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AGREEMENT AND PLAN OF MERGER
Between
G.C. ASSOCIATES HOLDINGS CORP.
and
AMERICAN EDUCATIONAL PRODUCTS, INC.
Dated as of August 14, 2000
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TABLE OF CONTENTS
Page
Glossary of Defined Terms
ARTICLE I THE MERGER..........................................................1
SECTION 1.01.The Merger...................................................1
SECTION 1.02.Effective Time; Closing......................................1
SECTION 1.03.Effect of the Merger.........................................2
SECTION 1.04.Charter; Bylaws..............................................2
SECTION 1.05.Directors and Officers of the Surviving Corporation..........2
ARTICLE II CONVERSION OF SECURITIES IN THE MERGER..............................2
SECTION 2.01.Conversion of Capital Stock..................................2
SECTION 2.02.Payment for Shares...........................................3
SECTION 2.03.Employee Stock Options.......................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................5
SECTION 3.01.Organization and Qualification; Subsidiaries.................5
SECTION 3.02.Charter and Bylaws...........................................6
SECTION 3.03.Capitalization...............................................6
SECTION 3.04.Authority Relative to This Agreement.........................7
SECTION 3.05.No Conflict; Required Filings and Consents...................7
SECTION 3.06.Permits; Compliance..........................................8
SECTION 3.07.SEC Filings; Financial Statements............................8
SECTION 3.08.Absence of Certain Changes or Events.........................9
SECTION 3.09.Employee Benefit Plans; Labor Matters.......................10
SECTION 3.10.Contracts; Debt Instruments.................................12
SECTION 3.11.Absence of Litigation.......................................14
SECTION 3.12.Environmental Matters.......................................14
SECTION 3.13.Trademarks, Patents and Copyrights..........................16
SECTION 3.14.Taxes.......................................................17
SECTION 3.15.Property and Leases.........................................17
SECTION 3.16.Insurance...................................................18
SECTION 3.17.Board Recommendation........................................18
SECTION 3.18.Brokers.....................................................18
SECTION 3.19.Vote Required; State Takeover Statutes......................18
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........19
SECTION 4.01.Organization and Qualification..............................19
SECTION 4.02.No Conflict; Required Filings and Consents..................19
SECTION 4.03.Absence of Litigation.......................................20
SECTION 4.04.Brokers.....................................................20
SECTION 4.05.No Activities...............................................20
SECTION 4.06.Financing...................................................20
ARTICLE V COVENANTS..........................................................20
SECTION 5.01.Conduct of Business by the Company Pending the Closing......20
SECTION 5.02.Formation of New Subsidiary.................................23
SECTION 5.03.Notices of Certain Events...................................23
SECTION 5.04.Contractual Consents........................................23
ARTICLE VI ADDITIONAL AGREEMENTS..............................................23
SECTION 6.01.Proxy Statement; Schedule 13E-3.............................23
SECTION 6.02.Company Shareholders' Meeting...............................24
SECTION 6.03.Access to Information; Confidentiality......................25
SECTION 6.04.No Solicitation of Transactions.............................26
SECTION 6.05.Election of Directors.......................................27
SECTION 6.06.Directors' and Officers' Indemnification and Insurance......27
SECTION 6.07.Further Action; Consents; Filings...........................29
SECTION 6.08.Public Announcements........................................29
ARTICLE VII CONDITIONS TO THE MERGER.........................................29
SECTION 7.01.Conditions to the Obligations of Each Party to Consummate
the Merger..................................................29
SECTION 7.02.Conditions to the Obligations of the Company................30
SECTION 7.03.Conditions to the Obligations of Parent and Merger Sub......30
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...............................31
SECTION 8.01.Termination.................................................31
SECTION 8.02.Notice of Termination; Effect of Termination................32
SECTION 8.03.Amendment...................................................32
SECTION 8.04.Waiver......................................................33
SECTION 8.05.Expenses....................................................33
ARTICLE IX GENERAL PROVISIONS................................................34
SECTION 9.01.Non-Survival of Representations, Warranties and Agreements..34
SECTION 9.02.Notices.....................................................34
SECTION 9.03.Certain Definitions.........................................35
SECTION 9.04.Severability................................................36
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SECTION 9.05.Assignment; Merger Sub; Binding Effect; Benefit.............36
SECTION 9.06.Incorporation of Exhibits...................................36
SECTION 9.07.Specific Performance........................................36
SECTION 9.08.Governing Law...............................................36
SECTION 9.09.Submission to Jurisdiction; Venue...........................36
SECTION 9.10.Headings....................................................37
SECTION 9.11.Counterparts................................................37
SECTION 9.12.Entire Agreement............................................37
SECTION 9.13.Waiver of Jury Trial........................................37
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GLOSSARY OF DEFINED TERMS
Affiliate (S) .......................................... 9.03(a)
Agreement .......................................... Preamble
Articles of Merger.......................................... (S) 1.02
business day .......................................... (S) 9.03(c)
Common Stock .......................................... Recitals
Closing .......................................... (S) 1.02
Closing Date .......................................... (S) 1.02
Code .......................................... (S) 2.02(e)
Company .......................................... Preamble
Company Board .......................................... Recitals
Company Certificates........................................ (S) 2.02(a)
Company Common Stock........................................ Recitals
Company Option .......................................... (S) 2.03(a)
Company SEC Reports......................................... (S) 3.07(a)
Company Stock Plans......................................... (S) 2.03(a)
Company Shareholders' Meeting............................... (S) 6.01(a)
Company Subsidiaries........................................ (S) 3.01(a)
Competing Transaction....................................... (S) 6.04
Control .......................................... (S) 9.03(d)
controlled by .......................................... (S) 9.03(d)
Costs .......................................... (S) 6.06(d)
Disclosure Schedule......................................... (S) 3.01(a)
Effective Time .......................................... (S) 1.02
Environmental Claims........................................ (S) 3.12(b)
Environmental Laws.......................................... (S) 3.12(b)
Environmental Permit........................................ (S) 3.12(b)
ERISA .......................................... (S) 3.09(a)
Exchange Act .......................................... (S) 3.05(b)(i)
Expenses .......................................... (S) 8.05(a)
Governmental Entity......................................... (S) 3.05(b)
Hazardous Material.......................................... (S) 3.12(b)
Indemnified Parties......................................... (S) 6.06(d)
IRS .......................................... (S) 3.09(a)(iii)
Knowledge .......................................... (S) 9.03(e)
Law .......................................... (S) 3.05(a)(ii)
Letter of Transmittal....................................... (S) 2.02(b)
Material Adverse Effect..................................... (S) 3.01(a)
Material Contract .......................................... (S) 3.10(a)
Merge .......................................... Recitals
Merger Consideration........................................ (S) 2.01(a)
Merger Sub .......................................... Preamble
Multiemployer Plan.......................................... (S) 3.09(b)
Multiple Employer Plan...................................... (S) 3.09(b)
Order .......................................... (S) 7.01(b)
Parent .......................................... Preamble
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Paying Agent .......................................... (S) 2.02(a)
Permits .......................................... (S) 3.06
Person .......................................... (S) 9.03(f)
Plans .......................................... (S) 3.09(a)
Preferred Stock .......................................... (S) 3.03(c)
Proxy Statement .......................................... (S) 6.01(a)
Real Property .......................................... (S) 3.12(a)(ii)
Release .......................................... (S) 3.12(b)
Remedial Action .......................................... (S) 3.12(b)
Representatives .......................................... (S) 6.02(a)
Schedule 13E-3 .......................................... (S) 6.01(a)
SEC .......................................... (S) 3.07(a)
subsidiary(ies) .......................................... (S) 9.03(g)
Superior Proposal .......................................... (S) 6.04
Surviving Corporation....................................... (S) 1.01
Tax Returns .......................................... (S) 3.14
Taxes .......................................... (S) 3.14
Third Party Provision....................................... (S) 9.05
under common control with................................... (S) 9.03(d)
U.S. GAAP .......................................... (S) 3.07(b)
Waivers .......................................... (S) 3.23
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 14, 2000 (this
"Agreement"), between G.C. ASSOCIATES HOLDINGS CORP., a Delaware corporation
("Parent") and AMERICAN EDUCATIONAL PRODUCTS, INC., a Colorado corporation (the
"Company").
Upon the terms and subject to the conditions of this Agreement and in
accordance with the Colorado Business Corporation Act (the "CBCA"), Parent will
form a wholly owned subsidiary ("Merger Sub") and Parent will acquire, pursuant
to the merger (the "Merger") of Merger Sub with and into the Company, all of the
issued and outstanding shares of the Company's common stock, par value $.05 per
share (the "Company Common Stock"), at a price of $10.00 per share;
The Board of Directors of the Company (the "Company Board") has (i)
approved and deemed the Merger advisable upon the terms and subject to the
conditions set forth in this Agreement and (ii) recommended the approval of the
Merger and this Agreement by the shareholders of the Company; and
The Board of Directors of Parent has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and has approved and adopted this Agreement, the Merger and the other
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending legally to be bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Provided that this Agreement shall not have been
terminated in accordance with Section 8.01, upon the terms and subject to
the conditions set forth in Article VII, and in accordance with the CBCA,
at the Effective Time (as defined below), Merger Sub shall be merged with
and into the Company. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. Provided that this Agreement shall not
have been terminated in accordance with Section 8.01, as promptly as
practicable and in no event later than the second business day following
the satisfaction or, if permissible, waiver of the conditions set forth in
clauses (a) through (c) of Section 7.01 (or such other date as may be
agreed to in writing by each of the parties hereto), the parties hereto
shall cause the Merger to be consummated by filing the articles of merger
(the "Articles of Merger") with the Secretary of State of Colorado (the
"SSC") in such form as is required by, and executed in accordance with, the
relevant provisions of the CBCA. The term "Effective Time" means the date
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and time of the filing with, and the acceptance for record by, the SSC of
the Articles of Merger (or such later time, not to exceed 30 days after
such acceptance for record, as may be agreed in writing by each of the
parties hereto and specified in the Articles of Merger). Immediately prior
to the filing of the Articles of Merger, a closing (the "Closing") will be
held on the Closing Date at the offices of Kramer Levin Naftalis & Frankel
LLP, 919 Third Avenue, New York, New York (or such other place as the
parties hereto may agree).
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the CBCA.
Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all of the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of each of the Company and Merger Sub shall become
the debts, liabilities, obligations, restrictions, disabilities and duties
of the Surviving Corporation.
SECTION 1.04. Charter; Bylaws. At the Effective Time, (a) subject to the
provisions of Section 6.05(a), the charter of Merger Sub as in effect
immediately prior to the Effective Time shall be the charter of the
Surviving Corporation until thereafter amended as provided by law, the
bylaws and such charter of the Surviving Corporation, except that Article I
shall be amended to provide that the name of the Surviving Corporation
shall be "American Educational Products, Inc." and (b) the bylaws of Merger
Sub as in effect immediately prior to the Effective Time shall be the
bylaws of the Surviving Corporation until thereafter amended as provided by
law, the charter of the Surviving Corporation and such bylaws.
SECTION 1.05. Directors and Officers of the Surviving Corporation. The directors
of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance
with the charter and bylaws of the Surviving Corporation, and the officers
of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES IN THE MERGER
SECTION 2.01. Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:
(a) each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Common
Stock to be canceled pursuant to Section 2.01(b) hereof) shall be
converted into the right to receive $10.00 in cash (the "Merger
Consideration"), payable without interest to the holder of such share
of Company Common Stock, upon surrender of the Company Certificate
that formerly evidenced such share of Company Common Stock;
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(b) each share of Company Common Stock owned by Parent or owned by any
direct or indirect wholly owned subsidiary of the Company or Parent
shall be canceled and extinguished without any conversion thereof and
no payment shall be made with respect thereto; and
(c) each issued and outstanding share of common stock, par value $.05 per
share, of Merger Sub will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving
Corporation.
SECTION 2.02. Payment for Shares.
(a) From and after the Effective Time, a bank or trust company designated
by Parent and reasonably acceptable to the Company shall act as paying
agent (the "Paying Agent") in effecting the payment of the Merger
Consideration in respect of certificates that, prior to the Effective
Time, represented shares of Company Common Stock entitled to payment
of the Merger Consideration pursuant to Section 2.01(a) (the "Company
Certificates"). From and after the Effective Time, Parent shall cause
to be provided to the Paying Agent cash in amounts necessary to pay
for all of the shares of Company Common Stock pursuant to Section
2.01.
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of a Company Certificate (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected,
and risk of loss and title to the Company Certificate shall pass, only
upon delivery of the Company Certificate to the Paying Agent) (the
"Letter of Transmittal") and (ii) instructions for use in surrendering
such Company Certificate in exchange for payment therefor. Upon the
surrender of each such Company Certificate, together with such Letter
of Transmittal, duly completed and validly executed in accordance with
the instructions therein, and such other documents as may be required
pursuant to such instructions, the Paying Agent shall pay the holder
of such Company Certificate an amount in cash equal to the product of
the Merger Consideration multiplied by the number of shares of Company
Common Stock formerly represented by such Company Certificate, in
consideration therefor, and such Company Certificate shall forthwith
be cancelled. Until so surrendered, each such Company Certificate
(other than Company Certificates representing shares of Company Common
Stock to be canceled pursuant to Section 2.01(b)) shall represent
solely the right to receive the aggregate Merger Consideration
represented thereby. No interest shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion
thereof) is to be paid to any person other than the person in whose
name the Company Certificate surrendered is registered, it shall be a
condition to such right to receive such payment that the Company
Certificate so surrendered shall be properly endorsed or otherwise be
in proper form for transfer and that the person surrendering such
Company Certificate shall pay to the Paying Agent any transfer or
other similar Taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the
Company Certificate surrendered, or shall establish to the
satisfaction of the Surviving Corporation that such Tax has been paid
or is not applicable.
(c) At any time following the six-month anniversary of the Effective Time,
the Surviving Corporation shall be entitled to require the Paying
Agent to direct the delivery of any funds which previously had been
made available to the Paying Agent and were not disbursed to holders
of shares of Company Common Stock (including, without limitation, all
interest and other income received by the Paying Agent in respect of
all funds made available to it), Company Certificates and other
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documents in its possession relating to the Merger, and the Paying
Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving
Corporation and receive in consideration therefor the aggregate Merger
Consideration relating thereto, without any interest. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent
shall be liable to any holder of a share of Company Common Stock for
any Merger Consideration delivered in respect of such share to a
public official pursuant to any abandoned property, escheat or other
similar law.
(d) At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no
further registration of 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, Company Certificates are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and
cancelled in return for the payment of the aggregate Merger
Consideration represented thereby, as provided in this Article II.
From and after the Effective Time, the holders of shares of Company
Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common
Stock, except as otherwise provided herein or by applicable law.
(e) The Surviving Corporation shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock such amounts as it is
required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any applicable provision of state, local or foreign Tax
law. To the extent that amounts are so withheld by the Surviving
Corporation and paid to the applicable taxing authorities, such
withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by
the Surviving Corporation.
(f) If any Company Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with
respect to such Company Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Company Certificate the
Merger Consideration to which the holder thereof is entitled pursuant
to Section 2.01(a).
SECTION 2.03. Employee Stock Options.
(a) At the Effective Time, each option to purchase shares of Company
Common Stock (a "Company Option") outstanding and whether or not
exercisable as of the Effective Time granted pursuant to the Company's
Stock Option Plan, as amended through the date of this Agreement will
be deemed converted into, and the holder of each such option will be
entitled to receive from the Paying Agent upon surrender of the Option
for cancellation, an amount of cash equal to the product of (i) the
positive difference, if any, between the Merger Consideration and the
exercise price of each such Company Option; and (ii) the number of
shares of Company Common Stock covered by such Company Option.
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Any payments related to such sale of Company Options shall be
subject to all applicable federal, state and local tax withholding
requirements.
(b) Prior to the Effective Date, the Company will have entered into
consulting agreements with certain individuals named in Section 2.03
of the Disclosure Schedule attached hereto, dated as of the date
hereof and forming a part of this Agreement (the "Disclosure
Schedule") to provide ongoing consulting services to the Company.
SECTION 2.04 Warrants. Each of the warrants of the Company, dated May 25, 2000,
to purchase Company Common Stock at a price of $8.00 per share subject to
adjustment, and the warrants of the Company, dated November 26, 1997 to
purchase Company Common Stock at a price of $10.00 per share subject to
adjustment (the "Company Warrants"), shall be exercisable at the respective
exercise price of each, from and after the Effective Time until the
respective expiration dates. Upon such exercise, if any, such Company
Warrants shall be entitled to receive an amount of cash equal to the Merger
Consideration multiplied by the number of Common Shares for which such
warrant was exercisable immediately prior to the Effective Time. Except as
aforesaid, the exercise of any Company Warrant shall remain subject to all
terms and conditions provided in the applicable Company Warrant and/or
Warrant Agreement. Each of the Company and Parent shall take all action
necessary to provide that, upon consummation of the Merger, all Company
Warrants outstanding immediately prior to the Effective Time shall be
exercisable for a cash amount as aforesaid and that full disclosure is
provided to the Warrant holders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries.
(a) Except as set forth in Section 3.01(a) of the Disclosure Schedule
attached hereto, dated as of the date hereof and forming a part of
this Agreement (the "Disclosure Schedule"), the Company and each
subsidiary of the Company (the "Company Subsidiaries") has been duly
organized, and is validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, as the case
may be, and has the requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of the Company and each of the Company Subsidiaries is
duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for
such failures to be so qualified or licensed and in good standing that
would not materially delay consummation of the Merger and would not
have a Material Adverse Effect. For purposes of this Agreement,
"Material Adverse Effect" means any event, circumstances, change in or
effect on the business of the Company and the Company Subsidiaries,
taken as a whole, that, when taken together with all other events,
circumstances, changes and effects occurring after the date hereof
that do not individually have a Material Adverse Effect and all other
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circumstances that would, but for the fact that they do not
individually have a Material Adverse Effect, constitute a breach of
any representation or warranty made by the Company in this Agreement,
is, or is reasonably likely to be, materially adverse to the business,
financial condition, results of operations or prospects of the Company
and the Company Subsidiaries taken as a whole, and that, taken as a
whole, is, or is reasonably likely to result in a loss of not less
than $50,000 to the Company and the Company Subsidiaries.
(b) A true and complete list of all the Company Subsidiaries, together
with the jurisdiction of incorporation or organization of each Company
Subsidiary and the percentage of the outstanding capital stock of each
Company Subsidiary owned by the Company and each other Company
Subsidiary, is set forth in Section 3.01(b) of the Disclosure
Schedule. Except as disclosed in Section 3.01(b) of the Disclosure
Schedule, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business association
or entity.
SECTION 3.02. Charter and Bylaws. The copies of the Company's charter and
bylaws, each as amended and restated, that are set forth as exhibits to the
Company's Form 10-Q for the quarter ended March 31, 2000 and the Form 10-K
for the year ended December 31, 1999, respectively, are complete and
correct copies thereof. Such charter and bylaws are in full force and
effect. The Company is not in violation of any of the provisions of its
charter or bylaws.
SECTION 3.03. Capitalization. The authorized capital stock of the Company
consists of (a) 100,000,000 shares of Common Stock, par value $0.05, and
(b) 50,000,000 shares of preferred stock, par value $0.01 (the "Preferred
Stock"). At the close of business on June 30, 2000, (i) 1,085,540 shares of
Common Stock, all of which were validly issued, fully paid and
nonassessable and no shares of Preferred Stock were issued and outstanding,
(ii) no shares of Common Stock were held in the treasury of the Company or
by the Company Subsidiaries, and (iii) 1,191,656 shares of Common Stock
were reserved for issuance in connection with the exercise of outstanding
Company Options and Company Warrants in the amounts and at the exercise
prices set forth in Section 3.03 of the Disclosure Schedule. Except as set
forth in Section 3.03 of the Disclosure Schedule, all publicly traded
shares of Common Stock and the warrants of the Company dated November 26,
1997 to purchase Company Common Stock at a price of $10.00 per share are
authorized for listing on the NASDAQ Small Cap Market ("NASDAQ") and the
Pacific Exchange ("Pacific"). Except as forth in Section 3.03 of the
Disclosure Schedule, from December 31, 1999 through the date hereof, the
Company has not issued any additional shares of capital stock, except
pursuant to the exercise of Company Options or the Employee Stock Purchase
Plan, nor has the Company granted any additional options, warrants or other
rights or entered into any agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company
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or any Company Subsidiary or obligating the Company or any Company
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any Company Subsidiary. Except as issued
pursuant to the Company Stock Plans, pursuant to agreements or arrangements
described in Section 3.03 of the Disclosure Schedule or as set forth in the
Company SEC Reports (as defined herein), there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to
which the Company is a party or by which the Company is bound relating to
the issued or unissued capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to issue or
sell any shares of capital stock of, or other equity interests in, the
Company or any Company Subsidiary. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance prior to the Effective Time
on the terms and conditions specified in the instruments pursuant to which
they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 3.03 of the Disclosure
Schedule, there are no outstanding contractual obligations of the Company
or any Company Subsidiary to repurchase, redeem or otherwise acquire any
shares of Common Stock or any capital stock of any Company Subsidiary. Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and, except as set
forth in Section 3.03 of the Disclosure Schedule, each such share owned by
the Company or another Company Subsidiary is free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever,
except where failure to own such shares free and clear would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in Section 3.03 of the Disclosure Schedule, there are no material
outstanding contractual obligations of the Company or any Company
Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Company Subsidiary or any
other person, other than obligations arising in the ordinary course of
business and obligations disclosed in the Company SEC Reports.
SECTION 3.04. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions (including, without limitation, the Merger) contemplated
herein to be consummated by the Company. The execution and delivery of this
Agreement by the Company and the consummation by the Company of such
transactions have been duly and validly authorized by all necessary
corporate action, including the unanimous approval of the Company Board,
and no other corporate proceedings on the part of the Company are necessary
to authorize this Agreement or to consummate such transactions (other than
the adoption of this Agreement by the requisite affirmative vote of the
shareholders of the Company as required by the CBCA). This Agreement has
been duly and validly executed and delivered by the Company and (assuming
due authorization, execution and delivery by Parent and Merger Sub)
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i)
conflict with or violate any provision of the charter or bylaws of the
Company or any equivalent organizational documents of the Company or
any Company Subsidiary, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.05(b) have
been obtained and all filings and obligations described in Section
3.05(b) have been made, conflict with or violate any United States or
non-United States or supranational law, statute, ordinance, rule,
regulation, code, executive order, injunction, judgment, decree or
other order ("Law") applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, or (iii) except as set forth
in Section 3.05(a)(iii) of the Disclosure Schedule, result in any
breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
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any right of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any Company Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except,
with respect to clause (iii), for any such conflicts, violations,
breaches, defaults, or other occurrences which would not reasonably be
expected to (A) have a Material Adverse Effect or (B) prevent or
materially delay the performance of this Agreement by the Company.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any United States federal, state, county or local or
non-United States or supranational government, governmental,
regulatory or administrative authority, agency, instrumentality or
commission or any court, tribunal or judicial or arbitral body
("Governmental Entity"), except (i) for applicable requirements of the
Securities Exchange Act of 1934, as amended (together with the rules
and regulations promulgated thereunder, the "Exchange Act"), and the
NASDAQ and the Pacific; (ii) for applicable requirements relating to
the filing and recordation of appropriate merger documents pursuant to
the CBCA and as set forth in Section 3.05(b) of the Disclosure
Schedule; and (iii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
would not reasonably be expected to (A) prevent or materially delay
consummation of the Merger or (B) have a Material Adverse Effect.
SECTION 3.06. Permits; Compliance. Except as set forth in Section 3.06 of the
Disclosure Schedule, each of the Company and the Company Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and
orders of any Governmental Entity necessary for the Company or any Company
Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Permits"), except where the
failure to have, or the suspension or cancellation of, any of the Permits
would not reasonably be expected to (a) have a Material Adverse Effect or
(b) prevent or materially delay the performance of this Agreement by the
Company, and no suspension or cancellation of any of the Permits is pending
or, to the knowledge of the Company, threatened. Neither the Company nor
any Company Subsidiary is in conflict with, or in default or violation of,
(i) any Law applicable to the Company or any Company Subsidiary or by which
any property or asset of the Company or any Company Subsidiary is bound or
affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, Permit, franchise or other instrument or obligation to
which the Company or any Company Subsidiary is a party to or by which the
Company or any Company Subsidiary is bound by, except for any such
conflicts, defaults or violations that would not reasonably be expected to
(A) have a Material Adverse Effect or (B) prevent or materially delay the
performance of this Agreement by the Company.
SECTION 3.07. SEC Filings; Financial Statements.
(a) Except as set forth in Section 3.07 of the Disclosure Schedule, the
Company has timely filed all forms, reports and documents required to
be filed by it with the Securities and Exchange Commission ("SEC")
since January 1, 1993 through the date of this Agreement (all of the
above, including the forms, reports and documents set forth in Section
3.07 of the Disclosure Schedule, the "Company SEC Reports"). The
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Company SEC Reports and all forms, reports and documents to be filed
by the Company after the date hereof and prior to the Closing (i) were
or will be prepared in all material respects in accordance with the
requirements of the Exchange Act and the rules and regulations
promulgated thereunder, (ii) did or will not, as of their respective
dates, contain any untrue statement of a material fact or omit to
state a 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, and (iii)
did not and will not omit any document required to be filed as an
exhibit thereto. No Company Subsidiary is required to file any form,
report or other document with the SEC.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Company SEC Reports and each of the
financial statements to be included in forms, reports and documents to
be filed with the SEC after the date hereof and prior to the Closing,
was or will be prepared in accordance with United States generally
accepted accounting principles as promulgated by the American
Institute of Certified Public Accountants and as interpreted from time
to time by the staff of the SEC ("U.S. GAAP"), applied on a consistent
basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly or will present fairly,
the consolidated financial position, results of operations and cash
flow of the Company, and the consolidated Company Subsidiaries as at
the respective dates thereof and for the respective periods indicated
therein in all material respects, except as otherwise noted therein in
accordance with U.S. GAAP (subject, in the case of unaudited
statements, to normal year-end adjustments which were not and are not
expected to have a Material Adverse Effect).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the Company Subsidiaries as of December 31,
1999, including the notes thereto, or in any of the Company SEC
Reports filed subsequent to December 31, 1999 or in Section 3.07(c) of
the Disclosure Schedule, neither the Company nor any Company
Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in
accordance with U.S. GAAP, except for liabilities or obligations
incurred in the ordinary course of business since December 31, 1999
that would not reasonably be expected to, individually or in the
aggregate, (i) have a Material Adverse Effect or (ii) prevent or
materially delay the performance of this Agreement by the Company.
(d) The Company has heretofore furnished to Parent a complete and correct
copy of any amendment or modification, that has not yet been filed
with the SEC, to agreements, documents or other instruments that
previously have been filed by the Company with the SEC pursuant to the
Exchange Act.
SECTION 3.08. Absence of Certain Changes or Events. Since December 31, 1999,
except as contemplated by or as set forth in Section 3.08 of the Disclosure
Schedule or as expressly contemplated by this Agreement or as specifically
disclosed in the Company SEC Reports filed subsequent to December 31, 1999,
the Company and the Company Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice,
except for a special cash dividend in the aggregate amount of $780,500
payable on October 30, 2000 prorata to holders of the Company's Common
Stock of record on August 18, 2000 (the "Cash Dividend"), and, since such
date, (a) there has not been any change, condition, event or development
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that has had a Material Adverse Effect, (b) there has not been any event
that could reasonably be expected to prevent or materially delay the
performance of this Agreement by the Company and (c) none of the Company or
any Company Subsidiary has taken any action that, if taken after the date
of this Agreement, would constitute a breach of any of the covenants set
forth in Section 5.01.
SECTION 3.09. Employee Benefit Plans; Labor Matters.
(a) Section 3.09(a) of the Disclosure Schedule lists each employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and each other plan,
policy, program, practice, agreement, understanding or arrangement
providing compensation or other benefits to any employee, former
employee or independent contractor of the Company (or to any dependent
or beneficiary thereof) which the Company maintains or under which the
Company has or could have any obligation or liability, whether
directly or as a member of a controlled group of corporations, a
controlled group of trades or businesses or an affiliated service
group within the meaning of Section 414 of the Code (whether
contingent or actual) (each, a "Plan"). No Plan is or was subject to
Title IV of ERISA. Each Plan is in writing and the Company has
furnished or made available to Parent a true and complete copy of each
material Plan and has delivered or made available to Parent a true and
complete copy of each material document, if applicable, prepared in
connection with each such Plan, including, without limitation, (A) a
copy of each trust or other funding arrangement, (B) each summary plan
description and summary of material modifications, (C) the most
recently filed Internal Revenue Service ("IRS") Form 5500, (D) the
most recently received IRS determination letter for each such Plan,
and (E) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Neither the Company nor
any Company Subsidiary has any express or implied commitment, whether
legally enforceable or not, (i) to create, incur liability with
respect to or cause to exist any other employee benefit plan, program
or arrangement, (ii) to enter into any contract or agreement to
provide compensation or benefits to any individual, or (iii) to
modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Code.
(b) Except as set forth in Section 3.09(b) of the Disclosure Schedule,
none of the Plans (i) provides for the payment of separation,
severance, termination or similar-type benefits to any person, (ii)
obligates or obligated the Company or any Company Subsidiary to pay,
or segregate any funds to pay (into a trust or otherwise), separation,
severance, termination or similar-type benefits solely or partially as
a result of any transaction contemplated by this Agreement, or (iii)
obligates or obligated the Company or any Company Subsidiary to make
any payment, or segregate any funds to pay (into a trust or
otherwise), or provide any benefit as a result of a "change in
control", within the meaning of such term under Section 280G of the
Code solely or partially as a result of any transaction contemplated
by this Agreement. Except as set forth in Section 3.09(b) of the
Disclosure Schedule, none of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company or any Company
Subsidiary. Each of the Plans is subject only to the Laws of the
United States or a political subdivision thereof.
(c) Each Plan is now and always has been operated in all material respects
in accordance with its terms and the requirements of all applicable
Law including, without limitation, ERISA and the Code. The Company and
the Company Subsidiaries have performed all obligations required to be
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performed by them under, are not in material default under or in
violation of, and have no knowledge of any default or violations by
any party to, any Plan. No action is pending or, to the knowledge of
the Company, threatened with respect to any Plan (other than claims
for benefits in the ordinary course), and, to the Company's knowledge,
no fact or event exists that could reasonably be expected to give rise
to any such action.
(d) Each Plan that is intended to be qualified under Section 401(a) or
Section 401(k) of the Code has heretofore been determined by the IRS
so to qualify, and if submitted and assuming all amendments required
by the IRS were made, the Company believes that such Plans would
receive a favorable determination letter from the IRS with respect to
the changes required by the Small Business Job Protection Act of 1996,
the General Agreement on Tariffs and Trade, the Tax Reform Act of
1997, and the Uniformed Services Employment and Reemployment Rights
Act of 1994, and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from
the IRS that it is so exempt, and no fact or event has occurred since
the date of such determination letter or letters from the IRS to
adversely affect the qualified status of any such Plan or the exempt
status of any such trust.
(e) There has not been any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) for which an
exemption is not available with respect to any Plan. Neither the
Company nor any Company Subsidiary has incurred any liability under,
arising out of or by operation of Title IV of ERISA, including,
without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to
Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan
or Multiple Employer Plan, and no fact or event exists which could
reasonably be expected to give rise to any such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All
such contributions have been fully deducted for income tax purposes to
the extent permitted by applicable Law and no such deduction has been
challenged or disallowed by any Governmental Entity and, to the
Company's knowledge, no fact or event exists which could reasonably be
expected to give rise to any such challenge or disallowance.
(g) Except as set forth in Section 3.09(g) of the Disclosure Schedule, all
directors and officers of the Company and the Company Subsidiaries are
under written obligation to the Company and the Company Subsidiaries
to maintain in confidence all confidential or proprietary information
acquired by them in the course of their employment and to assign to
the Company and the Company Subsidiaries all inventions made by them
within the scope of their employment during such employment and for a
reasonable period thereafter.
(h) Except as set forth in Section 3.09(h) of the Disclosure Schedule or
as disclosed in the Company SEC Reports, (i) there are no
controversies pending or, to the knowledge of the Company, threatened
between the Company or any Company Subsidiary and any of their
respective employees; (ii) neither the Company nor any Company
Subsidiary is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or
any Company Subsidiary, nor, to the knowledge of the Company, are
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there any activities or proceedings of any labor union to organize any
such employees; (iii) neither the Company nor any Company Subsidiary
has breached or otherwise failed to comply with any provision of any
such agreement or contract, and there are no grievances outstanding
against the Company or any Company Subsidiary under any such agreement
or contract; (iv) there are no unfair labor practice complaints
pending against the Company or any Company Subsidiary before the
National Labor Relations Board or any current union representation
questions involving employees of the Company or any Company
Subsidiary; and (v) there is no strike, slowdown, work stoppage or
lockout, or, to the knowledge of the Company, threat thereof, by or
with respect to any employees of the Company or any Company
Subsidiary. The consent of the labor unions which are a party to the
collective bargaining agreements listed in Section 3.09(h) of the
Disclosure Schedule is not required to consummate the Merger.
(i) Except as set forth in Section 3.09(i) of the Disclosure Schedule or
as disclosed in the Company SEC Reports, the Company and the Company
Subsidiaries are in material compliance with all applicable laws
relating to the employment of labor, including those relating to
wages, hours, collective bargaining and the payment and withholding of
taxes and other sums as required by the appropriate Governmental
Entity and has withheld and paid to the appropriate Governmental
Entity or are holding for payment not yet due to such Governmental
Entity all amounts required to be withheld from employees of the
Company or any Company Subsidiary and are not liable for any
significant arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing. The Company and the
Company Subsidiaries have paid in full to all employees or adequately
accrued for in accordance with U.S. GAAP consistently applied all
wages, salaries, commissions, bonuses, benefits and other compensation
due to or on behalf of such employees, and there is no claim with
respect to payment of wages, salary or overtime pay that has been
asserted or is now pending or, to the Company's knowledge, threatened
before any Governmental Entity with respect to any persons currently
or formerly employed by the Company or any Company Subsidiary. Except
as set forth in Section 3.09(i) of the Disclosure Schedule, neither
the Company nor any Company Subsidiary is a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental
Entity relating to employees or employment practices. Except as set
forth in Section 3.09(i) of the Disclosure Schedule, there is no
charge or proceeding with respect to a violation of any occupational
safety or health standards that has been asserted or is now pending
or, to the Company's knowledge, threatened with respect to the
Company. Except as set forth in Section 3.09(i) of the Disclosure
Schedule or as disclosed in the Company SEC Reports, there is no
charge of discrimination in employment or employment practices, for
any reason, including, without limitation, age, gender, race, religion
or other legally protected category, which has been asserted or is now
pending or, to the knowledge of the Company, threatened before the
United States Equal Employment Opportunity Commission, or any other
Governmental Entity in any jurisdiction in which the Company or any
Company Subsidiary have employed or employ any person.
SECTION 3.10. Contracts; Debt Instruments.
(a) Set forth in subsections (i) through (viii) of Section 3.10(a) of the
Disclosure Schedule is a true and accurate list of all contracts and
agreements of the types described in such subsections to which the
Company or any Company Subsidiary is a party as of the date hereof
(such contracts, agreements and arrangements as required to be set
forth in Section 3.10(a) of the Disclosure Schedule, together with
those listed in Section 3.09(a) of the Disclosure Schedule,
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and subject to the proviso at the end of paragraph (a) of this Section
3.10 being the "Material Contracts"):
(i) as of the date of this Agreement, each contract and agreement
which (A) is likely to involve consideration of more than
$50,000, in the aggregate, during the calendar year ending
December 31, 2000 or (B) is likely to involve consideration of
more than $100,000, in the aggregate, over the remaining term of
such contract, except for purchase orders arising in the usual
and ordinary course of business and consistent with past
practices (provided that in any case and without regard to the
proviso at the end of paragraph (a) of this Section 3.10, the top
15 purchase orders are set forth in Section 3.10(a)(i) of the
Disclosure Schedule) and which, in either case, cannot be
canceled by the Company or any Company Subsidiary without penalty
or further payment and without more than 90 days' notice;
(ii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contracts and
agreements to which the Company or any Company Subsidiary is a
party, in each case, not cancelable without penalty on not more
than 90 days' notice;
(iii)all material management contracts (excluding contracts for
employment) and contracts with other consultants, including any
contracts involving the payment of royalties or other amounts
calculated based upon the revenues or income of the Company or
any Company Subsidiary or income or revenues related to any
product of the Company or any Company Subsidiary to which the
Company or any Company Subsidiary is a party;
(iv) all material contracts and agreements evidencing indebtedness of
the Company or any Company Subsidiary;
(v) as of the date hereof, all material contracts and agreements with
any Governmental Entity to which the Company or any Company
Subsidiary is a party;
(vi) all contracts and agreements that materially limit, or purport to
materially limit, the ability of the Company or any Company
Subsidiary to compete in any line of business or with any person
or entity or in any geographic area or during any period of time;
(vii)all material contracts or arrangements that result in any person
or entity holding a power of attorney from the Company or any
Company Subsidiary that relates to the Company, any Company
Subsidiary or their respective businesses; and
(viii) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company
and any Company Subsidiary or the conduct of its businesses, or
the absence of which would prevent or materially delay
consummation of the Merger or otherwise prevent or materially
delay the Company from performing its obligations under this
Agreement or would have a Material Adverse Effect.
With respect to Sections 3.10
(a) (i) through (v) and Section 3.10(a)(viii), all contracts involving
consideration or the payment of less than $50,000 shall be deemed to
be not material; provided, however, that any contract in excess of
$50,000 is not necessarily material.
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(b) Except as would not prevent or materially delay consummation of the
Merger or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and would not have a
Material Adverse Effect, (i) each Material Contract is a legal, valid
and binding agreement, and, to the Company's knowledge, none of the
Material Contracts is in default by its terms or has been canceled by
the other party; (ii) to the Company's knowledge, no other party is in
breach or violation of, or default under, any Material Contract; (iii)
the Company and the Company Subsidiaries are not in receipt of any
claim of default under any Material Contract; and (iv) except as set
forth in Section 3.10(b)(iv) of the Disclosure Schedule, neither the
execution of this Agreement nor the consummation of any transaction
contemplated hereby shall constitute a default, give rise to
cancellation rights, or otherwise materially and adversely affect any
of the Company's rights under any Material Contract. The Company has
furnished or made available to Parent true and complete copies of all
Material Contracts, including any amendments thereto.
(c) Set forth in Section 3.10(c) of the Disclosure Schedule is a
description of any material changes to the amount and material terms
of the indebtedness of the Company and the Company Subsidiaries as
described in the notes to the financial statements incorporated in, or
otherwise disclosed in, the Company's Form 10-K for the year ended
December 31, 1999.
SECTION 3.11. Absence of Litigation. Except as set forth in Section 3.11 of the
Disclosure Schedule or as specifically disclosed in the Company SEC
Reports, there is no litigation, suit, claim, action, proceeding,
arbitration, review or investigation pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary or any
property or asset of the Company or any Company Subsidiary before any
Governmental Entity that is reasonably likely to have a Material Adverse
Effect or seeks to materially delay or prevent the consummation of the
Merger or otherwise prevent or materially delay the Company from performing
its obligations under this Agreement. Except as set forth in Section 3.11
of the Disclosure Schedule or as disclosed in the Company SEC Reports,
there has been no change since December 31, 1999 in the status of any
litigation, suit, claim, action, proceeding or investigation relating to
the Company or any Company Subsidiary that would be reasonably likely to
have a Material Adverse Effect. Except as disclosed in the Company SEC
Reports or as set forth in Section 3.11 of the Disclosure Schedule, neither
the Company nor any Company Subsidiary is subject to any outstanding Order
(as defined below), writ, injunction or decree which, insofar as can be
reasonably foreseen, would have a Material Adverse Effect.
SECTION 3.12. Environmental Matters.
(a) Except as disclosed in Section 3.12 of the Disclosure Schedule or as
disclosed in the Company SEC Reports or as would not reasonably be
expected to have a Material Adverse Effect, to the best knowledge of
the Company:
(i) The Company is in compliance with all applicable Environmental
Laws and all Environmental Permits. All past noncompliance with
Environmental Laws or Environmental Permits identified by the
Company has been resolved without any pending, ongoing or future
obligation, cost or liability, and, to the Company's actual
knowledge, there is no requirement proposed as of the date hereof
that is reasonably expected to be adopted or implemented and give
rise to liability under any Environmental Law or Environmental
Permit;
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(ii) Except as expressly authorized under any Environmental Law or
Environmental Permit, there has been no Release of Hazardous
Materials on any of the real property owned or leased by the
Company or any Company Subsidiary (the "Real Property") or,
during the Company's ownership or occupancy of such property, on
any property formerly owned, leased, used or occupied by the
Company;
(iii)The Company is not conducting, and has not undertaken or
completed, any Remedial Action relating to any Release or
threatened Release on the Real Property or at any other site,
location or operation, either voluntarily or pursuant to the
order of any Governmental Entity or the requirements of any
Environmental Law or Environmental Permit;
(iv) To the Company's knowledge, there is no asbestos or
asbestos-containing material on any of the Real Property;
(v) None of the Real Property is listed or proposed for listing, or,
to the Company's knowledge, adjoins any other property that is
listed or proposed for listing, on the National Priorities List
or the Comprehensive Environmental Response, Compensation and
Liability Information System under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
or any analogous federal, state or local list;
(vi) There are no Environmental Claims pending or, to the Company's
knowledge, threatened against the Company or the Real Property,
and, to the Company's knowledge, there are no circumstances that
can reasonably be expected to form the basis of any such
Environmental Claim, including, without limitation, with respect
to any off-site disposal location presently or formerly used by
the Company or any of its predecessors or with respect to any
previously owned or operated facilities;
(vii)Under current Law, the Company can maintain present production
levels, or any planned expansion of production levels upon which
financial projections provided to Parent have been based, in
compliance with applicable Environmental Laws without a material
increase in capital or operating expenditures and without
modifying any Environmental Permits or obtaining any additional
Environmental Permits;
(viii) The Company has provided Parent or made available copies of (i)
any environmental assessment or audit reports or other similar
studies or analyses relating to the Real Property or the Company,
and (ii) all insurance policies issued in the past five years
that may provide coverage to the Company for environmental
matters; and
(ix) Neither the execution of this Agreement nor the consummation of
the transactions contemplated herein will require any Remedial
Action or notice to or consent of Governmental Entities or third
parties pursuant to any applicable Environmental Law or
Environmental Permit.
(b) For purposes of this Agreement:
"Environmental Claims" means any and all actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
notices of liability or potential liability, investigations, proceedings,
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consent orders or consent agreements relating in any way to any
Environmental Law, any Environmental Permit or any Hazardous Materials.
"Environmental Law" means any Law in effect and as amended as of the
Effective Time, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any applicable
Environmental Law.
"Hazardous Material" means (i) petroleum and petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls and (ii) any
other chemical, material or substance defined or regulated as toxic or
hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the
like into or upon any land or water or air or otherwise entering into the
environment.
"Remedial Action" means all action to (i) clean up, remove, treat or
handle in any other way Hazardous Materials in the environment; (ii)
restore or reclaim the environment or natural resources; (iii) prevent the
Release of Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or the environment; or (iv) perform
remedial investigations, feasibility studies, corrective actions, closures
and postremedial or postclosure studies, investigations, operations,
maintenance and monitoring on, about or in any Real Property.
SECTION 3.13. Trademarks, Patents and Copyrights. Except as set forth in Section
3.13 of the Disclosure Schedule, and except to the extent the inaccuracy of
any of the following (or the circumstances giving rise to such inaccuracy)
would not reasonably be expected to have a Material Adverse Effect, the
Company and each of the Company Subsidiaries own or possess adequate
licenses or other legal rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade dress, trade name rights,
copyrights, service marks, trade secrets, applications for trademarks and
for service marks, mask works, know-how and other proprietary rights and
information used or held for use in connection with the businesses of the
Company and the Company Subsidiaries as currently conducted or as
contemplated to be conducted, and, to the Company's knowledge, there is no
assertion or claim challenging the validity of any of the foregoing.
Neither the Company nor any of the Company Subsidiaries has infringed or is
infringing in any way any patent, patent right, license, trademark,
trademark right, trade dress, trade name, trade name right, service mark,
mask work or copyright of any third party that would reasonably be expected
to have a Material Adverse Effect. To the Company's knowledge, there are no
infringements of any proprietary rights owned by or licensed by or to the
Company or any Company Subsidiary that could reasonably be expected to have
a Material Adverse Effect.
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SECTION 3.14. Taxes. Except as set forth in Section 3.14 of the Disclosure
Schedule, (a) the Company and the Company Subsidiaries have timely filed or
will timely file all federal, state, local and foreign Tax Returns required
to be filed by them with any taxing authority with respect to Taxes for any
period ending on or before the Effective Time, taking into account any
extension of time to file granted to or obtained on behalf of the Company
and the Company Subsidiaries, and all such Tax Returns are complete and
correct in all material respects; (b) all Taxes that are shown as due on
such Tax Returns have been or will be timely paid; (c) no deficiency for
any material amount of Tax has been asserted or assessed in writing by a
taxing authority against the Company or any of the Company Subsidiaries for
which there are not adequate reserves; (d) the Company and the Company
Subsidiaries have provided adequate reserves in accordance with U.S. GAAP
in their financial statements for any Taxes that have not been paid,
whether or not shown as being due on any returns; (e) as of the date
hereof, the Company and the Company Subsidiaries have neither extended nor
waived any applicable statute of limitations with respect to Taxes and have
not otherwise agreed to any extension of time with respect to Tax
assessment or deficiency; (f) none of the Company and the Company
Subsidiaries is a party to any Tax sharing agreement or arrangement other
than with each other; (g) as of the date hereof, there are no pending or
threatened in writing material audits, examinations, investigations,
litigation, or other proceedings in respect of Taxes of the Company or any
Company Subsidiary; (h) no liens for Taxes exist with respect to any of the
assets or properties of the Company or the Company Subsidiaries, except for
statutory liens for Taxes not yet due or payable or that are being
contested in good faith for which there are adequate reserves; (i) all
Taxes which the Company or any Company Subsidiary are required to withhold
or to collect for payment have been duly withheld and collected, and have
been paid or accrued, reserved against and entered on the books of the
Company; and (j) none of the Company or any Company Subsidiary has been a
member of any group or corporation filing Tax Returns on a consolidated,
combined, unitary or similar basis other than each such group of which it
is currently a member. As used in this Agreement, "Taxes" shall mean any
and all taxes, fees, levies, duties, tariffs, imposts, and other charges of
any kind (together with any and all interest, penalties, additions to tax
and additional amounts imposed with respect thereto) imposed by any
Governmental Entity, including, without limitation: taxes or other charges
on or with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth;
taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; license, registration and
documentation fees and customs duties, tariffs, and similar charges.
"Tax Returns" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes filed with a
taxing authority, including any schedule or attachment thereto, and
including any amendment thereof.
SECTION 3.15. Property and Leases.
(a) The Company and the Company Subsidiaries have sufficient title to all
their properties and assets to conduct their respective businesses as
currently conducted or as contemplated to be conducted, with only such
exceptions as would not have a Material Adverse Effect.
(b) No parcel of real property owned or leased by the Company or any
Company Subsidiary is subject to any governmental decree or order to
be sold or is being condemned, expropriated or otherwise taken by any
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public authority with or without payment of compensation therefor,
nor, to the knowledge of the Company, has any such condemnation,
expropriation or taking been proposed other than as could not
reasonably be expected to have a Material Adverse Affect.
(c) Except as set forth in Section 3.15(c) of the Disclosure Schedule,
there are no contractual or legal restrictions that preclude or
restrict the ability to use any real property owned or leased by the
Company or any Company Subsidiary for the purposes for which it is
currently being used other than preclusions or restrictions which do
not preclude or restrict or otherwise adversely affect the actual use
which the Company or Company Subsidiary is making of the real property
on the date of this Agreement but which may or would preclude or
restrict any expansion or enhancement or change in such use. There are
no material latent defects or material adverse physical conditions
affecting the real property, and improvements thereon, owned or leased
by the Company or any Company Subsidiary other than those that would
not prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would not have a Material Adverse
Effect.
SECTION 3.16. Insurance. The Company and the Company Subsidiaries have in effect
insurance coverage with reputable insurers or are self-insured, which, in
respect of amounts, premiums, types and risks insured, constitutes
reasonable coverage for the risks customarily insured against by companies
engaged in the industries in which the Company and the Company Subsidiaries
are engaged and comparable in size and operations to the Company and the
Company Subsidiaries. The Company's current annual premiums for directors'
and officers' liability insurance is approximately $14,000 per year, and,
as of the date of this Agreement, the Company has made arrangements to
acquire tail coverage for the six year period beginning August 2, 2000.
SECTION 3.17. Board Recommendation. Those members of the Company Board permitted
under applicable law to vote on this Agreement, at a meeting duly called
and held, have by unanimous vote approved and deemed it advisable that the
Company and its shareholders consummate the Merger, upon the terms and
subject to the conditions set forth in this Agreement.
SECTION 3.18. Brokers. Set forth in Section 3.18 of the Disclosure Schedule is a
description of all contracts, agreements or understandings which may form
the basis for a claim against the Company for the payment of brokerage,
finder's or other fees or commissions in connection with the transactions
contemplated hereby and there are no other arrangements which may obligate
the Company to the payment of any such fees; provided that the Parent has
notified the Company that it disputes the basis for any claim against the
Company in connection with the item disclosed in such Schedule.
SECTION 3.19. Vote Required; State Takeover Statutes. The only vote of the
holders of any class or series of capital stock of the Company necessary to
approve the Merger, this Agreement or the transactions contemplated by this
Agreement is the affirmative vote by the Company's shareholders
representing a majority of the outstanding shares of the Company's Common
Stock, with each outstanding share of Common Stock representing one vote.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company, that:
SECTION 4.01. Organization and Qualification. Each of Parent and Merger Sub has
been duly organized and is validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby to be consummated by Parent and Merger
Sub (including, without limitation, the Merger). The execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent
and Merger Sub of such transactions have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on the
part of Parent and Merger Sub are necessary to authorize this Agreement or
to consummate such transactions. This Agreement has been duly authorized
and validly executed and delivered by each of Parent and Merger Sub and
constitutes (assuming due authorization, execution and delivery by the
Company) a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, subject to bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the
availability of equitable remedies.
SECTION 4.02. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub
will not, (i) conflict with or violate any provision of the charter
and bylaws of Parent or Merger Sub, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section
4.02(b) have been obtained and all filings and obligations described
in Section 4.02(b) have been made, conflict with or violate any Law
applicable to Parent or Merger Sub or by which any property or asset
of Parent or Merger Sub is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except, with respect to
clause (iii) for any such conflicts, violations, breaches, defaults,
or other occurrences which would not reasonably be expected to prevent
or materially delay the performance of this Agreement by either Parent
or Merger Sub.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub do not, and the performance of this Agreement by Parent and
Merger Sub will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity,
except (i) for applicable requirements of the Exchange Act and the
filing and recordation of appropriate merger documents as required by
the CBCA and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
would not reasonably be expected to prevent or materially delay
consummation of the Merger.
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SECTION 4.03. Absence of Litigation. Except as set forth in Section 4.03 of the
Disclosure Schedule, there is no litigation, suit, claim, action,
proceeding or investigation pending or, to the best knowledge of Parent,
threatened against Parent or Merger Sub or any of their respective
properties or assets before any court, arbitrator or Governmental Entity
which seeks to delay or prevent or would result in the material delay of or
would prevent the consummation of any of the transactions contemplated
hereby. Neither Parent nor Merger Sub or any property or asset of Parent or
Merger Sub is subject to any continuing order of, consent decree,
settlement agreement or similar written agreement with, or, to the
knowledge of Parent, continuing investigation by, any Governmental Entity
or any order, writ, judgment, injunction, decree, determination or award of
any governmental or regulatory authority or any arbitrator which would
prevent Parent or Merger Sub from performing their respective material
obligations under this Agreement or prevent or materially delay the
consummation of any of the transactions contemplated hereby.
SECTION 4.04. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Merger based upon arrangements made by or on behalf of Parent.
SECTION 4.05. No Activities. Merger Sub will be formed solely for the purpose of
engaging in the Merger. Except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement, Merger Sub will not have any obligations or
liabilities of any nature (whether accrued, absolute, contingent or
otherwise) and will not engage in any business activities of any type or
kind whatsoever or enter into any agreements or arrangements with any
person.
SECTION 4.06. Financing. At or prior to the Closing Date, Parent will cause
Merger Sub to have, and Merger Sub will have, all of the financing required
to consummate the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing. The
Company agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 5.01 of the Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Parent shall
consent in writing, (1) the businesses of the Company and the Company
Subsidiaries shall be conducted only in, and the Company and the Company
Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (2) the Company shall use its
reasonable best efforts to keep available the services of such of the
current officers, significant employees and consultants of the Company and
the Company Subsidiaries and to preserve the current relationships of the
Company and the Company Subsidiaries with such of the customers, suppliers
and other persons with which the Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact
its business organization. By way of amplification and not limitation,
except as set forth in Section 5.01 of the Disclosure Schedule or as
contemplated by any other provision of this Agreement, the Company shall
not, and shall neither cause nor permit any Company Subsidiaries or any of
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the Company's affiliates (over which it exercises control), or any of its
or their officers, directors, employees and agents (in each case, in their
capacities as such) to, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the
following, without the prior written consent of Parent:
(a) amend or otherwise change its charter or bylaws or equivalent
organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance
of, (i) any shares of capital stock of the Company or any Company
Subsidiary of any class, or securities convertible or exchangeable or
exercisable for any shares of such capital stock, or any options,
warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without
limitation, any phantom interest), of the Company or any Company
Subsidiary (except for the issuance of any shares of capital stock
issuable pursuant to the exercise of any Company Options or Company
Warrants outstanding on the date of this Agreement); or (ii) any
property or assets of the Company or any Company Subsidiary, except in
issuing Company Common Stock as required upon the exercise of a
Company Warrant by a holder, and except in all cases in the ordinary
course of business and in a manner consistent with past practice;
provided that the aggregate amount of any such sale or disposition
(other than a sale or disposition of products or other inventory in
the ordinary course of business consistent with past practice, as to
which there shall be no restriction on the aggregate amount), or
pledge, grant, transfer, lease, license, guarantee or encumbrance of
such property or assets of the Company or any Company Subsidiary shall
not exceed $25,000;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of
its capital stock, other than dividends paid by any of the wholly
owned Company Subsidiaries to the Company in the ordinary course of
business consistent with past practice and other than the Cash
Dividend;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest in any corporation,
partnership, other business organization, person or any division
thereof or any assets, other than (x) acquisitions of any assets in
the ordinary course of business consistent with past practice that are
not, in the aggregate, in excess of $50,000 or (y) purchases (whether
for cash or pursuant to an exchange) of inventory for resale in the
ordinary course of business and consistent with past practice; (ii)
incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person for borrowed
money, except for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice; (iii)
terminate, cancel or request any material change in, or agree to any
material change in any Material Contract or enter into any contract or
agreement material to the business, results of operations or financial
condition of the Company and the Company Subsidiaries taken as a
whole, in either case other than in the ordinary course of business,
consistent with past practice; (iv) make or authorize any capital
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expenditure, other than as set forth in Section 5.01(e)(iv) of the
Disclosure Schedule; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 5.01(e);
(f) increase the compensation payable or to become payable to its officers
or employees, except for increases in accordance with past practices
or with the prior approval of Parent, which shall not be unreasonably
withheld, in salaries or wages of employees of the Company or any
Company Subsidiary who are not officers of the Company, or grant any
rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of the Company or any Company Subsidiary, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
stock option appreciation unit awards, performance awards or
performance restricted stock awards), stock purchase, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer or employee, except as contemplated
by this Agreement or to the extent required by applicable Law or the
terms of a collective bargaining agreement or a contractual obligation
existing on the date hereof;
(g) take any action with respect to modifying accounting policies or
procedures, other than actions in the ordinary course of business,
consistent with past practice or the requirements of U.S. GAAP and as
advised by the Company's regular certified independent public
accountants;
(h) waive, release, assign, settle or compromise any material claims or
litigation involving money damages in excess of $25,000, except for
claims asserted by the Company or the applicable Company Subsidiary;
(i) make any material Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
(j) authorize or enter into any formal or informal agreement or otherwise
make any commitment to do any of the foregoing;
(k) take any action that will be likely to result in the representations
and warranties set forth in Article III becoming false or inaccurate
in any material respect (or, with respect to any representation and
warranty already qualified by materiality, false or inaccurate in any
respect);
(l) enter into or carry out any other transaction other than in the
ordinary and usual course of business or other than as permitted
pursuant to the other clauses in this Section 5.01;
(m) take any action or fail to take any action that could reasonably be
expected to have or result in a Material Adverse Effect; or
(n) permit or cause any Company Subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing.
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SECTION 5.02. Formation of New Subsidiary. Prior to the Effective Time, Parent
will form a wholly owned subsidiary, known as Merger Sub. Merger Sub will
be merged into the Company at the Effective Time.
SECTION 5.03. Notices of Certain Events. Each of Parent and the Company shall
give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be
required in connection with the Merger, (ii) any notice or other
communication from any Governmental Entity in connection with the Merger,
(iii) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened in writing against, relating to
or involving or otherwise affecting Parent, the Company or their
subsidiaries that relate to the consummation of the Merger or the
transactions contemplated by this Agreement; (iv) the occurrence of a
default or event that, with notice or lapse of time or both, will become a
default under any Material Contract; and (v) any change that is reasonably
likely to result in a Material Adverse Effect or is likely to delay or
impede the ability of either Parent or the Company to consummate the
transactions contemplated by this Agreement or to fulfill its obligations
set forth herein.
SECTION 5.04. Contractual Consents. Except as set forth in Section 5.04 of the
Disclosure Schedule, prior to or at the Effective Time each of the parties
hereto shall use its reasonable best efforts to prevent the occurrence, as
a result of the Merger, of the triggering of a change of control or similar
clause or any event which constitutes a default (or an event which with
notice or lapse of time or both would become a default) under any material
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which it or any of its subsidiaries is a party.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement; Schedule 13E-3.
(a) As promptly as practicable after the execution of this Agreement, (i)
the Company shall prepare (in consultation with Parent) and file with
the SEC a proxy statement (together with any amendments thereof or
supplements thereto, the "Proxy Statement") relating to the meeting of
the Company's shareholders (the "Company Shareholders' Meeting") to be
held to consider approval of this Agreement and the Merger, and (ii)
Parent, Merger Sub and the Company shall if required by the Exchange
Act, prepare and file with the SEC a Rule 13e-3 Transaction Statement
on Schedule 13E-3 (together with all amendments and supplements
thereto, the "Schedule 13E-3") relating to the Merger and the other
transactions contemplated by this Agreement. The Company shall furnish
all information concerning the Company that Parent may reasonably
request in connection with such actions and the preparation of the
Proxy Statement and Schedule 13E-3, if any.
(b) Subject to the fiduciary duties of the Company Board, as described in
the following proviso, the Proxy Statement shall include a unanimous
recommendation of those members of the Company Board permitted under
applicable law to make such recommendation to the shareholders of the
Company to vote in favor of approving of the Merger and this
Agreement; provided, however, that such members of the Company Board
may, at any time prior to the date of the Company Shareholders'
Meeting, withdraw, modify or change any such recommendation to the
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extent that the Company Board determines in good faith after
consultation with independent legal counsel that the failure to so
withdraw, modify or change their recommendation could cause the
Company Board to breach its fiduciary duties to the Company's
shareholders under applicable law.
(c) No amendment or supplement to the Proxy Statement or the Schedule
13E-3, if any, will be made or filed with the SEC by Company or
Parent, as the case may be, without the approval of the other party
(which will not be unreasonably withheld). The Company and Parent each
will advise the other, promptly after they receive notice thereof of
any request by the SEC for amendment of the Proxy Statement or the
Schedule 13E-3 or comments thereon and responses thereto or requests
by the SEC for additional information.
(d) The information supplied by Parent for inclusion in the Proxy
Statement and the Schedule 13E-3 shall not, at (i) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first
mailed to the shareholders of the Company and (ii) the time of the
Company Shareholders' Meeting, contain any untrue statement of a
material fact or fail to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If,
at any time prior to the date of the Company Shareholders' Meeting,
any event or circumstance relating to Parent, or its officers or
directors, is discovered by Parent that should be set forth in an
amendment or a supplement to the Proxy Statement or the Schedule
13E-3, Parent shall promptly inform the Company. The Schedule 13E-3
will comply as to form and substance in all material aspects with the
applicable requirements of the Exchange Act.
(e) The information supplied by the Company for inclusion in the Proxy
Statement and the Schedule 13E-3 shall not, at (i) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first
mailed to the shareholders of the Company and (ii) the time of the
Company Shareholders' Meeting, contain any untrue statement of a
material fact or fail to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If,
at any time prior to the date of the Company Shareholders' Meeting,
any event or circumstance relating to the Company or any Company
Subsidiary, or their respective officers or directors, is discovered
by the Company that should be set forth in an amendment or a
supplement to the Proxy Statement or the Schedule 13E-3, the Company
shall promptly inform Parent. The Proxy Statement will comply as to
form and substance in all material respects with the applicable
requirements of the Exchange Act.
SECTION 6.02. Company Shareholders' Meeting.
(a) The Company shall call and hold the Company Shareholders' Meeting as
promptly as practicable for the purpose of voting upon the approval of
this Agreement and the Merger.
(b) The Company shall use all commercially reasonable efforts to solicit
from its shareholders proxies in favor of the approval of this
Agreement and the Merger, and shall take all other action necessary or
advisable to secure the vote or consent of its shareholders required
by the CBCA and the rules of the NASDAQ and the Pacific to obtain such
approvals.
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(c) Parent shall cause all shares of the Company Common Stock held by it
or any of its affiliates to be voted in favor of the Merger and this
Agreement.
SECTION 6.03. Access to Information; Confidentiality.
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which the Company or any of the
Company Subsidiaries is a party or pursuant to applicable Law from the
date of this Agreement to the Effective Time, the Company shall (and
shall cause the Company Subsidiaries to): (i) provide to Parent (and
its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives, collectively,
"Representatives") reasonable access at reasonable times, upon prior
notice to the Company, to the officers, employees, agents, properties,
offices and other facilities of the Company and the Company
Subsidiaries and to the books and records thereof (including, without
limitation, access to the Company's accountants, any correspondence
between the Company and such accountants and work papers prepared with
respect to the Company by such accountants), (ii) provide to Parent
and its Representatives access to the Real Property for Parent to
conduct any environmental site assessment that Parent deems
appropriate, including, without limitation, access to enter upon and
investigate and collect air, surface water, groundwater and soil
samples, and (iii) furnish promptly such information concerning the
business, properties, contracts, assets, liabilities, personnel and
other aspects of the Company and the Company Subsidiaries as Parent or
their respective Representatives may reasonably request. No
investigation conducted pursuant to this Section 6.03 shall affect or
be deemed to modify any representation or warranty made in this
Agreement.
(b) Unless (i) otherwise expressly provided in this Agreement, (ii)
required by applicable Law or any listing agreement with, or the rules
and regulations of, NASDAQ or the Pacific Exchange or (iii) consented
to in writing by Parent and the Company, all information (whether oral
or written) and documents furnished in connection herewith together
with analyses, compilations, studies or other documents prepared by
such party which contain or otherwise reflect such information shall
be kept strictly confidential by the Company, Parent, Merger Sub and
their respective officers, directors, employees and agents. Prior to
any disclosure permitted pursuant to the preceding sentence, the party
intending to make such disclosure shall consult with the other party
regarding the nature and extent of the disclosure. Nothing contained
herein shall preclude disclosures to the extent necessary to comply
with accounting, SEC and other disclosure obligations imposed by
applicable Law. In the event the transactions contemplated by this
Agreement are not consummated, each party shall return to the other
any documents furnished by the other and all copies thereof that any
of them may have made and will hold in confidence any information
obtained from the other party except to the extent (a) such party is
required to disclose such information by Law or such disclosure is
necessary or desirable in connection with the pursuit or defense of a
claim, (b) such information was known by such party prior to such
disclosure (and provided that, except with respect to information
referred to in the following clause (c), such party shall have advised
the other party of such knowledge upon or promptly after its receipt
of such information) or was thereafter developed or obtained by such
party independent of such disclosure or (c) such information is or
becomes generally available to the public other than by breach of this
Section 6.03. Prior to any disclosure of information pursuant to the
exception in clause (a) of the preceding sentence, the party intending
to disclose the same shall so notify the party which provided the same
in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
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SECTION 6.04. No Solicitation of Transactions. The Company agrees that, from and
after the date hereof until the earlier of the Effective Time or the
termination of this Agreement in accordance with Article VIII, neither it
nor any Company Subsidiary shall, and that it shall cause its and each
Company Subsidiary's Representatives not to, except as contemplated by this
Agreement, directly or indirectly, initiate, solicit or encourage any
inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase or sale of all or any significant portion of the
assets of the Company and the Company Subsidiaries, taken as a whole, or
any of the equity securities of the Company (any such proposal or offer
being hereinafter referred to as a "Competing Transaction"). The Company
further agrees that neither it nor any Company Subsidiary shall, and that
it shall cause its and each Company Subsidiary's Representatives not to,
directly or indirectly, have any discussion with or provide any
confidential information or data relating to the Company or any Company
Subsidiary to any person relating to a Competing Transaction or engage in
any negotiations concerning a Competing Transaction, or otherwise
facilitate any effort or attempt to make or implement a Competing
Transaction or accept a Competing Transaction; provided, however, that
nothing contained in this Section 6.04 shall prevent the Company or the
Company Board from (i) engaging in any discussions or negotiations with, or
providing any information to, any person in response to an unsolicited
written Competing Transaction by any such person; or (ii) recommending such
an unsolicited written Competing Transaction to the holders of Company
Common Stock if, in any such case as is referred to in clause (i) or (ii),
(A) the Company Board concludes in good faith (after consultation with
independent financial advisors) that such Competing Transaction would, if
consummated, result in a transaction more favorable to holders of Company
Common Stock than the transaction contemplated by this Agreement (any such
more favorable Competing Transaction being referred to in this Agreement as
a "Superior Proposal"), (B) the Company Board determines in good faith
after consultation with independent legal counsel that such action is
necessary for the Company Board to act in a manner consistent with its
fiduciary duties under applicable Law, (C) prior to providing any
information or data regarding the Company to any person or any of such
person's Representatives in connection with a Superior Proposal by such
person, the Company receives from such person an executed confidentiality
agreement and (D) prior to providing any information or data to any person
or any of such person's Representatives or entering into discussions or
negotiations with any person or any of such person's Representatives in
connection with a Superior Proposal by such person, the Company notifies
Parent promptly of the receipt of such Superior Proposal indicating, in
connection with such notice, the name of such person and attaching a copy
of the proposal or offer or providing a complete written summary thereof.
The Company agrees that it shall keep Parent informed, on a current basis,
of the status and terms of any discussions or negotiations related to such
Superior Proposal. The Company agrees that it will take the necessary steps
to promptly inform each Company Subsidiary and each Representative of the
Company or any Company Subsidiary of the obligations undertaken in this
Section 6.04. Immediately following the execution of this Agreement, the
Company shall terminate and cause the Company Subsidiaries to terminate any
existing activities, discussions or negotiations with any third parties
that may be ongoing with respect to any Competing Transaction and promptly
after the public announcement of the execution of this Agreement shall use
all reasonable efforts to request that all confidential information
previously furnished to any such third parties be returned promptly.
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Nothing contained in this Agreement shall prohibit the Company or the
Company Board from taking or disclosing to its shareholders a position
contemplated by Rules 14d-9 and 14e-(2)(a) promulgated under the Exchange
Act.
SECTION 6.05. Election of Directors. Prior to the Effective Time, in accordance
with the CBCA, the Company Board shall take all further action necessary to
ensure that the directors of Merger Sub shall become directors of the
Surviving Corporation and by accommodating the election by the sole
shareholder of the Surviving Corporation of a new board of directors of the
Surviving Corporation after the Effective Time.
SECTION 6.06. Directors' and Officers' Indemnification and Insurance.
(a) The charter and bylaws of the Surviving Corporation shall contain the
provisions regarding liability of directors and indemnification of
directors and officers that are set forth, as of the date of this
Agreement, in the charter and the bylaws, respectively, of the
Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of
individuals who at or at any time prior to the Effective Time were
directors, officers, employees, fiduciaries or agents of the Company.
(b) For a period of three years after the Effective Time, the Surviving
Corporation shall use best efforts to cause to be maintained in effect
policies of directors' and officers' liability insurance with coverage
in amount and scope at least as favorable as the Company's existing
policies with respect to claims arising from facts or events that
occurred prior to the Effective Time; provided, however, that the
Surviving Corporation shall not be required to pay any premium for
directors' and officers' liability insurance that would exceed the
amount being paid by the Company as of the date hereof. If the
Surviving Corporation cannot maintain such policies as provided in the
preceding sentences, the Surviving Corporation will cause to be
maintained in effect tail policies of directors' and officers'
liability insurance for a period of at least three years from the
Effective Time.
(c) This Section 6.06 is intended to be for the benefit of, and shall be
enforceable by, the indemnified parties, their heirs and personal
representatives and shall be binding on the Surviving Corporation and
its respective successors and assigns.
(d) From and after the Effective Time, the Surviving Corporation agrees
that it shall indemnify and hold harmless each present director and
officer of the Company, determined as of the Effective Time (the
"Indemnified Parties"), from and against any costs, judgments, fines,
losses, obligations, claims, damages, liabilities, or expenses
(including interest, penalties, reasonable out-of-pocket expenses and
reasonable attorneys' fees incurred in the investigation or defense of
any of the same or in asserting any of their rights hereunder)
(collectively, "Costs") incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of, resulting from, or
pertaining to matters existing or occurring at or prior to the
Effective Time (including, without limitation, the transactions
contemplated by this Agreement), whether asserted or claimed prior to,
at or after the Effective Time, to the fullest extent that the Company
would have been permitted or required under Colorado laws and under
the Company's charter documents (as in effect on the date hereof) to
indemnify such Indemnified Parties (and the Surviving Corporation
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shall advance expenses as incurred to the fullest extent permitted
under applicable Law; provided that the Indemnified Party to whom
expenses are advanced provides an undertaking to repay such advances
if it is ultimately determined that such Indemnified Party is not
entitled to indemnification); provided that any determination required
to be made with respect to whether an officer's or director's conduct
complies with the standards set forth under Colorado law and the
Company's charter documents shall be made by independent counsel
selected by the Surviving Corporation.
(e) Any Indemnified Party wishing to claim indemnification under paragraph
(d) of this Section 6.06, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent
thereof, but the failure to so notify shall not relieve the Surviving
Corporation of any liability it may have to such Indemnified Party,
except to the extent that such failure materially prejudices the
Surviving Corporation. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the
Effective Time), (i) the Surviving Corporation shall have the right to
assume the defense thereof, with counsel selected by Parent and
reasonably acceptable to the Indemnified Party, and the Surviving
Corporation shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense
thereof, except that if the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there
are issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received;
provided, however, that the Surviving Corporation shall be obligated
pursuant to this paragraph (e) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction unless the use of one
counsel for such Indemnified Parties would present such counsel with a
conflict of interest, (ii) the Indemnified Parties will cooperate in
the defense of any such matter and (iii) the Surviving Corporation
shall not be liable for any settlement effected without the prior
written consent of Parent; and provided further that the Surviving
Corporation shall not have any obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable Law. The Surviving Corporation
shall not, in the defense of any claim or litigation, except with the
consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed), consent to entry of judgment or
enter into any settlement that provides for injunctive or other
nonmonetary relief affecting the Indemnified Party or that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
(f) If the Surviving Corporation or any of its successors or assigns shall
(i) consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfer all or substantially all of
its properties and assets or outstanding voting securities to any
individual, corporation or other entity, then and in each such case,
proper provisions shall be made so that the successors and assigns of
the Surviving Corporation shall expressly assume all of the
obligations set forth in this Section 6.06.
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SECTION 6.07. Further Action; Consents; Filings. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use its reasonable
best efforts to (i) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the Merger,
(ii) obtain from Governmental Entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or
made by Parent or the Company or any of their subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger, (iii) make all necessary filings, and
thereafter make any other submissions either required or deemed appropriate
by each of the parties, with respect to this Agreement and the Merger
required under (A) the Exchange Act, (B) the rules of the NASDAQ and the
Pacific or (C) any other applicable Law. The parties hereto shall cooperate
and consult with each other in connection with the making of all such
filings, including by providing copies of all such documents to the
nonfiling party and its advisors prior to filing, and none of the parties
will file any such document if any of the other parties shall have
reasonably objected to the filing of such document. No party to this
Agreement shall consent to any voluntary extension of any statutory
deadline or waiting period or to any voluntary delay of the consummation of
the Merger at the behest of any Governmental Entity without the consent and
agreement of the other parties to this Agreement, which consent shall not
be unreasonably withheld or delayed. Without limiting the foregoing, each
of the parties hereto shall, and shall cause each of its subsidiaries to,
use its reasonable best efforts to obtain (and to cooperate and coordinate
with the other parties to obtain) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity that is required
to be obtained in connection with the Merger and to take all actions
reasonably necessary to satisfy any applicable regulatory requirements
relating thereto. Each of the parties shall promptly take, in the event
that any permanent or preliminary injunction or other order is entered or
becomes reasonably foreseeable to be entered in any proceeding that would
make consummation of the transaction contemplated hereby in accordance with
the terms of this Agreement unlawful or that would prevent or delay
consummation of the transaction contemplated hereby, any and all steps
necessary to vacate, modify or suspend such injunction or order so as to
permit such consummation prior to the deadline specified in Section
8.01(b).
SECTION 6.08. Public Announcements. After the issuance of the initial press
release, Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statement with
respect to this Agreement or any transaction contemplated hereby and shall
not issue any such press release or make any such public statement prior to
such consultation, except to the extent required by applicable Law or the
requirements of the NASDAQ or the Pacific, in which case the issuing party
shall consult with the other party before issuing any such release or
making any such public statement.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate the
Merger. The obligations of Parent, the Company and Merger Sub to effect the
Merger shall be subject to the satisfaction or, if permitted by applicable
Law, waiver prior to the Closing Date of the following conditions:
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(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite affirmative vote of the
shareholders of the Company in accordance with the CBCA; and
(b) no preliminary or permanent injunction, decree or other order (an
"Order"), issued by any Governmental Entity or other legal restraint
or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect, and no Law shall
have been enacted or adopted that enjoins, prohibits or makes illegal
consummation of any of the transactions contemplated hereby.
SECTION 7.02. Conditions to the Obligations of the Company. The obligations of
the Company to effect the Merger shall be subject to the satisfaction or,
if permitted by applicable Law, waiver, prior to the Closing Date, of the
following further conditions:
(a) each of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all material
respects as of the Effective Time, as though made on and as of the
Effective Time, except that those representations and warranties that
address matters only as of a particular date shall remain true and
correct in all material respects as of such date;
(b) Parent and Merger Sub shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement
to be performed or complied with by them on or prior to the Effective
Time; and
(c) the Company shall have received a written opinion of an independent
financial advisor to the effect the Merger Consideration to be
received by the shareholders of the Company is fair, from a financial
point of view, to the Company's shareholders (other than Parent and
its affiliates). The Company shall have delivered a signed copy of
such written opinion to Parent.
SECTION 7.03. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger shall be subject
to the satisfaction or, if permitted by applicable Law, waiver prior to the
Closing Date of the following further conditions:
(a) each of the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects as
of the Effective Time, as though made at and as of the Effective Time,
except that those representations and warranties that address matters
only as of a particular date shall remain true and correct in all
material respects as of such date (provided that any representation or
warranty that is qualified by materiality (including, without
limitation, qualification by reference to a Material Adverse Effect)
shall be true in all respects as of the Effective Time or as of such
particular date, as the case may be);
(b) the Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time;
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(c) all consents, approvals, waivers and authorizations required to be
obtained to effect the Merger shall have been obtained from all
Governmental Entities, except if the failure to obtain any such
consents, approvals and authorizations would not result in a Material
Adverse Effect;
(d) all consents, approvals, waivers and authorizations (including,
without limitation, waivers of termination rights) of third parties
(other than Governmental Entities) the failure of which to obtain
would result in a Material Adverse Effect shall have been obtained;
(e) holders of not more than 5% of the outstanding Company Common Stock
(other than shares held by Parent and all of its affiliates), shall
have exercised their dissenters' rights demanding payment under ss.
7-113 of the CBCA; and
(f) any litigation initiated against the Company or any of its affiliates,
members of the Board of Directors of the Company or any of its
affiliates or any officers or employees of the Company or any of its
affiliates, or the Parent or Merger Sub or any of their affiliates,
members of the Board of Directors of the Parent or Merger Sub or any
of their affiliates or any officers or employees of the Parent or
Merger Sub or any of their affiliates challenging any aspect of this
Merger shall be resolved in a manner that is satisfactory to the
Parent on or prior to the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement, as follows:
(a) by mutual written consent duly authorized by each of the Company Board
and the Board of Directors of Parent;
(b) by either Parent or the Company, if the Effective Time shall not have
occurred on or before October 30, 2000; provided, however, that the
right to terminate this Agreement under this Section 8.01(b) shall not
be available to the party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by either Parent or the Company, if any Order or other legal restraint
or prohibition preventing the consummation of the Merger shall have
been entered by any Governmental Entity or any Law shall have been
enacted or adopted that enjoins, prohibits or makes illegal
consummation of the Merger;
(d) by Parent, if (i) the Company Board withdraws, modifies or changes its
recommendation of this Agreement in a manner adverse to Parent, or
shall have resolved to do so, (ii) after receiving a bona fide
proposal or offer relating to a Competing Transaction, the Company
Board shall have refused to affirm its recommendation of this
Agreement as promptly as practicable (but in any case within ten
business days) after receipt of any written request from Parent, (iii)
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the Company Board shall have recommended to the shareholders of the
Company a Competing Transaction, or shall have resolved to do so, or
(iv) a tender offer or exchange offer for 15% or more of the
outstanding shares of capital stock of the Company is commenced, and
the Company Board fails to recommend against acceptance of such tender
offer or exchange offer by its shareholders (including not taking a
position with respect to the acceptance of such tender offer or
exchange offer by its shareholders);
(e) by Parent or the Company, if this Agreement shall fail to receive the
requisite vote for adoption at the Company Shareholders' Meeting or
any adjournment or postponement thereof;
(f) by Parent, upon a breach of, or failure to perform in any material
respect (which breach or failure cannot be or has not been cured
within 30 days after the giving of notice of such breach or failure),
any representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement, such that the conditions set
forth in clause (a) or (b) of Section 7.03 would not be satisfied;
(g) by Parent, upon the continuance of any litigation initiated against
the Company or any of its affiliates, members of the Board of
Directors of the Company or any of its affiliates or any officers or
employees of the Company or any of its affiliates, or the Parent or
Merger Sub or any of their affiliates, members of the Board of
Directors of the Parent or Merger Sub or any of their affiliates or
any officers or employees of the Parent or Merger Sub or any of their
affiliates challenging any aspect of this Merger; and
(h) by the Company, upon a breach of, or failure to perform in any
material respect (which breach or failure cannot be or has not been
cured within 30 days after the giving of notice of such breach or
failure), any representation, warranty, covenant or agreement on the
part of Parent set forth in this Agreement, such that the conditions
set forth in Section 7.02 would not be satisfied.
SECTION 8.02. Notice of Termination; Effect of Termination. In the event of
termination of this Agreement by either Parent or the Company pursuant to
Section 8.01 hereof, the terminating party shall give prompt written notice
thereof to the nonterminating party. Except as provided in Section 9.01, in
the event of termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of Parent, the Company or Merger Sub or any of
their respective officers or directors, and all rights and obligations of
each party hereto shall cease, subject to the remedies of the parties set
forth in Section 8.05(b), (c) and (d); provided, however, that nothing
herein shall relieve any party from liability for the breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by mutual agreement of
the parties hereto by action taken by or on behalf of their respective
Boards of Directors at any time prior to the Effective Time; provided,
however, that after the approval of this Agreement by the shareholders of
the Company, no amendment may be made that would reduce the amount or
change the type of consideration into which each share of Company Common
Stock shall be converted upon consummation of the Merger.
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SECTION 8.04. Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any obligation or other act
of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant
hereto, and (c) waive compliance with any agreement or condition contained
herein. Any waiver of a condition set forth in Section 7.01 will be
effective only if made in writing by each of the Company and Parent and,
unless otherwise specified in such writing, shall thereafter operate as a
waiver of such condition for any and all purposes of this Agreement. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
SECTION 8.05. Expenses.
(a) Except as otherwise set forth in this Section 8.05, all Expenses (as
defined below) incurred in connection with this Agreement and the
Merger shall be paid by the party incurring such expenses, whether or
not the Merger is consummated. "Expenses," as used in this Agreement,
shall consist of all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates)
reasonably incurred by a party or on its behalf in connection with, or
related to the authorization, preparation, negotiation, execution and
performance of, this Agreement, the preparation, printing, filing and
mailing of the Proxy Statement, the solicitation of shareholder
approvals and all other matters related to the consummation of the
Merger.
(b) The parties agree that if the Company or Parent shall terminate this
Agreement pursuant to Section 8.01(e) due to the failure of the
Company's shareholders to approve and adopt this Agreement and (i) at
the time of such failure to so approve and adopt this Agreement there
shall exist a Competing Transaction (which Competing Transaction shall
have become the subject of a public announcement or any person shall
have publicly announced an intention to make a proposal or offer
relating thereto) with respect to the Company and (ii) within 12
months of the termination of this Agreement, the Company enters into
an agreement with any third party with respect to a Competing
Transaction, which transaction is subsequently consummated, then the
Company shall reimburse all reasonable and documented Expenses of
Parent and Merger Sub simultaneously with the consummation of such
transaction, plus a Break-Up Fee in an amount of $475,000 (the
"Break-Up Fee").
(c) The parties agree that the payment of Expenses and Break-Up Fee
provided for in Section 8.05(b) shall be the sole and exclusive remedy
of the parties upon a termination of this Agreement pursuant to
Section 8.01(e), and such remedy shall be limited to the payments
stipulated in Section 8.05(b); provided, however, that nothing herein
shall relieve any party from liability for the willful breach of any
of its representations and warranties or the breach of any of its
covenants or agreements set forth in this Agreement.
(d) Any payment of Expenses and Break-Up Fee required to be made pursuant
to Section 8.05(b) shall be made by wire transfer of immediately
available funds to an account designated in writing by the party
entitled to receive payment.
(e) In the event that the Company shall fail to pay any Expenses of Parent
in accordance with Section 8.05(b) when due, the amount of any such
Expenses shall be increased to include the costs and expenses actually
incurred or accrued by Parent, acting together (including, without
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limitation, fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 8.05.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall terminate at the Effective Time
or upon the termination of this Agreement pursuant to Section 8.01, as the
case may be, except that the agreements set forth in Articles I and II,
Section 6.06 and this Article IX shall survive the Effective Time and those
set forth in Sections 6.03(b) and 8.05 and this Article IX shall survive
termination. Each party agrees that, except for the representations and
warranties contained in this Agreement and the Disclosure Schedule, no
party hereto has made any other representations and warranties, and each
party hereby disclaims any other representations and warranties made by
itself or any of its officers, directors, employees, agents, financial and
legal advisors or other representatives with respect to the execution and
delivery of this Agreement or the transactions contemplated herein,
notwithstanding the delivery or disclosure to any other party or any
party's representatives of any documentation or other information with
respect to any one or more of the foregoing.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy and facsimile or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
if to Parent:
G.C. Associates Holdings Corp.
96 Cummings Point Road
Stamford, Connecticut 06902
Attention: Steven B. Lapin
Telephone: (203) 358-8000
Facsimile: (203) 348-3103
with a copy (which shall not constitute notice to Parent) to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Ezra G. Levin, Esq.
Telephone: (212) 715-9100
Facsimile: (212) 715-8000
if to the Company:
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American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
Attention: President
Telephone: (303) 527-3230
Facsimile: (303) 527-3235
with copies (which shall not constitute notice to the Company) to:
Overton, Babiarz & Associates, P.C.
7720 Bellview Avenue
Suite 200
Englewood, Colorado 80111
Attention: David J. Babiarz, Esq.
Telephone: (303) 779-5900
Facsimile: (303) 779-6006
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled
by or is under common control with such specified person;
(b) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings or, in the case of
determining a date when any payment is due, any day on which banks are
not required or authorized to close in the State of Colorado;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership
of voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(d) "knowledge" means, with respect to any matter in question, that the
executive officers of Parent or the Company, as the case may be, (i)
have knowledge of such matter, or (ii) after reasonable due
investigation, should have known of such matter;
(e) "person" means an individual, corporation, company, limited liability
company, partnership, limited partnership, syndicate, person
(including, without limitation, a "person" as defined in section
13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government; and
(f) "subsidiary" or "subsidiaries" of any person means any corporation,
limited liability company, partnership, joint venture or other legal
entity of which such person (either alone or through or together with
any other subsidiary) owns, directly or indirectly, more than 50% of
the stock or other equity interests, the holders of which are
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generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
SECTION 9.04. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect, as long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible, in a mutually acceptable manner, in order that the transactions
contemplated hereby be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. Assignment; Merger Sub; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of Law or
otherwise), other than by Parent to one of its affiliates, without the
prior written consent of the other parties. Notwithstanding anything to the
contrary contained in this Agreement, Parent may transfer the shares of
Merger Sub to one of its subsidiaries prior to the consummation of the
Merger. Subject to the preceding sentences, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in
this Agreement to the contrary, except for the provisions of Section 6.06
(the "Third Party Provision"), nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto
or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third
Party Provision may be enforced by the beneficiaries thereof.
SECTION 9.06. Incorporation of Exhibits. The Disclosure Schedule and any
exhibits attached hereto and referred to herein are hereby incorporated
herein and made a part of this Agreement for all purposes as if fully set
forth herein.
SECTION 9.07. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 9.08. Governing Law. Except to the extent that the Merger is mandatorily
governed by, or pursuant to the terms of this Agreement is subject to, the
CBCA, this Agreement shall be governed by, and construed in accordance
with, the laws of the State of Colorado applicable to contracts executed in
and to be performed in that State, without regard to any conflicts of laws
principles otherwise applicable. No provision of this Agreement shall be
construed to require any of the parties hereto or any of their respective
subsidiaries, affiliates, directors, officers, employees or agents to take
any action that would violate any applicable Law.
SECTION 9.09. Submission to Jurisdiction; Venue. The parties hereto
unconditionally and irrevocably agree and consent to the exclusive
jurisdiction of, and service of process and venue in, the United States
District Court for the Southern District of New York and the courts of the
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State of New York and waive any objection with respect thereto, for the
purpose of any action, suit or proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby; the parties further
agree not to commence any such action, suit or proceeding except in any
such court. Each party irrevocably waives any objections or immunities to
jurisdiction to which it might otherwise be entitled or become entitled in
any legal suit, action or proceeding against it arising out of or relating
to this Agreement or the transactions contemplated hereby which is
instituted in any such court.
SECTION 9.10. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original but all of which,
taken together, shall constitute one and the same agreement.
SECTION 9.12. Entire Agreement. This Agreement (including the exhibits attached
hereto and the Disclosure Schedule) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless it is made in writing and signed by all parties
hereto.
SECTION 9.13. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
-37-
<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
G.C. ASSOCIATES HOLDINGS CORP.
By:
Name: /s/ Steven B. Lapin
----------------------------------
Title: President
---------------------------------
AMERICAN EDUCATIONAL PRODUCTS, INC.
By: Name: /s/ Clifford C. Thygesen
-------------------------
Title: Clifford C. Thygesen, President
--------------------------------
