the Company does not believe that these rights would necessarily
preclude others from developing substantially similar products.
The Company markets its products under a variety of registered and unregistered
trademarks, none of which it regards as being material to its overall success.
<PAGE> E-7
Item 2. Properties
The Company owns an 11,300 square foot facility in LaRioja, Argentina for
manufacturing and warehousing and a 7,100 square foot facility in Buenos Aires,
Argentina for sales and warehousing. The Company leases space for regional
sales offices and warehousing. The following table describes the Company's
principal leased facilities, including square footage and lease expiration
dates:
Lease Approximate
Expiration floor area in Location
Location Date square feet Purpose
Scottsdale, AZ February 2008 55,000 Sales, warehousing,
manufacturing and
operations.
San Diego, CA Month to month 425 Sales
Golden, CO Month to month 6,220 Corporate
headquarters
and sales
Hamilton, MT Month to month 2,500 Sales
Matlacha, FL Month to month 500 Sales
Queensland, Australia Month to month 3,200 Sales and
warehousing
Chatsworth, CA Month to month 7,000 Office and
manufacturing
San Luis Obispo, CA Month to month 1,000 Office,
manufacturing
and warehousing
Sacramento, CA Month to month 14,000 Manufacturing
and warehousing
Rio de Janeiro, Brazil Month to month 7,300 Sales and
warehousing
Westminster, CO December 2000 3,500 Manufacturing,
Closed October 1998 and subleased warehousing
and sales
Through November 30, 1998, the Company was leasing 10,750 square feet of
office/warehouse space in a building adjacent to the former corporate
headquarters in Scottsdale. The Company's former President and former Chief
Financial Officer own this adjacent office/warehouse building. The lease was
negotiated at fair market value rates.
On May 1, 1998 the Company relocated the Scottsdale offices, manufacturing and
warehouse functions to a new facility. The new, 55,000 square foot facility is
leased with a lease term through February 2008. The former Scottsdale facility
has been sold.
The Company believes that future space requirements can be met with the new
facility as well as available leasable property in each of its geographical
areas to provide for sufficient facilities to conduct its operations and expand
its business consistent with its strategic objectives in 1999.
Item 3. Legal Proceedings
On February 18, 1998, the Company was named as one of two dozen defendants in a
lawsuit brought in the U. S. District Court for the District of New Hampshire.
The suit alleged various violations of securities laws and breaches of
fiduciary duties, among other things. The Company was subsequently dismissed as
a defendant from the lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the shareholders during the fourth quarter
ended December 31, 1998, through the solicitation of proxies or otherwise.
<PAGE> E-8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
The Company's Common Stock trades on the NASDAQ small cap market system under
the symbol GGGO. The following information sets forth the high and low bid
quotations in dollars per share for the Company's common stock as reported by
NASDAQ.
Low High
Four months ended December 31, 1996
Period September 1, 1996 to December 31, 1996 $2.06 $2.81
Year ended December 31, 1997
First Quarter (through March 31, 1997) $2.06 $3.13
Second Quarter (through June 30, 1997) 1.88 2.50
Third Quarter (through September 30, 1997) 1.50 2.31
Fourth Quarter (through December 31, 1997) 1.38 2.03
Year ended December 31, 1998
First Quarter (through March 31, 1998) $1.53 $2.38
Second Quarter (through June 30, 1998) 1.88 2.81
Third Quarter (through September 30, 1998) 1.13 2.72
Fourth Quarter (through December 31, 1998) 1.13 1.81
On March 5, 1999 there were 787 stockholders of record for the Company's common
stock. The Company estimates that there are approximately 3,700 beneficial
owners of the Company's common stock.
The Company has never paid cash dividends on its common stock, and it intends
for the foreseeable future to retain any earnings to support the growth of its
business.
On January 23, 1998 the Company issued 400,000 shares of unregistered common
stock in exchange for all the outstanding shares of UPG. On July 21, 1998 the
Company issued 150,000 shares of unregistered common stock in exchange for all
the outstanding shares of RPI. The transactions were exempt pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
<PAGE> E-9
<TABLE>
<CAPTION>
Item 6. Selected Financial Data
Selected financial data for the years ended December 31, 1998 and 1997, the four months ended December 31, 1996 and
the years ended August 31, 1996, 1995 and 1994 follows.
(In thousands, except per share data)
Income Data
Four Months
Year Ended Year Ended Ended Year Ended Year Ended Year Ended
12/31/98 (2) 12/31/97 12/31/96 8/31/96 (1) 8/31/95 8/31/94
<S> <C> <C> <C> <C> <C> <C>
Sales $ 43,348 $ 32,829 $ 9,706 $ 22,995 $ 20,541 $ 14,272
Gross profit 7,202 6,909 2,198 5,558 4,821 3,408
Net income (loss) (1,482) (525) (1,389) 1,148 904 216
Net income (loss) per
basic common share (0.09) (0.03) (0.10) 0.08 0.06 0.02
In-kind dividends declared, per:
Series A preferred share - - - - - 0.15
Series B preferred share - - - - - 0.20
Cash dividends declared, per:
Series A preferred share 0.30 0.46 0.30 0.60 0.60 0.45
Series AA preferred share 0.33 0.51 0.33 0.66 0.66 0.66
Weighted average number of
common shares outstanding 16,722 16,216 14,906 13,917 12,342 11,264
Balance Sheet Data
12/31/98 12/31/97 12/31/96 8/31/96 8/31/95 8/31/94
Total assets $28,025 $19,505 $15,287 $15,586 $ 8,825 $ 7,327
Working capital 7,932 12,054 7,017 5,719 4,745 3,253
Long-term debt 5,155 4,150 134 638 720 844
Stockholders' equity 10,921 11,706 11,559 9,733 6,397 4,958
(1) Fiscal year 1996 includes the acquisitions of Solarjack Manufacturing, Inc. on February 2, 1996 and Sunelco,
Inc. on October 3, 1995.
(2) Fiscal year 1998 includes the acquisitions of Utility Power Group, on January 23, 1998, Remote Power, Inc. on
July 21, 1998, and Solartec S.A. and Golden Genesis do Brazil on September 4, 1998.
</TABLE>
<PAGE> E-10
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
References herein to 1998 and 1997 refer to the Company's fiscal years ended
December 31, 1998 and 1997, respectively. References herein to fiscal 1996
refer to the Company's previous fiscal year ended August 31, 1996.
Introduction
The Company markets, engineers, manufactures and distributes solar electric
systems utilized primarily in remote areas. Areas generally include those
where electric power is needed but access to electricity is not available,
costs are relatively high or access is inconvenient. Three primary markets
compose the majority of the Company's results from operations: the industrial
market, the distribution market and the international market.
The Company services a variety of customers in the industrial market. These
customers have power generation needs for communication systems, remote
monitoring systems and traffic signal systems.
The Company's distribution market includes more than 800 solar energy dealers,
which are predominantly located in North and South America. The Company
delivers a wide range of solar modules and related hardware to the dealer
network. The distribution market also includes retail sales through Sunelco, a
system integrator and mail-order design firm, and direct sales to end users of
prepackaged solar systems for recreational vehicles and boats and water pumping
systems for small residential customers or large agricultural and village
applications.
The Company expanded into new international markets during 1998 through the
purchase of two new wholly owned subsidiaries located in Brazil and Argentina.
These subsidiaries, added to the Company's existing Australian subsidiary,
allow the Company to serve a wide variety of international customers in South
America and Australia.
The Company's operating results reflect the strategic decisions to increase
marketing resources to expand current domestic and international sales,
activities to consolidate manufacturing, operations support and administration
and settlement costs with former management. The consolidation will allow the
Company to serve customers with higher quality goods and services at a lower
overall cost.
Results of Operations
The following table sets forth certain operational data as a percent of net
sales for the periods indicated:
Four
Year months
ended ended Year ended
December 31, August 31,
1998 1997 1996 1996
Sales 100% 100% 100% 100%
Cost of sales 83% 79% 77% 76%
Gross profit 17% 21% 23% 24%
Selling, general & administrative 19% 22% 36% 20%
Income (loss) from operations (2%) (1%) (13%) 4%
Year ended December 31, 1998 vs. year ended December 31, 1997
Sales
Sales for 1998 were $43,348,000, a 32% increase over sales of $32,829,000, for
1997. Sales increased in every market in which the Company operates.
Industrial sales increased $3,935,000 or 26%, primarily due to sales of UPG
purchased in January of 1998 and sales of RPI purchased in July of 1998. Sales
to the distribution network increased $3,807,000 or 28%, primarily due to the
increased number of distributors, increased demand for backup power systems in
North America and increased demand in South America. International sales
increased $2,690,000, or 77%, primarily due to the acquisition of GGB and
Solartec in September of 1998 and special projects delivered to Brazil.
<PAGE> E-11
The Company's sales mix changed slightly during 1998 compared to 1997. The
Company derived approximately 45% of its revenue from industrial customers, 41%
from distribution markets and 14% from international subsidiaries and special
projects. Sales during 1997 are comprised of 47% from the industrial markets,
42% from distribution markets and 11% from international subsidiaries and
special projects.
Gross Profit
Gross profit for 1998 was $7,202,000, a 4% increase over gross profit of
$6,909,000 for 1997. Gross margins were 17% in 1998 and 21% in 1997. The
slight increase in gross profit was due to a significant increase in overall
sales offset by a lower gross profit margin. The lower gross profit margins
are partially attributable to certain one time charges in 1998 for inventory,
severance and other organizational changes totaling approximately $916,000.
Excluding the one time charges, gross profit for 1998 would have been
$8,118,000, a 17% increase over 1997. Gross margins would have been 19% in
1998 versus 21% in 1997. This decrease in the gross margins is due to
increased competition from major module suppliers in the industrial and
telecommunications markets and lower absorption of fixed costs by the Company
in its manufacturing facilities.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses for 1998 were $8,318,000, a 15% increase over SG&A expenses of
$7,240,000 for 1997. The increase was partially due to a 1998 one time charge
of approximately $346,000 for certain fixed asset write downs relating to the
Company's consolidation of module manufacturing in Argentina and pump
manufacturing in Scottsdale. Included in 1997 SG&A expenses was a
compensation charge of approximately $800,000 for severance payments to former
executives of the Company.
Excluding the one time charges, SG&A expenses would have been $7,972,000 for
1998, a 24% increase over 1997. The increase was attributable to the purchase
of UPG, RPI, GGB and Solartec, increased facility costs, travel and other
expenses to support the Company's continued growth. Excluding the one time
charges, SG&A as a percentage of sales would have been 18% in 1998 versus 20%
in 1997. This decrease is primarily due to increased efficiencies through the
Company's centralization of operations and administration in the new
Scottsdale facility.
Other Income (Expense)
The Company's non-operating income and expense is primarily comprised of
interest expense offset by gains on the sale of fixed assets and the 1998 gain
of $177,000 on the sale of the former Scottsdale facility. Interest expense
increased in 1998 versus 1997 due to additional outstanding indebtedness
relating to the acquisitions of UPG, RPI, GGB and Solartec and investments in
upgraded infrastructure.
Income Tax
The Company did not recognize any income tax benefit or expense for 1998.
Utilization of the net operating loss ("NOL") carryforward as of December 31,
1998 totaling approximately $8,800,000, is dependent on generation of future
taxable income and is limited by ownership changes. At this time, management
has not determined that it is more likely than not that all of the deferred
tax asset will be realized and has provided a valuation allowance for a
significant portion of the value of the NOL carryforward.
Net Loss
The Company experienced a net loss of $1,482,000 or $0.09 per diluted common
share in 1998 versus net loss of $525,000 or $0.03 per diluted common share in
1997. The increase in net loss was primarily due to one time charges and
lower gross profit margins in 1998.
Year ended December 31, 1997 vs. year ended August 31, 1996.
Sales
Sales for 1997 were $32,829,000, a 43% increase over sales of $22,995,000, for
fiscal 1996. Sales increased in every market in which the Company operates.
Industrial sales increased $4,854,000 or 48%, primarily due to the acquisition
of the IPC contracts in July of 1997 and increased domestic sales to industrial
original equipment manufacturer customers. Sales to the distribution network
increased $1,306,000 or 10%, primarily due to the increased number of domestic
distributors. International sales increased due to sales by the Company's new
Australian subsidiary and increased special projects in South America.
<PAGE> E-12
The Company's sales mix changed slightly during 1997 compared to fiscal 1996.
The Company derived approximately 47% of its revenue from industrial customers
42% from distribution markets and 11% from international subsidiaries and
special projects. Sales during fiscal 1996 are comprised of 45% from the
industrial markets and 55% from distribution markets.
Gross Profit
Gross profit for 1997 was $6,909,000, a 24% increase over gross profit of
$5,558,000 for fiscal 1996. Gross margins were 21% in 1997 and 24% in fiscal
1996. The increase in gross profit was due to a significant increase in
overall sales. The lower gross profit margins are attributable to increased
sales within the international distribution markets, (where module suppliers
are often the major competitors and the Company is at a price disadvantage),
costs associated with entering new industrial markets, increased prices of
solar modules resulting from supply restrictions and lower absorption of fixed
costs by Company manufacturing facilities.
Selling, General and Administrative Expenses
SG&A expenses for 1997 were $7,240,000, a 54% increase over SG&A expenses of
$4,707,000 for fiscal 1996. The increase was partially due to a 1997
compensation charge of approximately $800,000 for severance payments to former
executives of the Company.
Excluding severance, SG&A expenses would have been $6,440,000 for 1997, a 37%
increase over fiscal 1996. The increase was attributable to overall staffing
increases including significant increases in sales and marketing salaries and
personnel, an expanded incentive bonus program, increased facility costs,
travel and other expenses for activities to support the Company's continued
growth.
Other Income (Expense)
The Company's non-operating income and expense is primarily comprised of
interest expense. Interest expense increased in 1997 versus fiscal 1996 due to
additional outstanding indebtedness relating to investments in upgraded
infrastructure, former executive settlements and the acquisition of IPC
assets.
Income Tax
The Company did not recognize any income tax benefit or expense for 1997.
Utilization of the NOL carryforward as of December 31, 1997 totaling
approximately $8,500,000, is dependent on generation of future taxable income
and is limited by ownership changes. At this time, management has not
determined that it is more likely than not that all of the deferred tax asset
will be realized and has provided a valuation allowance for a significant
portion of the value of the NOL carryforward.
Net Loss
The Company experienced a net loss of $525,000 or $0.03 per diluted common
share in 1997 versus net income of $1,148,000 or $0.07 per diluted common
share in fiscal 1996. The change to a net loss position was primarily due to
severance charges and lower gross profit margins in 1997. In addition, the
Company recognized a $350,000 income tax benefit in fiscal 1996.
Four months ended December 31, 1996 vs. four months ended December 31, 1995.
Sales
Sales for the four month period ended December 31, 1996 were $9,706,000, a 44%
increase over sales of $6,719,000 for the same period of 1995. The four month
period for 1996 included a $2,200,000 sale to an Indonesian telecommunications
customer.
Distribution increased approximately 12% during the four month period ended
December 31, 1996 versus the same 1995 period. In general, sales revenue
increases were due to volume increases with little or no effect related to
price changes.
Gross Profit
Gross profit increased 29% from $1,707,000 in the four month period ended
December 31, 1995 to $2,198,000 in the same period in 1996. Gross margins
were 25% in the four month period ended December 31, 1995 and 23% in the four
month period ended December 31, 1996. The gross profit for the 1996 period
included a $411,000 charge
<PAGE> E-13
related to inventory valuation allowances.
Exclusive of this inventory valuation allowance, gross margins would have been
27% for the four month period in 1996, a 2% improvement compared to the same
period in 1995. This was attributable to the higher margin realized on the
Indonesian telecommunications sale in 1996.
Selling, General and Administrative Expenses
SG&A expenses increased 139% from $1,481,000 in the four month period ended
December 31, 1995 to $3,540,000 in 1996. The increase in SG&A in 1996 was
largely driven by a $1,200,000 charge relating to severance with former
executives, increased labor costs and expanded marketing programs.
Labor costs increased $430,000 in the four month period of 1996 as compared to
the same period in 1995. Most of this increase was a result of salary
increases and increased staffing and bonus and benefit awards. Staffing
increases were largely the result of start-up of the Australia subsidiary in
October 1996 and from the acquisitions of Solarjack and Sunelco. The increase
in sales and marketing expenses was primarily attributable to increased
marketing of the Company's new solar water pumping division, advertising cost
associated with the retail distribution business through Sunelco and new
industrial markets.
Other Income (Expense)
The Company's non-operating income and expense is primarily comprised of
interest expense. Interest expense increased in the four month period ended
December 31, 1996 versus 1995 due to additional outstanding debt in 1996.
Income Tax
The Company did not recognize any income tax benefit or expense for the four
months ended December 31, 1996 or 1995. Utilization of the NOL carryforward
as of December 31, 1996 totaling approximately $8,000,000, is dependent on
generation of future taxable income and is limited by ownership changes. The
Company utilized NOL carryforward of $65,000 in the four months ended December
31, 1995 to offset current income tax expense.
Net Loss
The Company experienced a net loss of $1,389,000 or $0.10 per diluted common
share in the four month period of 1996 versus net income of $223,000 or $0.01
per diluted common share for the same period in 1995. Without the inventory
valuation allowance and other charges discussed above in the aggregate of
$1,823,000, net income would have been $434,000, a 95% improvement from the
same period in the prior year.
Liquidity and Capital Resources
The Company's liquidity is generated from both internal and external sources
and is used to fund short-term working capital needs, capital expenditures and
acquisitions. Internally generated liquidity is measured by net cash flows
from operations, as discussed below, and working capital. At December 31,
1998, the Company's working capital (current assets minus current liabilities)
was $7,932,000 with a current ratio (current assets divided by current
liabilities) of 1.66 to 1.
The Company has established an unsecured, $4,750,000 line of credit with ACX,
the parent of the Company's majority shareholder. This facility bears
interest, payable quarterly, at 1% below prime. The principal balance is due
October 31, 2000. At December 31, 1998, the Company had borrowed $4,250,000
under this line for use in funding working capital needs, capital expenditures,
and the acquisition of certain assets of IPC and Utility Power Group.
In 1998, the Company entered into a one year $3,600,000 note payable with GTC,
the Company's majority shareholder. This note was given for the purchase of
GGB and Solartec and bears interest, payable quarterly, at 6%. The principal
balance is due September 4, 1999.
As shown in the Consolidated Statement of Cash Flows, net cash provided by
operations was $94,000 for the year ended December 31, 1998 and net cash used
in operations was $2,806,000, $435,000 and $1,059,000 for the year ended
December 31, 1997, the four months ended December 31, 1996, and the fiscal year
ended August 31, 1996, respectively. A decrease in inventories net of
inventory acquired offset by a decrease in accounts payable and an increase in
other current assets account for the change to cash provided by operations in
the year ended December 31, 1998 from cash used in
<PAGE> E-14
operations in the year ended
December 31, 1997. Increased inventories and accounts receivable resulting
from the Company's significant revenue growth account for the increased use of
cash for operations between the fiscal year ended August 31, 1996 and the year
ended December 31, 1997. During the four months ended December 31, 1996, the
Company used $435,000 of cash for operations, compared with $24,000 generated
from operations for the comparable period of 1995. A $696,000 decrease in
current liabilities, partially offset by the liquidation of inventory and
receivables, was the primary use of cash for the four months ended December 31,
1996.
During 1998, the Company invested $514,000 in capital expenditures to continue
to upgrade equipment. This is a decrease of $64,000 from capital expenditures
in 1997. The Company received approximately $1,325,000, in proceeds from the
sale of assets during 1998. This mainly represents the sale of the Company's
former Scottsdale facility. In 1998, the Company also paid cash for the
acquisition of new subsidiaries and other assets. During 1997, the Company
invested $578,000 in capital expenditures to upgrade equipment. This
represents an increase of $260,000 over capital expenditures in fiscal 1996.
The Company invested $378,000 during 1997 for the purchase of patents,
trademarks, and other intangible assets, primarily for the purchase of
contracts from IPC. The Company believes these contracts will provide access
to key markets in the Middle East and Northern Africa. The Company will
continue to evaluate potential acquisitions and planned capital spending in
light of internally generated cash flows and the availability of external
sources of funds.
Although no assurances can be made, the Company currently expects that cash
flows from operations and access to its line of credit will be sufficient to
meet the Company's needs for working capital, temporary financing for capital
expenditures and acquisitions.
The impact of inflation on the Company's financial position and results of
operations has been minimal and is not expected to adversely affect future
results.
Year 2000 Readiness
The Year 2000 issue arose because many existing computer programs use only the
last two digits to refer to a year. Therefore, these computer programs do not
properly recognize a year that begins with "20" instead of the familiar "19".
If not corrected, many computer applications could fail or create erroneous
results disrupting normal business operations.
Management has implemented an enterprise-wide program to prepare the Company's
financial, manufacturing, and other critical systems and applications for the
Year 2000. The program includes a task force established in September 1998
that has the support and participation of upper management and includes
individuals with expertise in information technologies, accounting, legal and
engineering. The Board of Directors monitors the progress of the program on a
quarterly basis. The task force's objective is to ensure an uninterrupted
transition to the year 2000 by assessing, testing, and modifying all
information technology (IT) and non-IT systems, interdependent systems, and
third parties such as suppliers and customers.
The Year 2000 task force has taken an inventory of all IT and non-IT systems.
This inventory categorizes potential systems date failures into three
categories: "major" (critical to production and potentially threatening to
business with no short-term alternatives available); "limited" (disrupting to
the business operations with short-term solutions available); and "minor"
(inconsequential to the business operations). The task force has prioritized
the program to focus first on "major" systems. It is the Company's goal to
have all systems Year 2000 compliant no later than August 1, 1999.
IT Systems - The Company is primarily using internal resources to remediate IT
systems. External resources are used to assist in testing compliance of IT
systems. The Company does not rely on any one IT system. The majority of the
IT systems have been recently purchased from third party vendors. These
systems were already Year 2000 compliant or had Year 2000 compliance upgrades.
As of December 31, 1998, approximately 60% of the Company's IT systems were
Year 2000 compliant.
Non-IT Systems - The Company has only three manufacturing facilities and eight
sales facilities, none of which have a significant number of non-IT systems.
Two of the three manufacturing facilities are located in North America. To
ensure Year 2000
<PAGE> E-15
compliance for non-IT systems, the Year 2000 task force has
contacted the suppliers of these non-IT systems and obtained statements that
the systems are Year 2000 compliant and is in the process of testing Year 2000
compliance. The majority of these non-IT systems use time intervals instead of
dates, thus, the Company believes that potential disruptions of such systems
due to the Year 2000 issue should be minimal. As of December 31, 1998,
approximately 70% of the Company's "major" and "limited" non-IT systems are
Year 2000 compliant. The "minor" non-IT systems are in various stages of
compliance.
Third Parties - The Year 2000 task force has been in contact with key suppliers
and customers to minimize potential business disruptions related to the Year
2000 issue between the Company and these third parties. The task force has
focused on suppliers and customers that are classified as "major" and
"limited." While the Company cannot guarantee compliance by third party
suppliers, the Company is in the process of developing contingency plans to
ensure the availability of inventory supplies in the event a supplier is not
Year 2000 compliant.
Contingency Plans - The Company is in the process of forming contingency plans
in the event there are Year 2000 failures related to the Company's IT and non-
IT systems and/or key third parties. The Company's manufacturing facilities
are not interdependent in terms of non-IT systems, and its facilities utilize a
diverse range of non-IT systems. In addition, no one manufacturing facility
accounts for a significant amount of revenue. Thus, for non-IT systems the
contingency plan includes the transfer of production between facilities and
manufacturing equipment. Currently, the Company believes that there is enough
manufacturing capacity to accommodate the contingency plan.
The Company's IT systems are somewhat interdependent between locations, however
the Company still utilizes a diverse range of IT systems. The contingency plan
for IT systems includes the ability to transfer transaction processing, record
keeping, and compliance work between facilities in addition to maintaining
"hard" copies of critical information.
The Company is not dependent on any one supplier. The Company has established
back-up suppliers and will maintain adequate inventory levels at December 31,
1999 to minimize the potential business disruption in the event of a Year 2000
failure by a supplier.
Costs - Through December 31, 1998, the Company has spent approximately $33,000
out of an estimated total of $120,000 related to the Year 2000 issue. These
costs include the costs incurred for external consultants and professional
advisors and the costs for software and hardware. The Company has not
separately tracked internal costs such as payroll related costs for its
information technologies group and other employees working on the Year 2000
project. The Company expenses all costs related to the Year 2000 issue as
incurred. These costs are being funded through operating cash flows.
The Company's current estimate of the time and costs related to the remediation
of the Year 2000 issue are based on the facts and circumstances existing at
this time. New developments could affect the Company's estimates to remediate
the Year 2000 issue. These developments include, but are not limited to: (i)
the availability and cost of personnel trained in this area; (ii) the ability
to identify and remediate all IT and non-IT systems; (iii) unanticipated
failures in IT and non-IT systems; and (iv) the planning and Year 2000
compliance success that key customers and suppliers attain.
Forward-Looking Statements
Certain statements in this report that are not historical facts contain
forward-looking statements which involve uncertainties and factors that may
cause actual results to be materially different from those that may be implied
by such statements. Forward-looking statements include, but are not limited
to, statements of the Company's beliefs, expectations and strategies. Forward-
looking statements and related factors that may cause actual results to differ
from such forward-looking statements include but are not limited to, market
demand and acceptance of the Company's products, the impact of competitive
technologies, products and services, risks associated with international
operations including currency fluctuations, litigation, seasonality, claims to
which the Company may be a party, availability of critical materials or supply,
the Company's ability to managed planned expansion of its business and to
integrate acquisitions of other businesses.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk
For the years ended December 31, 1998 and 1997, the four months ended December
31, 1996 and the year ended August 31,1996, approximately 38%, 35%, 14% and
18%, respectively, of the Company's revenue was generated by its international
operations. The Company sells products directly through its subsidiaries in
Australia, Brazil and Argentina and through domestic channels that have end-
user customers located outside the United States. The Company expects that it
will continue to generate a significant portion of its revenue from
international operations in the future. The majority of the Company's
international operations involve transactions denominated in United States
dollars. Only the local transactions generated by the Company's subsidiaries
in Australia and Brazil are subject to currency exchange rate fluctuations, as
Argentina's currency is equal to the United States dollar. An increase in the
exchange value of the United States dollar reduces the value of revenue and
profits generated by the Company's international subsidiaries in Australia and
Brazil. The Company's operating and financial results can be materially
affected by fluctuations in foreign currency exchange rates. The Company does
not employ a foreign currency hedging program.
<PAGE> E-16
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements Page
Report of Independent Accountants - December 31, 1998, 1997 and 1996 17
Independent Auditors' Report - Year Ended August 31, 1996 18
Consolidated Balance Sheets as of December 31, 1998 and 1997 19
Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997, the four months ended December
31, 1996 and the year ended August 31, 1996 20
Consolidated Statements of Comprehensive Income for the years ended
December 31, 1998 and 1997, the four months ended December 31,
1996 and the year ended August 31, 1996 21
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998 and 1997, the four months ended
December 31, 1996 and the year ended August 31, 1996 22
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997, the four months ended December
31, 1996 and the year ended August 31, 1996 24
Notes to Consolidated Financial Statements 25
<PAGE> E-17
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Golden Genesis Company
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of operations, comprehensive income, stockholders'
equity and cash flows present fairly, in all material respects, the financial
position of Golden Genesis Company and its subsidiaries at December 31, 1998
and 1997, and the results of their operations and their cash flows for the
years ended December 31, 1998 and 1997 and the four months ended December 31,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Denver, Colorado
January 22, 1999
<PAGE> E-18
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Golden Genesis Company:
We have audited the accompanying consolidated statements of operations,
comprehensive income, stockholders' equity, and cash flows of Golden Genesis
Company and subsidiaries (formerly Photocomm, Inc. and subsidiaries) for the
year ended August 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of Golden Genesis Company and subsidiaries (formerly Photocomm, Inc. and
subsidiaries) for the year ended August 31, 1996 in conformity with generally
accepted accounting principles.
KPMG LLP
Phoenix, Arizona
October 18, 1996
<PAGE> E-19
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, December 31,
1998 1997
Assets
Current assets
Cash & cash equivalents $ 1,259 $ 1,182
Accounts receivable, net of allowance
for doubtful accounts of $84 and
$147, respectively 9,931 7,277
Inventories, net 7,130 5,810
Property held for sale, net - 1,018
Deferred tax asset 350 193
Other current assets 1,211 222
Total current assets 19,881 15,702
Property & equipment, net 2,327 1,684
Goodwill, net 5,278 1,620
Deferred tax asset - 157
Other assets, net 539 342
Total assets $28,025 $19,505
====== ======
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 5,663 $ 2,912
Short term notes payable 5,075 -
Other accrued expenses 1,146 654
Current installments of long-term debt 65 82
Total current liabilities 11,949 3,648
Long-term debt 5,155 4,151
Total liabilities 17,104 7,799
Commitments and contingencies (Note 13) - -
Stockholders' equity
Preferred stock: $0.001 par value,
5,000,000 shares authorized
Series A 12% convertible preferred stock,
125,000 shares authorized; zero and 38,972
shares issued and outstanding, respectively - -
Series AA 11% convertible preferred
stock, 200,000 shares authorized;
zero and 44,165 shares issued
and outstanding, respectively - -
Common Stock:
$0.10 par value, 25,000,000 shares
authorized; 17,151,948 and 16,245,044
shares issued and outstanding,
respectively 1,715 1,625
Additional paid-in capital 17,023 16,122
Accumulated other comprehensive
income (loss) (296) (2)
Accumulated deficit (7,521) (6,039)
Total stockholders' equity 10,921 11,706
Total liabilities and
stockholders' equity $28,025 $19,505
====== ======
See accompanying notes to consolidated financial statements.
<PAGE> E-20
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Four Months
Year Ended Year Ended Ended Year Ended
December 31, December 31, December 31, August 31,
1998 1997 1996 1996
<S> <C> <C> <C> <C>
Net sales $43,348 $32,829 $ 9,706 $22,995
Cost of sales 36,146 25,920 7,508 17,437
Gross profit 7,202 6,909 2,198 5,558
Selling, general and
administrative expenses 8,318 7,240 3,540 4,707
Income (loss) from
operations (1,116) (331) (1,342) 851
Other income (expense):
Interest expense (573) (161) (60) (101)
Other, net 207 (33) 13 48
Income (loss)
before taxes (1,482) (525) (1,389) 798
Income tax benefit - - - 350
Net income (loss) $(1,482) $ (525) $(1,389) $ 1,148
====== ====== ====== ======
Preferred stock dividend (2) (42) (68) (92)
====== ====== ====== ======
Net income (loss) applicable
to common stockholders $(1,484) $ (567) $(1,457) $ 1,056
====== ====== ====== ======
Net income (loss) per basic
share of common stock $ (0.09) $ (0.03) $ (0.10) $ 0.08
====== ====== ====== ======
Weighted average shares
outstanding - basic 16,722 16,216 14,906 13,917
Net income (loss) per diluted
share of common stock $ (0.09) $ (0.03) $ (0.10) $ 0.07
====== ====== ====== ======
Weighted average shares
outstanding - diluted 16,722 16,216 14,906 14,535
====== ====== ====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> E-21
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
<TABLE>
<CAPTION>
Four Months
Year Ended Year Ended Ended Year Ended
December 31, December 31, December 31, August 31,
1998 1997 1996 1996
<S> <C> <C> <C> <C>
Net income (loss) $(1,482) $ (525) $(1,389) $ 1,148
Other comprehensive income
(loss), net of tax of $0:
Foreign currency translation (294) (2) - -
Other comprehensive income (294) (2) - -
Comprehensive income (loss) $(1,776) $ (527) $(1,389) $ 1,148
===== ===== ===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> E-22
<TABLE>
<CAPTION>
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands) Accumulated
Convertible Preferred Stock Additional Other
Series A Series AA Common Stock Paid-in Accumulated Comprehensive
Shares Amount Shares Amount Shares Amount Capital Deficit Income(Loss) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1995 109,972 $ - 69,365 $ - 13,014,159 $1,301 $10,369 $(5,273) $ - $ 6,397
Common stock issued upon
exercise of stock options 391,085 39 351 390
Common stock issued as part
of Sunelco purchase agreement 225,000 23 377 400
Common stock issued as part
of Solarjack purchase agreement 560,000 56 1,344 1,400
Common stock issued upon
exercise of warrants 50,000 5 85 90
Series AA convertible
preferred stock converted
to common stock 4 to 1 (16,800) - 67,200 7 (7) -
Cash dividends on Series A
and Series AA preferred stock
$0.60 and $0.66 per share,
respectively (92) (92)
Net income 1,148 1,148
Balance, August 31, 1996 109,972 $ - 52,565 $ - 14,307,444 $1,431 $12,427 $(4,125) $ - $9,733
Common stock issued upon
exercise of stock options 560,000 56 585 641
Common stock issued as part
of GTC stock purchase agreement 1,000,000 100 2,542 2,642
Common stock issued upon
conversion of preferred
stock 4 to 1 (71,000) - 284,000 28 (28) -
Cash dividends on Series A
and Series AA preferred stock
$0.60 and $0.66 per share,
respectively (68) (68)
Net loss (1,389) (1,389)
Balance, December 31, 1996 38,972 $ - 52,565 $ - 16,151,444 $1,615 $15,458 $(5,514) $ - $11,559
See accompanying notes to consolidated financial statements.
<PAGE> E-23
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
(Dollars in thousands) Accumulated
Convertible Preferred Stock Additional Other
Series A Series AA Common Stock Paid-in Accumulated Comprehensive
Shares Amount Shares Amount Shares Amount Capital Deficit Income(Loss) Total
Balance, December 31, 1996 38,972 $ - 52,565 $ - 16,151,444 $1,615 $15,458 $(5,514) $ - $11,559
Common stock issued upon
exercise of stock options 60,000 6 60 66
Common stock issued upon
conversion of preferred
stock 4 to 1 (8,400) - 33,600 4 (4) -
Settlement of stock options 650 650
Cash dividends on Series A
and Series AA preferred stock
$0.60 and $0.66 per share,
respectively (42) (42)
Cumulative translation adjustment (2) (2)
Net loss (525) (525)
Balance, December 31, 1997 38,972 $ - 44,165 $ - 16,245,044 $1,625 $16,122 $(6,039) $ (2) $11,706
Common stock issued upon
exercise of stock options
and common stock sold to
officers 24,356 2 39 41
Common stock issued upon
conversion of preferred
stock 4 to 1 (38,972) - (44,165) - 332,548 33 (33) -
Common stock issued as part
of UPG purchase agreement 400,000 40 610 650
Common stock issued as part
of RPI purchase agreement 150,000 15 355 370
Purchase of GGB and Solartec
from GTC and ACX (68) (68)
Cash dividends on Series A
and Series AA preferred stock
$0.30 and $0.33 per share,
respectively (2) (2)
Cumulative translation adjustment (294) (294)
Net loss (1,482) (1,482)
Balance, December 31, 1998 - $ - - $ - 17,151,948 $1,715 $17,023 $(7,521) $ (296) $10,921
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> E-24
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Four Months
Year Ended Year Ended Ended Year Ended
December 31, December 31, December 31, August 31,
1998 1997 1996 1996
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss) $(1,482) $ (525) $(1,389) $1,148
Adjustments to reconcile net
income (loss) to net cash
used in operating activities:
Depreciation and amortization 801 616 149 379
Non-cash stock option
settlement charge - 650 - -
Gain on sale of assets (21) - - -
Change in accounts receivable (33) (2,719) 1,042 (3,242)
Change in inventories 1,690 (1,320) 214 (1,178)
Change in accounts payable
and other accrued expenses (619) 529 (696) 2,361
Change in other current assets (242) (37) 245 (177)
Deferred tax benefit - - - (350)
Net cash provided by (used in)
operating activities 94 (2,806) (435) (1,059)
Cash flows from investing
activities:
Purchase of property and
equipment (514) (578) (155) (318)
Proceeds from sale of assets 1,325 - - -
Purchase of patents, trademarks
and other assets (355) (378) (18) -
Cash paid for acquisitions (245) - - (395)
Net cash provided by (used in)
investing activities 211 (956) (173) (713)
Cash flows from financing
activities:
Proceeds from issuance of debt 750 4,102 - 1,199
Repayments of debt (1,008) (561) (1,429) (136)
Proceeds from issuance of stock 34 66 3,283 481
Cash dividends on preferred
stock (4) (41) (68) (92)
Net cash (used in) provided by
financing activities (228) 3,566 1,786 1,452
Net increase (decrease) in
cash and cash equivalents 77 (196) 1,178 (320)
Cash and cash equivalents at
beginning of period 1,182 1,378 200 520
Cash and cash equivalents at
end of period $1,259 $1,182 $1,378 $200
===== ===== ===== ===
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> E-25
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996 AND AUGUST 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Golden Genesis Company and its subsidiaries (the "Company") are engaged in the
designing, manufacturing and marketing of solar electric systems in the United
States, Australia, the Middle East, Asia and South America. The Company was
formerly known as Photocomm, Inc.
At December 31, 1998, 1997 and 1996, respectively, the Company was 52%, 55% and
52% owned by Golden Technologies Company, Inc. ("GTC"), a wholly owned
subsidiary of ACX Technologies, Inc. ("ACX"). At December 31, 1998 and 1997
ACX had the voting rights to an additional 3% of the Company's common stock,
par value $0.10 per share ("Common Stock"). At August 31, 1996 the Company was
46% owned by New World Power Corporation ("NWP"). At August 31, 1996 and 1995,
the Company was 10% and 14% owned by Programmed Land, Inc. ("PLI"),
respectively.
Basis of Presentation
The consolidated financial statements of the Company include the accounts of
Golden Genesis Company; Utility Power Group ("UPG"); Remote Power Incorporated
("RPI"); Photocomm Pty. Ltd. ("Australia"); Integrated Power Corporation, Inc.
("IPC"); Solartec S.A. ("Solartec" or "Argentina") and Golden Genesis do Brazil
("GGB" or "Brazil").
The financial statements of the Company's Brazilian and Australian subsidiaries
are recorded in the functional currency of Brazil ("Real" or "R$") and
Australia ("Australian Dollar" or "A$"), respectively. Prior to consolidation
with the Company, the local financial statements are translated into United
States dollars. Changes in currency exchange rates are reflected as a
cumulative translation adjustment in the Consolidated Balance Sheets and
Consolidated Statements of Comprehensive Income.
All material intercompany balances and transactions have been eliminated in
consolidation.
Certain reclassifications have been made in the financial statements for the
year ended August 31, 1996 to conform to the classifications used in the
financial statements as of and for the four months ended December 31, 1996 and
the years ended December 31, 1997 and 1998.
Revenue Recognition
Sales and related cost of sales are recorded when goods are shipped and
services rendered to customers. Certain sales related to the construction of
large solar systems are recognized on a percentage of completion basis.
Financial Instruments
The Company's financial instruments include cash, accounts receivable, accounts
payable and debt. The carrying value of these financial instruments
approximates their fair values.
Inventories
Inventories are valued at the lower of historical cost, determined by the
first-in, first-out method, or market. Provisions are made for excess,
obsolete and slow-moving inventory.
<PAGE> E-26
Inventories consist of the
following (In thousands): December 31, December 31,
1998 1997
Raw materials and goods purchased for resale $ 7,868 $ 5,703
Work-in-progress 157 209
Less allowance for obsolescence (895) (102)
$ 7,130 $ 5,810
====== ======
Property and Equipment
Property and equipment are stated at cost. Costs of repairs and maintenance
are expensed when incurred.
Depreciation of equipment is computed using the straight-line method over 5 to
10 years. Leasehold improvements are amortized over the term of the lease or
life of the asset, whichever is shorter. The buildings are depreciated using
the straight-line method over 31 1/2 years. The building and land are
mortgaged for $172,000.
Property and equipment consist of the following (In thousands):
December 31, December 31,
1998 1997
Machinery and equipment $1,843 $ 1,859
Computer equipment 726 427
Furniture and fixtures 533 527
Billboard systems 396 415
Building 335 -
Leasehold improvements 182 108
Land 155 -
Automobiles 103 10
4,273 3,346
Less accumulated depreciation (1,946) (1,662)
$ 2,327 $ 1,684
===== =====
Depreciation expense for the years ended December 31, 1998 and 1997, the four
months ended December 31, 1996 and the year ended August 31, 1996 was $537,000,
$426,000, $122,000 and $306,000, respectively.
As part of the Company's overall plan to centralize operations, warehousing and
administration in Scottsdale, the Company's Board of Directors approved
relocation of central operations to a new larger facility. The Board also
approved the sale of the existing land and building. The land had an original
cost of $300,000 and the building had an original cost of $897,000 with
accumulated depreciation of $179,000. The land and building were sold on
September 16, 1998 for approximately $1,325,000 with a gain of $177,000 after
commissions, taxes and fees.
The Company recorded a total of $184,000 in asset impairment charges in 1998.
The charges consisted of fixed asset impairments related to the relocation of
module manufacturing to Argentina and pump manufacturing to the new Scottsdale
facility.
Goodwill and Other Assets
Goodwill, which represents the excess of the purchase price over the fair value
of net assets acquired, is amortized on a straight-line basis over the expected
periods of benefit, generally 20 years. The Company assesses the
recoverability of goodwill and other assets by determining whether such assets
can be recovered through undiscounted future operating cash flows of the
acquired operations. The amount of goodwill impairment, if any, is measured
based on the requirements of Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of."
<PAGE> E-27
Goodwill and other assets consist of the following (In thousands):
December 31, December 31,
1998 1997
Goodwill $ 5,768 $ 1,896
Less accumulated amortization (490) (276)
$ 5,278 $ 1,620
===== =====
Other assets $ 807 $ 560
Less accumulated amortization (268) (218)
$ 539 342
===== =====
On July 2, 1997, the Company purchased certain assets and contracts of
Integrated Power Corporation, Inc. from Westinghouse Electric Corporation for
$450,000. Integrated Power Corporation specializes in highly engineered
alternative power systems incorporating solar, wind and diesel generators. The
assets purchased included contracts, fixed assets and intangible assets.
During 1998 the Company purchased goodwill and other assets through the
acquisition of UPG, RPI, Solartec and GGB. See Note 3.
Short Term Notes Payable
Short term notes payable consist of the following (In thousands):
December 31,
1998
Note payable to GTC (a related party),
interest payable quarterly at 6%, principal
due September 3, 1999. $ 3,600
Bank line of credit for Solartec S.A. with
ABN Bank, Argentina, with variable rate
of interest, interest payable monthly and
revolving principal, guaranteed by ACX 1,234
Bank line of credit for GGB with ABN Bank,
Brazil, with variable rate of interest,
interest payable monthly and revolving
principal, guaranteed by ACX 211
Other notes payable 30
Total short term notes payable $ 5,075
=======
The weighted average interest rate at December 31, 1998 for short term
borrowings was approximately 10%.
Other Accrued Expenses
Other accrued expenses consist of the following (In thousands):
December 31, December 31,
1998 1997
Billings in excess of costs $ 380 -
Employee compensation 319 $ 258
Non-employee commission 125 135
Accrued warranty 80 -
Accrued interest 72 -
Accrued freight 17 177
Other 153 84
Total other accrued expenses $1,146 $ 654
====== =====
Supplementary Cash Flow Information
The Company paid interest of $430,000 $143,000, $26,000 and $101,000 for the
years
<PAGE> E-28
ended December 31, 1998 and 1997, the four months ended December 31,
1996 and the year ended August 31, 1996, respectively.
No income taxes were paid for the years ended December 31, 1998 and 1997, the
four months ended December 31, 1996 or the year ended August 31, 1996.
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with an initial maturity of three months or less at the
time of purchase to be cash equivalents.
Non-cash investing and financing activities include the following:
On October 1, 1995, in connection with the Sunelco acquisition (see Note 3),
the Company issued 225,000 shares of its Common Stock valued at $400,000. On
February 2, 1996, in connection with the Solarjack acquisition (see Note 3),
the Company issued 560,000 shares of its Common Stock valued at $1,400,000. On
January 23, 1998, in connection with the UPG acquisition (see Note 3) the
Company issued 400,000 shares of its Common Stock valued at $650,000. On July
21, 1998, in connection with the RPI acquisition (see Note 3), the Company
issued 150,000 shares of its Common Stock valued at $370,000. On September 4,
1998, in connection with the Solartec and Brazil acquisitions (see Note 3) the
Company incurred a note payable to GTC for $3,600,000.
Significant assets and liabilities acquired as a part of purchase transactions
are as follows:
(In thousands) UPG RPI GGB Solartec
Accounts receivable $ 710 $ 156 $ 339 $1,748
Inventory 1,977 111 254 813
Other current assets - - 334 413
Fixed assets, net 45 - 67 841
Goodwill, net 484 84 153 1,961
Accounts payable &
accrued liabilities 2,724 154 430 806
Notes payable - - 234 4,854
Long term debt 176 82 743 164
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, the disclosure of
contingent assets and liabilities and the reporting of revenues and expenses to
prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those estimates.
Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," was issued in June 1997. The statement establishes
standards for reporting and display of comprehensive income in financial
statements and was adopted by the Company in the first quarter of 1998. The
Company's comprehensive income consists of net income and certain foreign
currency translation adjustments.
Segment Reporting
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," was issued in June 1997. This statement establishes standards
for the way public business enterprises report information about operating
segments. It also established standards for related disclosures about products
and services, geographical areas and major customers. This statement was
adopted in the Company's financial statements for the year ended December 31,
1998. See Note 12.
(2) CHANGE IN FISCAL YEAR END
On February 3, 1997 the Board of Directors elected to change the fiscal year
end of the Company from August 31 to December 31. As a result, the audited
financial statements presented herein include the period as of and for the four
months ended
<PAGE> E-29
December 31, 1996. The following supplemental unaudited
consolidated statement of operations and unaudited consolidated statement of
cash flows for the four months ended December 31, 1995 are presented for
comparative purposes only.
Consolidated Statement of Operations (unaudited)
(In thousands except per share data)
Four Months Ended
December 31,1995
Net Sales $ 6,719
Cost of sales 5,012
Gross profit 1,707
Selling, general and 1,481
administrative expenses
Income from operations 226
Other income (expense):
Interest expense (40)
Other, net 37
Income before taxes 223
Income taxes -
Net income $ 223
======
Preferred stock dividends 61
Net income applicable to common
stockholders $ 162
======
Net income per basic share of common stock $ 0.01
Weighted average shares outstanding - basic 13,354
Net income per diluted share of common stock $ 0.01
Weighted average shares outstanding - diluted 14,054
Consolidated Statement of Cash Flows (unaudited)
(In thousands)
Four Months Ended
December 31,1995
Cash flows from operating activities:
Net income $ 223
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 99
Decrease in accounts receivable 123
Increase in inventories (1,155)
Increase in accounts payable
and accrued expenses 617
Decrease in other current assets 117
Net cash provided by operating activities 24
Cash flows from investing activities:
Purchase of property and equipment (46)
Purchase of patents, trademarks and
other assets (33)
<PAGE> E-30
Net cash used in investing activities (79)
Cash flows from financing activities:
Repayments of debt (252)
Proceeds from issuance of common stock 333
Cash dividends on preferred stock (61)
Net cash provided by financing activities 20
Net decrease in cash and cash equivalents (35)
Cash and cash equivalents at beginning of period 520
Cash and cash equivalents at end of period $ 485
=====
(3) ACQUISITIONS
On September 4, 1998 the Company acquired Golden Genesis do Brazil Energy
Renovavel, Ltda. ("GGB"), a corporation organized under the laws of the
Federative Republic of Brazil. The acquisition was structured as a stock
purchase with GGB becoming a wholly owned subsidiary of the Company. GGB was
purchased from GTC, the Company's majority shareholder and ACX, GTC's parent
corporation. The purchase was accounted for as a transfer of the assets and
liabilities of GGB from GTC and ACX to the Company. As of the date of purchase
GGB had net liabilities of approximately $120,000. The aggregate
consideration, in addition to liabilities assumed, paid by the Company in
connection with this purchase was a one-year note payable to GTC in the amount
of $5,000. Goodwill of $159,000 transferred to the Company related to GGB is
being amortized over 20 years using the straight line method. The amount of
purchase price in excess of ACX's and GTC's historical net book value of GGB
was recorded by the Company as an adjustment to additional paid-in capital.
On September 4, 1998 the Company acquired Solartec Sociedad Anonima
("Solartec"), a corporation organized under the laws of the Republic of
Argentina. The acquisition was structured as a stock purchase with Solartec
becoming a wholly owned subsidiary of the Company. Solartec was purchased from
GTC and ACX. The purchase was accounted for as a transfer of the net assets
and liabilities of Solartec from GTC and ACX to the Company. The aggregate
consideration paid by the Company in connection with this purchase was a one-
year note payable to GTC in the amount of $3,600,000. Goodwill of $2,026,000
transferred to the Company related to Solartec is being amortized over 20
years using the straight-line method. The amount of purchase price in excess
of ACX's and GTC's historical net book value of Solartec was recorded by the
Company as an adjustment to additional paid-in capital.
On July 21, 1998 the Company acquired Remote Power, Inc. ("RPI"), a Colorado
corporation. RPI, headquartered in Westminster, Colorado, is a distributor
and systems integrator utilizing solar electric systems for customers
primarily within the oil and gas and railroad industries. The acquisition was
structured and accounted for as a stock purchase with RPI becoming a wholly
owned subsidiary of the Company. The aggregate consideration paid by the
Company in connection with this purchase was $490,000. The Company issued
150,000 shares of its Common Stock valued at $370,000 and paid $120,000 in
cash. The excess of purchase price over the fair market value of net assets
acquired of $474,000 is being amortized over 20 years using the straight-line
method.
On January 23, 1998 the Company acquired Silicon Energy Corporation, a
California corporation doing business as Utility Power Group ("UPG"). UPG,
headquartered in Chatsworth, California, functions as a value added systems
integrator of solar electric products, specializing in on-grid and off-grid
solar and hybrid power systems. The acquisition was structured as a merger
with Utility Power Group, Inc., a wholly owned subsidiary of the Company, as
the surviving corporation. The aggregate consideration paid by the Company in
connection with this merger was $1,250,000. The Company issued 400,000 shares
of its Common Stock valued at $650,000 and paid $600,000 in cash. The
Company's principal stockholder financed the cash portion of the merger. The
acquisition of UPG was accounted for as a
<PAGE> E-31
purchase and has been included in
the Company's results of operations since January 23, 1998. The excess of
purchase price over the fair market values of net assets acquired of
$1,210,000 is being amortized over 20 years using the straight-line method.
The following unaudited pro forma information has been prepared assuming that
the Solartec and UPG acquisitions had occurred on January 1, 1997. The pro
forma information does not include the effects of the acquisitions of RPI and
GGB. The effect of these acquisitions net of adjustments for non recurring
transactions adjusted out of these acquisitions financial statement is not
material to the Company's financial statements. The pro forma information
includes adjustments for increased interest expense related to new borrowings
at applicable rates for the purchase and amortization expense for goodwill
purchased. The pro forma financial information is presented for informational
purposes only and may not be indicative of the results of operations as they
would have been had the transaction actually been effected on January 1, 1997,
nor is it necessarily indicative of the results of operations which may occur
in the future.
(In thousands Year Ended
except per share data) December 31,
--------------------
1998 1997
(unaudited) (unaudited)
-------- --------
Sales, net $46,692 $41,162
======= =======
Net income (loss) $(1,674) $ (914)
======= =======
Net income (loss) per basic and
diluted share of common stock $ (0.10) $ (0.06)
======= =======
On February 2, 1996, the Company acquired all of the assets, excluding certain
accounts receivable, of Solarjack Manufacturing, Inc. ("Solarjack"), a solar
electric pumping products manufacturer located in Safford, Arizona. The
aggregate consideration paid by the Company in connection with this acquisition
was $1,737,000. The Company paid $337,000 in cash and 560,000 shares of its
Common Stock, valued at $1,400,000. The acquisition of Solarjack has been
accounted for as a purchase. The excess of purchase price over the fair market
values of net assets acquired of $1,091,000 is being amortized over 20 years
using the straight-line method.
On October 3, 1995, the Company acquired all of the assets and liabilities of
Sunelco, Inc. ("Sunelco"), a distributor of solar electric products located in
Hamilton, Montana. The aggregate consideration paid by the Company in
connection with this acquisition was $915,000. The Company issued 225,000
shares of its Common Stock, valued at $400,000, assumed Sunelco liabilities of
$457,000 and paid $58,000 in cash. The acquisition of Sunelco has been
accounted for as a purchase. The excess of purchase price over the fair market
values of net assets acquired of $458,000 is being amortized over 20 years
using the straight-line method.
In connection with the Sunelco and Solarjack acquisitions, the Company entered
into covenants not to compete with the principal owners of the acquired
companies. Pursuant to these agreements, the Company makes monthly payments
through February 2001, in a total aggregate amount of $400,000.
The accompanying consolidated statements of operations reflect the operating
results of Sunelco and Solarjack since the effective dates of the acquisitions.
Proforma unaudited consolidated operating results of the Company, Sunelco and
Solarjack for the year ended August 31, 1996, assuming the acquisitions had
occurred on September 1, 1995, would be as follows: sales, $23,615,000; net
income, $1,249,000; and basic and diluted earnings per share, $0.08 each.
These unaudited proforma results have been prepared for comparative purposes
only and include certain adjustments such as additional amortization expense as
a result of goodwill. They do not purport to be indicative of the results of
operations which actually would have resulted had the combination been in
effect on September 1, 1995 or of future results of operations of the
consolidated entities.
<PAGE> E-32
(4) OPERATING LEASES
The Company has leases covering office facilities and equipment. Total rental
expense was approximately $576,000, $366,000, $98,000 and $226,000 for the
years ended December 31, 1998 and 1997, the four months ended December 31, 1996
and the year ended August 31, 1996, respectively.
Future minimum lease payments for non-cancelable operating leases are as
follows:
(In thousands)
Years ending December 31 Amount
1999 $ 477
2000 471
2001 470
2002 470
2003 470
Thereafter 2,391
Future minimum lease payments are related primarily to the lease of the
Scottsdale facility. This lease began in March, 1998 and has a 10 year term.
Minor rate adjustments are built into the lease which are based on the Consumer
Price Index and are not to exceed 5% per year.
(5) LONG-TERM DEBT
Long-term debt consists of the following:
(In thousands) December 31, December 31,
1998 1997
Notes payable to ACX Technologies, Inc.
(a related party), variable annual interest
rate calculated at 1% below prime rate,
interest payments due quarterly, principal
due in full October 31, 2000. $4,250 $4,000
Notes payable to Golden International Inc.
(a related party), annual interest rate of 11%,
interest payments due quarterly beginning
September 1, 1999, principal payments due
quarterly beginning June 1, 2000. 527 -
Notes payable to Golden Technologies Company Inc.
(a related party), annual interest rate of 11%,
interest payments due quarterly beginning
April 15, 1999, principal payments due quarterly
beginning January 15, 2000. 243 -
Mortgage payable to Banco de Galicia y Buenos
Aires S.A., annual interest rate of 12.75%,
monthly payments of $6,943 through May 18, 2001;
collateralized by land and building. 172 -
Notes payable to Arizona Department of
Commerce, annual interest rate of 5%. - 227
Other 28 6
5,220 4,233
Current Installments 65 82
$5,155 $4,151
===== =======
Maturities of the long-term debt in years subsequent to 1998 are as follows:
1999, $65,000; 2000, $4,494,000; 2001, $240,000; 2002 $207,000; 2003 $186,000;
and thereafter, $28,000.
<PAGE> E-33
(6) INCOME TAXES
The Company did not have any income tax expense for the years ended December
31, 1998 and 1997, or the four months ended December 31, 1996. The Company's
tax benefit of $350,000 in the year ended August 31, 1996 resulted from the
recognition of a deferred tax asset.
The tax effects of temporary differences which give rise to significant
portions of the deferred tax assets (liabilities) as of December 31, 1998 and
1997, are as follows:
(In thousands) 1998 1997
Net operating loss carryforwards $3,543 $3,376
Inventory allowances 485 131
Intangible assets 164 104
Accounts receivable allowances 148 59
Depreciation and other property related 32 49
Employee benefits 24 4
Total gross deferred tax asset 4,396 3,723
Less: valuation allowance (4,046) (3,373)
Net deferred tax asset $ 350 $ 350
===== =====
The change in the valuation allowance was a net increase of $673,000 and
$196,000 for the years ended December 31, 1998 and 1997, respectively. In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets
is dependent upon generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. Based upon the
level of historical taxable income and projections for future taxable income
over the periods which the deferred tax assets are deductible, management
believes it is more likely than not that the Company will realize the deferred
tax asset, net of the valuation allowance.
The increase in the valuation allowance for the years ended December 31, 1998
and 1997 resulted primarily from generation of additional net operating loss
("NOL") carryforwards and increases in inventory and accounts receivable
reserves.
The Company has NOL carryforwards for federal income tax purposes of
approximately $8,800,000 at December 31, 1998. These NOLs expire in the years
2000 through 2018. Due to ownership changes, the Company is limited to
approximately $1,000,000 per year of net operating loss carryforwards which may
be utilized. Included in the NOL amount is approximately $1,500,000
attributable to tax deductions taken for stock options exercised, the benefit
of which will be credited to additional paid-in capital when realized.
(7) STOCK OPTION PLANS
The Company's 1998 Stock option plan (the "1998 Plan") provides for the
issuance of all ungranted or forfeited shares of all predecessor plans. The
1998 Plan replaces, on an ongoing basis, all prior plans. The Company's
predecessor plans include; the 1990 Stock Option Plan (the "1990 Plan") which
provided for the issuance of 2,895,000 shares of Common Stock, the 1996 Stock
Option Plan (the "1996 Plan") which provided for the issuance of 3,100,000
shares of Common Stock, and the Non-Employee Directors Stock Option Plan (the
"Directors Plan") which provided for the issuance of 100,000 shares of Common
Stock.
Options granted under the 1990 and 1998 Plans may be either (i) options
intended to constitute incentive stock options ("ISOs") under the Internal
Revenue Code or (ii) non-statutory options. ISOs may be granted under the 1990
Plan to employees and officers of the Company. Options granted under the 1996
Plan and the Directors Plan are non-statutory options.
The stockholders approved the 1998 plan at the annual stockholders meeting held
on May 27, 1998. The Board of Directors administers the 1998 Plan. The board
<PAGE> E-34
determines and designates from time to time those employees of the Company to
whom options are to be granted.
As a part of the 1998 Plan, the stockholders approved grants to outside
directors ("Director Grants"). Under the former Directors Plan and Directors
Grants under the 1998 Plan, non-employee members of the Board of Directors are
granted 10,000 options to acquire shares when they become a member of the board
and 3,000 options to acquire shares annually upon meeting certain requirements.
The options are immediately 25% vested, become 50% vested on the first
anniversary of grant and 100% vested on the second anniversary of grant. The
exercise price is set at the stock price on the date of grant.
ISOs granted under the 1990 and 1998 Plans may not be granted at a price less
than the fair market value of the common stock on the date of grant (or less
than 110% of fair market value in the case of employees or officers holding 10%
or more of the voting stock of the Company). The aggregate fair market value
of shares for which ISOs are granted to any employee exercisable for the first
time by such employee may not exceed $100,000. The options generally become
exercisable over a four year period, and ultimately lapse if unexercised at the
end of ten years.
Except for options granted to employees in 1998, options vest based upon the
anniversary of the date of each grant. Generally, a portion of the options
vest starting after the first anniversary and become fully vested between the
third and fifth anniversary. The 1998 options vest based on the Company's
performance. A portion of the options vest when the Company's Earnings Per
Share ("EPS") reaches $0.07 and become fully vested when the Company's EPS
reaches $0.13. All options become fully vested on or before the seventh
anniversary of their grant.
Activity under the Company's stock option plans is as follows:
Number of Shares Option Price
Incentive Non-Statutory Per Share
Outstanding August 31, 1995 540,500 1,107,000 $0.75-$1.88
Granted 207,000 315,000 $2.75
Exercised (111,085) (280,000) $0.75-$1.88
Canceled (32,375) - $0.75-$2.75
Outstanding August 31, 1996 604,040 1,142,000 $0.88-$2.75
Granted - 36,000 $2.69
Exercised (60,000) (500,000) $0.88-$1.88
Canceled - -
Outstanding December 31, 1996 544,040 678,000 $0.88-$2.75
Granted 90,000 1,852,000 $1.69-$3.09
Exercised (45,000) (15,000) $0.88-$1.88
Canceled (37,350) (597,000) $0.88-$2.75
Outstanding December 31, 1997 551,690 1,918,000 $0.88-$3.09
Granted - 672,373 $1.63-$2.13
Exercised - (2,500) $1.63-$1.69
Canceled (84,136) (644,174) $1.00-$3.09
Outstanding December 31, 1998 467,554 1,943,699 $0.88-$2.94
======= =========
At December 31, 1998, 1997 and 1996 and August 31, 1996, options to purchase
1,621,333, 1,453,915, 812,207, and 796,041 shares, respectively, were
exercisable at prices ranging from $0.88 to $2.94.
At December 31, 1998 the plans had the following options outstanding:
Shares Exercise price Weighted average Weighted average
range exercise price remaining life
86,125 $0.88 - $1.25 $1.05 2.90
1,235,478 $1.63 - $2.44 $1.72 7.34
1,089,650 $2.46 - $2.94 $2.58 7.05
2,411,253
=========
<PAGE> E-35
At December 31, 1998 the plans had the following options exercisable:
Shares Exercise price Weighted average
range exercise price
86,125 $0.88 - $1.25 $1.05
587,415 $1.63 - $2.44 $1.81
947,793 $2.46 - $2.94 $2.59
1,621,333
=========
All options granted under any plan are non-transferable during an optionee's
lifetime (except as noted below), but are transferable at death by will or by
laws of descent and distribution or disability. Options granted terminate
within a specified period of time following termination of an optionee's
employment or position as a director or consultant with the Company (except as
noted below).
On June 18, 1997, the Company entered into severance agreements with two former
executives that included amending certain option agreements by allowing them to
be transferable. As a result, 500,000 options were transferred to Programmed
Land, Inc., a corporation controlled by certain Directors of the Company, and
400,000 options were transferred to certain Directors of the Company. At
December 31, 1997 these options were included in the outstanding non-statutory
options. A separate option agreement was amended to permit immediate vesting at
termination and extended the exercise period after termination. In connection
with the severance agreements, the Company recorded a non-cash $650,000
compensation charge related to stock option activity.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
stock option plans. If the Company had elected to recognize compensation cost
based on the fair value of the options at grant date as allowed by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," compensation expense of $518,000, $563,000, $103,000, and
$312,000 would have been recorded for the years ended December 31, 1998 and
1997, the four months ended December 31, 1996 and the year ended August 31,
1996, respectively. Net income (loss) and earnings per share would have been
reduced to the pro forma amounts indicated below:
Four months
Years ended ended Year ended
December 31, December 31, August 31,
(In thousands) 1998 1997 1996 1996
Net income (loss)
As reported $(1,482) $ (525) $(1,389) $1,148
Pro forma (2,000) (1,088) (1,492) 836
Earnings (loss) per share
As reported - Basic (0.09) (0.03) (0.10) 0.08
As reported - Diluted (0.09) (0.03) (0.10) 0.07
Pro forma - Basic (0.12) (0.07) (0.10) 0.05
Pro forma - Diluted (0.12) (0.07) (0.10) 0.05
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: (i)
dividend yield of 0%; (ii) expected volatility of 51%; (iii) risk-free
interest rate ranging from 5.2% to 5.4%; and (iv) expected life of 2.40 to 5.40
years. The weighted average per share fair value of options granted during the
years ended December 31, 1998 and 1997, the four months ended December 31, 1996
and the year ended August 31, 1996 was $0.77, $0.56, $0.69, and $0.92,
respectively.
(8) STOCKHOLDERS' EQUITY
The $5.00 Series A Preferred Stock was convertible on the basis of four common
shares per preferred share. The cumulative 12% dividend ($0.60 per share) was
payable in cash. The Company had the right to redeem the outstanding preferred
stock at any time for $5.00 per share. The preferred stock had voting rights
based upon the common stock conversion rate. During the years ended December
31, 1998 and 1997, the four months ended December 31, 1996 and the year ended
August 31, 1996 the Company paid cash dividends of $2,000, $18,000, $44,000 and
$52,000 respectively. During the year ended December 31, 1998, 38,927 shares
were converted to 155,888 common shares in accordance with the common stock
conversion rights of the
<PAGE> E-36
agreement. During the four months ended December 31,
1996 71,000 shares were converted to 284,000 common shares in accordance with
the common stock conversion rights of the agreement. At December 31, 1998
there are no shares of Series A Preferred Stock outstanding.
The $6.00 Series AA Convertible Preferred Stock was convertible on the basis of
four common shares per preferred share. The cumulative 11% cash dividend
($0.66 per share) was payable quarterly. The Company had the right to redeem
the outstanding preferred stock at any time after the fifth anniversary of the
date of issuance of the shares for $6.00 per share. The Series AA Preferred
Stock had voting rights based upon the common stock conversion rate. During the
years ended December 31, 1998 and 1997, the four months ended December 31, 1996
and the year ended August 31, 1996 the Company paid cash dividends of $2,000,
$23,000, $24,000 and $40,000, respectively. During the year ended December 31,
1998, 44,165 shares were converted to 176,660 common shares, during the year
ended December 31, 1997, 8,400 shares were converted to 33,600 common shares
and during the year ended August 31, 1996, 16,800 shares were converted to
67,200 common shares in accordance with the common stock conversion rights of
the agreement. At December 31, 1998 there are no shares of Series AA Preferred
Stock outstanding.
NWP owned 6,612,447 shares of Common Stock at August 31, 1996 which represented
approximately 46.2% of the issued and outstanding shares of Common Stock and
approximately 44.2% of the total voting shares of the Company.
On November 21, 1996, the Company entered into an agreement with GTC and NWP
(the "Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement,
GTC acquired NWP's 44% interest in the Company, and NWP and the Company
terminated all of its rights and options pursuant to a November 9, 1993 stock
purchase agreement between NWP, Westinghouse, PLI and Robert R. Kauffman, the
Company's former president. GTC also acquired from the Company 1,000,000
shares of unregistered common stock for $2.75 per share. In conjunction with
the Stock Purchase Agreement, GTC also acquired an additional 1,000,000 common
shares held by related parties of the Company at $2.75 per share.
The Company granted demand registration rights to GTC covering the shares
purchased from NWP and the Company and all other shares they may own, as long
as GTC pays 50% of the costs of any demand registration. In addition, GTC has
the preemptive right to subscribe for its proportionate share of all future
equity offerings of the Company provided that GTC owns at least 20% of the
issued and outstanding stock of the Company or 6,000,000 shares. GTC is a
wholly owned subsidiary of ACX Technologies, Inc., a New York Stock Exchange
company.
On June 18, 1997 the Company entered into a settlement agreement with Robert
R. Kauffman. Pursuant to this agreement, GTC acquired the rights to an
additional 197,000 common shares and 75,763 preferred shares. Each of the
preferred shares are convertible to four common shares for an additional
303,052 equivalent common shares. As collateral for a loan in the settlement
agreement GTC acquired the voting rights to an additional 500,000 shares. As
of December 31, 1998, GTC owned or had the voting rights to approximately 55%
of the issued and outstanding shares of Common Stock of the Company.
(9) EARNINGS PER SHARE
The following is a reconciliation between basic and diluted earnings per common
share.
(Dollars in thousands) Year ended Year ended
December 31, December 31,
1998 1997
Income EPS Shares Income EPS Shares
Net loss $ (1,452) $ (525)
Preferred stock
dividends $ (2) $ (42)
Basic EPS $ (1,454) $(0.09) 16,721,959 $ (567) $(0.03) 16,215,919
<PAGE> E-37
Effect of dilutive
securities - - - - - -
Diluted EPS $ (1,454) $(0.09) 16,721,959 $ (567) $(0.03) 16,215,919
Four months
ended Year ended
August 31, August 31,
1996 1996
Income EPS Shares Income EPS Shares
Net income(loss)$ (1,389) $ 1,148
Preferred stock
dividends $ (68) $ (92)
Basic EPS $ (1,457) $(0.10) 14,906,251 $ 1,056 $0.08 13,917,490
Effect of dilutive
securities:
Stock options - - - - - 617,654
Diluted EPS $ (1,457) $(0.10) 14,906,251 $ 1,056 $0.07 14,535,144
Options to purchase 2,411,253 shares of Common Stock were outstanding at
December 31, 1998. Options to purchase 2,469,690 shares of Common Stock and
351,926 common share equivalents relating to 87,982 weighted average shares of
series A and series AA convertible preferred stock were outstanding at December
31, 1997. Options to purchase 1,222,040 shares of Common Stock and 579,148
common share equivalents relating to 144,787 weighted average shares of series
A and series AA convertible preferred stock were outstanding at December 31,
1996. Common share equivalents totaling 682,232 relating to 170,558 weighted
average shares of series A and series AA convertible preferred stock were
outstanding at August 31, 1996. These shares were not included in computation
of diluted EPS for 1998, 1997, the four months ended December 31, 1996 and the
year ended August 31, 1996 because the effect of adding the shares would
increase EPS.
(10) RETIREMENT SAVINGS PLAN
The Company has a 401(k) Retirement Savings Plan (the "Plan") which covers
certain employees 21 years of age and over who have completed ninety days of
service. Employees may voluntarily contribute up to 20% of pre-tax earnings to
the Plan, subject to a maximum IRS limit. The Company may contribute
additional amounts at its sole discretion. Company contributions to the Plan
were $96,000, $60,000, $65,000 and $36,000 for the years ended December 31,
1998 and 1997, the four months ended December 31, 1996 and the year ended
August 31, 1996, respectively.
(11) RELATED PARTIES
As of December 31, 1998 and 1997, ACX owned or had the voting rights to
approximately 55% and 58%, respectively, of the Company's Common Stock through
its wholly-owned subsidiary GTC. At December 31, 1998, ACX has loaned
$4,250,000 to the Company under a revolving credit facility. Subsequent to
December 31, 1998, the Company borrowed an additional $500,000 under this
facility. Interest accrues at 1% under the prime rate and is payable
quarterly. The principal is due October 31, 2000. (See Note 5.) The Company
has $4,250,000 principal and $80,000 of accrued interest outstanding at
December 31, 1998. The Company incurred $347,000 and $132,000 in interest
expense related to this note during the years ended December 31, 1998 and
1997, respectively.
As of December 31, 1998, the Company owed $3,600,000 under a one year note
payable to GTC. This note bears interest, payable quarterly, at 6%. The
principal is due September 3, 1999. As of December 31, 1998, the Company owed
approximately $72,000 of accrued interest under the note.
<PAGE> E-38
During the years ended December 31, 1998 and 1997, the Company purchased
$21,000 and $9,000 in goods and services from GTC, respectively. The Company
had $21,000 and $4,000 in accounts payable to GTC at December 31, 1998 and
1997, respectively.
Through September 4, 1998, the Company sold solar electric systems and related
products to GTC's subsidiaries. Sales are on equivalent terms to those
provided to non-related customers. Total sales to GTC's subsidiaries in 1998
and 1997 were $325,000 and $824,000, respectively. As of December 31, 1997,
the Company had $569,000 in receivables from GTC's subsidiaries.
The Company also purchases inventory and certain administrative services from
GTC's subsidiaries. Purchases are on equivalent terms to those provided by
non-related vendors. Total purchases during the year ended December 31, 1998
and 1997 from GTC's subsidiaries were $453,000 and $108,000, respectively. As
of December 31, 1998 and 1997, the Company had payables to GTC's subsidiaries
of $268,000 and $92,000, respectively.
Through November 1998 the Company leased approximately 10,750 square feet of
warehouse and sales office space in a building owned by Robert Kaufmann, the
Company's former President, and Thomas LaVoy, the Company's former Chief
Financial Officer. Rental expense for this lease was $66,000, $85,000, $28,000
and $80,000 for the years ended December 31, 1998 and 1997, the four months
ended December 31, 1996 and the year ended August 31, 1996, respectively. The
lease expired November 1, 1998.
Robert R. Kauffman sold 35,763 shares of Series A Convertible Preferred Stock
and 40,000 shares of Series AA Convertible Preferred Stock to GTC as a part of
the settlement agreement.
(12) Segment Information
The Company's reportable segments are based on its method of internal
reporting, which is based on a combination of product category and geographic
location. The Company's reportable segments are Distribution, Industrial and
International.
The accounting policies of the segments are the same as those described in
Note 1. The Company evaluates the performance of its segments and allocates
resources to them based primarily on operating income. Asset information and
depreciation and amortization information is not reported as the Company does
not produce such information internally.
The table below summarizes information about reported segments as of and for
the years ended:
(In thousands) Net Operating
Sales Income (Loss)
December 31, 1998
Distribution $17,624 $ 1,828
Industrial 18,908 2,032
International 6,191 354
Other 1,541 (661)
Segment total 44,264 3,553
Corporate - (4,669)
Other reconciling items (916) -
Consolidated total $43,348 $(1,116)
======= ======
December 31, 1997
Distribution $13,817 $ 1,242
Industrial 14,973 2,579
International 3,501 267
Other 1,838 (753)
Segment total 34,129 3,335
Corporate - (3,666)
<PAGE> E-39
Other reconciling items (1,300) -
Consolidated total $32,829 $ (331)
======= ======
August 31, 1996
Distribution $12,511 $ 1,306
Industrial 10,119 1,707
International - -
Other 1,514 (29)
Segment total 24,144 2,984
Corporate - (2,133)
Other reconciling items (1,149) -
Consolidated total $22,995 $ 851
====== ======
Other reconciling items in each period are intersegment sales. These sales
are recorded based on the total overhead applied to each manufacturing
segment.
The following is net sales and long-lived asset information by geographic area
as of and for the year ended:
(In thousands) Net Long-Lived
Sales Assets
December 31, 1998
United States $26,618 $7,186
Argentina 2,854 873
Brazil 2,546 70
United Kingdom 1,941 -
Israel 1,428 -
Canada 1,386 -
United Arab Emirates 1,119 -
Australia 1,094 15
Other 4,362 -
Total $43,348 $8,144
====== =====
Sales to unaffiliated customers located outside the United States aggregated
approximately $11,600,000, $1,400,000 and $4,200,000 for the year ended
December 31, 1997, the four months ended December 31, 1996 and the year ended
August 31, 1996, respectively. For the year ended December 31, 1997, sales
were approximately $1,600,000, $2,600,000, $4,700,000 and $2,700,000 in
Australia, the Middle East, North and South America, and other parts of the
world, respectively.
(13) COMMITMENTS AND CONTINGENCIES
On May 20, 1998 the Company opened an $800,000 credit facility with Norwest
Bank Arizona. The credit limit was increased to $1,600,000 on December 10,
1998. This facility is used to support the issuance of commercial and standby
letters of credit. As of December 31, 1998 the Company is contingently liable
for approximately $1,329,000 supporting standby letters of credit. The Company
will only be liable for this amount only if it does not perform as agreed on
certain contracts.
Financial instruments, which potentially expose the Company to a concentration
of credit risk, consist principally of cash and trade receivables. The Company
places substantially all of its cash with major financial institutions. The
balances , at times, may exceed federally insured limits. At December 31,
1998, the Company had approximately $406,000 which exceeded the insured limit
and approximately $542,000 in foreign banks. Approximately 30% of the
Company's accounts receivable was due from four customers at December 31, 1998.
On February 18, 1998, the Company was named as one of two dozen defendants in a
lawsuit brought in the U. S. District Court for the District of New Hampshire.
The suit alleged various violations of securities laws and breaches of
fiduciary duties, among other things. The Company was subsequently dismissed as
a defendant from the lawsuit.
<PAGE> E-40
The Company is named as a defendant in various actions and proceedings arising
in the normal course of business. In all such cases, the Company is denying
the allegations made against it and vigorously defending against them.
Although the eventual outcome of these lawsuits cannot be predicted, it is
management's opinion that these suits will not materially affect the Company's
financial position or results of operations.
Subsequent to December 31, 1998 the functional currency for GGB devalued from
R$1.21 per US dollar to R$2.04 per US dollar. This devaluation decreases the
US dollar value of the assets held in Brazil. The Company cannot determine at
this time if this devaluation will have a significant impact on the performance
of GGB, the international segment or the Company.
(14) SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands) Additions
Balance at charged to Balance
beginning costs and at end
of period expenses Deductions1 of period
Year ended
August 31, 1996:
Allowance for
doubtful accounts $ 25 $ 48 $ 47 $ 26
Reserve for obsolete
inventory 25 131 106 50
Four months ended
December 31, 1996:
Allowance for
doubtful accounts 26 16 (3) 45
Reserve for obsolete
inventory 50 411 409 52
Year ended
December 31, 1997:
Allowance for
doubtful accounts 45 104 2 147
Reserve for obsolete 52 90 40 102
inventory
Year ended
December 31, 1998:
Allowance for
doubtful accounts 147 262 325 84
Reserve for obsolete 102 886 93 895
inventory
1 Allowance for doubtful accounts: Uncollectible accounts written off, net of
recoveries from accounts previously written off.
(15) UNAUDITED QUARTERLY FINANCIAL DATA
(In thousands except per share data)
Fiscal 1996
quarter ended 11/30/95 2/29/96 5/31/96 8/31/96
Sales $ 5,281 $ 4,811 $ 5,178 $ 7,725
Gross profit 1,288 1,397 1,409 1,464
<PAGE> E-41
Net income 221 273 173 480
Net income per basic
share of common stock $ 0.01 $ 0.02 $ 0.01 $ 0.03
Net income per diluted
share of common stock $ 0.01 $ 0.02 $ 0.01 $ 0.03
Fiscal 1997
quarter ended 3/31/97 6/30/97 9/30/97 12/31/97
Sales $ 6,370 $ 7,865 $ 8,569 $10,025
Gross profit 1,495 1,285 2,175 1,954
Net income (loss) (188) (917) 478 102
Net income (loss) per basic
share of common stock $ (0.01) $ (0.06) $ 0.03 $ 0.01
Net income (loss) per diluted
share of common stock $ (0.01) $ (0.06) $ 0.03 $ 0.01
Fiscal 1998
quarter ended 3/31/98 6/30/98 9/30/98 12/31/98
Sales $ 9,792 $ 9,534 $11,859 $12,163
Gross profit 1,888 1,934 1,080 2,300
Net income (loss) 68 51 (1,300) (301)
Net income (loss) per basic
share of common stock $ 0.00 $ 0.00 $ (0.08) $ (0.02)
Net income (loss) per diluted
share of common stock $ 0.00 $ 0.00 $ (0.08) $ (0.02)
<PAGE> E-42
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On February 3, 1997, the Board of Directors of the Company, upon recommendation
of the Board's Audit Committee, appointed PricewaterhouseCoopers LLP as the
independent accountants to audit and report on the financial statements of the
Company for the transition period ended December 31, 1996 and the year ended
December 31, 1997. Also on February 3, 1997, at the recommendation of the Audit
Committee, the Board of Directors dismissed KPMG LLP as its independent
accountants.
The reports of KPMG LLP on the financial statements for the fiscal years ended
August 31, 1996 and 1995 contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principle.
The Company provided notice to KPMG LLP on February 6, 1997 and filed a Form
8-K on February 7, 1997 in accordance with Item 304 of Regulation S-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The following table sets forth certain information regarding the Board of
Directors as of March 5, 1999.
Director Current Position(s)
Age Since(1) with the Company
John K. Coors 42 1996 Chairman and Director
Joseph Coors, Jr. 57 1998 Director
Jed J. Burnham (2) 54 1997 Director
Norman E. Miller (3) 60 1997 Director
Gerritt J. Wolfaardt(2)(3) 52 1997 Director
John Markle(2) 43 1998 Director
(1) The dates shown reflect the year in which these persons were first
elected as directors of the Company or its predecessors.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
The principal occupations for the past five years of each of the six directors
are set forth below.
John K. Coors. Dr. John Coors has served as Chairman of the Company since
October 1998 and as a director of the Company since November 1996. He served
as President and Chief Executive Officer of the Company from January 1997 to
October 1998. He has served as President of Golden International, Inc., a
wholly owned subsidiary of ACX (Golden International), since July 1992. Dr.
John Coors is also a director of ACX. Dr. Coors received a B.S. in Chemical
and Petroleum Refining Engineering from the Colorado School of Mines, a M.S.
in Biochemistry from the University of Texas at Austin and a Doctorate in
Engineering from the Technical University of Munich.
Joseph Coors, Jr. Mr. Joseph Coors, Jr. has served as a director of the
Company since May 1998. He has served as President of ACX, the beneficial
owner of a majority of the outstanding capital stock of the Company, since
August 1992. He served as President and Chief Executive Officer of Coors
Porcelain Company, a wholly owned subsidiary of ACX ("Coors Ceramics"), from
March 1997 to October 1998, and as Chairman of the Board of Directors of Coors
Ceramics since 1989. Mr. Joseph Coors, Jr. is also a director of ACX and
Hecla Mining Company.
<PAGE> E-43
Jed J. Burnham. Mr. Burnham has served as a director of the Company since
November 1996. He served as Chairman of the Board of the Company from May 1998
to October 1998. He has served as Chief Financial Officer of ACX since March
1995 and as Treasurer of ACX since August 1992.
Norman E. Miller. Mr. Miller has served as a director of the Company since
August 1997. He has served as Chairman of Interstate Battery System of
America, Inc., a wholesaler of automotive batteries, since 1963.
Gerritt J. Wolfaardt. Mr. Wolfaardt has served as a director of the Company
since January 1997. He has served as Director, Economic Development in
Africa, for Development Associates International, an organization to
facilitate economic progress and leadership in developing nations, since
August 1997 and President of Global Marketrace Services Inc., an economic
development consulting service, since October 1996. Mr. Wolfaardt was a
Missionary/Base Director for Youth With a Mission, an international missionary
training and development program of the University of Nations in Cape Town,
South Africa, from April 1986 to July 1997.
John Markle. Mr. Markle has served as a director of the Company since May
1998. He has served as Senior Vice President of Operations, Western Region
for Rental Service Corporation, a construction equipment rental and sale
company, since January 1998. Mr. Markle was President of Center Rental and
Sales, Inc., a construction equipment rental and sale company, from 1987 to
December 1997.
Family Relationships
Joseph Coors, Jr. and John K. Coors are brothers. In addition, Joseph Coors,
Jr. and John K. Coors are both brothers of Jeffrey H. Coors and nephews of
William K. Coors, all of whom serve on the Board of Directors of ACX, the
parent of GTC, the Company's majority stockholder.
Executive Officers
The following table sets forth as of the date hereof the executive officers of
the Company as of March 5, 1999.
Name Age Position
J. Michael Davis 52 President and Chief
Executive Officer
Jeffrey C. Brines 41 Vice President, Chief
Financial Officer and
Secretary
Myron D. Anduri 43 Vice President - Industrial
Thomas P. Dyer 57 Vice President - International
Ronald Kenedi 51 Vice President - Distribution
Michael Stern 41 Vice President - Utilities
Donald E. Anderson 66 Vice President
J. Michael Davis. Mr. Davis has served as President and Chief Executive
Officer since March 1999. He served as Vice President of the Company since
February 1997 and as Chief Operating Officer of the Company since May 1997.
He was Vice President-Marketing of GTC from July 1993 to January 1997 and
Assistant Secretary of the United States Department of Energy from June 1989
to January 1993. Mr. Davis received a B.S. in Civil Engineering from the
United States Air Force Academy and a M.S. in Civil Engineering from the
University of Illinois.
Jeffrey C. Brines. Mr. Brines has served as Vice President, Chief Financial
Officer and Secretary of the Company since January 1997. He has served as
Vice President - Finance of Golden International since September 1996. Mr.
Brines was a Plant Manager of Golden Photon, Inc. ("Golden Photon," the
predecessor of Golden International), a solar module manufacturer and a wholly
owned subsidiary of GTC, from January 1995 to August 1996 and Controller of
Golden Photon from October 1993 to December 1994. Mr. Brines worked at Coors
Brewing Company from August 1980 to September 1993, where his last position was
Manager of Finance and Accounting. Mr. Brines received a B.S. in Accounting and
a M.B.A. from Regis University.
Myron D. Anduri. Mr. Anduri has served as Vice President - Industrial of the
<PAGE> E-44
Company since January 1999, prior to which he was Vice President - Marketing
and Sales from January 1994 to January 1999, prior to which he was Vice
President - Industrial Division of the Company from 1989 to 1994 and Manager -
Industrial Division of the Company from 1987 to 1989. Mr. Anduri received his
B.A. in Economics from Colorado State University.
Thomas P. Dyer. Mr. Dyer has served as Vice President - International of the
Company since January 1999, prior to which he was Vice President -
Manufacturing and Operations of the Company from August 1997 to January 1999.
Mr. Dyer served as Operations Manager of the Company from May 1997 to August
1997 and Marketing Coordinator and Manager of New Business Development of the
Company from January 1996 to May 1997. He served as a consultant for his own
consumer sales and marketing consulting company, TPD Consulting Services, from
1990 to 1996. Mr. Dyer worked at Arco Solar/Siemens Solar Industries, a
manufacturer of solar electric modules, from 1977 to 1990, where his last
position was Vice President of Sales and Marketing.
Ronald Kenedi. Mr. Kenedi has served as Vice President - Distribution of the
Company since June 1989, prior to which he was Manager - Distribution Division
of the Company since June 1988. From 1985 to 1988 Mr. Kenedi managed the
Company's mail order division and dealer development business. From 1976 to
1985 Mr. Kenedi was the co-owner and operator of Independent Power Company, a
solar electric company that was acquired by the Company. Mr. Kenedi received
his B.S. in Psychology and Fine Arts from the State University of New York at
Stonybrook.
Michael Stern. Mr. Stern has served as Vice President - Utilities of the
Company since January 1998. He was President of Silicon Energy Company, a
company which he founded, from its establishment in 1985 until it was acquired
by the Company in January 1998. Prior to starting Silicon Energy Company, Mr.
Stern worked at Arco Solar from 1980 to 1985, where his last position was
Manufacturing Manager. Mr. Stern received his B.E. from UCLA.
Donald E. Anderson. Mr. Anderson has served as Vice President of the Company
since January 1997. He served as a director of the Company from 1981 to May
1998 and Chairman of the Board of Directors of the Company from 1981 to
January 1997. Mr. Anderson received his B.A. form Minneapolis Business
College.
<PAGE> E-45
Item 11. Executive Compensation
<TABLE>
<CAPTION>
Summary Compensation Table
The following table sets forth certain information concerning the compensation paid during the periods
indicated to the Chief Executive Officer and the four other most highly compensated officers of the Company
whose combined salary and bonus exceeded $100,000 during the fiscal year ended December 31, 1998 (the "Named
Executive Officers").
Long Term
Compensation
Awards
Annual Securities
Compensation Underlying All Other
Name and Principal Position Year(1) Salary Bonus Options Compensation
<S> <C> <C> <C> <C> <C>
J. Michael Davis 1998 $157,731 $ - 100,000 $ 20,641(2)
President and Chief 1997 133,769 25,560 125,000 1,333(3)
Executive Officer
Jeffrey C. Brines 1998 115,077 - 100,000 19,439(2)
Executive Vice President, 1997 97,615 24,059 125,000 10,000(3)
Chief Financial Officer and
Secretary
John K. Coors(4) 1998 121,038 - 200,000 13,325(2)
Former President and Chief 1997 139,673 25,560 250,000 6,000(3)
Executive Officer
(1) The Company's 1996 fiscal year ended August 31.
(2) Other compensation for Mr. Davis in 1998 represents the Company's contributions to the 401(k) Plan for
his benefit and automobile allowance of $5,000 and $12,000, respectively. Other compensation for Mr. Brines
in 1998 represents Company's contributions to the 401(k) Plan for his benefit and automobile allowance of
$3,798 and $12,000, respectively. Other compensation for Mr. Coors in 1998 represents automobile allowance
of $10,000.
(3) Other compensation for Coors, Brines and Davis in 1997 represents in each case an automobile allowance.
(4) Mr. Coors resigned as President and Chief Executive Officer on October 7, 1998.
</TABLE>
<PAGE> E-46
<TABLE>
<CAPTION>
Option Grants
The following table sets forth information with respect to grants of stock options to each of the Named
Executive Officers during the year ended December 31, 1998.
Potential Realized
Percent of Value at
Number of Total Assumed Annual
Securities Options Rates of Stock
Underlying Granted to Price Appreciation
Options Employees in Exercise for Option Term
Name Granted Fiscal Year Price Grant Date Expiration Date 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
J. Michael Davis 100,000 14.9 $1.625 1-27-98 1-27-08 $102,195 $258,983
Jeffrey C. Brines 100,000 14.9 $1.625 1-27-98 1-27-08 $102,195 $258,983
John K. Coors 200,000 29.7 $1.625 1-27-98 1-27-08 $204,391 $517,966
The options vest based on Company performance. The first third of the options vest when the Company reaches
$0.07 earnings per share, the second third vest when the Company reaches $0.10 earnings per share and the
final third vest when the Company reaches $0.13 earnings per share.
Aggregate Option Exercises and Fiscal Year-End Values
The following table sets forth information with respect to the Named Executive Officers concerning the
exercise of options during fiscal year ended December 31, 1998, the number of securities underlying
unexercised options at the 1998 year-end and the year-end value of all unexercised in-the-money options held
by such individuals.
Shares Value of Unexercised
Acquired Number of Unexercised In-the-Money Options
on Value Options at Fiscal Year-End at Fiscal Year-End(1)
Exercise(2) Realized Exercisable Unexercisable Exercisable Unexercisable
J. Michael Davis - $ - - 100,000 $ - $ -
Jeffrey C. Brines - - - 100,000 - -
John K. Coors - - 10,000 200,000 - -
(1) Represents the difference between the exercise price and the closing price for the Common Stock on the
NASDAQ SmallCap Market at December 31, 1998. At December 31, 1998 none of the options held by any of the
Named Executive Officers were in-the-money.
(2) None of the Named Executive Officers exercised options during the year ended December 31, 1998.
</TABLE>
Stock Option Plans
On April 24, 1998, the Board of Directors adopted the Photocomm, Inc. 1998 Stock
Option and Incentive Plan (the "1998 Plan"). The stockholders of the Company
subsequently approved the 1998 Plan. The Plan is administered by the
Compensation Committee (the "Committee") of the Board of Directors.
The maximum number of shares of Common Stock for which awards may be made under
the 1998 Plan is (a) 1,305,828, which is comprised of shares of Common Stock
represented by shares reserved under any prior stock option plan of the Company
plus (b) any shares of Common Stock that are represented by awards granted under
any prior stock option plan of the Company which are forfeited or expire without
delivery of shares of Common Stock. No more than 20,000 shares of Common Stock
may be issued pursuant to awards of restricted stack or restricted stock units.
The maximum number of shares of Common Stock for which options may be granted to
any eligible person under the 1998 Plan is 250,000 per year. The maximum number
of shares of Common Stock which may be granted as restricted stock or restricted
stock units to any eligible person under the 1998 Plan is 500 per year.
The Committee will have discretion to grant options, restricted stock or
restricted stock units under the 1998 Plan to (i) employees (including officers
and directors) of the Company and of any "subsidiary" of the Company (within the
meaning of Section 424(f) of the Code) (ii) any consultant or adviser to the
Company and (iii) any non-employee directors.
All options granted under the 1998 Plan are intended to be treated as
nonstatutory stock options, unless the Committee specifically designates a stock
option as an ISO within the limitations of the 1998 Plan. For both ISOs and
nonstatutory options granted under the 1998 Plan, the exercise price per share
(the "Option Price") is equal to 100% of the fair market falue of a share of
Common Stock on the date of grant (but not less than the par value per share).
The Option Price of ISO's to any participant owning more than 10% of the
Company's outstanding voting stock on the date of grant must be at least equal
to 110% of the fair market value on such date.
Unless otherwise provided in the agreement evidencing the grant of an option,
each option under the 1998 Plan will generally vest over a three-year period
from the date of grant at the rate of one-third per year. Options are subject
to acceleration of vesting under certain circumstances or in the descretion of
the Committee.
<PAGE> E-47
Directors' Compensation
Directors of the Company who are also employees of the Company or its parent
receive no director's fees. Non-employee directors receive directors fees of
$1,000 for each Board meeting attended in person and, annually, $6,000 to
serve on one committee or $9,000 to serve on two committees. In addition,
directors are reimbursed for their reasonable out-of-pocket travel
expenditures incurred. Non-employee directors of the Company are also eligible
to receive grants of stock options under the Company's Directors Stock Option
Plan (the "Directors Plan") and starting in 1998 under the 1998 Stock Option
and Incentive Plan (the "1998 Plan").
The Directors Plan was adopted by the Board of Directors and approved by the
stockholders in January 1996. Under the Directors Plan, 100,000 shares of
Common Stock were initially reserved for purchase pursuant to options (subject
to adjustment for certain events, such as recapitalizations or stock splits,
effected without consideration) for grants to directors of the Company who are
not officers or employees of the Company (each an "Eligible Director"). The
1998 Plan replaces the Director plan on an ongoing basis. All ungranted
shares of Common Stock reserved under the Directors Plan were transferred to
the 1998 Plan. Under the 1998 Plan, each Eligible Director who commences
service as a director is granted an initial option to purchase 10,000 shares
of Common Stock. Each such Eligible Director is also granted an additional
option to purchase 3,000 shares of Common Stock immediately after the annual
meeting of the shareholders of each year if the Eligible Director continues to
be an Eligible Director at such time and has attended 75% of the meetings held
by the Board of Directors over the prior 12 month period or, if shorter,
during the term during which such Eligible Director has served as director at
least 75% of the meetings of the Board of Directors on which such Eligible
Director serves during such time. The stockholders of the Company approved the
1998 Plan in May 1998, which incorporates terms substantially similar to the
Directors Plan with respect to non-employee directors and allows for shares
reserved for issuance under the 1998 Plan to be used for option grants to such
directors. Subsequent to the approval of the 1998 Plan there have been no
further grants of options under the Directors Plan.
Other than the compensation described above, none of the directors received
any other compensation from the Company in 1998 in connection with their
service as directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 5, 1999 by each Named Executive
Officer, director and all directors and executive officers as a group.
Beneficial Ownership(1)(2)
Number of
Name of Beneficial Owner Shares Percent
J. Michael Davis 4,500(3) *
Jeffrey C. Brines 5,000(3) *
John K. Coors 16,000(3)(4)(5) *
Joseph Coors, Jr. 2,500(4)(6) *
Jed J. Burnham 11,500(7) *
Norman E. Miller 11,000(8) *
Gerritt J. Wolfaardt 11,500(9) *
John Markle 2,500(10) *
Directors and executive officers
as a group (13 persons) 1,235,708 6.8%
<PAGE> E-48
* Less than one percent.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be a "beneficial owner" of a security if he or she has or shares the
power to vote or direct the voting of such security or the power to dispose or
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has the right to
acquire beneficial ownership within 60 days of March 5, 1999. More than one
person may be deemed to be a beneficial owner of the same securities. The
percentage ownership of each stockholder is calculated based on the total number
of outstanding shares of Common Stock as of the Record Date and those shares of
Common Stock that may be acquired by such stockholder within 60 days of March 5,
1999. Consequently, the denominator for calculating such percentage may be
different for each stockholder.
(2) This table is based upon information supplied by directors and executive
officers of the Company. Unless otherwise indicated in the footnotes to this
table, each of the stockholders named in this table has sole voting and
investment power with respect to the shares shown as beneficially owned.
(3) During 1998 Mr. Davis, Mr. Brines and Mr. Coors without consideration
forfeited options to purchase shares of common stock of 125,000, 125,000 and
250,000, respectively.
(4) Does not include shares of Common Stock and Preferred Stock beneficially
owned by ACX. Joseph Coors, Jr. and John K. Coors are both directors of ACX,
and John K. Coors is a President, of Coors Ceramics, a wholly owned subsidiary
of ACX. In addition, Joseph Coors, Jr. is a co-trustee of one or more family
trusts that collectively own approximately 46 percent of the outstanding
common stock of ACX. As of March 5, 1999, ACX beneficially owned 9,429,379
shares of Common Stock of the Company, representing approximately 55% of the
voting power of the Common Stock outstanding at that date.
(5) Includes 10,000 shares of Common Stock that may be purchased pursuant to
options exercisable within 60 days of March 5, 1999.
(6) Includes 2,500 shares of Common Stock that may be purchased pursuant to
options exercisable within 60 days of March 5, 1999.
(7) Does not include shares of Common Stock and Preferred Stock beneficially
owned by ACX. Mr. Burnham is Chief Financial Officer and Treasurer of ACX.
Includes 11,500 shares of Common Stock that may be purchased pursuant to
options exercisable within 60 days of March 5, 1999.
(8) Includes 5,000 shares of Common Stock that may be purchased pursuant to
options exercisable within 60 days of March 5, 1999.
(9) Includes 11,500 shares of Common Stock that may be purchased pursuant to
options exercisable within 60 days of March 5, 1999.
(10) Includes 2,500 shares of Common Stock that may be purchased pursuant to
options exercisable within 60 days of March 5, 1999.
Principal Holders of Voting Securities
The following table sets forth information as of March 5, 1999 with respect to
the ownership of shares of capital stock of the Company by each person
believed by management to be the beneficial owner of more than five percent of
the Company's outstanding Common Stock. The information is based on the most
recent Schedule 13D or 13G filed with the SEC on behalf of such persons or
other information made available to the Company. Except as otherwise
indicated, the reporting persons have stated that they possess sole voting and
<PAGE> E-49
sole dispositive power over the entire number of shares reported.
Amount and
Nature of Percent of
Beneficial Class
Name of Beneficial Owner Class of Stock Ownership Outstanding
ACX Technologies, Inc. Common Stock 9,429,379(1) 55.0%
16000 Table Mountain Parkway
Golden, CO 80403
Programmed Land Incorporated Common Stock 1,550,000(2) 8.8%
9414 E San Salvador Dr Ste 99
Scottsdale AZ 85258
(1) Includes the voting rights to 500,000 shares pledged to ACX as a part of
ACX's loan agreement with Mr. Kauffman.
(2) Includes 500,000 shares of Common Stock that may be purchased pursuant to
options exercisable within 60 days of March 5, 1999.
Item 13. Certain Relationships and Related Transactions
Joseph Coors, Jr. and John K. Coors are both directors of ACX, the parent of
GTC, the Company's majority stockholder. Jed J. Burnham is an executive
officer of ACX. Joseph Coors, Jr. is a co-trustee of one or more family
trusts that collectively own approximately 46 percent of the outstanding
common stock of ACX. Joseph Coors, Jr. and John K. Coors are brothers.
As of the Record Date, ACX owned or had the voting rights to approximately 55%
of the Company's Voting Stock directly or indirectly through its wholly owned
subsidiary GTC.
The Company has extablished an unsecured, $4,750,000 line of credit (the "Line
of Credit") with ACX pursuant to a Loan Agreement entered into between the
Copmpany and ACX dated as of November 30, 1997. At December 31, 1998, ACX has
loaned $4,250,000 to the Company under the Line of Credit. Subsequent to
December 31, 1998, the Company borrowed an additional $500,000 under the Line
of Credit. Interest accrues at 1% under the prime rate and is payable
quarterly. The principal is due October 31, 2000. The Company has $4,250,000
principal and $80,000 of accrued interest outstanding at December 31, 1998.
The Company incurred $347,000 and $132,000 in interest expense related to this
note during the years ended December 31, 1998 and 1997, respectively.
As of December 31, 1998, the Company owed $3,600,000 under a one year note
payable to GTC. This note bears interest, payable quarterly, at 6%. The
principal is due September 3, 1999. As of December 31, 1998, the Company owed
approximately $72,000 of accrued interest under the note.
During the years ended December 31, 1998 and 1997, the Company purchased
$21,000 and $9,000 in goods and services from GTC, respectively. The Company
had $21,000 and $4,000 in accounts payable to GTC at December 31, 1998 and
1997, respectively.
Through September 4, 1998, the Company sold solar electric systems and related
products to GTC's subsidiaries. Sales are on equivalent terms to those
provided to non-related customers. Total sales to GTC's subsidiaries in 1998
and 1997 were $325,000 and $824,000, respectively. As of December 31, 1997,
the Company had $569,000 receivables from GTC's subsidiaries.
The Company also purchases inventory and certain administrative services from
GTC's subsidiaries. Purchases are on equivalent terms to those provided by
non-related vendors. Total purchases during the year ended December 31, 1998
and 1997 from GTC's subsidiaries were $453,000 and $108,000, respectively. As
<PAGE> E-50
of December 31, 1998 and 1997, the Company had payables to GTC's subsidiaries
of $268,000 and $92,000, respectively.
Through November 1998 the Company leased approximately 10,750 square feet of
warehouse and sales office space in a building owned by Robert Kaufmann, the
Company's former President, and Thomas LaVoy, the Company's former Chief
Financial Officer. Rental expense for this lease was $66,000, $85,000, $28,000
and $80,000 for the years ended December 31, 1998 and 1997, the four months
ended December 31, 1996 and the year ended August 31, 1996, respectively. The
lease expired November 1, 1998.
On July 22, 1997 the Company reached a settlement of the pending arbitration
proceedings with former executives Robert Kauffman and Thomas LaVoy. In
connection with the settlement, the Company paid Mr. Kauffman lump sum
severance, benefit and settlement payments in the aggregate amount of $638,135
and Mr. LaVoy lump sum severance, benefit and settlement payments in the
aggregate amount of $353,098. Additionally, the Company paid certain
attorney's fees of Messrs. Kauffman and LaVoy in the aggregate amount of
$65,425. As part of the settlement, Mr. Kauffman resigned from the Board of
Directors of the Company.
Pursuant to the settlement agreement with Mr. Kauffman and in accordance with
the terms of an agreement between Mr. Kauffman and ACX that was entered into
prior to the settlement, ACX purchased 197,000 shares of Common Stock, 35,763
shares of Series A Preferred Stock and 40,000 shares of Series AA Preferred
Stock at a price of $2.75 per share of Common Stock or Common Stock equivalent.
Each share of Preferred Stock was equivalent to four shares of Common Stock.
As part of the settlement agreement, ACX also made a 3 year, $2,000,000 non-
recourse loan to Mr. Kauffman secured by the remaining 1,000,000 shares of
Common Stock held by Mr. Kauffman. ACX has a proxy to vote one-half of the
shares of Common Stock held by Mr. Kauffman and used as collateral for such
loan.
As part of the settlement between the Company and Messrs. Kauffman and LaVoy,
Programmed Land, Inc., a company owned by Donald Anderson a former member of
the Company's Board of Directors, acquired from Mr. Kauffman for $375,000 in
the aggregate options to purchase 500,000 shares of Common Stock. In addition,
Mr. Anderson purchased from Mr. Kauffman for $135,000 options to purchase in
the aggregate 200,000 shares of Common Stock, and Mr. Baker purchased from Mr.
Kauffman for $135,000 in the aggregate options to purchase 200,000 shares of
Common Stock. The Company agreed to amend the terms of the options acquired
individually by Messrs. Anderson and Baker to reduce the exercise price for
such options from $2.46 per share to $2.125 per share, which was the prevailing
market price of the Common Stock on the date such options were acquired by
Messrs. Anderson and Baker.
In December 1998, ACX converted 35,763 shares of Series A Preferred Stock and
40,000 shares of Series AA Preferred Stock to a total of 303,052 shares of
Common Stock.
<PAGE> E-51
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
Exhibit
Number Description Page
3.1 Certificate of Incorporation of Golden Genesis Company
(filed as Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
3.2 Golden Genesis Company Bylaws adopted June 8, 1998.
(filed as Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
4.1 Specimen Certificate representing the Common Stock
of the Company (filed as Exhibit 4-A to the Company's
Annual Report on Form 10-KSB for the year ended August
31, 1988 and incorporated herein by reference).
4.2 Specimen Certificate representing the Series A
Convertible Preferred Stock of the Company (filed as
Exhibit 4.2 to the Company's Form S-3 dated September
19, 1994 and incorporated herein by reference).
4.3 Specimen Certificate representing the Series AA
Convertible Preferred Stock of the Company (filed as
Exhibit 4.3 to the Company's Form S-3 dated September
19, 1994 and incorporated herein by reference).
4.4 Specimen Certificate representing the Series B
Convertible Preferred Stock of the Company (filed as
Exhibit 4.4 to the Company's Form S-3 dated September
19, 1994 and incorporated herein by reference).
4.5 Registration Rights Agreement between the Company,
and Golden Technologies, Inc. and ACX Technologies,
Inc. dated November 21, 1996 (filed as Exhibit 4.5 to
the Company's Annual Report on Form 10-KSB for the year
ended August 31, 1996 and incorporated herein by reference).
10.1 Photocomm, Inc. Stock Option Plan, Non-Statutory
Stock Option Agreement and Incentive Stock Option
Agreement (filed as Exhibit 10-K to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
May 31, 1990 and incorporated herein by reference).
<PAGE> E-52
10.2 Promissory Notes, Loan Agreement, Deed of Trust,
Security Agreement dated February 4, 1991 for the
Arizona Department of Commerce loans for the
construction of the 10,000 square foot addition to
the corporate headquarters and the purchase and
construction of additional module manufacturing
equipment (filed as Exhibit 10-S to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
February 28, 1991 and incorporated herein by reference).
10.3 Convertible Preferred Stock Subscription and
Purchase Agreement with Powers, Preferences and
Rights of the Series AA Private issue in April and
May of 1993. (Filed as Exhibit 10-X to the Company's
Quarterly Report on 10-QSB for the quarter ended
May 31, 1993 and incorporated herein by reference).
10.4 Agreement and Plan of Reorganization between
Photocomm, Inc., Sunelco, Inc. and Daniel M.
Brandborg and Rebecca M. Brandborg dated October
3, 1995 (filed as Form 8-K, on October 18, 1995
and incorporated herein by reference).
10.5 Agreement and Plan of Reorganization between
Photocomm, Inc., Jadco Manufacturing and James C.
Allen dated January 31, 1996 (filed as Form 8-K on
February 14, 1996 and incorporated herein by reference).
10.6 Executive Compensation Agreement between Photocomm,
Inc. and Myron Anduri dated November 20, 1996
(filed as Exhibit 10.12 to the Company's Annual Report
on Form 10-KSB for the year ended August 31, 1996 and
incorporated herein by reference).
10.7 Executive Compensation Agreement between Photocomm,
Inc. and Donald Anderson dated November 20, 1996
(filed as Exhibit 10.13 to the Company's Annual Report
on Form 10-KSB for the year ended August 31, 1996 and
incorporated herein by reference).
10.8 Stock Purchase Agreement dated November 15, 1996
among Golden Technologies Company, Inc., The New
World Power Corporation and Photocomm, Inc. (filed
as Exhibit 10.17 to the Company's Annual Report on Form
10-KSB for the year ended August 31, 1996 and
incorporated herein by reference)
10.9 Photocomm, Inc. 1996 Stock Option Plan and Non-
Statutory Stock Option Agreement dated September
16, 1996 and November 19, 1996, respectively
(filed as Exhibit 3.3 to the Company's Annual Report
on Form 10-KSB for the year ended August 31, 1996 and
incorporated herein by reference).
10.10 Agreement and plan of merger between Photocomm, Inc. and
Silicon Energy Corporation dated January 23, 1998 (filed as
Form 8-K on February 18, 1998 and incorporated herein by
reference).
10.11 Loan agreement and promissory note between Photocomm, Inc.
and ACX Technologies, Inc. dated November 30, 1997. (filed
as Exhibit 10.11 to the Company's Annual Report on Form
<PAGE> E-53
10-K for the year ended December 31, 1997 and incorporated
herein by reference).
10.12 Settlement agreements and mutual releases between Photocomm,
Inc. and Robert R. Kauffman and Thomas C. LaVoy dated June
18, 1997 (filed as Exhibits 10.1 and 10.2 to the Company's
Quarterly Report on Form 10-QSB for the Quarter ended June
30, 1997 and incorporated herein by reference).
10.13 Agreement and Plan of Merger between Photocomm, Inc. and
Silicon Energy Corporation dated January 23, 1998 (filed
as Exhibit 2.1 to Form 8-K on February 18, 1998 and
incorporated herein by reference).
10.14 Agreement and Plan of Merger between Photocomm, Inc., an
Arizona corporation, and Golden Genesis Company, a Delaware
corporation, dated June 9, 1998. (filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 and incorporated herein by reference).
10.15 Articles of Merger of Photocomm, Inc., an Arizona corporation,
into Golden Genesis Company, a Delaware corporation, dated
June 9, 1998. (filed as Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.16 Certificate of Merger of Photocomm, Inc., an Arizona
corporation, into Golden Genesis Company, a Delaware
corporation, dated June 9, 1998. (filed as Exhibit 3.1 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 and incorporated herein by reference).
10.17 Share Purchase Agreement between Golden Genesis Company
Remote Power, Inc. and its shareholders dated July 21, 1998.
(filed as Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.18 Share Purchase Agreement between Golden Genesis Company,
Golden Technologies Company, Inc. and ACX Technologies, Inc.
dated September 4, 1998. (filed as Exhibit 2 to the Company's
Form 8-K dated September 4, 1998 and incorporated herein by
reference).
10.19 Photocomm, Inc. d/b/a Golden Genesis Company 1998 Stock Option
and Incentive Plan. 56
21 List of Subsidiaries 74
23 Consents of Independent Accountants 75
27 Financial Data Schedule 77
(b) Reports on 8-K
The following reports on Form 8-K were filed during the year ended December 31,
1998.
Form 8-K/A dated September 4, 1998 Acquisition of Solartec Sociedad Anonima,
filed November 20, 1998.
<PAGE> E-54
(c) Financial Statements: Page
Incorporated in Form 10-K Item 8. 16
(d) Financial Statement Schedule.
Schedules not listed above have been omitted because of the absence of
conditions under which they are required or because the required material
information is included in the Financial Statements or Notes to the
Financial Statements included herein.
<PAGE> E-55
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
GOLDEN GENESIS COMPANY
Date: March 31, 1999 By /s/ J Michael Davis
President &
Chief Executive Officer
Date: March 31, 1999 By /s/ Jeffrey C. Brines
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
GOLDEN GENESIS COMPANY
Date: March 31, 1999 By /s/ John K. Coors
Chairman of the Board
and Director
Date: March 31, 1999 By /s/ Joseph Coors, Jr.
Director
Date: March 31, 1999 By /s/ Jed J. Burnham
Director
Date: March 31, 1999 By /s/ Norman E. Miller
Director
Date: March 31, 1999 By /s/ Gerrit J. Wolfaardt
Director
Date: March 31, 1999 By /s/ John Markle
Director
<PAGE> E-56
EX-10
Material Contracts
EXHIBIT 10.19
PHOTOCOMM, INC.
d/b/a GOLDEN GENESIS COMPANY
1998 STOCK OPTION AND INCENTIVE PLAN
<PAGE> E-57
TABLE OF CONTENTS
Page
1. PURPOSE
2. DEFINITIONS
3. ADMINISTRATION OF THE PLAN
3.1. Board.
3.2. Committee.
3.3. Discretionary Grants.
3.4. Grants to Outside Directors.
3.5. No Liability.
3.6. Applicability of Rule 16b-3.
4. STOCK SUBJECT TO THE PLAN
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. Effective Date.
5.2. Term.
6. OPTION GRANTS
6.1. Company or Subsidiary Employees.
6.2. Successive Grants.
7. GRANTS TO OUTSIDE DIRECTORS
7.1. Initial Grants of Options.
7.2. Subsequent Grants of Options.
8. LIMITATIONS ON GRANTS
8.1. Limitation on Shares of Stock Subject to Grants.
8.2. Limitations on Incentive Stock Options.
9. AWARD AGREEMENT
10. OPTION PRICE
11. VESTING, TERM AND EXERCISE OF OPTIONS
11.1. Vesting and Option Period.
11.2. Term.
11.3. Acceleration.
11.4. Termination of Employment or Other Relationship.
11.5. Rights in the Event of Death.
11.6. Rights in the Event of Disability.
11.7. Limitations on Exercise of Option.
11.8. Method of Exercise.
11.9. Delivery of Stock Certificates.
12. TRANSFERABILITY OF OPTIONS
12.1. General Rule
12.2. Family Transfers.
13. RESTRICTED STOCK
13.1. Grant of Restricted Stock or Restricted Stock Units.
13.2. Restrictions.
13.3. Restricted Stock Certificates.
13.4. Rights of Holders of Restricted Stock.
13.5. Rights of Holders of Restricted Stock Units.
13.6. Termination of Employment or Other Relationship.
13.7. Rights in the Event of Death.
13.8. Rights in the Event of Disability.
13.9. Delivery of Stock and Payment Therefor.
14. PARACHUTE LIMITATIONS
15. REQUIREMENTS OF LAW
15.1. General.
15.2. Rule 16b-3.
16. AMENDMENT AND TERMINATION OF THE PLAN
17. EFFECT OF CHANGES IN CAPITALIZATION
17.1. Changes in Stock.
17.2. Reorganization in Which the Company Is the Surviving
Entity and in Which No Change of Control Occurs.
17.3. Reorganization, Sale of Assets or Sale of Stock
Which Involves a Change of Control.
17.4. Adjustments.
17.5. No Limitations on Company.
18. DISCLAIMER OF RIGHTS
<PAGE> E-58
19. NONEXCLUSIVITY OF THE PLAN
20. WITHHOLDING TAXES
21. CAPTIONS
22. OTHER PROVISIONS
23. NUMBER AND GENDER
24. SEVERABILITY
25. POOLING
26. GOVERNING LAW
<PAGE> E-59
PHOTOCOMM, INC.
d/b/a GOLDEN GENESIS COMPANY
1998 STOCK OPTION AND INCENTIVE PLAN
Photocomm, Inc., an Arizona corporation d/b/a Golden Genesis Company that
expects to reincorporate as a Delaware corporation upon stockholder approval at
its 1998 annual meeting (the "Company"), sets forth herein the terms of its
1998 Stock Option and Incentive Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to enhance the Company's ability to attract and retain
highly qualified officers, key employees, outside directors and other persons,
and to motivate such officers, key employees, outside directors and other
persons to serve the Company and its affiliates (as defined herein) and to
expend maximum effort to improve the business results and earnings of the
Company, by providing to such officers, key employees, outside directors and
other persons an opportunity to acquire or increase a direct proprietary
interest in the operations and future success of the Company. To this end, the
Plan provides for the grant of stock options, restricted stock and restricted
stock units in accordance with the terms hereof. Stock options granted under
the Plan may be non-qualified stock options or incentive stock options, as
provided herein, except that stock options granted to outside directors shall
in all cases be non-qualified stock options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1 "Affiliate" of, or person "affiliated" with, a person means any company
or other trade or business that controls, is controlled by or is under common
control of such person within the meaning of Rule 405 of Regulation C under the
Securities Act.
2.2 "Award Agreement" means the stock option agreement, restricted stock
agreement, restricted stock unit agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of a Grant.
2.3 "Benefit Arrangement" shall have the meaning set forth in Section 0
hereof.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Change of Control" means (i) the dissolution or liquidation of the
Company or a merger, consolidation, or reorganization of the Company with one
or more other entities in which the Company is not the surviving entity, (ii) a
sale of substantially all of the assets of the Company to another entity, or
(iii) any transaction (including without limitation a merger or reorganization
in which the Company is the surviving entity) which results in any person or
entity (other than persons who are stockholders or affiliates of the Company at
the time the Plan is approved by the Company's stockholders) owning 50% or more
of the combined voting power of all classes of stock of the Company.
2.6 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.7 "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any affiliate of the Company.
2.8 "Company" means Photocomm, Inc. d/b/a Golden Genesis Company.
2.9 "Effective Date" means April 24, 1998, the date on which the Plan was
adopted by the Board.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.11 "Fair Market Value" means the value of a share of Stock, determined as
follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on the NASDAQ National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
<PAGE> E-60
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high and low sale prices on such trading
day) or, if no sale of Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported. If the Stock is not
listed on such an exchange, quoted on such system or traded on such a market,
Fair Market Value shall be the value of the Stock as determined by the Board in
good faith.
2.12 "Grant" means an award of an Option, Restricted Stock or Restricted Stock
Units under the Plan.
2.13 "Grant Date" means, (a) for Grants other than Grants to Outside Directors
pursuant to Section 0 hereof, as determined by the Board or authorized
Committee, (i) the date as of which the Board or such Committee approves a
Grant, (ii) the date on which the recipient of a Grant first becomes eligible
to receive a Grant under Section 0 hereof, or (iii) such other date as may be
specified by the Board or such Committee, and (b) for Grants to Outside
Directors pursuant to Section 0 hereof, the date on which such Grant is made in
accordance with Section 0 hereof.
2.14 "Grantee" means a person who receives or holds an Option, Restricted
Stock or Restricted Stock Unit under the Plan.
2.15 "Immediate Family Members" means the spouse, children and grandchildren
of the Grantee.
2.16 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.17 "Option" means an option to purchase one or more shares of Stock pursuant
to the Plan.
2.18 "Option Period" means the period during which Options may be exercised as
set forth in Section 0 hereof.
2.19 "Option Price" means the purchase price for each share of Stock subject
to an Option.
2.20 "Other Agreement" shall have the meaning set forth in Section 0 hereof.
2.21 "Outside Director" means a member of the Board who is not an officer or
employee of the Company.
2.22 "Plan" means this Photocomm, Inc. [d/b/a Golden Genesis Company] 1998
Stock Option and Incentive Plan.
2.23 "Reporting Person" means a person who is required to file reports under
Section 16(a) of the Exchange Act.
2.24 "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 0 hereof.
2.25 "Restricted Stock" means shares of Stock, awarded to a Grantee pursuant
to Section 0 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.26 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
Section 0 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
2.27 "Securities Act" means the Securities Act of 1933, as now in effect or as
hereafter amended.
2.28 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or affiliate of the Company, and employees of any of the foregoing, as
such persons may be designated from time to time by the Board pursuant to
Section 0 hereof.
2.29 "Stock" means the common stock, par value $0.10 per share, of the
Company.
2.30 "Subsidiary" means any "subsidiary corporation" of the Company within the
meaning of Section 424(f) of the Code.
2.31 "Termination Date" shall be the date upon which an Option shall terminate
or expire, as set forth in Section 0 hereof.
<PAGE> E-61
3 ADMINISTRATION OF THE PLAN
3.1 Board.
The Board shall have such powers and authorities related to the administration
of the Plan as are consistent with the Company's certificate of incorporation
and by-laws and applicable law. The Board shall have full power and authority
to take all actions and to make all determinations required or provided for
under the Plan, any Grant or any Award Agreement, and shall have full power and
authority to take all such other actions and make all such other determinations
not inconsistent with the specific terms and provisions of the Plan that the
Board deems to be necessary or appropriate to the administration of the Plan,
any Grant or any Award Agreement. All such actions and determinations shall be
by the affirmative vote of a majority of the members of the Board present at a
meeting or by unanimous consent of the Board executed in writing in accordance
with the Company's certificate of incorporation and by-laws and applicable law.
The interpretation and construction by the Board of any provision of the Plan,
any Grant or any Award Agreement shall be final and conclusive. As permitted
by law, the Board may delegate its authority under the Plan to a member of the
Board of Directors or an executive officer of the Company.
3.2 Committee.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as
set forth in Section 0 above and in other applicable provisions, as the Board
shall determine, consistent with the certificate of incorporation and by-laws
of the Company and applicable law. In the event that the Plan, any Grant or
any Award Agreement entered into hereunder provides for any action to be taken
by or determination to be made by the Board, such action may be taken by or
such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action
or determination by the Committee shall be final, binding and conclusive. As
permitted by law, the Committee may delegate the authority delegated to it
under the Plan to a member of the Board of Directors or an executive officer of
the Company.
3.3 Discretionary Grants.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority (i) to designate Grantees, (ii) to determine the type
or types of Grant to be made to a Grantee, (iii) to determine the number of
shares of Stock to be subject to a Grant, (iv) to establish the terms and
conditions of each Grant (including, but not limited to, the exercise price of
any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of a Grant or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock
Options), (v) to prescribe the form of each Award Agreement evidencing a Grant,
and (vi) to amend, modify, or supplement the terms of any outstanding Grant.
Such authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Grants to
eligible individuals who are foreign nationals or are individuals who are
employed outside the United States to recognize differences in local law, tax
policy, or custom. As a condition to any subsequent Grant, the Board shall
have the right, at its discretion, to require Grantees to return to the Company
Grants previously awarded under the Plan. Subject to the terms and conditions
of the Plan, any such new Grant shall be upon such terms and conditions as are
specified by the Board at the time the new Grant is made.
3.4 Grants to Outside Directors.
With respect to Grants of Options to Outside Directors pursuant to Section 0
hereof, the Committee's responsibilities under the Plan shall be limited to
taking all legal actions necessary to document the Options so granted, to
interpret the Award Agreements evidencing such Options, to maintain appropriate
<PAGE> E-62
records and reports regarding such Options, and to take all acts authorized by
this Plan or otherwise reasonably necessary to effect the purposes hereof.
3.5 No Liability.
No member of the Board or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Grant or Award
Agreement.
3.6 Applicability of Rule 16b-3.
Those provisions of the Plan that make express reference to Rule 16b-3 under
the Exchange Act shall apply only to Reporting Persons.
4 STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 0 hereof, the number of shares of
Stock available for issuance under the Plan shall be equal to the sum of
(i) the shares of capitalized Stock that are reserved for issuance pursuant to
awards granted under any prior plan of the Company for the grant of options to
acquire Stock (the "Prior Plans") and (ii) any shares of Stock that are
represented by awards granted under any Prior Plans which are forfeited, expire
or are canceled without delivery of shares of Stock or which result in the
forfeiture of shares of Stock back to the Company. Stock issued or to be
issued under the Plan shall be authorized but unissued shares. If any shares
covered by a Grant are not purchased or are forfeited, or if a Grant otherwise
terminates without delivery of any Stock subject thereto, then the number of
shares of Stock counted against the aggregate number of shares available under
the Plan with respect to such Grant shall, to the extent of any such forfeiture
or termination, again be available for making Grants under the Plan. The
maximum number of shares of Stock that may be issued by Options intended to be
Incentive Stock Options shall be 1,305,828 shares. No more than 20,000 Shares
may be issued pursuant to awards of Restricted Stock or Restricted Stock Units.
5 EFFECTIVE DATE AND TERM OF THE PLAN
5.1 Effective Date.
The Plan shall be effective as of the Effective Date, subject to approval of
the Plan within one year of the Effective Date, by a majority of the votes cast
on the proposal at a meeting of stockholders, provided that the total votes
cast represent a majority of all shares entitled to vote or by the written
consent of the holders of a majority of the Company's shares entitled to vote.
Upon approval of the Plan by the stockholders of the Company as set forth
above, all Grants made under the Plan on or after the Effective Date shall be
fully effective as if the stockholders of the Company had approved the Plan on
the Effective Date. If the stockholders fail to approve the Plan within one
year after the Effective Date, any Grants made hereunder shall be null and void
and of no effect.
5.2 Term.
The Plan has no termination date; however, no Incentive Stock Option may be
granted under the Plan on or after the tenth anniversary of the Effective Date.
6 OPTION GRANTS
6.1 Company or Subsidiary Employees.
Grants (including Grants of Incentive Stock Options) may be made under the Plan
to any employee of, or Service Provider or employee of a Service Provider
providing, or who has provided, services to, the Company or any Subsidiary,
including any such employee who is an officer or director of the Company or of
any Subsidiary, as the Board shall determine and designate from time to time.
6.2 Successive Grants.
An eligible person may receive more than one Grant, subject to such
restrictions as are provided herein.
7 GRANTS TO OUTSIDE DIRECTORS
7.1 Initial Grants of Options.
<PAGE> E-63
Each Outside Director who is initially elected to the Board on or after the
Effective Date shall, upon the date of his or her initial election by the Board
or the stockholders of the Company, automatically be awarded a Grant of an
Option, which shall not be an Incentive Stock Option, to purchase 10,000 shares
of Stock (which amount shall be subject to adjustment as provided in Section 0
hereof).
7.2 Subsequent Grants of Options.
Immediately following each annual meeting of stockholders of the Company held
after the Effective Date, each Outside Director then duly elected and serving
(other than an Outside Director initially elected to the Board at such annual
meeting of stockholders) shall automatically be awarded a Grant of an Option,
which shall not be an Incentive Stock Option, to purchase 3,000 shares of Stock
(which amount shall be subject to adjustment as provided in Section 0 hereof);
provided, however, that no Outside Director shall be eligible to receive a
Grant of Options under this Section 0 unless such person attended, in person or
by telephone, at least seventy-five percent of the meetings held by the Board
during the immediately preceding calendar year (or such portion thereof during
which the Outside Director served on the Board).
8 LIMITATIONS ON GRANTS
8.1 Limitation on Shares of Stock Subject to Grants.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, no person eligible for a Grant under
Section 0 hereof may be awarded Options in any calendar year exercisable for
greater than 250,000 shares of Stock (subject to adjustment as provided in
Section 0 hereof). During any time when the Company has a class of equity
security registered under Section 12 of the Exchange Act, the maximum number of
shares of Restricted Stock that can be awarded under the Plan (including for
this purpose any shares of Stock represented by Restricted Stock Units) to any
person eligible for a Grant under Section 0 hereof is 500 per calendar year
(subject to adjustment as provided in Section 0 hereof).
8.2 Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only (i) if the Grantee of
such Option is an employee of the Company or any Subsidiary of the Company;
(ii) to the extent specifically provided in the related Award Agreement; and
(iii) to the extent that the aggregate Fair Market Value (determined at the
time the Option is granted) of the shares of Stock with respect to which all
Incentive Stock Options held by such Grantee become exercisable for the first
time during any calendar year (under the Plan and all other plans of the
Grantee's employer and its affiliates) does not exceed $100,000. This
limitation shall be applied by taking Options into account in the order in
which they were granted.
9 AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, in
such form or forms as the Board shall from time to time determine. Award
Agreements granted from time to time or at the same time need not contain
similar provisions but shall be consistent with the terms of the Plan. Each
Award Agreement evidencing a Grant of Options shall specify whether such
Options are intended to be non-qualified stock options or Incentive Stock
Options, and in the absence of such specification such options shall be deemed
non-qualified stock options.
10 OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in the
Award Agreement evidencing such Option. The Option Price shall be the Fair
Market Value on the Grant Date of a share of Stock; provided, however, that in
the event that a Grantee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of
the Code (relating to ownership of more than ten percent of the Company's
outstanding Stock), the Option Price of an Option granted to such Grantee that
<PAGE> E-64
is intended to be an Incentive Stock Option shall be not less than the greater
of the par value or 110 percent of the Fair Market Value of a share of Stock on
the Grant Date. In no case shall the Option Price of any Option be less than
the par value of a share of Stock.
11 VESTING, TERM AND EXERCISE OF OPTIONS
11.1 Vesting and Option Period.
Subject to Sections 0 and 0 hereof, each Option granted under the Plan, other
than a grant to an Outside Director, shall become exercisable at such times and
under such conditions as shall be determined by the Board and stated in the
Award Agreement. Each Option granted under the Plan to an Outside Director
pursuant to Section 0 hereof shall become exercisable in accordance with the
following schedule: (i) prior to the first anniversary of the Grant Date, the
Option shall not be exercisable; (ii) on the first anniversary of the Grant
Date, the Option shall become exercisable with respect to one-third of the
shares of Stock subject to such Option; (iii) on each the next two
anniversaries of the Grant Date, the Option shall become exercisable with
respect to an additional one-third of the shares of Stock subject to such
Option. For purposes of this Section 0, fractional numbers of shares of Stock
subject to an Option shall be rounded down to the next nearest whole number.
The period during which any Option shall be exercisable shall
constitute the "Option Period" with respect to such Option.
11.2 Term.
Each Option granted under the Plan shall terminate, and all rights to purchase
shares of Stock thereunder shall cease, upon the expiration of ten years from
the date such Option is granted, or, as to Options other than Options granted
to Outside Directors pursuant to Section 0 hereof, under such circumstances and
on such date prior thereto as is set forth in the Plan or as may be fixed by
the Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee
would otherwise be ineligible to receive an Incentive Stock Option by reason of
the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to
ownership of more than ten percent of the outstanding Stock), an Option granted
to such Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
11.3 Acceleration.
Any limitation on the exercise of an Option contained in any Award Agreement
may be rescinded, modified or waived by the Board, in its sole discretion, at
any time and from time to time after the Grant Date of such Option, so as to
accelerate the time at which the Option may be exercised. Notwithstanding any
other provision of the Plan, no Option shall be exercisable in whole or in part
prior to the date the Plan is approved by the stockholders of the Company as
provided in Section 0 hereof.
11.4 Termination of Employment or Other Relationship.
Upon the termination of a Grantee's employment or other relationship with the
Company other than by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Option or portion
thereof held by such Grantee that has not vested in accordance with the
provisions of Section 0 hereof shall terminate immediately, and any Option or
portion thereof that has vested in accordance with the provisions of Section 0
hereof but has not been exercised shall terminate at the close of business on
the 90th day following the Grantee's termination of employment or other
relationship (or, if such 90th day is a Saturday, Sunday or holiday, at the
close of business on the next preceding day that is not a Saturday, Sunday or
holiday), unless, the Board, in its discretion, extends the period during which
the Option may be exercised (which period may not be extended beyond the
original term of the Option). Notwithstanding the prior sentence, Options
granted to Outside Directors pursuant to Section 0 hereof shall not terminate
<PAGE> E-65
upon the termination of a Grantee's service as an Outside Director of the
Company other than by reason of death or "permanent and total disability" but
shall remain exercisable until the Termination Date, as set forth in Section 0
hereof unless earlier terminated pursuant to Sections 0 or 0. Upon termination
of an Option or portion thereof, the Grantee shall have no further right to
purchase shares of Stock pursuant to such Option or portion thereof. Whether a
leave of absence or leave on military or government service shall constitute a
termination of employment or other relationship for purposes of the Plan shall
be determined by the Board, which determination shall be final and conclusive.
For purposes of the Plan, a termination of employment, service or other
relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with the Company or any other Service Provider, or is
engaged as a Service Provider or an Outside Director of the Company. Whether a
termination of a Service Provider's or an Outside Directors relationship with
the Company shall have occurred shall be determined by the Committee, which
determination shall be final and conclusive.
11.5 Rights in the Event of Death.
If a Grantee dies while employed by or providing services to the Company, all
Options granted to such Grantee shall fully vest on the date of death, and the
executors or administrators or legatees or distributees of such Grantee's
estate shall have the right, at any time within one year after the date of such
Grantee's death (or, as to Grantees other than Outside Directors, such longer
period as the Board, in its discretion, may determine prior to the expiration
of such one-year period) and prior to termination of the Option pursuant to
Section 0 above, to exercise any Option held by such Grantee at the date of
such Grantee's death.
11.6 Rights in the Event of Disability.
If a Grantee's employment or other relationship with the Company is terminated
by reason of the "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) of such Grantee, such Grantee's Options shall
continue to vest, and shall be exercisable to the extent that they are vested,
for a period of one year after such termination of employment or service (or,
as to Grantees other than Outside Directors, such longer period as the Board,
in its discretion, may determine prior to the expiration of such one-year
period), subject to earlier termination of the Option as provided in Section 0
above. Whether a termination of employment or service is to be considered by
reason of "permanent and total disability" for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive.
11.7 Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option be
exercised, in whole or in part, prior to the date the Plan is approved by the
stockholders of the Company as provided herein, or after ten years following
the date upon which the Option is granted, or after the occurrence of an event
referred to in Section 0 hereof which results in termination of the Option.
11.8 Method of Exercise.
An Option that is exercisable may be exercised by the Grantee's delivery to the
Company of written notice of exercise on any business day, at the Companys
principal office, addressed to the attention of the Board. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of
the shares for which the Option is being exercised. The minimum number of
shares of Stock with respect to which an Option may be exercised, in whole or
in part, at any time shall be the lesser of (i) 100 shares or such lesser
number set forth in the applicable Award Agreement and (ii) the maximum number
of shares available for purchase under the Option at the time of exercise.
Payment of the Option Price for the shares purchased pursuant to the exercise
of an Option shall be made (i) in cash or in cash equivalents; (ii) through the
tender to the Company of shares of Stock, which shares, if acquired from the
Company, shall have been held for at least six months and which shall be
valued, for purposes of determining the extent to which the Option Price has
<PAGE> E-66
been paid thereby, at their Fair Market Value on the date of exercise; or (iii)
by a combination of the methods described in (i) and (ii). The Board may
provide (shall provide as to Outside Directors), by inclusion of appropriate
language in an Award Agreement, that payment in full of the Option Price need
not accompany the written notice of exercise provided that the notice of
exercise directs that the certificate or certificates for the shares of Stock
for which the Option is exercised be delivered to a licensed broker acceptable
to the Company as the agent for the individual exercising the Option and, at
the time such certificate or certificates are delivered, the broker tenders to
the Company cash (or cash equivalents acceptable to the Company) equal to the
Option Price for the shares of Stock purchased pursuant to the exercise of the
Option plus the amount (if any) of federal and/or other taxes which the Company
may in its judgment, be required to withhold with respect to the exercise of
the Option. An attempt to exercise any Option granted hereunder other than as
set forth above shall be invalid and of no force and effect. Unless otherwise
stated in the applicable Award Agreement, an individual holding or exercising
an Option shall have none of the rights of a stockholder (for example, the
right to receive cash or dividend payments or distributions attributable to the
subject shares of Stock or to direct the voting of the subject shares of Stock)
until the shares of Stock covered thereby are fully paid and issued to such
individual. Except as provided in Section 0 hereof, no adjustment shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such issuance.
11.9 Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in full
of the Option Price, such Grantee shall be entitled to the issuance of a stock
certificate or certificates evidencing his or her ownership of the shares of
Stock subject to the Option.
12 TRANSFERABILITY OF OPTIONS
12.1 General Rule
Except as provided in Section 0, during the lifetime of a Grantee, only the
Grantee (or, in the event of legal incapacity or incompetency, the Grantee's
guardian or legal representative) may exercise an Option. Except as provided
in Section 0, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.
12.2 Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may transfer all or
part of an Option that is not an Incentive Stock Option to (i) any Immediate
Family Member, (ii) a trust or trusts for the exclusive benefit of any
Immediate Family Member, or (iii) a partnership in which Immediate Family
Members are the only partners, provided that (x) there may be no consideration
for any such transfer, and (y) subsequent transfers of transferred Options are
prohibited except those in accordance with this Section 0 or by will or the
laws of descent and distribution. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Section 0 hereof
the term "Grantee" shall be deemed to refer to the transferee. The events of
termination of the employment or other relationship of Section 0 hereof shall
continue to be applied with respect to the original Grantee, following which
the Option shall be exercisable by the transferee only to the extent and for
the periods specified in Sections 0, 0 or 0.
13 RESTRICTED STOCK
13.1 Grant of Restricted Stock or Restricted Stock Units.
The Board may from time to time grant Restricted Stock or Restricted Stock
Units to persons eligible to receive Grants under Section 0 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
13.2 Restrictions.
At the time a Grant of Restricted Stock or Restricted Stock Units is made, the
<PAGE> E-67
Board shall establish a period of time (the "Restricted Period") applicable to
such Restricted Stock or Restricted Stock Units. Each Grant of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted
Period. The Board may, in its sole discretion, at the time a Grant of
Restricted Stock or Restricted Stock Units is made, prescribe restrictions in
addition to or other than the expiration of the Restricted Period, including
the satisfaction of corporate or individual performance objectives, which may
be applicable to all or any portion of the Restricted Stock or Restricted Stock
Units. Such performance objectives shall be established in writing by the
Board prior to the ninetieth day of the year in which the Grant is made and
while the outcome is substantially uncertain. Performance objectives shall be
based on Stock price, market share, sales, earnings per share, return on equity
or costs. Performance objectives may include positive results, maintaining the
status quo or limiting economic losses. Subject to the second sentence of this
Section 0, the Board also may, in its sole discretion, shorten or terminate the
Restricted Period or waive any other restrictions applicable to all or a
portion of the Restricted Stock or Restricted Stock Units. Neither Restricted
Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the Restricted Period or prior to
the satisfaction of any other restrictions prescribed by the Board with respect
to such Restricted Stock or Restricted Stock Units.
13.3 Restricted Stock Certificates.
The Company shall issue, in the name of each Grantee to whom Restricted Stock
has been granted, stock certificates representing the total number of shares of
Restricted Stock granted to the Grantee, as soon as reasonably practicable
after the Grant Date. The Secretary of the Company shall hold such
certificates for the Grantee's benefit until such time as the Restricted Stock
is forfeited to the Company, or the restrictions lapse.
13.4 Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board
may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions
and restrictions applicable to such Restricted Stock. All distributions, if
any, received by a Grantee with respect to Restricted Stock as a result of any
stock split, stock dividend, combination of shares, or other similar
transaction shall be subject to the restrictions applicable to the original
Grant.
13.5 Rights of Holders of Restricted Stock Units.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company.
The Board may provide in an Award Agreement evidencing a Grant of Restricted
Stock Units that the holder of such Restricted Stock Units shall be entitled to
receive, upon the Company's payment of a cash dividend on its outstanding
Stock, a cash payment for each Restricted Stock Unit held equal to the per-
share dividend paid on the Stock. Such Award Agreement may also provide that
such cash payment will be deemed reinvested in additional Restricted Stock
Units at a price per unit equal to the Fair Market Value of a share of Stock on
the date that such dividend is paid.
13.6 Termination of Employment or Other Relationship.
Upon the termination of the employment of a Grantee with the Company or a
Service Provider or of a Service Provider's relationship with the Company, in
either case other than, in the case of individuals, by reason of death or
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code), any shares of Restricted Stock or Restricted Stock Units held by such
Grantee that have not vested, or with respect to which all applicable
restrictions and conditions have not lapsed, shall immediately be deemed
forfeited, unless the Board, in its discretion, determines otherwise. Upon
<PAGE> E-68
forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall
have no further rights with respect to such Grant, including but not limited to
any right to vote Restricted Stock or any right to receive dividends with
respect to shares of Restricted Stock or Restricted Stock Units. Whether a
leave of absence or leave on military or government service shall constitute a
termination of employment or other relationship for purposes of the Plan shall
be determined by the Board, which determination shall be final and conclusive.
For purposes of the Plan, a termination of employment, service or other
relationship shall not be deemed to occur if the Grantee is immediately
thereafter employed with the Company or any other Service Provider, or is
engaged as a Service Provider or an Outside Director of the Company. Whether a
termination of a Service Provider's or an Outside Director's relationship with
the Company shall have occurred shall be determined by the Committee, which
determination shall be final and conclusive.
13.7 Rights in the Event of Death.
If a Grantee dies while employed by the Company or a Service Provider, or while
serving as a Service Provider, all Restricted Stock or Restricted Stock Units
granted to such Grantee shall fully vest on the date of death, and the shares
of Stock represented thereby shall be deliverable in accordance with the terms
of the Plan to the executors, administrators, legatees or distributees of the
Grantee's estate.
13.8 Rights in the Event of Disability.
If a Grantee's employment or other relationship with the Company or a Service
Provider, or while serving as a Service Provider, is terminated by reason of
the "permanent and total disability" (within the meaning of Section 22(e)(3) of
the Code) of such Grantee, such Grantee's Restricted Stock or Restricted Stock
Units shall continue to vest in accordance with the applicable Award Agreement
for a period of one year after such termination of employment or service (or
such longer period as the Board, in its discretion, may determine prior to the
expiration of such one-year period), subject to the earlier forfeiture of such
Restricted Stock or Restricted Stock Units in accordance with the terms of the
applicable Award Agreement. Whether a termination of employment or service is
to be considered by reason of "permanent and total disability" for purposes of
the Plan shall be determined by the Board, which determination shall be final
and conclusive.
13.9 Delivery of Stock and Payment Therefor.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units shall lapse,
and, upon payment by the Grantee to the Company, in cash or by check, of the
aggregate par value of the shares of Stock represented by such Restricted Stock
or Restricted Stock Units, a stock certificate for such shares shall be
delivered, free of all such restrictions, to the Grantee or the Grantee's
beneficiary or estate, as the case may be.
14 PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
participants or beneficiaries of which the Grantee is a member), whether or not
such compensation is deferred, is in cash, or is in the form of a benefit to or
for the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive
any payment or other benefit under this Plan shall not become exercisable or
vested (i) to the extent that such right to exercise, vesting, payment, or
<PAGE> E-69
benefit, taking into account all other rights, payments, or benefits to or for
the Grantee under this Plan, all Other Agreements, and all Benefit
Arrangements, would cause any payment or benefit to the Grantee under this Plan
to be considered a "parachute payment" within the meaning of Section 280G(b)(2)
of the Code as then in effect (a "Parachute Payment") and (ii) if, as a result
of receiving a Parachute Payment, the aggregate after-tax amounts received by
the Grantee from the Company under this Plan, all Other Agreements, and all
Benefit Arrangements would be less than the maximum after-tax amount that could
be received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such
right to exercise, vesting, payment, or benefit under this Plan, in conjunction
with all other rights, payments, or benefits to or for the Grantee under any
Other Agreement or any Benefit Arrangement would cause the Grantee to be
considered to have received a Parachute Payment under this Plan that would have
the effect of decreasing the after-tax amount received by the Grantee as
described in clause (ii) of the preceding sentence, then the Grantee shall have
the right, in the Grantee's sole discretion, to designate those rights,
payments, or benefits under this Plan, any Other Agreements, and any Benefit
Arrangements that should be reduced or eliminated so as to avoid having the
payment or benefit to the Grantee under this Plan be deemed to be a Parachute
Payment.
15 REQUIREMENTS OF LAW
15.1 General.
The Company shall not be required to sell or issue any shares of Stock under
any Grant if the sale or issuance of such shares would constitute a violation
by the Grantee, any other individual exercising an Option, or the Company of
any provision of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations. If at
any time the Company shall determine, in its discretion, that the listing,
registration or qualification of any shares subject to a Grant upon any
securities exchange or under any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance or purchase of
shares hereunder, no shares of Stock may be issued or sold to the Grantee or
any other individual exercising an Option pursuant to such Grant unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company, and
any delay caused thereby shall in no way affect the date of termination of the
Grant. Specifically, in connection with the Securities Act, upon the exercise
of any Option or the delivery of any shares of Restricted Stock or Stock
underlying Restricted Stock Units, unless a registration statement under such
Act is in effect with respect to the shares of Stock covered by such Grant, the
Company shall not be required to sell or issue such shares unless the Board has
received evidence satisfactory to it that the Grantee or any other individual
exercising an Option may acquire such shares pursuant to an exemption from
registration under the Securities Act. Any determination in this connection by
the Board shall be final, binding, and conclusive. The Company may, but shall
in no event be obligated to, register any securities covered hereby pursuant to
the Securities Act. The Company shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares of
Stock pursuant to the Plan to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable until the shares of Stock
covered by such Option are registered or are exempt from registration, the
exercise of such Option (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
15.2 Rule 16b-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Grants pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To
<PAGE> E-70
the extent that any provision of the Plan or action by the Board does not
comply with the requirements of Rule 16b-3, it shall be deemed inoperative to
the extent permitted by law and deemed advisable by the Board, and shall not
affect the validity of the Plan. In the event that Rule 16b-3 is revised or
replaced, the Board may exercise its discretion to modify this Plan in any
respect necessary to satisfy the requirements of, or to take advantage of any
features of, the revised exemption or its replacement.
16 AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or terminate
the Plan as to any shares of Stock as to which Grants have not been made;
provided, however, that the Board shall not, without approval of the Company's
stockholders, amend the Plan such that it does not comply with the Code. The
Company may retain the right in an Award Agreement to cause a forfeiture of the
gain realized by a Grantee on account of the Grantee taking actions in
"competition with the Company," as defined in the applicable Award Agreement.
Furthermore, the Company may annul a Grant if the Grantee is an employee of the
Company or an affiliate and is terminated "for cause" as defined in the
applicable Award Agreement. Except as permitted under this Section 0 or
Section 0 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Grant theretofore awarded under the Plan.
17 EFFECT OF CHANGES IN CAPITALIZATION
17.1 Changes in Stock.
If the number of outstanding shares of Stock is increased or decreased or the
shares of Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange
of shares, stock dividend or other distribution payable in capital stock, or
other increase or decrease in such shares effected without receipt of
consideration by the Company occurring after the Effective Date, the number and
kinds of shares for which Grants of Options, Restricted Stock and Restricted
Stock Units may be made under the Plan shall be adjusted proportionately and
accordingly by the Company. In addition, the number and kind of shares for
which Grants are outstanding shall be adjusted proportionately and accordingly
so that the proportionate interest of the Grantee immediately following such
event shall, to the extent practicable, be the same as immediately before such
event. Any such adjustment in outstanding Options shall not change the
aggregate Option Price payable with respect to shares that are subject to the
unexercised portion of an Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per share. The conversion of any
convertible securities of the Company shall not be treated as an increase in
shares effected without receipt of consideration.
17.2 Reorganization in Which the Company Is the Surviving Entity and in Which
No Change of Control Occurs.
Subject to Section 0 hereof, if the Company shall be the surviving entity in
any reorganization, merger, or consolidation of the Company with one or more
other entities in which no Change in Control occurs, any Option theretofore
granted pursuant to the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to such Option would
have been entitled immediately following such reorganization, merger, or
consolidation, with a corresponding proportionate adjustment of the Option
Price per share so that the aggregate Option Price thereafter shall be the same
as the aggregate Option Price of the shares remaining subject to the Option
immediately prior to such reorganization, merger, or consolidation. Subject to
any contrary language in an Award Agreement evidencing a Grant of Restricted
Stock, any restrictions applicable to such Restricted Stock shall apply as well
to any replacement shares received by the Grantee as a result of the
reorganization, merger or consolidation.
17.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a Change
of Control.
<PAGE> E-71
Subject to the exceptions set forth in the last sentence of this Section 0, (i)
upon the occurrence of a Change of Control, all outstanding shares of
Restricted Stock and Restricted Stock Units shall be deemed to have vested, and
all restrictions and conditions applicable to such shares of Restricted Stock
and Restricted Stock Units shall be deemed to have lapsed, immediately prior to
the occurrence of such Change of Control, and (ii) fifteen days prior to the
scheduled consummation of a Change of Control, all Options outstanding
hereunder shall become immediately exercisable and shall remain exercisable for
a period of fifteen days. Any exercise of an Option during such fifteen-day
period shall be conditioned upon the consummation of the event and shall be
effective only immediately before the consummation of the event. Upon
consummation of any Change of Control, the Plan and all outstanding but
unexercised Options shall terminate. The Board shall send written notice of an
event that will result in such a termination to all individuals who hold
Options not later than the time at which the Company gives notice thereof to
its stockholders. This Section 0 shall not apply to any Change of Control to
the extent that (A) provision is made in writing in connection with such Change
of Control for the continuation of the Plan or the assumption of the Options,
Restricted Stock and Restricted Stock Units theretofore granted, or for the
substitution for such Options, Restricted Stock and Restricted Stock Units of
new options, restricted stock and restricted stock units covering the stock of
a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares or units and exercise prices,
in which event the Plan and Options, Restricted Stock and Restricted Stock
Units theretofore granted shall continue in the manner and under the terms so
provided or (B) a majority of the full Board determines that such Change of
Control shall not trigger application of the provisions of this Section 0
subject to Section 0.
17.4 Adjustments.
Adjustments under this Section 0 related to shares of Stock or securities of
the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share.
17.5 No Limitations on Company.
The making of Grants pursuant to the Plan shall not affect or limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
18 DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be construed
to confer upon any individual the right to remain in the employ or service of
the Company or any affiliate, or to interfere in any way with any contractual
or other right or authority of the Company or Service Provider either to
increase or decrease the compensation or other payments to any individual at
any time, or to terminate any employment or other relationship between any
individual and the Company. In addition, notwithstanding anything contained in
the Plan to the contrary, unless otherwise stated in the applicable Award
Agreement, no Grant awarded under the Plan shall be affected by any change of
duties or position of the Optionee, so long as such Grantee continues to be a
director, officer, consultant or employee of the Company. The obligation of
the Company to pay any benefits pursuant to this Plan shall be interpreted as a
contractual obligation to pay only those amounts described herein, in the
manner and under the conditions prescribed herein. The Plan shall in no way be
interpreted to require the Company to transfer any amounts to a third party
trustee or otherwise hold any amounts in trust or escrow for payment to any
participant or beneficiary under the terms of the Plan. No Grantee shall have
<PAGE> E-72
any of the rights of a stockholder with respect to the shares of Stock subject
to an Option except to the extent the certificates for such shares of Stock
shall have been issued upon the exercise of the Option.
19 NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or particular individuals) as the Board in its discretion
determines desirable, including, without limitation, the granting of stock
options otherwise than under the Plan.
20 WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to deduct
from payments of any kind otherwise due to a Grantee any Federal, state, or
local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to Restricted Stock or
Restricted Stock Units or upon the issuance of any shares of Stock upon the
exercise of an Option. At the time of such vesting, lapse, or exercise, the
Grantee shall pay to the Company or the Subsidiary, as the case may be, any
amount that the Company or the Subsidiary may reasonably determine to be
necessary to satisfy such withholding obligation. Subject to the prior
approval of the Company or the Subsidiary, which may be withheld by the Company
or the Subsidiary, as the case may be, in its sole discretion, the Grantee may
elect to satisfy such obligations, in whole or in part, (i) by causing the
Company or the Subsidiary to withhold shares of Stock otherwise issuable to the
Grantee or (ii) by delivering to the Company or the Subsidiary shares of Stock
already owned by the Grantee. The shares of Stock so delivered or withheld
shall have an aggregate Fair Market Value equal to such withholding
obligations. The Fair Market Value of the shares of Stock used to satisfy such
withholding obligation shall be determined by the Company or the Subsidiary as
of the date that the amount of tax to be withheld is to be determined. A
Grantee who has made an election pursuant to this Section 0 may satisfy his or
her withholding obligation only with shares of Stock that are not subject to
any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
21 CAPTIONS
The use of captions in this Plan or any Award Agreement is for the convenience
of reference only and shall not affect the meaning of any provision of the Plan
or such Award Agreement.
22 OTHER PROVISIONS
Each Grant awarded under the Plan may contain such other terms and conditions
not inconsistent with the Plan as may be determined by the Board, in its sole
discretion.
23 NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the
plural form, the masculine gender shall include the feminine gender, etc., as
the context requires.
24 SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to be
illegal or unenforceable by any court of law in any jurisdiction, the remaining
provisions hereof and thereof shall be severable and enforceable in accordance
with their terms, and all provisions shall remain enforceable in any other
jurisdiction.
25 Pooling
Notwithstanding anything in the Plan to the contrary, if any right under or
feature of the Plan would cause to be ineligible for pooling of interest
<PAGE> E-73
accounting a transaction that would, but for the right or feature hereunder, be
eligible for such accounting treatment, the Board may modify or adjust the
right or feature so that the transaction will be eligible for pooling of
interest accounting. Such modification or adjustment may include payment of
cash or issuance to a Grantee of Stock having a Fair Market Value equal to the
cash value of such right or feature.
26 GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing the
Grants awarded hereunder shall be governed by the laws of the State of
Delaware.
* * *
The Plan was duly adopted and approved by the Board of Directors of the Company
as of the ___ day of April, 1998.
/S/
The Plan was duly approved by the stockholders of the Company on the ___ day of
April, 1998.
/S/
<PAGE> E-74
EX-21
Subsidiaries of the Registrant
EXHIBIT 21
List of Subsidiaries
Utility Power Group, Inc., incorporated in the state of Arizona.
Remote Power Incorporated, incorporated in the state of Colorado.
Photocomm Pty. Ltd. formed under the laws of Australia.
Integrated Power Corporation, Inc., incorporated in the state of Maryland.
Solartec S.A. formed under the laws of Argentina.
Golden Genesis do Brazil formed under the laws of Brazil.
<PAGE> E-75
EX-23
Consents of Experts and Counsel
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-40097, 33-62392, 33-01801 and 33-01799) of
Golden Genesis Company of our report dated January 22, 1999 relating to the
consolidated financial statements of Golden Genesis Company as of and for the
four months ended December 31, 1996 and as of and for the years ended December
31, 1997 and 1998, which report appears on page 17 of this Annual Report on
Form 10-K.
PricewaterhouseCoopers LLP
Denver, Colorado
March 30, 1999
<PAGE> E-76
INDEPENDENT ACCOUNTANTS' CONSENT
The Board of Directors
Golden Genesis Company:
We consent to incorporation by reference in the Registration Statements (No.
33-40097, 33-62392, 33-01801 and 33-01799) on Form S-8 of Golden Genesis
Company (formerly Photocomm, Inc.) of our report dated October 18, 1996,
relating to the consolidated statements of operations, comprehensive income,
stockholders' equity, and cash flows of Golden Genesis Company and subsidiaries
(formerly Photocomm, Inc. and subsidiaries) for the year ended August 31, 1996,
which report appears in the December 31, 1998 annual report on Form 10-K of
Golden Genesis Company.
KPMG LLP
Phoenix, Arizona
March 30, 1999
<PAGE> F
EXHIBIT F
Quarterly report on Form 10-Q the quarter ended March 31, 1999
<PAGE> F-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-12807
GOLDEN GENESIS COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0411983
- --------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4585 McIntyre St. Golden, CO 80403
-------------------------------------------
(Address of principal executive offices)
(Zip Code)
(303) 271-7465
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
At May 10, 1999 17,152,948 shares of the Registrant's Common
Stock were outstanding.
<PAGE> F-2
GOLDEN GENESIS COMPANY
INDEX
PART I Financial Information Page Number
Item 1. Financial Statements
Consolidated Balance Sheets - March 31,
1999 and December 31, 1998 3
Consolidated Statements of Operations -
Three Months ended March 31, 1999 and 1998 4
Consolidated Statements of Comprehensive
Income - Three months ended March 31, 1999
and 1998 5
Consolidated Statements of Cash Flows -
Three Months ended March 31, 1999 and 1998 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE> F-3
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN GENESIS COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 31, December 31,
1999 1998
Assets (Unaudited)
Current Assets
Cash and cash equivalents $ 1,506 $ 1,259
Accounts receivable, net 9,413 9,931
Inventories 6,818 7,130
Deferred tax asset 350 350
Other current assets 1,708 1,211
Total Current Assets 19,795 19,881
Property and equipment, net 2,232 2,327
Goodwill, net 5,216 5,278
Other assets, net 527 539
Total Assets $27,770 $28,025
====== =======
Liabilities and Stockholders' Equity
Current Liabilities
Current installments of long-term debt $ 65 $ 65
Accounts payable 5,923 5,663
Notes payable, short term 5,128 5,075
Other accrued expenses 1,029 1,146
Total Current Liabilities 12,145 11,949
Long-term debt, less current installments 5,654 5,155
Total Liabilities 17,799 17,104
Commitments and contingencies - -
Stockholders' Equity
Preferred stock: $.001 par value,
5,000,000 shares authorized
0 issued and outstanding - -
Common stock: $.10 par value, 25,000,000
shares authorized; 17,152,948 and
17,151,848 shares issued and
outstanding, respectively 1,715 1,715
Additional paid-in capital 17,024 17,023
Accumulated other comprehensive loss (755) (296)
Accumulated deficit (8,013) (7,521)
Total Stockholders' Equity 9,971 10,921
Total Liabilities and Stockholders'
Equity $27,770 $28,025
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> F-4
GOLDEN GENESIS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31
(In thousands except per share data)
1999 1998
Sales, net $11,556 $ 9,792
Cost of sales 9,400 7,904
Gross profit 2,156 1,888
Selling and marketing expenses 1,276 740
General and administrative expenses 1,041 978
Income (loss) from operations (161) 170
Other income (expenses):
Interest expense (236) (89)
Other income (expense), net (25) (13)
Income (loss) before income taxes (422) 68
Income tax (70) -
Net income (loss) (492) 68
Preferred stock dividends - 1
Net income (loss) applicable to common
stockholders $ (492) $ 67
======= =======
Net income (loss) per basic share of
common stock $ (0.03) $ 0.00
======= =======
Weighted average shares outstanding
- basic 17,153 16,547
======= =======
Net income (loss) per diluted share of
common stock $ (0.03) $ 0.00
======= =======
Weighted average shares outstanding
- diluted 17,153 16,962
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> F-5
GOLDEN GENESIS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended
March 31
(In thousands)
1999 1998
Net income (loss) $ (492) $ 68
Other comprehensive income
(loss), net of tax of $0:
Foreign currency translation (459) (124)
Comprehensive loss $ (951) $ (56)
===== =====
See accompanying notes to consolidated financial statements.
<PAGE> F-6
GOLDEN GENESIS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
(In thousands)
1999 1998
Cash flows from operating activities:
Net income (loss) $ (492) $ 68
Adjustments to reconcile net income to
net cash used in operating activities,
net of effects of acquisitions:
Depreciation and amortization 202 161
Change in accounts receivable 289 (783)
Change in inventories 83 1,213
Change in accounts payable and
accrued expense 196 (1,337)
Change in other current assets (497) 42
Net cash used in operating activities (219) (636)
Cash flows from investing activities:
Purchase of property and equipment (33) (156)
Cash paid for acquisitions and other
assets, net of cash acquired - (370)
Net cash used in investing activities (33) (526)
Cash flows from financing activities:
Repayments of debt (1) (197)
Proceeds from issuance of debt 500 750
Proceeds from issuance of common stock - 23
Net cash provided by
financing activities 499 577
Net increase (decrease) in cash and
cash equivalents 247 (585)
Cash and cash equivalents at beginning
of period 1,259 1,182
Cash and cash equivalents at end of period $ 1,506 $ 597
====== ======
Non-cash investing and financing activities:
Stock issued for acquisitions $ - $ 650
See accompanying notes to consolidated financial statements.
<PAGE> F-7
GOLDEN GENESIS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
NOTE 1. Inventories
Inventories consist of the following:
(In thousands)
March 31, December 31,
1999 1998
Raw materials and goods
purchased for resale $7,574 $7,868
Work-in-process 125 157
Less allowance for obsolescence (881) (895)
Total Inventories $6,818 $7,130
Note 2. Acquisitions
During 1998 Golden Genesis acquired the following companies:
Utility Power Group ("UPG") on January 23, 1998; Remote Power,
Inc. ("RPI") on July 21, 1998; Golden Genesis do Brazil ("GGB")
on September 4, 1998 and Solartec, S.A. ("Solartec") on September
4, 1998.
The following unaudited pro forma information has been prepared
assuming that the Solartec acquisition had occurred on January 1,
1998. The pro forma information does not include the effects of
the acquisitions of UPG, RPI and GGB. The effect of these
acquisitions was not material to the Company's 1998 financial
statements. The pro forma information includes an adjustment for
increased interest expense related to new borrowings at
applicable rates for the purchase. The pro forma financial
information is presented for informational purposes only and may
not be indicative of the results of operations as they would have
been had the Solartec transaction actually been effected on
January 1, 1998, nor is it necessarily indicative of the results
of operations which may occur in the future.
(In thousands Three months ended
except per share data) March 31,1998
(unaudited)
--------
Sales, net $ 10,973
=======
Net income (loss) $ (79)
=======
Net income (loss) per basic and
diluted share of common stock $ (0.01)
=======
<PAGE> F-8
Note 3. Segments
The Company's reportable segments are organized by its method of
internal reporting, which is based on a combination of product
category and geographic location. The Company's reportable
segments are Distribution, Industrial and International.
The accounting policies of the segments are the same as those
described in Note 1 of the Company's 1998 Annual Report on Form
10-K. The Company evaluates the performance of its segments and
allocates resources to them based primarily on operating income.
Asset and depreciation and amortization information is not
reported as the Company does not produce such information by
segment for internal purposes.
The table below summarizes information about reported segments as
of and for the three months ended:
(In thousands) Net Operating
Sales Income (Loss)
March 31, 1999
Distribution $ 7,222 $ 591
Industrial 2,433 (63)
International 1,875 (70)
Other 155 24
Segment total 11,685 482
Corporate - (643)
Other reconciling items (129) -
Consolidated total $11,556 $ (161)
======= ======
March 31, 1998
Distribution $ 3,282 $ (35)
Industrial 5,675 685
International 805 (2)
Other 317 (6)
Segment total 10,079 642
Corporate - (472)
Other reconciling items (287) -
Consolidated total $ 9,792 $ 170
======= ======
Other reconciling items in each period are intersegment sales.
These sales are recorded based on the total overhead applied to
each manufacturing segment.
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Business Overview
The Company markets, engineers, manufactures and distributes
<PAGE> F-9
solar electric systems utilized primarily in remote areas. Areas
generally include those where electric power is needed but access
to electricity is inconvenient, not available or costs are
relatively high. Three primary markets compose the majority of
the Company's results from operations: the industrial market, the
distribution market and the international market.
The Company services a variety of customers in the industrial
market. These customers have power generation needs for
communication systems, traffic signal systems and remote
monitoring systems. In addition, the industrial market includes
customers that use solar electric systems connected directly into
power grids.
The Company's distribution market includes more than 800 solar
energy dealers, which are predominantly located in North and
South America. The Company delivers a wide range of solar modules
and related hardware to the dealer network. The distribution
market also includes retail sales through a system integration
and mail-order design division, and direct sales to end users of
pre-packaged solar systems for recreational vehicles and boats
and water pumping systems for small residential customers or
large agricultural and village applications.
The Company operates subsidiaries internationally in Australia,
Brazil and Argentina. These subsidiaries service customers in
the industrial and distribution market segments within their
respective countries.
Results of Operations
Three months ended March 31, 1999 versus three months ended March
31, 1998.
Sales: Sales for the first quarter of 1999 were $11,556,000, an
18% increase over the $9,792,000 for the first quarter of 1998.
First quarter revenue included a decrease in base business
operations of $134,000 or 1% and increased sales of $1,898,000
from the recently acquired Solartec, Golden Genesis do Brazil and
Remote Power, Inc.
The Company's sales mix in the first quarter of 1999 was
approximately 21% industrial products, 63% distribution and 16%
international sales as compared to 58% industrial products, 34%
distribution and 8% international during the first quarter of
1998. The shift in sales mix was largely due to increased
marketing efforts in the distribution segment including sales of
Y2K backup power systems, the addition of Solartec and Golden
Genesis do Brazil within the international segment and weaker
demand within the industrial geophysical markets along with
unfavorable timing of project awards within the industrial
telecommunication markets.
<PAGE> F-10
Gross Profit: Gross Profit increased 14% from $1,888,000 in the
first quarter of 1998 to $2,156,000 in the first quarter of 1999.
Gross profit margins remained constant at 19% in each quarter.
The Company was able to maintain its margin even with the
significant decrease in higher margin industrial sales.
Selling, General and Administrative Expenses ("SG&A"): SG&A
expenses increased 35% from $1,718,000 in the first quarter of
1998 to $2,317,000 in the first quarter of 1999. The $599,000
increase was mainly due to the SG&A of recently acquired
subsidiaries totaling $461,000. SG&A as a percentage of sales
increased from 18% in the first quarter of 1998 to 20% in the
first quarter of 1999. The increase in SG&A as a percentage of
sales is a result of the decreased sales in the industrial market
and the addition of new international subsidiaries.
Other Income (Expense): The Company's non-operating income and
expense is primarily comprised of interest expense.
Income Tax: The Company recognized foreign income tax expense of
$61,000 and state income tax expense of $9,000 for a total
$70,000 of income tax expense in the three months ended March 31,
1999. The Company did not recognize any income tax benefit or
expense for the three months ended March 31, 1998. The expense
recognized relates to taxable income generated by the recently
acquired subsidiaries Solartec and Utility Power Group.
Realization of the net operating losses generated in prior
periods is dependent on generation of future taxable income and
limited by ownership changes. At this time, management has
determined that it is more likely than not that $350,000 of the
deferred tax asset will be realized and therefore has provided a
valuation allowance for all but $350,000 of the deferred tax
asset. The realizability of the deferred tax asset will be
monitored on a quarterly basis.
Net Income (Loss): The Company reported a net loss of $492,000,
or $0.03 per diluted common share, for the first quarter of 1999
versus net income of $68,000, or $0.004 per diluted common share,
for the first quarter of 1998. Increased SG&A and decreased
sales in the industrial market are primarily responsible for the
net loss.
Liquidity and Capital Resources
The Company's liquidity is generated from both internal and
external sources and is used to fund short-term working capital
needs, capital expenditures and acquisitions. Internally
generated liquidity is measured by net cash flows from operations,
as discussed below, and working capital. At March 31, 1999, the
Company's working capital (current assets minus current
liabilities) was $7,650,000 with a current ratio (current assets
divided by current liabilities) of 1.63 to 1.
<PAGE> F-11
The Company has established an unsecured, $4,750,000 line of
credit with ACX Technologies, Inc., the parent of the Company's
majority shareholder. This facility bears interest, payable
quarterly, at 1% below prime. The principal balance is due
October 31, 2000. At March 31, 1999, the Company had borrowed
$4,750,000 under this line to fund working capital needs, capital
expenditures, and acquisitions.
On September 3, 1998, the Company entered into a one year
$3,600,000 note payable with Golden Technologies Company, Inc.
("GTC"), the Company's majority shareholder. This note was given
for the purchase of GGB and Solartec and bears interest, payable
quarterly, at 6%. The principal balance is due September 4, 1999.
As shown in the Consolidated Statements of Cash Flows, net cash
used by operations was $219,000 and $636,000 for the first quarter
of 1999 and 1998, respectively. A decrease in accounts receivable
resulting from the Company's collection efforts and an increase in
accounts payable account for the majority of the decrease in the
use of cash for operations between the first quarter of 1998 and
the first quarter of 1999.
During the first quarter of 1999, the Company invested $33,000 in
capital expenditures to upgrade equipment. This represents an
decrease of $123,000 compared to capital expenditures in the first
quarter of 1998. The Company had no acquisitions in the first
quarter of 1999 compared to an investment of $369,948 net of cash
acquired for the purchase of UPG in the first quarter of 1998.
Although no assurances can be made, the Company currently expects
that cash flows from operations, access to its line of credit and
the possibility of refinancing related party indebtedness will be
sufficient to meet the Company's needs for working capital and
temporary financing for capital expenditures.
The impact of inflation on the Company's financial position and
results of operations has been minimal and is not expected to
adversely affect future results.
Year 2000 Readiness
The Year 2000 issue arose because many existing computer programs
use only the last two digits to refer to a year. Therefore, these
computer programs do not properly recognize a year that begins
with "20" instead of the familiar "19". If not corrected, many
computer applications could fail or create erroneous results
disrupting normal business operations.
Management has implemented an enterprise-wide program to prepare
the Company's financial, manufacturing, and other critical systems
and applications for the Year 2000. The program includes a task
<PAGE> F-12
force established in September 1998 that has the support and
participation of upper management and includes individuals with
expertise in information technologies, accounting, legal and
engineering. The Board of Directors monitors the progress of the
program on a periodic basis. The task force's objective is to
ensure an uninterrupted transition to the year 2000 by assessing,
testing, and modifying all information technology (IT) and non-IT
systems, interdependent systems, and third parties such as
suppliers and customers.
The Year 2000 task force has taken an inventory of all IT and non-
IT systems. This inventory categorizes potential systems date
failures into three categories: "major" (critical to production
and potentially threatening to business with no short-term
alternatives available); "limited" (disrupting to the business
operations with short-term solutions available); and "minor"
(inconsequential to the business operations). The task force has
prioritized the program to focus first on "major" systems. It is
the Company's goal to have all systems Year 2000 compliant no
later than August 1, 1999.
IT Systems: The Company is primarily using internal resources to
remediate IT systems. External resources are used to assist in
testing compliance of IT systems. The Company does not rely on
any one IT system. The majority of the IT systems have been
recently purchased from third party vendors. These systems were
already Year 2000 compliant or had Year 2000 compliance upgrades.
As of March 31, 1999, approximately 70% of the Company's IT
systems were Year 2000 compliant.
Non-IT Systems: The Company has only three manufacturing
facilities and eight sales facilities, none of which have a
significant number of non-IT systems. Two of the three
manufacturing facilities are located in North America. To ensure
Year 2000 compliance for non-IT systems, the Year 2000 task force
has contacted the suppliers of these non-IT systems and obtained
statements that the systems are Year 2000 compliant and is in the
process of testing Year 2000 compliance. The majority of these
non-IT systems use time intervals instead of dates, thus, the
Company believes that potential disruptions of such systems due to
the Year 2000 issue should be minimal. As of March 31, 1999,
approximately 75% of the Company's "major" and "limited" non-IT
systems are Year 2000 compliant. The "minor" non-IT systems are
in various stages of compliance.
Third Parties: The Year 2000 task force has been in contact with
key suppliers and customers to minimize potential business
disruptions related to the Year 2000 issue between the Company and
these third parties. The task force has focused on suppliers and
customers that are classified as "major" and "limited." While
the Company cannot guarantee compliance by third party suppliers,
the Company is in the process of developing contingency plans to
ensure the availability of inventory supplies in the event a
<PAGE> F-13
supplier is not Year 2000 compliant.
Contingency Plans: The Company is in the process of forming
contingency plans in the event there are Year 2000 failures
related to the Company's IT and non-IT systems and/or key third
parties. The Company's manufacturing facilities are not
interdependent in terms of non-IT systems, and its facilities
utilize a diverse range of non-IT systems. In addition, no one
manufacturing facility accounts for a significant amount of
revenue. Thus, for non-IT systems the contingency plan includes
the transfer of production between facilities and manufacturing
equipment. Currently, the Company believes that there is enough
manufacturing capacity to accommodate the contingency plan.
The Company's IT systems are somewhat interdependent between
locations, however the Company still utilizes a diverse range of
IT systems. The contingency plan for IT systems includes the
ability to transfer transaction processing, record keeping, and
compliance work between facilities in addition to maintaining
"hard" copies of critical information.
The Company is not dependent on any one supplier. The Company has
established back-up suppliers and will maintain adequate inventory
levels at December 31, 1999 to minimize the potential business
disruption in the event of a Year 2000 failure by a supplier.
Costs: Through March 31, 1999, the Company has spent
approximately $44,000 out of an estimated total of $120,000
related to the Year 2000 issue. These costs include the costs
incurred for external consultants and professional advisors and
the costs for software and hardware. The Company has not
separately tracked internal costs such as payroll related costs
for its information technologies group and other employees working
on the Year 2000 project. The Company expenses all costs related
to the Year 2000 issue as incurred. These costs are being funded
through operating cash flows.
The Company's current estimate of the time and costs related to
the remediation of the Year 2000 issue are based on the facts and
circumstances existing at this time. New developments could
affect the Company's estimates to remediate the Year 2000 issue.
These developments include, but are not limited to: (i) the
availability and cost of personnel trained in this area; (ii) the
ability to identify and remediate all IT and non-IT systems; (iii)
unanticipated failures in IT and non-IT systems; and (iv) the
planning and Year 2000 compliance success that key customers and
suppliers attain.
Other
These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K
for the year ended December 31, 1998. The accompanying financial
<PAGE> F-14
statements have not been examined by independent accountants in
accordance with generally accepted auditing standards, but in the
opinion of the management of the Company, such financial
statements include all adjustments necessary to summarize fairly
the Company's financial position and results of operations. All
adjustments made to the interim financial statements presented
are of a normal recurring nature. The results of operations for
the three month period ended March 31, 1999 may not be indicative
of results that may be expected for the year ending December 31,
1999.
Forward-Looking Statements
The statements made in this Report that are not historical facts
contain forward-looking information that involves risks and
uncertainties. Important factors that may cause actual results
to differ from such forward-looking statements include, but are
not limited to, market demand and acceptance of the Company's
products, the impact of competitive technologies, products and
services, risks associated with any litigation and claims to
which the Company may be a party, availability of critical
materials or supply, the effect of economic and business
conditions and other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibits are filed as part of this Report:
Exhibit
Number Description Page
3.1 Certificate of Incorporation of Golden Genesis
Company (filed as Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 and incorporated herein by
reference).
3.2 Golden Genesis Company Bylaws adopted June 8,
1998 (filed as Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998 and incorporated herein by
reference).
4.1 Specimen Certificate representing the Common
Stock of the Company (filed as Exhibit 4-A to the
Company's Annual Report on Form 10-KSB for the
year ended August 31, 1988 and incorporated herein
by reference).
<PAGE> F-15
4.2 Specimen Certificate representing the Series A
Convertible Preferred Stock of the Company (filed
as Exhibit 4.2 to the Company's Form S-3 dated
September 19, 1994 and incorporated herein by
reference).
4.3 Specimen Certificate representing the Series AA
Convertible Preferred Stock of the Company (filed as
Exhibit 4.3 to the Company's Form S-3 dated September
19, 1994 and incorporated herein by reference).
4.4 Specimen Certificate representing the Series B
Convertible Preferred Stock of the Company (filed as
Exhibit 4.4 to the Company's Form S-3 dated September
19, 1994 and incorporated herein by reference).
4.5 Registration Rights Agreement between the Company,
and Golden Technologies, Inc. and ACX Technologies,
Inc. dated November 21, 1996 (filed as Exhibit 4.5 to
the Company's Annual Report on Form 10-KSB for the
year ended August 31, 1996 and incorporated herein by
reference).
10.1 Photocomm, Inc. Stock Option Plan, Non-Statutory
Stock Option Agreement and Incentive Stock Option
Agreement (filed as Exhibit 10-K to the Company's
Quarterly Report on Form 10-QSB for the quarter ended
May 31, 1990 and incorporated herein by reference).
10.2 Promissory Notes, Loan Agreement, Deed of Trust,
Security Agreement dated February 4, 1991 for the
Arizona Department of Commerce loans for the
construction of the 10,000 square foot addition to
the corporate headquarters and the purchase and
construction of additional module manufacturing
equipment (filed as Exhibit 10-S to the Company's
Quarterly Report on Form 10-QSB for the quarter
ended February 28, 1991 and incorporated herein by
reference).
10.3 Convertible Preferred Stock Subscription and
Purchase Agreement with Powers, Preferences and
Rights of the Series AA Private issue in April and
May of 1993 (filed as Exhibit 10-X to the Company's
Quarterly Report on 10-QSB for the quarter ended
May 31, 1993 and incorporated herein by reference).
10.4 Agreement and Plan of Reorganization between
Photocomm, Inc., Sunelco, Inc. and Daniel M.
Brandborg and Rebecca M. Brandborg dated October
3, 1995 (filed as Form 8-K, on October 18, 1995
and incorporated herein by reference).
<PAGE> F-16
10.5 Agreement and Plan of Reorganization between
Photocomm, Inc., Jadco Manufacturing and James C.
Allen dated January 31, 1996 (filed as Form 8-K on
February 14, 1996 and incorporated herein by
reference).
10.6 Executive Compensation Agreement between Photocomm,
Inc. and Myron Anduri dated November 20, 1996
(filed as Exhibit 10.12 to the Company's Annual Report
on Form 10-KSB for the year ended August 31, 1996 and
incorporated herein by reference).
10.7 Executive Compensation Agreement between Photocomm,
Inc. and Donald Anderson dated November 20, 1996
(filed as Exhibit 10.13 to the Company's Annual Report
on Form 10-KSB for the year ended August 31, 1996 and
incorporated herein by reference).
10.8 Stock Purchase Agreement dated November 15, 1996
among Golden Technologies Company, Inc., The New
World Power Corporation and Photocomm, Inc. (filed
as Exhibit 10.17 to the Company's Annual Report on Form
10-KSB for the year ended August 31, 1996 and
incorporated herein by reference)
10.9 Photocomm, Inc. 1996 Stock Option Plan and Non-
Statutory Stock Option Agreement dated September
16, 1996 and November 19, 1996, respectively
(filed as Exhibit 3.3 to the Company's Annual Report
on Form 10-KSB for the year ended August 31, 1996 and
incorporated herein by reference).
10.10 Agreement and plan of merger between Photocomm,
Inc. and Silicon Energy Corporation dated January
23, 1998 (filed as Form 8-K on February 18, 1998
and incorporated herein by reference).
10.11 Loan agreement and promissory note between
Photocomm, Inc. and ACX Technologies, Inc. dated
November 30, 1997 (filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by
reference).
10.12 Settlement agreements and mutual releases between
Photocomm, Inc. and Robert R. Kauffman and Thomas C.
LaVoy dated June 18, 1997 (filed as Exhibits 10.1
and 10.2 to the Company's Quarterly Report on Form
10-QSB for the Quarter ended June 30, 1997 and
incorporated herein by reference).
10.13 Agreement and Plan of Merger between Photocomm, Inc. and
<PAGE> F-17
Silicon Energy Corporation dated January 23, 1998 (filed
as Exhibit 2.1 to Form 8-K on February 18, 1998 and
incorporated herein by reference).
10.14 Agreement and Plan of Merger between Photocomm, Inc.,
an Arizona corporation, and Golden Genesis Company, a
Delaware corporation, dated June 9, 1998 (filed as
Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998 and
incorporated herein by reference).
10.15 Articles of Merger of Photocomm, Inc., an Arizona
corporation, into Golden Genesis Company, a Delaware
corporation, dated June 9, 1998 (filed as Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by
reference).
10.16 Certificate of Merger of Photocomm, Inc., an Arizona
corporation, into Golden Genesis Company, a Delaware
corporation, dated June 9, 1998 (filed as Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by
reference).
10.17 Share Purchase Agreement between Golden Genesis Company
Remote Power, Inc. and its shareholders dated July 21,
1998 (filed as Exhibit 3.1 to the Company'[s Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998
and incorporated herein by reference).
10.18 Share Purchase Agreement between Golden Genesis Company,
Golden Technologies Company, Inc. and ACX Technologies,
Inc. dated September 4, 1998 (filed as Exhibit 2 to
the Company's Form 8-K dated September 4, 1998 and
incorporated herein by reference).
10.19 Photocomm, Inc. d/b/a Golden Genesis Company 1998 Stock
Option and Incentive Plan (filed as Exhibit 10.19 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and incorporated herein by
reference).
27 Financial Data Schedule 19
(b) Reports on Form 8-K
None
<PAGE> F-18
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, thereunto duly authorized.
Date: May 14, 1999
Golden Genesis Company
By: /s/ J. Michael Davis By: /s/ Jeffrey C. Brines
J. Michael Davis Jeffrey C. Brines
Chief Executive Officer Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
Officer)
<PAGE>
PROXY CARD
Golden Genesis Company
Special Meeting of Stockholders July 21, 1999
This Proxy Is Solicited on Behalf of the Board of Directors
John K. Coors and Jed J. Burnham and each of them, as proxies, with full
power of substitution in each of them, are hereby authorized to represent and
to vote, as designated below and on the reverse side, on all proposals and in
the direction of the proxies on such other matters as may properly come before
the special meeting of stockholders of Golden Genesis Company (the "Company")
to be held on July 21, 1999 or any adjournment(s), postponement(s), or other
delay(s) thereof (the "Special Meeting"), all shares of stock of the Company
to which the undersigned is entitled to vote at the Special Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
1. Proposal #1:
Proposal to adopt the Agreement / / FOR/ / AGAINST/ / ABSTAIN
and Plan of Merger, dated May 26,
1999, by and among Kyocera International,
Inc., GGC Acquisition Company and the
Company (the "Merger Agreement") and to
approve the merger of GGC Acquisition
Company with and into the Company (with
the Company being the surviving corporation)
pursuant to the terms of the Merger Agreement.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL
Address: Date:
Signature(s) in Box
Please sign exactly as your name(s) appear on
Proxy. If held in joint tenancy, all persons
must sign. Trustees, administrators, etc.,
should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the proxy.
