<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE
ACT OF 1934
---------------------
OPTICAL SECURITY GROUP, INC.
(Name of subject company)
APPLIED OPSEC CORPORATION
APPLIED HOLOGRAPHICS PLC
(Bidders)
--------------------------
COMMON STOCK, PAR VALUE $.005 PER SHARE
(Title of class of securities)
--------------------------
683848 20 4
(CUSIP number of class of securities)
DAVID J. TIDMARSH
President
Applied Opsec Corporation
c/o Applied Holographics PLC
40 Phoenix Road
Crowther District 3
Washington
Tyne and Wear
England NE OAD
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
--------------------------
WITH COPIES TO:
GERALD J. KEHOE, ESQ.
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
(617) 951-8000
--------------------------
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
<S> <C>
$60,250,000 $12,050.00
</TABLE>
* For purposes of calculating amount of filing fee only. The amount assumes
the purchase of 6,535,758 shares of Common Stock, par value $.005 per share
(collectively, the "Shares"), at a price per Share of $7.00 in cash and the
cashing out of all other options, warrants and convertible securities at a
net cost of $14,500,000.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: None Filing Party: N/A
Form of Registration No.: N/A Date Filed: N/A
</TABLE>
- --------------------------------------------------------------------------------
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<PAGE>
SCHEDULE 14D-1
CUSIP NO. 683848 20 4
- --------------------------------------------------------------------------------
(1) Name of reporting persons Applied Opsec Corporation
I.R.S. Identification No. of above persons:
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group
(a) / /
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds
AF
- --------------------------------------------------------------------------------
(5) Check if disclosure of legal proceedings is required pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization
Colorado
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person 100*
- --------------------------------------------------------------------------------
(8) Check if the aggregate amount in row (7) excludes certain shares
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented by amount in row (7)
0
- --------------------------------------------------------------------------------
(10) Type of reporting person
CO
- --------------------------------------------------------------------------------
* Michael W. Angus, Director, Treasurer and Secretary of the reporting person,
and David J. Tidmarsh, Director and President of the reporting person,
jointly hold 100 shares of common stock, par value $.005, of the subject
company for the beneficial interest of Applied Holographics PLC.
<PAGE>
SCHEDULE 14D-1
CUSIP NO. 683848 20 4
- --------------------------------------------------------------------------------
(1) Name of reporting persons Applied Holographics PLC
I.R.S. Identification No. of above persons: Not applicable
- --------------------------------------------------------------------------------
(2) Check the appropriate box if a member of a group
(a) / /
(b) / /
- --------------------------------------------------------------------------------
(3) SEC use only
- --------------------------------------------------------------------------------
(4) Source of funds
OO
- --------------------------------------------------------------------------------
(5) Check if disclosure of legal proceedings is required pursuant to Items 2(e)
or 2(f)
/ /
- --------------------------------------------------------------------------------
(6) Citizenship or place of organization
England and Wales
- --------------------------------------------------------------------------------
(7) Aggregate amount beneficially owned by each reporting person 100*
0
- --------------------------------------------------------------------------------
(8) Check if the aggregate amount in row (7) excludes certain shares
/ /
- --------------------------------------------------------------------------------
(9) Percent of class represented by amount in row (7)
0
- --------------------------------------------------------------------------------
(10) Type of reporting person
OO
- --------------------------------------------------------------------------------
* Michael W. Angus, Finance Director of the reporting person, and David J.
Tidmarsh, Chief Executive of the reporting person, jointly hold 100 shares
of common stock, par value $.005, of the subject company for the beneficial
interest of the reporting person.
<PAGE>
This Tender Offer Statement on Schedule 14D-1 relates to the offer by
Applied Opsec Corporation, a Colorado corporation (the "Purchaser") and a
wholly-owned subsidiary of Applied Holographics PLC, a public limited company
incorporated and existing under the laws of England and Wales ("Parent"), to
purchase all of the outstanding shares of common stock, par value $.005 per
share (the "Shares"), of Optical Security Group, Inc., a Colorado corporation
(the "Company").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Optical Security Group, Inc., which
has its principal executive offices at 535 16(th) Street, Suite 920, Denver,
Colorado 80202.
(b) This Schedule 14D-1 relates to the offer by the Purchaser to purchase
all outstanding Shares at a price of $7.00 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments and supplements thereto, collectively constitute the
"Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively. Information concerning the number of outstanding Shares is set
forth in the "Introduction" of the Offer to Purchase and is incorporated herein
by reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of Shares for each quarterly period
during the past two years is set forth in Section 6 ("Price Range of the Shares;
Dividends on the Shares") of the Offer to Purchase and is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Schedule 14D-1 is being filed by the Purchaser and
Parent. Information concerning the principal offices of the Purchaser and Parent
is set forth in Section 9 ("Certain Information Concerning the Purchaser and
Parent") of the Offer to Purchase and is incorporated herein by reference. The
names, business addresses, present principal occupations or employment, material
occupations, positions, offices or employments during the last five years and
citizenship of the directors and executive officers of the Purchaser and Parent
are set forth in Schedule I to the Offer to Purchase and are incorporated herein
by reference.
(e) and (f) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Parent") of the Offer to Purchase is incorporated
herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 11 ("Contacts with the
Company; Background of the Offer") and Section 12 ("Purpose of the Offer; The
Merger Agreement") of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in Section 10 ("Source and Amount of Funds")
of the Offer to Purchase is incorporated herein by reference.
(b) and (c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement") of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 7 ("Effect of the Offer on
the Market for Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the "Introduction," Section 9
("Certain Information Concerning the Purchaser and Parent") and Section 12
("Purpose of the Offer; The Merger Agreement") of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "Introduction", Section 9 ("Certain
Information Concerning the Purchaser and Parent"), Section 11 ("Contacts the
Company; Background of the Offer") and Section 12 ("Purpose of the Offer; The
Merger Agreement") of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 12 ("Purpose of the Offer; The
Merger Agreement") of the Offer to Purchase is incorporated herein by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal
Matters") of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Effect of the Offer on the
Market for the Shares; Stock Quotation; Exchange Act Registration; Margin
Regulations") of the Offer to Purchase is incorporated herein by reference.
(e) The information set forth in Section 15 ("Certain Legal Matters") of the
Offer to Purchase in incorporated herein by reference.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Agreement and Plan of Merger, dated as of November 30, 1999,
among the Purchaser, Parent and the Company, copies of which are attached hereto
as Exhibits (a)(1), (a)(2) and (c)(1), respectively, is incorporated herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies
and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Summary Advertisement, dated December 6, 1999
(a)(8) Text of Press Release, dated November 30, 1999
(b) Placing and Open Offer Agreement
<PAGE>
(c)(1) Agreement and Plan of Merger, dated as of November 30, 1999, among
the Purchaser, Parent and the Company
(c)(2) Loan Agreement, dated as of November 30, 1999, between Parent and the
Company
(c)(3) Stock Option Agreement, dated as of November 30, 1999, between Parent
and the Company
(c)(4) Form of Stockholder Agreement between Parent and certain stockholders
of the Company
(d) None
(e) Not applicable
(f) None
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Dated: December 6, 1999
<TABLE>
<S> <C> <C>
APPLIED OPSEC CORPORATION
By: /s/ MICHAEL W. ANGUS
-----------------------------------------
Name: Michael W. Angus
Title: Treasurer and Secretary
</TABLE>
<TABLE>
<S> <C> <C>
APPLIED HOLOGRAPHICS PLC
By: /s/ MICHAEL W. ANGUS
-----------------------------------------
Name: Michael W. Angus
Title: Finance Director
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------------------- -------------------
<S> <C>
(a)(1) Offer to Purchase
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Banks, Trust Companies and Other
Nominees
(a)(5) Letter to Clients for use by Brokers, Dealers, Banks, Trust
Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9
(a)(7) Summary Advertisement, dated December 6, 1999
(a)(8) Text of Press Release, dated November 30, 1999
(b) Placing and Open Offer Agreement
(c)(1) Agreement and Plan of Merger, dated as of November 30, 1999,
among the Purchaser, Parent and the Company
(c)(2) Loan Agreement, dated as of November 30, 1999, between
Parent and the Company
(c)(3) Stock Option Agreement, dated as of November 30, 1999,
between Parent and the Company
(c)(4) Form of Stockholder Agreement between Parent and certain
stockholders of the Company
(d) None
(e) Not applicable
(f) None
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
OPTICAL SECURITY GROUP, INC.
AT
$7.00 NET PER SHARE
BY
APPLIED OPSEC CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
APPLIED HOLOGRAPHICS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 NOON, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 7, 2000, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF OPTICAL SECURITY GROUP, INC. HAS UNANIMOUSLY
APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE
TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE DATE OF THE EXPIRATION OF THE OFFER THAT
NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE SHARES
(DETERMINED AS OF THE DATE OF THE EXPIRATION OF THE OFFER ON A FULLY DILUTED
BASIS FOR ALL OUTSTANDING STOCK OPTIONS, WARRANTS, AND ANY OTHER RIGHTS TO
ACQUIRE SHARES OUTSTANDING ON THE DATE OF THE EXPIRATION OF THE OFFER, AS
FURTHER DESCRIBED BELOW).
IMPORTANT
If you wish to tender all or any portion of your Shares in Optical Security
Group, Inc., you must do one of the following:
--If you are the record holder of your Shares and hold certificates for your
Shares, (1) complete and sign the Letter of Transmittal (or a facsimile copy)
following the instructions in the Letter of Transmittal, (2) have your signature
on the Letter of Transmittal guaranteed if required by Instruction 1 to the
Letter of Transmittal, and (3) mail or deliver the Letter of Transmittal (or a
facsimile copy), the certificates for your Shares and any other required
documents to the Depositary, Wilmington Trust Company.
--If you are the record holder of your Shares and delivery of the Shares is
to be made by book-entry transfer, (1) transmit an agent's message (as described
in Section 2 below) and any other required documents, to Wilmington Trust
Company and (2) deliver your Shares pursuant to the procedure for book-entry
transfer set forth in Section 2 below.
--If your Shares are registered in the name of a broker, dealer, bank, trust
company or other nominee, you must contact and request your broker, dealer,
bank, trust company or other nominee to tender your Shares.
--If you desire to tender your Shares and your certificates for your Shares
are not immediately available or you cannot comply in a timely manner with the
procedures for book-entry transfer, or you cannot deliver all the required
documents to Wilmington Trust Company prior to the expiration of the Offer, you
may tender your Shares by following the procedure for guaranteed delivery
described in Section 2 below.
--If you have any questions or if you need assistance or additional copies
of this Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery, please call the Information Agent, MacKenzie Partners, Inc., at its
address and telephone number set forth on the back cover of this Offer to
Purchase.
------------------------
DECEMBER 6, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 2
1. Terms of the Offer...................................... 2
2. Procedure for Tendering Shares.......................... 4
3. Withdrawal Rights....................................... 7
4. Acceptance for Payment and Payment for Shares........... 7
5. Certain Federal Income Tax Consequences................. 8
6. Price Range of the Shares; Dividends on the Shares...... 9
7. Effect of the Offer on the Market for the Shares; Stock
Quotation; Exchange Act Registration; Margin
Regulations............................................ 10
8. Certain Information Concerning the Company.............. 11
9. Certain Information Concerning the Purchaser and
Parent..................................................... 14
10. Source and Amount of Funds.............................. 22
11. Contacts with the Company; Background of the Offer...... 23
12. Purpose of the Offer; The Merger Agreement.............. 27
13. Dividends and Distributions............................. 38
14. Certain Conditions of the Offer......................... 38
15. Certain Legal Matters................................... 39
16. Fees and Expenses....................................... 41
17. Miscellaneous........................................... 41
Schedule I--Directors and Executive Officers of Parent and
the Purchaser............................................. S-1
</TABLE>
i
<PAGE>
To the Holders of Common Stock
of Optical Security Group, Inc.:
INTRODUCTION
Applied Opsec Corporation, a Colorado corporation (the "Purchaser") and a
wholly-owned subsidiary of Applied Holographics PLC, a public limited company
incorporated and existing under the laws of England and Wales ("Parent"), is
offering to purchase all outstanding shares (the "Shares") of common stock, par
value $.005 per share ("Common Stock"), of Optical Security Group, Inc., a
Colorado corporation (the "Company"), at $7.00 per Share (the "Offer Price"),
net to the seller, in cash, upon the terms and subject to the conditions set
forth in this Offer to Purchase dated December 6, 1999 and in the related Letter
of Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
If you have Shares registered in your name that you tender directly, you
will not be obligated to pay brokerage fees or commissions or, except as set
forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the
purchase of Shares pursuant to the Offer. If you hold your Shares through a
broker or bank, you should consult with them to determine if there are any fees
applicable to a tender of the Shares. The Purchaser will pay all fees and
expenses of Wilmington Trust Company, which is acting as the Depositary (the
"Depositary") and MacKenzie Partners, Inc., which is acting as Information Agent
(the "Information Agent"), incurred in connection with the Offer. See
Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
THE MERGER (AS DEFINED BELOW) AND DETERMINED THAT THE TERMS OF THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES.
The Company has advised the Purchaser that Wasserstein Perella & Co., Inc.
("Wasserstein Perella") has delivered to the board of directors of the Company
its written opinion dated November 29, 1999 to the effect that, subject to and
based upon the matters described in the opinion, as of the date of such opinion,
the $7.00 in cash per Share to be received by the holders of Shares pursuant to
the Offer and the Merger is fair to such holders from a financial point of view.
That opinion is set forth in full as an exhibit to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being mailed to you with this Offer to Purchase. YOU ARE URGED TO, AND
SHOULD, READ SUCH OPINION CAREFULLY IN ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF THE
OUTSTANDING SHARES (DETERMINED AS OF THE EXPIRATION DATE ON A FULLY DILUTED
BASIS, TAKING INTO ACCOUNT ALL SHARES ISSUABLE ON EXERCISE OR CONVERSION OF ALL
OPTIONS, WARRANTS AND ANY OTHER RIGHTS TO ACQUIRE SHARES OUTSTANDING ON THE
EXPIRATION DATE) (THE "MINIMUM CONDITION"). THE PURCHASER RESERVES THE RIGHT
(SUBJECT TO THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION")), WHICH IT PRESENTLY HAS NO INTENTION OF
EXERCISING, TO WAIVE OR REDUCE THE MINIMUM CONDITION AND TO ELECT TO PURCHASE,
PURSUANT TO THE OFFER, LESS THAN THE NUMBER OF SHARES REQUIRED TO SATISFY THE
MINIMUM CONDITION. SEE SECTIONS 1 AND 14.
The Company has informed the Purchaser that, as of November 30, 1999, there
were 6,202,425 Shares issued and outstanding and 3,713,616 shares reserved for
issuance upon the exercise of outstanding options, warrants, and other rights to
acquire Shares (including 333,333 Shares issuable by the Company in connection
with the Bridgestone Acquisition (see Section 11), and excluding 426,154 Shares
issuable upon exercise of the Company's $6.50 Senior Subordinated Convertible
Debentures, and 309,052 Shares issuable upon exercise of certain warrants and
options, on the assumption that such securities will either be cashed out or
terminated prior to exercise). Accordingly, based on the foregoing assumptions,
the Minimum Condition will be satisfied if at least 4,958,021 Shares, or
approximately 80% of the outstanding Shares as
1
<PAGE>
of November 30, 1999, are validly tendered and not withdrawn prior to the
Expiration Date. Once the Minimum Condition has been satisfied and the Purchaser
accepts for payment Shares tendered pursuant to the Offer, the Purchaser will be
able to elect a majority of the members of the Company's board of directors and,
if such amount of shares also constitutes at least 90% of all Shares outstanding
at such time, to effect the Merger without the affirmative vote of any other
stockholder of the Company.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of November 30, 1999 (the "Merger Agreement"), among Parent, the Purchaser
and the Company, pursuant to which, following the consummation of the Offer and
the satisfaction or waiver of certain conditions, the Purchaser will be merged
with and into the Company, with the Company surviving the merger (as such, the
"Surviving Corporation") as a subsidiary of Parent (the "Merger"). In the
Merger, each Share issued and outstanding immediately prior to the Merger (other
than Shares (1) owned or held in treasury by the Company, (2) owned by Parent or
the Purchaser, (3) remaining outstanding held by any subsidiary of the Company
or Parent or (4) owned by stockholders, if any, who are entitled to and who
properly exercise dissenters' rights under Colorado law) will be converted into
the right to receive in cash, without interest, the per Share price paid in the
Offer (the "Merger Consideration"). See Section 12.
The Merger is subject to a number of conditions, including approval by
stockholders of the Company, if such approval is required by applicable law. If
the Purchaser acquires 90% or more of the outstanding Shares pursuant to the
Offer or otherwise, the Purchaser will effect the Merger pursuant to the
short-form merger provisions of the Colorado Business Corporation Act (the
"CBCA"), without prior notice to, or any action by, any other stockholder of the
Company. See Section 12.
The Merger Agreement is more fully described in Section 12. Certain Federal
income tax consequences of the sale of Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 3. The term "Expiration Date" means 12:00 noon, New York
City time, on Friday, January 7, 2000, unless the Purchaser shall have extended
the period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Purchaser, shall expire.
Subject to applicable rules and regulations of the Commission, the Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, and regardless of whether or not any of the events set forth in
Section 14 hereof shall have occurred or shall have been determined by the
Purchaser to have occurred, (1) to extend the period of time during which the
Offer is open, and thereby delay acceptance for payment of and the payment for
any Shares, by giving oral or written notice of such extension to the Depositary
and (2) to amend the Offer in any other respect by giving oral or written notice
of such amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If by 12:00 noon, New York City time, on Friday, January 7, 2000 (or any
other date or time then set as the Expiration Date), any or all conditions to
the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the terms and conditions contained in
the Merger Agreement and to the applicable rules and regulations of the
Commission, (1) to terminate the Offer and not accept for payment any Shares and
return all tendered Shares to tendering stockholders, (2) to waive
2
<PAGE>
one or more of the unsatisfied conditions and, subject to complying with the
terms of the Merger Agreement and the applicable rules and regulations of the
Commission, accept for payment and pay for all Shares validly tendered prior to
the Expiration Date and not theretofore withdrawn, (3) to extend the Offer and,
subject to the right of stockholders to withdraw Shares until the Expiration
Date, retain the Shares that have been tendered during the period or periods for
which the Offer is extended or (4) to amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, waiver, amendment or termination will be
followed as promptly as practicable by public announcement. In the case of an
extension, Rule 14e-l(d) under the Securities Exchange Act of 1934 (the
"Exchange Act") requires that the announcement be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act which require that
any material change in the information published, sent or given to stockholders
in connection with the Offer be promptly disseminated to stockholders in a
manner reasonably designed to inform stockholders of such change), and without
limiting the manner in which the Purchaser may choose to make any public
announcement, the Purchaser currently intends to make such public announcement
by issuing a press release to the Dow Jones News Service and making any
appropriate filing with the Commission.
Pursuant to the Merger Agreement, the Purchaser may, without the prior
consent of the Company, extend the Offer, particularly, but not exclusively
(1) if at the Expiration Date any of the conditions to the Purchaser's
obligations to accept Shares for payment are not satisfied or waived, until such
time as such conditions are satisfied or waived, (2) for any period required by
any rule, regulation, interpretation or position of the Commission or the staff
thereof applicable to the Offer or any period required by applicable law and
(3) on one or more occasions for an aggregate period of not more than 10
business days beyond the latest expiration date that would otherwise be
permitted under clause (1) or (2) of this sentence, if on such expiration date
there shall not have been tendered at least 90% of the outstanding Shares. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or a federal holiday and consists of the time period from 12:01 a.m.
through 12:00 Midnight, New York City time.
If the Purchaser extends the Offer or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its acceptance for
payment of or payment for Shares or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 3.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-1 under the Exchange
Act, which requires that a bidder pay the consideration offered or return the
securities deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-l under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to stockholders.
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<PAGE>
CONSUMMATION OF THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM
CONDITION AND THE OTHER CONDITIONS SET FORTH IN SECTION 14. Subject to the terms
and conditions contained in the Merger Agreement, the Purchaser reserves the
right (but shall not be obligated) to waive any or all such conditions. The
Company has provided the Purchaser with the Company's stockholder lists and
security position listings for the purpose of disseminating the Offer to holders
of the Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed by the Purchaser to record holders of
Shares and will be furnished by the Purchaser to brokers, dealers, banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder lists or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
VALID TENDER. For a stockholder to tender Shares validly pursuant to the
Offer, either (1) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or in
the case of a book-entry transfer, an Agent's Message (as defined in the second
succeeding paragraph), and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date
and either certificates for tendered Shares must be received by the Depositary
at one of such addresses or such Shares must be delivered pursuant to the
procedure for book-entry transfer set forth below (and a Book-Entry Confirmation
(as defined in the next paragraph) received by the Depositary), in each case,
prior to the Expiration Date, or (2) the tendering stockholder must comply with
the guaranteed delivery procedure set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents, must, in any case, be transmitted to,
and received by, the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedure described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at the Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation." DELIVERY OF THE LETTER OF TRANSMITTAL OR
ANY OTHER REQUIRED DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
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<PAGE>
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if (1) the Letter of Transmittal is signed by the registered holder
(which term, for purposes of this Section, includes any participant in the
Book-Entry Transfer Facility's system whose name appears on a security position
listing as the owner of the Shares) of Shares tendered therewith unless such
registered holder has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on the Letter
of Transmittal or (2) such Shares are tendered for the account of a financial
institution (including most commercial banks, savings and loan associations and
brokerage houses) that is a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). In all other cases, all signatures on
the Letters of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made, or certificates for Shares
not tendered or not accepted for payment are to be issued, to a person other
than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case, signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instruction 5 to the Letter of
Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by the Purchaser is received by the
Depositary, as provided below, prior to the Expiration Date; and
(3) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other documents
required by the Letter of Transmittal, are received by the Depositary within
three trading days after the date of execution of such Notice of Guaranteed
Delivery. A "trading day" is any day on which the New York Stock
Exchange, Inc. (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (1) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (2) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (3) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations are actually
received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
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<PAGE>
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
APPOINTMENT. By executing a Letter of Transmittal, the tendering
stockholder will irrevocably appoint designees of the Purchaser as such
stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after November 30, 1999. All such proxies shall be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such stockholder as provided herein. Upon such
acceptance for payment, all prior powers of attorney, proxies and consents given
by such stockholder with respect to such Shares or other securities or rights
will, without further action, be revoked and no subsequent powers of attorney,
proxies or consents may be given (and, if given, will not be deemed effective).
The designees of the Purchaser will thereby be empowered to exercise all voting
rights with respect to such Shares or other securities or rights in respect of
any annual, special or adjourned meeting of the Company's stockholders, or
otherwise, and may execute any written consent, and may otherwise act as an
attorney-in-fact and proxy concerning any matter as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting rights with respect to such Shares and other securities or rights,
including voting at any meeting of stockholders then scheduled.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of, or payment for, any Shares which acceptance or payment, in the
opinion of the Purchaser's counsel, may be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in any tender with
respect to any particular Shares, whether or not similar defects or
irregularities are waived in the case of other Shares. No tender of Shares will
be deemed to have been validly made until all defects or irregularities relating
thereto have been cured or waived. None of the Purchaser, Parent, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
BACKUP FEDERAL INCOME TAX WITHHOLDING. In order to avoid "backup
withholding" of federal income tax on payments of cash pursuant to the Offer, a
stockholder surrendering Shares in the Offer must, unless an exemption applies,
provide the Depositary with such Stockholder's correct Taxpayer Identification
Number ("TIN") on a Substitute Form W-9 and certify under penalty of perjury
that such TIN is correct and that such stockholder is not subject to backup
withholding. If a stockholder does not provide its correct TIN or fails to
provide the certifications described above, the Internal Revenue Service ("IRS")
may impose a penalty on such stockholder and payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proven in
a manner satisfactory to the Purchaser and the Depositary). Foreign stockholders
should complete and sign the main signature form and a Form W-8, Certificate of
Foreign Status, a copy of which may be obtained from the Depositary, in order to
avoid
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<PAGE>
backup withholding. See instruction 9 to the Letter of Transmittal and
"Important Tax Information" in the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after February 3, 2000.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase and must specify the name
of the person having tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in Section 2, any notice of withdrawal must also specify the name and
number of the account at the Book Entry Transfer Facility to be credited with
the withdrawn Shares and must otherwise comply with the Book Entry Transfer
Facility's procedures. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly tendered
for any purposes of the Offer. However, withdrawn Shares may be retendered by
again following one of the procedures described in Section 2 at any time prior
to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
any notice of withdrawal or incur any liability for failure to give any such
notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and, promptly after the
Expiration Date, will pay for all Shares validly tendered prior to the
Expiration Date and not properly withdrawn in accordance with Section 3. Any
determination concerning the satisfaction of such terms and conditions will be
within the sole discretion of the Purchaser, and such determination will be
final and binding on all tendering stockholders. See Sections 1 and 14. The
Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of or payment for Shares in order to comply with any
applicable law. Any such delays will be effected in compliance with
Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to
pay for or return tendered Shares promptly after the termination or withdrawal
of the Offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (1) certificates for
such Shares (or timely Book-Entry Confirmation of a transfer of such Shares as
described in Section 2), (2) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
(3) any other documents required by the Letter of Transmittal. The per Share
consideration paid to any stockholder pursuant to the Offer will be the highest
per Share consideration paid to any other stockholder pursuant to the Offer.
7
<PAGE>
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after the termination or withdrawal of a tender
offer), the Depositary may, nevertheless, on behalf of the Purchaser, retain
tendered Shares. Any such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or otherwise, certificates for any such Shares will be returned,
without expense to the tendering stockholder (or, in the case of Shares
delivered by book-entry transfer of such Shares into the Depositary's account at
the Book-Entry Transfer Facility pursuant to the procedure set forth in
Section 2, such Shares will be credited to an account maintained at the
Book-Entry Transfer Facility), as promptly as practicable after the expiration
or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to
the Offer. Any such transfer or assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will constitute a
taxable transaction for federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code"), and may also constitute a taxable
transaction under applicable state, local, foreign and other tax laws. As a
result, a tendering stockholder will generally recognize gain or loss for
Federal income tax purposes in an amount equal to the difference between the
amount of cash received by the stockholder pursuant to the Offer or the Merger
and such stockholder's aggregate adjusted tax basis in the Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or
loss will be calculated separately for each block of Shares tendered and
purchased pursuant to the Offer (or canceled pursuant to the Merger). If
tendered Shares are held by a tendering stockholder as capital assets, any gain
or loss recognized by the tendering stockholder will constitute capital gain or
loss, and will constitute long-term capital gain or loss if the tendering
stockholder held the underlying Shares for more than 12 months as of the date of
disposition. There are limits on the deductibility of capital losses.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to backup withholding at a rate of 31% unless the stockholder
provides its correct TIN (or certifies that it is awaiting a TIN) and certifies
as to no loss of exemption from backup withholding and otherwise complies with
the applicable requirements of the backup withholding rules. A stockholder that
does not furnish its correct TIN in the prescribed manner or that does not
otherwise establish a basis for an exemption from backup withholding may be
subject to a penalty imposed by the IRS, and the gross proceeds of the Offer or
the Merger payable to such
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stockholder may be subject to backup withholding at a rate of 31%. Each
stockholder should complete and sign the Substitute Form W-9 included as part of
the Letter of Transmittal so as to provide the information and certification
necessary to avoid backup withholding.
If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the Federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the IRS. If
backup withholding results in an overpayment of tax, a refund can be obtained by
the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A
HOLDER OF SHARES IN LIGHT OF SUCH PERSON'S INDIVIDUAL CIRCUMSTANCES.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded on The Nasdaq SmallCap Stock Market(SM) under the
symbol "OPSC" The following table sets forth, for each of the periods indicated,
the high and low reported sale prices per Share, as reported by The Nasdaq Stock
Market.
<TABLE>
<CAPTION>
SHARES
-------------------
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL YEAR ENDED MARCH 31, 1998
First Quarter............................................... $7.75 $6.13
Second Quarter.............................................. $8.00 $6.00
Third Quarter............................................... $7.63 $5.69
Fourth Quarter.............................................. $7.25 $5.00
FISCAL YEAR ENDED MARCH 31, 1999
First Quarter............................................... $6.13 $5.25
Second Quarter.............................................. $6.38 $5.13
Third Quarter............................................... $6.25 $4.25
Fourth Quarter.............................................. $6.50 $5.00
FISCAL YEAR ENDED MARCH 31, 2000
First Quarter............................................... $5.25 $3.13
Second Quarter.............................................. $5.38 $3.00
Third Quarter (through November 23, 1999)................... $6.25 $3.06
</TABLE>
On November 29, 1999, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the reported last sale
price of the Shares on The Nasdaq SmallCap Stock Market(SM) was $5.63 per Share.
On December 2, 1999, the reported last sale price of the Shares on The Nasdaq
SmallCap Stock Market(SM) was $6.75 per Share. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR THE SHARES.
According to the Company's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1999 (the "Form 10-KSB"), the Company has not paid cash
dividends on Common Stock to date and does not plan to pay cash dividends to its
common stockholders in the foreseeable future.
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7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly
and could adversely affect the liquidity and market value of the remaining
Shares held by the public.
MARKET FOR SHARES. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the requirements of the National
Association of Securities Dealers, Inc. (the "NASD") for continued inclusion in
The Nasdaq SmallCap Stock Market(SM). According to published guidelines for the
Nasdaq SmallCap Stock Market(SM), the Shares might no longer be eligible for
quotation on the Nasdaq SmallCap Stock Market(SM) if, among other things, either
(1) the Company's net tangible assets were less than $2,000,000, the Company's
market capitalization was less than $35,000,000, and the Company's net income
(in latest fiscal year or 2 of last 3 fiscal years) was less than $500,000, or
(2) the number of Shares publicly held was fewer than 500,000, there were fewer
than 300 holders of round lots, the aggregate market value of publicly held
Shares was less than $1,000,000, or there were fewer than two registered and
active market makers for the Shares. If these standards are not met, the Shares
might nevertheless continue to be included in The Nasdaq Stock Market with
quotations published in the Nasdaq "additional list" or in one of the "local
lists," but if the number of holders of the Shares were to fall below 300, or if
the number of publicly held Shares were to fall below 100,000 or there were not
at least two registered and active market makers for the Shares, the NASD's
rules provide that the Shares would no longer be "qualified" for Nasdaq Stock
Market reporting and The Nasdaq Stock Market would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. According to the Company, as of November 26,
1999, there were approximately 831 holders of record of Shares (including one
holder in "street name" representing approximately 800 stockholders) and
6,202,425 Shares were outstanding. If, as a result of the purchase of Shares
pursuant to the Offer, the Shares no longer meet the requirements of the NASD
for continued inclusion in The Nasdaq Stock Market or The Nasdaq SmallCap Stock
Market(SM), as the case may be, the market for Shares could be adversely
affected.
If the Shares no longer meet the requirements of the NASD for quotation
through any tier of The Nasdaq Stock Market, it is possible that the Shares
would continue to trade in the over-the-counter market and that price quotations
would be reported by other sources. The extent of the public market for the
Shares and the availability of such quotations would depend, however, upon the
number of holders of Shares remaining at such time, the interests in maintaining
a market in Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
shortswing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, may be impaired or eliminated. The Purchaser intends to seek to cause the
Company to apply for termination of registration of the Shares under the
Exchange Act as soon after the completion of the Offer as the requirements for
such termination are met.
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If registration of the Shares is not terminated prior to the Merger, then
the Shares will cease to be reported on The Nasdaq Stock Market and the
registration of the Shares under the Exchange Act will be terminated following
the consummation of the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers. If registration of Shares under the Exchange Act were terminated,
the Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Colorado corporation with its principal executive offices
at 535 16(th) Street, Suite 920, Denver, Colorado 80202. According to the
Form 10-KSB, the Company, together with its subsidiaries, is a leading provider
of imaging technology and optical coatings used in a variety of security,
document authentication, product protection, and anti-tampering applications.
Set forth below is certain consolidated financial information with respect
to the Company and its subsidiaries excerpted or derived from the information
contained in the Form 10-KSB or the Company's Form 10-QSB for the quarter ended
September 30, 1999. More comprehensive financial information is included in
those reports and other documents filed by the Company with the Commission, and
the following summary is qualified in its entirety by reference to those reports
and such other documents and all the financial information (including any
related notes) contained therein. Those reports and such other documents should
be available for inspection and copies thereof should be obtainable in the
manner set forth below under "Available Information."
11
<PAGE>
OPTICAL SECURITY GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1999, YEAR ENDED MARCH 31,
----------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues............................................. $8,365,180 $7,062,150 $14,172,133 $ 9,798,713
Cost of goods sold................................... 4,450,104 4,042,914 7,919,501 5,730,654
---------- ---------- ----------- -----------
Gross margin......................................... 3,915,076 3,019,236 6,252,632 4,068,059
Operating expenses:
Salaries and related costs......................... 1,732,609 1,325,706 2,972,955 1,548,604
Depreciation....................................... 145,945 90,036 216,245 113,720
Amortization....................................... 231,487 142,773 340,083 187,851
Other operating expenses........................... 980,155 853,919 1,949,361 1,156,959
---------- ---------- ----------- -----------
Total operating expenses............................. 3,090,196 2,412,434 5,478,644 3,007,134
---------- ---------- ----------- -----------
Income from operations............................... 824,880 606,802 773,988 1,060,925
Other income (expense):
Interest income.................................... 12,063 16,583 33,447 36,929
Interest expense................................... (190,807) (117,433) (291,563) (37,072)
Other income....................................... 207,954 11,521 10,286 (48,188)
Foreign currency transaction gain (loss)........... (1,406) (1,163) (8,395) 1,756
---------- ---------- ----------- -----------
Total other income (expense)......................... 27,804 (90,492) (256,225) (46,575)
Income before income taxes........................... 852,684 516,310 517,763 1,014,350
Income tax benefit................................... -- -- 10,310 18,517
---------- ---------- ----------- -----------
Income from continuing operations.................... 852,684 516,310 528,073 1,032,867
Discontinued operations:............................. -- --
Loss from operations of discontinued segment....... -- -- (1,648,146) (3,052,382)
Loss on disposal of business segment............... -- -- (4,487,326) (2,460,000)
---------- ---------- ----------- -----------
Total loss from discontinued operations.............. -- -- (6,135,472) (5,512,382)
---------- ---------- ----------- -----------
Net income (loss).................................... 852,684 516,310 (5,607,399) (4,479,515)
Dividends on preferred stock......................... 71,720 71,720 143,440 143,440
---------- ---------- ----------- -----------
Net income (loss) applicable to common stock......... $ 780,964 $ 444,590 $(5,750,839) $(4,622,955)
---------- ---------- ----------- -----------
Earnings (loss) per share:
Basic:
Continuing operations............................ $ 0.13 $ 0.07 $ 0.06 $ 0.18
Discontinued operations.......................... -- -- (1.03) (1.09)
---------- ---------- ----------- -----------
Net income (loss) applicable to common stock..... $ 0.13 $ 0.07 $ (0.97) $ (0.91)
========== ========== =========== ===========
Diluted:
Continuing operations.............................. $ 0.13 $ 0.07 $ 0.06 $ 0.15
Discontinued operations............................ -- -- (1.00) (0.94)
---------- ---------- ----------- -----------
Net income (loss) applicable to common stock....... $ 0.13 $ 0.07 $ (0.94) $ (0.79)
========== ========== =========== ===========
Weighted average number of shares outstanding:
Basic:............................................. 6,150,721 5,985,620 5,948,720 5,056,039
Diluted:
Weighted shares outstanding...................... 6,150,721 5,985,620 5,948,720 5,056,039
Shares attributed to options and warrants........ 27,171 209,964 167,667 800,418
---------- ---------- ----------- -----------
6,177,892 6,195,584 6,116,387 5,856,457
========== ========== =========== ===========
</TABLE>
12
<PAGE>
OPTICAL SECURITY GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT MARCH 31,
---------------- ---------------------------
1999 1999 1998
---------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,240,040 $ 1,337,128 $ 797,388
Accounts receivable, less allowance of $121,276, $124,349
and $19,353 at September 30, 1999, March 31, 1999 and
March 31, 1998, respectively............................ 2,510,917 2,704,189 2,143,303
Inventory................................................. 1,290,407 1,443,912 906,747
Prepaid expenses.......................................... 267,248 230,723 262,956
Net current assets of discontinued operations............. -- -- 647,685
------------ ------------ ------------
Total current assets........................................ 5,308,612 5,715,952 4,758,079
Property and equipment, net................................. 3,694,881 3,406,972 2,392,676
Other assets:
Patents and patent applications, net of accumulated
amortization of $173,920, $159,445 and $98,327 at
September 30, 1999, March 31, 1999 and March 31, 1998,
respectively............................................ 271,961 281,739 259,475
Goodwill, net of accumulated amortization of $611,743,
$490,457 and $262,516 at September 30, 1999, March 31,
1999 and March 31, 1998, respectively................... 4,256,383 4,376,668 1,077,989
License and non-compete agreements, net of accumulated
amortization of $360,491, $321,067 and $241,332 at
September 30, 1999, March 31, 1999 and March 31, 1998,
respectively............................................ 379,958 675,410 498,737
Deposits and other assets................................. 705,253 228,126 207,895
Net long-term assets of discontinued operations........... -- 109,318 4,289,781
------------ ------------ ------------
Total assets................................................ $ 14,617,048 $ 14,794,185 $ 13,484,632
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,073,693 $ 970,140 $ 1,146,312
Accrued expenses.......................................... 654,594 511,009 338,235
Current portion of capital lease obligations.............. 38,557 37,479 4,385
Current portion of long-term obligations.................. 256,344 972,344 632,344
Net current liabilities of discontinued operations........ 241,168 841,363 --
Allowance for operating losses of discontinued
operations.............................................. -- -- 900,000
------------ ------------ ------------
Total current liabilities................................... 2,264,356 3,332,335 3,021,276
Capital lease obligations................................... -- 11,541 2,462
Long-term obligations....................................... 1,158,971 1,229,643 1,001,582
Convertible debentures...................................... 3,270,000 3,270,000 --
Commitments
Stockholders' equity:
Voting convertible preferred stock, $0.01 par value:
2,500,000 shares authorized; 1,793 Preferred Series B
shares issued and outstanding (preference in liquidation
$1,927,475)............................................. 18 18 18
Common stock, $0.005 par value:
15,000,000 shares authorized; 6,185,514, 6,070,620 and
5,230,619 shares issued and outstanding at
September 30, 1999, March 31, 1999 and March 31, 1998,
respectively............................................ 30,928 30,353 26,153
Additional paid-in capital................................ 23,853,396 23,662,560 20,399,614
Foreign currency translation adjustment or other
comprehensive income.................................... 54,402 53,722 78,675
Accumulated deficit....................................... (16,015,023) (16,795,987) (11,045,148)
------------ ------------ ------------
Total stockholders' equity.................................. 7,923,721 6,950,666 9,459,312
------------ ------------ ------------
Total liabilities and stockholders' equity.................. $ 14,617,048 $ 14,794,185 $ 13,484,632
============ ============ ============
</TABLE>
13
<PAGE>
AVAILABLE INFORMATION. The Company is subject to the reporting requirements
of the Exchange Act and, in accordance therewith, is required to file reports
and other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in proxy statements distributed to the Company's stockholders and
filed with the Commission. Such reports, proxy statements and other information
should be available for inspection at the public reference facilities of the
Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located in the Northwestern Atrium Center,
500 West Madison Street (Suite 1400), Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies should be obtainable,
by mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Such reports, proxy and information statements and other
information may be found on the Commission's web site, the address of which is:
http://www.sec.gov. Such information should also be on file at The Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information or disclosures made by the Company to the Purchaser and
Parent. Although the Purchaser and Parent do not have any knowledge that any
such information is untrue, neither the Purchaser nor Parent takes any
responsibility for the accuracy or completeness of such information or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
The Purchaser, a Colorado corporation and a wholly owned subsidiary of
Parent, was organized to acquire the Company and has not conducted any unrelated
activities since its organization. The principal office of the Purchaser is
located c/o the principal office of Parent. All outstanding shares of capital
stock of the Purchaser are owned by Parent.
Parent is a manufacturer of holographic films and products for the security
and packaging industry. Parent is public limited company incorporated and
existing under the laws of England and Wales having its principal place of
business at 40 Phoenix Road, Crowther District 3, Washington, Tyne & Wear,
England NE 38 0AD.
Neither the Purchaser nor Parent (together, the "Corporate Entities") or, to
the best knowledge of the Corporate Entities, any of the persons listed in
Schedule I or any associate or majority-owned subsidiary of the Corporate
Entities or any of the persons so listed, beneficially owns any equity security
of the Company, with the exception of 100 shares of common stock of the Company
jointly held by Michael W. Angus, Finance Director of Parent, and David J.
Tidmarsh, Chief Executive Officer of Parent, for the beneficial interest of
Parent. None of the Corporate Entities or, to the best knowledge of the
Corporate Entities, any of the other persons referred to above, or any of the
respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of the Company
during the past 60 days.
Except as described in this Offer to Purchase, (1) there have not been any
contacts, negotiations or transactions between the Corporate Entities, any of
their respective subsidiaries or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I, on the one hand, and the
Company or any of its directors, officers or affiliates, on the other hand, that
are required to be disclosed pursuant to the rules and regulations of the
Commission and (2) none of the Corporate Entities or, to the best
14
<PAGE>
knowledge of the Corporate Entities, any of the persons listed in Schedule I has
any contract, arrangement, understanding or relationship with any person with
respect to any securities of the Company.
Except as described in this Offer to Purchase, during the last five years,
none of the Corporate Entities or, to the best knowledge of the Corporate
Entities, any of the persons listed in Schedule I (1) has been convicted in a
criminal proceeding (excluding traffic violations and similar misdemeanors) or
(2) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws. The name, business address, present principal occupation or
employment, five-year employment history and citizenship of each of the
directors and executive officers of the Purchaser and Parent are set forth in
Schedule I.
Set forth below is certain consolidated financial information with respect
to Parent and its subsidiaries excerpted or derived from either the consolidated
audited accounts of the Parent for each of the fiscal years ended March 31,
1997, 1998 and 1999, or the unaudited consolidated interim accounts of the
Parent for the six months ended September 30, 1998 and 1999.
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
6 MONTHS 6 MONTHS YEAR
ENDED 30 ENDED 30 ENDED
SEPTEMBER SEPTEMBER 31 MARCH
1999 1998 1999
POUNDS STERLING POUNDS STERLING POUNDS STERLING
--------------- --------------- ---------------
<S> <C> <C> <C>
TURNOVER; GROUP AND SHARE OF JOINT VENTURES... 10,150,113 7,453,669 14,715,782
Less; share of joint ventures' turnover....... (2,668,598) (229,332) (621,515)
---------- ---------- ----------
GROUP TURNOVER................................ 7,481,515 7,224,337 14,094,267
Cost of Sales................................. (5,342,650) (4,486,802) (8,862,935)
---------- ---------- ----------
GROSS PROFIT.................................. 2,138,865 2,737,535 5,231,332
Net operating expenses........................ (2,026,558) (2,100,565) (3,901,651)
---------- ---------- ----------
GROUP OPERATING PROFIT........................ 112,307 636,970 1,329,681
Share of operating profit of joint ventures... 1,193,406 207,311 379,633
Share of operating profit of associated
undertakings................................ 0 176,497 176,497
---------- ---------- ----------
OPERATING PROFIT.............................. 1,305,713 1,020,778 1,885,811
Net interest payable and similar charges...... (111,990) (54,522) (103,524)
Profit on ordinary activities before
taxation.................................... 1,193,723 966,256 1,782,287
Taxation...................................... 0 0 (16,215)
---------- ---------- ----------
PROFIT FOR THE FINANCIAL PERIOD YEAR AFTER
TAXATION.................................... 1,193,723 966,256 1,766,072
========== ========== ==========
BASIC EARNINGS PER SHARE...................... 4.5pence 3.7pence 6.7pence
========== ========== ==========
DILUTED EARNINGS PER SHARE.................... 4.2pence 3.5pence 6.4pence
========== ========== ==========
</TABLE>
15
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
30 30
SEPTEMBER SEPTEMBER 31 MARCH
1999 1998 1999
POUNDS STERLING POUNDS STERLING POUNDS STERLING
--------------- --------------- ---------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets.................................... 7,324,076 4,403,725 6,405,536
INVESTMENTS
Investments in joint ventures
Share of gross assets.............................. 1,425,922 56,426 92,811
Share of gross liabilities......................... (511,189) (67,873) (85,546)
---------- ---------- ----------
914,733 (11,447) 7,265
========== ========== ==========
Investments in associates.......................... 185,955 812,036 0
Other investments.................................. 6,305 0 6,305
---------- ---------- ----------
8,431,069 5,204,314 6,419,106
========== ========== ==========
CURRENT ASSETS
Stocks............................................. 1,441,358 1,150,252 1,425,321
Debtors
- --amounts falling due within 1 year................ 4,829,217 4,010,534 3,844,048
- --amounts falling due after more than 1 year....... 537,536 0 659,431
---------- ---------- ----------
5,366,753 4,010,534 4,503,479
---------- ---------- ----------
Cash at bank and in hand........................... 211,965 1,181,256 2,636,518
---------- ---------- ----------
7,020,076 6,342,042 8,565,318
---------- ---------- ----------
CREDITORS: Amounts falling due within one year..... (3,941,513) (3,233,225) (4,611,396)
---------- ---------- ----------
NET CURRENT ASSETS................................. 3,078,563 3,108,817 3,953,922
========== ========== ==========
TOTAL ASSETS LESS CURRENT LIABILITIES.............. 11,509,623 8,313,131 10,373,028
========== ========== ==========
CREDITORS: Amounts filling due after more than one
year............................................. 3,226,085 2,096,379 3,343,594
Called up equity share capital..................... 1,333,707 1,326,935 1,330,957
Share premium account.............................. 5,607,370 5,509,994 5,554,219
Reserves........................................... 1,342,470 (620,177) 144,258
---------- ---------- ----------
Equity shareholders' funds......................... 8,283,547 6,216,752 7,029,434
========== ========== ==========
11,509,632 8,313,131 10,373,028
========== ========== ==========
</TABLE>
16
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
6 MONTHS 6 MONTHS YEAR
ENDED 30 ENDED 30 ENDED
SEPTEMBER SEPTEMBER 31 MARCH
1999 1998 1999
POUNDS STERLING POUNDS STERLING POUNDS STERLING
--------------- --------------- ---------------
<S> <C> <C> <C>
CASHFLOW FROM OPERATING ACTIVITIES................. (459,571 1,521,275 3,291,239
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE.... (111,990) (54,522) (103,524)
TAXATION........................................... 0 0 (16,215)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT....... (1,263,222) (955,251) (3,113,652)
ACQUISITIONS AND DISPOSALS......................... (185,955) 0 5,442
FINANCING
Issue of shares.................................... 55,901 37,226 85,473
(Decrease)/increase in debt........................ (459,716) (116,965) 1,738,262
---------- ---------- ----------
Net cash (outflow)/inflow from financing........... (403,815) (79,739) 1,823,735
(DECREASE)/INCREASE IN CASH IN THE PERIOD.......... (2,424,553) 431,753 1,887,025
========== ========== ==========
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT
(DECREASE)/INCREASE IN CASH IN THE PERIOD.......... (2,424,553) 431,763 1,887,025
Cash (inflow)/outflow from (increase)/decrease in
debt and lease financing......................... 459,716 116,965 (1,738,262)
---------- ---------- ----------
Change in net debt resulting from cash flows....... (1,964,837) 548,728 148,763
New finance leases................................. (780,775) (88,109) (88,109)
---------- ---------- ----------
MOVEMENT IN NET DEBT IN PERIOD..................... (2,745,612) 460,619 60,654
NET DEBT IN BEGINNING OF PERIOD.................... (1,180,167) (1,240,821) (1,240,821)
---------- ---------- ----------
NET DEBT AT END OF PERIOD.......................... (3,925,779) (780,202) (1,180,167)
========== ========== ==========
</TABLE>
17
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 MARCH
--------------------------------------------------------------------------
1997 1998 1999
POUNDS STERLING '000 POUNDS STERLING '000 POUNDS STERLING '000
-------------------- -------------------- --------------------
<S> <C> <C> <C>
TURNOVER; GROUP AND SHARE OF JOINT
VENTURES........................ 9,617 12,095 14,716
Less: share of joint ventures'
turnover........................ (34) (524) (622)
------ ------- ------
GROSS TURNOVER.................... 9,583 11,571 14,094
Cost of Sales..................... (6,352) (7,.357) (8,863)
------ ------- ------
GROSS PROFIT...................... 3,231 4,214 5,231
Net operating expenses............ (3,425) (3,786) (3,901)
------ ------- ------
GROUP OPERATING PROFIT
(LOSS)/PROFIT................... (194) 428 1,330
Share of operating profit of joint
ventures........................ -- 46 380
Share of operating profit of
associated undertakings......... 9 178 176
------ ------- ------
OPERATING (LOSS)/PROFIT........... (185) 652 1,886
Interest receivable and similar
income.......................... 69 44 73
Interest payable and similar
charges......................... (124) (135) (177)
------ ------- ------
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION...... (240) 561 1,782
Taxation.......................... -- -- (16)
------ ------- ------
(LOSS)/PROFIT FOR THE FINANCIAL
YEAR AFTER TAXATION............. (240) 561 1,766
------ ------- ------
BASIC (LOSS)/EARNINGS PER SHARE... (0.9pence) 2.1pence 6.7pence
------ ------- ------
DILUTED (LOSS)/EARNINGS PER
SHARE........................... (0.5pence) 2.1pence 6.4pence
------ ------- ------
</TABLE>
18
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
31 MARCH 31 MARCH 31 MARCH
1997 1998 1999
POUNDS STERLING '000 POUNDS STERLING '000 POUNDS STERLING '000
-------------------- -------------------- --------------------
<S> <C> <C> <C>
FIXED ASSETS
Tangible fixed assets................... 2,476 3,070 6,406
INVESTMENTS
Investments in joint ventures........... --
Share of gross assets................... 21 120 93
Share of gross liabilities.............. (20) (22) (86)
------ ------ ------
1 98 7
------ ------ ------
Investments in associates............... 705 749 --
Other investments....................... -- -- 6
------ ------ ------
3,182 3,917 6,419
------ ------ ------
CURRENT ASSETS
Stocks.................................. 1,066 1,165 1,425
Debtors
- --amounts falling due within 1 year..... 2,596 3,299 3,844
- --amounts falling due after more than 1
year.................................. -- -- 659
------ ------ ------
3,662 3,229 4,503
Cash at bank and in hand................ 1,339 750 2,637
------ ------ ------
5,001 5,144 8,565
CREDITORS: Amounts falling due within
one year.............................. (2,206) (2,063) (4,611)
------ ------ ------
NET CURRENT ASSETS...................... 2,795 3,081 3,954
------ ------ ------
TOTAL ASSETS LESS CURRENT LIABILITIES... 5,977 6,998 10,373
====== ====== ======
CREDITORS: Amounts falling due after
more than one year.................... 41 521 2,044
CONVERTIBLE LOAN STOCK.................. 1,300 1,300 1,300
CAPITAL AND RESERVES
Called up equity share capital.......... 1,323 1,324 1,331
Share premium account................... 5,470 5,476 5,554
Profit and loss account................. (2,157) (1,623) 144
------ ------ ------
Equity shareholders' funds.............. 4,636 5,177 7,029
------ ------ ------
5,977 6,998 10,373
====== ====== ======
</TABLE>
19
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 MARCH
---------------------------------------------------
1997 1998 1999
--------------- --------------- ---------------
POUNDS STERLING POUNDS STERLING POUNDS STERLING
'000 '000 '000
<S> <C> <C> <C>
CASHFLOW FROM OPERATING ACTIVITIES................. 403 160 3,291
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE.... (20) (49) (103)
TAXATION........................................... -- -- (16)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT....... (1,219) (425) (3,115)
ACQUISITIONS AND DISPOSALS......................... -- (52) 6
FINANCING
Issue of shares.................................... 56 6 85
Decrease/(increase) in debt........................ (40) (230) 1,738
------ ------ ------
Net cash inflow/(outflow) from financing........... 7.16 (224) 1,823
------ ------ ------
DECREASE/(INCREASE) IN CASH IN THE PERIOD.......... (820) (590) 1,886
------ ------ ------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT
DECREASE/(INCREASE) IN CASH IN THE PERIOD
Cash (outflow)/inflow from (decrease)/increase in
debt and lease financing......................... (820) (590) 1,886
40 230 (1,738)
------ ------ ------
Change in net debt resulting from cash flows New
finance leases................................... (780) (360) 148
(111) (529) (87)
------ ------ ------
MOVEMENT IN NET DEBT IN PERIOD..................... (891) (889) 61
NET CASH/(DEBT) AT 1 APRIL......................... 539 (352) (1,241)
------ ------ ------
NET DEBT AT 31 MARCH............................... (352) (1,241) (1,180)
====== ====== ======
</TABLE>
SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP. The
consolidated financial statements of Applied Holographics PLC above are prepared
and presented under the historical cost convention in accordance with United
Kingdom generally accepted accounting principles ("UK GAAP"). UK GAAP differs in
certain significant respects from United States generally accepted accounting
principles ("US GAAP"). Certain significant differences between UK GAAP and US
GAAP as they relate to the financial statements of Parent are summarized below.
Such summary should not be construed to be exhaustive. Given the inherent
differences between UK GAAP and US GAAP, the financial statements presented
under UK GAAP are not presented fairly, in all material respects, under US GAAP.
Parent has not quantified these differences, nor prepared consolidated financial
statements under US GAAP, nor undertaken a reconciliation of UK GAAP and US GAAP
financial statements. Had Parent undertaken any such qualification or
preparation or reconciliation, other potentially significant accounting and
disclosure differences may have come to their attention, which are not
identified below. Accordingly, Parent can provide no assurance that the
identified differences in the summary below represent all the principal
differences relating to Parent. Further, no attempt has been made to identify
future differences between UK GAAP and US GAAP as the result of prescribed
changes in accounting standards. Professional bodies that promulgate UK GAAP and
US GAAP have significant projects that could affect future comparisons such as
this one. Finally, no attempt has been made to identify all future differences
between UK GAAP and US GAAP that may affect the financial statements as a result
of transactions or events that may occur in the future.
20
<PAGE>
(1) CURRENT ASSETS AND LIABILITIES. Current assets under UK GAAP
include amounts which fall due after more than one year. Under US GAAP such
assets would be reclassified as non-current assets. Provisions for
liabilities and charges under UK GAAP include amounts due within one year
which would be reclassified to current liabilities under US GAAP.
(2) COMPENSATION EXPENSE. Parent has three principal stock compensation
schemes which result in a UK GAAP to US GAAP accounting difference.
Under UK GAAP, qualified Save As You Earn (SAYE) schemes which offer
employees up to a 20% discount on stock prices do not result in
compensation expense. Under US GAAP, if all other qualifications for a
non compensatory plan are met, but the plan offers a discount on the
stock price greater than 15%, the plan is considered compensatory, and
compensation expense is recognized.
Under UK GAAP, in a share option scheme no compensation expense is
recognized upon the issuance of stock options if the exercise price for
the option is equivalent to, or above, the market price of the stock on
the date of issue. Under US GAAP, compensation expense is based upon the
exercise price of the option in comparison to the market price of the
stock on the measurement date. The measurement date is fixed only when
both the number of shares to be issued and the exercise price are fixed.
Under UK GAAP, compensation expense is recognized upon the payment of
cash under the phantom share option scheme, which pays an employee the
increase in the market value of specific number of shares. Under US GAAP,
compensation cost should be recognized over the vesting period and
measured as the amount by which the quoted market value of the shares
exceeds the option price, subject to adjustment in future periods for
changes in the market value prior to exercise of the option.
(3) DEFERRED TAXATION. Under UK GAAP, deferred taxation is only
accounted for the extent that it is probable that a liability or asset will
arise in the foreseeable future. The calculation of deferred taxation is
based upon timing differences between taxable and accounting income. Under
US GAAP, deferred taxation is accounted for on all temporary differences,
and a valuation allowance is established in respect of deferred taxation
assets where it is more likely than not that some portion will not be
realized. Additionally, for US GAAP purposes deferred taxes would be
provided in respect of US GAAP adjustments to the book basis of assets and
liabilities.
(4) JOINT VENTURES. Under UK GAAP Parent has reflected its interest in
joint ventures on the basis of proportional consolidation. Under US GAAP,
investments in joint ventures are generally recorded as a single line in
accordance with the principles of equity accounting.
(5) EARNINGS PER ORDINARY SHARE. Under UK GAAP, a fully diluted
calculation is provided only if materially dilutive (five per cent) in
relation to the undiluted amount. Under US GAAP, the calculation of diluted
earnings per share includes the effect of the assumed exercise of all
dilutive potential common shares (e.g., outstanding share options and
warrants as well as convertible debt) that were outstanding during the
period, unless such exercise would prove to be antidilutive. Furthermore,
under US GAAP both basic and fully diluted earnings per share must be
presented on the face of the income statement of public companies.
(6) CONVERTIBLE SECURITIES. Under UK GAAP, convertible debt securities
are classified as liabilities and the accrued interest payable on the
securities is recorded as interest expense. Under US GAAP, conditions may
require the convertible securities to be classified within the equity
section and interest expense to be classified as dividends.
(7) CASH FLOW STATEMENTS. The definition of "cash flows" differs
between UK GAAP and US GAAP. Cash flows under UK GAAP represents increases
or decreases in "cash", which is comprised of cash in hand and repayable on
demand and overdrafts. Under US GAAP, cash flow represents increases or
decreases in "cash and cash equivalents", which include short term, highly
liquid investments with original maturities of less than 90 days, and
exclude overdrafts.
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There are also certain differences in classification of items within the
cash flow statement between UK GAAP and US GAAP. Under UK GAAP, cash flows
are presented in the following categories: (a) operating activities;
(b) returns on investments and servicing of finance; (c) taxation;
(d) capital expenditure and financial investment; (e) acquisitions and
disposals; (f) equity dividends paid; (g) management of liquid resources;
and (h) financing. Under US GAAP cash flows are segregated into operating,
investing and financing activities.
Cash flows from taxation, returns on investments and servicing of
finance would be, with the exception of any interest paid but capitalized,
included as operating activities under US GAAP. The payment of any dividends
would be included under financing activities and any capitalized interest
would be included under investing activities for US GAAP purposes.
Additionally, under US GAAP cash flows from the purchase and sale of
tangible fixed assets and the sale of debt and equity investments would be
shown within investing activities.
(8) DISCLOSURES. In general, disclosures required under US GAAP are
more extensive than those required under UK GAAP. For example, under US GAAP
more detailed disclosures would be required with respect to share options
(details of all share option schemes and the fair value of share options
issued), financial instruments (fair value, terms, gains recognized), taxes
(details of the components of current and deferred income tax expenses and
deferred tax items, including valuation allowances), and equity (a statement
of changes in shareholders equity and associated rights).
10. SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related to
the Offer and the Merger is estimated to be approximately $64 million. The
Purchaser plans to obtain all funds needed for the Offer and the Merger through
a capital contribution which will be made by Parent to the Purchaser.
Parent intends to provide to the Purchaser the funds required to consummate
the Offer and the Merger by way of a Placing and Open Offer (the "Placing and
Open Offer") of 20,370,370 new ordinary 5 pence shares of Parent (the "New
Ordinary Shares") at 270 pence each, to raise approximately 52.5 million pounds
sterling (US $84 million). The New Ordinary Shares will be listed on the London
Stock Exchange, and will be issued to certain institutional investors and to
Parent's existing stockholders. The Placing and Open Offer is being fully
underwritten by Greig Middleton & Co. Limited ("Greig Middleton").
The Placing and Open Offer is conditional, inter alia, on the following:
(1) the prospectus (the "UK Prospectus") relating to the Placing and Open
Offer being approved by the London Stock Exchange and filed with the
Registrar of Companies in England and Wales by 4:00 p.m., London time, on
November 30, 1999 (the "Launch Date");
(2) the UK Prospectus, and associated documentation, being posted to
Parent's stockholders by 12:00 midnight, London time, on the Launch Date;
(3) the mailing of the Offer to Purchase, Letter of Transmittal, and other
relevant materials by the Purchaser to record holders of Shares and the
furnishing of such materials by the Purchaser to brokers, dealers, banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder, lists or, if applicable, who are
listed as participants in a clearing agency's security position listing,
for subsequent transmittal to beneficial owners of Shares, as set forth
in Section 1 of this Offer, by close of business in Colorado on
December 7, 1999;
(4) the approval and adoption of the Merger Agreement, the Merger and the
Placing and Open Offer by the requisite vote of the stockholders of
Parent by not later than December 23, 1999 or at any adjournment of such
extraordinary general meeting to a date not more than 5 business days
after December 23, 1999 at a duly convened extraordinary general meeting
("EGM") of
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Parent (this EGM has been convened for December 23, 1999 or at any
adjournment of such extraordinary general meeting to a date not more than
5 business days after December 23, 1999);
(5) Greig Middleton not having terminated the Placing Agreement (the
"Placing Agreement") between itself and Parent in accordance with its
terms prior to admission of the New Ordinary Shares to the London Stock
Exchange's Official List ("Admission"). Greig Middleton's rights to
terminate the Placing Agreement include the right to terminate in the
event of any material breach of the Placing Agreement (or the warranties
and indemnities contained in it) occurring before Admission becomes
effective;
(f) admission becoming effective by not later than January 11, 2000 (or such
later time as Parent and Greig Middleton may agree); and
(g) the filing of a Schedule 14D-1 with the Commission in connection with
the Offer.
11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER
LOAN AGREEMENT WITH THE COMPANY. Parent and the Company are parties to a
Loan Agreement dated November 30, 1999 (the "Loan Agreement"). Pursuant to the
terms and conditions set forth in the Loan Agreement, Parent has agreed to lend
to the Company on or before December 10, 1999 an amount not in excess of
$10,000,000 (the "Loan"). The Company shall use the proceeds of the Loan solely
to complete the purchase of 100% of the issued and outstanding capital stock of
Bridgestone Technologies, Inc. and 19.9% of the membership interests of two
associated limited liability companies, Label Systems Acquisition L.L.C. and
Keystone Technologies, L.L.C (the "Bridgestone Transaction"), pursuant to the
Stock Purchase Agreement executed between the Company, Keystone Technologies,
L.L.C., and Kenneth P. Felis, Michael J. Zubretsky, Richard Zucker and Timothy
Dolan, as sellers (the "Bridgestone Agreement"). Subject to acceleration of the
Loan in accordance with the terms of the Loan Agreement, the Loan shall be due
and payable in full in cash on the date (the "Maturity Date) which is the
earliest to occur of (1) December 31, 2000, or (2) any date specified in a
demand notice delivered by Parent to the Company; provided, that such date shall
not be earlier than six months from the date of such demand notice; provided
further, that such demand notice shall not be delivered to the Company prior to
the date of termination of the Merger Agreement, or (3) any date which may be
mutually agreed upon in writing by Parent and the Company. In the event the
Merger is not completed on or before the Maturity Date and the failure to
complete the Merger is not the result of Parent's stockholders failing to
approve the Merger or Parent failing to obtain the financing necessary to
complete the Merger, and so long as Parent has not materially breached any
agreement or other document in connection with the Merger, then a fee of
$1,700,000 shall be due from the Company to Parent on the Maturity Date. The
Loan shall be secured by liens (subject only to existing senior lender liens and
other mutually agreed upon liens) on all assets of the Company and its
subsidiaries located in the United States, whether now owned or hereafter
acquired, pursuant to the terms of the security documents to which the Company
or its subsidiaries located in the United States are a party.
STOCK OPTION AGREEMENT WITH THE COMPANY. Immediately after the execution of
the Merger Agreement, the Company executed and delivered a stock option
agreement, dated November 30, 1999 (the "Option Agreement"), pursuant to which
the Company granted to Parent an option to purchase Common Stock under the
conditions set forth below. The Option Agreement is intended to increase the
likelihood that the Merger will be consummated in accordance with the terms of
the Merger Agreement. Consequently, certain aspects of the Option Agreement may
have the effect of discouraging persons who might now or at any other time prior
to the completion of the Merger may be interested in acquiring all of or a
significant interest in the Company from considering or proposing an
acquisition, even if those persons were prepared to offer to pay consideration
to shareholders of the Company in excess of that proposed to be paid by Parent
pursuant to the Merger Agreement.
The Option Agreement provides for the purchase by Parent of up to 1,234,283
shares (the "Option Shares") of Common Stock, subject to certain anti-dilutive
adjustments, at an exercise price of $7.00 per
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share, payable in cash. The Option Shares will in no event exceed 19.9% of the
Common Stock issued and outstanding without giving effect to the issuance of any
Common Stock subject to the Option.
EXERCISE OF THE COMPANY OPTION. The Option will become exercisable, in
whole or in part, but only if both an Initial Triggering Event and a Subsequent
Triggering Event occur prior to an Exercise Termination Event. For purposes of
the Option Agreement:
(1) An "Initial Triggering Event" will occur if one of the following events
occurs:
(a) the Company, without Parent's prior written consent, enters into an
agreement to engage in, or the board of directors of the Company
recommends that shareholders of the Company approve or accept, an
Acquisition Transaction,
(b) the Company, without Parent's prior written consent, authorizes,
recommends, proposes or publicly announces its intention to
authorize, recommend or propose to engage in an Acquisition
Transaction, or the board of directors of the Company publicly
withdraws or modifies, or publicly announces its intention to
withdraw or modify, in any manner adverse to Parent, its
recommendation that its shareholders approve the Merger Agreement,
(c) the Company terminates the Merger Agreement after receipt of a
superior proposal from a third party,
(d) a third party acquires beneficial ownership, or the right to acquire
beneficial ownership, of 20% or more of the outstanding shares of
Common Stock,
(e) a third party makes a BONA FIDE proposal to the Company or its
shareholders by public announcement, or written communication that
becomes the subject of public disclosure, to engage in an Acquisition
Transaction, or
(f) the Company breaches any covenant or obligation in the Merger
Agreement after an overture is made by a third party to engage in an
Acquisition Transaction, and following the breach, Parent would be
entitled to terminate the Merger Agreement.
(2) As used above in (1), the term "Acquisition Transaction" means:
(a) a merger or consolidation, or any similar transaction with the
Company or any of its subsidiaries
(b) a purchase, lease or other acquisition or assumption of all or
substantially all of the assets of the Company or any of its
subsidiaries
(c) a purchase or other acquisition of securities representing 20% or
more of the voting power of the Company or any of the Company's
subsidiaries, or
(d) any transaction substantially similar to those described in (a) - (c)
above.
(3) A "Subsequent Triggering Event" will occur if either of the following
occurs:
(a) any person acquires beneficial ownership of 30% or more of the
then-outstanding shares of Common Stock; or
(b) the Initial Triggering Event described in clause (1)(a) occurs,
except that the percentage referred to in clause (2)(c) of the
definition of "Acquisition Transaction" set forth above is 30%.
(4) An "Exercise Termination Event" means the earliest of:
(a) the effective time of the Merger,
(b) termination of the Merger Agreement in accordance with its terms if
the termination occurs prior to the occurrence of an Initial
Triggering Event, except in the case of the termination of the Merger
Agreement by Parent as a result of an uncured material breach by the
Company of any of its representations, warranties, covenants or
agreements, or
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(c) the date that is 6 months after the termination of the Merger
Agreement.
REPURCHASE OF THE COMPANY OPTION. The Option Agreement also provides that
after the occurrence of a Repurchase Event (as defined below), upon request, the
Company will repurchase the Option and all or any part of the Option Shares
received upon the full or partial exercise of the Option from the holder of
those shares At the Company's option, however, instead of repurchasing the
Option and any Option Shares, the Company may choose to cause any Option Shares
to be registered with the SEC under the Securities Act of 1933, as amended. In
the event that the Company chooses this option, the Option and any Option Shares
will not be repurchased by the Company.
Any repurchase of the Option will be made at an aggregate price equal to the
amount by which the Market/Offer Price (as defined below) exceeds the option
price multiplied by the number of shares then subject to the Option. A
repurchase of any shares received upon exercise of the Option will be made at an
aggregate price equal to the Market/Offer Price multiplied by the number of
shares to be repurchased.
The term "Market/Offer Price" means the highest of the following:
(1) the price per share at which a tender or exchange offer has been made
for the Common Stock,
(2) the price per share of the Common Stock that any third party is to pay
pursuant to an agreement with the Company,
(3) the highest closing price per share of the Common Stock within the
six-month period immediately preceding the date that notice to repurchase
is given, or
(4) if there is a sale of all or a substantial portion of the Company's
assets, the sum of the price paid for those assets and the current market
value of the remaining assets (as determined by a nationally recognized
investment banking firm), divided by the number of shares of the Common
Stock outstanding at the time of such sale.
The term "Repurchase Event" is defined in the Option Agreement to mean
(1) the acquisition by any third party of beneficial ownership of 50% or more of
the outstanding shares of Common Stock or (2) the consummation of a merger,
consolidation or similar transaction involving the Company or any purchase,
lease or other acquisition of all or a substantial portion of the assets of the
Company unless the transaction would not constitute an Acquisition Transaction,
in either case provided that a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event.
TOTAL PROFIT. The total profit that Parent may realize with regard to the
exercise of the Option may not exceed $1.5 million. "Total profit" is defined to
mean the aggregate (before taxes) of:
(1) any amount received by Parent pursuant to the Company's repurchase of
the Option,
(2) any amount received by Parent pursuant to the Company's repurchase of
the Option Shares (less the purchase price for those Option Shares),
(3) any net cash received pursuant to the sale of Option Shares to any
unaffiliated party (less Parent's purchase price of those Option Shares),
and
(4) any amounts received by Parent on transfer of the Option or any portion
of the Option to any unaffiliated party.
STOCKHOLDER AGREEMENTS WITH CERTAIN STOCKHOLDERS OF THE
COMPANY. Concurrently with the execution of the Merger Agreement, the
directors, certain executive officers, and certain stockholders of the Company,
Mark Bar, Linda Bar, Richard Bard, Philena Enterprises, Yoram Curiel, Martin T.
Hart, Hunt Capital Group, LLC, Richard Lamm, Dorothy Lamm, Heather Lamm, Scott
Lamm, Bruce Raben, and Mark Turnage each entered into a voting agreement with
the Company under which these individuals and entities agreed to:
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(1) vote all of the shares of Common Stock owned, controlled by or
subsequently acquired by that director or executive officer in favor of
the Merger, the Merger Agreement and the transactions contemplated by the
Merger Agreement.
(2) vote all of the shares of Common Stock owned, controlled by or
subsequently acquired by that director or executive officer against any
other Merger Agreement or merger, consolidation, combination, sale of
substantial assets, reorganization, dissolution, liquidation or winding
up of the affairs of the Company or the adoption of amendments to the
Company's charter documents which would frustrate or impede the Merger.
In addition, with respect to all shares owned of record and all shares
acquired by these directors and executive officers at any time prior to the
effective time of the Merger, each signing stockholder has appointed Parent as
their irrevocable proxy and lawful attorney to vote their shares in favor of the
Merger and the Merger Agreement and against any other Merger or combination
proposal. The stockholder agreements terminate upon the earlier of the
termination of the Merger Agreement or the effective time of the Merger.
The stockholder agreements also provide that each stockholder will accept
the all cash offer of $7.00 per share made by Parent in accordance with the
Offer and will not withdraw such acceptance, so long as either (1) holders of at
least a majority of the Shares have agreed to accept the cash offer in
accordance with the Offer, or (2) Parent has not terminated the Offer or
permitted the Offer to lapse in accordance with its terms. For purposes of
determining whether the condition in subclause (1) above is satisfied, each
stockholder's shares are to be included in the shares, the holders of which have
accepted the cash offer in accordance with the Offer.
The stockholder agreements also prohibit each signing stockholder from
soliciting additional acquisition proposals from third parties on behalf of the
Company or from engaging in any discussions with third parties regarding any
acquisition proposal.
As of November 29, 1999, these directors, executive officers and other
individuals beneficially owned an aggregate of 2,185,406 shares of Common Stock,
which represented approximately 35.2% of the Shares outstanding on that date.
MERGER NEGOTIATIONS WITH THE COMPANY. In February 1997, Parent and the
Company commenced initial discussions regarding a possible merger of their
business. The parties terminated these discussions soon thereafter after little
progress was made. Parent and the Company made intermittent contacts with each
other between February 1997 and August 1999, including the execution of a
confidentiality agreement on February 17, 1998, but did not undertake any
further material discussions regarding a potential merger.
On August 11, 1999, representatives of Parent and the Company met in New
York to discuss a possible merger. At this meeting, the parties also discussed
the Company's planned acquisition of Bridgestone and the Company's source of
financing for the acquisition.
On August 24, 1999, the representatives of Parent and the Company met a
second time in New York to discuss the terms of a possible merger. Over the next
two weeks representatives of Parent and the Company spoke intermittently via the
telephone to further discuss possible terms of a merger.
On September 7, 1999, Parent sent a letter to the Company proposing a
merger, subject to further negotiations, definitive documentation and due
diligence.
On October 4, 1999, Parent sent a follow up letter with further terms of a
potential transaction.
On October 11, 1999, the Company and Parent executed an additional
confidentiality agreement with Parent.
On October 13, 1999, representatives of Parent and the Company met in
Denver, Colorado to further discuss the terms of a possible transaction.
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On October 21, 1999, Parent sent a further letter to the Company with terms
of a proposed transaction.
On October 27, 1999, representatives of Parent and the Company, together
with various financial, legal and accounting advisers, met in London to discuss
the terms of a potential transaction including the form of consideration, the
structure of the transaction and other material items relating to the
transaction.
On November 11, 1999, Parent and the Company executed a non-binding letter
of intent regarding the proposed transaction. The parties negotiated the
definitive documentation for the Merger over the following two weeks.
On November 29, 1999, the board of directors of the Company held a meeting
to consider the Offer, the Merger and the Merger Agreement. At the meeting, the
board of directors of the Company heard presentations by its legal counsel with
respect to the terms of the proposed offer, the Merger and the Merger Agreement,
and legal counsel advised the board of directors that the negotiations for the
Merger Agreement were substantially complete.
At the November 29, 1999 meeting of the board of directors of the Company,
representatives of Wasserstein Perella delivered Wasserstein Perella's oral
opinion that, subject to and based upon the matters described in the opinion, as
of the date of the Merger Agreement, the $7.00 in cash per Share to be paid to
the holders of Shares, pursuant to the Offer and the Merger was fair to such
stockholders from a financial point of view. Wasserstein Perella subsequently
delivered a written opinion, dated the date of the Merger Agreement, to the same
effect.
On November 30, 1999, Parent, the Purchaser and the Company executed and
delivered the Merger Agreement.
Based upon such discussion, presentations and opinion, the board of
directors of the Company has unanimously approved the Merger and determined that
the terms of the Offer and the Merger are fair to, and in the best interests of,
the stockholders of the Company and unanimously recommends that stockholders of
the Company accept the Offer and tender their Shares to the Purchaser pursuant
to the terms of the Offer.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT
PURPOSE OF THE OFFER. The purpose of the Offer is to enable Parent to
acquire control of, and the entire equity interest in, the Company. Following
the consummation of the Offer, the Purchaser and Parent intend to acquire any
remaining equity interest in the Company not acquired in the Offer by
consummating the Merger. The Offer is subject to certain terms and conditions.
Notwithstanding anything to the contrary set forth in this Offer to Purchase,
any determination concerning the satisfaction of such terms and conditions will
be within the reasonable discretion of the Purchaser.
THE MERGER AGREEMENT. The Merger Agreement provides that following the
satisfaction or waiver of the conditions described below under "Conditions to
the Merger," the Purchaser will be merged with and into the Company, and each
then outstanding Share (other than Shares (1) owned or held in treasury by the
Company, (2) owned by the Purchaser or Parent, (3) remaining outstanding held by
any subsidiary of the Company or Parent or (4) owned by stockholders, if any,
who are entitled to and who properly exercise dissenters' rights under Colorado
law), will be converted into the right to receive an amount in cash, without
interest, equal to the price per Share paid pursuant to the Offer. Shares
described in (1), (2) and (3) of this paragraph will be cancelled without the
payment of any consideration.
VOTE REQUIRED TO APPROVE THE MERGER. The CBCA requires, among other things,
that the adoption of any plan of Merger or consolidation of the Company must be
approved by the board of directors of the Company and, if the "short form"
Merger procedure described below is not available, by the holders of a majority
of the Company's outstanding Shares. The board of directors of the Company has
approved the Offer, the Merger and the Merger Agreement; consequently, the only
additional corporate action of the Company that may be necessary to effect the
Merger is approval by such stockholders if the "short-form"
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Merger procedure described below is not available. Under the CBCA, the
affirmative vote of holders of a majority of the outstanding Shares (including
any Shares owned by the Purchaser), is generally required to approve the Merger.
In addition, holders of Company preferred stock will also have the right to vote
on the Merger, on the same basis as the holders of the Shares. If the Purchaser
acquires, through the Offer or otherwise, voting power with respect to at least
a majority of the outstanding Shares (which would be the case if the Minimum
Condition were satisfied and the Purchaser were to accept for payment Shares
tendered pursuant to the Offer), it would have sufficient voting power to effect
the Merger without the vote of any other stockholder of the Company. The CBCA
also provides, however, that if a parent company owns at least 90% of each class
of stock of a subsidiary, the parent company can effect a "short-form" merger
with that subsidiary without the action of the other stockholders of the
subsidiary. Accordingly, if, as a result of the Offer or otherwise, the
Purchaser acquires or controls the voting power of at least 90% of the
outstanding Shares, the Purchaser could (and, under the Merger Agreement, is
required to) effect the Merger using the "short-form" merger procedures without
prior notice to, or any action by, any other stockholder of the Company.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the respective
obligations of Parent, the Purchaser and the Company to effect the Merger are
subject to the fulfillment at or prior to the effective time of the Merger of
each of the following conditions: (1) other than as described above with respect
to the "short-form merger procedures" the Offer, the Merger Agreement and the
Merger shall have been approved and adopted by the requisite vote of the
stockholders of the Company in accordance with the CBCA, (2) the Merger
Agreement, the Merger and the Placing and Open Offer shall have been approved
and adopted by the requisite vote of the stockholders of Parent in accordance
with the Listing Rules of London Stock Exchange Limited and (3) no temporary
restraining order, preliminary or permanent injunction, judgment or other order,
decree or ruling nor any statute, rule, regulation or order shall be in effect
which prevents the consummation of the Merger.
The obligations of Parent and Purchaser to consummate the Merger are also
subject to the satisfaction at or prior to the effective time of the Merger of
the following conditions (unless any such condition is waived in writing by
Parent or the Purchaser):
(1) the representations and warranties of the Company set forth in the
Merger Agreement shall be true and correct in all material respects (without
giving duplicative effect to any materiality qualification contained in the
applicable representation or warranty) as of the effective time of the Merger
with the same force and effect as though made again at and as of the effective
time of the Merger, except for any representations and warranties that address
matters only as of a particular date (which shall remain true and correct in all
material respects (without giving duplicative effect to any materiality
qualification contained in the applicable representation or warranty) as of such
date) and Parent shall have received a certificate from the Company's chief
executive officer and chief financial officer to that effect;
(2) the Company shall have performed in all material respects all
obligations required to be performed by the Company under the Merger Agreement
at or prior to the effective time of the Merger and Parent shall have received a
certificate from the Company's chief executive officer and chief financial
officer to that effect;
(3) there shall not have occurred any change in the business, assets,
prospects, financial condition or results of operations of the Company or any of
its subsidiaries which has had, or is reasonably likely to have, individually or
in the aggregate, a change or effect that is, in the reasonable judgement of
Parent, materially adverse to the business, assets, prospects, financial
condition, results of operations or condition of the Company and its
subsidiaries taken as a whole (a "Material Adverse Effect");
(4) the Company shall have received all necessary consents or waivers to the
Merger, in form and substance satisfactory to Parent, from the other parties to
each contract, lease or agreement to which the Company is a party, except where
the failure to obtain such consent or waiver would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect;
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(5) the consummation of the Bridgestone Transaction on terms substantially
in accordance with the terms of the Bridgestone Agreement;
(6) the receipt by Parent of sufficient funds from the Placing and Open
Offer to fund its obligations under the Merger Agreement; and
(7) the admittance of the New Ordinary Shares to the Official List of the
London Stock Exchange, subject to notice of admittance.
The obligations of the Company to consummate the Merger are also subject to
the satisfaction at or prior to the effective time of the Merger of the
following conditions (unless any such condition is waived in writing by the
Company):
(1) the representations and warranties of Parent set forth in the Merger
Agreement shall be true and correct in all material respects (without giving
duplicative effect to any materiality qualification contained in the applicable
representation or warranty) as of the effective date of the Merger with the same
force and effect as though made again at and as of the effective date of the
Merger, except for any representations and warranties that address matters only
as of a particular date (which shall remain true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of such date) and the
Company shall have received a certificate to that effect from Parent's chief
executive officer and chief financial officer and
(2) Parent shall have performed in all material respects all obligations
required to be performed by it under the Merger Agreement at or prior to the
effective time of the Merger and the Company shall have received a certificate
to that effect from Parent's chief executive officer and chief financial
officer.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the effective time of the Merger, whether before or after
approval and adoption of the Merger Agreement by the stockholders of the
Company:
(1) by mutual agreement of the boards of directors of Parent and the
Company;
(2) by Parent or the Company if (a) any court of competent jurisdiction in
the United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree or ruling or other
action has become final and nonappealable, (b) there has been a material breach
by the other party of any representation, warranty, covenant or agreement set
forth in the Merger Agreement or the Option Agreement that is not capable of
being cured, (c) the stockholders of Parent shall fail to approve the Merger and
the Placing and Open Offer, or (d) the stockholders of the Company shall fail to
approve the Merger;
(3) by Parent, if (a) the Company or any of its directors or officers shall
participate in discussions or negotiations in breach of the covenants of the
Company described under "No Solicitation by the Company; Acquisition Proposals"
in this Section 12, (b) the board of directors of the Company approves or
recommends an acquisition proposal by a third party (other than Parent) or
withdraws or modifies in a manner adverse to Parent its recommendation that
stockholders of the Company approve the Merger or (c) the Company shall have
failed to mail a proxy statement to the stockholders in connection with the
approval of the Merger by the shareholders of the Company or failed to include
in such proxy statement its recommendation of the Merger Agreement and the
transactions contemplated thereby;
(4) by Parent prior to the purchase of the Shares pursuant to the Offer, in
the event of a breach or failure to perform by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement which (a) would give rise to the failure of a condition set forth in
the Stockholder Agreements and (b) cannot be cured, or has not been cured within
15 days after the Company receives written notice from Parent of such breach or
failure to perform;
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(5) by Parent if the Placing and Open Offer or the Placing Agreement shall
have been terminated without Parent having received the proceeds of the Placing
and Open Offer or any alternative financing;
(6) by Parent if Parent permits the Offer to lapse in accordance with its
terms or Parent or the Purchaser terminates the Offer without the purchase of
the Shares by the Purchaser in accordance with the conditions to the Offer;
(7) by the Company if in response to an acquisition proposal which
constitutes a Superior Proposal (as defined in "No Solicitation by the Company;
Acquisition Proposals" in this Section 12 below) which was not solicited by the
Company and which did not otherwise result from a breach of the covenants of the
Company described under "No Solicitation by the Company; Acquisition Proposals"
in this Section 12, if, in effecting such termination, the Seller complies with
the relevant provisions of the Merger Agreement; or
(8) by either Parent or the Company, in the event the effective time of the
Merger has not occurred by the latest to occur of (a) March 31, 2000 or
(b) 60 days after the clearance by the Commission of the proxy statement issued
in connection with approval of the Merger by the shareholders of the Company
(with such date, as it may thereafter be extended by mutual written agreement of
Parent and the Company,
NO SOLICITATION BY THE COMPANY; ACQUISITION PROPOSALS. The Merger Agreement
provides that the Company will not, nor will it permit any of it subsidiaries
to, nor will it authorize or permit any of its, directors, officers or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly, (1) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any inquiries or
the making of any proposal which constitutes an Acquisition Proposal (as defined
below) or (2) participate in any discussions or negotiations regarding any
Acquisition Proposal. Notwithstanding the foregoing, if the board of directors
of the Company determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law, the Company, in
response to a Superior Proposal (as defined below) which was not solicited by it
or which did not result from a breach by the Company of its non-solicitation
obligations, and subject to compliance with the Merger Agreement, may furnish
information with respect to the Company and its subsidiaries to any person
making a Superior Proposal pursuant to a confidentiality agreement on terms no
less favorable than the confidentiality agreement between the Company and Parent
and participate in discussions or negotiations regarding such Superior Proposal.
For purposes of the Merger Agreement, an "Acquisition Proposal" means any
inquiry, proposal or offer from any person (1) relating to any direct or
indirect acquisition or purchase of (a) a business that constitutes 15% or more
of the net revenues, net income or the assets of the Company and its
subsidiaries, taken as a whole, (b) 20% or more of any class of equity
securities of the Company or (c) any material equity interest in any subsidiary
of the Company, (2) relating to any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any material equity interest in any
of its subsidiaries, or (3) relating to any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by the Merger Agreement.
For purposes of the Merger Agreement, "Superior Proposal" means any proposal
made by a third party to acquire, directly or indirectly, including pursuant to
a tender offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the Shares then outstanding or all or substantially all
the assets of the Company and otherwise on terms which the board of directors of
the Company determines in its good faith judgment is reasonably likely to be
consummated, taking into account the person making the proposal and all legal,
financial and regulatory aspects of the proposal, and would provide greater
value to the stockholders of the Company than the Merger.
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The Merger Agreement provides further that neither the board of directors of
the Company nor any committee thereof may (1) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such board of directors or such committee of the Offer, the
Merger or the Merger Agreement, (2) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal or (3) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Acquisition Proposal other than any such
agreement entered into concurrently with the termination of the Merger Agreement
by the Company to facilitate such action. See "Termination of the Merger
Agreement" in this Section 12.
The Merger Agreement provides that the Company must promptly advise Parent
orally and in writing of any Acquisition Proposal or any request for any
non-public information by any person which the Company reasonably believes is in
connection with the preparation of an Acquisition Proposal, the material terms
and conditions of the Acquisition Proposal or the information requested by the
person making the request and the identity of the person making the Acquisition
Proposal or request for information. The Company must promptly inform Parent of
any change in the status and material terms and conditions (including amendments
or proposed amendments) of any such Acquisition Proposal or request for
information.
FEES AND EXPENSES; TERMINATION FEE. The Merger Agreement provides that all
fees and expenses incurred in connection with the Offer, the Merger, the Merger
Agreement and the transactions contemplated by the Merger Agreement will be paid
by the party incurring such fees or expenses, whether or not the Offer or the
Merger is consummated.
The Merger Agreement provides that the Company shall pay $300,000 to Parent,
within three business days after termination of the Merger Agreement by Parent
or the Company, as applicable, in the event that:
(1) there has been a material breach by the Company of any representation,
warranty, covenant or agreement set forth in this agreement which was not cured
prior to the effective time of the Merger;
(2) the stockholders of the Company shall fail to approve the Offer and the
Merger at the Company Stockholder Meeting;
(3) the Company or any of its directors or officers shall participate, or
have publicly resolved to participate, in discussions or negotiations in breach
of the Company's covenants described under "No Solicitation by the Company;
Acquisition Proposals" in this Section 12;
(4) the board of directors of the Company shall have approved or
recommended, or have publicly resolved to approve or recommend, an Acquisition
Proposal by a third party or withdrawn or modified its approval or
recommendation of the Merger Agreement or the transactions contemplated thereby
in a manner adverse to Parent or Purchaser;
(5) the Company failed to mail the proxy statement regarding the Merger to
its stockholders or failed to include in such proxy statement the recommendation
that the stockholders of Company vote in favor of the Merger;
(6) the Company, prior to the purchase of Shares pursuant to the Offer, has
failed to perform any representation, warranty, covenant or other agreement
contained in the Merger Agreement which (a) would give rise to the failure of a
condition set forth in any of the stockholder agreements executed by certain
stockholders of the Company in connection with the Offer and the Merger and
(b) cannot be cured, or has not been cured within 15 days after the Company
receives written notice from Parent or Purchaser of such breach or failure to
perform; or
(7) the Company terminates the Merger Agreement in response to a Superior
Proposal which was not solicited by the Company and which does not otherwise
result from a breach of the non-solicitation or
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other covenants of the Company described above under "No Solicitation by the
Company; Acquisition Proposals" in this Section 12.
The Merger Agreement also provides that Parent shall pay $300,000 to the
Company, within three business days after termination of the Merger Agreement by
Parent or the Company, as applicable, in the event that:
(1) the stockholders of Parent shall fail to approve the Merger and the
Placing and Open Offer at the EGM of Parent; or
(2) the Placing and Open Offer or the Placing Agreement shall have been
terminated without Parent having received the proceeds of the Placing and
Open Offer or any alternative financing.
CONDUCT OF THE BUSINESS OF THE COMPANY. The Merger Agreement provides that
unless provided for in the Merger Agreement or approved by Parent in writing,
from the date of the Merger Agreement until the consummation of the Merger, the
Company will not (and will cause each of its Subsidiaries to not):
(1) amend its articles of incorporation or other charter document or
by-laws;
(2) authorize for issuance, issue, sell, deliver, pledge or agree or commit
to issue, sell, deliver or pledge (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any capital stock of any class or any debt or other securities convertible into
capital stock or equivalents (including, without limitation, stock appreciation
rights), or amend any of the terms of any of the foregoing, other than the
issuance of shares of capital stock upon the exercise of outstanding options or
rights in accordance with the terms of the Company's Incentive Stock Option
Plan, Nonqualified Stock Option Plan and Stock Bonus Plan (collectively, the
"Company Equity Plans") as the case may be;
(3) (a) split, combine or reclassify any shares of its capital stock, or
authorize or propose the issuance or authorization of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
adopt or approve any stockholder rights plan providing for the issuance to
holders of shares of Common Stock or preferred stock of the Company of rights to
purchase or receive stock, cash or other assets upon the acquisition or proposed
acquisition of Common Stock or preferred stock of the Company, or repurchase,
redeem or otherwise acquire any of its securities or any securities of its
subsidiaries, or (b) make any payment of cash or other property to terminate,
cancel or otherwise settle any outstanding options, other than in the case of
clauses (a) or (b) above for the issuance of shares of Common Stock in
connection with the exercise of options or rights under the Company Equity
Plans;
(4) (a) incur or assume any long-term indebtedness or increase any amounts
outstanding under long-term credit facilities existing as of the date of the
Merger Agreement or grant, extend or increase the amount of a mortgage lien on
any leasehold or fee simple interest of the Company or its subsidiaries; or,
except in the ordinary course of business consistent with past practice in the
case of clauses (a) through (f) below, (b) incur or assume any short-term debt
or increase amounts outstanding under short-term credit facilities existing as
of September 30, 1999, (c) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other entity or individual, except for obligations of the Company or any
subsidiary of the Company, (d) make any loans, advances or capital contributions
to, or investments in, any other entity or individual, (e) pledge or otherwise
encumber shares of capital stock of the Company or any of its subsidiaries, or
(f) mortgage or pledge any of its assets, tangible or intangible, or create or
suffer to exist any lien thereon except as existing on the date of the Merger
Agreement or as may be required under agreements outstanding on the date of the
Merger Agreement to which the Company or any of its subsidiaries are parties;
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(5) except as expressly provided in the Merger Agreement, enter into, adopt
or amend in any manner or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance, change-in-control or
other employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee, or increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or arrangement as in effect as of
the date of the Merger Agreement or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(6) sell, lease, license, pledge or otherwise dispose of or encumber any
material assets except in the ordinary course of business consistent with past
practice (including without limitation any indebtedness owed to it or any claims
held by it);
(7) except in connection with the Bridgestone Agreement, acquire or agree to
acquire by merging or consolidating with or by purchasing any portion of the
capital stock or assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, association or other
business organization or division thereof, other than in the ordinary course of
business consistent with past practice;
(8) change any of the accounting principles or practices used by it
affecting its assets, liabilities or business, except for such changes required
by a change in generally accepted accounting principles;
(9) pay, discharge or satisfy any claims, liabilities or obligations
(whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise), other than the payment, discharge or satisfaction of liabilities
(a) in the ordinary course of business consistent with past practices, (b) with
notice to Buyer, in an amount which does not exceed $25,000 in the aggregate,
(c) incurred pursuant to the terms of the engagement letter agreement between
the Company and Wasserstein Perella, dated October 1, 1999 in an amount not to
exceed $1,250,000, plus expenses, or (d) incurred in connection with the
transactions contemplated by Offer and the Merger Agreement, not to exceed the
amounts described in a schedule attached to the Merger Agreement;
(10) except as required by their terms, enter into, terminate or breach (or
take or fail to take any action, that, with or without notice or lapse of time
or both, would become a breach) or materially amend any contract which is or
would be a material agreement, as defined in the Merger Agreement;
(11) without prior consultation with Parent or the Purchaser (in addition to
the consent requirement described above) commence any litigation or arbitration
other than in accordance with past practice or settle any litigation or
arbitration for money damages or other relief in excess of $50,000 or if as part
of such settlement the Company or any subsidiary would agree to any restrictions
on its operations;
(12) grant any license with respect to or otherwise convey any intellectual
property of the Company;
(13) elect or appoint any new directors or officers of the Company or any
subsidiary;
(14) waive, release or amend its rights under any confidentiality,
"standstill" or similar agreement that the Company entered into in connection
with its consideration of a potential strategic transaction; provided, however,
that the Company may waive, release or amend its rights under any such
confidentiality, "standstill" or similar agreement if the Company's board of
directors determines, based on the advice of independent legal counsel that
failure to do so would be reasonably likely to constitute a breach of its
fiduciary duties to the Company's stockholders under applicable law;
(15) make or change any election, request permission of any tax authority or
to change any accounting method, file any amended federal, state, local, foreign
or other tax return, enter into any closing agreement, settle any federal,
state, local, foreign or other tax claim or assessment relating to the Company
or its subsidiaries, surrender any right to claim a refund of federal, state,
local, foreign, or other
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taxes, or consent to any extension or waiver of the limitation period applicable
to any federal, state, local, foreign or other tax claim or assessment relating
to the Company or its subsidiaries;
(16) settle or comprise any pending or threatened suit, action or claim
which is material or which relates to any of the transactions contemplated by
the Merger Agreement;
(17) take any action that would reasonably be expected to result in (a) any
of the representations and warranties of the Company set forth in the Merger
Agreement becoming untrue or (b) any of the conditions of the Offer not being
satisfied;
(18) amend, modify or otherwise change of any of the terms and conditions
set forth in the Bridgestone Agreement; or
(19) take, or agree in writing or otherwise to take, any of the actions
described in sub-paragraphs (1) through (18) listed above.
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment for, Shares by the Purchaser pursuant to
the Offer, the Purchaser will be entitled to designate such number of directors
on the board of directors of the Company as will give the Purchaser, subject to
compliance with Section 14(f) of the Exchange Act, representation on the
Company's board of directors equal to the product of (1) the total number of
directors on the Company's board of directors and (2) the percentage that the
number of Shares purchased by the Purchaser in the Offer bears to the number of
Shares outstanding, and the Company will, at such time, cause the Purchaser's
designees to be selected by its existing board of directors. Subject to
applicable law, the Company has agreed to take all action requested by Parent
necessary to effect any such election, including mailing to its stockholders the
Information Statement containing the information required by Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder. The Merger Agreement
further provides that in the event that the Purchaser's designees are elected to
the board of directors of the Company, until the effective time of the Merger,
the board of directors of the Company will have at least two independent
directors who were directors on the date of the Merger Agreement and who are not
officers of the Company or any of its subsidiaries. The Merger Agreement also
provides that the Company will promptly, at the option of Parent, either
increase the size of the Company's board of directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
the Purchaser's designees to be elected or appointed to, and to constitute a
majority of, the Company's board of directors as provided above.
STOCK OPTIONS. The Merger Agreement provides that prior to the effective
time of the Merger, the Company shall to terminate the Company Equity Plans and
shall provide written notice to each holder of a then outstanding option to
purchase shares of Common Stock pursuant to the Company Equity Plans (whether or
not such option is then vested or exercisable), that such option shall be
exercisable in full as of the date of such notice and that such option shall
terminate at the effective time of the Merger and that, if such option is not
exercised or otherwise terminated before the effective time of the Merger, such
holder shall be entitled to receive in cancellation of such option a cash
payment from Parent promptly after the effective time of the Merger, in an
amount equal to the excess, if any, by which the Offer Price exceeds the
exercise price per share with respect to such option multiplied by the number of
shares represented by such option immediately prior to such cancellation,
subject to income tax withholding as required by applicable law.
WARRANTS. The Merger Agreement also provides that, prior to the effective
time of the Merger, the Company shall use its commercially reasonable efforts to
receive from each holder of an outstanding warrant to purchase shares of Common
Stock an agreement that, as of the effective time of the Merger, such warrant
shall be converted into a right of such holder to receive from Parent promptly
after the effective time of the Merger an amount in cash, without interest equal
to the product of (1) the number of shares of Common Stock subject to such
warrant immediately prior to the effective time of the Merger and
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(2) the excess, if any, by which the Offer Price exceeds the exercise price per
share that was applicable with respect to such warrant.
DEBENTURES. The Merger Agreement further provides that, prior to the
effective time of the Merger, the Company shall use its commercially reasonable
efforts to receive from each holder of an outstanding debenture issued by the
Company an agreement that, simultaneously with the consummation of the Merger
and at the effective time of the Merger, the debenture then held by it shall,
automatically and without further action by the holder of the debenture, be
cancelled and deemed to be paid-in-full. Promptly after the effective time of
the Merger. Parent shall pay to each holder of a debenture with a strike price
of $6.00 who shall have entered into an agreement with the Company for the
cancellation of such holder's debenture, an amount in cash equal to 116.67% of
such debenture holders' pro-rata share of the outstanding principal amount of
such class of debenture, together with accrued interest thereon as provided in
the applicable debentures. The maximum aggregate consideration payable to the
holders of debentures with a strike price of $6.00 by Parent, assuming that all
such holders enter into agreements with the Company for the cancellation of
their debentures, shall be $583,350. In addition, promptly after the effective
time of the Merger, Parent shall pay to each holder of a debenture with a strike
price of $6.50 who shall have entered into an agreement with the Company for the
cancellation of such holder's debenture, an amount in cash equal to 109% of such
debenture holders' pro-rata share of the outstanding principal amount of such
class of debenture, together with accrued interest thereon as provided in the
applicable debentures. The maximum aggregate consideration payable to the
holders of debentures with a strike price of $6.50 by Parent, assuming that all
such holders enter into agreements with the Company for the cancellation of
their debentures, shall be $3,019,300. From and after the effective time of the
Merger, none of Parent, Purchaser or the Company shall have any liability or
obligation of any kind whatsoever under debentures with respect to which the
holder shall have received payment as described herein.
EMPLOYEE MATTERS. The Merger Agreement provides that from and after the
Merger, Parent will cause the Surviving Corporation to provide, employee benefit
plans, programs and arrangements to employees of the Company which are in the
aggregate at least as favorable as those maintained by the Company today.
The Merger Agreement also provides that with respect to each benefit plan,
program practice, policy or arrangement maintained by the Surviving Corporation
in which employees of the Company subsequently participate, for purposes of
determining vesting and entitlement to benefits, including for severance
benefits and vacation entitlement (but not for accrual of pension benefits),
service with the Company (or predecessor employers to the extent the Company
provides past service credit) will be treated as service with the Surviving
Corporation.
As described in the Company's most recent proxy statement dated November 2,
1999, the Company is party to an amended employment agreement with Richard H.
Bard, Chairman and Chief Executive Officer of the Company. Under the terms of
his employment agreement, Mr. Bard is entitled to certain benefits in the event
of an acquisition of the Company. In connection with the execution of the Merger
Agreement, the Company and Mr. Bard entered into an amendment to his employment
agreement.
Under the amendment executed by the Company and Mr. Bard dated as of
November 30, 1999 (the "Amendment"), Mr. Bard's employment with the Company will
terminate on the later to occur of the effective time of the Merger and January
31, 2000. In addition, the Company has agreed to pay to Mr. Bard bonuses for
past service to the Company for the years 1997, 1998 and 1999 in the amounts of
$160,000, $200,000 and $240,000, respectively. Furthermore, in the Amendment,
Mr. Bard has agreed that the provisions of his employment agreement which
provide for a payment upon termination of 1.5 times the present value of the
salary and other benefits for the remaining term (currently through March 31,
2006) of the agreement are to be deleted.
In addition to the foregoing, in the Merger Agreement, Parent has agreed to
pay to Mr. Bard following the effective time of the Merger an amount in cash
equal to $3,500,000 in full satisfaction of
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certain rights of Mr. Bard under his employment agreement to receive 500,000
shares of Common Stock upon a merger or acquisition of the Company and certain
other rights to which he is entitled under his employment upon a termination of
his employment with the Company. Furthermore, Parent has also agreed in the
Merger Agreement to pay to Mr. Bard $250,000 in full satisfaction of his options
to acquire 147,000 shares of Common Stock.
After the consummation of the Merger, Mark Turnage, the current President
and Chief Operating Officer of the Company, will (1) assume primary
responsibility for the United States operations of the Surviving Corporation and
be entitled to an annual salary of $200,000, (2) join the board of directors of
Parent and the Surviving Corporation, pending the requisite shareholder
approval, (3) be entitled to participate in a bonus plan, receive certain
pension contributions (to be agreed) and to benefit from a company car and
private medical health insurance cover, and (4) become entitled to receive
payments of bonuses from the Company in respect of prior years' service in the
amount of approximately $390,000, and an additional bonus of approximately
$110,000. Mr. Turnage has agreed to invest such payment in New Ordinary Shares
at their issue price and to retain such shares for a minimum period of one year.
INDEMNIFICATION. From and after the consummation of the Merger and for a
period of six years thereafter, Parent will, or will cause the Surviving
Corporation to, fulfill and honor in all respects the obligations of the Company
to indemnify each person who is or was a director or officer (an "Indemnified
Party") of the Company or any of its subsidiaries pursuant to any
indemnification provision of the Company's articles of incorporation or by-laws
as each is in effect on the date of the Merger Agreement. In addition, for a
period of six years after the Merger, the Surviving Corporation will not amend
or reduce the rights to indemnification provided in the articles of
incorporation of the Company. Furthermore, the Merger Agreement provides that,
for a period of three years after the consummation of the Merger, Parent shall
cause to be maintained in effect the current officers' and directors' liability
insurance maintained by the Company with respect to the Indemnified Parties to
the extent that it provides coverage for events occurring prior to the
consummation of the Merger for all persons who are directors and officers of
Seller on the date of the Merger Agreement, so long as such insurance is
available on commercially reasonable terms and the annual premium for such
liability insurance would not be in excess of 200% of the last annual premium
paid prior to the date of the Merger Agreement If the existing officers' and
directors' liability insurance expires, is terminated or cancelled during such
three-year period, Parent will use all reasonable efforts to cause to be
obtained as much officers' and directors' liability insurance as can be obtained
for the remainder of such period for an annualized premium as provided in the
Merger Agreement and on terms and conditions no less advantageous than the
existing officers' and directors' liability insurance.
COMMERCIALLY REASONABLE EFFORTS. Upon the terms and subject to the
conditions set forth in the Merger Agreement, Parent, the Purchaser and the
Company have each agreed to use its commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with each other in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer, the Merger and the other transactions contemplated by
the Merger Agreement, including (1) the taking of all reasonable acts necessary
to cause the conditions of the Offer to be satisfied, (2) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals from
governmental entities and the making of all necessary registrations and filings
and the taking of all steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any governmental entity, (3) the
obtaining of all necessary consents, approvals or waivers from third parties,
(4) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging the Merger Agreement or the consummation of the
transactions contemplated by the Merger Agreement, including seeking to have any
stay or temporary restraining order entered by any court or other governmental
entity vacated or reversed, and (5) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, the Merger Agreement. In connection with and
without limiting the foregoing, but subject
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to the terms and conditions of the Merger Agreement, the Company and its board
of directors will (1) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Offer,
the Merger, the Merger Agreement or any of the other transactions contemplated
by the Merger Agreement, and (2) if any state takeover statute or similar
statute or regulation becomes applicable to the Offer, the Merger, the Merger
Agreement or any other transaction contemplated by the Merger Agreement, take
all action necessary to ensure that the Offer, the Merger, the Merger Agreement
and the other transactions contemplated by the Merger Agreement may be
consummated as promptly as practicable on the terms contemplated by the Offer
and the Merger Agreement and otherwise to minimize the effect of such statute or
regulation on the Offer, the Merger, the Merger Agreement and the other
transactions contemplated by the Merger Agreement.
The Merger Agreement further provides that the Company will give prompt
notice to Parent, and Parent will give prompt notice to the Company, of (1) the
occurrence, or non-occurrence, of any event which would be likely to cause any
representation or warranty contained in the Merger Agreement to be untrue or
inaccurate in any material respect or any covenant, condition or agreement
contained in the Merger Agreement not to be complied with or satisfied or
(2) any failure of the Company, Parent or the Purchaser to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under the Merger Agreement; provided that no such notification will limit or
otherwise affect the remedies available to the party receiving the notice.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties. The foregoing summary of the Merger
Agreement is qualified in its entirety by reference to the Merger Agreement, a
copy of which is filed as Exhibit (c)(1) to the Purchaser's Tender Offer
Statement on Schedule 14D-1 filed with the Commission on the date hereof (the
"Schedule 14D-1") and incorporated by reference herein. The Merger Agreement
should be read in its entirety for a more complete description of the matters
summarized above.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated holders of Shares will have certain
rights pursuant to the provisions of Section 7-113-102 of the CBCA to dissent
and demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. If the statutory procedures were complied with, such rights could
lead to a judicial determination of the fair value required to be paid in cash
to such dissenting holders for their Shares. In determining the fair value of
the Shares, the court is required to take into account all relevant factors.
Accordingly, any such judicial determination of the fair value of Shares could
be based upon considerations other than or in addition to the Offer Price or the
market value of the Shares, including the asset value and investment value of
the Shares. The value so determined could be more or less than the Offer Price
or the Merger Consideration.
If any holder of Shares who demands appraisal under Section 7-113-102 of the
CBCA fails to perfect, or effectively withdraws or loses his right to appraisal,
as provided in the CBCA, the Shares of such stockholder will be converted into
the Merger Consideration in accordance with the Merger Agreement.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the CBCA and is qualified in its entirety by the full
text of Section 7-113-102 of the CBCA.
FAILURE TO FOLLOW THE STEPS REQUIRED BY THE CBCA FOR PERFECTING APPRAISAL
RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any
applicable Federal law operative at the time of its consummation. Rule 13e-3
under the Exchange Act is applicable to certain "going private" transactions.
The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger
unless the Merger is consummated more than one year after the termination of the
Offer. If applicable, Rule 13e-3 would require, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the Merger and the consideration offered to minority
stockholders be filed with the Commission and disclosed to minority stockholders
prior to consummation of the Merger.
37
<PAGE>
13. DIVIDENDS AND DISTRIBUTIONS
Pursuant to the terms of the Merger Agreement, prior to the effective time
of the merger, unless otherwise permitted in the Merger Agreement or approved in
writing by the Purchaser, the Company may not (1) declare, set aside, make or
pay any dividends on, or make any other distributions in respect of, any of its
capital stock, or (b) issue or sell any shares of any class of its capital
stock, or any securities convertible into or exchangeable for any such shares,
or issue, sell, grant or enter into any subscriptions, options, warrants,
conversion or other rights, agreements, commitments, arrangements or
understandings of any kind, contingently or otherwise to purchase or otherwise
acquire any such shares or securities convertible into or exchangeable for any
such shares. Nothing herein shall constitute a waiver by the Purchaser or Parent
of any of its rights under the Merger Agreement or a limitation of remedies
available to the Purchaser or Parent for any breach of the Merger Agreement,
including termination thereof.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to pay
for any Shares tendered pursuant to the Offer unless the Minimum Condition shall
have been satisfied. Furthermore, the Purchaser will not be required to accept
for payment or, subject as aforesaid, to pay for any Shares not theretofore
accepted for payment or paid for, and may, in accordance with the provisions of
the Merger Agreement described in the subsection entitled "Termination of the
Merger Agreement" in Section 12 above, terminate the Merger Agreement or amend
the Offer with the consent of the Company, if, upon the scheduled expiration
date of the Offer (as extended, if required, pursuant to the provisions
discussed in Section 1 above), any of the following conditions exists and is
continuing and does not result principally from the breach by Parent or the
Purchaser of any of their obligations under the Merger Agreement:
(1) there shall be instituted or pending by any governmental entity any
suit, action or proceeding (a) challenging the acquisition by Parent or the
Purchaser of any Shares under the Offer, seeking to restrain or prohibit the
making or consummation of the Offer or the Merger or the performance of any of
the other transactions contemplated by the Merger Agreement or seeking to obtain
from the Company, Parent or the Purchaser any damages that are material in
relation to the Company and its subsidiaries as a whole, (b) seeking to prohibit
or materially limit the ownership or operation by the Company, Parent or any of
Parent's subsidiaries of all or a portion of the business or assets of the
Company or Parent and its subsidiaries, taken as a whole, or to compel the
Company or Parent and its subsidiaries to dispose of or hold separate all or a
portion of the business or assets of the Company or Parent and their
subsidiaries, taken as a whole, in each case as a direct result of the Offer or
any of the other transactions contemplated by the Merger Agreement, (c) seeking
to impose material limitations on the ability of Parent or the Purchaser to
acquire or hold, or exercise full rights of ownership of, any Shares to be
accepted for payment pursuant to the Offer, including, without limitation, the
right to vote such Shares on all matters properly presented to the stockholders
of the Company, (d) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect any material portion of the
business or operations of the Company, (e) that could reasonably be expected to
require the divestiture by Parent or the Purchaser of Shares, in the case of any
of the foregoing in clauses (b), (c) or (d), which could reasonably be expected,
individually or in the aggregate, to have a material adverse effect on the
businesses of the Company and its subsidiaries, or (f) that could reasonably be
expected to result in a material adverse effect on the Company or Parent;
(2) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, by any governmental entity or court that would result in
any of the consequences referred to in clauses (a) through (f) of paragraph (1)
above;
38
<PAGE>
(3) there shall have occurred any events or changes which have had or which
could reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the Company;
(4) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true and
correct or any such representations and warranties that are not so qualified
shall not be true and correct in any material respect, in each case, at the date
of the Merger Agreement and at the scheduled or extended expiration of the
Offer;
(5) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or material covenant of the Company to be performed or complied with
by it under the Merger Agreement, which failure to perform or comply cannot be
cured, or has not been cured within 15 business days after the Company receives
written notice from Parent of such breach or failure to perform;
(6) the Merger Agreement shall have been terminated in accordance with its
terms;
(7) any consent (other than the filing of the Certificate of Merger or
Company Stockholder Approval if required by the CBCA) required to be filed, or
to have occurred or been obtained by the Company or any of its Subsidiaries in
connection with the execution and delivery of the Merger Agreement, the Offer
and the consummation of the transactions contemplated by the Merger Agreement
shall not have been filed or obtained or shall not have occurred, except where
the failure to obtain such consent could not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Company;
(8) the Company's board of directors (a) shall have withdrawn, or modified
or changed in a manner adverse to Parent or the Purchaser (including by
amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement or the Merger, (b) shall have recommended a Superior Proposal,
(c) shall have adopted any resolution to effect any of the foregoing or
(d) upon request of Parent or the Purchaser, shall fail to reaffirm its approval
of recommendation of the Offer, the Merger Agreement or the Merger;
(9) the Company shall not have consummated the Bridgestone Transaction on
terms substantially in accordance with the Bridgestone Agreement; or
(10) any person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act), other than Parent, the Purchaser or their affiliates or any group
of which any of them is a member, shall have acquired or announced its intention
to acquire beneficial ownership (as determined pursuant to Rule 13d-3
promulgated under the Exchange Act) of 30% or more of the Shares;
and, in the good faith judgment of Parent or the Purchaser, in its sole
discretion, make it inadvisable to proceed with such acceptance of Shares for
payment or the payment therefor.
The Merger Agreement provides that the foregoing conditions are for the sole
benefit of Parent and the Purchaser and may be waived by Parent and the
Purchaser in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or the Purchaser at any time to exercise any
of the foregoing rights will not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances will
not be deemed a waiver with respect to any other facts and circumstances and
each such right will be deemed an ongoing right that may be asserted at any time
and from time to time.
15. CERTAIN LEGAL MATTERS
Based on a review of publicly available filings made by the Company with the
Commission and other publicly available information concerning the Company and
representations made by representatives of the Company and the Company, neither
the Purchaser nor Parent is aware of any license or regulatory permit that
appears to be material to the business of the Company and its subsidiaries,
taken as a whole, that might be adversely affected by the Purchaser's
acquisition of Shares as contemplated herein or of any
39
<PAGE>
approval or other action, except as otherwise described in this Section 15, by
any governmental entity that would be required for the acquisition or ownership
of Shares by the Purchaser as contemplated herein. Should any such approval or
other action be required, the Purchaser and Parent currently contemplate that
such approval or other action will be sought. Except as otherwise expressly
described in this Section 15, while the Purchaser does not presently intend to
delay the acceptance for payment of or payment for Shares tendered pursuant to
the Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, the Purchaser could decline to accept for payment or pay for any Shares
tendered. See Section 14 for certain conditions to the Offer.
ANTITRUST. Under the provisions of the Hart-Scott Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the regulations
thereunder applicable to the Offer, an acquiring person and the person whose
voting securities are being acquired in a tender offer must make an HSR filing
by filing a Notification and Report Form with respect to the tender offer if
each of the following three conditions are satisfied: (1) the acquiring person
or the person whose voting securities are being acquired are engaged in commerce
or in any activity affecting commerce, (2)(a) any voting securities or assets of
a person engaged in manufacturing which has annual net sales or total assets of
$10,000,000 or more are being acquired by any person which has total assets or
annual net sales of $100,000,000 or more, (b) any voting securities or assets of
a person not engaged in manufacturing which has total assets of $10,000,000 or
more are being acquired by any person which has total assets or annual net sales
of $100,000,000 or more or (c) any voting securities or assets of a person with
annual net sales or total assets of $100,000,000 or more are being acquired by
any person which has total assets or annual net sales of $10,000,000 or more,
and (3) as a result of such acquisition, the acquiring person would hold
(a) 15% or more of the voting securities or assets of the acquired person, or
(b) an aggregate total amount of the voting securities and assets of the
acquired person in excess of $15,000,000.
Although Parent, the Purchaser and the Company are engaged in commerce in
satisfaction of the first statutory condition to an HSR filing stated above, and
the consummation of the Offer will result in the acquisition by the Purchaser of
15% or more of the voting securities or assets of the Company in satisfaction of
the third statutory condition to an HSR filing stated above, none of Parent, the
Purchaser and the Company have total assets or annual net sales of $100,000,000
or more in satisfaction of the second statutory condition to an HSR filing.
Therefore, none of Parent, the Purchaser, or the Company is required to file a
Notification and Report Form with respect to the Offer under the HSR Act and
applicable regulations.
Nevertheless, the FTC and the Antitrust Division may scrutinize the legality
of transactions such as the Purchaser's proposed acquisition of the Company
under the antitrust laws. If the Antitrust Division or the FTC raises
substantive issues in connection with a proposed transaction, the parties may
engage in negotiations with the relevant governmental agency concerning possible
means of addressing those issues and may agree to delay consummation of the
transaction while such negotiations continue. At any time before or after the
Purchaser's purchase of Shares pursuant to the Offer, the Antitrust Division or
FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Purchaser or the divestiture of
substantial assets of Parent or its subsidiaries, or the Company or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if such a challenge is made,
of the results thereof.
40
<PAGE>
OTHER FOREIGN APPROVALS. The Company conducts business in a number of
foreign countries and jurisdictions. In connection with the acquisition of
Shares pursuant to the Offer, the laws of certain of those foreign countries and
jurisdictions may require the filing of information with, or the obtaining of
the approval of, governmental authorities in such countries and jurisdictions.
The governments in such countries and jurisdictions might attempt to impose
additional conditions on the Company's operations conducted in such countries
and jurisdictions as a result of the acquisition of the Shares pursuant tot he
offer. There can be no assurance that the Purchaser will be able to cause the
Company or its subsidiaries to satisfy or comply with such laws or that
compliance or non-compliance will not have adverse consequences for the Company
or any subsidiary after purchase of the Shares pursuant to the Offer.
16. FEES AND EXPENSES
The Purchaser has retained MacKenzie Partners, Inc. to act as the
Information Agent and Wilmington Trust Company to serve as the Depositary in
connection with the Offer. The Information Agent and the Depositary each will
receive reasonable and customary compensation for their services, be reimbursed
for certain reasonable out-of-pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the Federal securities laws.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent and the
Depositary) in connection with the solicitation of tenders of Shares pursuant to
the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the
Purchaser upon request for customary mailing and handling expenses incurred by
them in forwarding materials to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in
which the making of the Offer or the tender of Shares in connection therewith
would not be in compliance with the laws of such jurisdiction. To the extent the
Purchaser or Parent becomes aware of any state law that would limit the class of
offerees in the Offer, the Purchaser will amend the Offer and, depending on the
timing of such amendment, if any, will extend the Offer to provide adequate
dissemination of such information to holders of Shares prior to the expiration
of the Offer.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser or Parent has filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer. In addition, the Company has filed with
the Commission the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act
setting forth its recommendation with respect to the Offer and the reasons for
such recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Section 8 (except that they will not be available at the regional offices of the
Commission).
APPLIED OPSEC CORPORATION
December 6, 1999
41
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address,
present principal occupation or employment and five-year employment history of
each of the directors and executive officers of Parent are set forth below.
Unless otherwise indicated, the business address of each such director and each
such executive officer is 40 Phoenix Road, Crowther District 3, Washington,
Tyne & Wear, England NE 38 0AD. Except as set forth below, the directors and
executive officers listed below are citizens of the United Kingdom.
<TABLE>
<CAPTION>
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE YEAR-EMPLOYMENT HISTORY
- ---- ---------------------------------------------------------------------------
<S> <C>
Michael W. Angus Mr. Angus serves as Finance Director of Parent, a position which he has
held since January 1997, at which time Mr. Angus joined Parent. Mr. Angus
previously served from October 1985 to January 1997 as a Senior Manager at
Price Waterhouse.
David A. Mahony Mr. Mahony serves as Non-executive Chairman and Director of Parent, which
he joined in 1986. Mr. Mahony is a self employed consultant and he also
serves as a director of Holders Technology PLC, and as chairman of PBW
Ltd., Consort Securities Systems LTD, and Emrad Ltd. Mr. Mahony joined
Holders Technology in 1988, PBW in 1992, Consort in 1997 and Emrad in 1996.
Mr. Mahony also served as chairman of Tower Mint Ltd., which he joined in
1978. Mr. Mahony left Tower in 1999.
Richard T. Povey Mr. Povey joined the board of directors of Parent in June 1996 and serves
as a Non-executive Director of Parent. Mr. Povey previously served as
managing director of Swire Trading Offshore Ltd. from 1992 to 1996 and
currently serves as a Non-Executive Director of Europower PLC, a position
which he has held since 1996, as a Non-Executive Director of Bannes Telecom
PLC, a position which he has held since 1998, as a Non-executive Director
of The Singapore SESDAQ Fund Ltd., a position which he has held since 1998,
as a Non-executive Director of Govelt Asian Smaller Companies Investment
Trust Ltd., a position which he has held since 1999, and as chairman of
Beta Vietnam Fund Ltd., a position which he has held since 1999.
David J. Tidmarsh Mr. Tidmarsh serves as Chief Executive of Parent, a position which he has
held since 1990.
</TABLE>
S-1
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The name, business
address, present principal occupation or employment and five-year employment
history of each of the directors and executive officers of the Purchaser are set
forth below. The business address of the directors and executive officers listed
below is 40 Phoenix Road, Crowther District 3, Washington, Tyne & Wear, England
NE 38 0AD. Except as set forth below, the directors and executive officers
listed below are citizens of the United Kingdom.
<TABLE>
<CAPTION>
NAME PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND FIVE YEAR-EMPLOYMENT HISTORY
- ---- ---------------------------------------------------------------------------
<S> <C>
Michael W. Angus Mr. Angus serves as a Director, Secretary, and Treasurer of the Purchaser.
For additional information regarding Mr. Angus, see the information
regarding Directors and Executive Officers of Parent above on page S-1.
David J. Tidmarsh Mr. Tidmarsh serves as a Director and President of the Purchaser. For
additional information regarding Mr. Tidmarsh, see the information
regarding Directors and Executive Officers of Parent above on page S-1.
</TABLE>
S-2
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS:
WILMINGTON TRUST COMPANY
<TABLE>
<CAPTION>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
<S> <C> <C>
Wilmington Trust Company (302) 651-1079 Wilmington Trust Company
1100 North Market Street 1105 North Market Street
Rodney Square North Wilmington, DE 19890
Wilmington, DE 19890 Attn: Corporate Trust
Attn: Corporate Trust Operations
Operations
FOR CONFIRMATION TELEPHONE:
(302) 651-8869
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A stockholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
<PAGE>
STOCKHOLDERS WISHING TO TENDER THEIR SHARES
SHOULD USE THIS LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK OF
OPTICAL SECURITY GROUP, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 6, 1999 BY
APPLIED OPSEC CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
APPLIED HOLOGRAPHICS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 NOON, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 7, 2000, UNLESS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
WILMINGTON TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
Wilmington Trust Company (302) 651-1079 Wilmington Trust Company
1100 North Market Street 1105 North Market Street
Rodney Square North Wilmington, DE 19890
Wilmington, DE 19890 Attn: Corporate Trust
Operations
Attn: Corporate Trust
Operations
FOR CONFIRMATION TELEPHONE:
(302) 651-8869
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, WILL NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
NAME(S) AND ADDRESS(ES) OF THE REGISTERED SHARE CERTIFICATE(S) AND SHARES TENDERED
HOLDER(S) (IF BLANK, PLEASE FILL IN EXACTLY AS (ATTACH ADDITIONAL LIST, IF NECESSARY)
NAME APPEARS ON SHARE CERTIFICATE)
TOTAL NUMBER
OF SHARES
SHARE CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
Total Shares:
</TABLE>
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described
herein are being tendered. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be used either if certificates for Shares
(as defined below) are to be forwarded herewith or, unless an Agent's Message
(as defined in Section 2 of the Offer to Purchase (as defined below)) is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at the Book-Entry Transfer Facility (as
defined in and pursuant to the procedures set forth in Section 2 of the Offer to
Purchase). Stockholders who deliver Shares by book-entry transfer are referred
to herein as "Book-Entry Stockholders" and other Stockholders are referred to
herein as "Certificate Stockholders." Stockholders whose certificates for Shares
are not immediately available or who cannot deliver either the certificates for,
or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase)
with respect to, their Shares and all other documents required hereby to the
Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase) must tender their Shares in accordance with the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: _____________________________________________
The Depository Trust Company Account Number: _______________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution which Guaranteed Delivery: _____________________________
Check here if delivered by book-entry transfer: / /
The Depository Trust Company Account Number: _______________________________
Transaction Code Number: ___________________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Applied Opsec Corporation, a Colorado
corporation (the "Purchaser"), which is a wholly owned subsidiary of Applied
Holographics PLC, a public limited company incorporated and existing under the
laws of England and Wales ("Parent"), the above-described shares of Common
Stock, par value $.005 per share (the "Shares"), of Optical Security
Group, Inc., a Colorado corporation (the "Company"), upon the terms and subject
to the conditions set forth in the Purchaser's Offer to Purchase dated December
3, 1999 (the "Offer to Purchase"), and this Letter of Transmittal (which,
together with any amendments or supplements thereto or hereto, collectively
constitute the "Offer"), receipt of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, the Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities or rights issued or issuable in respect thereof on or after
November 30, 1999), and irrevocably constitutes and appoints Wilmington Trust
Company (the "Depositary"), the true and lawful agent and attorney-in-fact of
the undersigned, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to the full extent
of the undersigned's rights with respect to such Shares (and any such other
Shares or securities or rights), (1) to deliver certificates for such Shares
(and any such other Shares or securities or rights) or transfer ownership of
such Shares (and any such other Shares or securities or rights) on the account
books maintained by the Book-Entry Transfer Facility together, in any such case,
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Purchaser, (2) to present such Shares (and any such other Shares
or securities or rights) for transfer on the Company's books and (3) to receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other Shares or securities or rights), all in accordance
with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all other shares or other securities or rights issued or issuable
in respect of such Shares on or after November 30, 1999) and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances, and
the same will not be subject to any adverse claim. The undersigned, upon
request, will execute any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the tendered Shares (and any and all such other Shares or securities
or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints David J. Tidmarsh and Michael W.
Angus, and each of them acting singly, and any other designees of the Purchaser,
the attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote at any annual, special or adjourned meeting of the
Company's stockholders or otherwise in such manner as each such attorney-in-fact
and proxy or his substitute shall in his or her sole discretion deem proper with
respect to, to execute any written consent concerning any matter as each such
attorney-in-fact and proxy or his or her substitute shall in his or her sole
discretion deem proper with respect to, and to otherwise act as each such
attorney-in-fact and proxy or his or her substitute shall in his or her sole
discretion deem proper with respect to, the Shares tendered hereby that have
been accepted for payment by the Purchaser prior to the time any such action is
taken and with respect to which the undersigned is entitled to vote (and any and
all other Shares or other securities or rights issued or issuable in respect of
such Shares on or after November 30, 1999). This appointment is effective when,
and only to the extent that, the Purchaser accepts for payment such Shares as
provided in the Offer to Purchase. This power of attorney and proxy are
irrevocable and are granted in consideration of the acceptance for payment of
such Shares in accordance with the terms of the Offer. Upon such acceptance for
payment, all prior powers of attorney, proxies and consents given by the
undersigned with respect to such Shares (and any such other Shares or securities
or rights) will, without further action, be revoked and no subsequent powers of
attorney, proxies, consents or revocations may be given (and, if given, will not
be deemed effective) by the undersigned.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
<PAGE>
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the check
for the purchase price and/or return any certificates for Shares not tendered or
accepted for payment (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Shares
Tendered." In the event that both "Special Delivery Instructions" and "Special
Payment Instructions" are completed, please issue the check for the purchase
price and/or return any certificates for Shares not tendered or accepted for
payment (and any accompanying documents, as appropriate) in the name of, and
deliver such check and/or return such certificates (and any accompanying
documents, as appropriate) to, the person or persons so indicated. Please credit
any Shares tendered herewith by book-entry transfer that are not accepted for
payment by crediting the account at the Book-Entry Transfer Facility. The
undersigned recognizes that the Purchaser has no obligation pursuant to "Special
Payment Instructions" to transfer any Shares from the name of the registered
holder thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
<PAGE>
/ / CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Shares represented by the lost or destroyed
certificates: ______________.
PLEASE FILL IN THE REMAINDER OF THIS LETTER OF TRANSMITTAL.
- ------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be issued in the name of someone other than the undersigned
or if Shares tendered by book-entry transfer which are not accepted for
payment are to be returned by credit to an account maintained at the
Book-Entry Transfer Facility other than the account shown above.
Issue: / / Check / / Certificate(s) to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(INCLUDE ZIP CODE)
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
____________________________________________________________________________
Credit Shares tendered by book-entry transfer that are not accepted for
payment to:
____________________________________________________________________________
(ACCOUNT NUMBER)
- ------------------------------------------------------------
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not accepted
for payment and/or the check for the purchase price of Shares accepted for
payment are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that above.
Mail: / / Check / / Certificate(s) to:
Name _______________________________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(INCLUDE ZIP CODE)
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9)
____________________________________________________________________________
- ------------------------------------------
NOTE: IF EITHER BOX IS COMPLETED, SIGNATURE NEEDS TO BE GUARANTEED BY AN
ELIGIBLE INSTITUTION.
<PAGE>
IMPORTANT:
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
Sign > _________________________________________________________________________
Here > _________________________________________________________________________
(SIGNATURE(S) OF STOCKHOLDER(S))
Daytime Telephone Number: ( ) __________________________________________
(AREA CODE)
Dated: _________________, ________
(Must be signed by registered holder(s) as name(s) appear(s) on the
certificate(s) for the Shares or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following information
and see Instruction 5.)
Name(s): _______________________________________________________________________
(PLEASE PRINT)
Capacity (Full Title): _________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( ) __________________________________________
(AREA CODE)
Tax Identification or Social Security Number: __________________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
(PLEASE PRINT)
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Daytime Telephone Number: ( ) __________________________________________
(AREA CODE)
Dated: _________________, ________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (1) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in the Book-Entry Transfer Facility's system whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
herewith, unless such registered holder(s) has completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (2) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message (as defined below) is utilized, if delivery of Shares is to be
made pursuant to the procedures for book-entry transfer set forth in Section 2
of the Offer to Purchase. For a stockholder to validly tender Shares pursuant to
the Offer, either (1) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents, must be received by the Depositary at one of its addresses
set forth herein prior to the Expiration Date and either certificates for
tendered Shares must be received by the Depositary at one of such addresses or
such Shares must be delivered pursuant to the procedures for book-entry transfer
set forth herein (and a Book-Entry Confirmation received by the Depositary), in
each case prior to the Expiration Date, or (2) the tendering stockholder must
comply with the guaranteed delivery procedures set forth below and in Section 2
of the Offer to Purchase.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date, such stockholder's tender may be effected by properly
completing and duly executing the Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase.
Pursuant to such procedures, (1) such tender must be made by or through an
Eligible Institution, (2) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Purchaser, must
be received by the Depositary prior to the Expiration Date and (3) the
certificates for all tendered Shares in proper form for transfer (or a
Book-Entry Confirmation with respect to all such Shares), together with a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, and any other required documents, must be received
by the Depositary within three trading days after the date of execution of such
Notice of Guaranteed Delivery as provided in Section 2 of the Offer to Purchase.
A "trading day" is any day on which the New York Stock Exchange, Inc. is open
for business.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
<PAGE>
4. PARTIAL TENDERS. (Applicable to Certificate Stockholders Only). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled "Number
of Shares Tendered." In any such case, new certificate(s) for the remainder of
the Shares that were evidenced by the old certificate(s) will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the acceptance for payment
of, and payment for, the Shares tendered herewith. All Shares represented by
certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to the
Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
to, a person other than the registered owner(s). Signatures on such certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any person(s) other than the registered owner(s), or
if tendered certificates are registered in the name(s) of any person(s) other
than the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered owner(s) or such person(s))
payable on account of the transfer to such person(s) will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in
the name of, and/or certificates for Shares not accepted for payment are to be
returned to, a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such certificates are to be returned to a person
other than the signer of this Letter of Transmittal or to an address other than
that shown above, the appropriate boxes on this Letter of Transmittal should be
completed.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right to waive
any of the specified conditions of the Offer, in whole or in part at any time
and from time to time in its sole discretion.
9. BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. In order to avoid backup
withholding of Federal income tax on payments of cash pursuant to the Offer, a
stockholder surrendering Shares in the Offer must, unless an exemption applies,
provide the Depositary with such stockholder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below in this Letter of Transmittal and
certify under penalty of perjury that such TIN is correct and that such
stockholder is not subject to backup withholding. If a stockholder does not
provide such stockholder's correct TIN or fails to provide the certifications
described above, the Internal Revenue Service (the "IRS") may impose a penalty
on such stockholder and the payment of cash to such stockholder pursuant to the
Offer may be subject to backup withholding of 31%.
<PAGE>
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the U.S. federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the stockholder upon filing an
income tax return.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at its address set forth below.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary by checking the box immediately preceding the special
payment/special delivery instructions and indicating the number of Shares lost.
The stockholder will then be instructed as to the steps that must be taken in
order to replace the certificate. This Letter of Transmittal and related
documents cannot be processed until the procedures for replacing lost or
destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED
SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT
TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE, PRIOR TO THE EXPIRATION
DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR
GUARANTEED DELIVERY.
<PAGE>
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder is required to provide the
Depositary such stockholder's TIN (i.e., social security number or employer
identification number) on Substitute Form W-9 (or otherwise establish a basis
for exemption from backup withholding) and certify under penalty of perjury that
such TIN is correct and that such stockholder is not subject to backup
withholding. If the Shares are held in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report. If the Depositary is not provided with a
stockholder's correct TIN, the stockholder or other payee may be subject to a
penalty imposed by the Internal Revenue Service. In addition, any amounts
payable to such stockholder in connection with the Offer may be subject to
backup withholding at a 31% rate.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary.
Foreign stockholders should complete and sign the main signature form and a
Form W-8, Certificate of Foreign Status, a copy of which may be obtained from
the Depositary, in order to avoid backup withholding. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for more instructions.
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 9 AND "IMPORTANT TAX INFORMATION" ABOVE)
PAYER'S NAME: WILMINGTON TRUST COMPANY, AS DEPOSITARY
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR --------------------------------------Social
FORM W-9 TAXPAYER IDENTIFICATION NUMBER Security Number
DEPARTMENT OF THE TREASURY IN THE BOX AT RIGHT AND CERTIFY or
INTERNAL REVENUE SERVICE PAYER'S BY SIGNING AND DATING BELOW. --------------------------------------Employer
REQUEST FOR TAXPAYER Identification Number
IDENTIFICATION NUMBER (TIN)
----------------------------------------------------------------------------
PART 2--CERTIFICATION Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup withholding
because you have failed to report all interest or dividends on your tax
returns. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS stating
that you are no longer subject to backup withholding, do not cross out such
item (2). If you are exempt from backup withholding, check the box in Part 4
below.
----------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications
required to avoid backup withholding.
- ------------------------------------------------------------------------------------------------------------------------------
SIGNATURE: Part 3--Awaiting TIN: / /
- ------------------------------------------------------------------------------------------------------------------------------
DATE: Part 4--Exempt TIN: / /
- ------------------------------------------------------------------------------------------------------------------------------
NAME:
- ------------------------------------------------------------------------------------------------------------------------------
ADDRESS:
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, if I do not provide a taxpayer identification number to the
Depositary by the time of payment, 31% of all reportable payments made to me
thereafter will be withheld until I provide a properly certified taxpayer
identification number to the Depositary.
_____________________ ____________________________________
SIGNATURE DATE
------------------------------------------------------------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF SHARES OF COMMON STOCK OF
OPTICAL SECURITY GROUP, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below), as set forth in Section 2
of the Offer to Purchase (1) if certificates ("Share Certificates") evidencing
shares of Common Stock, par value $.005 per share (the "Shares"), of Optical
Security Group, Inc., a Colorado corporation (the "Company"), are not
immediately available, (2) if the procedure for book-entry transfer cannot be
completed on a timely basis or (3) time will not permit all required documents
to reach the Depositary prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by
hand to the Depositary or transmitted by facsimile transmission or mailed to the
Depositary and must include a guarantee by an Eligible Institution (as defined
in Section 2 of the Offer to Purchase). See Section 2 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
WILMINGTON TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
Wilmington Trust Company (302) 651-1079 Wilmington Trust Company
1100 North Market Street 1105 North Market Street
Rodney Square North Wilmington, DE 19890
Wilmington, DE 19890 Attn: Corporate Trust
Attn: Corporate Trust Operations
Operations
</TABLE>
FOR CONFIRMATION TELEPHONE:
(302) 651-8869
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Applied Opsec Corporation, a Colorado
corporation (the "Purchaser"), which is a wholly owned subsidiary of Applied
Holographics PLC, a public limited company incorporated and existing under the
laws of England and Wales, upon the terms and subject to the conditions set
forth in the Purchaser's Offer to Purchase dated December 6, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"), receipt
of which is hereby acknowledged, the number of Shares set forth below, all
pursuant to the guaranteed delivery procedures set forth in Section 2 of the
Offer to Purchase.
Number of Shares:_______________________________________________________________
Certificate Nos. (if available):________________________________________________
/ / Check box if Shares will be tendered by book-entry transfer
Name of Tendering Institution:______________________________________________
The Depository Trust Company Account Number:________________________________
Signature(s) of Holder(s):
________________________________________________________________________________
________________________________________________________________________________
Dated:_________________________
(Please Type or Print)
Name(s) of Record Holder(s):
________________________________________________________________________________
________________________________________________________________________________
Address(es)_____________________________________________________________________
________________________________________________________________________________
(Please include zip code)
Daytime Area Code and Tel. No.:_________________________________________________
<PAGE>
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program, hereby guarantees to deliver to the
Depositary either the certificates representing the Shares tendered hereby, in
proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to such Shares, in any such case together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase), and any other required documents, within
three trading days (as defined in the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
(Please Type or Print)
Name of Firm: __________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Area Code and Tel. No.: ________________________________________________________
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
Title: _________________________________________________________________________
(Please Print)
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
MACKENZIE PARTNERS, INC.
156 FIFTH AVENUE
NEW YORK, NY 10010
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
OPTICAL SECURITY GROUP, INC.
AT
$7.00 NET PER SHARE
BY
APPLIED OPSEC CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
APPLIED HOLOGRAPHICS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 NOON, NEW YORK CITY
TIME, ON FRIDAY, JANUARY 7, 2000, UNLESS EXTENDED.
December 6, 1999
To Brokers, Dealers, Banks, Trust Companies and Other Nominees:
We have been appointed by Applied Opsec Corporation, a Colorado corporation
(the "Purchaser"), and a wholly-owned subsidiary of Applied Holographics PLC, a
public limited company incorporated and existing under the laws of England and
Wales ("Parent"), to act as Information Agent in connection with the Purchaser's
offer to purchase all outstanding shares (the "Shares") of Common Stock, par
value $.005 per share ("Common Stock"), of Optical Security Group, Inc., a
Colorado corporation (the "Company"), at $7.00 per Share, net to the seller, in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated December 6, 1999 and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer").
Please furnish copies of the enclosed materials to those of your clients for
whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated December 6, 1999;
2. Letter of Transmittal to be used by stockholders of the Company
accepting the Offer;
3. The Letter to Stockholders of the Company from the Chief Executive
Officer and Chairman of the Board of the Board of Directors of the
Company accompanied by the Company's Solicitation/ Recommendation
Statement on Schedule 14D-9;
4. a printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with
space provided for obtaining such client's instructions with regard to
the Offer;
5. Notice of Guaranteed Delivery;
6. guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. return envelope addressed to Wilmington Trust Company, the Depositary.
<PAGE>
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING SHARES
(DETERMINED AS OF THE DATE OF EXPIRATION OF THE OFFER ON A FULLY DILUTED BASIS
TAKING INTO ACCOUNT ALL SHARES ISSUABLE ON EXERCISE OR CONVERSION OF ALL
OPTIONS, WARRANTS AND ANY OTHER RIGHTS TO ACQUIRE SHARES OUTSTANDING ON THE DATE
OF THE EXPIRATION OF THE OFFER (THE "MINIMUM CONDITION").
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 NOON, NEW YORK CITY TIME, ON FRIDAY,
JANUARY 7, 2000, UNLESS EXTENDED.
The Board of Directors of the Company has unanimously approved the Offer and
the Merger and determined that the terms of the Offer and the Merger are fair
to, and in the best interests of, the stockholders of the Company and
unanimously recommends that stockholders of the Company accept the Offer and
tender their Shares. The Offer is being made pursuant to the Agreement and Plan
of Merger dated as of November 30, 1999 (the "Merger Agreement"), among Parent,
the Purchaser and the Company pursuant to which, following the consummation of
the Offer and the satisfaction or waiver of certain conditions, the Purchaser
will be merged with and into the Company, with the Company surviving the merger
as a wholly owned subsidiary of Parent (the "Merger"). In the Merger, each
outstanding Share (other than Shares owned by the Company or any subsidiary of
the Company or by Parent, the Purchaser or any other subsidiary of Parent or by
stockholders, if any, who are entitled to and who properly exercise dissenters'
rights under Colorado law) will be converted into the right to receive $7.00 per
Share, without interest, as set forth in the Merger Agreement and described in
the Offer to Purchase.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by Wilmington Trust Company (the
"Depositary"), of (1) certificates for (or a timely Book-Entry Confirmation (as
defined in the Offer to Purchase) with respect to) such Shares, (2) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, in the case of a book-entry transfer
effected pursuant to the procedure set forth in Section 2 of the Offer to
Purchase, an Agent's Message (as defined in the Offer to Purchase), and (3) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent and the
Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed
upon request for customary mailing and handling expenses incurred by you in
forwarding the enclosed offering materials to your customers.
Questions and requests for additional copies of the enclosed material may be
directed to the Information Agent at the address and telephone number set forth
on the back cover of the enclosed Offer to Purchase.
Very truly yours,
MACKENZIE PARTNERS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR ANY OTHER PERSON
TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF
ANY OF THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
OPTICAL SECURITY GROUP, INC.
FOR
$7.00 NET PER SHARE
BY
APPLIED OPSEC CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
APPLIED HOLOGRAPHICS PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 NOON, NEW YORK CITY TIME,
ON FRIDAY, JANUARY 7, 2000, UNLESS EXTENDED.
December 6, 1999
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated December 6,
1999 (the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to an offer to purchase by Applied Opsec Corporation, a
Colorado corporation (the "Purchaser"), and a wholly-owned subsidiary of Applied
Holographics PLC, a public limited company incorporated and existing under the
laws of England and Wales ("Parent"), all outstanding shares (the "Shares") of
common stock, par value $.005 per share ("Common Stock"), of Optical Security
Group, Inc., a Colorado corporation (the "Company"), at $7.00 per Share, net to
the seller, in cash, upon the terms and subject to the conditions set forth in
the Offer. Also enclosed is the Letter to Stockholders of the Company from the
Chief Executive Officer and Chairman of the Board of Directors of the Company
accompanied by the Company's Solicitation/Recommendation Statement on
Schedule14D-9.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED
TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US
FOR YOUR ACCOUNT.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The tender price is $7.00 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer.
2. The Board of Directors of the Company has unanimously approved the Offer
and the Merger (as defined below) and determined that the terms of the
Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company and unanimously recommends that the
stockholders of the Company accept the Offer and tender their Shares.
3. The Offer is being made for all outstanding Shares.
<PAGE>
4. The Offer is being made pursuant to the Agreement and Plan of Merger,
dated as of November 30, 1999 (the "Merger Agreement"), by and among
Parent, the Purchaser and the Company pursuant to which, following the
consummation of the Offer and the satisfaction or waiver of certain
conditions, the Purchaser will be merged with and into the Company, with
the Company surviving the merger as a wholly owned subsidiary of Parent
(the "Merger"). In the Merger, each outstanding Share (other than Shares
owned by the Company or any subsidiary of the Company or by Parent, the
Purchaser or any other subsidiary of Parent or by stockholders, if any,
who are entitled to and who properly exercise dissenters' rights under
Colorado law) will be converted into the right to receive $7.00 per
Share, without interest, as set forth in the Merger Agreement and
described in the Offer to Purchase.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the date of the expiration of the
Offer that number of Shares that would constitute at least a majority of
the outstanding Shares (determined as of the date of the expiration of
the Offer on a fully diluted basis, taking into account all Shares
issuable on exercise or conversion of all options, warrants and any other
rights to acquire Shares outstanding on the date of the expiration of the
Offer) (the "Minimum Condition").
6. The Offer and withdrawal rights will expire at 12:00 noon, New York City
time, on Friday, January 7, 2000, unless the Offer is extended by the
Purchaser.
7. The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
If you wish to have us tender any of or all your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
set forth below. An envelope to return your instructions to us is enclosed. If
you authorize tender of your Shares, all such Shares will be tendered unless
otherwise specified below. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US PROMPTLY
TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by Wilmington Trust Company (the
"Depositary"), of (1) certificates for (or a timely Book-Entry Confirmation (as
defined in the Offer to Purchase) with respect to) such Shares, (2) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, in the case of a book-entry transfer
effected pursuant to the procedure set forth in Section 2 of the Offer to
Purchase, an Agent's Message (as defined in the Offer to Purchase), and (3) any
other documents required by the Letter of Transmittal. Accordingly, tendering
stockholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE
PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
OPTICAL SECURITY GROUP, INC.
BY
APPLIED OPSEC CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated December 6, 1999 (the "Offer to Purchase"), and a related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer") relating to an offer to purchase
by Applied Opsec Corporation, a Colorado corporation (the "Purchaser"), and a
wholly-owned subsidiary of Applied Holographics PLC, a public limited company
incorporated and existing under the laws of England and Wales ("Parent"), all
outstanding shares (the "Shares") of common stock, par value $.005 per share
("Common Stock"), of Optical Security Group, Inc., a Colorado corporation (the
"Company"), at $7.00 per Share, net to the seller, in cash, upon the terms and
subject to the conditions set forth in this Offer. This will instruct you to
tender the number of Shares indicated below held by you for the account of the
undersigned on the terms and conditions set forth in such Offer.
Number of Shares to be Tendered* _______________________________________________
Date: __________________________________________________________________________
SIGN HERE
Signature(s) ___________________________________________________________________
________________________________________________________________________________
(PRINT NAME(S)
________________________________________________________________________________
(PRINT ADDRESS(ES))
________________________________________________________________________________
(AREA CODE AND TELEPHONE NUMBER(S))
________________________________________________________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
- ------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor or
incompetent person
7. a. The usual revocable The actual owner(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The grantor-trustee(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
GIVE THE TAXPAYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the pension
trust identifying number
of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a
State or local government,
school district, or prison)
that receives agricultural
program payments
</TABLE>
- -------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
- An organization exempt from tax under section 501(a), an individual
retirement plan, or a custodial account under section 403(b)(7) if the
account satisfies the requirements of section 401(f)(2).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
Other payees that may be exempt from backup withholding include:
- A corporation.
- A financial institution.
- An international organization or any agency or instrumentality thereof.
- A dealer in securities or commodities registered in the United States, the
District of Columbia or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
- A futures commission merchant registered with the Commodity Futures
Trading Commission.
- A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
<PAGE>
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Payees described above should file Form W-9 to avoid possible erroneous backup
withholding. IF YOU BELIEVE THAT YOU ARE EXEMPT FROM BACKUP WITHHOLDING, FILE
THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE
"EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE
PAYER.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being
due to negligence and will be subject to a penalty of 20% on any portion of
an underpayment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (a)(7)
SUMMARY ADVERTISEMENT
This announcement is neither an offer to purchase nor a solicitation of
an offer to sell Shares. The Offer is made solely by the Offer to Purchase,
dated December 6, 1999, and the related Letter of Transmittal and is not being
made to (nor will tenders be accepted from or on behalf of) holders of Shares in
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK OF
OPTICAL SECURITY GROUP, INC.
AT $7.00 NET PER SHARE BY
APPLIED OPSEC CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
APPLIED HOLOGRAPHICS PLC
Applied Opsec Corporation, a Colorado corporation (the "Purchaser") and
a wholly owned subsidiary of Applied Holographics PLC, a public limited company
incorporated and existing under the laws of England and Wales ("Parent"), is
offering to purchase all outstanding shares of Common Stock, par value $.005 per
share (the "Shares"), of Optical Security Group, Inc., a Colorado corporation
(the "Company"), at $7.00 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated December
6, 1999, and in the related Letter of Transmittal (which together with any
amendments or supplements thereto, collectively constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 NOON, NEW YORK
CITY TIME, ON FRIDAY, JANUARY 7, 2000, UNLESS EXTENDED.
The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the expiration of the Offer that
number of Shares that would constitute at least a majority of the outstanding
Shares (determined as of the date of the expiration of the Offer on a fully
diluted basis for all outstanding stock options, warrants and any other
rights to acquire Shares outstanding on the date of the expiration of the
Offer, as further described in the Offer) (the "Minimum Condition").
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of November 30, 1999 (the "Merger Agreement"), among Parent, the
Purchaser and the Company pursuant to which, following the consummation of the
Offer, the Purchaser will be merged with and into the Company (the "Merger"). On
the effective date of the Merger, each outstanding Share (other than Shares
owned by the Company or any subsidiary of the Company or by Parent, the
Purchaser or any other subsidiary of Parent or by stockholders, if any, who are
entitled to and who properly exercise appraisal rights under Colorado law) will
be converted into the right to receive $7.00, in cash, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
<PAGE>
COMPANY, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES.
For purposes of the Offer, the Purchaser shall be deemed to have
accepted for payment, and thereby purchased, Shares properly tendered to the
Purchaser and not properly withdrawn as, if and when the Purchaser gives oral
or written notice to the Depositary of the Purchaser's acceptance for payment
of such Shares. Upon the terms and subject to the conditions of the Offer,
payment for Shares purchased pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from the
Purchaser and transmitting payment to tendering stockholders whose Shares
have been accepted for payment. In all cases, payment for Shares purchased
pursuant to the Offer will be made only after timely receipt by the
Depositary of (i)certificates for such Shares or timely confirmation of
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase) pursuant
to the procedures set forth in Section 2 of the Offer to Purchase, (ii) a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase)
and (iii) any other documents required by the Letter of Transmittal. Under no
circumstances will interest be paid by the Purchaser on the purchase price of
the Shares to be paid by the Purchaser, regardless of any extension of the
Offer or any delay in making such payment.
The term "Expiration Date" means 12:00 noon, New York City time, on
Friday, January 7, 2000, unless and until the Purchaser, in its sole
discretion but subject to the terms of the Merger Agreement, shall have
extended the period of time during which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date on which the
Offer, as so extended by the Purchaser, shall expire. The Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time,
and regardless of whether or not any of the events set forth in Section 14 of
the Offer to Purchase shall have occurred, (i) to extend the period of time
during which the Offer is open and thereby delay acceptance for payment of,
and the payment for, any Shares, by giving oral or written notice of such
extension to the Depositary and (ii) to amend the Offer in any other respect
by giving oral or written notice of such amendment to the Depositary. The
Purchaser shall not have any obligation to pay interest on the purchase price
for tendered Shares, whether or not the Purchaser exercises its right to
extend the Offer. There can be no assurance that the Purchaser will exercise
its right to extend the Offer. Any such extension will be followed by a
public announcement thereof no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. During
any such extension, all Shares previously tendered and not withdrawn will
remain subject to the Offer, subject to the right of a tendering stockholder
to withdraw such stockholder's Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless previously accepted for payment and paid for by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after
February 3, 1999. For a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase and
must specify the name of the person having delivered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution (as defined in Section 2 of the Offer to Purchase), the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer as
set forth in Section 2 of the Offer to Purchase, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn shares and otherwise comply with the
Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may
not be rescinded, and any Shares properly withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However, withdrawn Shares may be
re tendered by again following one of the procedures described in Section 2
<PAGE>
of the Offer to Purchase at any time prior to the Expiration Date. All questions
as to the form and validity (including time of receipt) of notices of withdrawal
will be determined by the Purchaser, in its sole discretion, whose determination
will be final and binding.
The Offer to Purchase and the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owner of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the Securities Exchange Act of 1934 is contained in the Offer to Purchase and is
incorporated herein by reference.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
Requests for copies of the Offer to Purchase, the Letter of Transmittal
and all other tender offer materials may be directed to the Information Agent
as set forth below, and copies will be furnished promptly at the Purchaser's
expense.
THE DEPOSITARY FOR THE OFFER IS:
WILMINGTON TRUST COMPANY
<TABLE>
<CAPTION>
BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT COURIER:
<S> <C> <C>
Wilmington Trust Company (302) 651-1079 Wilmington Trust Company
1100 North Market Street 1105 North Market Street
Rodney Square North Wilmington, DE 19890
Wilmington, DE 19890 Attn: Corporate Trust Operations
Attn: Corporate Trust Operations
</TABLE>
FOR CONFIRMATION TELEPHONE:
(302) 651-8869
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE (800 322-2885)
<PAGE>
Exhibit (a)(8)
30 November 1999
APPLIED HOLOGRAPHICS PLC
ACQUISITION OF OPTICAL SECURITY GROUP, INC.
PLACING AND OPEN OFFER TO RAISE L52.5M (NET)
CHANGE OF NAME TO APPLIED OPTICAL TECHNOLOGIES PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999
Applied Holographics PLC ("Applied Holographics" or "the Company"), the
manufacturer of holographic films and products for the security and packaging
industries announces:
ACQUISITION OF OPTICAL SECURITY GROUP, INC ("OPSEC")
- - Applied Holographics has today agreed to acquire OpSec, listed on Nasdaq
and a leading supplier in the US of security and product authentication
solutions, for a consideration of approximately US$64 million in cash
(L39.93 million)
- - OpSec, based on the East Coast of the USA, offers a range of overt and
covert security products, such as imaging-based foils, labels, laminates
and coatings, which protect documents and products from forgery and
counterfeiting, deter tampering, provide authentication and prevent
diversion. Customers include US federal, state and overseas governments as
well as major companies and organisations
For the six months to 30 September 1999 OpSec made pre-tax profits of
US$853,000 on turnover of US$8.4 million
- - The Board of Directors of Applied Holographics believes that the
acquisition of OpSec will enhance Applied Holographics' position in the
security market by combining Applied Holographics' expertise in currency
and document protection with OpSec's expertise in document and brand
protection
The Enlarged Group will maintain production facilities in the UK and the
US. Mark Turnage, President and Chief Operating Officer of OpSec, will join
the Board of the Company as Deputy Chief Executive, with primary
responsibility for the Enlarged Group's operations in the Americas
- - The acquisition is expected to enhance earnings per share (before goodwill
amortisation) for the year ended 31 March 2001
PLACING AND 5 FOR 13 OPEN OFFER TO RAISE L52.5 MILLION, NET OF EXPENSES
- - Applied Holographics has announced today a Placing and 5 for 13 Open Offer
at 270p per share to raise approximately L52.5 million, net of expenses, to
fund the consideration payable on the acquisition of Opsec, to refinance
borrowings taken out to fund a US$10 million loan made by Applied
Holographics to OpSec to allow OpSec to complete its acquisition of
Bridgestone Technologies, Inc ("Bridgestone"), a US supplier of security
authentication products, and to provide working capital for the Enlarged
Group
<PAGE>
- - The Placing and Open Offer is fully underwritten by Greig Middleton & Co.
Limited
CHANGE OF NAME TO APPLIED OPTICAL TECHNOLOGIES PLC
- - Applied Holographics proposes changing its name to Applied Optical
Technologies plc to reflect better the nature and scale of the Enlarged
Group's activities
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999
- - Applied Holographics also today announces Interim Results for the six
months ended 30 September 1999
Highlights include:
- pre-tax profits rose 24% to L1.19 million (1998: L0.97 million) on
turnover up 4% to L7.48 million (1998: L7.22 million)
- the installation of facilities to enable new bank note and high
security work
- joint ventures made strong contributions
- there was a major contribution from a new Microsoft contract,
announced today
- initial orders for Euro note production were secured during the period
- a three year contract was won with a major European railway operation
for a national transport scheme
David Tidmarsh, Applied Holographics Chief Executive, commented:
"WE ARE DELIGHTED THAT OUR TWO COMPANIES ARE JOINING FORCES. BY COMBINING OUR
COMPLEMENTARY MANAGEMENT SKILLS, OPERATIONS, CUSTOMER BASE, TECHNOLOGIES AND
GEOGRAPHIC FOCUS, THE ENLARGED GROUP WILL BE A WORLD LEADER IN THE
ANTI-COUNTERFEITING AND AUTHENTICATION SECURITY MARKET.
"WE CONTINUE TO ANTICIPATE A SATISFACTORY OUTTURN FOR THE CURRENT YEAR AND,
EQUALLY IMPORTANTLY, TO LAY THE BASE FOR SIGNIFICANT ADVANCES IN PROFITABILITY
IN FUTURE YEARS RESULTING FROM THE PROPOSED MERGING OF OPSEC'S OPERATIONS WITH
OUR OWN ACTIVITIES."
- ends -
For further information please contact:
APPLIED HOLOGRAPHICS PLC 0191 417 5434
David Tidmarsh, Chief Executive
Mike Angus, Finance Director
Astrid Mitchell, Director of Marketing and PR
SQUARE MILE COMMUNICATIONS 0171 601 1000
Nick Oborne
<PAGE>
ABOUT APPLIED HOLOGRAPHICS
Based in Washington, Tyne and Wear, Applied Holographics designs and
manufactures holographic products principally for the security and packaging
markets.
Applied Holographics' products are used on commercial and government security
products, including identification documents, branded products and banknotes (it
has European Central Bank accreditation to supply banknote security products for
the Euro). In packaging, Applied Holographics' films and foils are used as
distinctive marketing features which also provide security protection.
Companies and organisations using Applied Holographics' product include UK and
overseas governments, banknote printers, banknote paper and thread
manufacturers, UK clearing banks, transport authorities and major corporations
such as Microsoft Licensing Inc, Cadbury Schweppes Limited, Colgate-Palmolive
(UK) Limited and Procter & Gamble.
<PAGE>
30 November 1999
APPLIED HOLOGRAPHICS PLC
ACQUISITION OF OPTICAL SECURITY GROUP, INC. ("OPSEC")
PLACING AND OPEN OFFER AT 270P PER SHARE TO RAISE L52.5M (NET)
CHANGE OF NAME TO APPLIED OPTICAL TECHNOLOGIES PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999
INTRODUCTION
It is announced today that Applied Holographics has entered into an agreement to
acquire OpSec for approximately US$64 million in cash (L39.93 million). OpSec is
listed on the Nasdaq securities exchange and is a leading provider in the US of
security and product authentication solutions.
By a separate loan agreement entered into between Applied Holographics and
OpSec, Applied Holographics has agreed to lend OpSec US$10 million (L6.24
million), financed by a short term bank facility, to enable OpSec to complete
its acquisition of Bridgestone. Bridgestone also provides security
authentication products and services.
The Board also announced today a Placing and Open Offer to raise approximately
L52.5 million (net of expenses) to fund the consideration payable in connection
with the OpSec Acquisition, to re-finance the OpSec Loan and to provide working
capital for the Enlarged Group. 10,132,240 New Ordinary Shares have been placed
firm with institutional and other investors and 10,238,130 New Ordinary Shares
have been placed subject to recall to satisfy valid applications by Qualifying
Shareholders under the Open Offer. The Open Offer is being made on the basis of
5 New Ordinary Shares for every 13 existing Ordinary Shares held at the close of
business on the Record Date. The Placing and Open Offer is fully underwritten by
Greig Middleton & Co Limited.
Contemporaneously with the Placing and Open Offer, the Company also proposes to
issue 3,100,000 New Ordinary Shares at the issue price to trustees of new
employee share schemes of the Company. Mark Turnage, President and Chief
Executive of OpSec, who will become Deputy Chief Executive of the Enlarged
Group, will also subscribe for up to 115,000 shares at the issue price.
The OpSec Acquisition will be effected by means of a US Tender Offer and Merger.
The Tender Offer has been unanimously recommended to the shareholders of OpSec
by its directors, and is conditional, INTER ALIA, upon the acceptance of the
holders of a majority of the OpSec Shares on a fully diluted basis. Certain
OpSec shareholders, including all of its directors and some members of its
senior management team, together holding approximately 34 percent. of the
existing issued OpSec Shares, have agreed irrevocably to tender their Opsec
Shares pursuant to the Tender Offer.
As part of the Proposals, the Directors propose that the name of the Company is
changed to Applied Optical Technologies plc.
<PAGE>
In addition, Applied Holographics announced today its interim results for the
six months ended 30 September 1999.
INFORMATION ON OPSEC AND BRIDGESTONE
OPSEC
OpSec designs, manufactures and supplies imaging-based foils, labels, laminates
and technology and optical coatings for a range of security, document
authentication, product protection and anti-tampering applications.
OpSec operates in five key areas:
- - BRAND PROTECTION - protection of branded and licensed products against
counterfeiting and diversion
- - DOCUMENT AUTHENTICATION - travellers cheques, credit cards, gift
certificates and event tickets
- - GOVERNMENT PRODUCTS - security features for passports, driving licences,
identification cards and other government-issued documents
- - PHARMACEUTICALS AND AGROCHEMICALS - authentication and tamper-evident
labels
- - PARTS AUTHENTICATION AND TRACKING - protection, authentication and tracking
of automotive, aircraft and other components
OpSec's products offer a range of overt and covert security technologies which
protect documents and products from forgery and counterfeiting, deter tampering,
provide authentication and track and prevent diversion. OpSec's technologies can
be used with a variety of marking systems, including labels, hang tags, hot
stamping foils, laminates, plastic pouches and threads.
OpSec's customers include US federal, state and overseas governments as well as
major companies and organisations. OpSec has production facilities on the East
Coast of the US and design and origination premises in Loughborough in the UK.
BRIDGESTONE
Bridgestone is also involved in providing security authentication products and
services for anti-counterfeiting and anti-diversion purposes to corporate and
government customers. Its products and services include embossed security
labels, data tracking and compliance and monitoring.
It is proposed that Bridgestone's printed and polymer labels operations will be
transferred after completion of the Bridgestone Acquisition to Keystone Imaging
Technology LLC, a company in which OpSec will retain a 19.9 per cent interest.
Bridgestone's continuing operations will be transferred to OpSec's existing
production facilities over a period of twelve months from completion of the
Bridgestone Acquisition.
BACKGROUND TO AND REASONS FOR THE ACQUISITION
Applied Holographics' strategy over the past few years has been to achieve
growth and improved profitability by focusing on specific products directed to
selected markets. The Directors believe that the Company now has established
market positions in the key product areas of security and selected packaging
applications.
<PAGE>
The Directors believe that the OpSec Acquisition will provide Applied
Holographics with the opportunity significantly to enhance its position in the
security market by combining the Company's existing expertise in currency and
document protection with OpSec's expertise in document and brand protection.
OpSec has a complementary product range and customer base, a strong sales and
marketing team, technical capability and experienced management.
The Enlarged Group will maintain production facilities in both the UK and the US
which the Directors believe will enable it to service its clients' increasing
focus on global sales. Applied Holographics will retain its packaging capability
where, increasingly, it will place an emphasis on branding and brand protection,
where the security benefits of the use of holography and related technologies
are increasingly being recognised by its customers. An immediate benefit of the
Acquisition will be the ability of OpSec and Applied Holographics to source from
each other products and technologies not currently in their respective
portfolios. This will provide enhanced marketing opportunities for both
companies.
DIRECTORS AND SENIOR MANAGEMENT OF THE ENLARGED GROUP
Mark Turnage, currently president and chief operating officer of OpSec, will
assume primary responsibility for the Enlarged Group's operations in the
Americas. He will join the Board upon completion of the Acquisition in the role
of Deputy Chief Executive. Richard Bard, currently chairman and chief executive
of OpSec, will stand down from his executive responsibilities within OpSec upon
completion of the Acquisition.
FINANCIAL EFFECTS OF THE ACQUISITION
The Acquisition is expected to enhance earnings per share (before goodwill
amortisation) for the year ending 31 March 2001.
CFC
The Company currently licenses technology to CFC for use by it in generating
holography sales in the US, Canada and Mexico. In return, the Company receives a
six per cent. royalty on all such sales. During the six months to 30 September
1999, the total royalties receivable by the Company from CFC under these
arrangements amounted to approximately US$213,000. As a consequence of the
Acquisition, the Company has agreed with CFC to terminate the existing
arrangements in return for a one-off severance payment by CFC to the Company of
approximately US$3.5 million. The existing joint venture between the Company and
Nimbus CD International Inc. in the US relating to the licensing of
anti-counterfeiting technologies for compact discs will not be affected by the
Acquisition.
CURRENT TRADING AND PROSPECTS FOR THE ENLARGED GROUP
Applied Holographics trading remains in line with expectations and, accordingly,
the Directors are confident in the outlook for the Enlarged Group for the
current financial year of the Company.
<PAGE>
THE PLACING
Under the terms of the Placing, 20,370,370 New Ordinary Shares are to be
conditionally placed with institutional and other investors, subject to the
terms and conditions of the Placing Agreement, at the Issue Price. 10,132,240
New Ordinary Shares have been placed firm with institutional and other
investors, whilst 10,238,130 New Ordinary Shares (the "Open Offer Shares") have
been placed subject to recall to satisfy valid applications by Qualifying
Shareholders under the Open Offer. The Placing and Open Offer has been fully
underwritten by Greig Middleton.
The Placing is conditional, INTER ALIA, upon the passing of the necessary
resolutions at the EGM, the Placing Agreement becoming unconditional (save for
the condition as to Admission), and upon Admission taking place. Dealings in the
New Ordinary Shares on the Official List are expected to commence on 11 January
2000.
THE OPEN OFFER
Pursuant to the Open Offer, the Open Offer Shares are being offered to
Qualifying Shareholders at the Issue Price, free of expenses and PRO RATA to
their existing shareholdings, on the basis of:
5 OPEN OFFER SHARES FOR EVERY 13 EXISTING ORDINARY SHARES
held at close of business on the Record Date and so in proportion for any other
number of Ordinary Shares then held. Fractional entitlements will not be
allotted.
Application forms are personal to shareholders and may not be transferred except
to satisfy BONA FIDE market claims.
NEW ORDINARY SHARES
The New Ordinary shares will be issued fully paid and will rank, at the time of
issue, PARRI PASSU in all respects with the existing Ordinary Shares save that
(with the exception of the Open Offer shares) the New Ordinary Shares will not
rank for entitlements under the Open Offer.
USE OF PROCEEDS
The proceeds of the Placing and Open Offer and Mark Turnage's subscription for
New Ordinary Shares will be approximately L52.7 million, net of expenses. Of
these proceeds approximately L46.17 million will be used to fund the Acquisition
and to refinance borrowings taken out to fund the OpSec Loan, with the balance
providing working capital for the Enlarged Group.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
1999/2000
Record date for the Open Offer 22 November
Latest time and date for splitting Application Forms 3.00pm on 17 December
(to satisfy BONA FIDE market claims only)
<PAGE>
Latest time and date for receipt of Forms of Proxy 11.00am on 21 December
1999/2000
LATEST TIME AND DATE FOR RECEIPT OF COMPLETED 3.00pm on 21 December
APPLICATION FORMS AND PAYMENT IN FULL UNDER
THE OPEN OFFER
Extraordinary General Meeting 11.00am on 23 December
Dealings in New Ordinary Shares expected to commence 11 January
Delivery in CREST of New Ordinary Shares to be held in 11 January
uncertificated form
Despatch of definitive share certificates in respect of the by 14 January
New Ordinary Shares
<PAGE>
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 1999
CHAIRMAN'S STATEMENT
I am pleased to report that in the six months to 30 September 1999 profits rose
to L1,193,723 (1998: L966,256) on Group turnover of L7,481,515 (1998:
L7,224,337). The Group operating profit was L112,307 (1998: L636,970). The
contribution from joint ventures and associated undertakings was L1,193,406
(1998: L383,808).
In my Chairman's statement contained within the last Annual Report, I cautioned
that the disruption caused by the installation of the facilities required to
enable the production facility at Crowther to undertake bank note and high
security work would inevitably impact production in the early months of the
current year. This was the case and the first three months of the period
suffered from a fall in volumes coupled with a high level of rejects. As a
result, there was a loss for the first quarter but this was fully offset by
profits in the subsequent three months as the upgraded plant became fully
operational.
A major contribution to profits in the first six months resulted from the
machine element of a new Microsoft contract. It should be noted that whilst the
contribution via our share in the 3DCD joint venture contract is largely
accounted for in the first half year, the Group will receive a significant
benefit in the second half from the associated contract to supply security
products to the production units.
Our production facility now has full ECB approval and initial orders for Euro
note production have been secured. Unsurprisingly, given the complexity of
introducing the Euro, there has been some slippage in the overall programme with
some consequent delay in the placing of orders for holographic patches and
stripes. We have been pleased with the reception which our products have
received and remain confident that we will win significant business with a
number of bank note printers and paper manufacturers.
Our banknote and high security activities are not solely directed at the Euro
programme and during the period we received orders for holographic thread
material and patches for use in a number of currency applications by countries
outside the EU. This continues to be an expanding market and with our enhanced
facilities we are well placed to benefit from the growth in this market.
The use of holography for document and brand protection continues to expand into
new areas. The largest of the general security contracts won in the period was a
three year contract with a major European railway operation for a national
transport scheme. Initial production for this order will start in the second
half of the current year.
The unaudited consolidated cash flow statement reflects the impact of debtor
levels arising from the higher sales in August and September coupled with a
continuing high level of capital expenditure without the benefit of a
distribution from 3DCD which will be received in the second half.
In general the market for holography continues to expand rapidly worldwide and
in order to address the opportunity which this presents we continue to examine a
number of opportunities to acquire or invest in companies able to service
discreet geographic areas. This year we acquired a 25% holding in MTM Guvenlik
ve Holografik Kart Sistemleri San.Tic. A.S. (MTM) - a Turkish company well
positioned to supply both the public and private sectors in Turkey and
neighbouring countries.
<PAGE>
We announced today the proposed acquisition of Optical Security Group, Inc
("OpSec"). Full details of OpSec's business and the related equity fund-raising
are contained in a circular to shareholders which is being posted today.
PROSPECTS
We continue to anticipate a satisfactory outturn for the current year and,
equally importantly, to lay the base for significant advances in profitability
in future years resulting from the proposed merging of OpSec's operations with
our own activities.
D A Mahony
CHAIRMAN
30 NOVEMBER 1999
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE 6 MONTHS TO 30 SEPTEMBER 1999
<TABLE>
<CAPTION>
Unaudited Unaudited
6 months 6 months Year ended
ended ended 31 March
30 Sept 1999 30 Sept 1998 1999
L L L
<S> <C> <C> <C>
TURNOVER: GROUP AND SHARE OF JOINT VENTURES 10,150,113 7,453,669 14,715,782
Less: share of joint ventures' turnover (2,668,598) (229,332) (621,515)
------------------------------------------------
GROUP TURNOVER 7,481,515 7,224,337 14,094,267
Cost of sales (5,342,650) (4,486,802) (8,862,935)
------------------------------------------------
GROSS PROFIT 2,138,865 2,737,535 5,231,332
Net operating expenses (2,026,558) (2,100,565) (3,901,651)
------------------------------------------------
GROUP OPERATING PROFIT 112,307 636,970 1,329,681
Share of operating profit of joint ventures 1,193,406 207,311 379,633
Share of operating profit of associated undertakings -- 176,497 176,497
------------------------------------------------
OPERATING PROFIT 1,305,713 1,020,778 1,885,811
Net interest payable and similar charges (111,990) (54,522) (103,524)
------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,193,723 966,256 1,782,287
Taxation -- -- (16,215)
------------------------------------------------
PROFIT FOR THE FINANCIAL PERIOD AFTER TAXATION 1,193,723 966,256 1,766,072
------------------------------------------------
BASIC EARNINGS PER SHARE 4.5P 3.7p 6.7p
------------------------------------------------
DILUTED EARNINGS PER SHARE 4.2P 3.5p 6.4p
------------------------------------------------
</TABLE>
Diluted earnings per share for the 6 months ended 30 September 1998 have been
restated in accordance with Financial Reporting Standard number 14.
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 1999
<TABLE>
<CAPTION>
Unaudited Unaudited
At At At
30 September 30 September 31 March
1999 1998 1999
L L L
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 7,324,076 4,403,725 6,405,536
INVESTMENTS
Investments in joint ventures
Share of gross assets 1,425,922 56,426 92,811
Share of gross liabilities (511,189) (67,873) (85,546)
------------------------------------------------
914,733 (11,447) 7,265
------------------------------------------------
Investments in associates 185,955 812,036 --
Other investments 6,305 -- 6,305
------------------------------------------------
8,431,069 5,204,314 6,419,106
------------------------------------------------
CURRENT ASSETS
Stocks 1,441,358 1,150,252 1,425,321
Debtors
- - amounts falling due within one year 4,829,217 4,010,534 3,844,048
- - amounts falling due after more than one year 537,536 -- 659,431
------------------------------------------------
5,366,753 4,010,534 4,503,479
Cash at bank and in hand 211,965 1,181,256 2,636,518
------------------------------------------------
7,020,076 6,342,042 8,565,318
CREDITORS: Amounts falling due within one year (3,941,513) (3,233,225) (4,611,396)
------------------------------------------------
NET CURRENT ASSETS 3,078,563 3,108,817 3,953,922
------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 11,509,632 8,313,131 10,373,028
------------------------------------------------
CREDITORS: Amounts falling due after more than one year 3,226,085 2,096,379 3,343,594
Capital and reserves
Called up equity share capital 1,333,707 1,326,935 1,330,957
Share premium account 5,607,370 5,509,994 5,554,219
Reserves 1,342,470 (620,177) 144,258
------------------------------------------------
Equity shareholders' funds 8,283,547 6,216,752 7,029,434
------------------------------------------------
11,509,632 8,313,131 10,373,028
------------------------------------------------
</TABLE>
<PAGE>
APPLIED HOLOGRAPHICS PLC
CONSOLIDATED CASHFLOW STATEMENT FOR THE 6 MONTHS TO 30 SEPTEMBER 1999
<TABLE>
<CAPTION>
Unaudited Unaudited
Six months Six months
ended ended Year ended
30 September 30 September 31 March
1999 1998 1999
L L L
<S> <C> <C> <C>
CASHFLOW FROM OPERATING ACTIVITIES (459,571) 1,521,275 3,291,239
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (111,990) (54,522) (103,524)
TAXATION -- -- (16,215)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (1,263,222) (955,251) (3,113,652)
ACQUISITIONS AND DISPOSALS (185,955) -- 5,422
FINANCING
Issue of shares 55,901 37,226 85,473
(Decrease)/increase in debt (459,716) (116,965) 1,738,262
------------------ -------------------- --------------
Net cash (outflow)/inflow from financing (403,815) (79,739) 1,823,735
------------------ -------------------- --------------
(DECREASE)/INCREASE IN CASH IN THE PERIOD (2,424,553) 431,763 1,887,025
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
(DECREASE)/INCREASE IN CASH IN THE PERIOD (2,424,553) 431,763 1,887,025
------------------ -------------------- --------------
Cash outflow/ (inflow) from decrease/(increase) in
debt and lease financing 459,716 116,965 (1,738,262)
------------------ -------------------- --------------
Change in net debt resulting from cash flows (1,964,837) 548,728 148,763
New finance leases (780,775) (88,109) (88,109)
------------------ -------------------- --------------
MOVEMENT IN NET DEBT IN PERIOD (2,745,612) 460,619 60,654
NET DEBT AT 1 APRIL 1999 (1,180,167) (1,240,821) (1,240,821)
------------------ -------------------- --------------
NET DEBT AT 30 SEPTEMBER 1999 (3,925,779) (780,202) (1,180,167)
================== ==================== ==============
</TABLE>
<PAGE>
NOTES
1. COMPANIES ACT 1985
The figures for the year ended 31 March 1999 are an abridged version of the
Group's full accounts for that year which received an unqualified auditor's
report and have been filed with the registrar of Companies.
The figures for the six months ended 30 September 1999 and the six months ended
30 September 1998 have not been audited or reviewed by the auditors.
2. GROUP TURNOVER BY ACTIVITY
<TABLE>
<CAPTION>
Six months Six months Year ended
ended ended 31 March
30 September 30 September 1999
1999 1998
Unaudited Unaudited
L L L
<S> <C> <C> <C>
HolographY
Security 2,571,879 2,320,744 4,922,002
Packaging 3,082,855 3,056,154 5,558,068
Other 573,184 358,151 827,097
6,227,918 5,735,049 11,307,167
Metallising
Toll 696,469 673,135 1,569,194
Metallised film 557,128 816,153 1,217,906
---------------- -------------------- --------------
1,253,597 1,489,288 2,787,100
7,481,515 7,224,337 14,094,267
---------------- -------------------- --------------
</TABLE>
3. SHARE OF OPERATING PROFIT OF JOINT VENTURES
The share of operating profit of joint ventures represents the Group's share of
the profits of 3DCD for the six months ended 30 September 1999.
4. TAXATION
No taxation is payable in the current period due to losses brought forward from
prior years. At 30 September 1999 there were no deferred taxation liabilities
and the group had significant losses available to carry forward to offset
against future profits of the same trade.
5. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Six months Six months Year ended
ended ended 31 March
30 September 30 September 1999
1999 1998
Unaudited Unaudited
L L L
<S> <C> <C> <C>
Profit for the financial year (Basic EPS) 1,193,723 966,256 1,766,072
Interest saved on conversion of loan stock 52,000 52,000 104,000
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Profit used for Diluted EPS 1,245,723 1,018,256 1,870,072
Weighted average number of shares
For basic EPS 26,631,981 26,498,541 26,531,187
Conversion of convertible loan stock 2,166,667 2,166,667 2,166,667
Exercise of share options 814,538 381,704 494,324
For Diluted EPS 29,613,186 29,046,912 29,192,178
</TABLE>
6. A copy of the Interim Results announcement is being sent to all shareholders.
Further copies are available to members of the public from the Company's
registered office, 22 Sedling Road, Washington, Tyne & Wear, NE38 9BZ.
<PAGE>
Exhibit 99(b)
DATED 30 NOVEMBER 1999
APPLIED HOLOGRAPHICS PLC
- and -
GREIG MIDDLETON & CO. LIMITED
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PLACING AND OPEN OFFER AGREEMENT
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WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax. 0171 246 7777
REF NEF/HMC/110634/CC0259251.07
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE NUMBER
<S> <C> <C>
1. DEFINITIONS AND INTERPRETATION..................................................................1
2. CONDITIONS......................................................................................6
3. FOREIGN SHAREHOLDERS............................................................................8
4. APPOINTMENT OF AGENT............................................................................8
5. THE OPEN OFFER AND PLACING......................................................................9
6. ALLOTMENT AND REGISTRATION.....................................................................10
7. PAYMENT........................................................................................11
8. COMMISSION, FEES AND EXPENSES..................................................................11
9. WARRANTIES.....................................................................................12
10. INDEMNITY......................................................................................14
11. TERMINATION....................................................................................15
12. ANNOUNCEMENTS AND COVENANTS....................................................................16
13. WITHHOLDING....................................................................................17
14. REMEDIES AND ENFORCEMENT.......................................................................17
15. INVALIDITY.....................................................................................17
16. ASSIGNMENT.....................................................................................18
17. WAIVER.........................................................................................18
18. TIME OF THE ESSENCE............................................................................18
19. VARIATION......................................................................................18
20. ENTIRE AGREEMENT...............................................................................18
21. COUNTERPARTS...................................................................................18
22. NOTICES........................................................................................19
23. PROPER LAW AND JURISDICTION....................................................................20
SCHEDULE 1 Documents for delivery to the Sponsor........................................................21
SCHEDULE 2 The Warranties...............................................................................23
SCHEDULE 3 Warranty Certificate.........................................................................29
</TABLE>
<PAGE>
THIS AGREEMENT is made on the 30th day of November 1999.
BETWEEN:
(1) APPLIED HOLOGRAPHICS PLC (registered in England with number 1688482) whose
registered office is at 22 Sedling Road, District 6, Washington, Tyne and
Wear NE38 9BZ (the "COMPANY"); and
(2) GREIG MIDDLETON & CO. LIMITED (registered in England with number 2752982)
whose registered office is at 30 Lombard Street, London EC3V 9EN (the
"SPONSOR").
RECITALS
(A) The Company has an authorised share capital of 1,900,000 pounds sterling
divided into 38,000,000 Existing Ordinary Shares of which 26,674,139 have
been issued and are fully paid up.
(B) Subject to the terms and conditions set out in this Agreement, the Sponsor
has agreed:
(i) as agent for the Company to offer pursuant to the Open Offer the New
Ordinary Shares for subscription by Qualifying Shareholders at the
Placing Price on the basis of 5 New Ordinary Shares for every 13
Existing Ordinary Shares held as shown in the register of members of
the Company at the close of business on the Record Date;
(ii) as agent for the Company to place New Ordinary Shares with
institutional and other investors, certain of which will be placed
firm and the balance of which will be placed subject to reduction by a
proportion based on the number of New Ordinary Shares subscribed for
pursuant to the Open Offer; and
(iii) as principal itself to subscribe for such of the Placing Shares as
are not subscribed for pursuant to the Open Offer or pursuant to the
Placing.
(C) The Company intends to seek admission to the Official List of the New
Ordinary Shares.
(D) Pursuant to the OpSec Merger Agreement, the Company has conditionally
agreed to acquire the whole of the issued share capital of OpSec.
(E) Pursuant to the OpSec Loan Agreement, the Company has conditionally agreed
to provide the Loan to fund the Bridgestone Acquisition.
NOW IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
In this Agreement (including its recitals and schedules):
1.1 DEFINED TERMS
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"ACCEPTANCE DATE" means 21 December 1999;
"ADMISSION" means admission of the New Ordinary Shares to the Official List
becoming effective as a result of an announcement under paragraph 7.1 of
Chapter 7 of the Listing Rules;
"AGREED FORM" means in the form of a document or draft agreed between the
parties on or prior to the date hereof and initialled by them or on their
behalf for the purposes of identification;
"APPLICATION FORM" means the application form for use by Qualifying
Shareholders in connection with the Open Offer in the agreed form;
"ASSOCIATE" has the meaning given to the words 'associate' and 'associated
company' by sections 417 and 416 of the Income and Corporation Taxes Act
1988;
"BRIDGESTONE" has the meaning set out in the Circular;
"BRIDGESTONE ACQUISITION" has the meaning set out in the Circular;
"BUSINESS DAY" means a day (other than a Saturday) on which dealings take
place on the Stock Exchange;
"CERTIFICATED SHARES" means those of the New Ordinary Shares which are not
Uncertificated Shares;
"CIRCULAR" means the circular comprising a notice of extraordinary general
meeting of shareholders of the Company and a prospectus prepared in
accordance with the Listing Rules in the agreed form from the Company to
its shareholders giving details of, inter alia, (1) the Placing and the
Open Offer, (2) the OpSec Merger, (3) the Loan, (4) the Bridgestone
Acquisition and (5) the interim results of the Group for the six months
ended 30 September 1999;
"CRESTCO" means CRESTCo Limited;
"CREST SYSTEM" means the settlement system operated by CRESTCo pursuant to
the Uncertificated Securities Regulations 1995;
"CREST MEMBER" means a person who has been admitted by CRESTCo as a member
of the CREST System;
"DIRECTORS" means the directors of the Company;
"EGM" means the extraordinary general meeting of shareholders of the
Company notice of which is set out in the Circular;
"ENGAGEMENT LETTER" means the letter of agreement made between the Company
and the Sponsor dated 17 November 1999;
"ESTIMATE OF EXPENSES" means the schedule of estimated expenses in the
agreed form in
<PAGE>
respect of the expenses of the advisers to the Company to be incurred in
relation to the Proposals (as defined in the Circular);
"EXISTING ORDINARY SHARES" means the Ordinary Shares in issue at the date
of the EGM;
"FSA" means the Financial Services Act 1986;
"GROUP" means the Company and the Subsidiaries or, where appropriate, any
one or more of them;
"GROUP COMPANY" means any company in the Group;
"INTERIM RESULTS" means the interim results of the Group for the six months
ended 30th September 1999 contained in the Circular;
"ISSUE DOCUMENTS" means the Circular, the Application Form, the Press
Announcement and (in the case of those invited to become Placees) the
Placing Letter;
"LAUNCH DATE" means 30 November 1999;
"LISTING RULES" means the listing rules made by the Stock Exchange pursuant
to Part IV of the FSA (as from time to time amended, supplemented or
replaced);
"LOAN" means the loan to be made by the Company to OpSec pursuant to the
OpSec Loan Agreement;
"NEW ORDINARY SHARES" means the 20,370,370 new Ordinary Shares to be
allotted by the Company for cash pursuant to the Placing and the Open
Offer;
"OPEN OFFER" means the open offer to Qualifying Shareholders to apply to
subscribe for New Ordinary Shares on the terms and conditions in the Issue
Documents;
"OPEN OFFER SHARES" means New Ordinary Shares which are the subject of the
Open Offer;
"OFFER CLOSING DATE" means the latest time and date for acceptance and
payment under the Open Offer;
"OFFICIAL LIST" means the Official List of the Stock Exchange;
"OPSEC" means Optical Security Group, Inc.;
"OPSEC LOAN AGREEMENT" has the meaning set out in the Circular;
"OPSEC MERGER" has the meaning set out in the Circular;
"OPSEC MERGER AGREEMENT" has the meaning set out in the Circular;
"OPSEC SHARES" has the meaning set out in the Circular;
"ORDINARY SHARES" means ordinary shares of 5 pence each in the capital of
the Company;
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"PERSON CONNECTED" has the meaning given to that expression by section 346
of the Companies Act 1985;
"PLACEES" means persons procured by the Sponsor to subscribe for the New
Ordinary Shares pursuant to Clause 5.1.2;
"PLACING" means the placing of the New Ordinary Shares with Placees by the
Sponsor as described in this Agreement (either placed firm or subject to
the rights of Qualifying Shareholders under the Open Offer);
"PLACING LETTER" means the form of letter in the agreed form to be
despatched by the Sponsor to prospective Placees inviting them to apply for
New Ordinary Shares pursuant to the Placing;
"PLACING PRICE" means 270 pence per New Ordinary Share;
"PLACING SHARES" means New Ordinary Shares that are not subscribed pursuant
to the Open Offer in accordance with Clause 5.4;
"PRESS ANNOUNCEMENT" means the press announcement in the agreed form
concerning the Open Offer and the despatch of the Issue Documents;
"PROHIBITED SHAREHOLDERS" means Qualifying Shareholders with registered
addresses in the United States of America (or Shareholders with registered
addresses elsewhere whom the Company knows or reasonably believes to be
holding Existing Ordinary Shares for the account or benefit of a US Person
(as defined in Regulation S under the US Securities Act of 1933)) or Canada
or their respective territories or possessions or the Commonwealth of
Australia, Japan or the Republic of Ireland;
"PROXY FORM" the form of proxy for use in connection with the EGM in the
agreed form;
"QUALIFYING SHAREHOLDERS" means Shareholders on the register of members of
the Company at the close of business on the Record Date and those with a
bona fide market claim, other than Prohibited Shareholders;
"RECORD DATE" means 22 November 1999;
"REGISTRARS" means IRG plc, Balfour House, 390-398 High Road, Ilford, Essex
IG1 1NQ;
"REGISTRARS' AGREEMENT" means the agreement between the Company and the
Registrars in relation to the performance by the Registrars of the function
of registrars and receiving bankers in connection with the Placing and the
Open Offer;
"RELATED PERSONS" means, in relation to a Director, that Director, his
associates and persons connected with him;
"REPORTING ACCOUNTANT" means PricewaterhouseCoopers;
"RESOLUTIONS" means the resolutions set out in the notice convening the EGM
included in the
<PAGE>
Circular but excluding the resolutions 5 and 6 in that notice;
"SHAREHOLDERS" means holders of fully paid Existing Ordinary Shares;
"SHARE OPTION SCHEMES" has the meaning given to that term in the Circular;
"STOCK EXCHANGE" means London Stock Exchange Limited;
"SUBSIDIARIES" means the subsidiaries of the Company as set out in Part 8
of the Circular;
"TENDER OFFER" has the meaning set out in the Circular;
"UNCERTIFICATED SECURITIES" means those New Ordinary Shares in respect of
which Placees or Qualifying Shareholders (being CREST members) validly
elect for issue in uncertificated form in the CREST System;
"VERIFICATION NOTES" means the verification questions in the agreed form
together with the answers thereto prepared for the purpose of
substantiating certain statements in the Circular;
"WARRANTIES" means the warranties, representations and undertakings
referred to in Clause 9 and set out in Schedule 2;
"WARRANTY CERTIFICATE" means a certificate in the form set out in Schedule
3; and
"WORKING CAPITAL REPORT" means the cashflow and working capital report in
respect of the Group prepared by the Reporting Accountant and adopted by
the Company in the agreed form.
1.2 Save as expressly stated herein or unless the context otherwise requires,
terms and expressions defined in the Circular shall have the same meaning
herein.
1.3 The recitals and schedules form part of this Agreement.
1.4 The table of contents and headings and sub-headings are for convenience
only and shall not affect the construction of this Agreement.
1.5 Unless the context otherwise requires, words denoting the singular shall
include the plural and vice versa and references to any gender shall
include all other genders. References to any person (which for the purposes
of this Agreement shall include bodies corporate, unincorporated
associations, partnerships, governments, governmental agencies and
departments, statutory bodies or other entities, in each case whether or
not having a separate legal personality) shall include that person's
successors.
1.6 References to Recitals, Schedules and Clauses are to (respectively)
recitals to, schedules to, and Clauses of this Agreement (unless otherwise
specified) and references within a schedule to paragraphs are to paragraphs
of that schedule (unless otherwise specified).
1.7 References to any English legal terms for any action, remedy, method of
judicial proceedings, legal document, legal status, court, organisation,
body, official or any legal concept, state of affairs or thing shall in
respect of any jurisdiction other than England be deemed to include
<PAGE>
that which most nearly approximates in that jurisdiction to the English
legal term.
1.8 Any reference to "WRITING" or "WRITTEN" includes faxes and any legible
reproduction of words delivered in permanent and tangible form (but does
not include e-mail).
1.9 References in this Agreement to any statute, statutory provision, directive
of the Council of the European Union (whether issued jointly with any other
person or under any other name) or other legislation include a reference to
that statute, statutory provision, directive or legislation as amended,
extended, consolidated or replaced from time to time (whether before or
after the date of this Agreement) and include any order, regulation,
instrument or other subordinate legislation made under the relevant
statute, statutory provision, directive or legislation.
1.10 References to times of the day are (unless otherwise expressly provided) to
London time and references to a day are to a period of 24 hours running
from midnight.
1.11 Words and expressions defined in or for the purposes of the recitals and/or
the schedules shall have the same meaning in this Agreement.
1.12 References to this Agreement to "material" mean (unless otherwise stated)
material in the context of the Placing and/or the Open Offer.
2. CONDITIONS TO SPONSOR'S OBLIGATIONS
2.1 The obligations of the Sponsor under this Agreement are conditional upon:
2.1.1 the Circular having been approved by the Stock Exchange in accordance
with the Listing Rules not later than 4.00 p.m. on the Launch Date
("REGISTRATION");
2.1.2 an application for Admission in the form set out in schedule 3 to the
Listing Rules in respect of the New Ordinary Shares signed on behalf
of the Company having been delivered to the Stock Exchange on or
before midnight on the Launch Date;
2.1.3 two copies of the Circular having been delivered to the Registrar of
Companies in England and Wales as required by section 149 of the FSA
prior to the despatch of the Circular, subject to the Circular having
first been approved by the Stock Exchange;
2.1.4 subject to Registration, the Press Announcement being released to the
Stock Exchange not later than 8.30 a.m. on the Launch Date;
2.1.5 subject to Registration, the Circular being published in accordance
with the FSA and the Listing Rules following Registration but not
later than [midnight] on the Launch Date;
2.1.6 the Schedule 14D-1 document being filed with the US Securities and
Exchange Commission pursuant to Rule 14D-1 of the US Securities
Exchange Act 1934;
2.1.7 the posting of the Tender Offer to the holders of OpSec Shares not
later than close
<PAGE>
of business in Colorado, USA on 7 December 1999;
2.1.8 the posting of the Circular and Proxy Form to shareholders following
Registration but not later than midnight on the Launch Date;
2.1.9 the posting of Application Forms to Qualifying Shareholders not
later than midnight on the Launch Date;
2.1.10 the passing (without amendment) of the Resolutions by not later than
23 December 1999 or, if later, the date of any adjournment of the
meeting intended for that date, provided that such subsequent
meeting shall be held within 5 Business Days of the adjourned
meeting;
2.1.11 the delivery to the Sponsor of each of the documents referred to in
Schedule 1 by close of business on the Launch Date and of two copies
of the Circular (signed by or on behalf of each of the Directors)
prior to its posting in accordance with Clause 2.1.8;
2.1.12 the Warranties remaining true and accurate to a material extent;
there having occurred no breach of any Warranty to a material
extent, as if the Warranties had been repeated by reference to the
facts and circumstances from time to time subsisting immediately
prior to the Sponsor's obligations under this Agreement becoming
unconditional and the Warranty Certificate having been duly executed
and dated and delivered by the Company to the Sponsor on the
Business Day immediately prior to Admission;
2.1.13 any supplementary prospectus which may be required pursuant to
section 147 of the FSA and the Listing Rules being approved by the
Stock Exchange and published in accordance with such provisions
prior to the commencement of dealings in the New Ordinary Shares;
2.1.14 the Sponsor not having validly exercised its right to terminate this
Agreement pursuant to Clause 11;
2.1.15 the Stock Exchange agreeing to admit the New Ordinary Shares to the
Official List subject to the passing of the Resolutions and to
allotment;
2.1.16 Admission having become effective not later than 8.00 a.m. on 11
January 2000 (or such later time and/or date as the Sponsor may
agree);
2.1.17 the following conditions contained in the OpSec Merger Agreement
having been fulfilled (and not waived or varied without the consent
of the Sponsor):
(i) the conditions contained in Section 6.01(c) therein not being
in existence as at the date of satisfaction of the conditions
contained in Clause 2.1.18;
(ii) the condition contained in Section 6.02(e) therein having been
fulfilled; and
<PAGE>
(iii) the conditions contained in Sections 6.02(a) and (c) therein
remaining true and correct in all material respects as at the
date of satisfaction of the conditions contained in Clause
2.1.18.
2.1.18 the Minimum Condition (as defined in the Tender Offer) having been
fulfilled (and not waived or varied without the consent of the
Sponsor) and none of the conditions listed in Section 14 of the
Tender Offer being in existence (and not waived by the Company
without the Sponsor's consent) as at the date of satisfaction of
the Minimum Condition.
2.2 The conditions referred to in Clause 2.1 may be waived, by the Sponsor, in
whole or in part, by notice in writing by the Sponsor to the Company.
2.3 Until such time as any of the conditions specified in Clause 2.1 becomes
incapable of being fulfilled, in the reasonable opinion of the Sponsor, or
the time and/or date for its fulfilment has expired, each of the parties
hereto shall comply with the obligations on its part contained in this
Agreement.
2.4 If all of the conditions set out in Clause 2.1 are not fulfilled or waived
in accordance with Clause 2.2 by the relevant times and dates specified in
Clause 2.1, the respective obligations of the parties hereunder shall ipso
facto cease and determine and, except in relation to any breach of any
provision of this Agreement prior thereto and save to the extent that
Clause 11.3 provides otherwise, no party will have any claim against any
other party, save as provided in Clauses 8, 9 and 10.
2.5 The Company will use all reasonable endeavours to procure that all the
conditions set out in Clause 2.1 are satisfied at or before the times and
dates referred to therein.
2.6 The Company shall take all such steps, execute all such documents, supply
such information and documents, give all such undertakings, pay all such
fees and other expenses, and do or procure to be done all such things as
may properly be required by the Stock Exchange in connection with the
application for Admission or as may be reasonably required by the Sponsor
to discharge the obligations of the Sponsor under this Agreement and/or for
the purposes of complying with any requirements of the Stock Exchange in
connection with the Placing and the Open Offer and the application for
Admission, and shall generally use all reasonable endeavours to obtain
Admission by not later than 8.00 a.m. on 11 January 2000 or such later date
as the Sponsor and the Company may agree.
2.7 The times and/or dates referred to in Clause 2.1 may be extended with the
written consent of the Sponsor, save that the date for satisfaction of the
condition in Clause 2.1.16 shall not be extended beyond the date falling
two weeks after the date set out in that Clause.
2.8 The Sponsor shall extend to the Company such assistance in connection with
the application for Admission and the publication of any supplementary
prospectus as is reasonable and appropriate to its obligations and duties
as sponsor to such application.
3. FOREIGN SHAREHOLDERS
<PAGE>
3.1 The Company shall procure that Application Forms are not sent to Prohibited
Shareholders. Copies of the Circular and Proxy Form will however be posted
to Prohibited Shareholders, for information only.
3.2 The Company undertakes to the Sponsor that neither it, its affiliates nor
any person acting on its instructions has engaged or will (i) engage in any
directed selling efforts in the United States (for the purposes of the
foregoing, "directed selling efforts" and "United States" shall have the
meanings ascribed to them in Regulation S under the US Securities Act of
1933) nor (ii) engage in any activities in any jurisdiction outside the
United Kingdom in respect of the New Ordinary Shares (or any of them)
which, in either case, would result in a breach of applicable securities
laws or regulations in those jurisdictions or result in the Sponsor
incurring any liability in connection therewith.
4. APPOINTMENT OF AGENT
4.1 The Company irrevocably and unconditionally appoints the Sponsor as its
agent to procure subscribers for the Placing Shares, subject to the rights
of Qualifying Shareholders pursuant to the Open Offer, at the Placing Price
and otherwise on the terms and subject to the conditions set out in this
Agreement and in the Issue Documents, and the Sponsor, relying on the
covenants, Warranties and indemnities of the Company contained in this
Agreement, accepts such appointment.
4.2 The Company confirms that the appointment made by Clause 4.1 confers on the
Sponsor all powers and authorities on behalf of the Company which are
necessary for, or reasonably incidental to, the Placing and the making of
the Open Offer and the procuring of subscribers for the New Ordinary Shares
on the basis set out in this Agreement and in the Issue Documents and the
Company agrees to ratify and confirm everything which the Sponsor shall
lawfully do in the exercise of such powers and authorities.
4.3 The Company authorises any director of the Sponsor to give to the
Registrars all instructions which the Sponsor considers necessary or
expedient in relation to the Placing and/or the Open Offer and agrees that
the Sponsor may delegate to the Registrars such powers and authorities as
the Sponsor considers necessary or expedient in relation to the Placing
and/or the Open Offer.
5. THE OPEN OFFER AND PLACING
5.1 Subject to the terms and conditions in this Agreement, the Sponsor hereby
agrees:
5.1.1 as agent for the Company to make the Open Offer on the terms and
conditions set out in the Issue Documents;
5.1.2 as agent for the Company to use its reasonable endeavours to procure
persons to subscribe for the Placing Shares by way of (i) a firm
placing participation (which is not subject to any reduction pursuant
to the rights of Qualifying Shareholders under the Open Offer); and
(ii) a conditional placing participation (which is subject
<PAGE>
to reduction pursuant to the recall of such number of New Ordinary
Shares as it is required to satisfy valid applications by Qualifying
Shareholders under the Open Offer), on the terms and conditions set
out in the Issue Documents; and
5.1.3 if there are any Placing Shares which have not been subscribed
pursuant to the Open Offer in accordance with Clause 5.4 or for which
Placees are not procured, as principal itself to subscribe for any of
such Placing Shares not later than Admission on the terms and
conditions set out in the Issue Documents, save as modified by this
Agreement,
such subscription in each case being at the Placing Price.
5.2 Subject to the terms and conditions of this Agreement, the Company agrees
that the Sponsor may implement the Placing of the Placing Shares at the
Placing Price on the terms and conditions set out in the Placing Letter and
on the basis of the information contained in the Issue Documents. The
Company hereby acknowledges and consents to the Placing upon the basis of
the information contained in or referred to in the Placing Letter and
hereby consents to the issue of the Placing Letter, having attached thereto
the Issue Documents (whether in draft or final form), whether before or
after this Agreement is executed.
5.3 The Sponsor shall, as agent for the Company in relation to the New Ordinary
Shares, make the Open Offer of the New Ordinary Shares at the Placing Price
on the terms and subject to the conditions set out in the Issue Documents.
The Company hereby acknowledges and consents to the Open Offer being made
by the Sponsor upon the basis of the information contained in the Issue
Documents and hereby consents to the issue of the Issue Documents in
connection therewith.
5.4 For the purposes of its agency pursuant to Clause 5.1.2, subject to the
terms of this Agreement, the Sponsor shall use its reasonable endeavours to
procure subscribers for all or any of the New Ordinary Shares not
subscribed pursuant to the Open Offer and for the purposes of this Clause
5.4 a New Ordinary Share shall be deemed to be "subscribed pursuant to the
Open Offer" if a valid application therefor in the agreed form is received
before the Offer Closing Date and is accompanied by a cheque or other
remittance for the amount payable in respect thereof (whether or not such
cheque or remittance is paid on presentation).
6. ALLOTMENT AND REGISTRATION
6.1 As soon as practicable following the closing of the Open Offer and in any
event not later than the close of business on the Acceptance Date, the
Company will notify the Sponsor in writing (or procure that it is so
notified) of the aggregate numbers of each of the New Ordinary Shares
subscribed pursuant to the Open Offer. Following such notification, and in
any event within two Business Days thereafter, the Sponsor shall nominate
the Placees to whom such Placing Shares should be allotted and issued
pursuant to the terms hereof.
6.2 As soon as practicable following the closing of the Open Offer (and in any
event prior to Admission) and subject to and upon satisfaction or waiver of
each of the conditions set out in Clauses 2.1, other than Admission, the
Company shall allot at the Placing Price the New Ordinary Shares
conditionally only upon Admission to:
<PAGE>
6.2.1 Qualifying Shareholders who have validly applied for New Ordinary
Shares under the Open Offer;
6.2.2 such persons as are nominated by the Sponsor as Placees in accordance
with Clauses 5.4 and 6.1; and
6.2.3 the Sponsor itself in respect of any Placing Shares for which it is
required itself to subscribe as principal pursuant to Clause 5.1.3.
6.3 The Company undertakes to the Sponsor that the New Ordinary Shares will,
when issued and fully paid, rank pari passu in all respects with the
Ordinary Shares in issue immediately following the EGM.
6.4 The Company undertakes to the Sponsor that the allotment and issue of the
New Ordinary Shares will be made upon and subject to the memorandum and
articles of association of the Company and the terms and conditions and on
the basis of the information set out in the Issue Documents.
6.5 The Company undertakes to the Sponsor that (as far as it is lawful so to
do) the Company will use the whole of the net proceeds of the Placing and
Open Offer in the manner set out in the Circular.
6.6 The Company will procure that:
6.6.1 the Registrars will promptly register (without registration fee) as
holders of New Ordinary Shares the persons entitled thereto under
Clause 6.2 prior to the close of business on the date of Admission;
6.6.2 subject to the registrations referred to in Clause 6.6.1 being
effected, definitive certificates in respect of the Certificated
Shares will be despatched as soon as reasonably practicable to the
persons registered as the holders of such shares pursuant to Clause
6.6.1;
6.6.3 the Uncertificated Shares will be credited as soon as practicable
after Admission to the accounts maintained in the CREST System by the
persons entitled thereto; and
6.6.4 the Registrars will be provided with all necessary authorisations and
information to enable them to perform their duties as registrars in
accordance with and as contemplated by the terms of the Issue
Documents and this Agreement.
7. PAYMENT
Not later than the close of business on the Business Day following the date
of Admission the Sponsor will, subject to Clauses 8.3, 8.4 and 8.5 (and
provided that the conditions in Clause 2.1 shall have been satisfied or
waived), pay to the Company in cleared funds an amount equal to the Placing
Price multiplied by the aggregate number of Placing Shares for which the
Sponsor or Placees are obliged to subscribe pursuant to Clauses 5.1.2 and
5.1.3. Upon
<PAGE>
payment as aforesaid, the Sponsor shall have no further obligations to the
Company under this Agreement.
8. COMMISSION, FEES AND EXPENSES
8.1 Subject to Clause 8.4, the Company shall pay to the Sponsor for its
services under this Agreement:
8.1.1 a fee in the amount set out in the Engagement Letter (the "CORPORATE
FEE"); plus
8.1.2 a commission of 2 per cent. of the value of subscription moneys
raised pursuant to the Placing and Open Offer (the "COMMISSION") (out
of which the Sponsor agrees to pay any sub-underwriting commissions
payable).
8.2 The Corporate Fee shall be payable as set out in the Engagement Letter.
8.3 The Commission shall be payable upon receipt by the Company of the
subscription moneys raised pursuant to the Placing and Open Offer (the
"SUBSCRIPTION MONEYS"). The Company hereby agrees and consents that an
amount equal to the Commission payable shall, at the Sponsor's option, be
deducted by the Sponsor from the Subscription Moneys held by the Sponsor
and retained in satisfaction of the payment of the Commission.
8.4 In the event that the transaction shall terminate, whether pursuant to
Clause 11 or otherwise, prior to Admission, the Company shall pay to the
Sponsor (or the Sponsor shall retain, as appropriate) the Corporate Fee on
the basis set out in the Engagement Letter.
8.5 Subject to Clause 8.7, the Company shall pay (or reimburse the Sponsor, as
appropriate) the costs and expenses of, and incidental to, the arrangements
referred to or contemplated in this Agreement, the application for
Admission, the Placing, the Open Offer and the transactions connected with
it including, without limitation, the following: (a) all fees payable to
the Stock Exchange; (b) all accountancy, legal and other professional
expenses of the Company and the Sponsor (including the Sponsor's legal fees
and all accommodation and travelling expenses) (c) the fees and expenses
payable to the Registrars; (d) the costs of preparing, printing,
advertising and circulating the Issue Documents, the Placing and the Open
Offer; and (e) any stamp duty or stamp duty reserve tax and any related
costs, fines, penalties or interest arising in respect of any allotment of
New Ordinary Shares pursuant to the Placing or the Open Offer.
8.6 In the event that any of the costs or expenses referred to in Clause 8.5
are in the first instance incurred by the Sponsor as agent on behalf of the
Company, the Company shall reimburse the Sponsor in respect of them,
provided that the Sponsor shall procure wherever possible that any relevant
supplier submits all invoices in respect of such costs and expenses
addressed to the Company.
8.7 Where the Company is liable to make any payment or reimbursement to the
Sponsor pursuant to Clause 8.5 in respect of any costs or expenses incurred
by the Sponsor, and such costs or expenses constitute consideration for any
supply of goods or services to the Sponsor for the purposes of value added
tax the Company shall, in addition, pay to the Sponsor such amount that
equals any value added tax chargeable on any such supply. Payment by the
Company
<PAGE>
shall be made promptly upon the Sponsor requesting the same.
8.8 Notwithstanding that the Sponsor is acting as agent of the Company in
connection with the Placing and the Open Offer, it may retain any fees,
commissions or other amounts payable to it as referred to in this Clause 8
and any Placing Shares which it is obliged to purchase or subscribe for may
be retained or dealt in by it for its own use and benefit.
8.9 All fees, commissions and other amounts payable to the Sponsor (together
with any value added tax thereon) under this Agreement will be payable not
later than the date for payment by the Sponsor to the Company pursuant to
Clause 7 and may be deducted by the Sponsor from the amount of such
payment, or the second Business Day after the date on which the obligations
of the Sponsor shall cease and determine pursuant to Clause 2.4 or be
terminated pursuant to Clause 11.1. The Sponsor shall promptly produce to
the Company an appropriate value added tax invoice.
8.10 In the event that any provisions of this Agreement are inconsistent or
conflict with any of the provisions of the Engagement Letter, the
provisions of this Agreement shall prevail.
9. WARRANTIES
9.1 The Company represents, warrants and undertakes to the Sponsor in the terms
set out in Schedule 2 in each case as at the date hereof.
9.2 The Company accepts that the Sponsor is assuming its obligations under this
Agreement in reliance upon each of the Warranties given by Clause 9.1.
9.3 The Warranties are given subject only to matters fairly disclosed in the
Circular in a manner which is not misleading and, for the purposes of the
Warranties and this Clause 9, the Company shall be deemed to have knowledge
of all matters known to the Directors or which would have been discovered
by them if they had made due and careful enquiry.
9.4 Where any Warranty is expressed to be qualified by reference to the
awareness and/or knowledge and/or information and/or belief of any person,
or words to similar effect, it shall be deemed to include a statement to
the effect that it has been given after the making of due and careful
enquiry by such person.
9.5 The Company undertakes:
9.5.1 that it will and will procure that the Subsidiaries will refrain
from doing or omitting to do any act or thing whereby any of the
Warranties would cease to be true or accurate (or would otherwise
be breached) at any time up to and including Admission;
9.5.2 forthwith to notify the Sponsor if it comes to its knowledge at any
time prior to Admission that any of the Warranties is (or may be)
untrue or inaccurate or misleading in any respect when made and/or
that any of the Warranties has ceased (or may have ceased) to be true
or accurate or has become (or may have become) misleading in any
respect were the Warranties to be repeated by reference to the
<PAGE>
facts and circumstances for the time being subsisting;
9.5.3 forthwith to disclose in writing to the Sponsor any matter or thing
which arises (or is reasonably likely to arise) or becomes known to
it after the date of this Agreement and before Admission which is
material to be known by a subscriber for any of the New Ordinary
Shares or which is reasonably likely to give rise to a claim under
Clause 10; and
9.5.4 forthwith to notify the Sponsor of all other information which is
reasonably likely to require the publication of a supplementary
prospectus under section 147 of the FSA.
9.6 If, at any time prior to Admission, the Sponsor receives notification
pursuant to Clause 9.5 or otherwise becomes aware that any of the
Warranties is (or has become reasonably likely to become were the
Warranties to be repeated by reference to the facts and circumstances for
the time being subsisting) untrue, inaccurate or misleading to a material
extent, the Sponsor may (without prejudice to its right to terminate its
obligations under this Agreement pursuant to Clause 11) require the Company
at its own expense to make or cause to be made such communication as the
Sponsor shall reasonably consider necessary, after consultation with the
Company, including, without limitation, the publication of a supplementary
prospectus in accordance with section 147 of the FSA.
9.7 If a supplementary prospectus is published by the Company in connection
with the Placing and Open Offer, Warranties relating to the Circular given
pursuant to Clause 9.1 shall be deemed to be repeated on the date of
publication of such supplementary prospectus and when so repeated shall be
read and construed as if the references in Schedule 2 and this Clause 9 to
the Circular meant the Circular when read together with such supplementary
prospectus.
9.8 The Sponsor shall, at the Company's expense, take reasonable steps to
mitigate any loss or liability suffered by it which is the subject of a
claim or potential claim under the Warranties.
9.9 In the event of a claim by the Sponsor under the Warranties and without
prejudice to any right or remedy which may be available to it, the quantum
of the Sponsor's claim shall not be restricted to a calculation based on
the diminution in value of any New Ordinary Shares subscribed by it under
this Agreement.
10. INDEMNITY
10.1 The Company will not make any claim (and will procure that no other member
of the Group will make any claim) against the Sponsor or any of its
affiliates to recover any loss, claim, cost, liability, expense, charge, or
demand which the Company or any other member of the Group or its respective
directors, officers, employees or agents or any subscriber of New Ordinary
Shares pursuant to the Placing or the Open Offer or any subsequent
purchaser or transferee thereof may suffer or incur by reason of or arising
out of the carrying out by the Sponsor or on its behalf of its obligations
and services hereunder or otherwise in connection with the Placing, or the
Open Offer save to the extent that such loss, damage, cost, charge or
expense arises from the fraud, negligence, or wilful default of an
Indemnified Person (as defined in Clause 10.2) or a breach by the Sponsor
of its obligations under this Agreement.
<PAGE>
10.2 The Company undertakes to the Sponsor for itself and as trustee for each of
its affiliates, to indemnify and at all times to keep the Sponsor and each
of its affiliates (each an "INDEMNIFIED PERSON") fully and effectively
indemnified on demand (on an after tax basis) against all losses, claims,
costs, liabilities, expenses, charges, actions or demands whatsoever which
the Sponsor or any of its affiliates may wheresoever suffer or incur
(including, without limitation, all such costs, charges and expenses as any
of such persons may pay or incur in responding to, disputing or considering
any such actual or potential actions, claims or demands or in enforcing its
rights under this Clause 10) or which may be made or threatened against or
incurred by the Sponsor or any of its affiliates in any jurisdiction
whatsoever to the extent that in any such case arises directly or
indirectly out of or results from or is attributable to:
10.2.1 any publication, statement or communication including, without
limitation, the Press Announcement or the Issue Documents or the
Proxy Form not containing or being alleged not to contain all
information required to be stated therein or any statement therein
being or being alleged to be untrue, inaccurate, incomplete or
misleading in any respect or as having been made negligently or
otherwise without therequired standard of skill and care or
reasonableness;
10.2.2 the issue or approval of any investment advertisement (as defined
for the purpose of section 57(2) of the FSA) issued in connection
with the issue of the New Ordinary Shares for the purpose of
section 57(1) of the FSA;
10.2.3 the performance by the Sponsor or any of its affiliates of its
obligations and services under or in connection with this Agreement
and/or the Placing and/or the Open Offer;
10.2.4 the making of the Placing or the Open Offer or the preparation and
distribution of the Press Announcement or the Issue Documents or the
Proxy Form; or
10.2.5 any breach or alleged breach of the laws or regulations of any
country resulting from the Placing or the Open Offer, the
implementation of the other transactions and matters referred to
in the Circular or the distribution of the Issue Documents in the
manner contemplated hereby;
and which does not in any such case arise from the negligence, wilful
default or fraud of the Sponsor or a breach by the Sponsor of its
obligations under this Agreement.
10.3 For the purposes of this clause, "affiliates" means any subsidiary
undertaking or holding company of the Sponsor and any other subsidiary
undertaking of its holding company and any of their respective directors,
officers, agents, employees and advisers.
10.4 Any agreement or arrangement made by the Company in connection with the
Placing or the Open Offer with any adviser excluding or limiting in any
manner the liability of that adviser to the Company or any other person
shall not increase the liability of the Sponsor or any Indemnified Person
to the Company, and the Company shall not be entitled to recover from the
Sponsor or any Indemnified Person any amount which, if such exclusion or
limitation had not been agreed, the Sponsor would have been entitled to
recover from that adviser pursuant to the Civil Liability (Contribution)
Act 1978.
<PAGE>
10.5 Save in the event of a breach of any Warranty, Clauses 9 and 10 shall not
apply with respect to any trading losses of the Sponsor arising in relation
to any New Ordinary Shares acquired pursuant to its underwriting
obligations under Clause 5.1.3. Save as set out above, the Sponsor shall
have, in addition to its rights under Clauses 9 and 10, the same rights and
remedies pursuant to Part IV of the FSA in relation to any New Ordinary
Shares subscribed by it hereunder as any other subscriber for New Ordinary
Shares, and the provisions of this Agreement shall be without prejudice to
the statutory rights of the Sponsor in respect to such subscription.
10.6 The indemnities contained in this Clause 10 shall extend to any payments
made by the Sponsor or any loss suffered as a result of any reasonable
action taken by the Sponsor (including, without limitation, the purchase of
any Ordinary Shares by the Sponsor (other than purchases made by the
Sponsor for its own investment purposes or shares acquired pursuant to its
underwriting obligations under Clause 5.1.3)) notwithstanding that the
Sponsor may be under no legal obligation to make such payment or take such
action.
11. TERMINATION
11.1 If at any time prior to Admission:
11.1.1 it shall come to the notice of the Sponsor that any statement
contained in the Circular is untrue or incorrect or misleading in
any respect or that matters have arisen which would, if the Circular
were issued at that time, constitute a material omission therefrom;
or
11.1.2 it shall come to the notice of the Sponsor that a matter has arisen
which might give rise to a claim under the indemnity in Clause 10.2
or that any of the Warranties was untrue or inaccurate or misleading
in any respect when given and/or that any of the Warranties has
at the relevant time ceased to be true or accurate or has become
misleading in any respect by reference to the facts and
circumstances for the time being subsisting, so as (in the
reasonable opinion of the Sponsor) to result in the Circular being
or becoming misleading in any material respect, or as to make it
otherwise commercially inadvisable (based on an objective investment
decision) to proceed with the Placing or the Open Offer; or
11.1.3 the Company fails in any material respect to comply with any of its
obligations under this Agreement,
then and in any such case the Sponsor may, following reasonable
consultation with the Company (including considering whether it would
be appropriate to issue a supplementary prospectus), in its absolute
discretion give notice in writing to the Company to terminate this
Agreement and its obligations hereunder save to the extent specified
in Clause 11.2 (and, for the avoidance of doubt, the Sponsor shall not
be required to wait until Admission to exercise any right arising
pursuant to Clause 11.1.2).
11.2 If the obligations of the Sponsor or the Company under this Agreement (save
to the extent specified in this Clause 11.2) shall cease or determine
pursuant to Clause 2.4 or be terminated
<PAGE>
pursuant to Clause 11.1, no party will have any claim against any other for
compensation, costs, damages or otherwise (except in relation to any
breaches prior to such determination or termination) save that:
11.2.1 the Company shall pay the expenses and costs and fees and
commissions referred to in Clause 8 (together with any value added
tax payable thereon); and
11.2.2 the provisions of Clauses 1, 9, 10, 11.2 and 12 to 24 inclusive
shall remain in full force and effect notwithstanding such
termination or determination.
12. ANNOUNCEMENTS AND COVENANTS
12.1 Save as required by law or the Listing Rules or the requirements of any
relevant regulatory authority:
12.1.1 the Company undertakes to the Sponsor that it will hold no press
conferences and will not make any public announcement or
communication concerning this Agreement, the Company, the Open
Offer or the Placing (other than the publication of the documents
referred to in this Agreement) or otherwise relating to the
financial condition or trading or financial prospects of the Company
between the date of this Agreement and forty days after Admission,
whether in response to enquiries or otherwise, without the prior
approval of the Sponsor (such approval not to be unreasonably
withheld or delayed);
12.1.2 no announcement, statement or communication to shareholders (other
than the Press Announcement, the Issue Documents and the Proxy Form)
concerning the Company or any other members of the Group or in
connection with the Issue Documents or the New Ordinary Shares will
be made or despatched by the Company or any other members of the
Group to any third party between the date of this Agreement and
forty days after Admission without the prior approval of the Sponsor
such approval not to be unreasonably withheld or delayed;
12.1.3 the Company will not (and will procure that no member of the Group
will) between the date of this Agreement and forty days after
Admission enter into any commitment or agreement which it is obliged
to announce or put itself into a position where it is obliged to
announce that any commitment or agreement may be entered into
without (in each case) the prior approval of the Sponsor such
approval not to be unreasonably withheld or delayed; and
12.1.4 save as set out in the Circular, the Company will not (and will
procure that no member of the Group will) issue any share or right
to be allotted any share or agree to do any such thing between the
date of this Agreement and forty days after Admission without the
prior approval of the Sponsor such approval not to be unreasonably
withheld or delayed.
12.2 The Company agrees and undertakes to perform and implement each of the
OpSec Merger Agreement and Tender Offer in accordance with its provisions
and to use all reasonable endeavours to ensure that the Opsec Merger and
the Tender Offer complete according to the
<PAGE>
timetable set out in the Circular. The Company undertakes to take such
steps as may be reasonably required to enforce or procure the exercise of
any undertakings or rights contained in the OpSec Merger Agreement and/or
Tender Offer and/or any document entered into pursuant thereto or in
connection therewith. The Company undertakes to the Sponsor that it will
not materially alter, revise or amend or agree any material alteration,
revision or amendment of any of the terms of the OpSec Merger Agreement
and/or Tender Offer (or any document entered into pursuant thereto or in
connection therewith) or (where material) waive any condition or exercise
any discretion pursuant thereto or grant any time for performance or other
indulgence thereunder or proceed to completion of the Opsec Merger without
the full satisfaction of each of the terms and conditions in the OpSec
Merger Agreement without the prior approval of the Sponsor, such approval
not to be unreasonably withheld or delayed. In the event of any claim, suit
or proceedings by any third party, regulatory authority or otherwise which
may have the effect of interfering with or delaying the Opsec Merger or
Tender Offer, all proposed actions which are material taken by (or approved
by) the Company shall be promptly notified to the Sponsor and no action
shall be taken without the Sponsor's prior approval, such approval not to
be unreasonably withheld or delayed.
13. WITHHOLDING
All sums payable to the Sponsor under this Agreement shall be paid without
any set off or counterclaim and free and clear of all deductions or
withholdings unless the deduction or withholding is required by law, in
which event the relevant person shall pay such additional amount as shall
be required to ensure that the net amount received by the Sponsor will
equal the full amount which would have been received by it had no such
deduction or withholding been made.
14. REMEDIES AND ENFORCEMENT
14.1 This Agreement shall (except for any obligation fully performed) remain in
full force and effect notwithstanding the completion of this Agreement, the
Open Offer, the Placing and the subscription of the New Ordinary Shares
pursuant thereto.
14.2 The Warranties and the indemnities herein contained shall be in addition
to, and shall not be construed to limit, affect or prejudice, any other
right or remedy available to the Sponsor or any Indemnified Person.
14.3 In exercising any right or power as trustee of an Indemnified Person under
this Agreement, the Sponsor shall be entitled to act in such manner as it
shall in its absolute discretion consider appropriate.
15. INVALIDITY
Each of the provisions of this Agreement is severable and distinct from the
others and the invalidity, illegality or unenforceability of any one or
more of the provisions of this Agreement shall not affect the continuation
in force of the remaining provisions of this Agreement.
<PAGE>
16. ASSIGNMENT
The benefit of this Agreement may not be assigned or charged by either
party without the prior written consent of the other but subject thereto
this Agreement shall be binding upon and enure for the benefit of the
respective successors and assigns of the parties.
17. WAIVER
17.1 No neglect, indulgence, failure to exercise or delay on the part of the
Sponsor or the Company in exercising any right or remedy under this
Agreement shall constitute a waiver of such right or remedy and no single
or partial exercise of any right or remedy under this Agreement shall
preclude or restrict any other or further exercise of such right or remedy
or the exercise of any other right or remedy. The rights and remedies
contained in this Agreement are cumulative and not exclusive of any rights
or remedies provided by law.
17.2 Any waiver must be in writing and may be given subject to any conditions
thought fit by the grantor. Any waiver shall be effective only in the
instance and for the purpose for which it is given.
18. TIME OF THE ESSENCE
Time shall be of the essence to this Agreement but any time, date or period
mentioned in any Clause of this Agreement may be extended by mutual written
agreement between the Company and the Sponsor.
19. VARIATION
No variation of this Agreement shall be effective unless it is in writing
and signed by or on behalf of each of the parties.
20. ENTIRE AGREEMENT
This Agreement, the Engagement Letter, the other agreements and
arrangements referred to herein contain the entire agreement and
understanding between the parties concerning the subject matter of this
Agreement and supersede any previous agreement or understanding between the
parties relating to its subject matter.
21. COUNTERPARTS
This Agreement may be executed in any number of counterparts by the
parties. Each separate counterpart when executed and delivered shall
constitute an original and all counterparts together shall constitute one
and the same instrument.
<PAGE>
22. NOTICES
22.1 Any communication to be given in connection with the matters contemplated
by this Agreement shall except where expressly provided otherwise be in
writing and shall either be delivered by hand or sent by first class
pre-paid post or facsimile transmission. Delivery by courier shall be
regarded as delivery by hand.
22.2 Such communication shall be sent to the address of the relevant addressee
referred to in this Agreement or the facsimile number (if any) set out
below or to such other address or facsimile number as may previously have
been communicated by the recipient party to the sending party in accordance
with this clause. Each communication shall be marked for the attention of
the relevant person.
Company - facsimile number (0191) 416 3053, for the attention of the Chief
Executive and Company Secretary.
Sponsor - facsimile number (0171) 655 4100, for the attention of Gary Gould
and David Rasouly.
22.3 A communication shall be deemed to have been served:
22.3.1 if delivered by hand at the address referred to in Clause 22.2 at
the time of delivery;
22.3.2 if sent by first class pre-paid post to the address referred to in
Clause 22.2, at the expiration of two clear days after the time of
posting; and
22.3.3 if sent by facsimile to the number referred to in Clause 22.2, at
the time of completion of transmission by the sender.
If a communication would otherwise be deemed to have been delivered
outside normal business hours (being 9.30 a.m. to 5.30 p.m. on a
Business Day) under the preceding provisions of this clause, it shall
be deemed to have been delivered at the next opening of such normal
business hours.
22.4 In proving service of the communication, it shall be sufficient to show
that delivery by hand was made or that the envelope containing the
communication was properly addressed and posted as a first class pre-paid
letter or that the facsimile was despatched and a confirmatory transmission
report received.
22.5 A party may notify the other of a change to its name, relevant person,
address or facsimile number for the purposes of Clause 22.2 provided that
such notification shall only be effective on:
22.5.1 the date specified in the notification as the date on which the
change is to take place; or
<PAGE>
22.5.2 if no date is specified or the date specified is less than five
clear Business Days after the date on which notice is deemed to
have been served, the date falling five clear Business Days after
notice of any such change is deemed to have been given.
23. PROPER LAW AND JURISDICTION
23.1 This Agreement shall be governed by and construed in accordance with the
laws of England.
23.2 Each of the parties agrees that the courts of England are to have
jurisdiction to settle any disputes which may arise out of or in connection
with this Agreement and that accordingly any suit, action or proceeding
(together in this clause referred to as "PROCEEDINGS") arising out of or in
connection with this Agreement may be brought in such courts. Nothing
contained in this clause shall limit the right of either party to take or
defend Proceedings in any other jurisdiction, nor shall the taking of the
Proceedings in one or more jurisdictions by one party preclude the other
party from taking Proceedings in any other jurisdictions, whether
concurrently or not.
AS WITNESS the hands of the parties or their duly authorised representatives
hereto the day and year first above written.
<PAGE>
SCHEDULE 1
DOCUMENTS FOR DELIVERY TO THE SPONSOR
1. One copy of the Placing Letter, one copy of the Application Form and one
copy of the Press Announcement, in each case signed by or on behalf of one
of the Directors or his attorney.
2. One original signed copy of the Working Capital Report.
3. Letters from the Reporting Accountant to the Directors and the Sponsor in
the form set out in Parts 3, 4 and 5 of the Circular; a pro forma financial
reconciliation for OpSec prepared by the Reporting Accountant; a short form
report prepared by the Reporting Accountants on Bridgestone; a pro forma
set of financial statements from the Reporting Accountants for the Company
as adjusted for the acquisition of OpSec and Bridgestone; and a long form
report by the Reporting Accountants on OpSec and Bridgestone.
4. One original signed copy of the report (in agreed form) prepared by the
Reporting Accountant addressed to the Sponsor reporting on the indebtedness
of the Group as at 31 October 1999, and of each other report prepared by
the Reporting Accountant in connection with the Placing and the Open Offer.
5. An original signed copy of the letter (in agreed form) from the Reporting
Accountant addressed to the Directors and the Sponsor concerning the
correct extraction and accuracy of certain financial information contained
in the Circular.
6. A working capital comfort letter (in agreed form) from the Company and the
Reporting Accountant.
7. A certified copy of the executed Bridgestone Acquisition Agreement, OpSec
Merger Agreement and Tender Offer, the Turnage Subscription Agreement, the
Scheme Subscription Agreement, and the option agreement described at
paragraph 11.6.5 of Part 8 of the Circular (provided that in the event that
any of such documents shall not have been executed at such time, then a
copy of the latest draft initialled by or on behalf of the Company shall be
delivered).
8. An original signed copy of the letter from the Reporting Accountant
consenting to the inclusion in the Circular of the references to their name
in the form and context in which they are included in the Circular.
9. An original copy of the Verification Notes signed by or on behalf of each
of the Directors.
10. Certified copies of each of:
10.1 the minutes (in agreed form) of the meeting of the Directors at which,
inter alia, resolutions were passed approving and authorising the
issue of the Issue Documents, the execution of this Agreement by the
Company, and the application for Admission;
10.2 the directors' powers of attorney and the directors' responsibility
statements (in
<PAGE>
agreed form) executed by each of the Directors;
10.3 the Registrar's Agreement, duly executed by the Parties thereto; and
10.3 the memorandum prepared by the Company's Solicitors and addressed to
the Directors explaining the nature of responsibilities and
obligations of directors of listed company in relation to new issues
of shares.
11. An original signed copy of letters (in agreed form) from (i) the Company,
(ii) Dickinson Dees and (iii) the Reporting Accountant to the Sponsor
concerning the matters referred to in paragraph 2.8 of the Listing Rules.
12. An original signed copy of a letter (in agreed form) from the Company's
Solicitors to the Sponsor concerning the matters referred to in paragraph
2.9 of the Listing Rules.
13. Two original signed copies of a letter from the Directors to the Stock
Exchange dealing with the matters referred to in paragraph 5.5 of the
Listing Rules.
14. A certified copy of the application for Admission in the form of schedule
3A to the Listing Rules.
15. A copy of the Estimate of Expenses.
<PAGE>
SCHEDULE 2
THE WARRANTIES
1. CIRCULAR
1.1 The information contained in the Circular is in accordance with the facts
and all statements of fact contained in the Circular are true and accurate
in all material respects and are not misleading in any material respect. In
particular, without prejudice to the generality of the foregoing:
1.1.1 the summary of the terms and conditions of the OpSec Merger Agreement
are true and accurate in all material respects and are not misleading
in any material respect; and
1.1.2 only the shares of Common Stock (as defined in the Tender Offer) and
Series B 8% Convertible Preferred Voting Stock (as defined in the
Tender Offer) entitle the holders to vote at any shareholder or
stockholder meeting to be held in relation to the OpSec Merger (as
defined in the Circular) (the "VOTING SHARES").
1.2 All forecasts and expressions of opinion, intention or expectation, whether
as to present or future circumstances, contained in the Circular are
honestly given, and either fairly based upon facts within the knowledge of
the Company or have been made on reasonable grounds after due and careful
consideration having regard to all the information currently available to
the Company and the Directors.
1.3 There are no facts or considerations known or which could on reasonable
enquiry have been known to the Company or any of the Directors which are
not disclosed in the Circular and which by their omission would or might
reasonably be considered to:
1.3.1 make any statement therein (whether of fact, opinion, intention or
expectation) inaccurate or misleading in any material respect;
1.3.2 invalidate or qualify any assumption made in support of any statement
therein (whether of fact, opinion, intention or expectation): or
1.3.3 be material for disclosure to a potential subscriber or purchaser of
the New Ordinary Shares.
1.4 The Circular contains all such information as, having regard to the matters
referred to in section 146(3) of the FSA, investors and their professional
advisers would reasonably require, and reasonably expect to find there, for
the purpose of making an informed assessment of:
1.4.1 the assets and liabilities, financial position, profits and losses
and prospects of the Group; and
1.4.2 the rights attaching to the New Ordinary Shares.
<PAGE>
1.5 The Issue Documents contain all information required by, and the allotment
of the New Ordinary Shares and the publication and contents of the Issue
Documents in the manner proposed will comply with, the FSA, the Companies
Act 1985, the Listing Rules and all other applicable laws, rules and
regulations of the United Kingdom.
1.6 All communications with (including any non-applicability letter in the
agreed form made by or on behalf of the Company in connection with any
application) the Stock Exchange are true and accurate and are not
misleading and there are no facts which have not been disclosed to the
Stock Exchange in connection therewith which by their omission make any
such statements misleading or are material for disclosure to the Stock
Exchange in connection therewith.
1.7 All the documents required by the Listing Rules to be included in the
application for Admission have been supplied to the Stock Exchange, all
other relevant requirements of the Listing Rules have been complied with
and there are no matters other than those disclosed in the Circular or
otherwise in writing to the Stock Exchange which should be taken into
account by the Stock Exchange in considering the application for Admission.
2. INTERIM RESULTS
2.1 The Interim Results have been prepared on a basis consistent with the
audited accounts of the Company for the two years ended 31 March 1998 and
31 March 1999 and the accounting policies and practices set out in such
accounts and in a manner similar to the preparation of interim results in
the previous two financial years of the Company and, so far as the
Directors are aware, have been prepared with due care and attention and are
based on reasonable assumptions.
2.2 So far as the Directors are aware, there is no fact or circumstance the
existence of which would make the Interim Results materially inaccurate or
misleading.
3. CURRENT FINANCIAL PERIOD
3.1 Since the date of the last audited accounts:
3.1.1 each Group Company has carried on its business in the ordinary and
usual course; and
3.1.2 there has been no material adverse change in the financial or trading
position or prospects of the Company and the Group taken as a whole
and no material depletion in the net assets of the Group.
4. WORKING CAPITAL
4.1 The statement as to the working capital of the Group set out in paragraph
15 of Part 8 of the Circular has been approved by the Directors and has
been prepared with due care and attention and made after careful enquiry.
<PAGE>
4.2 All statements of fact contained in the Working Capital Report are true and
accurate in all respects and not misleading, all expressions of opinion,
intention or expectation of the Directors contained therein were made on
reasonable grounds and are truly and honestly held by the Directors, the
Working Capital Report is based on reasonable assumptions and there are no
other facts known or which could on reasonable inquiry have been known to
the Directors the omission of which would make any such statement
assumption or expression misleading in any respect.
4.3 Without prejudice to the generality of paragraph 4.1, in making the
statement referred to therein the Directors have taken full account of all
matters set out in the Working Capital Report.
5. REPORTING ACCOUNTANT
All information which the Directors reasonably consider relevant or which
has been requested by the Reporting Accountant for the purpose of the
preparation by it of any letter or report in connection with the Placing
and/or the Open Offer has been disclosed to the Reporting Accountant, such
information was when supplied and is now true and accurate in all material
respects (save as may have been superseded by further information supplied
to the Reporting Accountant before such letters or reports were finalised
and published) and no information known to the Company has been omitted or
withheld the absence of which would make misleading the information so
provided.
6. VERIFICATION NOTES
The information contained in the replies to the Verification Notes is true
and accurate in all material respects and not misleading in any material
respect and no information has been omitted from such replies the absence
of which would make misleading any of such replies. All expressions of
opinion, intention and expectation contained in the replies to the
Verification Notes are honestly held and based on the assumptions stated
therein and such assumptions are reasonable; such replies have been
prepared or approved by persons having appropriate knowledge and
responsibilities to enable them properly to provide such replies and all
such replies have been given in good faith.
7. INDEBTEDNESS
7.1 No circumstances have arisen or are about to arise and no notice has been
received by the Company such that any person is, or would with the giving
of notice and/or the lapse of time and/or the satisfaction of any other
condition become, entitled to require payment before its stated maturity
of, or security for, any indebtedness in respect of borrowed moneys of any
Group Company and the Company has not received notice that any person to
whom any indebtedness for borrowed moneys of any Group Company which is
payable on demand is owed presently proposes to demand payment of, or
security for, the same.
7.2 The information contained in the report by the Reporting Accountant to the
Sponsor on
<PAGE>
indebtedness of the Group (in agreed form) is true, complete and accurate
and not misleading and was provided by the Directors after due and careful
enquiry.
7.3 The amounts borrowed by each member of the Group do not exceed any
limitation on its borrowing contained in its Articles of Association, any
debenture or other deed or document binding upon it and no Group Company
has outstanding any loan capital, nor has it factored any of its debts, or
engaged in financing of a type which is not required to be shown or
reflected in audited accounts, nor has it borrowed any money which it has
not repaid save for borrowings specified in the Interim Results or
statements of indebtedness referred to in paragraph 7.2.
8. OTHER EVENTS OF DEFAULT
No event has occurred or is subsisting or (so far as the Directors are
aware) is about to occur which constitutes or results in, or would with the
giving of notice and/or the lapse of time and/or the satisfaction of any
other condition constitute or result in termination of, or a default or the
acceleration of any obligation under, any agreement, instrument or
arrangement to which any Group Company is a party or by which it or any of
its properties, revenues or assets are bound and which would in any such
case have a material adverse effect on the businesses or financial or
trading position, assets or prospects of the Group as a whole.
9. INSOLVENCY
No member of the Group has taken any action nor has the Company received
notice that any other steps have been taken or legal proceedings have
either started or been threatened against any member of the Group for its
winding up or dissolution or for any member of the Group to enter into any
arrangement or composition for the benefit of creditors or for the
appointment of an administrator, a receiver, trustee or similar officer of
any member of the Group or over any of its interests, properties, revenues
or assets.
10. EFFECT OF THE PLACING AND THE OPEN OFFER ON GROUP OBLIGATIONS
The allotment and issue of the New Ordinary Shares, the Placing, the Open
Offer and the distribution of the Issue Documents and any other document by
or on behalf of the Company in connection with the Placing and the Open
Offer will comply with all relevant requirements of the Companies Act 1985,
the Listing Rules, the FSA and all other applicable rules regulations and
laws and all agreements to which any Group Company is a party or by which
it is bound, and will not exceed or infringe any restrictions in or in the
terms of any contract, obligation or commitment binding upon any Group
Company.
11. COMPLIANCE
Each Group Company has been duly incorporated, has full corporate power and
authority to carry on its activities in the ordinary course of business as
at the date hereof and has obtained all material licences, permissions,
authorisations and consents ("AUTHORITIES") required for the
<PAGE>
carrying on of its business and such Authorities have at all times been and
are complied with (whether retrospectively or otherwise) and are in full
force and effect. No circumstances exist which make it reasonably apparent
to the Directors that any of such Authorities will be revoked and each
Group Company has complied (whether retrospectively or otherwise) with all
material legal and regulatory requirements applicable to its business.
12. CONTRACTS
12.1 All material contracts entered into by any member of the Group outside the
ordinary course of business in the two years preceding the date of this
agreement are properly described in the Circular in accordance with the
Listing Rules.
12.2 So far as the Directors are aware, there are no grounds for the invalidity
or rescission, avoidance or repudiation of any material agreement or
transaction to which any member of the Group is a party and which, if
invalid or terminated, would have a material adverse effect on the business
of the Group as a whole.
12.3 Neither the Company nor any of the Directors has received a notice (whether
verbally or in writing) of termination of, or of an intention by a third
party to terminate, any material agreement, undertaking, instrument or
arrangement to which any member of the Group is a party or by which any
member of the Group is bound and which, if terminated, would have a
material adverse effect on the business of the Group as a whole.
13. SYSTEMS
The Year 2000 Compliance statement relating to the Company and the
Subsidiaries contained in paragraph 19 of Part 8 of the Circular is
honestly given and either fairly based upon facts within the knowledge of
the Directors or made on reasonable grounds after due and careful
consideration having regard to all the information currently available to
the Company and the Directors. So far as the Directors are aware the
Company has taken all steps which the Directors consider to be appropriate
in relation to risks associated with the Year 2000 date change.
14. LITIGATION
Other than as disclosed in the Circular, neither the Company nor any other
member of the Group nor any person for whom any of them is or may be
vicariously or otherwise liable is engaged in any legal or arbitration or
similar proceedings which, individually or collectively, may have a
material effect upon the financial or trading position of the Group or the
prospects of the Group as a whole nor has been engaged in any such
proceedings in the 12 months prior to the date hereof. Other than as
disclosed in the Circular, no such proceedings are threatened or pending
nor, so far as the Directors are aware, are there any circumstances which
are likely to give rise to any such proceedings by or against any member of
the Group.
15. OPTIONS
<PAGE>
Save as disclosed in the Circular, there are in force no options or other
agreements which call for the issue or accord to any person the right to
call for the issue of any shares in the capital of the Company or any other
securities of any Group Company.
16. RELATIONSHIPS WITH SHAREHOLDERS AND DIRECTORS
16.1 The Circular contains all information which is material to investors or
potential investors in the Company concerning actual or potential conflicts
of interest between any Group Company and any Director or any Related
Person and all statements contained in the Circular concerning such
conflict or concerning the future relationship with such Director or
Related Person are truly and honestly made and are not misleading and there
are no other facts concerning the same the omission of which makes any such
statement false or misleading in any material respect.
16.2 Save as referred to in paragraph 16.3 below, there is not outstanding:
16.2.1 any loan made by any Group Company to, or debt owing to any Group
Company by, any Director, or so far as the relevant Director is
aware, any Related Person of a Director; or
16.2.2 any agreement or arrangement to which any Group Company is a party
and in which any Director or any Related Person of a Director is
interested (other than the service contracts of the Directors).
16.3 The Company is independent of any controlling shareholder (as defined in
paragraph 3.13 of the Listing Rules).
17. CAPACITY
Following for the passing of the Resolutions, the Company has or will have
power under its memorandum and articles of association to allot and issue
the New Ordinary Shares and to enter into and perform its obligations under
this Agreement without in any case any further sanction or consent by
members of the Company or any class of them or by creditors of the Company
or by any other person (other than the Directors in relation to board
resolutions required to implement and effect the matters set out in this
Agreement or the Circular), and there are no authorisations, approvals,
consents or licences required from third parties by the Company for the
issue of the New Ordinary Shares or the entering into of this Agreement
which have not been obtained irrevocably and (otherwise than with respect
of Admission) unconditionally.
18. SUBSIDIARIES
The Subsidiaries are all the subsidiaries of the Company and the Company
and the Subsidiaries do not have any beneficial or other interest in the
shares or stock of any other Company, save in respect of securities listed
on a recognised investment exchange representing not more than five per
cent of the issued securities of that class. Save as disclosed in the
Circular, each of the Subsidiaries is wholly or beneficially owned by the
<PAGE>
Company.
19. SHAREHOLDERS' RIGHTS
So far as the Directors are aware, none of the owners or holders of shares
in the Company have any rights, in their capacity as such, in relation to
the Company other than as set out in the Articles of Association of the
company.
20. THE COMPANY
The Company is not an 'investment company' required to be registered as
such under the US Investment Company Act of 1940.
<PAGE>
SCHEDULE 3
Warranty Certificate
Greig Middleton & Co. Limited
30 Lombard Street
London
Dear Sirs
We refer to the Placing and Open Offer agreement dated 1999 between
you and the Company (the "Placing Agreement"). Words and expressions defined in
the Placing Agreement have the same meaning in this letter.
We hereby confirm to you that:
(A) each of the conditions to the Placing Agreement (other than Admission) has
been, or will, upon delivery of this letter, have been satisfied or
fulfilled in accordance with its terms;
(B) the London Stock Exchange has agreed to admit the New Ordinary Shares to
the Official List (nil paid) subject only to allotment; and
(C) so far as the company is aware, having made all reasonable enquiries, none
of the Warranties was at the date of the Placing Agreement or has, were the
Warranties to be repeated prior to the Sponsor's obligations under the
Placing Agreement becoming unconditional, become, since that date, untrue,
or inaccurate or misleading, by reference to the facts and circumstances
then subsisting, to a material extent.
This letter, which has been delivered to you prior to the date of Admission, is
released to you immediately prior to Admission.
.........................................................
duly authorised on behalf of
APPLIED HOLOGRAPHICS PLC
<PAGE>
Signed by David A. Mahony )
for and on behalf of ) /s/ David A. Mahony
APPLIED HOLOGRAPHICS PLC )
in the presence of /s/ Michael Babcock )
Michael Babcock
112 Quagside
Newcastle upon Tyne
Solicitor
Signed by Robert P. Clinton )
for and on behalf of ) /s/ Robert P. Clinton
GREIG MIDDLETON & CO. LIMITED )
in the presence of /s/ Gary M. Gould )
Gary M. Gould
<PAGE>
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of this 30th day of November, 1999, by and among Applied Holographics
plc, a public limited company incorporated and existing under the laws of
England and Wales ("BUYER"), Applied OpSec Corporation, a Colorado corporation,
and a direct wholly-owned subsidiary of Buyer ("NEWCO"), and Optical Security
Group, Inc., a Colorado corporation ("SELLER").
RECITALS
WHEREAS, Buyer and Seller have agreed that Buyer shall acquire Seller
by causing Newco, which has been formed for the express purpose of consummating
the transactions contemplated hereby, to merge with and into Seller (the
"MERGER"), with Seller as the surviving corporation of the Merger, upon the
terms and subject to the conditions set forth herein, all in accordance with the
Colorado Business Corporation Act (the "CBCA").
WHEREAS, substantially concurrently herewith and as a condition and
inducement to Buyer's willingness to enter into this Agreement, Buyer and
certain stockholders of Seller, who include certain of the directors and
officers of Seller and its Subsidiaries (as defined herein) who hold, in the
aggregate, approximately 35.2% of the outstanding shares of common stock, par
value $.005, of Seller (the "SELLER COMMON STOCK"), are entering into
Stockholder Agreements in the form of EXHIBIT A hereto (the "STOCKHOLDER
AGREEMENTS").
WHEREAS, as a condition and inducement to Buyer to enter into, and
after the execution of, this Agreement, Buyer and Seller are entering into the
Seller Option Agreement ("SELLER OPTION AGREEMENT"), attached hereto as EXHIBIT
B, pursuant to which Seller has granted an option to purchase shares of Seller
Common Stock ("SELLER OPTION") to Buyer.
WHEREAS, in furtherance of the acquisition of Seller by Buyer on the
terms and subject to the conditions set forth in this Agreement, Buyer proposes
to cause Newco to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "OFFER") to purchase all of the outstanding
shares of Seller Common Stock, at a purchase price of $7.00 per share (the
"OFFER PRICE"), without interest thereon, upon the terms and subject to the
conditions set forth in this Agreement.
WHEREAS, the Boards of Directors of Buyer, Newco and Seller have
determined that the Offer, this Agreement and the Merger are advisable and in
the best interests of Buyer, Newco and Seller and their respective stockholders.
The Boards of Directors of each of Buyer, Newco and Seller have approved the
Offer, this Agreement and the Merger. The Board of Directors of Seller has
resolved to recommend to the stockholders of Seller to vote in favor of this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Buyer, Newco and
Seller hereby agree as follows:
ARTICLE I
THE OFFER
1.01. THE OFFER.
<PAGE>
(a) Subject to the provisions of this Agreement, as promptly as
practicable, but in no event later than five (5) business days after the date of
the public announcement by Buyer and Seller of this Agreement, Buyer shall cause
Newco to commence the Offer. The initial expiration date for the Offer shall be
the 20th business day following the commencement of the Offer. The obligation of
Newco to accept for payment, and pay for, any shares of Seller Common Stock
tendered pursuant to the Offer shall be subject to the conditions set forth in
EXHIBIT C hereto (the "OFFER CONDITIONS") (any of which may be waived in whole
or in part by Buyer in its sole discretion) and to the terms and conditions of
this Agreement.
(b) Buyer may, without the consent of Seller, cause Newco to (A)
extend the Offer, if at the scheduled or extended expiration date of the
Offer any of the Offer Conditions shall not be satisfied or waived, until
such time as such conditions are satisfied or waived, (B) extend the Offer
for any period required by any rule, regulation, interpretation or position
of the U.S. Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer or any period required by applicable law and
(C) extend the Offer on one or more occasions for an aggregate period of not
more than ten (10) business days beyond the latest expiration date that would
otherwise be permitted under clause (A) or (B) of this sentence, if on such
expiration date there shall not have been tendered at least 90% of the
outstanding shares of Seller Common Stock. Subject to the terms and
conditions of the Offer and this Agreement, Buyer shall cause Newco to accept
for payment, and pay for, all shares of Seller Common Stock validly tendered
and not withdrawn pursuant to the Offer that Newco becomes obligated to
accept for payment and pay for, pursuant to the Offer as promptly as
practicable after the expiration of the Offer.
(c) On the date of commencement of the Offer, Buyer shall cause Newco
to file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "SCHEDULE
14D-1") with respect to the Offer, which shall contain an offer to purchase and
a related letter of transmittal and summary advertisement (such Schedule 14D-1
and the documents included therein pursuant to which the Offer shall be made,
together with any supplements or amendments thereto, the "OFFER DOCUMENTS"). The
Offer Documents shall comply as to form in all material respects with the
requirements of the Exchange Act (as defined herein) and the rules and
regulations promulgated thereunder and the Offer Documents, on the date first
published, sent or given to the holders of shares of Seller Common Stock, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of Buyer, Newco and Seller agree promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect, and Buyer further agrees to cause Newco to take all steps necessary to
cause the Schedule 14D-1 as so corrected to be filed with the SEC and the other
Offer Documents as so corrected to be disseminated to holders of Seller Common
Stock, in each case as and to the extent required by applicable federal
securities laws. Seller and its counsel shall be given reasonable opportunity to
review and comment upon the Offer Documents prior to their filing with the SEC
or dissemination to the holders of Seller Common Stock. Buyer agrees to cause
Newco to provide Seller and its counsel any comments Buyer, Newco or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
1.02. SELLER ACTIONS.
(a) Seller hereby approves of, and consents to, the Offer and
represents that the Board of Directors of Seller, at a meeting duly called and
held, duly and unanimously adopted resolutions approving this Agreement, the
Offer and the Merger, determining, as of the date of such resolutions, that the
terms of the Offer are fair to, and in the best interests of, the holders of
Seller Common Stock, recommending that the holders of Seller Common Stock accept
the Offer, tender their shares of Seller Common Stock pursuant to the Offer and
approve this Agreement (if required) and approving the acquisition of shares of
Seller Common Stock by Newco pursuant to the Offer and the other transactions
contemplated by this Agreement, including the Merger. Seller
<PAGE>
has been advised by each of its directors and executive officers who owns shares
of Seller Common Stock (each of whom is listed in Section 1.02(a) of the Seller
Disclosure Schedule) that such person currently intends to tender all shares of
Seller Common Stock.
(b) On the date the Offer Documents are filed with the SEC, Seller
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as supplemented or amended
from time to time, the "SCHEDULE 14D-9") containing, subject to the terms of
this Agreement, the recommendation described in paragraph (a) and shall mail the
Schedule 14D-9 to the holders of shares of Seller Common Stock. The Schedule
14D-9 shall comply as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations promulgated thereunder and, on
the date filed with the SEC and on the date first published, sent or given to
the holders of Seller Common Stock, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of Buyer, Newco
and Seller agrees promptly to correct any information provided by it for use in
the Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and Seller further agrees to take
all steps necessary to amend or supplement the Schedule 14D-9 and to cause the
Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. Buyer, Newco and their counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 prior to its filing with the SEC or dissemination to the holders of Seller
Common Stock. Seller agrees to provide Buyer, Newco and their counsel any
comments Seller or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, Seller shall cause its
transfer agent to furnish Buyer promptly with mailing labels containing the
names and addresses of the record holders of Seller Common Stock as of a recent
date and of those persons becoming record holders subsequent to such date,
together with copies of all lists of stockholders, security position listings
and computer files and all other information in Seller's possession or control
regarding the beneficial owners of shares of Seller Common Stock, and shall
furnish to Buyer such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Buyer may
reasonably request in communicating the Offer to the holders of shares of Seller
Common Stock. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Buyer and each of its agents shall
hold in confidence the information contained in any such labels, listings and
files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will deliver, and will use
their reasonable efforts to cause their agents to deliver, to Seller all copies
and any extracts or summaries from such information then in their possession or
control.
ARTICLE II
THE MERGER
2.01. THE MERGER. At the Effective Time (as defined in Section 2.03
hereof), in accordance with this Agreement and the CBCA, Newco shall be merged
with and into Seller, the separate existence of Newco (except as may be
continued by operation of law) shall cease, and Seller shall continue as the
surviving corporation under the corporate name it possesses immediately prior to
the Effective Time, as a wholly-owned subsidiary of Buyer. Seller after the
Merger hereinafter sometimes is referred to as the "SURVIVING CORPORATION."
2.02. EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of this Agreement and
the CBCA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the rights and property of Seller and Newco (the
"CONSTITUENT CORPORATIONS") shall vest in the Surviving Corporation, and all
debts and liabilities of Seller and Newco shall become the debts and liabilities
of the Surviving Corporation.
<PAGE>
2.03. CONSUMMATION OF THE MERGER. In the event of, and as soon as is
practicable after, the satisfaction or waiver of the conditions set forth in
Article VI hereof, the parties hereto will cause the Merger to be consummated by
filing, with the Secretary of State of Colorado, Articles of Merger (the time of
confirmation of such filing or such later time as is specified in such Articles
of Merger being the "EFFECTIVE TIME"). Contemporaneous with the filing referred
to in this Section 2.03, a closing (the "CLOSING") will be held at the offices
of Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110 or at such
other location as the parties may establish for the purpose of confirming all
the foregoing. The date and the time of such Closing are referred to as the
"CLOSING DATE."
2.04. CHARTER; BYLAWS; DIRECTORS AND OFFICERS. Unless otherwise
determined by Buyer prior to the Effective Time, the Articles of Organization
and Bylaws of the Surviving Corporation shall be the Articles of Organization
and Bylaws of Seller, as in effect immediately prior to the Effective Time,
until thereafter amended as provided therein and under the CBCA. The directors
of Newco immediately prior to the Effective Time will be the initial directors
of the Surviving Corporation, and the officers of Newco immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation, in
each case until their successors are elected and qualified.
2.05. EFFECT ON OUTSTANDING SECURITIES.
(a) NEWCO COMMON STOCK. By virtue of the Merger, automatically and
without any action on the part of any Person, including without limitation the
holder thereof, each share of common stock, par value $.01 per share, of Newco
("NEWCO COMMON STOCK") issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the Surviving
Corporation.
(b) SELLER COMMON STOCK. By virtue of the Merger, automatically and
without any action on the part of any Person, including without limitation the
holder thereof, each of the shares of Seller Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Seller Common
Stock to be cancelled pursuant to Section 2.05(d) hereof and any Dissenting
Shares (as defined in Section 2.08)), shall be cancelled and extinguished and be
automatically converted into and become a right to receive an amount per share
in cash (the "COMMON STOCK MERGER CONSIDERATION") equal to $7.00, upon surrender
in the manner provided in Section 2.09 of the certificate that evidenced the
shares of Seller Common Stock (a "COMMON STOCK CERTIFICATE").
(c) SELLER PREFERRED STOCK. By virtue of the Merger, automatically and
without any action on the part of any Person, including without limitation the
holder thereof, each of the shares of Series B 8% Convertible Preferred Voting
Stock of Seller ("SELLER PREFERRED STOCK") issued and outstanding immediately
prior to the Effective Time (other than any Dissenting Shares (as hereinafter
defined)), shall be cancelled and extinguished and be automatically converted
into and become a right to receive an amount per share in cash (the "PREFERRED
STOCK MERGER CONSIDERATION", and, together with the Common Stock Merger
Consideration, the "MERGER CONSIDERATION") equal to the product of (i) the
number of shares of Seller Common Stock into which such share of Seller
Preferred Stock is convertible MULTIPLIED BY (ii) the Common Stock Merger
Consideration, upon surrender in the manner provided in Section 2.09 of the
certificate that evidenced the shares of Seller Preferred Stock (a "PREFERRED
STOCK CERTIFICATE," and, together with the Common Stock Certificates, the
"CERTIFICATES").
(d) TREASURY STOCK; SHARES OWNED BY BUYER OR SELLER. Each share of
Seller Common Stock which is issued and held in the treasury of Seller
immediately prior to the Effective Time or issued and outstanding and owned by
Buyer or any direct or indirect Subsidiary (as defined in Article VIII) of Buyer
or Seller, shall be cancelled and retired, and no payment shall be made with
respect thereto.
(e) DISSENTING SHARES. The holders of Dissenting Shares, if any, shall
be entitled to payment for such shares only to the extent permitted by and in
accordance with the provisions of the CBCA; provided,
<PAGE>
however, that if, in accordance with the applicable provisions of the CBCA, any
holder of Dissenting Shares shall forfeit such right to payment of the fair cash
value of such shares, such shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration applicable thereto as provided in
Section 2.05(b) or (c), as the case may be.
2.06. SELLER STOCK OPTIONS, WARRANTS AND RELATED MATTERS.
(a) Prior to the Effective Time, Seller shall terminate Seller's
Incentive Stock Option Plan, Nonqualified Stock Option Plan and Stock Bonus Plan
(collectively, the "SELLER EQUITY PLANS"), and, in connection therewith, shall
provide written notice to each holder of a then outstanding stock option (each,
an "OPTION") to purchase shares of Seller Common Stock pursuant to the Seller
Equity Plans (whether or not such Option is then vested or exercisable), that
such Option shall be, as of the date of such notice, exercisable in full and
that such Option shall terminate at the Effective Time and that, if such Option
is not exercised or otherwise terminated before the Effective Time, such holder
shall be entitled to receive in cancellation of such Option a cash payment from
Buyer promptly after the Effective Time, in an amount equal to the excess of the
Common Stock Merger Consideration over the per share exercise price of such
Option, if any, multiplied by the number of shares covered by such Option (the
"OPTION SETTLEMENT AMOUNT"), subject to income tax withholding as required by
applicable law. The Seller Disclosure Schedule includes a complete listing of
Options held by each optionee (including the date of grant, the number of shares
issuable upon exercise of the Option, and the Option Settlement Amount to which
the Optionee is entitled). Except as otherwise provided in this Section 2.06(a),
Seller shall not grant or amend any Option after the date hereof. Seller hereby
represents and warrants to Buyer that the number of shares of Seller Common
Stock subject to issuance pursuant to the exercise of Options issued and
outstanding under the Seller Equity Plans is, and shall be as of the Effective
Time, not in excess of 2,154,712. To the extent that the cancellation of any
Option pursuant to this Section 2.06(a) requires the agreement of the holder of
such Option under a Seller Equity Plan, Seller shall use commercially reasonable
efforts, including taking reasonable instructions from Buyer, to enter into an
agreement with such holder providing for the cancellation of such Option in
consideration for the receipt by such holder of the applicable Option Settlement
Amount with respect to such Option. Buyer acknowledges and agrees that the
failure of Seller to obtain any required agreement of a holder of an Option to
the provisions of this Section 2.06(a) after using its commercially reasonable
efforts to do so, shall not be deemed to be a breach by Seller of this Agreement
but shall be relevant in determining whether or not Seller has satisfied its
obligations under this Agreement for purposes of Section 6.02(b) hereof.
(b) Prior to the Effective Time, Seller shall use its commercially
reasonable efforts, including taking reasonable instructions from Buyer, to
receive from each holder of an outstanding warrant (each, a "WARRANT") to
purchase shares of Seller Common Stock an agreement that, as of the Effective
Time, such Warrant shall be converted into a right of such holder to receive
from Buyer promptly after the Effective Time the consideration set forth in the
next sentence. Each holder of a Warrant shall be entitled to receive from Buyer
in respect of the shares of Seller Common Stock to be issued upon the exercise
of such Warrant, an amount in cash, without interest (the "WARRANT
CONSIDERATION"), equal to the product of (i) the number of shares of Seller
Common Stock subject to such Warrant immediately prior to the Effective Time and
(ii) the excess, if any, by which the Common Stock Merger Consideration exceeds
the exercise price per share that was applicable with respect to such Warrant.
Seller hereby represents and warrants to Buyer that the number of shares of
Seller Common Stock subject to issuance pursuant to the Warrants is, and shall
be as of the Effective Time, not in excess of 1,152,457. Buyer acknowledges and
agrees that the failure of Seller to obtain the agreements with each holder of a
Warrant described in this Section 2.06(b) after using its commercially
reasonable efforts to do so, shall not be deemed to be a breach by Seller of
this Agreement but shall be relevant in determining whether or not Seller has
satisfied its obligations under this Agreement for purposes of Section 6.02(b)
hereof.
(c) Simultaneously with the execution of this Agreement, Seller and
Richard H. Bard are entering an amendment to Mr. Bard's employment agreement
(the "AMENDMENT"), which Amendment shall not be amended or otherwise changed
without the prior written consent of Buyer. In addition, promptly after the
Effective Time, Buyer shall pay to Mr. Bard an amount in cash equal to $250,000
in settlement of certain
<PAGE>
Options held by Mr. Bard under a Seller Equity Plan. Also, in satisfaction of
certain rights of Mr. Bard to receive shares of Seller Common Stock upon a
merger or acquisition of Seller as described in paragraph 3-5 of Mr. Bard's
employment agreement, and as otherwise allocated in a manner to be agreed upon
by the parties, Buyer shall pay to Mr. Bard promptly after the Effective Time an
amount in cash equal to $3,500,000.
2.07. CANCELLATION OF CONVERTIBLE DEBENTURES.
(a) Prior to the Effective Time, Seller shall use its commercially
reasonable efforts to receive from each holder (each, a "DEBENTURE HOLDER") of
an outstanding debenture (each, a "DEBENTURE") an agreement that, simultaneously
with the consummation of the Merger and at the Effective Time, the Debenture
then held by it shall (automatically and without further action by the Debenture
Holder) be cancelled and deemed to be paid-in-full and each Debenture Holder
shall be entitled to receive as payment therefor the consideration set forth in
Sections 2.07(c) and (d) below. Buyer acknowledges and agrees that the failure
of Seller to obtain the agreements with each Debenture Holder described in this
Section 2.07(a) after using its best efforts and taking all actions necessary to
do so, shall not be deemed to be a failure of Seller to satisfy its covenants
and other agreements contained herein for purposes of Section 6.02(b) hereof.
(b) At the Closing, each Debenture Holder who shall have agreed to the
cancellation of the Debenture held by such holder pursuant to Section 2.07(a)
hereof, shall deliver the original Debenture held by it for cancellation in
accordance with this Section 2.07. At the Effective Time, and subject to and
upon delivery and cancellation of such original Debenture, Buyer shall pay to
such Debenture Holder the consideration to which such Debenture Holder is
entitled, pursuant to Sections 2.07(c) and (d) below, as payment for, and in
full satisfaction of, all amounts owed by Seller thereunder. From and after the
Effective Time, none of Buyer, Newco or Seller shall have any liability or
obligation of any kind whatsoever under the Debentures to the extent that a
Debenture Holder shall have agreed to the cancellation of his, her or its
Debenture pursuant to this Section 2.07.
(c) Subject to the provisions of this Section 2.07, promptly after the
Effective Time, Buyer shall pay to each Debenture Holder of a Debenture with a
strike price of $6.00 who shall have entered into an agreement with Seller for
the cancellation of such holder's Debenture, an amount in cash equal to 116.67%
of such Debenture Holders' pro-rata share of the outstanding principal amount of
such Debenture, together with accrued interest thereon as provided in the
applicable Debenture. The maximum aggregate consideration payable to the
Debenture Holders of Debentures with a strike price of $6.00 by Buyer, assuming
that all such Debenture Holders enter into agreements with Seller for the
cancellation of such holders' Debentures, shall be $583,350.
(d) Subject to the provisions of this Section 2.07, promptly after the
Effective Time, Buyer shall pay to each Debenture Holder of a Debenture with a
strike price of $6.50 who shall have entered into an agreement with Seller for
the cancellation of such holder's Debenture, an amount in cash equal to 109% of
such Debenture Holders' pro-rata share of the outstanding principal amount of
such Debenture, together with accrued interest thereon as provided in the
applicable Debenture. The maximum aggregate consideration payable to the
Debenture Holders of Debentures with a strike price of $6.50 by Buyer, assuming
that all such Debenture Holders enter into agreements with Seller for the
cancellation of such holders' Debentures, shall be $3,019,300.
2.08. DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the contrary,
holders of Seller Common Stock and Seller Preferred Stock which are entitled to
dissenter's rights in connection with the Merger under the CBCA (collectively,
the "DISSENTING SHARES") shall not be converted into or represent the right to
receive the Merger Consideration applicable to such shares. Such stockholders
shall be entitled to receive payment of the fair market value of such Dissenting
Shares held by them in accordance with the provisions of the CBCA, except that
all Dissenting Shares held by stockholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to the payment of fair
market value for such shares under the CBCA shall
<PAGE>
thereupon be deemed to have been converted into and to have become exchangeable
for, as of the Effective Time, the right to receive the Merger Consideration
applicable to such shares, without any interest thereon, upon surrender, in the
manner provided in Section 2.09, of the certificate or certificates that
formerly evidenced such shares.
(b) Seller shall give Buyer (i) prompt notice of any demand for payment
of fair market value received by Seller, the withdrawals of any such demand, and
any other instrument served pursuant to the CBCA and received by Seller and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for payment of fair market value under the CBCA. Seller shall not,
except with the prior written consent of Buyer, make any payment with respect to
any demands for payment of fair market value or offer to settle or settle any
such demands.
2.09. EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, a bank or trust company to be
designated by Buyer (the "EXCHANGE AGENT") shall act as exchange agent in
effecting the exchange of the Merger Consideration for Certificates which, prior
to the Effective Time, represented shares of Seller Common Stock or Seller
Preferred Stock, as the case may be, entitled to payment pursuant to Section
2.05 hereof. At or immediately prior to the Effective Time, Buyer shall deposit
with the Exchange Agent the aggregate Merger Consideration necessary to make the
payments contemplated hereby on a timely basis (the "DEPOSIT AMOUNT") in trust
for the benefit of the holders of Certificates. Upon the surrender of each such
Certificate and the issuance and delivery by the Exchange Agent of the Merger
Consideration applicable thereto in exchange therefor, such Certificate shall
forthwith be cancelled. Until so surrendered and exchanged, each such
Certificate (other than Certificates representing shares held by Buyer or Seller
or any direct or indirect Subsidiary of Buyer or Seller and Dissenting Shares)
shall represent solely the right to receive the Merger Consideration applicable
thereto, without interest, multiplied by the number of shares represented by
such Certificate. Promptly after the Effective Time, the Exchange Agent shall
mail to each record holder of Certificates which immediately prior to the
Effective Time represented shares a form of letter of transmittal and
instructions for use in surrendering such Certificates and receiving the Merger
Consideration applicable thereto. Upon the surrender to the Exchange Agent of
such an outstanding Certificate together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be required pursuant to such instructions, the
holder shall receive the Merger Consideration applicable thereto, without any
interest thereon and such Certificate shall be cancelled. If any Merger
Consideration is to be paid to a name other than the name in which the
Certificate representing shares surrendered in exchange therefor is registered,
it shall be a condition to such payment or exchange that the Person requesting
such payment or exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the payment of such Merger Consideration to a name
other than that of the registered holder of the Certificate surrendered, or such
Person shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of shares for
any Merger Consideration delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(b) Buyer shall not be entitled to the return of any of the Deposit
Amount in the possession of the Exchange Agent relating to the transactions
described in this Agreement until the date which is 180 days after the Effective
Time. Thereafter, each holder of a Certificate representing a share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Merger Consideration applicable thereto, without any interest
thereon, but shall have no greater rights against the Surviving Corporation than
may be accorded to general creditors of the Surviving Corporation.
(c) At and after the Effective Time, the holders of Certificates to be
exchanged for the Merger Consideration applicable thereto pursuant to this
Agreement shall cease to have any rights as to stockholders of Seller except for
the right to surrender such holder's Certificates in exchange for payment of the
Merger Consideration applicable thereto, and after the Effective Time there
shall be no transfers on the stock transfer
<PAGE>
books of the Surviving Corporation of the shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent,
they shall be cancelled and exchanged for the Merger Consideration applicable
thereto, as provided in this Article II, subject to applicable law in the case
of Dissenting Shares.
(d) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed and subject to such other conditions as the
Buyer may impose, the Exchange Agent shall pay in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration deliverable in respect of such
Certificate as determined in accordance herewith. When authorizing such payment
of the Merger Consideration in exchange for such Certificate, the Buyer (or any
authorized officer thereof) may, in its reasonable discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to deliver to the Surviving Corporation a bond in such sum
as the Surviving Corporation may reasonably require as indemnity against any
claim that may be made against Buyer, the Surviving Corporation or the Exchange
Agent with respect to the Certificate alleged to have been lost, stolen or
destroyed.
(e) The provisions of this Section 2.09 shall also apply to Dissenting
Shares that lose their status as such, except that the obligations of Exchange
Agent under this Section 2.09 shall commence on the date of loss of such status.
2.10. SUPPLEMENTARY ACTION. If, at any time after the Effective Time,
any further assignments or assurances in law or any other things are necessary
or desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either Seller or Newco, or
otherwise to carry out the provisions of this Agreement, the officers and
directors of the Surviving Corporation are hereby authorized and empowered, in
the name of and on behalf of Seller and Newco, to execute and deliver any and
all things necessary or proper to vest or to perfect or confirm title to such
property or rights in the Surviving Corporation, and otherwise to carry out the
purposes and provisions of this Agreement.
2.11. POSSIBLE ALTERNATIVE STRUCTURE. Notwithstanding any other
provision of this Agreement to the contrary, prior to the Effective Time, Buyer
shall be entitled to revise the structure of the transaction to provide that
Seller shall be merged with and into Newco at the Effective Time, with Newco as
the surviving corporation of the Merger. Notwithstanding the foregoing or any
other provision of this Agreement to the contrary, Buyer and Seller may jointly
elect prior to the Effective Time, to substitute an alternative structure for
the accomplishment of the transactions contemplated by this Agreement; it being
understood by Buyer and Seller that any change to the structure of the Merger
pursuant to this Section 2.11 shall not be adopted if such change would (a)
materially delay consummation of the Merger, (b) change the amount or form of
consideration to be received by the stockholders of Seller or (c) have an
adverse impact on the financial benefits reasonably expected to be derived by,
or affect the obligations of Seller to, the security holders (Seller Common
Stock, Seller Preferred Stock, Options, Debentures and Warrants) of Seller from
the transactions provided for herein. Buyer and Seller agree that this Agreement
shall be appropriately amended in order to reflect any alternative structure.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer and Newco that, except as
described in the applicable section of the Seller Disclosure Schedule furnished
by Seller to Buyer prior to the execution of this Agreement (the "SELLER
DISCLOSURE SCHEDULE") corresponding to the Sections set forth below:
3.01. ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. Each Subsidiary of Seller is a corporation duly
<PAGE>
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Seller and its Subsidiaries have all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as it is now being conducted. Each of Seller and
its Subsidiaries is duly qualified as a foreign corporation, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, other than in jurisdictions where the failure to be so qualified,
individually and in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. Except as set forth in Section 3.01
of the Seller Disclosure Schedule, other than Seller's ownership interest in its
Subsidiaries, Seller has no direct or indirect equity or related interest in any
partnership, corporation, limited liability company, joint venture, business
association or other entity.
3.02. ARTICLES OF ORGANIZATION; BYLAWS; AND STOCK TRANSFER RECORDS.
Seller has made available to Buyer prior to the date of this Agreement complete
and correct copies of (i) the Articles of Organization (or other charter
document) and By-laws of Seller and each of its Subsidiaries, (ii) shareholder
list of each of Seller's Subsidiaries and (iii) all stock certificates
representing any of the issued and outstanding capital stock of each of Seller's
Subsidiaries, and in each case such copies are or will be accurate and complete
as of the date of this Agreement or when furnished.
3.03. CAPITALIZATION OF SELLER.
(a) On the date of this Agreement, the authorized capital stock of
Seller consists of (i) 15,000,000 shares of Seller Common Stock, of which
6,202,425 shares are issued and outstanding and (ii) 2,500,000 shares of
preferred stock, of which 15,000 shares have been designated Seller Preferred
Stock, of which 1,793 shares are issued and outstanding. Except for (i) Options
listed in the Seller Disclosure Schedule which were granted under the Seller
Equity Plans, (ii) the rights created pursuant to this Agreement, (iii) rights
created pursuant to the Warrants, (iv) rights created pursuant to the
Debentures, and (v) as set forth in Section 3.03 of Seller Disclosure Schedule,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Seller is a party or by which it is bound obligating
Seller to issue, sell, deliver, repurchase or redeem or cause to be issued,
sold, delivered, repurchased or redeemed any shares of capital stock of, or
equity interests in, Seller. All outstanding shares are, and all shares subject
to issuance as aforesaid, upon issuance 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 and free of preemptive rights or
rights of first refusal. None of Seller or any of its Subsidiaries is required
to redeem, repurchase or otherwise acquire shares of capital stock of Seller or
any of its Subsidiaries. Seller has no stockholder rights plan or agreement in
force providing for the issuance to holders of shares of Seller Common Stock or
Seller Preferred Stock of rights to purchase or receive stock, cash or other
assets upon the acquisition or proposed acquisition of shares of Seller Common
Stock or Seller Preferred Stock by a Person (a "RIGHTS PLAN"), nor has Seller's
Board of Directors or stockholders ever adopted a Rights Plan.
(b) All of Seller's Subsidiaries are listed in Exhibit 21.1 to Seller's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 1999 (the "1999
10-KSB"). Except as set forth in the 1999 10-KSB or in the Seller Disclosure
Schedule, Seller owns all of the outstanding capital stock of its Subsidiaries
free and clear of any liens, security interests, pledges, agreements, claims,
charges or encumbrances of any nature whatsoever. Except as set forth in Section
3.03 of Seller Disclosure Schedule, there are no voting trusts or other
agreements or understandings to which Seller or any of its Subsidiaries is a
party or by which Seller or any of its Subsidiaries may be bound with respect to
the voting of the capital stock of Seller or any of Seller's Subsidiaries.
Except as set forth in Section 3.03 of Seller Disclosure Schedule, there are no
options, warrants, calls, rights, commitments, or agreements of any character to
which any of Seller's Subsidiaries is a party or by which any of Seller's
Subsidiaries is bound obligating such Subsidiary to issue, sell, deliver,
repurchase or redeem, or caused to be issued, sold, delivered, repurchased or
redeemed, any shares of capital stock of, or equity interests in, such
Subsidiary. All of the outstanding capital stock of each of Seller's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and issued free of preemptive rights or rights of first refusal.
<PAGE>
3.04. CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Seller has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Seller, the
performance by Seller of its obligations hereunder and the consummation by
Seller of the transactions contemplated hereby have been duly and validly
authorized by Seller's Board of Directors and no other corporate action on the
part of Seller is necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Offer and the
Merger, the approval and adoption of this Agreement by holders of a majority of
the Seller Common Stock and, with respect to the Merger, the approval and
adoption of this Agreement by the holders of a majority of the Seller Preferred
Stock). This Agreement has been duly executed and delivered by Seller and is a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms. The affirmative vote of the holders of a majority of
the outstanding shares of Seller Common Stock and Seller Preferred Stock
entitled to vote thereon is the only vote of any class of capital stock of
Seller required by the CBCA, the Articles of Organization of Seller or the
Bylaws to adopt this Agreement and approve the Offer and the Merger.
3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming satisfaction of any applicable requirements referred to in
Section 3.05(b) below, and except as set forth in Section 3.05 of the Seller
Disclosure Schedule, the execution and delivery by Seller of this Agreement, the
compliance by Seller with the provisions hereof and the consummation by Seller
of the transactions contemplated hereby:
(A) will not conflict with or violate any statute, law,
ordinance, rule, regulation, order, writ, judgment, award, injunction,
decree or ruling applicable to Seller or any of its Subsidiaries or any
of their properties, or conflict with, violate or 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 any
rights of termination, amendment, cancellation or acceleration of, or
the loss of a benefit under, or result in the creation of a lien,
security interest, charge or encumbrance on any of the properties or
assets of Seller or any of its Subsidiaries pursuant to (i) the
Articles of Organization (or other charter document) or Bylaws of
Seller or any of its Subsidiaries, or (ii) any contract, lease,
agreement, note, bond, mortgage, indenture, deed of trust, or other
instrument or obligation, or any license, authorization, permit,
certificate or other franchise, other than such conflicts, violations,
breaches, defaults, losses, rights of termination, amendment,
cancellation or acceleration, liens, security interests, charges or
encumbrances as to which requisite waivers have been obtained; and
(B) do not and will not result in any grant of rights to any
other party under the Articles of Organization (or other charter
document) or Bylaws of Seller or any of its Subsidiaries or restrict or
impair the ability of the Buyer or any of its Subsidiaries to vote, or
otherwise exercise the rights of a stockholder with respect to shares
of Seller or any of its Subsidiaries that may be directly or indirectly
acquired or controlled by them.
(b) Other than in connection with or in compliance with the provisions
of the CBCA and the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), (i) Seller is not required to submit any notice, report, registration,
declaration or other filing with any foreign, federal, state or local
government, court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (collectively, "GOVERNMENTAL
ENTITIES"), in connection with the execution or delivery of this Agreement by
Seller or the performance by Seller of its obligations hereunder or the
consummation by Seller of the transactions contemplated by this Agreement and
(ii) no waiver, consent, approval, order or authorization of any Governmental
Entity is required to be obtained in connection with the execution or delivery
of this Agreement by Seller or the performance by Seller of its obligations
hereunder or the consummation by Seller of the transactions contemplated by this
Agreement, other than such notices, reports, registrations, declarations,
filings, waivers, consents, approvals, orders, or authorizations, the absence of
which would not, individually and in the
<PAGE>
aggregate, subject Seller or its Subsidiaries to any criminal penalties or
otherwise reasonably be expected to have a Material Adverse Effect.
3.06. SEC REPORTS; FINANCIAL STATEMENTS. Seller has filed all required
reports, schedules, forms, statements and other documents with the Securities
and Exchange Commission (the "SEC") since March 31, 1994 (collectively, the "SEC
REPORTS"). Seller has delivered to Buyer copies of (a) the consolidated balance
sheets of Seller and its Subsidiaries as of March 31 for the fiscal years 1998
and 1999, and the related consolidated statements of operations and cash flows
for the fiscal years 1997 through 1999, inclusive, as reported in the Annual
Report of Seller on Form 10-KSB for the fiscal year ended March 31, 1999 filed
with the SEC under the Exchange Act, accompanied by the audit report of Ernst &
Young LLP, and (b) the unaudited consolidated balance sheet of Seller and its
Subsidiaries as of September 30, 1999, the related unaudited consolidated
statements of income and changes in stockholders' equity for the six (6) months
ended September 30, 1999 and September 30, 1998 and the related unaudited
consolidated statements of cash flows for the six (6) months ended September 30,
1999 and September 30, 1998, all as reported in the Seller's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1999 (the "SEPTEMBER 1999
10-QSB") filed with the SEC under the Exchange Act. The March 31, 1999
consolidated balance sheet (the "SELLER BALANCE SHEET") of Seller (including the
related notes, where applicable) and the other financial statements referred to
herein were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved ("GAAP") (except
as may be indicated in the notes or schedules thereto and except, in the case of
the unaudited interim statements, as may be permitted under Form 10-QSB of the
Exchange Act) and present fairly in all material respects the consolidated
financial position of Seller and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows as of
the dates and for the fiscal periods indicated therein (subject, in the case of
unaudited interim financial statements, to normal year-end adjustments). The
books and records of Seller and its Subsidiaries have been, and are being,
maintained in accordance with GAAP and applicable legal and regulatory
requirements. Each SEC Report filed with the SEC complied in all material
respects with the then applicable requirements of the Exchange Act and the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and the rules and
regulations of the SEC promulgated thereunder and did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Seller has filed all
documents and agreements which were required to be filed as exhibits to the SEC
Reports. None of Seller's Subsidiaries is required to file any statements or
reports with the SEC.
3.07. NO DEFAULT. Neither Seller nor any of its Subsidiaries is in
default or violation (and no event has occurred which with or without notice,
the lapse of time or the happening or occurrence of any other event would
constitute a default or violation) of any term, condition or provision of (i)
its Articles of Organization (or other charter document) or Bylaws, or (ii) any
contract, lease, agreement, license, note, bond, mortgage, indenture, deed of
trust or other instrument or obligation to which Seller or any of its
Subsidiaries is a party or by which Seller or its Subsidiaries or any of their
properties or assets may be bound (nor to the knowledge of Seller is any other
party thereto in breach thereof or default thereunder), except, in each case,
for such violations, conflicts, breaches or defaults which either individually
or in the aggregate will not have a Material Adverse Effect.
3.08. COMPLIANCE WITH LAW. Except as set forth in Section 3.08 of the
Seller Disclosure Schedule, each of Seller and its Subsidiaries is in
compliance, and has conducted its respective businesses so as to comply with,
all statutes, laws, ordinances, rules, regulations, permits and approvals
applicable to its operations, whether domestic or foreign, other than where such
noncompliance will not result in, or create the possibility of resulting in, a
material limitation on the conduct of the business of Seller, will not cause, or
create the possibility of causing, Seller or any of its Subsidiaries to incur
any financial penalty in excess of $20,000, and will not otherwise result, or
create the possibility of resulting in, any Material Adverse Effect. Except as
disclosed in the SEC Reports, as of the date hereof no investigation or review
by any Governmental Entity with respect to Seller, any of its Subsidiaries or
any property owned or leased by Seller or any of its Subsidiaries is pending or,
to the knowledge of Seller, threatened.
<PAGE>
3.09. PERMITS. Seller and its Subsidiaries have all permits,
authorizations, licenses and franchises from Governmental Entities required to
conduct their business as now being conducted, except where the failure to have
any such permits, authorizations, licenses and franchises would not have a
Material Adverse Effect. Section 3.09 of the Seller Disclosure Schedule lists as
of the date of this Agreement all of Seller's licenses and permits
(collectively, the "LICENSES"). The Licenses are the only permits and licenses
required by Seller to operate its business as currently conducted. Seller is not
in material default with respect to any of the Licenses. The consummation of the
transactions contemplated by this Agreement will not cause any default,
cancellation or loss of a benefit under, or require any approval of a
Governmental Authority with respect to, any of the Licenses.
3.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the 1999
10-KSB, the September 1999 10-QSB, in Section 3.10 of the Seller Disclosure
Schedule, or incurred hereinafter in the ordinary course of business consistent
with past practice and with Section 5.01 hereof, since March 31, 1999, (i) the
business of each of Seller and its Subsidiaries has been conducted only in the
ordinary course consistent with past practices, (ii) there has not been any
change in the business, assets, financial condition or results of operations of
Seller and its Subsidiaries, (iii) there has not been any change in any policy
or practice followed by Seller nor its Subsidiaries in the ordinary course of
business except for changes which have not had and are not likely to have a
Material Adverse Effect, (iv) there has not been any material agreement,
contract or commitment entered into, or agreed to be entered into, except for
those in the ordinary course of business; (v) there has not been any increase in
or establishment of any bonus, insurance, severance (including severance after a
change in control), deferred compensation, pension, retirement, profit sharing,
life insurance or split dollar life insurance, retiree medical or life
insurance, or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
Seller or its Subsidiaries, except with respect to cash compensation, in the
ordinary course of business consistent with past practice; (vi) there has not
been any change in any of the accounting methods or practices of Seller and its
Subsidiaries other than changes required by applicable law or applicable
accounting policies; and (viii) neither Seller nor its Subsidiaries has
declared, paid or set aside for payment any dividend or other distribution in
respect of its capital stock or redeemed, purchased or otherwise acquired,
directly or indirectly, any shares of capital stock or other securities of
Seller or any Subsidiary.
3.11. NO UNDISCLOSED LIABILITIES. Except for liabilities and
obligations incurred since March 31, 1999 in the ordinary course of business,
incurred in connection with this Agreement or identified in Section 3.11 of the
Seller Disclosure Schedule, neither Seller nor any of its Subsidiaries has any
liabilities or obligations of any nature whatsoever (whether absolute, accrued,
fixed, contingent, liquidated, unliquidated or otherwise), required by generally
accepted accounting principles to be recognized or disclosed on a consolidated
balance sheet of Seller and its Subsidiaries or in the notes thereto, other than
those recognized or disclosed in the Seller Balance Sheet or disclosed in the
1999 10-KSB or the September 1999 10-QSB.
3.12. LITIGATION. Except as set forth in the 1999 10-KSB or the
September 1999 10-QSB, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of Seller, threatened against or affecting,
Seller or any of its Subsidiaries or any of their respective properties as to
which there is a reasonable possibility of an adverse determination and which if
determined adversely to Seller could be expected to have a Material Adverse
Effect and there is no judgment, decree, writ, injunction, award, ruling or
order of any Governmental Entity or arbitrator outstanding against Seller or any
of its Subsidiaries having, or which, insofar as can reasonably be foreseen, in
the future would have, a Material Adverse Effect. Section 3.12 of the Seller
Disclosure Schedule includes a list of all litigation pending or threatened
against Seller as of the date of this Agreement. Seller has made available to
Buyer correct and complete copies of all correspondence prepared by its counsel
for Seller's auditors in connection with the last completed audit of Seller's
financial statements and any such correspondence since the date of the last such
audit. As of the date of this Agreement, there are no actions, suits or
proceedings pending or, to the knowledge of Seller, threatened against Seller
arising out of or in any way related to this Agreement, the Offer, the Merger or
any of the transactions contemplated hereby or thereby.
<PAGE>
3.13. ERISA.
(a) Section 3.13 of the Seller 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 all other written or oral plans
or agreements involving direct or indirect compensation (including any
employment agreements entered into between Seller or any of its Subsidiaries and
any employee or former employee of Seller or any of its Subsidiaries, but
excluding worker's compensation, unemployment compensation and other
government-mandated programs) currently or previously maintained, contributed to
or entered into by Seller or any of its Subsidiaries or any ERISA Affiliate
thereof for the benefit of any employee or former employee of or current or
former service provider to Seller or any of its Subsidiaries under which Seller
or any of its Subsidiaries or any ERISA Affiliate thereof has or may have any
present or future obligation or liability (collectively, the "SELLER EMPLOYEE
PLANS"). For purposes of this Section 3.13, "ERISA AFFILIATE" shall mean any
entity which is a member of (i) a "controlled group of corporations," as defined
in Section 414(b) of the Internal Revenue Code of 1986, as amended (the "CODE"),
(ii) a group of entities under "common control," as defined in Section 414(c) of
the Code or (iii) an "affiliated service group," as defined in Section 414(m) of
the Code or treasury regulations promulgated under Section 414(o) of the Code,
any of which includes Seller or any of its Subsidiaries. Section 3.13 of Seller
Disclosure Schedule identifies the only Seller Employee Plans which individually
or collectively would constitute an "employee pension benefit plan," as defined
in Section 3(2) of ERISA (collectively, the "SELLER PENSION PLANS").
(b) No Seller Pension Plan is subject to Title IV of ERISA, Part 3 of
Title I of ERISA or Section 412 of the Code. No Seller Pension Plan constitutes
or has since the enactment of ERISA constituted a "multiemployer plan," as
defined in Section 3(37) of ERISA. Nothing done or omitted to be done and no
transaction or holding of any asset under or in connection with any Seller
Employee Plan has or is likely to make Seller or any of its Subsidiaries or any
officer or director thereof subject to any material liability under Title I of
ERISA or liable for any material tax pursuant to Section 4975 of the Code.
(c) Each Seller Pension Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date. Each trust forming a part of a Seller Pension
Plan is exempt from tax pursuant to Section 501(a) of the Code. Each Seller
Employee Plan has been maintained in compliance with its terms and with the
applicable requirements of ERISA and the Code.
(d) Each employment, severance or other similar contract, arrangement
or policy and each plan or arrangement (written or oral) providing for insurance
coverage (including any self-insured arrangements), vacation benefits, severance
or severance-type benefits, disability benefits, death benefits, hospitalization
benefits, retirement benefits, deferred compensation, profit-sharing, bonuses,
stock options, stock purchase, phantom stock, stock appreciation or other forms
of incentive compensation or post-retirement insurance, compensation or benefits
which (i) is not a Seller Employee Plan, (ii) is entered into, maintained or
contributed to, as the case may be, by Seller or any of its Subsidiaries, and
(iii) covers any employee or former employee of or other current or former
service provider to Seller or any of its Subsidiaries, is herein referred to as
a "SELLER BENEFIT ARRANGEMENT" and collectively as the "SELLER BENEFIT
ARRANGEMENTS." All Seller Benefit Arrangements are listed in Section 3.13 of the
Seller Disclosure Schedule. Each Seller Benefit Arrangement has been maintained
in compliance with its terms and with the requirements prescribed by any and all
statutes (including but not limited to the Code), orders, rules and regulations
which are applicable to such Seller Benefit Arrangements.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Seller or any of its Subsidiaries
relating to, or change in employee participation or coverage under, any Seller
Employee Plan or Seller Benefit Arrangement which would increase the expense of
maintaining such Seller Employee Plan or Seller Benefit Arrangement above the
level of the expense incurred in respect thereof for the fiscal year ended March
31, 1999.
<PAGE>
(f) The Seller has complied with the requirements of Section 4980B of
the Code with respect to any "qualifying event" (as defined in Section
4980B(f)(3) of the Code) occurring prior to and including the Closing Date,
except where failure to be in compliance individually and in the aggregate has
not had and would not reasonably be expected to have a Material Adverse Effect
and, to Seller's knowledge, no tax payable on account of Section 4980B of the
Code has been incurred with respect to any current or former employees of Seller
or any of its Subsidiaries.
(g) There is no term of any Seller Employee Plan or Seller Benefit
Arrangement covering a "disqualified individual" (as defined in Section 280G(c)
of the Code), or of any contract, instrument, agreement or arrangement with any
such disqualified individual, that individually or collectively could result in
a disallowance of the deduction for any "excess parachute payment" (as defined
in Section 280G(b)(i) of the Code) or the imposition of the excise tax provided
in Section 4999 of the Code. The consummation of the transactions contemplated
by this Agreement will not result in any "excess parachute payment" or the
imposition of any such excise tax.
(h) Seller has heretofore delivered or made available to Buyer copies
of all of Seller Employee Plans, Seller Pension Plans and Seller Benefit
Arrangements listed in Section 3.13 of Seller Disclosure Schedule.
(i) There is no pending or, to Seller's knowledge, threatened legal
action, proceeding or investigation, other than routine claims for benefits,
concerning any Seller Employee Plan, Seller Pension Plan or Seller Benefit
Arrangement or, to the knowledge of Seller any fiduciary or service provider
thereof and, to the knowledge of Seller, there is no basis for any such legal
action or proceeding.
(j) No Seller Employee Plan or Seller Benefit Arrangement provides
health, life or other similar welfare coverages after termination of employment
except to the extent required by applicable state insurance laws and Title I,
Part 6 of ERISA.
(k) With respect to each Seller Employee Plan, Seller Pension Plan or
Seller Benefit Arrangement for which a separate fund of assets is or is required
to be maintained, full payment has been made of all amounts required of Seller
and its Subsidiaries and ERISA Affiliates under the terms of each such Plan or
Arrangement or applicable law, through the Closing Date.
3.14. LABOR MATTERS. There is no labor strike, dispute, slowdown,
stoppage or lockout actually pending, or threatened against Seller or any
Subsidiary. Neither Seller nor any Subsidiary is a party to or bound by any
collective bargaining agreement with any labor organization applicable to
employees of Seller or any Subsidiary. Neither Seller nor any Subsidiary has
experienced any material work stoppage or other material labor difficulty during
the two-year period ending on the date hereof.
3.15. TAX RETURNS AND REPORTS.
(a) Seller and its Subsidiaries have timely filed in correct form with
the appropriate taxing authorities all federal, state, county, local and foreign
returns, estimates, information statements, reports and other documents in
respect of Taxes (as defined in Article VIII) required to be filed by Seller and
its Subsidiaries. All amounts shown due on such returns have been timely paid as
required by law.
(b) No assessment that has not been settled or otherwise resolved has
been made with respect to Taxes not shown on the Tax returns, other than such
additional Taxes as are being contested in good faith or which if determined
adversely to Seller would not have a Material Adverse Effect. There are no
material disputes pending or written claims asserted for Taxes or assessments
upon Seller or any of its Subsidiaries, nor has Seller or any of its
Subsidiaries been requested to give any currently effective waivers extending
the statutory period of limitation applicable to any Federal, state, county,
foreign or local income tax return for any period. No deficiency in Taxes or
other proposed adjustment that has not been settled or otherwise resolved has
<PAGE>
been asserted in writing by any taxing authority against any of Seller or its
Subsidiaries. No Tax return of Seller or any of its Subsidiaries is now under
examination by any applicable taxing authority. There are no material liens for
Taxes (other than current Taxes not yet due and payable) on any of the assets of
Seller or any of its Subsidiaries, except for such liens for Taxes that would
not have a Material Adverse Effect. During the past five years, no jurisdiction
has made any written claim or allegation, or made any written inquiry pursuant
to such a written claim or allegation, that Seller or any of its Subsidiaries is
required to file Tax returns in such jurisdiction for any Tax for which Seller
or the applicable Subsidiary does not presently filed Tax returns in such
jurisdiction.
(c) Adequate provision has been made on the Seller Balance Sheet for
all Taxes of Seller and its Subsidiaries in respect of all periods through the
date hereof.
(d) As of the date of this Agreement, Seller has no ruling requests
currently pending with the Internal Revenue Service.
(e) Except as set forth in the SEC Reports, neither Seller nor any of
its Subsidiaries is a party to (or obligated under) any Tax allocation, tax
sharing or tax indemnity agreement which has as a party any Person other than
Seller or its Subsidiaries.
(f) Seller and its Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, consultant, independent contractor, creditor, stockholder or
other party.
3.16. SELLER DEBT. Section 3.16 of the Seller Disclosure Schedule lists
all outstanding Indebtedness of Seller and each Subsidiary as of the date
hereof, except for individual items of indebtedness the principal amount of
which do not exceed $25,000. Section 3.16 of the Seller Disclosure Schedule sets
forth the amount of principal and unpaid interest outstanding under each
instrument evidencing Indebtedness of Seller or each Subsidiary, if any, that
will accelerate or become due or result in a right on the part of the holder of
such indebtedness (with or without due notice or lapse of time) to require
prepayment, redemption or repurchase as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby.
3.17. TRADEMARKS, PATENTS AND COPYRIGHTS.
(a) Section 3.17 of the Seller Disclosure Schedule contains a true and
complete list of Seller Intellectual Property and includes details of all due
dates for further filings, maintenance, payments or other actions falling due
within twelve (12) months of the Closing Date. All of Seller's patents, patent
applications, registered trademarks, and trademark applications, and registered
copyrights remain in good standing with all fees and filings due as of the
Closing Date duly made and the due dates specified in the Seller Disclosure
Schedule are accurate and complete.
(b) The Seller Intellectual Property consists solely of items and
rights which are: (i) owned by Seller; or (ii) rightfully used by Seller
pursuant to a valid license ("SELLER LICENSED INTELLECTUAL PROPERTY"), the
parties and date of each such license agreement and each material agreement in
which Seller is the licensor or owner of the subject rights in the agreement
being set forth on Section 3.17(b) of the Seller Disclosure Schedule. Seller has
all rights in Seller Intellectual Property necessary to carry out Seller's
current activities (and had all rights necessary to carry out its former
activities at the time such activities were being conducted), including without
limitation, to the extent required to carry out such activities, rights to make,
use, reproduce, modify, adopt, create derivative works based on, translate,
distribute (directly and indirectly), transmit, display and perform publicly,
license, rent and lease and, other than with respect to the Seller Licensed
Intellectual Property, assign and sell, the Seller Intellectual Property.
(c) The reproduction, manufacturing, distribution, licensing,
sublicensing or sale of any Seller Intellectual Property, now used or offered or
proposed for use, licensing or sale by Seller does not infringe on
<PAGE>
any patent, copyright, trademark, service mark, trade name, trade dress, firm
name, Internet domain name, logo, trade dress, of any person and does not
constitute a misappropriation of any trade secret. No claims (i) challenging the
validity, effectiveness or ownership by Seller of any of the Seller Intellectual
Property, or (ii) to the effect that the use, distribution, licensing,
sublicensing or sale of the Seller Intellectual Property as now used or offered
or proposed for use, licensing, sublicensing or sale by Seller infringes or will
infringe on any intellectual property or other proprietary right of any person
have been asserted or, to the knowledge of Seller, are threatened by any person
or have been made or threatened by any person against the Seller's distributors.
To the knowledge of Seller, there is no unauthorized use, infringement or
misappropriation of any of the Seller Intellectual Property by any third party,
employee or former employee.
(d) All Seller Intellectual Property has been solely developed by full
time employees within the scope of his or her employment with the Seller or
within the scope of his or her employment with companies acquired by Seller
prior to the date hereof. All employee contribution or participation in the
conception and development of the Seller Intellectual Property on behalf of
Seller constitutes work prepared by an employee within the scope of his or her
employment in accordance with applicable federal and state law that has accorded
Seller ownership of all tangible and intangible property thereby arising.
(e) Seller is not, nor as a result of the execution or delivery of this
Agreement, or performance of Seller's obligations hereunder, will Seller be, in
violation of any material license, sublicense, agreement or instrument to which
Seller is a party or otherwise bound, nor will execution or delivery of this
Agreement, or performance of Seller's obligations hereunder, cause the
diminution, termination or forfeiture of any material Seller Intellectual
Property.
(f) Section 3.17(f) of the Seller Disclosure Schedule contains a true
and complete list of all of Seller's internally-developed software programs
("SELLER SOFTWARE PROGRAMS"). Seller owns full and unencumbered right and good,
valid and marketable title to such Seller Software Programs and all Seller
Intellectual Property free and clear of all mortgages, pledges, liens, security
interests, conditional sales agreements or encumbrances.
(g) The Seller Software Programs (i) have been designed to ensure year
2000 compatibility, which includes, but is not limited to, being able to provide
specific dates and calculate spans of dates within and between twentieth century
and twenty-first century, prior to, including and following January 1, 2000;
(ii) operate and will operate in accordance with their specifications and
correctly process day and date calculations for dates prior and up to December
31, 1999, and on and after January 1, 2000, prior to, during and after the
calendar year 2000; and (iii) shall not end abnormally or provide invalid or
incorrect results as a result of date data, specifically including date data
which represents or references different centuries or more than one century.
3.18. MATERIAL AGREEMENTS. Except as set forth in the 1999 10-KSB and
as listed in Section 3.18 of the Seller Disclosure Schedule, except for this
Agreement and the agreements specifically referred to herein, neither Seller nor
any of its Subsidiaries is a party to or bound by any of the following
agreements (with the following agreements, and the agreements included as
exhibits to the SEC Reports, collectively referred to as the "MATERIAL
AGREEMENTS"):
(a) any contract or agreement or amendment thereto that would be
required to be filed as an exhibit to a registration statement on Form S-1 filed
by Seller as of the date hereof;
(b) any confidentiality agreement, non-competition agreement or other
contract or agreement that contains covenants limiting Seller's or any of its
Subsidiaries' freedom to compete in any line of business or in any location or
with any Person; and
<PAGE>
(c) any loan agreement, indenture, note, bond, debenture or any other
document or agreement evidencing a capitalized lease obligation or other
Indebtedness (as defined in Article VIII) to any Person, other than any
Indebtedness in a principal amount less than $25,000 individually or $100,000 in
the aggregate.
Seller has delivered to Buyer a correct and complete copy of each
Material Agreement and a written summary setting forth the terms and conditions
of each oral agreement, if any, referred to in the Seller Disclosure Schedule.
Each such Material Agreement constitutes the legal, valid and binding obligation
of Seller or a Subsidiary, as the case may, and to the knowledge of Seller, the
other party thereto, enforceable against such parties in accordance with the
terms thereof (except as enforcement may be limited by general principles of
equity whether applied in a court of law or equity and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies generally). None of
Seller or any of its Subsidiaries, as the case may be, is in default under, or
with the giving of notice or the lapse of time, or both, would be in default
under, any of the material terms or conditions of any Material Agreement. To the
knowledge of Seller, there has occurred no material default or event which, with
the giving of notice or the lapse of time, or both, would constitute a material
default by any other party to any Material Agreement.
3.19. INSURANCE. Seller and each Subsidiary is presently insured, and
during each of the past five calendar years has been insured, against such risks
as companies engaged in a similar business would, in accordance with good
business practice, customarily be insured. The policies of fire, theft,
liability and other insurance maintained with respect to the assets or
businesses of Seller and its Subsidiaries provide reasonably adequate coverage
against loss. Seller has heretofore furnished to Buyer a complete and correct
list as of the date hereof of all insurance policies maintained by Seller or its
Subsidiaries, and has made available to Buyer complete and correct copies of all
such policies, together with all riders and amendments thereto. All such
policies are in full force and effect and all premiums due thereon have been
paid to the date hereof. Seller and its Subsidiaries have complied in all
material respects with the terms of such policies.
3.20. PROPERTIES. Except as set forth in Section 3.20 of the Seller
Disclosure Schedule, neither Seller nor any or its Subsidiaries owns any real
property. Seller and its Subsidiaries have good and valid title, free and clear
of all Encumbrances to all of their material properties and assets, whether
tangible or intangible, real, personal or mixed, reflected in the 1999 10-KSB as
being owned by Seller and its Subsidiaries as of the date thereof, other than
(i) any properties or assets that have been sold or otherwise disposed of in the
ordinary course of business since the date of the Seller Balance Sheet, (ii)
liens disclosed in the notes to the Seller Balance Sheet and (iii) liens arising
in the ordinary course of business after the date of the Seller Balance Sheet.
All buildings, and all fixtures, equipment and other property and assets that
are material to its business on a consolidated basis, held under leases or
sub-leases by Seller or any Subsidiary are held under valid instruments
enforceable in accordance with their respective terms, subject to applicable
laws of bankruptcy, insolvency or similar laws relating to creditors' rights
generally and to general principles of equity (whether applied in a proceeding
in law or equity). Substantially all of Seller's and its Subsidiaries' equipment
in regular use has been reasonably maintained and is in serviceable condition,
reasonable wear and tear excepted.
3.21. LEASES. Section 3.21 of the Seller Disclosure Schedule lists all
outstanding leases, both capital and operating, or licenses, pursuant to which
Seller or any of its Subsidiaries has (i) obtained the right to use or occupy
any real or tangible personal property under arrangements where the remaining
obligation is more than $25,000, inclusive of any renewal rights or (ii) granted
to any other Person the right to use any material item of machinery, equipment,
furniture, vehicle or other personal property of Seller or any of its
Subsidiaries having an original cost of $25,000 or more.
3.22. BUSINESS ACTIVITY RESTRICTION. Except as set forth in Section
3.22 of the Seller Disclosure Schedule, there is no non-competition or other
similar agreement, commitment, judgment, injunction, order or decree to which
Seller or any Subsidiary is a party or subject to that has or could reasonably
be expected to have the effect of prohibiting or impairing the conduct of
business by Seller. Seller has not entered into any agreement under which Seller
is restricted from selling, licensing or otherwise distributing any of its
technology
<PAGE>
or products to, or providing services to, customers or potential customers or
any class of customers, in any geographic area, during any period of time or in
any segment of the market or line of business.
3.23. ACCOUNTS RECEIVABLE; INVENTORY.
(a) Except as specifically set forth in Section 3.23 of the Seller
Disclosure Schedule, hereto, all accounts and notes receivable reflected in the
Seller Balance Sheet, and all accounts and notes receivable arising subsequent
to the date of the Seller Balance Sheet, have arisen in the ordinary course of
business, represent valid obligations to Seller or a Subsidiary and, subject
only to an amount of bad debts reasonable in the industry and not materially
different than Seller's past experience, have been collected or are collectible
in the aggregate recorded amounts thereof in accordance with their terms.
(b) The inventories (and any reserves established with respect thereto)
of Seller and its Subsidiaries as of March 31, 1999 are described in Section
3.23(b) of the Seller Disclosure Schedule. All such inventories (net of any such
reserves) are properly reflected on the Seller Balance Sheet in accordance with
GAAP and, to the best knowledge of Seller, are of such quality as to be useable
and saleable in the ordinary course of business (subject, in the case of
work-in-process inventory, to completion in the ordinary course of business).
3.24. CUSTOMERS AND SUPPLIERS. Neither Seller's nor any of its
Subsidiaries' customers which individually accounted for more than 5% of
Seller's or such Subsidiary's gross revenues during the 12-month period
preceding the date hereof has terminated or threatened or indicated an intention
to terminate any agreement with Seller or such Subsidiary. Except as set forth
in Section 3.24 of the Seller Disclosure Schedule, as of the date hereof, no
material supplier of Seller or any of its Subsidiaries has notified Seller in
writing that it will stop, or decrease the rate of, supplying materials,
products or services to Seller or such Subsidiary.
3.25. YEAR 2000 COMPLIANCE. The only "mission-critical" computer
systems (as such term is commonly used in regulations and trade organization
guidelines with respect to the Year 2000 Problem (as defined below)) owned or
utilized by Seller and its Subsidiaries in their businesses are set forth in
Section 3.25 of the Disclosure Schedule (the "SELLER MISSION CRITICAL SYSTEMS").
Seller and its Subsidiaries have taken all steps necessary to ensure that all of
such Seller Mission Critical Systems will not, or each of Seller and its
Subsidiaries has received written assurances from the applicable third-party
service providers with respect to each Seller Mission Critical System that each
of such Seller Mission Critical Systems will not, contain any deficiencies
relating generally to formatting for entering dates (commonly referred to and
referred herein as the "YEAR 2000 PROBLEM") and each Seller Mission Critical
System is in compliance with all regulations and trade organization guidelines
concerning the Year 2000 Problem. To the knowledge of Seller, all of Seller's
and its Subsidiaries' other computer systems ("NON-MISSION CRITICAL SYSTEMS"),
third party service and equipment providers are in compliance with all
regulations and trade organization guidelines concerning the Year 2000 Problem,
except where the failure to be compliant would not result in any Material
Adverse Effect. None of Seller or any Subsidiary is aware of any inability on
the part of any customer or service provider with which Seller or any Subsidiary
transacts business to timely remedy any deficiencies of its own in respect of
the Year 2000 Problem.
3.26. ENVIRONMENTAL MATTERS. Except as would not reasonably be
expected to have a Material Adverse Effect, (a) Seller and each Subsidiary
are in compliance with all applicable Environmental Laws, (b) neither Seller
nor any Subsidiary has received any written notice with respect to the
business of, or any property owned or leased by, Seller or any Subsidiary
from any governmental entity or third party alleging that Seller or any
Seller Subsidiary is not in compliance with any Environmental Law, and (c)
there has been no "release" of a "hazardous substance", as those terms are
defined in the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 ET SEQ., in excess of a reportable
quantity on any real property owned by Seller or any Subsidiary that is used
for the business of Seller or any Subsidiary.
3.27. PRIOR ACQUISITIONS AND DISPOSITIONS. Except as set forth in the
1999 10-KSB or in Section 3.27 of the Seller Disclosure Schedule, no claims,
amounts owed, liabilities (contingent or otherwise), encumbrances,
<PAGE>
legal proceedings or any other obligations of any kind are due or were incurred
or outstanding in connection with any acquisitions or dispositions made by
Seller or any of its Subsidiaries prior to the date of this Agreement.
3.28. ABSENCE OF CERTAIN BUSINESS PRACTICES. No employee, consultant,
agent or other representative of Seller or any of its Subsidiaries has directly
or indirectly within the past five years given or agreed to give any gift or
similar benefit to any customer, supplier, governmental employee or other Person
who is or may be in a position to help or hinder the business of Seller or any
of its Subsidiaries in connection with any actual or proposed transaction which
(a) would reasonably be expected to subject Seller or any of its Subsidiaries to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (b) if not given in the past, would reasonably be expected to have
had a Material Adverse Effect, or (c) if not continued in the future, would
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Seller has not committed, been charged with or to
the knowledge of Seller been under investigation with respect to, nor does there
exist, any violation by Seller of the Foreign Corrupt Practices Act, as amended
(the "FCPA").
3.29. TAKEOVER LAWS. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States including, without limitation,
applicable to Seller or any of Seller Subsidiaries is applicable to the
execution, delivery and performance of this Agreement, the Seller Option
Agreement or the Stockholder Agreements or the consummation of the Offer or the
Merger.
3.30. OPINION OF FINANCIAL ADVISOR. Seller has received the opinion of
Seller's Financial Advisor, as of the date of this Agreement, to the effect that
the Merger Consideration is fair, from a financial point of view, to Seller's
stockholders.
3.31. DISCLOSURE. To Seller's knowledge, as of the date of this
Agreement, no representation or warranty by Seller in this Agreement contains
any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not false or
misleading.
3.32. BROKERS AND FINDERS. Seller has furnished to Buyer or its counsel
a true and complete copy of that certain letter agreement (the "WASSERSTEIN
ENGAGEMENT LETTER") between Seller and Wasserstein Perella & Co., Inc. (the
"SELLER'S FINANCIAL ADVISOR"), such letter agreement being the only agreement
pursuant to which such firm would be entitled to any payment relating to the
transactions contemplated hereunder. No broker, finder or investment banker
other than Seller's Financial Advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Seller or any of its
Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND NEWCO
Buyer and Newco, jointly and severally, represent and warrant to Seller
that:
4.01. ORGANIZATION AND QUALIFICATION. Each of Buyer and Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business as it is now being conducted. Newco is a new corporation that was
formed for the purpose of consummating the transactions contemplated by this
Agreement and has conducted no business and engaged in no activities unrelated
to the transactions contemplated by this Agreement.
<PAGE>
4.02. CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Each of Buyer
and Newco has full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder and to consummate all the transactions
contemplated hereby. The execution and delivery of this Agreement by Buyer and
Newco, the performance by each of Buyer and Newco of their respective
obligations hereunder and the consummation by Buyer and Newco of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Newco and the Board of Directors of the Buyer and no other
corporate action on the part of Buyer or Newco is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than the
approval of this Agreement and the Merger by the shareholders of Buyer and
Newco). This Agreement has been duly executed and delivered by each of Buyer and
Newco and is a legal, valid and binding obligation of each of Buyer and Newco,
enforceable against Buyer and Newco in accordance with its terms. The
affirmative vote of the holders of a majority of the outstanding shares of
common stock of Buyer entitled to vote thereon is the only vote of any class of
capital stock of Buyer required to adopt this Agreement and approve the Merger.
4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming satisfaction of all applicable requirements referred to in
Section 4.03(b) below, the execution and delivery of this Agreement by Buyer and
Newco, the compliance by Buyer and Newco with the provisions hereof and the
consummation by Buyer and Newco of the transactions contemplated hereby will not
conflict with or violate any statute, law, ordinance, rule, regulation, order,
writ, judgment, award, injunction, decree or ruling applicable to the Buyer or
any of its Subsidiaries or any of their properties, or conflict with, violate or
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 any
rights of termination, amendment, cancellation or acceleration of, or the loss
of a benefit under, or result in the creation of a lien, security interest,
charge or encumbrance on any of the properties or assets of the Buyer or any of
its Subsidiaries pursuant to (i) the organizational documents of the Buyer or
any of its Subsidiaries or (ii) any contract, lease, agreement, note, bond,
mortgage, indenture, deed of trust, or other instrument or obligation, or any
license, authorization, permit, certificate or other franchise, other than such
conflicts, violations, breaches, defaults, losses, rights of termination,
amendment, cancellation or acceleration, liens, security interests, charges or
encumbrances as to which requisite waivers have been obtained or which
individually or in the aggregate would not have a material adverse effect on the
ability of the Buyer and Newco to perform their obligations under this
Agreement.
(b) Other than in connection with or in compliance with the provisions
of the CBCA, the Companies Act 1985 (as amended) and the Listing Rules of the
London Stock Exchange Limited, (i) neither Buyer nor Newco is required to submit
any notice, report, registration, declaration or other filing with any
Governmental Entity in connection with the execution or delivery of this
Agreement by Buyer and Newco or the performance by Buyer and Newco of their
obligations hereunder or the consummation by Buyer and Newco of the transactions
contemplated by this Agreement and (ii) no waiver, consent, approval, order or
authorization of any Governmental Entity is required to be obtained by Buyer or
Newco in connection with the execution or delivery of this Agreement by Buyer
and Newco or the performance by Buyer and Newco of their obligations hereunder
or the consummation by Buyer and Newco of the transactions contemplated by this
Agreement.
4.04. BROKERS AND FINDERS. No broker, finder or investment banker other
than Greig Middleton and Co. Limited, the fees and expenses of which will be
paid by Buyer, is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Buyer or any of its Subsidiaries.
4.05. FINANCING. Buyer has provided to Seller a true and correct copy
of the Placing Agreement, between Buyer and Greig Middleton and Co. Limited (the
"PLACING AGREEMENT"), pursuant to which, prior to the Effective Time, Buyer will
complete a placing of ordinary 5p shares in Buyer (the "SHARE ISSUANCE"), which
placing is being underwritten by Greig Middleton and Co. Limited, and which, if
consummated will provide sufficient funds to consummate the transactions
contemplated by this Agreement, including (i) the payment of the aggregate
Merger Consideration to be paid pursuant to Section 2.05, (ii) the payment of
the amounts to be
<PAGE>
paid with respect to outstanding Options, Warrants and Debentures pursuant to
Sections 2.06 and 2.07, (iii) the payment of any fees and expenses in connection
with the Merger or the financing thereof and (iv) provide for the working
capital needs of the Surviving Corporation following the Merger.
ARTICLE V
COVENANTS
5.01. CONDUCT OF BUSINESS BY SELLER. Except as required or permitted by
this Agreement or as disclosed in Section 5.01 of the Seller Disclosure
Schedule, during the period from the date of this Agreement until the Effective
Time, Seller agrees as to itself and its Subsidiaries that (except to the extent
that Buyer shall otherwise consent in writing) Seller and its Subsidiaries shall
conduct their respective operations in the ordinary course of business
consistent with past practice, and each of Seller and its Subsidiaries will use
its reasonable efforts to preserve intact its present business organization, to
keep available the services of its present officers and employees and to
maintain satisfactory relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having business relationships
with it. Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time, neither Seller nor any of
its Subsidiaries shall, without the prior written consent of Buyer (which
consent will be given or denied within a reasonable time after any request for
such consent):
(a) amend its Articles of Organization or other charter document or
Bylaws;
(b) authorize for issuance, issue, sell, deliver, pledge or agree or
commit to issue, sell, deliver or pledge (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any capital stock of any class or any debt or other securities
convertible into capital stock or equivalents (including, without limitation,
stock appreciation rights), or amend any of the terms of any of the foregoing,
other than the issuance of shares of capital stock upon the exercise of
outstanding options or rights under the Seller Equity Plans;
(c) (i) split, combine or reclassify any shares of its capital stock,
or authorize or propose the issuance or authorization of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
adopt or approve any Rights Plan, or repurchase, redeem or otherwise acquire any
of its securities or any securities of its Subsidiaries, or (ii) make any
payment of cash or other property to terminate, cancel or otherwise settle any
outstanding Options, other than in the case of clauses (i) or (ii) above for the
issuance of shares of Seller Common Stock in connection with the exercise of
options or rights under the Seller Equity Plans;
(d) (i) incur or assume any long-term Indebtedness or increase any
amounts outstanding under long-term credit facilities existing as of the date of
this Agreement or grant, extend or increase the amount of a mortgage lien on any
leasehold or fee simple interest of Seller or its Subsidiaries; or, except in
the ordinary course of business consistent with past practice in the case of
clauses (ii) through (vi) below, (ii) incur or assume any short-term debt or
increase amounts outstanding under short-term credit facilities existing as of
September 30, 1999; (iii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other Person, except for obligations of Seller or any Subsidiary of
Seller; (iv) make any loans, advances or capital contributions to, or
investments in, any other Person; (v) pledge or otherwise encumber shares of
capital stock of Seller or any of its Subsidiaries; or (vi) mortgage or pledge
any of its assets, tangible or intangible, or create or suffer to exist any lien
thereon except as existing on the date of this Agreement or as may be required
under agreements outstanding on the date of this Agreement to which Seller or
any of its Subsidiaries are parties;
<PAGE>
(e) except as expressly provided in this Agreement, enter into, adopt
or amend in any manner or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance, change-in-control or
other employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee, or increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan or arrangement as in effect as of
the date of this Agreement or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(f) sell, lease, license, pledge or otherwise dispose of or encumber
any material assets except in the ordinary course of business consistent with
past practice (including without limitation any indebtedness owed to it or any
claims held by it);
(g) except in connection with the Bridgestone Agreement, acquire or
agree to acquire by merging or consolidating with or by purchasing any portion
of the capital stock or assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, association or other
business organization or division thereof, other than in the ordinary course of
business consistent with past practice;
(h) change any of the accounting principles or practices used by it
affecting its assets, liabilities or business, except for such changes required
by a change in generally accepted accounting principles;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise), other than the payment, discharge or satisfaction of liabilities (i)
in the ordinary course of business consistent with past practices, (ii) with
notice to Buyer, in an amount which does not exceed $25,000 in the aggregate,
(iii) incurred pursuant to the terms of the Wasserstein Engagement Letter in an
amount not to exceed $1,250,000 plus expenses, or (iv) incurred in connection
with the transactions contemplated hereby, not to exceed the amounts described
in Section 5.01(i) of the Seller Disclosure Schedule;
(j) except as required by their terms, enter into, terminate or breach
(or take or fail to take any action, that, with or without notice or lapse of
time or both, would become a breach) or materially amend any contract which is
or would be a Material Agreement;
(k) without prior consultation with Buyer (in addition to the consent
requirement described above) commence any litigation or arbitration other than
in accordance with past practice or settle any litigation or arbitration for
money damages or other relief against Seller or any Subsidiary in excess of
$50,000 or if as part of such settlement Seller or any Subsidiary would agree to
any restrictions on its operations;
(l) grant any license with respect to or otherwise convey any Seller
Intellectual Property or take any action or fail to take any action which would
cause the representations and warranties of Seller set forth in Section 3.17
hereof to become untrue in any respect;
(m) elect or appoint any new directors or officers of Seller or any
Subsidiary;
(n) waive, release or amend its rights under any confidentiality,
"standstill" or similar agreement that Seller entered into in connection with
its consideration of a potential strategic transaction; provided, however, that
Seller may waive, release or amend its rights under any such confidentiality,
"standstill" or similar agreement if Seller's Board determines, based on the
advice of independent legal counsel that failure to do so would be reasonably
likely to constitute a breach of its fiduciary duties to Seller's stockholders
under applicable law;
(o) make or change any election, request permission of any Tax
authority or to change any accounting method, file any amended Tax return, enter
into any closing agreement, settle any Tax claim or
<PAGE>
assessment relating to Seller or its Subsidiaries, surrender any right to claim
a refund of Taxes, or consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to Seller or its
Subsidiaries; or
(p) settle or comprise any pending or threatened suit, action or claim
which is material or which relates to any of the transactions contemplated by
this Agreement;
(q) take any action that would reasonably be expected to result in (i)
any of the representations and warranties of Seller set forth in this Agreement
becoming untrue or (ii) any of the Offer Conditions not being satisfied;
(r) amend, modify or otherwise change any of the terms and conditions
set forth in the Bridgestone Agreement; or
(s) take, or agree in writing or otherwise to take, (i) any of the
actions described in Sections 5.01(a) through 5.01(r).
5.02. ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to and in accordance with the terms and conditions of that
certain letter agreement between Buyer and Seller regarding the confidentiality
of information exchanged by the parties prior to the date hereof (the
"CONFIDENTIALITY AGREEMENT"), from the date of this Agreement to the Effective
Time, Seller shall, and shall cause its Subsidiaries, officers, directors,
employees and agents to, afford the officers, employees and agents of Buyer and
its affiliates and the attorneys, accountants, banks, other financial
institutions and investment banks working with Buyer and its officers, employees
and agents, reasonable access, at all reasonable times upon reasonable notice
and in such manner as will not unreasonably interfere with the conduct of
Seller's business, to its officers, employees, agents, properties, books,
records and contracts, and shall furnish Buyer and its affiliates and the
attorneys, banks, other financial institutions and investment banks working with
Buyer, all financial, operating and other data and information as they
reasonably request.
(b) Subject to the requirements of law, Buyer shall, and shall cause
its officers, employees, agents, consultants and affiliates and the attorneys,
banks, other financial institutions and investment banks who obtain such
information to, hold all information obtained pursuant to this Agreement or the
Confidentiality Agreement in confidence in accordance with the terms and
conditions of the Confidentiality Agreement and in the event of termination of
this Agreement for any reason, Buyer shall promptly return or destroy all
nonpublic documents obtained from Seller or any of its Subsidiaries and any
copies made of such documents for Buyer and all documentation and other material
prepared by Buyer or its advisors based on written nonpublic information
furnished by Seller or its advisors shall be destroyed except for those which
Buyer or its counsel deems advisable to retain in connection with pending or
future litigation.
<PAGE>
5.03. PROXY STATEMENT.
(a) Promptly after execution and delivery of this Agreement, Seller
shall prepare and shall file with the SEC as soon as is reasonably practicable a
preliminary Proxy Statement, together with a form of proxy, with respect to the
Seller Special Meeting and shall use all reasonable efforts to have the Proxy
Statement and form of proxy cleared by the SEC as promptly as practicable, and
promptly after request by Buyer shall mail the definitive Proxy Statement and
form of proxy to stockholders of Seller. Subject to its fiduciary duties under
applicable law, the Proxy Statement shall contain the recommendation of the
Board of Directors that the stockholders of Seller vote to adopt and approve the
Offer, the Merger and this Agreement. The term "Proxy Statement" shall mean such
proxy or information statement at the time it initially is mailed to Seller's
stockholders and all amendments or supplements thereto, if any, similarly filed
and mailed.
(b) Buyer will provide Seller with all information concerning Buyer (or
its Affiliates) required to be included in, or otherwise reasonably requested by
Seller in connection with the preparation of, the Proxy Statement. The
information provided and to be provided by Buyer and Seller, respectively, for
use in the Proxy Statement shall, on the date the Proxy Statement is first
mailed to Seller's stockholders and on the date of the Seller Special Meeting
(as hereinafter defined), not contain an untrue statement of a material fact or
omit to state any material fact necessary in order to make such information, in
light of the circumstances under which it was provided, not misleading, and
Seller and Buyer each agree to correct any information provided by it for use in
the Proxy Statement which shall have become false or misleading in any material
respect. The Proxy Statement shall comply as to form in all material respects
with all applicable requirements of federal securities laws.
5.04. MEETING OF STOCKHOLDERS OF SELLER.
(a) Seller shall take all action necessary, in accordance with the CBCA
and its Articles of Incorporation, to cause only proposals one and two set forth
in Seller's definitive proxy statement (the "ANNUAL MEETING PROXY STATEMENT")
filed with the SEC on November 2, 1999, to be voted on by Seller's stockholders
at the annual meeting of Seller's stockholders currently scheduled for December
2, 1999 (the "ANNUAL MEETING"). Seller shall take all action necessary to cause
proposals three, four and five set forth in the Annual Meeting Proxy Statement
not to be voted on by the stockholders of Seller at the Annual Meeting,
including causing all proxies held by management of Seller to be voted in favor
of adjourning the Annual Meeting so that no such vote is taken on such matters
at such meeting.
(b) If required under the CBCA and Seller's Articles of Incorporation,
Seller shall, as soon as practicable following the expiration of the Offer, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"SELLER SPECIAL MEETING") to consider and vote upon this Agreement, the Offer
and the Merger and shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of the Offer, this Agreement, the Merger
and the other transactions contemplated hereby. Without limiting the generality
of the foregoing but subject to its rights to terminate this Agreement pursuant
to Section 7.01(d), Seller agrees that its obligations pursuant to the second
sentence of this Section 5.04 shall not be affected by the commencement, public
proposal, public disclosure or communication to Seller of any Acquisition
Proposal. Notwithstanding the foregoing, if Buyer shall acquire at least 90% of
the outstanding shares of Seller Common Stock in the Offer, the parties shall
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
Seller Special Meeting in accordance with the CBCA. Buyer agrees to cause all
shares of Seller Common Stock purchased pursuant to the Offer to be voted in
favor of the Merger, this Agreement and the transactions contemplated hereby.
5.05. NO SOLICITATION BY SELLER.
(a) Except as provided in Section 5.05(b), Seller agrees that, from the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement pursuant to Section 7.01, Seller shall not, nor
shall it permit any of its Subsidiaries to, nor shall it authorize or permit any
of its directors, officers or employees or any representative retained by it
(including Seller's Financial Advisor) or any of its Subsidiaries
<PAGE>
to, directly or indirectly through another Person, (i) solicit, initiate,
entertain or encourage (including by way of furnishing non-public information)
any inquiries or the making of an Acquisition Proposal, or (ii) participate in
any discussions or negotiations regarding any Acquisition Proposal; PROVIDED,
HOWEVER, that if, at any time, the Board of Directors of Seller determines in
good faith, after consultation with and receipt of advice from outside counsel,
that it is necessary to do so in order to act in a manner consistent with its
fiduciary duties to Seller's stockholders under applicable law, Seller may, in
response to a Superior Proposal (as defined below) and subject to delivering a
Seller Notice (as defined in paragraph (c) below) and compliance with the other
provisions of paragraph (c) below, following delivery of Seller Notice (x)
furnish information with respect to Seller and its Subsidiaries to any Person
making such Acquisition Proposal pursuant to a confidentiality agreement entered
into between such Person and Seller with terms no less favorable to Seller than
those contained in the Confidentiality Agreement and (y) participate in
discussions or negotiations regarding such Acquisition Proposal. For purposes of
this Agreement, an "Acquisition Proposal" means any inquiry, proposal or offer
from any Person (i) relating to any direct or indirect acquisition or purchase
of (A) a business that constitutes 15% or more of the net revenues, net income
or the assets of Seller and its Subsidiaries, taken as a whole, (B) 20% or more
of any class of equity securities of Seller or (C) any material equity interest
in any Subsidiary of Seller (i.e., in excess of 20% of the outstanding capital
stock of such Subsidiary), (ii) relating to any tender offer or exchange offer
that if consummated would result in any Person beneficially owning 20% or more
of any class of equity securities of Seller or any material equity interest in
any of its Subsidiaries, or (iii) relating to any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Seller or any of its Subsidiaries, in each case, other
than the transactions contemplated by this Agreement. Immediately following the
execution and delivery of this Agreement by the parties hereto, Seller will
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted with respect to the foregoing. Promptly
following the execution of this Agreement by the parties hereto, Seller will
request each Person that has, prior to the date of this Agreement, executed a
confidentiality agreement in connection with its consideration of an Acquisition
Proposal to return or destroy all confidential information heretofore furnished
to such Person by or on behalf of Seller or any of its Subsidiaries.
(b) Except as expressly permitted by this Section 5.05, the Board of
Directors of Seller shall not (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Buyer, the approval or recommendation
by such Board of Directors of the Merger, the Offer or this Agreement, (ii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (iii) cause Seller to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement (each,
a "SELLER ACQUISITION AGREEMENT") related to any Acquisition Proposal, other
than any such agreement entered into concurrently with a termination pursuant to
the next sentence to facilitate such action. Notwithstanding the foregoing, if
at any time the Board of Directors of Seller determines in good faith, after
consultation with and receipt of advice from outside counsel, that it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to Seller's stockholders under applicable law, subject to compliance with
paragraph (c) below, the Board of Directors of Seller may, in response to a
Superior Proposal which was not solicited by Seller and which did not otherwise
result from a breach of this Section 5.05 (subject to this and the following
sentences) terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause Seller to enter into any Acquisition
Agreement with respect to any Superior Proposal) but only at a time that is at
least after the third business day after delivery of a Seller Notice. For
purposes of this Agreement, a "Superior Proposal" means any proposal made by a
third party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of Seller Common Stock then outstanding or
all or substantially all the assets of Seller which (i) the Board of Directors
of Seller determines in good faith is reasonably likely to be consummated,
taking into account the Person making the proposal and all legal, financial and
regulatory aspects of the proposal, including any break-up fees, expense
reimbursement provisions and conditions to consummation, and (ii) the Board of
Directors determines in good faith (after consultation with and based upon the
advice of its outside financial advisors) would, if consummated, provide greater
value to Seller's stockholders than the transactions contemplated by this
Agreement.
<PAGE>
(c) In addition to the obligations of Seller as set forth in paragraphs
(a) and (b) of this Section 5.05, Seller shall advise the Buyer orally and in
writing of any request for non-public information, any Acquisition Proposal,
including all of the material proposed terms of such Acquisition Proposal, the
identity of the third party, or any decision by Seller to take any of the
actions permitted in clauses (x) or (y) of paragraph (a) above (with any such
notice referred to as a "SELLER NOTICE"). Any such Seller Notice will be
delivered promptly after (and in no event later than 24 hours after) receipt of
any request for non-public information or of any Acquisition Proposal and prior
to Seller taking any of the actions permitted in clauses (x) or (y) of paragraph
(a) above. In addition, in the event Seller intends to enter into a Seller
Acquisition Agreement relating to a Superior Proposal, Seller will deliver a
Seller Notice at least 24 hours prior to entering into such Seller Acquisition
Agreement, which Seller Notice will identify the third party and the material
proposed terms of such Superior Proposal. Seller will keep Buyer reasonably
informed of the status of any such request or Acquisition Proposal and will
update the information required to be provided in Seller Notice upon the request
of the Newco.
5.06. PUBLIC ANNOUNCEMENTS. Buyer and Seller will consult with each
other before, but will not be required to obtain the other party's consent with
respect to, issuing any press release, any filing with the SEC on Form 8-K or
otherwise making any public statements with respect to this Agreement or the
Merger or the other transactions contemplated hereby, and shall not issue any
such press release, SEC Form 8-K filing or make any such public statement prior
to such consultation, except to the extent that compliance with legal
requirements requires a party to issue a press release or public announcement or
make an 8-K filing prior to such consultation. This Section 5.06 shall supersede
any conflicting provisions in the Confidentiality Agreement.
5.07. NOTIFICATION OF CERTAIN MATTERS.
(a) Seller shall give prompt notice (which notice shall state that it
is delivered pursuant to Section 5.07 of this Agreement) in writing to Buyer and
Buyer shall give prompt notice in writing to Seller, of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
through the Effective Time and (ii) any material failure of Seller or Buyer, as
the case may be, or of any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, no such notification
shall affect the representations or warranties of the parties or the conditions
to the obligations of the parties hereunder.
(b) Seller shall give prompt notice in writing (which notice shall
state that it is delivered pursuant to Section 5.07 of this Agreement) to Buyer
of any occurrence that has had or may reasonably be expected to have a Material
Adverse Effect.
5.08. EMPLOYMENT AND BENEFIT MATTERS
(a) From and after the Effective Time, Buyer agrees to cause the
Surviving Corporation to provide the employees of Seller and its Subsidiaries
(the "SELLER EMPLOYEES") who remain employed after the Effective Time with the
types and levels of employee benefits which are in the aggregate at least as
favorable as those maintained by Seller prior to the Effective Time. Buyer will
cause the Surviving Corporation to treat, and cause its applicable benefit plans
to treat, the service of Seller Employees with Seller or any Subsidiary as
service rendered to the Surviving Corporation for purposes of eligibility to
participate, vesting and for other appropriate benefits but not for benefit
accrual.
(b) Notwithstanding anything to the contrary contained herein, Buyer
shall have sole discretion with respect to the determination as to whether or
when to terminate, merge or continue any employee benefit plans and programs of
Seller after the Effective Time.
<PAGE>
5.09. OFFICERS' AND DIRECTORS' INDEMNIFICATION; INSURANCE.
(a) The Surviving Corporation agrees that for a period ending on the
sixth anniversary of the Effective Time, the Surviving Corporation will maintain
all rights to indemnification (including with respect to the advancement of
expenses incurred in the defense of any action or suit) existing on the date of
this Agreement in favor of the present and former directors, officers, employees
and agents of Seller as provided in Seller's Articles of Incorporation and
By-laws , in each case as in effect on the date of this Agreement, and that
during such period, neither the Articles of Incorporation nor the Bylaws of the
Surviving Corporation shall be amended to reduce or limit the rights of
indemnity afforded to the present and former directors, officers, employees and
agents of Seller, or the ability of the Surviving Corporation to indemnify them,
nor to hinder, delay or make more difficult the exercise of such rights or
indemnity or the ability to indemnify.
(b) The Surviving Corporation agrees to indemnify to the fullest extent
permitted under its Articles of Incorporation, its Bylaws, and applicable law
the present and former directors, officers, employees and agents of Seller
against all losses, damages, liabilities or claims made against them arising
from their service in such capacities prior to and including the Effective Time,
to at least the same extent as such persons are currently permitted to be
indemnified pursuant to Seller's Articles of Incorporation and Bylaws for a
period ending on the sixth anniversary of the Effective Time.
(c) Buyer will cause to be maintained for a period of three years from
the Effective Time Seller's current directors' and officers' insurance and
indemnification policy to the extent that it provides coverage for events
occurring prior to the Effective Time (the "D&O INSURANCE") for all persons who
are directors and officers of Seller on the date of this Agreement, so long as
such insurance is available on commercially reasonable terms and the annual
premium therefor would not be in excess of 200% of the last annual premium paid
prior to the date of this Agreement (the "MAXIMUM PREMIUM"). If the existing D&O
Insurance expires, is terminated or cancelled during such three-year period,
Buyer will use all reasonable efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and conditions no less
advantageous than the existing D&O Insurance.
5.10. ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement (including consummation of the
Merger) and to cooperate with each other in connection with the foregoing.
(b) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to use commercially reasonable efforts to: (i) obtain all
necessary waivers, consents and approvals from other parties to loan agreements,
leases, licenses and other contracts, (ii) obtain all necessary consents,
approvals and authorizations as required to be obtained under any federal, state
or foreign law or regulations, (iii) defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (iv) lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (v) effect all necessary registrations and
filings, including, but not limited to, submissions of information requested by
Governmental Entities, and (vi) fulfill all conditions to this Agreement.
(c) In connection with and without limiting the foregoing, Seller and
its Board of Directors shall (i) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to the Offer, the Merger, this Agreement or any of the other transactions
contemplated by this Agreement and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to the Offer, the Merger, this
Agreement or any other transaction contemplated by this Agreement, take all
action necessary
<PAGE>
to ensure that the Offer, the Merger, this Agreement and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by the Offer and this Agreement and otherwise to minimize
the effect of such statute or regulation on the Offer, the Merger or this
Agreement and the other transactions contemplated by this Agreement.
5.11. SELLER INDEBTEDNESS. Prior to the Effective Time, Seller shall
cooperate with Buyer in taking such actions requested by Buyer as are reasonably
appropriate or necessary in connection with the redemption, prepayment,
modification, satisfaction or elimination of any outstanding Indebtedness of
Seller or any of its Subsidiaries with respect to which a consent is required to
be obtained to effectuate the Merger and the transactions contemplated by this
Agreement and has not been so obtained.
5.12. UPDATE OF DISCLOSURE SCHEDULES. Each party agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Section 6.02(a) and
6.03(a) have been fulfilled, the Schedules hereby shall be deemed to include
only that information contained therein on the date of this Agreement and shall
be deemed to exclude all information contained in any supplement or amendment
thereto.
5.13. FUTURE FILINGS. Seller will deliver to Buyer as soon as they
become available true and complete copies of any report or statement mailed by
it to its stockholders generally or filed by it with the SEC subsequent to the
date of this Agreement and prior to the Effective Time. As of their respective
dates, such reports and statements (excluding any information therein provided
by Buyer, as to which Seller makes no representation) will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply as to
form in all material respects with all applicable requirements of law. The
consolidated financial statements of Seller to be included in such reports and
statements (excluding any information therein provided by Buyer, as to which
Seller makes no representation) will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except (i) as otherwise indicated in such financial statements
and the notes thereto or (ii) in the case of unaudited interim statements, to
the extent permitted under Form 10-QSB under the Exchange Act) and will present
fairly the consolidated financial position, results of operations and cash flows
of Seller as of the dates thereof and for the periods indicated therein
(subject, in the case of any unaudited interim financial statements, to normal
year-end audit adjustments). Buyer shall deliver to Seller as soon as they
become available, true and complete copies of any report or statement mailed by
it to Seller's stockholders generally or filed by it with the SEC subsequent to
the date of this Agreement and prior to the Effective Time.
5.14. FINANCING. As soon as practicable after the date hereof, Buyer
shall use its best efforts and take all actions necessary to complete the Share
Issuance pursuant to which the New Buyer Shares will be offered for sale to the
public in accordance with the Placing Agreement. Buyer shall use its best
efforts and take all actions necessary to cause the New Buyer Shares to be
admitted to the London Stock Exchange's Official List. Buyer will notify Seller
promptly in the event that Buyer becomes aware of any facts, circumstances or
developments that would create reasonable doubt regarding the completion prior
to the Closing Date of the Share Issuance. Prior to the Effective Time, Buyer
shall contribute the proceeds of the Share Issuance to Newco and Newco shall use
such proceeds solely to complete the Offer in accordance with its terms and pay
the Merger Consideration and other amounts payable pursuant to Article II
hereof.
5.15. MEETING OF STOCKHOLDERS OF BUYER. Promptly after the execution
and delivery of this Agreement, Buyer shall duly call, give notice of, convene
and hold a meeting of its shareholders (the "BUYER SPECIAL MEETING") to consider
and vote upon this Agreement, the Merger and the Share Issuance, and shall,
through its Board of Directors, recommend to its shareholders the approval and
adoption of the Merger, this Agreement, and the Share Issuance. Buyer shall use
reasonable efforts to solicit from stockholders of Buyer
<PAGE>
proxies in favor of such adoption and approval and, subject to the rules of the
London Stock Exchange and the duties of the directors of Buyer under the laws of
England, to take all other action necessary to secure the vote or consent of
stockholders required by the laws of the United Kingdom to effect the Merger and
the Share Issuance. On or prior to the date hereof, each of the directors of
Buyer has delivered a written irrevocable commitment to Seller that they will
vote their shares of Buyer stock at the Buyer Special Meeting in favor of the
Merger, the Merger Agreement and the Share Issuance.
5.16. COMPLETION OF BRIDGESTONE TRANSACTION. Seller shall use its best
efforts to complete the transactions contemplated by the Bridgestone Agreement
substantially in accordance with its terms.
5.17. DIRECTORS. Promptly upon the acceptance for payment of, and
payment for, Shares by Buyer pursuant to the Offer, Buyer shall be entitled to
designate such number of directors on the Board of Directors of Seller as will
give Buyer, subject to compliance with Section 14(f) of the Exchange Act,
representation on Seller's Board of Directors equal to the product of (i) the
total number of directors on Seller's Board of Directors and (ii) the percentage
that the number of shares of Seller Common Stock purchased by Buyer in the Offer
bears to the number of shares of Seller Common Stock outstanding, and Seller
shall, at such time, cause Buyer's designees to be so elected by its existing
Board of Directors; provided, that in the event that Buyer's designees are
elected to the Board of Directors of Seller, until the Effective Time such Board
of Directors shall have at least two directors who are directors of Seller on
the date of this Agreement and who are not officers of Seller or any of its
Subsidiaries (the "INDEPENDENT DIRECTORS") and; provided further that, in such
event, if the number of Independent Directors shall be reduced below two for any
reason whatsoever, the remaining Independent Director shall designate a person
to fill such vacancy who shall be deemed to be an Independent Director for
purposes of this Agreement or, if no Independent Directors then remain, the
other directors of Seller on the date hereof shall designate two persons to fill
such vacancies who shall not be officers or affiliates of Seller or any of its
Subsidiaries, or officers or affiliates of Buyer or any of its Subsidiaries, and
such persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable law, Seller shall take all action requested by
Buyer necessary to effect any such election, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
Seller agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Buyer shall have provided to Seller on a timely basis all
information required to be included in the Information Statement with respect to
Buyer's designees). In connection with the foregoing, Seller will promptly, at
the option of Buyer, either increase the size of the Seller's Board of Directors
and/or obtain the resignation of such number of its current directors as is
necessary to enable Buyer's designees to be elected or appointed to, and to
constitute a majority of Seller's Board of Directors as provided above.
ARTICLE VI
CONDITIONS OF MERGER
6.01. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) SELLER STOCKHOLDER APPROVAl. Except as otherwise provided in
Section 5.04(b) hereof, this Agreement, the Offer and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of Seller in
accordance with the CBCA.
(b) BUYER STOCKHOLDER APPROVAL. This Agreement, the Merger and the
Share Issuance shall have been approved and adopted by the requisite vote of the
stockholders of Buyer in accordance with the Listing Rules of London Stock
Exchange Limited.
<PAGE>
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction, judgment or other order, decree or
ruling nor any statute, rule, regulation or order shall be in effect which
prevents the consummation of the Merger.
6.02. CONDITIONS PRECEDENT TO BUYER'S AND NEWCO'S OBLIGATIONS. Buyer
and Newco shall be obligated to perform the acts contemplated for performance by
them under Article II only if each of the following conditions is satisfied at
or prior to the Closing Date, unless any such condition is waived in writing by
Buyer and Newco:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller set forth in this Agreement shall be true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of the Closing Date
with the same force and effect as though made again at and as of the Closing
Date, except for any representations and warranties that address matters only as
of a particular date (which shall remain true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of such date). Buyer
shall have received a certificate to the foregoing effect signed by the
president and chief executive officer and chief financial officer of Seller.
(b) PERFORMANCE OF OBLIGATIONS OF SELLER. Seller shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date. Buyer shall have received a
certificate to the foregoing effect signed by the president and chief executive
officer and chief financial officer of Seller.
(c) ABSENCE OF MATERIAL ADVERSE CHANGES. There shall not have occurred
any change in the business, assets, prospects, financial condition or results of
operations of Seller or any of its Subsidiaries which has had, or is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect.
(d) CONSENTS. Seller shall have received all necessary consents or
waivers, in form and substance satisfactory to Buyer, from the other parties to
each contract, lease or agreement to which Seller is a party to the Merger,
except where the failure to obtain such consent or waiver would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
(e) BRIDGESTONE TRANSACTION. The Bridgestone Transaction shall have
been consummated substantially in accordance with the terms of the Bridgestone
Agreement.
(f) SHARE ISSUANCE. Buyer shall have received sufficient funds from the
Share Issuance to fund its obligations under this Agreement.
(g) ADMITTANCE OF NEW BUYER SHARES. The New Buyer Shares shall have
been admitted to the London Stock Exchange's Official List, subject to notice of
admittance.
6.03. CONDITIONS TO OBLIGATION OF SELLER. The Seller shall be obligated
to perform the acts contemplated for performance by it under Article II only if
each of the following conditions is satisfied at or prior to the Closing Date,
unless any such condition is waived in writing by Seller:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer set forth in this Agreement shall be true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of the Closing Date
with the same force and effect as though made again at and as of the Closing
Date, except for any representations and warranties that address matters only as
of a particular date (which shall remain true and correct in all material
respects (without giving duplicative effect to any materiality qualification
contained in the applicable representation or warranty) as of such date). Seller
shall have received a certificate to the foregoing effect signed by the
president and chief executive officer and chief financial officer of Buyer.
<PAGE>
(b) PERFORMANCE OF OBLIGATIONS OF BUYER. Buyer shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date. Seller shall have received a
certificate to the foregoing effect signed by the president and chief executive
officer and chief financial officer of Buyer.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.01 TERMINATION. This Agreement may be terminated, at any time prior
to the Effective Time, whether before or after approval by the stockholders of
Seller:
(a) by mutual written agreement of the Boards of Directors of Buyer and
Seller;
(b) by either Buyer or Seller:
(i) if any court of competent jurisdiction in the United
States or other United States governmental body shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
(ii) if there has been a material breach by the other party of
any representation, warranty, covenant or agreement set forth in this Agreement
or the Seller Option Agreement unless such breach is capable of being cured and
is cured prior to the Closing Date;
(iii) if the stockholders of Buyer shall fail to approve the
Merger and the Share Issuance at the Buyer Special Meeting;
(iv) if the stockholders of Seller shall fail to approve the
Offer and the Merger at the Seller Special Meeting;
(c) by Buyer:
(i) if Seller or any of its directors or officers shall
participate in discussions or negotiations in breach of Section 5.05 or if the
Board of Directors of Seller shall have approved or recommended an Acquisition
Proposal by a third party, or withdrawn or modified in a manner adverse to Buyer
its approval or recommendation of this Agreement or the transactions
contemplated hereby, or failed to mail the Proxy Statement to its stockholders
or failed to include in such Proxy Statement such recommendation (including the
recommendation that the stockholders of Seller vote in favor of the Merger); or
publicly resolved to do any of the foregoing;
(ii) prior to the purchase of shares of Seller Common Stock
pursuant to the Offer, in the event of a breach or failure to perform by Seller
of any representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
Exhibit A and (ii) cannot be cured, or has not been cured within 15 days after
Seller receives written notice from Buyer of such breach or failure to perform.
(iii) if the Buyer Share Issuance or the Placing Agreement
shall have been terminated without Buyer having received the proceeds of the
Buyer Share Issuance or any alternative financing;
<PAGE>
(iv) if Buyer permits the Offer to lapse in accordance with
its terms or the Offer is terminated by Buyer or Newco without the purchase of
shares of Seller Common Stock by Newco in accordance with the Offer Conditions;
(d) by Seller, pursuant to Section 5.05(b); provided, that, in order
for the termination of this Agreement pursuant to this paragraph (d) to be
deemed effective, Seller shall have complied with all provisions of Section
5.05, including the notice provisions therein, and with applicable requirements,
including the payment of the Seller Break-Up Fee;
(e) by either Seller or Buyer in the event the Effective Time has not
occurred by the latest to occur of (i) March 31, 2000 or (ii) 60 days after the
clearance by the SEC of the Proxy Statement (with such date, as it may
thereafter be extended by mutual written agreement of Buyer and Seller, referred
to as the "OUTSIDE DATE").
7.02. PROCEDURE AND EFFECT OF TERMINATION. In the event of the
termination of this Agreement by Seller or Buyer or both of them pursuant to
Section 7.01, the terminating party shall provide written notice of such
termination to the other party and this Agreement shall forthwith become void
and there shall be no liability on the part of Buyer, Newco or Seller, except as
set forth in this Section 7.02 and in Sections 5.02(b) and 7.03 of this
Agreement. The foregoing shall not relieve any party for liability for damages
actually incurred as a result of any breach of this Agreement. The
Confidentiality Agreement and Sections 5.03(b), 7.02 and 7.03 of this Agreement
shall survive the termination of this Agreement.
7.03. FEES AND EXPENSES. (a) Except as otherwise provided in this
Agreement and whether or not the transactions contemplated by this Agreement are
consummated, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
(b) In the event that Buyer terminates this Agreement pursuant to
Section 7.01 (other than Sections 7.01(a), (b)(i), (b)(iii) or (c)(iii)), or
Seller terminates this Agreement pursuant to Section 7.01(b)(iv) or (d), then
Seller shall pay to Buyer the amount of $300,000 as reimbursement of Buyer's
expenses and as liquidated damages (the "SELLER BREAK-UP FEE"). Any such payment
shall be made within three (3) business days after a termination.
(c) In the event that Buyer terminates this Agreement pursuant to
Section 7.01(b)(iii) or (c)(iii) or Seller terminates this Agreement pursuant to
Section 7.01(b)(iii), then Buyer shall pay to Seller the amount of $300,000 as
reimbursement of Buyer's expenses and as liquidated damages (the "BUYER BREAK-UP
FEE"). Any such payment shall be made within three (3) business days after a
termination.
7.04. AMENDMENT. This Agreement may be amended by each of the parties
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that (i) such amendment
shall be in writing signed by all of the parties, and (ii) after adoption of
this Agreement and the Merger by the stockholders of Seller, no amendment may be
made without the further approval of the stockholders of Seller to the extent
such approval is required by applicable law.
7.05. WAIVER. Subject to the requirements of applicable law, at any
time prior to the Effective Time, whether before or after the Seller Special
Meeting, any party hereto, by action taken by its Board of Directors (or, in the
case of Buyer, any similar body), may (i) extend the time for the performance of
any of the obligations or other acts of any other party hereto or (ii) waive
compliance with any of the agreements of any other party or with any conditions
to its own obligations. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer of such party.
Notwithstanding the above, any waiver given shall not apply to any subsequent
failure of compliance with agreements of the other party or conditions to its
own obligations.
ARTICLE VIII
<PAGE>
DEFINITIONS
As used herein the following terms not otherwise defined have the
following respective meanings:
"AFFILIATE" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person. As used in this definition the term "CONTROL" (including the terms
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means, with respect to the
relationship between or among two or more Persons, the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"BRIDGESTONE AGREEMENT" shall mean that certain Stock Purchase
Agreement, dated as of September 15, 1999, by and among Seller, Keystone
Technologies, L.L.C., Kenneth P. Felis, Michael J. Zubretsky, Richard Zucker and
Timothy Dolan.
"BRIDGESTONE TRANSACTION" shall mean the transactions contemplated by
the Bridgestone Agreement.
"ENCUMBRANCES" shall mean any and all liens, charges, security
interests, options, claims, mortgages, pledges, proxies, voting trusts or
agreements, obligations, understandings or arrangements or other restrictions on
title or transfer of any nature whatsoever.
"ENVIRONMENTAL LAW" shall mean all foreign, federal, state or local
laws governing pollution or the protection of the environment.
"INDEBTEDNESS" as applied to any Person, means (i) all indebtedness of
Seller or any of its Subsidiaries for borrowed money, whether current or funded,
or secured or unsecured, (ii) all indebtedness of Seller or any of its
Subsidiaries for the deferred purchase price of property or services represented
by a note or other security, (iii) all indebtedness of Seller created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by Seller or any of its Subsidiaries (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (iv) all
indebtedness of Seller or any of its Subsidiaries secured by a purchase money
mortgage or other lien to secure all or part of the purchase price of property
subject to such mortgage or lien, (v) all obligations under leases which shall
have been or must be, in accordance with generally accepted accounting
principles, recorded as capital leases in respect of which Seller or any of its
Subsidiaries is liable as lessee, (vi) any liability of Seller or any of its
Subsidiaries in respect of banker's acceptances or letters of credit, (vii) all
indebtedness referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above
which is directly or indirectly guaranteed by Seller or any of its Subsidiaries
or which Seller or any of its Subsidiaries has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss and (viii) all Debentures.
"MATERIAL ADVERSE EFFECT" means a change or effect that is, or in the
reasonably judgment of Buyer, would be, materially adverse to the business,
properties, assets, prospects, results of operations or condition (financial or
otherwise) of Seller and its Subsidiaries taken as a whole.
"PERSON" means any corporation, association, partnership, limited
liability company, organization, business, individual, government or political
subdivision thereof or governmental agency.
"SELLER INTELLECTUAL PROPERTY" mean all trademarks, trade names,
service marks, trade dress, and all goodwill associated with any of the
foregoing, patents, Internet domain names, copyrights and any renewal rights
therefor, technology, supplier lists, trade secrets, know-how, computer software
programs or applications in both source and object code form, technical
documentation of such software programs, registrations and
<PAGE>
applications for any of the foregoing and all other tangible or intangible
proprietary information or materials that are or have been used (including
without limitation in the development of) Seller's business and/or in any
product, technology or process (i) currently being or formerly manufactured,
published or marketed by Seller or (ii) previously or currently under
development for possible future manufacturing, publication, marketing or other
use by Seller.
"SUBSIDIARY" means, with respect to any Person, 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
of such person) owns, directly or indirectly, a majority of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity; PROVIDED, FURTHER, that for all purposes under this
Agreement, those Persons, corporations and other legal entities described on
Section 8.01 of the Seller Disclosure Schedule shall be deemed to be
Subsidiaries of Seller as of the date of this Agreement.
"TAX" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee or other tax or levy, of
any kind whatsoever, including any interest, penalties or additions to tax in
respect of any of the foregoing.
ARTICLE IX
MISCELLANEOUS
9.01. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner 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 an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
9.02. NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given,
or made as of the date delivered if sent via telecopier or delivered personally
(including, without limitation, delivery by commercial carrier warranting
next-day delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by similar notice, except that notices
of changes of address shall be effective upon receipt):
(a) If to Seller:
Optical Security Group, Inc.
535 16th Street
Suite 920
Denver, CO 80202
Attention: Richard H. Bard, CEO
Telecopier No.: 303-534-1010
with a copy to
Lohf, Shaiman & Jacobs, P.C.
950 South Cherry Street
Suite 900
<PAGE>
Denver, CO 80246
Attention: Charles H. Jacobs
Telecopier No.: 303-753-9997
(b) If to Buyer or Newco:
Applied Holographics plc
40 Phoenix Road
Crowther District 3
Washington
Tyne & Wear
England NE38 OAD
Attention: Michael Angus
Telecopier No.: 011-44-191-416-3053
With copies to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Gerald J. Kehoe
Telecopier No.: (617) 951-8736
9.03. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.04. REPRESENTATIONS AND WARRANTIES, ETC. The respective
representations and warranties of Seller, Buyer and Newco contained herein shall
survive until, and shall expire with, and be terminated and extinguished upon
the earlier to occur of (a) the termination of this Agreement pursuant to
Section 6.1 and (b) the Closing Date. This Section 8.4 shall have no effect upon
any other obligation of the parties hereto, whether to be performed before or
after the consummation of the Merger.
9.05. MISCELLANEOUS. This Agreement, the documents delivered pursuant
hereto or in connection herewith and the Confidentiality Agreement (i)
constitute the entire agreement and supersede all other prior agreements and
undertakings, both written and oral (including, without limitation, any
agreement or proposed agreement relating to the timing of execution of this
Agreement and the payment of any amount in connection therewith), among the
parties, or any of them, with respect to the subject matter hereof, (ii) are not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder, (iii) may not be assigned without the prior written consent
of the other parties hereto, except that Newco may assign its rights hereunder
in whole or in part to one or more direct or indirect Subsidiaries or affiliates
of Buyer which, in written instruments reasonably satisfactory to Seller, shall
agree to make all representations and warranties of Newco set forth herein and
shall agree to assume all of such party's obligations hereunder and be bound by
all of the terms and conditions of this Agreement and Newco and Buyer may assign
this Agreement to their lenders as collateral security; PROVIDED, HOWEVER, that
no such assignment shall relieve the assignor of its obligations hereunder, and
(iv) shall be governed by and construed in accordance with the laws of the State
of Colorado (without reference to choice of law rules). This Agreement may be
executed in one or more counterparts which together shall constitute a single
agreement.
<PAGE>
IN WITNESS WHEREOF, Buyer, Newco and Seller have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
APPLIED HOLOGRAPHICS PLC
By: /s/ David J. Tidmarsh
----------------------------------------
Name: David J. Tidmarsh
-------------------------------
Title: Chief Executive
------------------------------
By: /s/ Michael W. Angus
----------------------------------------
Name: Michael W. Angus
-------------------------------
Title: Finance Director
------------------------------
APPLIED OPSEC CORPORATION
By: /s/ David J. Tidmarsh
----------------------------------------
Name: David J. Tidmarsh
-------------------------------
Title: President
------------------------------
By: /s/ Michael W. Angus
----------------------------------------
Name: Michael W. Angus
-------------------------------
Title: Treasurer and Secretary
------------------------------
OPTICAL SECURITY GROUP, INC.
By: /s/ Richard H. Bard
----------------------------------------
Name: Richard H. Bard
-------------------------------
Title: Chief Executive Officer
------------------------------
By: /s/ John A. Labate
----------------------------------------
Name: John A. Labate
-------------------------------
Title: Vice President and Chief
Financial Officer
------------------------------
<PAGE>
Exhibit (c)(2)
LOAN AGREEMENT
This LOAN AGREEMENT is made as of November 30, 1999 by and between
OPTICAL SECURITY GROUP, INC. (the "BORROWER"), a Colorado corporation having its
principal place of business at 535 16th Street, Suite 920, Denver, Colorado
80202, USA, and APPLIED HOLOGRAPHICS PLC (Registered No. 1688482), a public
limited company incorporated and existing under the laws of England and Wales
having its registered office at 22 Sedling Road, District 6, Washington, Tyne &
Wear NE38 9BZ (the "LENDER").
1. DEFINITIONS AND RULES OF INTERPRETATION.
1.1. DEFINITIONS. The following terms shall have the meanings
set forth in this Section 1 or elsewhere in the provisions of this Loan
Agreement referred to below:
AFFILIATE. Any Person that would be considered to be an affiliate of
the Borrower under Rule 144(a) of the Rules and Regulations of the Securities
and Exchange Commission, as in effect on the date hereof, if the Borrower were
issuing securities.
APPLICABLE PENSION LEGISLATION. At any time, any pension or retirement
benefits legislation (be it federal, provincial, territorial or otherwise) then
applicable to the Borrower or any of its Subsidiaries.
BALANCE SHEET DATE. March 31, 1999.
BORROWER. As defined in the preamble hereto.
BRIDGESTONE. Bridgestone Technologies, Inc., a Delaware corporation
with its principal place of business at 375 Howard Avenue, Bridgeport,
Connecticut 06605.
BRIDGESTONE ACQUISITION. See Section 5.17.
BRIDGESTONE ACQUISITION DOCUMENTS. All documents, instruments and
agreements which are to be executed in connection with the Bridgestone
Acquisition, all in form and substance satisfactory to the Lender.
BRIDGESTONE GUARANTY. The Guaranty to be made by Bridgestone in favor
of the Lender pursuant to which Bridgestone guaranties to the Lender the payment
and performance of the Obligations and in form and substance satisfactory to the
Lender.
BUSINESS DAY. Any day on which banks are open for ordinary banking
business in New York, New York, Denver, Colorado and London, England.
CAPITALIZED LEASES. Leases under which the Borrower or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.
CERCLA. See Section 5.18(a).
CLOSING DATE. The first date on which the conditions set forth in
Section 8 have been satisfied.
CLOSING FEE. See Section 3.1.
CODE. The Internal Revenue Code of 1986.
<PAGE>
COLLATERAL. All of the property, rights and interests of the Borrower
and its Domestic Subsidiaries that are or are intended to be subject to the
security interests created by the Security Documents.
COLLECTED INTEREST. See Section 3.8.
DEFAULT. See Section 10.1.
DISTRIBUTION. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of the Borrower; the
purchase, redemption, or other retirement of any shares of any class of capital
stock of the Borrower, directly or indirectly through a Subsidiary of the
Borrower or otherwise; the return of capital by the Borrower to its shareholders
as such; or any other distribution on or in respect of any shares of any class
of capital stock of the Borrower.
DOLLARS or $. Dollars in lawful currency of the United States of
America.
DOMESTIC SUBSIDIARY. Any Subsidiary of the Borrower which is not a
Foreign Subsidiary.
DRAWDOWN DATE. The date on which the Loan is made or is to be made.
DRAWDOWN TERMINATION DATE. December 10, 1999.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
ENVIRONMENTAL LAWS. See Section 5.18(a).
EPA. See Section 5.18(b).
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder.
EUROPEAN UNION. The European community established by the Treaty of
Rome of 25 March 1957 as amended by the Single European Act 1986 and by the
Treaty on European Union which was signed at Maastricht on 7 February 1992 (and
came into being on 1 November 1993) (the Maastricht Treaty) as further amended
from time to time.
EVENT OF DEFAULT. See Section 10.1.
FOREIGN SUBSIDIARY. Any Subsidiary which conducts substantially all of
its business in countries other than the United States of America and that is
organized under the laws of a jurisdiction other than the United States of
America and the States (or the District of Columbia) thereof.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time,
and (b) consistently applied with past financial statements of the Borrower
adopting the same principles, PROVIDED that in each case referred to in this
definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position
<PAGE>
to deliver an unqualified opinion (other than a qualification regarding changes
in generally accepted accounting principles) as to financial statements in which
such principles have been properly applied.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
GUARANTIES. The several Guaranties, each dated as of the date hereof,
made by each Domestic Subsidiary of the Borrower in favor of the Lender pursuant
to which each Domestic Subsidiary of the Borrower guaranties to the Lender the
payment and performance of the Obligations and in form and substance
satisfactory to the Lender.
HAZARDOUS SUBSTANCES. See Section 5.18(b).
HIGHEST LAWFUL RATE. The maximum non-usurious rate of interest
permitted by applicable law.
INDEBTEDNESS. As to any Person and whether recourse is secured by or is
otherwise available against all or only a portion of the assets of such Person
and whether or not contingent, but without duplication:
(i) every obligation of such Person for money borrowed,
(ii) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations
incurred in connection with the acquisition of property, assets or
businesses,
(iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person,
(iv) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including securities
repurchase agreements but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith),
(v) every obligation of such Person under any Capitalized
Lease,
(vi) every obligation of such Person under any lease (a
"SYNTHETIC LEASE") treated as an operating lease under generally
accepted accounting principles and as a loan or financing for U.S.
income tax purposes,
(vii) all sales by such Person of (A) accounts or general
intangibles for money due or to become due, (B) chattel paper,
instruments or documents creating or evidencing a right to payment of
money or (C) other receivables (collectively "RECEIVABLES"), whether
pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person relating
thereto or a disposition of defaulted receivables for collection and
not as a financing arrangement, and together with any obligation of
such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith,
(viii) every obligation of such Person (an "EQUITY RELATED
PURCHASE OBLIGATION") to purchase, redeem, retire or otherwise acquire
for value any shares of capital stock of any class issued by such
Person, any warrants, options or other rights to acquire any such
shares, or any rights measured by the value of such shares, warrants,
options or other rights,
(ix) every obligation of such Person under any forward
contract, futures contract, swap, option or other financing agreement
or arrangement (including, without limitation, caps, floors, collars
<PAGE>
and similar agreements), the value of which is dependent upon interest
rates, currency exchange rates, commodities or other indices (a
"DERIVATIVE CONTRACT"),
(x) every obligation in respect of Indebtedness of any other
entity (including any partnership in which such Person is a general
partner) to the extent that such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such
entity, except to the extent that the terms of such Indebtedness
provide that such Person is not liable therefor and such terms are
enforceable under applicable law,
(xi) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of
clauses (i) through (x) (the "PRIMARY OBLIGATION") of another Person
(the "PRIMARY OBLIGOR"), in any manner, whether directly or indirectly,
and including, without limitation, any obligation of such Person (A) to
purchase or pay (or advance or supply funds for the purchase of) any
security for the payment of such primary obligation, (B) to purchase
property, securities or services for the purpose of assuring the
payment of such primary obligation, or (C) to maintain working capital,
equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (u) any Indebtedness, issued at a price that is
less than the principal amount at maturity thereof, shall be the amount of the
liability in respect thereof determined in accordance with generally accepted
accounting principles, (v) any Capitalized Lease shall be the principal
component of the aggregate of the rentals obligation under such Capitalized
Lease payable over the term thereof that is not subject to termination by the
lessee, (w) any sale of receivables shall be the amount of unrecovered capital
or principal investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or
interest earned on such investment, (x) any synthetic lease shall be the
stipulated loss value, termination value or other equivalent amount, (y) any
derivative contract shall be the maximum amount of any termination or loss
payment required to be paid by such Person if such derivative contract were, at
the time of determination, to be terminated by reason of any event of default or
early termination event thereunder, whether or not such event of default or
early termination event has in fact occurred and (z) any equity related purchase
obligation shall be the maximum fixed redemption or purchase price thereof
inclusive of any accrued and unpaid dividends to be comprised in such redemption
or purchase price.
INSOLVENCY EVENT. Any of the following events or circumstances: (i) the
Borrower or any of its Subsidiaries organized in the United Kingdom shall be
deemed unable to pay its debts within the meaning of section 123(1) (a), (b), or
(2) of the Insolvency Act 1986 (United Kingdom) or shall otherwise become
insolvent or stop or suspend making payments (whether of principal or interest)
with respect to all or any class of its Indebtedness or announce an intention to
do so, (ii) a meeting shall be convened by the Borrower or any of its
Subsidiaries for the purpose of passing any resolution to purchase, reduce or
redeem any of its capital stock or to comply with section 142 of the Companies
Act 1985 (England), (iii) any petition shall be presented or other step taken
for the purpose of the appointment of an administrator or the winding up of the
Borrower or any of its Subsidiaries (not being, in the case of a winding up, a
petition which such Person can demonstrate to the reasonable satisfaction of the
Lender, by providing an opinion of leading counsel to that effect, is frivolous,
vexatious or an abuse of the process of the court or relates to a claim to which
such Person has a good defense and which is being vigorously contested by such
Person) or an order shall be made or resolution passed for the winding up of any
the Borrower or any of its Subsidiaries or a notice shall be issued by convening
a meeting for the purpose of passing any such resolution (except for the purpose
of a solvent amalgamation or reconstitution which shall have been approved by
the Lender), or (iv) any steps shall be taken, or negotiations commenced by the
Borrower or any of its Subsidiaries or by any of their respective creditors with
a view to proposing any kind of composition, compromise or arrangement involving
such Person and any of its creditors or for the presentation of a petition for
the appointment of an administrator.
<PAGE>
INTEREST. See Section 3.8.
INVESTMENTS. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
LENDER. As defined in the preamble hereto.
LENDER'S COST OF FUNDS. The rate per annum determined by the Lender in
its sole discretion to be that which fairly expresses as a percentage per annum
the cost to the Lender of funding such principal amount from whatever source it
may select in good faith. For reference purposes only, the Lender's Cost of
Funds as at November 29, 1999 was [LIBOR plus 1.4%].
LENDER'S HEAD OFFICE. 22 Sedling Road, District 6, Washington, Tyne &
Wear NE38 9BZ, England.
LIEN. Any mortgage, security interest, pledge, hypothecation,
assignment, attachment, deposit arrangement, encumbrance, lien (statutory,
judgment or otherwise), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any similar
such interest arising under the laws of any applicable domestic or foreign
jurisdiction and including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any domestic or foreign
jurisdiction).
LOAN. The loan made or to be made by the Lender to the Borrower on the
Drawdown Date in the aggregate principal amount not to exceed $10,000,000
pursuant to Section 2.1.
LOAN AGREEMENT. This Loan Agreement, including the Schedules and
Exhibits hereto.
LOAN DOCUMENTS. This Loan Agreement, the Note and the Security
Documents.
LOAN REQUEST. See Section 2.4.
MATURITY DATE. The date which is the earliest to occur of (a) December
31, 2000; or (b) any date specified in a demand notice delivered by the Lender
to the Borrower; PROVIDED, that such date shall not be earlier than six (6)
months from the date of such demand notice; PROVIDED FURTHER, that such demand
notice shall not be delivered to the Borrower prior to the date of termination
of the Merger Agreement pursuant to the terms thereof; or (c) any date which may
be mutually agreed upon in writing by the Borrower and the Lender; PROVIDED,
that the Maturity Date may be accelerated by the Lender in accordance with the
provisions of Section 10.1.
MERGER. See Section 3.1.
MERGER AGREEMENT. That certain Agreement and Plan of Merger, dated
November 30, 1999, by and among the Lender, Newco and the Borrower.
<PAGE>
MERGER DOCUMENTS. All documents, instruments and agreements (including
without limitation the Merger Agreement) which are to be executed in connection
with the Merger, all in form and substance satisfactory to the Lender.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
NEWCO. NEWCO, a Colorado corporation and a direct wholly-owned
subsidiary of the Lender.
NOTE. See Section 2.3.
NOTE RECORD. A Record with respect to a Note.
OBLIGATIONS. All indebtedness, obligations and liabilities of any of
the Borrower and its Subsidiaries to the Lender existing on the date of this
Loan Agreement or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, arising by contract, operation of law or otherwise,
arising or incurred under this Loan Agreement or any of the other Loan Documents
or in respect of the Loan or the Note or other instruments at any time
evidencing any thereof.
OECD. The Organization for Economic Cooperation and Development.
OUTSTANDING. With respect to the Loan, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
PERFECTION CERTIFICATES. The Perfection Certificates as defined in the
Security Agreements.
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 7.2.
PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
RCRA. See Section 5.18(a).
REAL ESTATE. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries.
RECORD. The grid attached to the Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by the
Lender with respect to the Loan referred to in the Note.
SARA. See Section 5.18(a).
SECURITY AGREEMENTS. The several Security Agreements dated as of the
date hereof between the Borrower and its Domestic Subsidiaries and the Lender
and each in form and substance satisfactory to the Lender.
SECURITY DOCUMENTS. The Guaranties, the Bridgestone Guaranty, the
Security Agreements, the Stock Pledge Agreement and all other instruments and
documents, including without limitation Uniform Commercial Code financing
statements, required to be executed or delivered pursuant to any Security
Document.
SENIOR LENDER. Mercantile Safe Deposit & Trust Company, a Maryland
banking and trust company.
<PAGE>
STOCK PLEDGE AGREEMENT. The Stock Pledge Agreement dated as of the date
hereof between the Borrower and the Lender and in form and substance
satisfactory to the Lender.
SUBSIDIARY. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
UNITED KINGDOM. The United Kingdom of Great Britain and Northern
Ireland.
UNRESTRICTED INTEREST. See Section 3.8.
VOTING STOCK. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or person
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
YEAR 2000 COMPLIANT. See Section 5.20.
1.2. RULES OF INTERPRETATION.
(a) A reference to any document or agreement shall
include such document or agreement as amended, modified or
supplemented from time to time in accordance with its terms
and the terms of this Loan Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein
have the meanings assigned to them by generally accepted
accounting principles applied on a consistent basis by the
accounting entity to which they refer.
(f) The words "include", "includes" and "including"
are not limiting.
(g) All terms not specifically defined herein or by
generally accepted accounting principles, which terms are
defined in the Uniform Commercial Code as in effect in the
State of New York, have the meanings assigned to them therein,
with the term "instrument" being that defined under Article 9
of the Uniform Commercial Code.
(h) Reference to a particular "Section " refers to
that section of this Loan Agreement unless otherwise
indicated.
(i) The words "herein", "hereof", "hereunder" and
words of like import shall refer to this Loan Agreement as a
whole and not to any particular section or subdivision of this
Loan Agreement.
(j) Unless otherwise expressly indicated, in the
computation of periods of time from a specified date to a
later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but
excluding," and the word "through" means "to and including."
<PAGE>
(k) This Loan Agreement and the other Loan Documents
may use several different limitations, tests or measurements
to regulate the same or similar matters. All such limitations,
tests and measurements are, however, cumulative and are to be
performed in accordance with the terms thereof.
(l) This Loan Agreement and the other Loan Documents
are the result of negotiation among, and have been reviewed by
counsel to, among others, the Lender and the Borrower and are
the product of discussions and negotiations among all parties.
Accordingly, this Loan Agreement and the other Loan Documents
are not intended to be construed against the Lender merely on
account of the Lender's involvement in the preparation of such
documents.
2. THE TERM LOAN.
2.1. COMMITMENT TO LEND. Subject to the terms and conditions
set forth in this Loan Agreement, the Lender agrees to lend on the
Drawdown Date in a single draw such amount as requested by the Borrower
up to a maximum aggregate principal amount of $10,000,000. The Drawdown
Date shall occur on any single date from the Closing Date up to and
including the Drawdown Termination Date upon notice by the Borrower to
the Lender given in accordance with Section 2.4. The Borrower's request
for the Loan hereunder shall constitute a representation and warranty
by the Borrower that the conditions set forth in Section 8 and Section
9 have been satisfied on the date of such request.
2.2. REPAYMENT OF THE LOAN. The Borrower hereby absolutely and
unconditionally promises to pay the Lender on the Maturity Date the
entire unpaid principal amount of the Loan then outstanding and the
entire unpaid amount of all other Obligations (except as may be
expressly waived in writing by the Lender).
2.3. THE NOTE. The Loan shall be evidenced by a promissory
note of the Borrower in substantially the form of EXHIBIT A hereto (the
"NOTE"), dated the Closing Date and completed with appropriate
insertions. The Note shall be payable to the order of the Lender in a
principal amount equal to the aggregate principal amount of the Loan
and representing the obligation of the Borrower to pay to the Lender
such principal amount or, if less, the outstanding amount of the Loan,
plus interest accrued thereon, as set forth below. The Borrower
irrevocably authorizes the Lender to make or cause to be made a
notation on the Note Record reflecting the original principal amount of
the Loan and, at or about the time of the Lender's receipt of any
principal payment on the Note, an appropriate notation on the Note
Record reflecting such payment. The aggregate unpaid amount set forth
on the Note Record shall be PRIMA FACIE evidence of the principal
amount thereof owing and unpaid to the Lender, but the failure to
record, or any error in so recording, any such amount on the Note
Record shall not affect the obligations of the Borrower hereunder or
under the Note to make payments of principal of and interest on the
Note when due.
2.4. REQUEST FOR LOAN. The Borrower shall give to the Lender
written notice in the form of EXHIBIT B hereto (or telephonic notice confirmed
in a writing in the form of EXHIBIT B hereto) of the Loan requested hereunder (a
"LOAN REQUEST") no less than two (2) Business Days prior to the proposed
Drawdown Date. Such notice shall specify (a) the principal amount of the Loan
requested, and (b) the proposed Drawdown Date of Loan. Such notice shall be
irrevocable and binding on the Borrower and shall obligate the Borrower to
accept the Loan requested from the Lender on the proposed Drawdown Date.
2.5. OPTIONAL PREPAYMENT OF LOAN. The Borrower shall have the
right at any time to prepay the Note on or before the Maturity Date, as
a whole, or in part, upon not less than three (3) Business Days prior
written notice to the Lender, without premium or penalty, PROVIDED that
each partial prepayment shall be in the principal amount of $500,000 or
an integral multiple thereof. Any
<PAGE>
prepayment of principal of the Loan shall include all fees and interest
accrued to the date of prepayment. No amount repaid with respect to the
Loan may be reborrowed.
2.6. INTEREST ON LOAN. Except as otherwise provided in Section
3.7, the outstanding amount of the Loan shall bear interest at the rate
of two percent (2%) per annum above the Lender's Cost of Funds as in
effect from time to time[; provided, that in the event the Merger
Agreement is terminated solely because (a) the Lender's shareholders
failed to approve the Merger, or (b) the Lender failed to obtain the
financing necessary to complete the Merger, or (c) a material breach by
the Lender of any Merger Document, then commencing as of the Drawdown
Date and continuing thereafter the outstanding amount of the Loan shall
bear interest at the rate of one-half percent (1/2%) per annum above
the Lender's Cost of Funds as in effect from time to time]. Interest
shall be payable monthly in arrears on the first day of each calendar
month for the immediately preceding calendar month, commencing on the
first such date following the Drawdown Date, and on the Maturity Date.
Any change in the interest rate resulting from a change in the Lender's
Cost of Funds is to be effective at the beginning of the day of such
change in the Lender's Cost of Funds. The Lender will give the Borrower
prompt notice in writing of any change in the Lender's Cost of Funds.
The Borrower promises to pay interest on the amount of the Loan
outstanding from time to time from the Drawdown Date until the earlier
of the Maturity Date or payment in full of the Obligations in
accordance with the provisions of this Section 2.6.
3. CERTAIN GENERAL PROVISIONS.
3.1. CLOSING FEE. Unless otherwise expressly waived in writing
by the Lender in accordance with the terms hereof, the Borrower agrees
to pay to the Lender on the Maturity Date a closing fee in the amount
of $1,700,000 (the "CLOSING FEE"). For the avoidance of doubt, each of
the Borrower and the Lender agree that the Closing Fee shall be deemed
fully earned by the Lender on the Closing Date; PROVIDED, that prior to
the Maturity Date the Closing Fee shall not bear interest and
commencing on the Maturity Date and thereafter the Closing Fee shall
bear interest at the rate of six (6%) per annum above the Lender's Cost
of Funds until the Closing Fee is paid in full in cash or otherwise
waived. The Lender agrees to waive the Closing Fee if, as at the
Maturity Date, (a) the Borrower has completed its merger with a
wholly-owned Subsidiary of the Lender pursuant to the terms and
conditions set forth in the Merger Agreement and the other Merger
Documents (the "Merger"), or (b) the Merger Agreement has been
terminated solely because either (i) the Lender's shareholders failed
to approve the Merger, or (ii) the Lender failed to obtain the
financing necessary to complete the Merger, or (c) a material breach by
the Lender of any Merger Document.
3.2. FUNDS FOR PAYMENTS.
3.2.1. PAYMENTS TO LENDER. All payments of principal,
interest, fees and any other amounts due hereunder or under
any of the other Loan Documents shall be made on the due date
thereof to the Lender in Dollars at the Lender's Head Office
or at such other place that the Lender may from time to time
designate, in each case such payment shall be sent by the
Borrower not later than 11:00 a.m. (Denver, Colorado time) and
in immediately available funds; PROVIDED, that in calculating
interest hereunder such payment shall only be credited to the
Borrower's account when it is actually received by the Lender
at the Lender's Head Office or at such other place as the
Lender has designated.
3.2.2. NO OFFSET, ETC. All payments by the Borrower
hereunder and under any of the other Loan Documents shall be
made without recoupment, setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts,
duties, charges, fees, deductions, withholdings, compulsory
loans, restrictions or conditions of any nature now or
hereafter imposed or levied by any jurisdiction or any
political subdivision thereof or taxing or other authority
therein unless the Borrower is compelled by law to make such
deduction or withholding. If any such obligation is imposed
upon the Borrower with respect to any amount
<PAGE>
payable by it hereunder or under any of the other Loan
Documents, the Borrower will pay to the Lender on the date on
which such amount is due and payable hereunder or under such
other Loan Document, such additional amount in Dollars as
shall be necessary to enable the Lender to receive the same
net amount which the Lender would have received on such due
date had no such obligation been imposed upon the Borrower.
The Borrower will deliver promptly to the Lender certificates
or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the
Borrower hereunder or under such other Loan Document.
3.3. COMPUTATIONS. All computations of interest on the Loan
and of other fees shall be based on a 360-day year and paid for the
actual number of days elapsed. Whenever a payment hereunder or under
any of the other Loan Documents becomes due on a day that is not a
Business Day, the due date for such payment shall be extended to the
next succeeding Business Day, and interest shall accrue during such
extension. In the absence of manifest error, the outstanding amount of
the Loan as reflected on the Note Record from time to time shall be
considered correct and binding on the Borrower unless within five (5)
Business Days after receipt of any notice by the Lender of such
outstanding amount, the Lender shall notify the Borrower to the
contrary.
3.4. ADDITIONAL COSTS, ETC. If any present or future
applicable law, which expression, as used herein, includes statutes,
rules and regulations thereunder and interpretations thereof by any
competent court or by any governmental or other regulatory body or
official charged with the administration or the interpretation thereof
and requests, directives, instructions and notices at any time or from
time to time hereafter made upon or otherwise issued to the Lender by
any regulatory authority (whether or not having the force of law),
shall:
(a) subject the Lender to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with
respect to this Loan Agreement, the other Loan Documents, or
the Note (other than taxes based upon or measured by the
income or profits of the Lender), or
(b) materially change the basis of taxation (except
for changes in taxes on income or profits) of payments to the
Lender of the principal of or the interest on the Loan or any
other amounts payable to the Lender under this Loan Agreement
or the other Loan Documents, or
(c) impose or increase or render applicable (other
than to the extent specifically provided for elsewhere in this
Loan Agreement) any special deposit, reserve, assessment,
liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or
commitments of an office of the Lender, or
(d) impose on the Lender any other conditions or
requirements with respect to this Loan Agreement, the other
Loan Documents, or the Note, and the result of any of the
foregoing is
(i) to increase the cost to the Lender of
making, funding, issuing, renewing, extending or
maintaining the Loan, or
(ii) to reduce the amount of principal,
interest, or other amount payable to the Lender
hereunder on account of the Loan, or
(iii) to require the Lender to make any
payment or to forego any interest or other sum
payable hereunder, the amount of which payment or
foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable
or deemed received by the Lender from the Borrower
hereunder,
<PAGE>
then, and in each such case, the Borrower will, upon demand made by the
Lender at any time and from time to time and as often as the occasion
therefor may arise, pay to the Lender such additional amounts as will
be sufficient to compensate the Lender for such additional cost,
reduction, payment or foregone interest or other sum.
3.5. CERTIFICATE. A certificate setting forth any additional
amounts payable pursuant to Section 3.4 and a brief explanation of such
amounts which are due, submitted by the Lender to the Borrower, shall
be conclusive, absent manifest error, that such amounts are due and
owing.
3.6. INDEMNITY. The Borrower agrees to indemnify the Lender
and to hold the Lender harmless from and against any loss, cost or
expense that the Lender may sustain or incur as a consequence of (a)
default by the Borrower in payment of the principal amount of or any
interest on the Loan as and when due and payable, including any such
loss or expense arising from interest or fees payable by the Lender to
lenders of funds obtained by it in order to maintain the Loan, (b)
default by the Borrower in making a borrowing after the Borrower has
given (or is deemed to have given) a Loan Request, or (c) the making of
any payment on the Loan on a day that is not the Maturity Date,
including interest or fees payable by the Lender to lenders of funds
obtained by it in order to maintain the Loan.
3.7. INTEREST AFTER DEFAULT.
3.7.1. OVERDUE AMOUNTS. Overdue principal and (to the
extent permitted by applicable law) interest on the Loan and
all other overdue amounts payable hereunder or under any of
the other Loan Documents shall bear interest compounded
monthly and payable on demand at a rate per annum equal to
four percent (4%) above the otherwise applicable rate until
such amount shall be paid in full (after as well as before
judgment).
3.7.2. AMOUNTS NOT OVERDUE. During the continuance of
a Default or an Event of Default the principal of the Loan not
overdue shall, until such Default or Event of Default has been
cured or remedied or such Default or Event of Default has been
waived in writing by the Lender, bear interest at a rate per
annum equal to four percent (4%) above the otherwise
applicable rate.
3.8. USURY PROVISION. It is not the intention of any parties
to this Loan Agreement to make an agreement in violation of the laws of
any applicable jurisdiction relating to usury. Regardless of any
provision of this Loan Agreement or of any other Loan Document, the
Lender shall not be entitled to receive, collect or apply, as interest,
charges, fees, penalties or additional amounts (collectively, referred
to herein as "INTEREST") on any of the Loans or any other Obligation,
any amount in excess of the Highest Lawful Rate. If under the laws of
any applicable jurisdiction there is no legal limitation on the rate of
Interest that may be charged with respect to an obligation owing to the
Lender (including, without limitation, the outstanding principal amount
of the Loan, unpaid interest with respect to the Loan or any other
Obligations due and payable under any Loan Document), there shall be no
maximum amount applicable to such obligation, notwithstanding any
reference thereto herein or in any other Loan Document. If at any time
the rate at which interest is payable to the Lender on the Loan or any
other Obligation exceeds the Highest Lawful Rate, the Loan or other
Obligation shall bear interest at the Highest Lawful Rate only but
shall continue to bear interest at the Highest Lawful Rate until such
time as the total amount of interest accrued on the Loan or other
Obligation equals (but does not exceed) the total amount of interest
which would have accrued thereon had there been no Highest Lawful Rate
applicable thereto. If at the maturity or final payment of the Loan or
other Obligation (whether at stated maturity, by acceleration or
prepayment or otherwise) the total amount of interest which has then
accrued or been paid thereon as provided above (the "COLLECTED
INTEREST") is less than the total amount of interest which would have
accrued thereon had there been no Highest Lawful Rate applicable
thereto (the "UNRESTRICTED INTEREST"), then the Borrower shall, in
addition to the Collected Interest, pay to the Lender an amount equal
to (a) the lesser of the Unrestricted Interest owed or accrued for the
benefit of
<PAGE>
the Lender and the total amount of interest which would have accrued
thereon for the benefit of the Lender had the Loan or other Obligation
at all times borne Interest at the Highest Lawful Rate, MINUS (b) the
Collected Interest paid for the account of the Lender. This Section 3.8
shall control every provision of every agreement pertaining to the
transactions contemplated by or contained in this Loan Agreement or any
of the other Loan Documents and shall equally apply to any guaranty or
other obligation of any Subsidiary of the Borrower or of any other
Person under the Loan Documents as if such obligations were
"Obligations" as defined herein.
4. SECURITY AND GUARANTIES.
4.1. SECURITY OF BORROWER. The Obligations shall be secured by
a perfected security interest (subject only to the Permitted Liens
entitled to priority under applicable law) in all of the assets of the
Borrower and its Domestic Subsidiaries, whether now owned or hereafter
acquired, pursuant to the terms of the Security Documents to which the
Borrower or its Domestic Subsidiaries are a party.
4.2. GUARANTIES OF DOMESTIC SUBSIDIARIES. The Obligations
shall also be guaranteed pursuant to the terms of the Guaranties and
the Bridgestone Guaranty.
5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender as of the date
hereof, as of the date the Loan is made and immediately following the
consummation of the Bridgestone Acquisition as follows:
5.1. CORPORATE AUTHORITY.
5.1.1. INCORPORATION; GOOD STANDING. Each of the
Borrower and its Subsidiaries (a) is a corporation duly
organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, (b)
has all requisite corporate power to own its property and
conduct its business as now conducted and as presently
contemplated, and (c) is in good standing as a foreign
corporation (or similar business entity) and is duly
authorized to do business in each jurisdiction where such
qualification is necessary except where a failure to be so
qualified would not have a materially adverse effect on the
business, assets or financial condition of the Borrower or its
Subsidiaries.
5.1.2. AUTHORIZATION. The execution, delivery and
performance of this Loan Agreement and the other Loan
Documents to which the Borrower or any of its Subsidiaries is
or is to become a party and the transactions contemplated
hereby and thereby (a) are within the corporate (or similar)
authority of such Person, (b) have been duly authorized by all
necessary corporate (or similar organizational) proceedings,
(c) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or
regulation to which the Borrower or any of its Subsidiaries is
subject or any judgment, order, writ, injunction, license or
permit applicable to such Person, (d) do not conflict with any
provision of the corporate charter or bylaws or other
organizational or constitutive documents of, or any agreement
or other instrument binding upon, the Borrower or any of its
Subsidiaries, and (e) except for the Liens granted in favor of
the Lender under this Loan Agreement and the other Loan
Documents, do not result in the creation or imposition of any
Lien on any undertaking, assets, rights or revenues of the
Borrower or its Subsidiaries.
5.1.3. ENFORCEABILITY. The execution and delivery of
this Loan Agreement and the other Loan Documents to which the
Borrower or any of its Subsidiaries is or is to become a party
will result in valid and legally binding obligations of such
Person enforceable against it in accordance with the
respective terms and provisions hereof and thereof, except as
enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or
<PAGE>
affecting generally the enforcement of creditors' rights and
except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the
discretion of the court before which any proceeding therefor
may be brought.
5.2. GOVERNMENTAL APPROVALS. The execution, delivery and
performance by the Borrower and any of its Subsidiaries of this Loan
Agreement and the other Loan Documents to which the Borrower or any of
its Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby do not require the approval or consent
of, or filing with, any governmental agency or authority other than
those already obtained.
5.3. TITLE TO PROPERTIES; LEASES. Except as indicated on
SCHEDULE 5.3 hereto, the Borrower and its Subsidiaries own all of the
assets reflected in the consolidated balance sheet of the Borrower and
its Subsidiaries as at the Balance Sheet Date or acquired since that
date (except property and assets sold or otherwise disposed of in the
ordinary course of business since that date), subject to no rights of
others, including any mortgages, leases, conditional sales agreements,
title retention agreements, liens or other encumbrances except
Permitted Liens.
5.4. FISCAL YEAR; FINANCIAL STATEMENTS.
5.4.1. FISCAL AND FINANCIAL YEAR. The Borrower and
each of its Subsidiaries has a fiscal year (or financial year,
as applicable) which is the twelve months ending on March 31
of each calendar year.
5.4.2. FINANCIAL STATEMENTS. There has been furnished
to the Lender a consolidated balance sheet of the Borrower and
its Subsidiaries as at the Balance Sheet Date, and a
consolidated statement of income for the fiscal year then
ended, certified by the Borrower's independent certified
public accountants. Such balance sheet and statement of income
have been prepared in accordance with generally accepted
accounting principles and fairly present the financial
condition of the Borrower as at the close of business on the
date thereof and the results of operations for the fiscal year
then ended. There are no contingent liabilities of the
Borrower or any of its Subsidiaries as of such date involving
material amounts, known to the officers of the Borrower not
disclosed in said balance sheet and the related notes thereto.
5.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date
there has occurred no materially adverse change in the financial
condition or business of the Borrower and its Subsidiaries as shown on
or reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries as at the Balance Sheet Date, or the consolidated
statement of income for the fiscal year then ended, other than changes
in the ordinary course of business that have not had any materially
adverse effect either individually or in the aggregate on the business
or financial condition of the Borrower or its Subsidiaries. Except as
set forth on SCHEDULE 5.5, since the Balance Sheet Date the Borrower
has not made any Distribution.
5.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the
Borrower and its Subsidiaries possesses all franchises, patents,
copyrights, trademarks, trade names, licenses and permits, and rights
in respect of the foregoing, adequate for the conduct of its business
substantially as now conducted without known conflict with any rights
of others.
5.7. LITIGATION. There are no actions, suits, proceedings or
investigations of any kind pending or threatened against the Borrower
or any of its Subsidiaries before any court, tribunal or administrative
agency or board that, if adversely determined, might, either in any
case or in the aggregate, materially adversely affect the properties,
assets, financial condition or business of the Borrower and its
Subsidiaries or materially impair the right of the Borrower and its
Subsidiaries, considered as a whole, to carry on business substantially
as now conducted by them, or result in any substantial liability not
adequately covered by insurance, or for which adequate reserves are not
maintained on the consolidated
<PAGE>
balance sheet of the Borrower, or which question the validity of this
Loan Agreement or any of the other Loan Documents, or any action taken
or to be taken pursuant hereto or thereto.
5.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the
Borrower nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a
materially adverse effect on the business, assets or financial
condition of the Borrower or any of its Subsidiaries. Neither the
Borrower nor any of its Subsidiaries is a party to any contract or
agreement that has or is expected, in the judgment of the Borrower's
officers, to have any materially adverse effect on the business of the
Borrower or any of its Subsidiaries.
5.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the
Borrower nor any of its Subsidiaries is in violation of any provision
of its charter documents, bylaws, or any agreement or instrument to
which it may be subject or by which it or any of its properties may be
bound or any decree, order, judgment, statute, license, rule or
regulation, in any of the foregoing cases in a manner that could result
in the imposition of substantial penalties or materially and adversely
affect the financial condition, properties or business of the Borrower
or any of its Subsidiaries.
5.10. TAX STATUS. The Borrower and its Subsidiaries (a) have
made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which
any of them is subject, (b) have paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and by appropriate proceedings and (c) have set aside on their books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Borrower know of no basis for any such claim.
5.11. NO EVENT OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
5.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the
Borrower nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an affiliate" of a
"holding company", as such terms are defined in the Public Utility
Holding Company Act of 1935; nor is it an "investment company", or an
"affiliated company" or a "principal underwriter" of an "investment
company", as such terms are defined in the Investment Company Act of
1940.
5.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with
respect to Permitted Liens, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document
filed or recorded with any filing records, registry, or other public
office, that purports to cover, affect or give notice of any present or
possible future lien on, or security interest in, any assets or
property of the Borrower or any of its Subsidiaries or rights
thereunder.
5.14. PERFECTION OF SECURITY INTEREST. All filings,
assignments, pledges and deposits of documents or instruments have been
made and all other actions have been taken that are necessary or
advisable, under applicable law, to establish and perfect the Lender's
security interest in the Collateral. The Collateral and the Lender's
rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrower is the owner of
the Collateral free from any Lien, except for Permitted Liens.
5.15. CERTAIN TRANSACTIONS. Except for arm's length
transactions pursuant to which the Borrower or any of its Subsidiaries
makes payments in the ordinary course of business upon terms no less
favorable than the Borrower or such Subsidiary could obtain from third
parties, none of the officers, directors, or employees of the Borrower
or any of its Subsidiaries is presently a party to any transaction with
the Borrower or any of its Subsidiaries (other than for services as
employees, officers and
<PAGE>
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Borrower, any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
5.16. EMPLOYEE BENEFIT PLANS.
5.16.1. IN GENERAL. Each Employee Benefit Plan and
each Guaranteed Pension Plan has been maintained and operated
in compliance in all material respects with the provisions of
ERISA and/or all Applicable Pension Legislation and, to the
extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions and
the bonding of fiduciaries and other persons handling plan
funds as required by Section 412 of ERISA. The Borrower has
heretofore delivered to the Lender the most recently completed
annual report, Form 5500, with all required attachments, and
actuarial statement required to be submitted under Section
103(d) of ERISA, with respect to each Guaranteed Pension Plan.
5.16.2. TERMINABILITY OF WELFARE PLANS. No Employee
Benefit Plan, which is an employee welfare benefit plan within
the meaning of Section 3(1) or Section 3(2)(B) of ERISA,
provides benefit coverage subsequent to termination of
employment, except as required by Title I, Part 6 of ERISA or
the applicable state insurance laws. The Borrower may
terminate each such Plan at any time (or at any time
subsequent to the expiration of any applicable bargaining
agreement) in the discretion of the Borrower without liability
to any Person other than for claims arising prior to
termination.
5.16.3. GUARANTEED PENSION PLANS. Each contribution
required to be made to a Guaranteed Pension Plan, whether
required to be made to avoid the incurrence of an accumulated
funding deficiency, the notice or lien provisions of Section
302(f) of ERISA, or otherwise, has been timely made. No waiver
of an accumulated funding deficiency or extension of
amortization periods has been received with respect to any
Guaranteed Pension Plan, and neither the Borrower nor any
ERISA Affiliate is obligated to or has posted security in
connection with an amendment to a Guaranteed Pension Plan
pursuant to Section 307 of ERISA or Section 401(a)(29) of the
Code. No liability to the PBGC (other than required insurance
premiums, all of which have been paid) has been incurred by
the Borrower or any ERISA Affiliate with respect to any
Guaranteed Pension Plan and there has not been any ERISA
Reportable Event (other than an ERISA Reportable Event as to
which the requirement of 30 days notice has been waived), or
any other event or condition which presents a material risk of
termination of any Guaranteed Pension Plan by the PBGC. Based
on the latest valuation of each Guaranteed Pension Plan (which
in each case occurred within twelve months of the date of this
representation), and on the actuarial methods and assumptions
employed for that valuation, the aggregate benefit liabilities
of all such Guaranteed Pension Plans within the meaning of
Section 4001 of ERISA did not exceed the aggregate value of
the assets of all such Guaranteed Pension Plans, disregarding
for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit
liabilities.
5.16.4. MULTIEMPLOYER PLANS. Neither the Borrower nor
any ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer Plan as a
result of a complete or partial withdrawal from such
Multiemployer Plan under Section 4201 of ERISA or as a result
of a sale of assets described in Section 4204 of ERISA.
Neither the Borrower nor any ERISA Affiliate has been notified
that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of Section 4241 or Section 4245
of ERISA or is at risk of entering reorganization or becoming
insolvent, or that any Multiemployer Plan intends to terminate
or has been terminated under Section 4041A of ERISA.
<PAGE>
5.17. USE OF PROCEEDS. The proceeds of the Loan shall be used
solely to finance the acquisition by the Borrower of 100% of the issued and
outstanding common stock of Bridgestone and other transactions in connection
therewith (the "BRIDGESTONE ACQUISITION"), all in accordance with the terms of
and pursuant to the Bridgestone Acquisition Documents.
5.18. ENVIRONMENTAL COMPLIANCE. The Borrower has taken all
necessary steps to investigate the past and present condition and usage
of the Real Estate and the operations conducted thereon and, based upon
such diligent investigation, has determined that:
(a) none of the Borrower, its Subsidiaries or any
operator of the Real Estate or any operations thereon is in
violation, or alleged violation, of any judgment, decree,
order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those
arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended ("CERCLA"),
the Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal Clean Air
Act, the Toxic Substances Control Act, or any state or local
statute, regulation, ordinance, order or decree relating to
health, safety or the environment in the United Kingdom,
France, Germany, the European Union or other applicable
jurisdiction (hereinafter "ENVIRONMENTAL LAWS"), which
violation would have a material adverse effect on the
environment or the business, assets or financial condition of
the Borrower or any of its Subsidiaries;
(b) neither the Borrower nor any of its Subsidiaries
has received notice from any third party including, without
limitation, any federal, state or local governmental
authority, (i) that any one of them has been identified by the
United States Environmental Protection Agency ("EPA") as a
potentially responsible party under CERCLA with respect to a
site listed on the National Priorities List, 40 C.F.R. Part
300 Appendix B; (ii) that any hazardous waste, as defined by
42 U.S.C. Section 6903(5), any hazardous substances as defined
by 42 U.S.C. Section 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. Section 9601(33), any waste substance or
other material as defined in the Environmental Protection Act
1990 (United Kingdom), and any toxic substances, oil or
hazardous materials or other chemicals or substances regulated
by any Environmental Laws ("HAZARDOUS SUBSTANCES") which any
one of them has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or
authority in any other applicable jurisdiction, or other third
party has conducted or has ordered that the Borrower or any of
its Subsidiaries conduct a remedial investigation, removal or
other response action pursuant to any Environmental Law; or
(iii) that it is or shall be a named party to any claim,
action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out
of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release
of Hazardous Substances;
(c) except as set forth on SCHEDULE 5.18 attached
hereto: (i) no portion of the Real Estate has been used for
the handling, processing, storage or disposal of Hazardous
Substances except in accordance with applicable Environmental
Laws; and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any portion
of the Real Estate; (ii) in the course of any activities
conducted by the Borrower, its Subsidiaries or operators of
its properties, no Hazardous Substances have been generated or
are being used on the Real Estate except in accordance with
applicable Environmental Laws; (iii) there have been no
releases (i.e. any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened
releases of Hazardous Substances on, upon, into or from the
properties of the Borrower or its Subsidiaries, which releases
would have a material adverse effect on the value of any of
the Real Estate or adjacent properties or the environment;
(iv) to the best of the Borrower's knowledge, there have
<PAGE>
been no releases on, upon, from or into any real property in
the vicinity of any of the Real Estate which, through soil or
groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of,
the Real Estate; and (v) in addition, any Hazardous Substances
that have been generated on any of the Real Estate have been
transported offsite only by carriers having an identification
number issued by the EPA (or by a similar agency in other
jurisdictions, as applicable), treated or disposed of only by
treatment or disposal facilities maintaining valid permits as
required under applicable Environmental Laws, which
transporters and facilities have been and are, to the best of
the Borrower's knowledge, operating in compliance with such
permits and applicable Environmental Laws; and
(d) None of the Borrower and its Subsidiaries or any
of the other Real Estate is subject to any applicable
environmental law requiring the performance of Hazardous
Substances site assessments, or the removal or remediation of
Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other
Persons of an environmental disclosure document or statement
by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the recording of any
Mortgage or to the effectiveness of any other transactions
contemplated hereby.
5.19. SUBSIDIARIES, ETC. SCHEDULE 5.19 sets forth all the
Subsidiaries of the Borrower, their respective jurisdictions of
organization and principal places of business. Except as set forth on
SCHEDULE 5.19, neither the Borrower nor any Subsidiary of the Borrower
is engaged in any joint venture or partnership with any other Person.
5.20. YEAR 2000 PROBLEM. The Borrower and its Subsidiaries
have (a) reviewed the areas within their businesses and operations
which could be adversely affected by failure to become "YEAR 2000
COMPLIANT" (i.e. that computer applications, imbedded microchips and
other systems used by the Borrower or any of its Subsidiaries, will be
able properly to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December
31, 1999), (b) developed a detailed plan and timetable to become Year
2000 Compliant in a timely manner, and (c) committed adequate resources
to support the Year 2000 plan of the Borrower and its Subsidiaries.
Based upon such review, the Borrower reasonably believes that the
Borrower and its Subsidiaries will become "Year 2000 Compliant" in a
timely manner except to the extent that failure to do so will not have
any materially adverse effect on the business or financial condition of
the Borrower or any of its Subsidiaries.
5.21. DISCLOSURE. None of this Loan Agreement or any of the
other Loan Documents contains any untrue statement of a material fact
or omits to state a material fact (known to the Borrower or any of its
Subsidiaries in the case of any document or information not furnished
by it or any of its Subsidiaries) necessary in order to make the
statements herein or therein not misleading. There is no fact known to
the Borrower or any of its Subsidiaries which materially adversely
affects, or which is reasonably likely in the future to materially
adversely affect, the business, assets, financial condition or
prospects of the Borrower or any of its Subsidiaries, exclusive of
effects resulting from changes in general economic conditions, legal
standards or regulatory conditions.
5.22. NO WITHHOLDING. Neither the Borrower nor any of its
Subsidiaries is required by the laws of any jurisdiction to make any
deduction or withholding of any nature whatsoever from any payment to
be made by the Borrower or its Subsidiaries hereunder or under any Loan
Document unless disclosed to the Lender in writing prior to the Closing
Date (which may be in the form of legal opinions) and unless the amount
and likelihood such deductions or withholdings are not, in the Lender's
reasonable discretion, material. Neither this Loan Agreement nor any of
the other Loan Documents is subject to any registration or stamp tax or
any other similar or like taxes payable in any jurisdiction.
<PAGE>
5.23. CHIEF EXECUTIVE OFFICE. The location of the Borrower's
and each of its Subsidiaries chief executive office or registered
office, as applicable, is set forth in SCHEDULE 5.23.
5.24. INSURANCE. The Borrower and each of its Subsidiaries
maintain with financially sound and reputable insurers insurance with
respect to its properties and businesses against such casualties and
contingencies as are in accordance with sound business practices and
with the details of such coverage being more fully described on
SCHEDULE 5.24 hereto.
5.25. DELIVERY OF CERTAIN DOCUMENTS. The Borrower has
delivered to the Lender true and complete copies of all of the
Bridgestone Acquisition Documents (including all amendments thereto).
Each of the representations and warranties made by the Borrower and any
of its Subsidiaries in any of the Bridgestone Acquisition Documents was
true and correct in all material respects when made and continues to be
true and correct in all material respects on the Closing Date, except
to the extent that any of such representations and warranties relate,
by the express terms thereof, solely to a date falling prior to the
Closing Date.
6. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as the Loan or Note is
outstanding:
6.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loan and the
fees provided for in this Loan Agreement, all in accordance with the
terms of this Loan Agreement and the Note.
6.2. MAINTENANCE OF OFFICE.
(a) The Borrower and each of its Subsidiaries
incorporated or organized in the United States of America will
maintain its chief executive office at the location set forth
in SCHEDULE 5.23, or at such other place in the United States
of America as such Person shall designate upon written notice
to the Lender where notices, presentations and demands to or
upon such Person in respect of the Loan Agreement and the
other Loan Documents to which such Person is a party may be
given or made.
(b) Each Subsidiary of the Borrower incorporated or
organized in a jurisdiction other than the United States of
America will maintain its registered office at the location
set forth in SCHEDULE 5.23, or at such other place in such
jurisdiction of incorporation or organization as such Person
shall designate upon written notice to the Lender where
notices, presentations and demands to or upon such Person in
respect of the Loan Agreement and the other Loan Documents to
which such Person is a party may be given or made.
6.3. RECORDS AND ACCOUNTS. The Borrower will (a) keep, and
cause each of its Subsidiaries to keep, true and accurate records and
books of account in which full, true and correct entries will be made
in accordance with generally accepted accounting principles (or
equivalent thereof in any jurisdiction other than the United States of
America), and (b) maintain, and cause each of its Subsidiaries to
maintain, adequate accounts and reserves for all taxes (including
income taxes), depreciation, depletion, obsolescence and amortization
of its properties and the properties of its Subsidiaries,
contingencies, and other reserves.
6.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The
Borrower will deliver to the Lender contemporaneously with the filing or mailing
thereof, copies of all material of a financial nature filed with the Securities
and Exchange Commission (or equivalent thereof in any other jurisdiction) or
sent to the stockholders of the Borrower and from time to time such other
financial data and information as the Lender may reasonably request.
<PAGE>
6.5. NOTICES.
6.5.1. DEFAULTS. The Borrower will promptly notify
the Lender in writing of the occurrence of any Default or
Event of Default. If any Person shall give any notice or take
any other action in respect of a claimed default (whether or
not constituting an Event of Default) under this Loan
Agreement or any other note, evidence of indebtedness,
indenture or other obligation to which or with respect to
which the Borrower or any of its Subsidiaries is a party or
obligor, whether as principal or surety, the Borrower shall
forthwith give written notice thereof to the Lender,
describing the notice or action and the nature of the claimed
default.
6.5.2. ENVIRONMENTAL EVENTS. The Borrower will
promptly give notice to the Lender (a) of any violation of any
Environmental Law that the Borrower or any of its Subsidiaries
reports in writing or is reportable by such Person in writing
(or for which any written report supplemental to any oral
report is made) to any federal, state or local environmental
agency or any similar environmental agency or board in any
other jurisdiction and (b) upon becoming aware thereof, of any
inquiry, proceeding, investigation, or other action, including
a notice from any agency of potential environmental liability,
of any federal, state or local environmental agency or board,
that has the potential to materially affect the assets,
liabilities, financial conditions or operations of the
Borrower or any of its Subsidiaries, or the Lender's security
interests pursuant to the Security Documents.
6.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. The
Borrower will, immediately upon becoming aware thereof, notify
the Lender in writing of any setoff, claims (including, with
respect to the Real Estate, environmental claims),
withholdings or other defenses to which any of the Collateral,
or the Lender's rights with respect to the Collateral, are
subject.
6.5.4. NOTICE OF LITIGATION AND JUDGMENTS. The
Borrower will, and will cause each of its Subsidiaries to,
give notice to the Lender in writing within fifteen (15) days
of becoming aware of any litigation or proceedings threatened
in writing or any pending litigation and proceedings affecting
the Borrower or any of its Subsidiaries or to which the
Borrower or any of its Subsidiaries is or becomes a party
involving an uninsured claim against the Borrower or any of
its Subsidiaries that could reasonably be expected to have a
materially adverse effect on the Borrower or any of its
Subsidiaries and stating the nature and status of such
litigation or proceedings. The Borrower will, and will cause
each of its Subsidiaries to, give notice to the Lender, in
writing, in form and detail satisfactory to the Lender, within
ten (10) days of any judgment not covered by insurance, final
or otherwise, against the Borrower or any of its Subsidiaries
in an amount in excess of $100,000.
6.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The
Borrower will do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and
franchises and those of its Subsidiaries and will not, and will not
cause or permit any of its Subsidiaries to, convert to a limited
liability company (or the equivalent thereof in any foreign
jurisdiction). It (a) will cause all of its properties and those of its
Subsidiaries used or useful in the conduct of its business or the
business of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary
equipment, (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried
on in connection therewith may be properly and advantageously conducted
at all times, and (c) will, and will cause each of its Subsidiaries to,
continue to engage primarily in the businesses now conducted by them
and in related businesses; PROVIDED that nothing in this Section 6.6
shall prevent the Borrower from discontinuing the operation and
maintenance of any of its properties or those of its Subsidiaries if
such discontinuance is, in the judgment of the Borrower, desirable in
the conduct of its or their business and that do not in the aggregate
materially adversely affect the business of the Borrower and its
Subsidiaries on a consolidated basis.
<PAGE>
6.7. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent and in accordance with the terms of the Security
Agreements.
6.8. TAXES. The Borrower will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all taxes,
assessments and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or upon the
income or profits therefrom, as well as all claims for labor,
materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; PROVIDED that any such tax,
assessment, charge, levy or claim need not be paid if the validity or
amount thereof shall currently be contested in good faith by
appropriate proceedings and if the Borrower or such Subsidiary shall
have set aside on its books adequate reserves with respect thereto; and
PROVIDED FURTHER that the Borrower and each Subsidiary of the Borrower
will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien
that may have attached as security therefor.
6.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. The Borrower
shall permit the Lender to visit and inspect any of the properties of the
Borrower or any of its Subsidiaries, to examine the books of account of the
Borrower and its Subsidiaries (and to make copies thereof and extracts
therefrom), and to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times and intervals as the Lender may
reasonably request.
6.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
The Borrower will, and will cause each of its Subsidiaries to, be in
material compliance with (a) the applicable laws and regulations
wherever its business is conducted, including all Environmental Laws,
(b) the provisions of its charter documents and by-laws and all other
organizational and constitutive documents, (c) all agreements and
instruments by which it or any of its properties may be bound and (d)
all applicable decrees, orders, and judgments. If at any time while the
Loan or Note is outstanding, any authorization, consent, approval,
permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the
Borrower may fulfill any of its obligations hereunder, the Borrower
will immediately take or cause to be taken all reasonable steps within
the power of the Borrower to obtain such authorization, consent,
approval, permit or license and furnish the Lender with evidence
thereof.
6.11. EMPLOYEE BENEFIT PLANS. The Borrower will (a) promptly
upon filing the same with the Department of Labor or Internal Revenue
Service, furnish to the Lender a copy of the most recent actuarial
statement required to be submitted under Section 103(d) of ERISA and
Annual Report, Form 5500, with all required attachments, in respect of
each Guaranteed Pension Plan, (b) promptly upon receipt or dispatch,
furnish to the Lender any notice, report or demand sent or received in
respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042,
4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of
ERISA, and (c) furnish to the Lender (at such time as such reports are
prepared in order to comply with Applicable Pension Legislation) copies
of all actuaries reports in relation to the Employee Benefit Plans
operated by them from time to time.
6.12. USE OF PROCEEDS. The Borrower will use the proceeds of
the Loan solely to finance the Bridgestone Acquisition.
6.13. FURTHER ASSURANCES. The Borrower will, and will cause
each of its Subsidiaries to, cooperate with the Lender and execute such
further instruments and documents as the Lender shall
<PAGE>
reasonably request to carry out to its satisfaction the transactions
contemplated by this Loan Agreement, the other Loan Documents, the
Bridgestone Acquisition Documents and the Merger Documents.
6.14. ADDITIONAL GUARANTORS. The Borrower will cause each
Domestic Subsidiary created, acquired or existing on or after the
Closing Date (including Bridgestone) to become a Guarantor immediately
and shall cause such Subsidiary to execute and deliver to the Lender
(a) a Guaranty (or in the case of Bridgestone, the Bridgestone
Guaranty) in form and substance satisfactory to the Lender, and (b)
further Security Documents or other instruments and documents as the
Lender may reasonably require in order to grant to the Lender a first
priority perfected security interest in such Subsidiary's assets,
together with legal opinions in form and substance reasonably
satisfactory to the Lender to be delivered to the Lender opining as to
the authorization, validity and enforceability of such Guaranty and
Security Documents and (as to the applicable Security Documents) the
perfection of such security interests.
6.15. ADDITIONAL SUBSIDIARIES. If, after the Closing Date, the
Borrower or any of its Subsidiaries creates or acquires, either
directly or indirectly, any Subsidiary, it will immediately notify the
Lender of such creation or acquisition, as the case may be, and provide
the Lender with an updated SCHEDULE 5.19 hereof and take all other
actions required by Section 6.14 hereof.
7. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as the Loan or Note is
outstanding:
7.1. RESTRICTIONS ON INDEBTEDNESS. The Borrower will not, and
will not permit any of its Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Lender arising under any of
the Loan Documents;
(b) endorsements for collection, deposit or
negotiation and warranties of products or services, in each
case incurred in the ordinary course of business;
(c) Indebtedness incurred in connection with the
acquisition after the date hereof of any real or personal
property by the Borrower or any Subsidiary of the Borrower or
under any Capitalized Lease, PROVIDED that the aggregate
principal amount of such Indebtedness of the Borrower and its
Subsidiaries shall not exceed the aggregate amount of
$1,000,000 at any one time;
(d) Indebtedness existing on the date of this Loan
Agreement (including all commitments to make loans or credit
extensions available to the Borrower by any Person but which
remain undrawn by the Borrower on the date hereof) and any
refinancings thereof (so long as the aggregate amount of such
Indebtedness is not increased) and listed and described on
SCHEDULE 7.1 hereto;
(e) Existing Indebtedness of Bridgestone assumed by
the Borrower in connection with the Bridgestone Acquisition
pursuant to the Bridgestone Acquisition Documents;
(f) Indebtedness of a Subsidiary of the Borrower to
the Borrower; and
(g) deposits or pledges made in connection with, or
to secure payment of, workmen's compensation, unemployment
insurance, old age pensions or other social security
obligations.
<PAGE>
7.2. RESTRICTIONS ON LIENS. The Borrower will not, and will
not permit any of its Subsidiaries to, (a) create or incur or suffer to
be created or incurred or to exist any Lien upon any of its property or
assets of any character whether now owned or hereafter acquired, or
upon the income or profits therefrom; (b) transfer any of such property
or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of
any other obligation in priority to payment of its general creditors;
(c) acquire, or agree or have an option to acquire, any property or
assets upon conditional sale or other title retention or purchase money
security agreement, device or arrangement; (d) suffer to exist for a
period of more than thirty (30) days after the same shall have been
incurred any Indebtedness or claim or demand against it that if unpaid
might by law or upon bankruptcy or insolvency, or otherwise, be given
any priority whatsoever over its general creditors; or (e) sell,
assign, pledge or otherwise transfer any "receivables" as defined in
clause (vii) of the definition of the term "Indebtedness," with or
without recourse; PROVIDED that the Borrower or any of its Subsidiaries
may create or incur or suffer to be created or incurred or to exist:
(i) Liens in favor of the Borrower on all or part of
the assets of Subsidiaries of the Borrower securing
Indebtedness owing by Subsidiaries of the Borrower to the
Borrower;
(ii) Liens to secure taxes, assessments and other
government charges in respect of obligations not overdue or
Liens on properties to secure claims for labor, material or
supplies in respect of obligations not overdue;
(iii) deposits or pledges made in connection with, or
to secure payment of, workmen's compensation, unemployment
insurance, old age pensions or other social security
obligations;
(iv) Liens on properties in respect of judgments or
awards that have been in force for less than the applicable
period for taking an appeal so long as execution is not levied
thereunder or in respect of which the Borrower or such
Subsidiary shall at the time in good faith be prosecuting an
appeal or proceedings for review and in respect of which a
stay of execution shall have been obtained pending such appeal
or review;
(v) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens on properties, in existence
less than 120 days from the date of creation thereof in
respect of obligations not overdue;
(vi) encumbrances consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real
property and defects and irregularities in the title thereto,
landlord's or lessor's Liens under leases to which the
Borrower or a Subsidiary of the Borrower is a party, and other
minor Liens or encumbrances none of which in the opinion of
the Borrower interferes materially with the use of the
property affected in the ordinary conduct of the business of
the Borrower and its Subsidiaries, which defects do not
individually or in the aggregate have a materially adverse
effect on the business of the Borrower individually or of the
Borrower and its Subsidiaries on a consolidated basis;
(vii) presently outstanding Liens listed on SCHEDULE
7.2 hereto;
(viii) purchase money security interests in or
purchase money mortgages on real or personal property acquired
after the date hereof to secure purchase money Indebtedness of
the type and amount permitted by Section 7.1(c), incurred in
connection with the acquisition of such property, which
security interests or mortgages cover only the real or
personal property so acquired;
(ix) Liens in favor of the Lender under the Loan
Documents; and
<PAGE>
(x) Liens to secure the Indebtedness permitted by
Section 7.1(e).
7.3. RESTRICTIONS ON INVESTMENTS. The Borrower will not, and
will not permit any of its Subsidiaries to, make or permit to exist or
to remain outstanding any Investment except Investments in:
(a) Bridgestone in connection with the Bridgestone
Acquisition;
(b) marketable direct or guaranteed obligations of
the United States of America that mature within one (1) year
from the date of purchase by the Borrower;
(c) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having
total assets in excess of $1,000,000,000 or banks of any other
jurisdiction which are members of the OECD;
(d) securities commonly known as "commercial paper"
issued by a corporation organized and existing under the laws
of the United States of America or any state thereof that at
the time of purchase have been rated and the ratings for which
are not less than "P 1" if rated by Moody's Investors Service,
Inc., and not less than "A 1" if rated by Standard and Poor's
Rating Group;
(e) Investments existing on the date hereof and
listed on SCHEDULE 7.3 hereto;
(f) Investments with respect to Indebtedness
permitted by Section 7.1(e);
(g) Investments consisting of the Guaranty or
Investments by the Borrower in Subsidiaries of the Borrower
existing on the Closing Date;
(h) Investments in OpSec France not to exceed
$150,000 in the aggregate;
(i) Investments consisting of promissory notes
received as proceeds of asset dispositions permitted by
Section 7.5.2; and
(j) Investments consisting of loans and advances to
employees for moving, entertainment, travel and other similar
expenses in the ordinary course of business not to exceed
$50,000 in the aggregate at any time outstanding;
PROVIDED, HOWEVER, that, such Investments will be considered
Investments permitted by this Section 7.3 only if all actions have been
taken to the satisfaction of the Lender a first priority perfected
security interest in all of such Investments free of all encumbrances
other than Permitted Liens.
7.4. DISTRIBUTIONS. Except as set forth on SCHEDULE 7.4, the
Borrower will not make any Distributions.
7.5. MERGER, CONSOLIDATION.
7.5.1. MERGERS AND ACQUISITIONS. The Borrower will
not, and will not permit any of its Subsidiaries to, become a
party to any merger or consolidation, or agree to or effect
any asset acquisition or stock acquisition (other than the
acquisition of assets in the ordinary course of business
consistent with past practices) except the merger or
consolidation of one or more of its Subsidiaries of the
Borrower with and into the Borrower, or the Bridgestone
Acquisition, or the Merger, or the merger or consolidation of
two or more Subsidiaries of the Borrower so long as such
merger does not have an adverse effect on the Liens held by
the Lender as security for the Obligations.
<PAGE>
7.5.2. DISPOSITION OF ASSETS. The Borrower will not,
and will not permit any of its Subsidiaries to, become a party
to or agree to or effect any disposition of assets, other than
the sale of inventory, the licensing of intellectual property
and the disposition of obsolete assets, in each case in the
ordinary course of business consistent with past practices.
7.6. SALE AND LEASEBACK. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any arrangement, directly
or indirectly, whereby the Borrower or any Subsidiary of the Borrower
shall sell or transfer any property owned by it in order then or
thereafter to lease such property or lease other property that the
Borrower or any Subsidiary of the Borrower intends to use for
substantially the same purpose as the property being sold or
transferred.
7.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrower will
not, and will not permit any of its Subsidiaries to, (a) use any of the
Real Estate or any portion thereof for the handling, processing,
storage or disposal of Hazardous Substances, (b) cause or permit to be
located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances, (c) generate
any Hazardous Substances on any of the Real Estate, (d) conduct any
activity at any Real Estate or use any Real Estate in any manner so as
to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping) or threatened release of Hazardous
Substances on, upon or into the Real Estate or (e) otherwise conduct
any activity at any Real Estate or use any Real Estate in any manner
that would violate any Environmental Law or bring such Real Estate in
violation of any Environmental Law.
7.8. EMPLOYEE BENEFIT PLANS. Neither the Borrower nor any
ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code
which could result in a material liability for the Borrower or
any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
302 of ERISA, whether or not such deficiency is or may be
waived; or
(c) fail to contribute to any Guaranteed Pension Plan
to an extent which, or terminate any Guaranteed Pension Plan
in a manner which, could result in the imposition of a Lien or
encumbrance on the assets of the Borrower or any of its
Subsidiaries pursuant to Section 302(f) or Section 4068 of
ERISA; or
(d) amend any Guaranteed Pension Plan in
circumstances requiring the posting of security pursuant to
Section 307 of ERISA or Section 401(a)(29) of the Code;
(e) permit or take any action which would result in
the aggregate benefit liabilities (with the meaning of Section
4001 of ERISA) of all Guaranteed Pension Plans exceeding the
value of the aggregate assets of such Plans, disregarding for
this purpose the benefit liabilities and assets of any such
Plan with assets in excess of benefit liabilities; or
(f) take any action referred to in paragraphs (a)
through (e) above that would violate any provisions of
Applicable Pension Legislation.
7.9. CHANGES TO BRIDGESTONE ACQUISITION DOCUMENTS. The
Borrower will not, and will not permit its Subsidiaries to, (a) amend
the economic terms of the Bridgestone Acquisition Documents or (b)
amend, supplement or waive any of the other terms or conditions set
forth in the Bridgestone Acquisition Documents, without the prior
written consent of the Lender.
<PAGE>
7.10. ASSIGNMENT BY BORROWER. The Borrower shall not, and will
not permit its Subsidiaries to, assign or transfer any of its rights or
obligations under any of the Loan Documents, the Bridgestone
Acquisition Documents or the Merger Documents without the prior written
consent of the Lender.
7.11. MODIFICATION OF CHARTER. The Borrower will not, nor
permit any of its Subsidiaries to amend or permit to be amended its
certificate of incorporation or bylaws, memorandum and articles of
association, or similar organizational documents without the prior
written consent of the Lender unless such amendment, supplement or
modification would not have any material adverse effect on the Lender's
rights under the Loan Documents or the Borrower's or any of its
Subsidiaries' obligations under the Loan Documents or any of such
Persons' abilities to perform such obligations.
7.12. UPSTREAM LIMITATIONS. The Borrower will not enter into,
nor permit any of its Subsidiaries to enter into, any agreement,
contract or arrangement (other than the Loan Agreement and the other
Loan Documents) restricting the ability of any Subsidiary to pay or
make dividends or distributions in cash or kind, to make loans,
advances or other payments of whatsoever nature or to make transfers or
distributions of all or any part of its assets to the Borrower or any
Subsidiary.
7.13. INCONSISTENT AGREEMENTS. The Borrower will not, nor will
it permit its Subsidiaries to, enter into any agreement containing any
provision which would be violated or breached by the performance by the
Borrower or such Subsidiary of its obligations hereunder or under any
of the Loan Documents.
7.14. NEGATIVE PLEDGES. Except as set forth on SCHEDULE 7.14,
the Borrower will not, nor will it permit its Subsidiaries to, enter
into or permit to exist any arrangement or agreement, enforceable under
applicable law, which directly or indirectly prohibits the Borrower or
its Subsidiaries from creating or incurring any lien, encumbrance,
mortgage, pledge, charge, restriction or other security interest in
favor of the Lender under the Loan Documents other than customary
anti-assignment provisions in leases and licensing agreements entered
into by such Person in the ordinary course of its business.
8. CLOSING CONDITIONS.
The obligation of the Lender to make the Loan shall be subject to the
satisfaction of the following conditions precedent:
8.1. LOAN DOCUMENTS; MERGER DOCUMENTS; BRIDGESTONE ACQUISITION
DOCUMENTS. Each of the Loan Documents, the Merger Agreement and the Bridgestone
Acquisition Documents shall have been duly executed and delivered by the
respective parties thereto, shall be in full force and effect and shall be in
form and substance satisfactory to the Lender. The Lender shall have received a
fully executed copy of each Loan Document and Bridgestone Acquisition Document.
8.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Lender shall
have received from the Borrower and each of its Subsidiaries, a copy,
certified by a duly authorized officer of such Person to be true and
complete on the Closing Date, of each of (a) its charter or other
incorporation documents as in effect on such date of certification, and
(b) its by-laws (or other similar document) as in effect on such date.
8.3. CORPORATE ACTION. All corporate action necessary for the
valid execution, delivery and performance by the Borrower and each of
its Subsidiaries of this Loan Agreement and the other Loan Documents to
which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Lender
shall have been provided to the Lender.
8.4. INCUMBENCY CERTIFICATE. The Lender shall have received
from the Borrower and each of the Domestic Subsidiaries an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized
officer of the Borrower or such Domestic Subsidiary, and giving the
name and bearing a
<PAGE>
specimen signature of each individual who shall be authorized: (a) to
sign, in the name and on behalf of each of the Borrower or such
Domestic Subsidiary, each of the Loan Documents to which the Borrower
or such Domestic Subsidiary is or is to become a party; (b) in the case
of the Borrower to make the Loan Request; and (c) to give notices and
to take other action on its behalf under the Loan Documents.
8.5. VALIDITY OF LIENS. The Security Documents shall be
effective to create in favor of the Lender a legal, valid and
enforceable security interest in the Collateral (subject only to
Permitted Liens entitled to priority under applicable law). All
filings, recordings, deliveries of instruments and other actions
necessary or desirable in the opinion of the Lender to protect and
preserve such security interests shall have been duly effected. The
Lender shall have received evidence thereof in form and substance
satisfactory to the Lender.
8.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The
Lender shall have received from each of the Borrower and its
Subsidiaries a completed and fully executed Perfection Certificate and
the results of UCC searches and all other applicable Lien searches,
indicating no Liens other than Permitted Liens and otherwise in form
and substance satisfactory to the Lender.
8.7. SENIOR LENDER CONSENTS. The Borrower and its Subsidiaries
shall have delivered to the Lender evidence satisfactory to the Lender
that all necessary or otherwise advisable consents by the Senior Lender
permitting the Borrower and its Subsidiaries to enter into and fully
perform their obligations under this Loan Agreement and the other Loan
Documents have been obtained by the Borrower and its Subsidiaries.
8.8. CERTIFICATES OF INSURANCE. The Lender shall have received
(a) a certificate of insurance from an independent insurance broker
dated as of the Closing Date, identifying insurers, types of insurance,
insurance limits, and policy terms, and otherwise describing the
insurance obtained in accordance with the provisions of the Security
Agreements and (b) certified copies of all policies evidencing such
insurance (or certificates therefore signed by the insurer or an agent
authorized to bind the insurer).
8.9. OPINION OF COUNSEL. The Lender shall have received a
favorable opinion addressed to the Lender, dated as of the Closing Date, in form
and substance satisfactory to the Lender, from Lohf, Shaiman & Jacobs, P.C.,
counsel to the Borrower and its Subsidiaries.
9. CONDITIONS TO BORROWING.
The obligation of the Lender to make the Loan, whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
9.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of any of the Borrower and its
Subsidiaries contained in this Loan Agreement, the other Loan Documents
or in any document or instrument delivered pursuant to or in connection
with this Loan Agreement shall be true as of the date as of which they
were made and shall also be true at and as of the time of the making of
the Loan, with the same effect as if made at and as of that time
(except to the extent of changes resulting from transactions
contemplated or permitted by this Loan Agreement and the other Loan
Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the
extent that such representations and warranties relate expressly to an
earlier date) and no Default or Event of Default shall have occurred
and be continuing.
9.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any
law or regulations thereunder or interpretations thereof that in the
reasonable opinion of the Lender would make it illegal for the Lender
to make the Loan.
<PAGE>
9.3. PROCEEDINGS AND DOCUMENTS. All proceedings in connection
with the transactions contemplated by this Loan Agreement, the other
Loan Documents, the Bridgestone Acquisition Documents and all other
documents incident thereto shall be satisfactory in substance and in
form to the Lender and the Lender shall have received all information
and such counterpart originals or certified or other copies of such
documents as the Lender may reasonably request.
9.4. BRIDGESTONE ACQUISITION. The Lender shall have received
evidence satisfactory to the Lender, including a legal opinion from
Borrower's counsel, that all of the closing conditions (other than full
payment of the purchase price for which the funds provided by the
Lender to the Borrower under this Loan Agreement are to be used) to the
purchase of 100% of Voting Stock of Bridgestone pursuant to the
Bridgestone Acquisition Documents shall have been satisfied and none of
the conditions shall have been amended, supplemented or waived except
in accordance with Section 7.9 hereof.
10. EVENTS OF DEFAULT; ACCELERATION; ETC.
10.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the
following events ("EVENTS OF DEFAULT" or, if the giving of notice or
the lapse of time or both is required, then, prior to such notice or
lapse of time, "DEFAULTS") shall occur:
(a) the Borrower shall fail to pay any principal of
the Loan when the same shall become due and payable, whether
at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on
the Loan, the Closing Fee, or other sums due hereunder or
under any of the other Loan Documents, when the same shall
become due and payable, whether at the stated date of maturity
or any accelerated date of maturity or at any other date fixed
for payment;
(c) the Borrower shall fail to comply with any of its
covenants contained in Sections 6 or 7;
(d) the Borrower or any of its Subsidiaries shall
fail to perform any term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those
specified elsewhere in this Section 10.1) for fifteen (15)
days after written notice of such failure has been given to
the Borrower by the Lender;
(e) any representation or warranty of the Borrower or
any of its Subsidiaries in this Loan Agreement or any of the
other Loan Documents or in any other document or instrument
delivered pursuant to or in connection with this Loan
Agreement shall prove to have been false in any material
respect upon the date when made or deemed to have been made or
repeated;
(f) the Borrower or any of its Subsidiaries shall
fail to pay at maturity, or within any applicable period of
grace, any obligation for borrowed money or credit received or
in respect of any Capitalized Leases, or fail to observe or
perform any material term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing
borrowed money or credit received or in respect of any
Capitalized Leases for such period of time as would permit
(assuming the giving of appropriate notice if required) the
holder or holders thereof or of any obligations issued
thereunder to accelerate the maturity thereof, or any such
holder or holders shall rescind or shall have a right to
rescind the purchase of any such obligations;
(g) the Borrower or any of its Subsidiaries shall
make an assignment for the benefit of creditors, or admit in
writing its inability to pay or generally fail to pay its
debts as they mature or become due, or shall petition or apply
for the appointment of a trustee or other
<PAGE>
custodian, liquidator or receiver of the Borrower or any of
its Subsidiaries or of any substantial part of the assets of
the Borrower or any of its Subsidiaries or shall commence any
case or other proceeding relating to the Borrower or any of
its Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or
hereafter in effect, or any Insolvency Event shall occur, or
shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be
filed or any such case or other proceeding shall be commenced
against the Borrower or any of its Subsidiaries and the
Borrower or any of its Subsidiaries shall indicate its
approval thereof, consent thereto or acquiescence therein or
such petition or application shall not have been dismissed
within fourteen (14) days following the filing thereof;
(h) the Borrower or any of its Subsidiaries organized
in Germany shall become obligated to file for bankruptcy
proceedings pursuant to Section 64 of the GmbH Act;
(i) a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or adjudicating the
Borrower or any of its Subsidiaries bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or
a decree or order for relief is entered in respect of the
Borrower or any Subsidiary of the Borrower in an involuntary
case under federal bankruptcy laws as now or hereafter
constituted;
(j) there shall remain in force, undischarged,
unsatisfied and unstayed, for more than fourteen (14) days,
whether or not consecutive, any final judgment against the
Borrower or any of its Subsidiaries that, with other
outstanding final judgments, undischarged, against the
Borrower or any of its Subsidiaries exceeds in the aggregate
$200,000;
(k) if any of the Loan Documents shall be cancelled,
terminated, revoked or rescinded or the Lender's security
interests or liens in a substantial portion of the Collateral
shall cease to be perfected, or shall cease to have the
priority contemplated by the Security Documents, in each case
otherwise than in accordance with the terms thereof or with
the express prior written agreement, consent or approval of
the Lender, or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan
Documents shall be commenced by or on behalf of the Borrower
or any of its Subsidiaries party thereto or any of their
respective stockholders, or any court or any other
governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one
or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof;
(l) the Borrower or any ERISA Affiliate incurs any
liability to the PBGC or a Guaranteed Pension Plan pursuant to
Title IV of ERISA in an aggregate amount exceeding $50,000, or
the Borrower or any ERISA Affiliate is assessed withdrawal
liability pursuant to Title IV of ERISA by a Multiemployer
Plan requiring aggregate annual payments exceeding $50,000, or
any of the following occurs with respect to a Guaranteed
Pension Plan: (i) an ERISA Reportable Event, or a failure to
make a required installment or other payment (within the
meaning of Section 302(f)(1) of ERISA), PROVIDED that the
Lender determines in its reasonable discretion that such event
(A) could be expected to result in liability of the Borrower
or any of its Subsidiaries to the PBGC or such Guaranteed
Pension Plan in an aggregate amount exceeding $50,000 and (B)
could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC, for the appointment by
the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan or for the imposition
of a lien in favor of such Guaranteed Pension Plan; or (ii)
the appointment by a United States District Court of a trustee
to administer such Guaranteed Pension Plan; or (iii) the
institution by the PBGC of proceedings to terminate such
Guaranteed Pension Plan;
<PAGE>
(m) the Borrower or any of its Subsidiaries shall be
enjoined, restrained or in any way prevented by the order of
any court or any administrative or regulatory agency from
conducting any material part of its business and such order
shall continue in effect for more than fourteen (14) days;
(n) there shall occur any material damage to, or
loss, theft or destruction of, any Collateral, whether or not
insured, or any strike, lockout, labor dispute, embargo,
condemnation, act of God or public enemy, or other casualty,
which in any such case causes the cessation or substantial
curtailment of revenue producing activities at any facility of
the Borrower or any of its Subsidiaries if such event or
circumstance is not covered by business interruption insurance
and would have in the opinion of the Lender a material adverse
effect on the business or financial condition of the Borrower
or such Subsidiary;
(o) there shall occur the loss, suspension or
revocation of, or failure to renew, any license or permit now
held or hereafter acquired by the Borrower or any of its
Subsidiaries if such loss, suspension, revocation or failure
to renew would have in the opinion of the Lender a material
adverse effect on the business or financial condition of the
Borrower or such Subsidiary; and
(p) the Borrower or any of its Subsidiaries shall
fail to observe or perform, in any material respect, any
covenant, agreement or obligation contained in any of the
Merger Documents or the Bridgestone Acquisition Documents;
then, and in any such event, so long as the same may be continuing, the
Lender may by notice in writing to the Borrower declare all amounts
owing with respect to this Loan Agreement, the Note and the other Loan
Documents to be, and they shall thereupon forthwith become, immediately
due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived by the Borrower;
PROVIDED that in the event of any Event of Default specified in
Sections 10.1(g), 10.1(h), 10.1(i), all such amounts shall become
immediately due and payable automatically and without any requirement
of notice from the Lender.
10.2. REMEDIES. In case any one or more of the Events of
Default shall have occurred and be continuing, and whether or not the
Lender shall have accelerated the maturity of the Loan pursuant to
Section 10.1, the Lender, if owed any amount with respect to the Loan,
may proceed to protect and enforce its rights by suit in equity, action
at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Loan
Agreement and the other Loan Documents or any instrument pursuant to
which the Obligations to the Lender are evidenced, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce
the payment thereof or any other legal or equitable right of the
Lender. No remedy herein conferred upon the Lender or the holder of the
Note is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity
or by statute or any other provision of law.
10.3. DISTRIBUTION OF COLLATERAL PROCEEDS. If following the
occurrence or during the continuance of any Default or Event of
Default, the Lender receives any monies in connection with the
enforcement of any the Security Documents, or otherwise with respect to
the realization upon any of the Collateral, such monies shall be
distributed for application as follows:
(a) First, to the payment of, or (as the case may be)
the reimbursement of the Lender for or in respect of all
reasonable costs, expenses, disbursements and losses which
shall have been incurred or sustained by the Lender in
connection with the collection of such monies by the Lender,
for the exercise, protection or enforcement by the Lender of
all or any of the rights, remedies, powers and privileges of
the Lender under this Loan Agreement or any of the
<PAGE>
other Loan Documents or in respect of the Collateral or in
support of any provision of adequate indemnity to the Lender
against any taxes or liens which by law shall have, or may
have, priority over the rights of the Lender to such monies;
(b) Second, to all other Obligations in such order or
preference as the Lender may determine;
(c) Third, the excess, if any, shall be returned to
the Borrower or to such other Persons as are entitled thereto.
11. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from the
Lender to the Borrower and any securities or other property of the Borrower in
the possession of the Lender may be applied to or set off by the Lender against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to the Lender.
12. EXPENSES AND INDEMNIFICATION.
12.1. EXPENSES. The Borrower agrees to pay (a) any taxes
(including any interest and penalties in respect thereto) payable by
the Lender (other than taxes based upon the Lender's net income) on or
with respect to the transactions contemplated by this Loan Agreement
(the Borrower hereby agreeing to indemnify the Lender with respect
thereto), (b) the fees, expenses and disbursements of the Lender or any
of its affiliates incurred by the Lender or such affiliate in
connection with the preparation, syndication, administration or
interpretation of the Loan Documents and other instruments mentioned
herein, including all title insurance premiums and surveyor,
engineering and appraisal charges, (c) all reasonable out-of-pocket
expenses (including without limitation reasonable attorneys' fees and
costs, which attorneys may be employees of the Lender, and reasonable
consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by the Lender in connection
with (i) the enforcement of or preservation of rights under any of the
Loan Documents against the Borrower or any of its Subsidiaries or the
administration thereof after the occurrence of a Default or Event of
Default and (ii) any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to the Lender's relationship
with the Borrower or any of its Subsidiaries and (d) all reasonable
fees, expenses and disbursements of he Lender incurred in connection
with UCC searches, UCC filings or mortgage recordings.
12.2. INDEMNIFICATION. The Borrower agrees to indemnify and
hold harmless the Lender and its affiliates from and against any and
all claims, actions and suits whether groundless or otherwise, and from
and against any and all liabilities, losses, damages and expenses of
every nature and character arising out of this Loan Agreement or any of
the other Loan Documents or the transactions contemplated hereby
including, without limitation, (a) any actual or proposed use by the
Borrower or any of its Subsidiaries of the proceeds of any of the Loan,
(b) the Borrower or any of its Subsidiaries entering into or performing
this Loan Agreement or any of the other Loan Documents or (c) with
respect to the Borrower and its Subsidiaries and their respective
properties and assets, the violation of any Environmental Law, the
presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threatened release of any Hazardous Substances or
any action, suit, proceeding or investigation brought or threatened
with respect to any Hazardous Substances (including, but not limited
to, claims with respect to wrongful death, personal injury or damage to
property), in each case including, without limitation, the reasonable
fees and disbursements of counsel and allocated costs of internal
counsel incurred in connection with any such investigation, litigation
or other proceeding. In litigation, or the preparation therefor, the
Lender and its affiliates shall be entitled to select their own counsel
and, in addition to the foregoing indemnity, the Borrower agrees to pay
promptly the reasonable
<PAGE>
fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this Section 12.2 are unenforceable
for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment in satisfaction of such obligations which
is permissible under applicable law.
12.3. SURVIVAL. The covenants contained in this Section 12
shall survive payment or satisfaction in full of all other Obligations.
12.4. CONSEQUENTIAL DAMAGES. Notwithstanding any provision to
the contrary contained herein, in no event shall the Borrower be liable
to the Lender or any third party for any consequential damages;
PROVIDED, that the foregoing shall not impair the payment and
satisfaction in full of the Obligations hereunder.
13. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
13.1. CONFIDENTIALITY. The Lender agrees, on behalf of itself
and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential
information of the same nature and in accordance with safe and sound
banking practices, any non-public information supplied to it by the
Borrower or any of its Subsidiaries pursuant to this Loan Agreement
that is identified by such Person as being confidential at the time the
same is delivered to the Lender, PROVIDED that nothing herein shall
limit the disclosure of any such information (a) after such information
shall have become public other than through a violation of this Section
13, (b) to the extent required by statute, rule, regulation or judicial
process, (c) to counsel for any of the Lender, (d) to any regulatory
authority having jurisdiction over the Lender, or to auditors or
accountants, (e) in connection with any litigation to which the Lender
is a party, or in connection with the enforcement of rights or remedies
hereunder or under any other Loan Document, or (f) to a Subsidiary or
affiliate of the Lender.
13.2. PRIOR NOTIFICATION. Unless specifically prohibited by
applicable law or court order, the Lender shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such
non-public information by any governmental agency or representative
thereof or pursuant to legal process.
13.3. OTHER. In no event shall the Lender be obligated or
required to return any materials furnished to it by the Borrower or any
of its Subsidiaries. The obligations of the Lender under this Section
13 shall supersede and replace the obligations of the Lender under any
confidentiality letter in respect of this financing signed and
delivered by the Lender to the Borrower prior to the date hereof.
14. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein,
in the Note, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of its Subsidiaries
pursuant hereto shall be deemed to have been relied upon by the Lender,
notwithstanding any investigation heretofore or hereafter made by any of them,
and shall survive the making by the Lender of the Loan, as herein contemplated,
and shall continue in full force and effect so long as any amount due under this
Loan Agreement or the Note or any of the other Loan Documents remains
outstanding or the Lender has any obligation to make the Loan, and for such
further time as may be otherwise expressly specified in this Loan Agreement. All
statements contained in any certificate or other paper delivered to the Lender
at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant
hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower or such Subsidiary
hereunder.
15. NOTICES, ETC.
<PAGE>
Except as otherwise expressly provided in this Loan Agreement, all
notices and other communications made or required to be given pursuant to this
Loan Agreement or the Note shall be in writing and shall be delivered in hand,
mailed by United States registered or certified first class mail, postage
prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or
telex and confirmed by delivery via courier or postal service, addressed as
follows:
(a) if to the Borrower, at 535 16th Street, Suite 920, Denver,
Colorado 80202, USA, Attention: Richard H. Bard and Mark T. Turnage, or
at such other address for notice as the Borrower shall last have
furnished in writing to the Person giving the notice; and
(b) if to the Lender, at the Lender's Head Office Attention:
Michael Angus, Finance Director, or such other address for notice as
the Lender shall last have furnished in writing to the Person giving
the notice.
Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, at
the time of the receipt thereof.
16. GOVERNING LAW.
THIS CREDIT AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS, EXCEPT
AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF
THE STATE OF NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK (EXCLUDING THE LAWS
APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT
FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY
FEDERAL COURT SITTING THEREIN AND CONSENT TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE
BORROWER BY CERTIFIED OR REGULAR MAIL AT THE ADDRESS SPECIFIED IN SECTION 15.
THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN
AN INCONVENIENT COURT.
17. HEADINGS.
The captions in this Loan Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
18. COUNTERPARTS.
This Loan Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Loan Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
19. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Loan Agreement nor
any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 21.
<PAGE>
20. WAIVER OF JURY TRIAL.
The Borrower hereby waives its right to a jury trial with respect to
any action or claim arising out of any dispute in connection with this Loan
Agreement, the Note or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of such rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (a)
certifies that no representative, agent or attorney of the Lender has
represented, expressly or otherwise, that the Lender would not, in the event of
litigation, seek to enforce the foregoing waivers and (b) acknowledges that the
Lender has been induced to enter into this Loan Agreement, the other Loan
Documents to which it is a party by, among other things, the waivers and
certifications contained herein.
21. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Loan Agreement, any
consent or approval required or permitted by this Loan Agreement to be given by
the Lender may be given, and any term of this Loan Agreement or of any other
instrument related hereto or mentioned herein may be amended, and the
performance or observance by the Borrower of any terms of this Loan Agreement or
such other instrument or the continuance of any Default or Event of Default may
be waived (either generally or in a particular instance and either retroactively
or prospectively) with, but only with, the written consent of the Lender. No
waiver shall extend to or affect any obligation not expressly waived or impair
any right consequent thereon. No course of dealing or delay or omission on the
part of the Lender in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
22. SEVERABILITY.
The provisions of this Loan Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Loan Agreement in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Loan
Agreement as a sealed instrument as of the date first set forth above.
APPLIED HOLOGRAPHICS PLC
By: /s/ Michael W. Angus
---------------------------------------
Name: Michael W. Angus
Title: Finance Director
OPTICAL SECURITY GROUP, INC.
By: /s/ Richard H. Bard
---------------------------------------
Name: Richard H. Bard
Title: Chief Executive Officer
<PAGE>
Exhibit (c)(3)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into as of November 30,
1999, by and between Optical Security Group, Inc., a Colorado corporation
("ISSUER") and Applied Holographics plc, a public limited company incorporated
and existing under the laws of England and Wales ("GRANTEE").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "MERGER AGREEMENT"), which agreement has been
executed by the parties hereto immediately prior to this Agreement; and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined):
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "OPTION") to purchase, subject to the terms hereof, up to 1,234,283
fully paid and nonassessable shares (the "OPTION SHARES") of Issuer's Common
Stock, par value $0.005 per share ("COMMON STOCK"), at a price of $7.00 per
share (the "OPTION PRICE"); PROVIDED that in no event shall the number of shares
of Common Stock for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock without giving effect to
any shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement), the number of shares of Common Stock subject
to the Option shall be increased so that, after such issuance, it equals 19.9%
of the number of shares of Common Stock then issued and outstanding without
giving effect to any shares subject to or issued pursuant to the Option. Nothing
contained in this Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined); PROVIDED THAT the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within ninety (90) days following such Subsequent Triggering Event.
Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement) of the Merger; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 7.01(b)(ii) of the Merger
Agreement; or (iii) the passage of six months after termination of the Merger
Agreement if such termination follows the occurrence of an Initial Triggering
Event or is a termination by Grantee pursuant to Section 7.01(b)(ii) of the
Merger Agreement (provided that if an Initial Triggering Event continues or
occurs beyond such termination and prior to the passage of such six-month
period, the Exercise Termination Event shall be three months from the expiration
of the Last Triggering Event but in no event more than nine months after such
termination). The "Last Triggering Event" shall mean the last Initial Triggering
Event to expire. The term "Holder" shall mean the holder or holders of the
Option.
<PAGE>
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "ISSUER SUBSIDIARY"),
without having received Grantee's prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction (as hereinafter defined)
with any person (the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each a "GRANTEE
SUBSIDIARY") or the Board of Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition Transaction or shall
have failed to publicly oppose an Acquisition Transaction, in each case with any
person other than Grantee or a Grantee Subsidiary. For purposes of this
Agreement, "Acquisition Transaction" shall mean (w) a merger or consolidation,
or any similar transaction, involving Issuer or any Significant Subsidiary (as
defined in Rule 1-02 of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC")) of Issuer, (x) a purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other acquisition (including
by way of merger, consolidation, share exchange or otherwise) of securities
representing 20% or more of the voting power of Issuer or any Significant
Subsidiary of Issuer, or (z) any substantially similar transaction; PROVIDED,
HOWEVER, that in no event shall any merger, consolidation, purchase,
liquidation, dividend in kind, reorganization or similar transaction involving
only the Issuer and one or more of its Subsidiaries or involving only any two or
more of such Subsidiaries, be deemed to be an Acquisition Transaction, so long
as any such transaction is not entered into in violation of the terms of the
Merger Agreement;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended, proposed or
publicly announced its intention to authorize, recommend or propose to engage
in, an Acquisition Transaction with any person other than Grantee or a Grantee
Subsidiary, or the Board of Directors of Issuer shall have publicly withdrawn or
modified, or publicly announced its intention to withdraw or modify, in any
manner adverse to Grantee, its recommendation that the stockholders of Issuer
approve the transactions contemplated by the Merger Agreement;
(iii) Issuer terminates the Merger Agreement pursuant to Section
7.01(d) of the Merger Agreement;
(iv) Any person other than Grantee, any Grantee Subsidiary or
any Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to acquire
beneficial ownership of 20% or more of the outstanding shares of Common Stock
(the term "beneficial ownership" for purposes of this Option Agreement having
the meaning assigned thereto in Section 13(d) of the 1934 Act, and the rules and
regulations thereunder);
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of public
disclosure to engage in an Acquisition Transaction; or
(vi) After an overture is made by a third party to Issuer or
its stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and such
breach (x) would entitle Grantee to terminate the Merger Agreement and (y) shall
not have been cured prior to the Notice Date (as defined below).
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 30% or
more of the then outstanding Common Stock; or
<PAGE>
(ii) The occurrence of the Initial Triggering Event described
in clause (i) of subsection (b) of this Section 2, except that the percentage
referred to in clause (y) shall be 30%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"TRIGGERING EVENT"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of the Holder to exercise the
Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "NOTICE DATE") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "CLOSING DATE"). Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, PROVIDED that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof
without charge upon receipt by Issuer of a written request
therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 ACT"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder.
<PAGE>
Issuer shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock; (ii)
that it will not, by charter amendment or through reorganization, consolidation,
merger, dissolution or sale of assets, or by any other voluntary act, avoid or
seek to avoid the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be required
(including complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. sec. 18a and regulations promulgated
thereunder necessary before the Option may be exercised, cooperating fully with
the Holder in preparing such applications or notices and providing such
information to the any federal or state regulatory authority as they may
require) in order to permit the Holder to exercise the Option and Issuer duly
and effectively to issue shares of Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights of the Holder
against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations hereunder.
6. Subject to Section 8 below, upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within ninety (90) days after such
Subsequent Triggering Event (whether on its own behalf or on behalf of any
subsequent holder of this Option (or part thereof) or any of the shares of
Common Stock issued pursuant hereto), promptly prepare, file and keep current a
shelf registration statement under the 1933 Act covering the resale of any
shares issued pursuant to this Option and the issuance of any shares issuable
pursuant to this Option to the extent then permitted under the rules,
regulations or policies of the SEC and, to the extent not so permitted, the
resale of such shares issuable pursuant to this Option. The Issuer shall use its
reasonable best efforts to cause such registration statement to become effective
and remain current in order to permit the sale or other disposition of this
Option and any shares of Common Stock issued upon total or partial exercise of
this Option ("OPTION
<PAGE>
SHARES") in accordance with any plan of disposition requested by Grantee. Issuer
will use its reasonable best efforts to cause such registration statement first
to become effective and then to remain effective for such period not in excess
of 180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by Grantee for
registration of the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of the Holder's Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by Issuer,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; and PROVIDED, HOWEVER, that after
any such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate; and
PROVIDED FURTHER, however, that if such reduction occurs, then the Issuer shall
file a registration statement for the balance as promptly as practical and no
reduction shall thereafter occur. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for the Issuer. Upon
receiving any request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), subject to Section 8 below, (i) following a request of the
Holder, delivered prior to an Exercise Termination Event, Issuer (or any
successor thereto) shall repurchase the Option from the Holder at a price (the
"OPTION REPURCHASE PRICE") equal to the amount by which (A) the market/offer
price (as defined below) exceeds (B) the Option Price, multiplied by the number
of shares for which this Option may then be exercised and (ii) at the request of
the owner of Option Shares from time to time (the "OWNER") delivered within
ninety (90) days after such occurrence (or such later period as provided in
Section 10), Issuer shall repurchase such number of the Option Shares from the
Owner as the Owner shall designate at a price (the "OPTION SHARE REPURCHASE
PRICE") equal to the market/offer price multiplied by the number of Option
Shares so designated. The term "market/offer price" shall mean the highest of
(i) the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or a substantial portion
of Issuer's assets, the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, divided by the number of shares of Common Stock of
Issuer outstanding at the time of such sale. In determining the market/offer
price, the value of consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the Holder or Owner,
as the case may be, and reasonably acceptable to the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise
its right to require Issuer to repurchase the Option and any Option Shares
pursuant to this Section 7 by surrendering for such purpose to Issuer, at its
principal office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the later to occur of (x) five business days after the
surrender of the Option and/or certificates
<PAGE>
representing Option Shares and the receipt of such notice or notices relating
thereto and (y) the time that is immediately prior to the occurrence of a
Repurchase Event, Issuer shall deliver or cause to be delivered to the Holder
the Option Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof that Issuer is not then prohibited under
applicable law and regulation from so delivering.
(c) For purposes of this Section 7, a Repurchase Event shall
be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition Transaction
pursuant to the proviso to Section 2 (b) (i) hereof or (ii) upon the acquisition
by any person of beneficial ownership of 50% or more of the then outstanding
shares of Common Stock. The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall not terminate
upon the occurrence of an Exercise Termination Event unless no Subsequent
Triggering Event shall have occurred prior to the occurrence of an Exercise
Termination Event.
8. (a) Notwithstanding the terms of Sections 6 and 7 to the
contrary, in the event that Grantee notifies Issuer, after Grantee becomes
entitled to do so under Section 6, that Grantee is exercising its right to
require Issuer to cause the Option Shares to be registered under the 1933 Act
pursuant to Section 6 above, at Issuer's option, Issuer may elect (i) to cause
the Option Shares to be registered under the 1933 Act pursuant to Section 6
above or (ii) to repurchase the Option or the Option Shares by paying to the
Grantee the Option Repurchase Price or Option Share Repurchase Price pursuant to
Section 7(b) notwithstanding the fact that a Repurchase Event shall not have
occurred as of the date Grantee requests that Issuer register the Option Shares.
To the extent that, prior to a Repurchase Event, the Grantee has requested, and
the Issuer has agreed, to cause the Option Shares to be registered under the
1933 Act pursuant to Section 6 above, the Grantee shall not be entitled to
exercise its rights to cause Issuer to repurchase the Option or the Option
Shares pursuant to Section 7 hereof.
(b) Notwithstanding the terms of Sections 6 and 7 to the
contrary, in the event that the Holder or the Owner, as the case may be,
notifies Issuer, after the Holder or the Owner, as the case may be, becomes
entitled to do so under Section 7, that such Holder or Owner is exercising its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to Section 7 hereof, at Issuer's option, Issuer may elect (i) to repurchase the
Option or the Option Shares by paying to such Holder or Owner the Option
Repurchase Price or Option Share Repurchase Price pursuant to Section 7(b), or
(ii) to cause the Option Shares to be registered under the 1933 Act pursuant to
Section 6 above. It is further understood and agreed that, to the extent that
the Issuer has elected pursuant to this Section 8 not to repurchase the Option
or the Option Shares, the Holder or the Owner, as the case may be, shall be
entitled to exercise its rights under Section 6 hereof without limitation
(except as otherwise set forth in such Section 6).
(c) It is understood and agreed by the parties hereto that
Grantee shall not be entitled to exercise its rights under both Sections 6 and 7
hereof.
9. (a) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined below) of more than
$1.5 million; PROVIDED THAT nothing in this sentence shall restrict any exercise
of the Option permitted hereby on any subsequent date..
(b) As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit (as defined below) determined as of the date of
such proposed exercise assuming that this Option were exercised on such date for
such number of shares and assuming that such shares, together with all other
Option Shares held by Grantee and its affiliates as of such date, were sold for
cash at the closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage commissions).
<PAGE>
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares (or any portion thereof) pursuant to
Section 7, less (y) the Grantee's purchase price for such Option Shares, (iii)
the net cash amounts received by Grantee pursuant to the sale of Option Shares
(or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less (y) the Grantee's purchase price of
such Option Shares, and (iv) any amounts received by Grantee on the transfer of
the Option (or any portion thereof) to any unaffiliated party.
10. The 90-day period for exercise of certain rights under
Sections 2, 6, 7 and 13 shall be extended: (i) to the extent necessary to obtain
all regulatory approvals for the exercise of such rights, and for the expiration
of all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within
ninety (90) days following such Subsequent Triggering Event (or such later
period as provided in Section 10).
14. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions
<PAGE>
contemplated by this Agreement, including without limitation making application
to list the shares of Common Stock issuable hereunder on the Nasdaq National
Stock Market upon official notice of issuance.
15. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief.
16. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
OPTICAL SECURITY GROUP, INC.
By: /s/ Richard H. Bard
------------------------------------
Name: Richard H. Bard
Title: Chief Executive Officer
APPLIED HOLOGRAPHICS PLC
By: /s/ Michael W. Angus
------------------------------------
Name: Michael W. Angus
Title: Finance Director
<PAGE>
Exhibit (c)(4)
FORM OF STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "AGREEMENT") is made and entered into
as of , 1999, by and between Applied Holographics plc, a public
company limited company incorporated and existing under the laws of England and
Wales ("BUYER") and (the "STOCKHOLDER").
WHEREAS, the Stockholder desires that Buyer, a newly-formed Colorado
corporation and wholly-owned subsidiary of Buyer ("NEWCO"), and Optical Security
Group, Inc., a Colorado corporation ("SELLER"), enter into an Agreement and Plan
of Merger, dated as of the date hereof (as the same may be amended or
supplemented, the "MERGER AGREEMENT") with respect to the merger of Newco with
Seller (the "MERGER"); and
WHEREAS, the Stockholder is executing this Agreement as an inducement
to Buyer to enter into and execute, and to cause Newco to enter into and
execute, the Merger Agreement;
NOW, THEREFORE, in consideration of the execution and delivery by Buyer
and Newco of the Merger Agreement and the mutual covenants, conditions and
agreements contained herein and therein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES. Stockholder represents and warrants
to Buyer as follows:
(a) The Stockholder is the record and beneficial owner of the
number of shares (the "STOCKHOLDER'S SHARES") of common stock, $0.05
par value of Seller ("SELLER COMMON STOCK") set forth below such
Stockholder's name on the signature page hereof. This Agreement has
been duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, Stockholder, enforceable in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws of general application respecting creditors' rights and by general
equitable principles.
(b) Neither the execution and delivery of this Agreement nor
the consummation by Stockholder of the transactions contemplated hereby
will result in a violation of, or a default under, or conflict with,
any contract, trust, commitment, agreement, understanding, arrangement
or restriction of any kind to which Stockholder is a party or bound or
to which the Stockholder's Shares are subject. If Stockholder is
married and the Stockholder's Shares constitute community property,
this Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, Stockholder's spouse,
enforceable against such person in accordance with its terms.
Consummation by Stockholder of the transactions contemplated hereby
will not violate, or require any consent, approval, or notice under,
any provision of any judgment, order, decree, statute, law, rule or
regulation applicable to Stockholder or the Stockholder's Shares.
(c) The Stockholder's Shares and the certificates representing
the Stockholder's Shares are now, and at all times during the term
hereof will be, held by the Stockholder, or by a nominee or custodian
for the benefit of Stockholder, free and clear of all liens, security
interests, proxies, voting trusts or voting agreements or any other
encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
(d) No broker, investment banker, financial adviser or other
person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of
Stockholder.
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(e) Stockholder understands and acknowledges that Buyer is
entering into, and causing Newco to enter into, the Merger Agreement in
reliance upon Stockholder's execution and delivery of this Agreement.
Stockholder acknowledges that the irrevocable proxy set forth in
Section 4 and the agreement to accept the cash offer made by Buyer
pursuant to the Offer, as described in Section 5, are granted in
consideration for the execution and delivery of the Merger Agreement by
Buyer and Newco.
2. VOTING AGREEMENTS. Stockholder agrees with, and covenants to, Buyer
as follows:
(a) At any meeting of stockholders of Seller called to vote
upon the Merger and the Merger Agreement or at any adjournment thereof
or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger and the Merger Agreement is sought
(the "STOCKHOLDERS' MEETING"), Stockholder shall vote (or cause to be
voted) the Stockholder's Shares in favor of the Merger, the execution
and delivery by Seller of the Merger Agreement, and the approval of the
terms thereof and each of the other transactions contemplated by the
Merger Agreement.
(b) While this Agreement shall be in effect, at any meeting of
stockholders of Seller or at any adjournment thereof or in any other
circumstances upon which their vote, consent or other approval is
sought, Stockholder shall vote (or cause to be voted) the Stockholder's
Shares against (i) any merger agreement or merger (other than the
Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of or by Seller or (ii) any amendment of
Seller's Articles of Organization or Bylaws or other proposal or
transaction involving Seller or any of its subsidiaries which amendment
or other proposal or transaction would in any manner impede, frustrate,
prevent or nullify the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement (each of the
foregoing in clause (i) or (ii) above, a "COMPETING TRANSACTION").
3. COVENANTS. Stockholder agrees with, and covenants to, Buyer that,
while this Agreement shall be in effect, Stockholder shall not (i) transfer
(which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Stockholder's Shares or any interest therein,
except pursuant to the Merger; (ii) enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of the
Stockholder's Shares or any interest therein; (iii) grant any proxy, power of
attorney or other authorization in or with respect to such shares, except for
this Agreement; (iv) deposit such shares into a voting trust or enter into a
voting agreement or arrangement with respect to such shares; (v) initiate,
solicit or request, or take any action to facilitate the making of, any offer or
proposal which constitutes or is reasonably likely to lead to an Acquisition
Proposal or Superior Proposal (as such terms are defined in the Merger
Agreement); or (vi) in the event of any unsolicited proposed Acquisition
Proposal or Superior Proposal, engage in negotiations with or discussions with,
or provide any information or data to, any person or entity (other than Buyer,
any of its affiliates or representatives) relating to any Acquisition Proposal
or Superior Proposal; PROVIDED, THAT Stockholder may transfer (as defined above)
any of the Stockholder's Shares to any other person or entity who is on the date
hereof, or to any family member of a person or to any charitable institution
which prior to the Stockholders Meeting and prior to such transfer becomes, a
party to this Agreement bound by all the obligations of "Stockholder" hereunder.
4. GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(a) Stockholder hereby irrevocably grants to, and appoints,
Buyer and David Tidmarsh, Chief Executive of Buyer, and Mike Angus,
Group Finance Director of Buyer, in their respective capacities as
officers of Buyer, and any individual who shall hereafter succeed to
any such office of Buyer, and each of them individually, Stockholder's
proxy and attorney-in-fact (with full power of substitution), for and
in the name, place and stead of Stockholder, to vote the Stockholder's
Shares, or grant a consent or approval in respect of the Stockholder's
Shares (i) in favor of the Merger, the execution and delivery of the
Merger Agreement and approval of the terms thereof and each of the
other transactions contemplated by the Merger Agreement, and (ii)
against any Competing Transaction.
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(b) Stockholder represents that any proxies heretofore given
in respect of the Stockholder's Shares are not irrevocable, and that
any such proxies are hereby revoked.
(c) Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4 is given in connection with the execution of
the Merger Agreement, that such irrevocable proxy is given to secure
the performance of the duties of Stockholder under this Agreement and
that such irrevocable proxy will continue in force and effect while
this Agreement is in effect. Stockholder hereby further affirms that
the irrevocable proxy is coupled with an interest sufficient in law to
support an irrevocable power and may under no circumstances be revoked.
Stockholder hereby ratifies and confirms all that such irrevocable
proxy may lawfully do or cause to be done by virtue hereof. Such
irrevocable proxy is executed and intended to be irrevocable in
accordance with the Colorado Business Corporation Act.
5. AGREEMENT TO TENDER STOCKHOLDER'S SHARES. Stockholder covenants and
agrees to promptly accept the all cash offer of $7.00 per share to purchase each
of Stockholder's Shares made by Buyer or Newco in accordance with the Offer and
Stockholder further agrees not to withdraw such acceptance, so long as either
(i) the holders of more than 50% of the outstanding shares of Seller Common
Stock have agreed to accept the cash offer in accordance with the Offer, or (ii)
neither Buyer nor Newco has terminated the Offer without the purchase by Buyer
or Newco of shares of Seller Common Stock or permitted the Offer to lapse in
accordance with its terms. For the avoidance of doubt, for purposes of
determining whether the condition in subclause (i) of this Section is satisfied,
the Stockholder's Shares shall be included in the shares, the holders of which
have accepted the cash offer in accordance with the Offer.
6. CERTAIN EVENTS. Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of any
or all of the Stockholder's Shares shall pass, whether by operation of law or
otherwise, including without limitation Stockholder's successors or assigns. In
the event of any stock split, stock dividend, merger, reorganization,
recapitalization or other change in the capital structure of Seller affecting
Seller Common Stock, or the acquisition of additional shares of Seller Common
Stock or other voting securities of Seller by Stockholder, the number of the
Stockholder's Shares subject to the terms of this Agreement shall be adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of Seller Common Stock or other voting securities of
Seller issued to or acquired by Stockholder.
7. LEGEND Stockholder agrees that at the request of Buyer, Stockholder
will place a legend, referring to this Agreement and in a form reasonably
satisfactory to Buyer, on the certificates representing such Stockholder's
Shares.
8. FURTHER ASSURANCES. Stockholder shall, upon request of Buyer,
execute and deliver any additional documents and take such further actions as
may reasonably be deemed by Buyer to be necessary or desirable to carry out the
provisions hereof and to vest the power to vote the Stockholder's Shares as
contemplated by Section 4 in Buyer and the other irrevocable proxies described
therein at the expense of Buyer.
9. TERMINATION. This Agreement, and all rights and obligations of the
parties hereunder, shall terminate upon the earlier of (a) termination of the
Merger Agreement in accordance with its terms or (b) upon consummation of the
Merger (as defined in the Merger Agreement).
10. ENFORCEMENT COSTS. If any party institutes an action for the
enforcement of this Agreement, the prevailing party shall be entitled to
reimbursement on demand of all costs and expenses of such action including
reasonable legal fees.
11. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the
<PAGE>
respective meanings assigned to them in the Merger Agreement.
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
deemed given if delivered personally or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified by like
notice): (i) if to Buyer, to the address provided in the Merger
Agreement; and (ii) if to Stockholder, to its address shown below its
signature on the last page hereof.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(d) This Agreement may be executed in two or more
counterparts, each of which shall be considered an original hereof and
one and the same agreement.
(e) This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado, regardless of the
laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise, by any of the parties without
the prior written consent of the other parties, except as expressly
contemplated by the proviso to Section 3(b). Any assignment in
violation of the foregoing shall be void.
(h) Stockholder agrees that irreparable damage would occur and
that Buyer would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Buyer shall be entitled to an injunction or
injunctions to prevent breaches by Stockholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any
court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto
(i) consents to submit such party to the personal jurisdiction of any
Federal court located in the State of Colorado or any State of Colorado
state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and (iii) agrees
that such party will not bring any action relating to this Agreement or
any of the transactions contemplated hereby in any court other than a
Federal court sitting in the State of Colorado or a Colorado state
court. The foregoing remedies are in addition to, and not in lieu of,
any payment required to be made by Seller pursuant to the terms of the
Merger Agreement.
(i) If any term, provision, covenant or restriction herein, or
the application thereof to any circumstance, shall, to any extent, be
held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any
way be affected, impaired or invalidated, and shall be enforced to the
fullest extent permitted by law.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in
writing and signed by such party.
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed and delivered
this Agreement as of the day and year first above written.
APPLIED HOLOGRAPHICS PLC
By:
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Name:
Title:
STOCKHOLDER:
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Name:
Address:
Number of Shares
Beneficially Owned:
