MERGER AGREEMENT
between
GAIAM, INC.,
and
REAL GOODS TRADING CORPORATION
dated as of
OCTOBER 13, 2000
</PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER 3
SECTION 1.1. Gaiam Subsidiary; Merger 4
SECTION 1.2. Conversion of Shares 5
SECTION 1.3. Exchange of Certificates 5
SECTION 1.4. Dissenting Shares 9
SECTION 1.5. Stock Options 10
Section 1.6. Transfer Taxes, etc 10
ARTICLE 2 The Surviving Corporation 10
SECTION 2.1. Articles of Incorporation 10
SECTION 2.2. By-laws 10
SECTION 2.3. Directors and Officers 10
SECTION 2.4. Corporate Name 10
SECTION 2.5. Director and Officer Liability 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF REAL GOODS 11
SECTION 3.1. Corporate Existence and Power 11
SECTION 3.2. Corporate Authorization 11
SECTION 3.3. Governmental Authorization 11
SECTION 3.4. Non-Contravention 11
SECTION 3.5. Capitalization 12
SECTION 3.6. Subsidiaries 12
SECTION 3.7. SEC Filings 13
SECTION 3.8. Consolidated Financial Statements 14
SECTION 3.9. Disclosure Documents 14
SECTION 3.10. Absence of Certain Changes 15
SECTION 3.11. Litigation; Compliance 16
SECTION 3.12. Taxes 17
SECTION 3.13. ERISA 18
SECTION 3.14. Permits 19
SECTION 3.15. Required Shareholder Vote 19
SECTION 3.16. Finders' Fees 19
SECTION 3.17. Environmental Matters 19
SECTION 3.18. Restrictions on Business Activities 19
SECTION 3.19. Property 20
SECTION 3.20. Interested Party Transactions 20
SECTION 3.21. Insurance 20
SECTION 3.22. Intellectual Property 21
SECTION 3.23. Material Contracts 21
SECTION 3.24. Board Recommendation 21
SECTION 3.25. Absence of Undisclosed Liabilities 22
SECTION 3.26. Tax Free Reorganization 22
SECTION 3.27. Guarantees 22
SECTION 3.28. Labor 22
SECTION 3.29. Full Disclosure 23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF GAIAM 23
SECTION 4.1. Corporate Existence and Power 23
SECTION 4.2. Corporate Authorization 23
SECTION 4.3. Governmental Authorization 23
SECTION 4.4. Non-Contravention 24
SECTION 4.5. Capitalization 24
SECTION 4.6. Subsidiaries 24
SECTION 4.7. SEC Filings 25
SECTION 4.8 Consolidated Financial Statements 25
SECTION 4.9. Disclosure Documents 26
SECTION 4.10. Absence of Certain Changes 26
SECTION 4.11. Litigation; Compliance 27
SECTION 4.12. Taxes 27
SECTION 4.13. ERISA 28
SECTION 4.14. Permits 29
SECTION 4.15. Finders' Fees 29
SECTION 4.16. Environmental Matters 29
SECTION 4.17. Restrictions on Business Activities 29
SECTION 4.18. Property 30
SECTION 4.19. Interested Party Transactions 30
SECTION 4.20. Insurance 30
SECTION 4.21. Intellectual Property 30
SECTION 4.22. Material Contracts 31
SECTION 4.23. Board Approval 31
SECTION 4.24. Absence of Undisclosed Liabilities 31
SECTION 4.25. Tax Free Reorganization 32
SECTION 4.26. Labor Matters 32
SECTION 4.27. Full Disclosure 32
ARTICLE 5 COVENANTS OF REAL GOODS AND GAIAM 33
SECTION 5.1. Affirmative Covenants of Real Goods 33
SECTION 5.2. Negative Covenants of Real Goods 33
SECTION 5.3. No Solicitation 35
SECTION 5.4. Settlement of Certain Claims 36
SECTION 5.5. Antitakeover Statutes 36
SECTION 5.6. Covenants of Gaiam 37
SECTION 5.7. Certain Employee Matters 37
ARTICLE 6 COVENANTS OF EACH PARTY 38
SECTION 6.1. Preparation of the Registration Statement;
Shareholder Meeting 38
SECTION 6.2. Letters and Consents of Real Goods'
Accountants 39
SECTION 6.3. Letters and Consents of Gaiam's Accountants 39
SECTION 6.4. Reasonable Efforts 39
SECTION 6.5. Public Announcements 40
SECTION 6.6. Notification of Certain Matters 41
SECTION 6.7. Access to Information 41
SECTION 6.8. Nasdaq Listing 41
SECTION 6.9. Rule 145 41
SECTION 6.10. Fairness Opinion 41
ARTICLE 7 CONDITIONS 42
SECTION 7.1. Conditions to the Obligations of Each Party 43
SECTION 7.2. Conditions to the Obligations of Real Goods 43
SECTION 7.3. Conditions to the Obligations of Gaiam 44
ARTICLE 8 TERMINATION 45
SECTION 8.1. Termination 45
SECTION 8.2. Effect of Termination 47
SECTION 8.3. Certain Fees 47
ARTICLE 9 MISCELLANEOUS 48
SECTION 9.1. Notices 48
SECTION 9.2. Amendments; No Waivers 49
SECTION 9.3. Rules of Construction 49
SECTION 9.4. Successors and Assigns 49
SECTION 9.5. Governing Law; etc 49
SECTION 9.6. Counterparts; Effectiveness 50
SECTION 9.7. Parties in Interest 50
SECTION 9.8. Severability 50
SECTION 9.9. Entire Agreement 51
SECTION 9.10. Survival of Representations and Warranties 51
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EXHIBITS
Exhibit A - Rule 145 Letter
</PAGE>
MERGER AGREEMENT
MERGER AGREEMENT dated as of October 13, 2000 between
GAIAM,INC., a Colorado corporation ("GAIAM"), and REAL GOODS
TRADING CORPORATION, a California corporation ("REAL GOODS").
Certain capitalized terms used in this Agreement shall have the
meanings assigned to them in Annex I.
WHEREAS, the Boards of Directors of each of Real Goods and
Gaiam have determined to engage in the transactions contemplated
by this Agreement, pursuant to which, among other things, at the
Effective Time, (i) a wholly owned Subsidiary to be formed by
Gaiam ("GAIAM SUBSIDIARY") shall merge with and into Real Goods
(the "MERGER"), and (ii) each share of common stock, without par
value, of Real Goods ("REAL GOODS COMMON SHARES") (except for
Real Goods Common Shares owned by Real Goods and Real Goods
Common Shares as to which appraisal rights have been perfected)
shall be converted, as set forth in this Agreement, into the
right to receive, in exchange for ten such Real Goods Common
Shares, one share of the class A common stock of Gaiam (the
"GAIAM CLASS A");
WHEREAS, the Board of Directors of Gaiam has approved this
Agreement and the Merger contemplated by this Agreement;
WHEREAS, the Board of Directors of Real Goods has approved
this Agreement and the Merger contemplated by this Agreement and
resolved to recommend that shareholders of Real Goods approve and
adopt this Agreement and the Merger;
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a tax free reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986,
as amended (the "CODE");
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for under the purchase method of
accounting; and
WHEREAS, Real Goods and Gaiam desire to make certain
representations, warranties, covenants and agreements in
connection with the transactions contemplated by this Agreement
and also to prescribe certain conditions to the transactions
contemplated by this Agreement; and
WHEREAS, as inducements to Real Goods and Gaiam entering
into this Agreement and incurring the obligations set forth
herein, and contemporaneously with the execution and delivery of
this Agreement, certain shareholders of Real Goods have agreed to
enter into separate Voting Agreements pursuant to which, among
other things, such shareholders will vote all of their Real Goods
Common Shares in favor of this Agreement and the Merger;
NOW, THEREFORE, in consideration of the foregoing and the
warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
</PAGE>
ARTICLE 1
THE MERGER
SECTION 1.1. GAIAM SUBSIDIARY; MERGER.
(a) At the Effective Time, Gaiam Subsidiary shall bemerged
(the "MERGER") with and into Real Goods in accordance with the
California General Corporation Law (the "CALIFORNIA
LAW"),whereupon the separate existence of Gaiam Subsidiary shall
cease, and Real Goods shall be the surviving corporation (the
"SURVIVING CORPORATION").
(b) The Closing shall take place at the offices of Bartlit
Beck Herman Palenchar & Scott in Denver, Colorado at 10:00 a.m.
on the second business day following the fulfillment or waiver of
each of the conditions precedent to the Merger set forth in
Article 7, or at such other place, time and date as the parties
hereto may agree.
(c) At the Closing, upon fulfillment or waiver of the
conditions precedent to the Merger set forth in Article 7, the
parties shall cause a Certificate of Merger to be filed with the
Secretary of State of the State of California and a tax clearance
certificate, in such form as required by, and duly executed in
accordance with, the relevant provisions of the California Law
using the procedures permitted in Section 103 of the California
Law. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State
of the State of California or at such later time as Gaiam and
Real Goods agree to specify in the Certificate of Merger (the
"EFFECTIVE TIME").
(d) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions,
disabilities and duties of Real Goods, all as provided under
California Law.
(e) The Surviving Corporation may, at any time after
the Effective Time, take any action (including the execution and
delivery of any document) in the name and on behalf of Real Goods
or Gaiam Subsidiary in order to carry out and effectuate the
transactions contemplated by this Agreement.
(f) Gaiam hereby represents that its Board of Directors
has (x) unanimously determined that this Agreement and the Merger
are fair to and in the best interests of Gaiam's shareholders and
(y) approved this Agreement and the Merger, which approval
satisfies in full the requirements of the California Law that the
Agreement be approved by Gaiam's Board of Directors. Real Goods
hereby represents that its Board of Directors has (i) unanimously
determined that this Agreement and the Merger are fair to and in
the best interests of Real Goods shareholders, (ii) approved this
Agreement and the Merger, and (iii) resolved to recommend
approval and adoption of this Agreement and the Merger by its
shareholders.
SECTION 1.2. CONVERSION OF SHARES. At the Effective Time:
(a) each Real Goods Common Share held by Real Goods as
treasury stock shall be canceled and no payment shall be made
with respect thereto; and
(b) each ten Real Goods Common Shares outstanding
immediately prior to the Effective Time shall (except as
otherwise provided in Section 1.2(a) or as provided in Section
1.4 with respect to Real Goods Common Shares as to which
appraisal rights have been perfected) be cancelled and
extinguished and be converted into and become a right to receive
one (the "EXCHANGE RATIO") share of Gaiam Class A in exchange for
such Real Goods Common Shares; provided that the Exchange Ratio
may be further adjusted subject to the terms of Sections 1.3(k),
8.1(l) or 8.1(m). In addition to the shares of Gaiam Class A,
following the Closing Gaiam shall provide to each Real Goods
shareholder a gift certificate to purchase Gaiam's products.
Each shareholder of Real Goods shall receive a $1 gift
certificate for each Real Goods Common Share exchanged pursuant
to this Section 1.2(b), up to a maximum of $100 for such
shareholder. Such gift certificate along with the shares of
Gaiam Class A issued to Real Goods shareholders shall be referred
to as the "MERGER CONSIDERATION"; and
(c) Each issued and outstanding share of the common stock
of Gaiam Subsidiary shall be converted into one fully paid and
nonassessable share of common stock of the Surviving Corporation.
SECTION 1.3. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. From and after the Effective
Time, from time to time Gaiam shall make available to American
Securities Transfer & Trust, Inc. or such other bank or trust
company designated by Gaiam (the "EXCHANGE AGENT"), for the
benefit of the holders of Real Goods Common Shares, for exchange
in accordance with this Article 1 through the Exchange Agent, (i)
certificates evidencing a sufficient number of shares of Gaiam
Class A and (ii) a sufficient number of gift certificates
described in Section 1.2, all issuable to holders of Real Goods
Common Shares, to satisfy the requirements set forth in Section
1.2 relating to Merger Consideration (such shares of Gaiam Class
A, gift certificates and any cash deposited with the Exchange
Agent relating to Additional Payments, if any, being hereinafter
referred to as the "EXCHANGE FUND"). As promptly as practicable
after the Effective Time, Gaiam shall cause the Exchange Agent to
deliver the Merger Consideration and Additional Payments, if any,
contemplated to be issued pursuant to Section 1.2 out of the
Exchange Fund in accordance with the procedures specified in this
Section 1.3. Except as contemplated by Section 1.3(g) hereof,
the Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. Promptly after the Effective
Time, Gaiam shall cause the Exchange Agent to mail to each record
holder of a certificate or certificates which immediately prior
to the Effective Time represented outstanding Real Goods Common
Shares (the "CERTIFICATES") (i) a letter of transmittal (which
shall be in customary form and shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger
Consideration.
(c) EXCHANGE OF CERTIFICATES. Upon surrender to the
Exchange Agent of a Certificate for cancellation, together with a
properly completed letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such
other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that
number of whole shares of Gaiam Class A, if any, constituting the
Merger Consideration to which such holder is entitled pursuant to
this Article 1 (including any dividends or other distributions to
which such holder is entitled pursuant to Section 1.3(d)
(together, the "ADDITIONAL PAYMENTS")), and the Certificate so
surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Real Goods Common Shares which is not
registered in the transfer records of Real Goods, the applicable
Merger Consideration and Additional Payments, if any, may be
issued to a transferee if the Certificate representing such Real
Goods Common Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this
Section 1.3, each Certificate shall be deemed at all times after
the Effective Time to represent only the right to receive upon
such surrender the applicable Merger Consideration with respect
to the Real Goods Common Shares formerly represented thereby and
Additional Payments, if any.
(d) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED
CERTIFICATES. No dividends or other distributions declared or
made after the Effective Time with respect to Gaiam Class A with
a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to Gaiam
Class A, until the holder of such Certificate shall surrender
such Certificate. Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates
representing whole shares of Gaiam Class A issued in exchange
therefor, without interest, (i) promptly, the amount of dividends
or other distributions with a record date after the Effective
Time and theretofore paid with respect to such whole shares of
Gaiam Class A, and (ii) at the appropriate payment date, the
amount of dividends or other distributions, with a record date
after the Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such
whole shares of Gaiam Class A. After the Effective Time, each
outstanding Certificate which theretofore represented Real Goods
Common Shares shall, until surrendered for exchange in accordance
with this Section 1.3, be deemed for all purposes to evidence the
right to receive the Merger Consideration into which the Real
Goods Common Shares (which, prior to the Effective Time, were
represented thereby) shall have been so converted.
(e) NO FURTHER RIGHTS IN REAL GOODS COMMON SHARES.
At the Effective Time all outstanding Real Goods Common Shares,
by virtue of the Merger and without any action on the part of the
holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of
a Certificate shall thereafter cease to have any rights with
respect to such Real Goods Common Shares, except the right to
receive the Merger Consideration for such Real Goods Common
Shares. All Gaiam Class A and gift certificates constituting
Merger Consideration issued upon conversion of the Real Goods
Common Shares in accordance with the terms hereof shall be deemed
to be validly issued, fully paid and nonassessable and all such
cash paid pursuant to Section 1.3(d) or (f) shall be deemed to
have been issued or paid, as the case may be, in full
satisfaction of all rights pertaining to such Real Goods Common
Shares.
(f) NO FRACTIONAL SHARES. No fractional shares of
Gaiam Class A shall be issued in the Merger. In lieu of any such
fractional shares, each holder of Real Goods Common Shares who
holds a number of Real Goods Common Shares that is not a whole
multiple of 10, will be entitled to receive, in addition to the
gift certificates referred to in Section 1.2(b), $1 in additional
gift certificates for each $1 (rounded up to the nearest whole
dollar) in market value of fractional Gaiam Class A shares to
which such holder would otherwise have been entitled had
fractional shares been issued (based on the closing price of a
share of Gaiam Class A on the Nasdaq National Market on the date
on which the Effective Time occurs as reported in THE WALL STREET
JOURNAL). For example, if the closing price of Gaiam Class A is
$20, a holder of 25 Real Goods Common Shares will receive 2
shares of Gaiam Class A based upon the Exchange Ratio and a $10
gift certificate in exchange for the remaining 5 Real Goods
Common Shares and in lieu of fractional shares (in addition to
the $25 gift certificate such holder will also receive as part of
the Merger Consideration). The parties acknowledge that payment
of the gift certificates in lieu of issuing fractional shares was
not separately bargained for consideration but merely represents
a mechanical rounding for purposes of simplifying the corporate
and accounting complexities which would otherwise be caused by
the issuance of fractional shares.
(g) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of Real
Goods Common Shares for one year after the Effective Time shall
be delivered to Gaiam (who shall thereafter act as Exchange
Agent), upon demand, and any holders of Real Goods Common Shares
who have not theretofore complied with this Article 1 shall
thereafter look only to Gaiam for the applicable Merger
Consideration and any Additional Payments to which they are
entitled. To the extent permitted by applicable law, any portion
of the Exchange Fund remaining unclaimed by holders of Real Goods
Common Shares as of a date which is immediately prior to such
time as such amounts would otherwise escheat to or become
property of any government entity shall, on the first anniversary
of the Effective Date and to the extent permitted by applicable
law, become the property of Gaiam free and clear of any claims or
interest of any person previously entitled thereto.
(h) NO LIABILITY. None of the Exchange Agent or Gaiam
shall be liable to any holder of Certificates for any shares of
Gaiam Class A (or dividends or distributions with respect
thereto), or cash delivered to a public official pursuant to any
abandoned property, escheat or similar law.
(i) WITHHOLDING RIGHTS. Gaiam shall be entitled to deduct
and withhold from the consideration otherwise payable pursuant to
this Agreement to any holder of Certificates such amounts as it
is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by
Gaiam, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the holder of the
Certificates in respect of which such deduction and withholding
was made by Gaiam.
(j) LOST CERTIFICATES. 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, if required by Gaiam, the posting by
such person of a bond, in such reasonable amount as Gaiam may
direct, as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed Certificate
the applicable Merger Consideration and Additional Payments, if
any.
(k) ANTI-DILUTION. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of
securities convertible into Real Goods Common Shares or Gaiam
Class A, as applicable), extraordinary dividend, reorganization,
recapitalization or any other like change with respect to Real
Goods Common Shares or Gaiam Class A occurring after the date
hereof and prior to the Effective Time. References to the
Exchange Ratio elsewhere in this Agreement shall be deemed to
refer to the Exchange Ratio as it may have been adjusted pursuant
to this Section 1.3(k).
(l) STOCK TRANSFER BOOKS. At the Effective Time, the
stock transfer books of Real Goods shall be closed and there
shall be no further registration of transfers of Real Goods
Common Shares thereafter on the records of Real Goods. On or
after the Effective Time, any Certificates presented to the
Exchange Agent or Gaiam for any reason shall be converted into
the applicable Merger Consideration and Additional Payments, if
any.
(m) APPRAISAL RIGHTS. Any Merger Consideration made
available to the Exchange Agent pursuant to this Section 1.3 to
pay for Real Goods Common Shares for which appraisal rights have
been perfected shall be returned to Gaiam upon its demand.
(n) REASONABLE ACTIONS. Real Goods and Gaiam shall use
all reasonable efforts to take all such action as may be
necessary or appropriate in order to effectuate the Merger as
promptly as possible. If, at any time after the Effective Time,
any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest Gaiam with full right,
title and possession to all assets, property, rights, privileges,
immunities, powers and franchises of Real Goods, the officers and
directors of Gaiam are fully authorized in the name of Real Goods
or otherwise to take, and shall take, all such action.
SECTION 1.4. DISSENTING SHARES. Notwithstanding Section
1.2, Real Goods Common Shares outstanding immediately prior to
the Effective Time and held by a holder who has not voted in
favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Real Goods Common Shares in
accordance with California Law ("DISSENTING SHARES") shall not be
converted into a right to receive the Merger Consideration,
unless such holder fails to perfect or withdraws or otherwise
loses its right to appraisal or it is determined that such holder
does not have appraisal rights in accordance with California Law.
If after the Effective Time such holder fails to perfect or
withdraws or loses its right to appraisal, or if it is determined
that such holder does not have an appraisal right, such Real
Goods Common Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive in
exchange for each Real Goods Common Share the Merger
Consideration.
SECTION 1.5. STOCK OPTIONS. At the Effective Time, any
options to purchase and Real Goods Common Shares or any other
securities of Real Goods shall be canceled and extinguished and
of no further force or effect and no payment shall be made with
respect thereto, except to the extent required by Real Goods
stock option plans as in effect on the date of this Agreement.
Any stock option plan or other plan pursuant to which Real Goods
Common Shares or any other options, warrants or convertible
securities exercisable for or convertible into securities of Real
Goods may be issued or granted shall also be canceled and
extinguished and of no further force or effect.
SECTION 1.6. TRANSFER TAXES, ETC. Except as set forth in
Section 1.3, the Surviving Corporation shall bear and be
responsible for the payment of all transfer, stamp, documentary,
sales, use, registration and other similar Taxes (but excluding
any federal, state, or local taxes measured by the income of the
Person responsible for paying such Taxes) incurred in connection
with the exchange of Real Goods Common Shares for the Merger
Consideration.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1. ARTICLES OF INCORPORATION. At the Effective
Time, the articles of incorporation of Gaiam Subsidiary shall be
the articles of incorporation of the Surviving Corporation until
thereafter amended in accordance with applicable law.
SECTION 2.2. BY-LAWS. The by-laws Of Gaiam Subsidiary in
Effect at the Effective Time shall be the bylaws of the Surviving
Corporation until amended in accordance with applicable law.
SECTION 2.3. DIRECTORS AND OFFICERS. From and after the
Effective Time, the directors and officers of Gaiam Subsidiary
shall be the directors and officers of the Surviving Corporation.
SECTION 2.4. CORPORATE NAME. From and after the Effective
Time, the name of the Surviving Corporation shall be Real Goods
Trading Corporation.
SECTION 2.5. DIRECTOR AND OFFICER LIABILITY. The Surviving
Corporation will comply with the indemnification agreements
entered into by Real Goods and its directors and officers;
provided that any new agreement or change, amendment or waiver to
any such existing agreement after the date of this Agreement
shall require consent of Gaiam.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF REAL GOODS
Real Goods Hereby represents and warrants to Gaiam as
follows:
SECTION 3.1. CORPORATE EXISTENCE AND POWER. Real Goods is
a corporation duly incorporated, validly existing and in good
standing under the laws of the State of California, and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted. Real Goods is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased
by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a
Real Goods Material Adverse Effect.
SECTION 3.2. CORPORATE AUTHORIZATION. The execution,
delivery and performance by Real Goods of this Agreement and the
consummation by Real Goods of the transactions contemplated by
this Agreement are within Real Goods' corporate powers and,
except for any required approval by Real Goods' shareholders in
connection with the consummation of the Merger, have been duly
authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of Real Goods,
enforceable against Real Goods in accordance with its terms,
subject to applicable bankruptcy, insolvency or other similar
laws relating to or affecting the enforcement of creditors'
rights generally and to legal principles of general applicability
governing the application and availability of equitable remedies.
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. The execution,
delivery and performance by Real Goods of this Agreement and the
consummation of the transactions contemplated by this Agreement
by Real Goods require no action or waiting period by or in
respect of, or filing with, any governmental body, agency,
official or authority, other than (a) the filing of a certificate
of merger and a tax clearance certificate in accordance with the
California Law; (b) compliance with any applicable requirements
of the Securities Act, the Exchange Act or any Blue Sky Laws; and
(c) compliance with those Laws, Regulations and Orders
noncompliance with which would not reasonably be expected to have
a Real Goods Material Adverse Effect or to prevent, impair or
result in significant delay of the consummation of the Merger.
Without limiting the first sentence of this Section 3.3, the
execution, delivery and performance by Real Goods of this
Agreement and the consummation of the transactions contemplated
by this Agreement by Real Goods require no action or waiting
period by or in respect of, or filing with, any governmental
body, agency, official or authority in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act").
SECTION 3.4. NON-CONTRAVENTION. Except as set forth in
Section 3.4 of the Disclosure Schedule, the execution, delivery
and performance by Real Goods of this Agreement and the
consummation by Real Goods of the transactions contemplated by
this Agreement do not and will not (a) contravene or conflict
with the articles of incorporation or bylaws of Real Goods or (b)
assuming effectuation of all filings and registrations with, the
termination or expiration of any applicable waiting periods
imposed by, and receipt of all Permits and Orders of,
Governmental Authorities indicated as required in Section 3.3,
(i) constitute a default under or give rise to (A) a right of
termination, cancellation, acceleration, amendment or
modification with respect to Real Goods or any of its
Subsidiaries, (B) a loss of any benefit to which Real Goods or
any of its Subsidiaries is entitled or (C) an increase in the
obligations of Real Goods or any of its Subsidiaries, in each
case, under any provision of any Material Contract of Real Goods
or any of its Subsidiaries which, in any such case, individually
or in the aggregate, would have a Real Goods Material Adverse
Effect, (ii) result in the creation or imposition of any material
Lien (other than any Permitted Encumbrances) on any material
asset of Real Goods or any of its Subsidiaries or (iii) violate
or cause a breach under any Law, Regulation, Order or Permit
applicable to Real Goods, its Subsidiaries and their respective
assets except for any such matters that would not reasonably be
expected, individually or in the aggregate, to have a Real Goods
Material Adverse Effect.
SECTION 3.5. CAPITALIZATION. THE AUTHORIZED CAPITAL STOCK
OF Real Goods consists of 10,000,000 authorized Real Goods Common
Shares. As of the date of this Agreement, there were issued and
outstanding 4,814,242 Real Goods Common Shares and options to
purchase an aggregate of 1,147,950 Real Goods Common Shares. All
outstanding shares of capital stock of Real Goods have been duly
authorized and validly issued and are fully paid and
nonassessable. Section 3.5 of the Disclosure Schedule sets forth
all outstanding options, warrants or other rights, whether or not
exercisable, to acquire any Real Goods Common Shares or any other
equitable interest in Real Goods, and, in the case of outstanding
options, identifies the Real Goods stock plans or other Real
Goods benefit plans under which such options were granted.
Except as set forth in Section 3.5 of the Disclosure Schedule and
the transactions contemplated by this Agreement, neither Real
Goods nor any of its Subsidiaries is a party to any agreement or
understanding, oral or written, which (a) grants an option,
warrant or other right to acquire Real Goods Common Share or any
other equitable interest in Real Goods, (b) grants a right of
first refusal or other such similar right upon the sale of Real
Goods Common Shares, or (c) restricts or affects the voting
rights of Real Goods Common Shares. There is no liability for
dividends declared or accumulated but unpaid with respect to any
Real Goods Common Shares. There are no outstanding obligations
of Real Goods or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Real Goods Common Shares.
SECTION 3.6. SUBSIDIARIES. (a) Section 3.6 of the
Disclosure Schedule sets forth, with respect to Real Goods and
each of its Subsidiaries, each of the jurisdictions in which they
are incorporated or qualified or otherwise licensed as a foreign
corporation to do business. Each of Real Goods' Subsidiaries is
a corporation or other legal entity duly incorporated or
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has all
corporate or entity powers and all governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted, except to the extent the failure to
have such licenses, authorizations, consents and approvals would
not, individually or in the aggregate, have a Real Goods Material
Adverse Effect, and is duly qualified to do business as a foreign
corporation or entity and is in good standing in each
jurisdiction where the character of the property owned or leased
by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a
Real Goods Material Adverse Effect.
(b) The only Subsidiaries of Real Goods are those
listed in Section 3.6 of the Disclosure Schedule. Real Goods
owns all of the issued and outstanding shares of capital stock
of, or other equity interests in, each of the Subsidiaries of
Real Goods and such shares and interests have been duly
authorized and are validly issued, and, with respect to capital
stock, are fully paid and nonassessable, and were not issued in
violation of any preemptive or similar rights of any past or
present equity holder of such Subsidiary.
SECTION 3.7. SEC FILINGS. Real Goods has Filed all required
forms, reports and documents with the SEC since January 1, 1997,
including, (i) its Annual Report on Form 10-K for the fiscal year
ended March 31, 2000 (the "REAL GOODS 10-K"), (ii) the proxy
statement relating to Real Goods' 1999 annual meeting of
shareholders, (iii) its Quarterly Report on Form 10-Q for the
fiscal quarter ended June 24, 2000 (the "REAL GOODS 10-Q") and,
(iv) all other reports or registration statements filed by Real
Goods with the SEC since January 1, 1997 (collectively, the "REAL
GOODS SEC RREPORTS") with the SEC, all of which complied when
filed in all material respects with all applicable requirements
of the Securities Act and the Exchange Act. The audited
consolidated financial statements and unaudited consolidated
interim financial statements of Real Goods and its subsidiaries
included or incorporated by reference in such Real Goods SEC
Reports were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and present fairly, in all material respects, the
financial position and results of operations and cash flows of
Real Goods and its Subsidiaries on a consolidated basis at the
respective dates and for the respective periods indicated (and in
the case of all such financial statements that are interim
financial statements, contain all adjustments so to present
fairly). Except to the extent that information contained in any
Real Goods SEC Report was revised or superseded by a later filed
Real Goods SEC Report, none of the Real Goods SEC Reports
contained any untrue statement of a material fact or omitted 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.
Real Goods has provided to Gaiam copies of all other
correspondence sent to or received from the SEC by Real Goods and
its Subsidiaries since January 1, 1997 (other than cover
letters).
SECTION 3.8. CONSOLIDATED FINANCIAL STATEMENTS. Real Goods
has provided to Gaiam true and complete copies of the unaudited
consolidated balance sheet of Real Goods at June 24, 2000 (the
"REAL GOODS BALANCE SHEET") and the unaudited consolidated
statements of income, shareholders' equity and cash flow of Real
Goods for the period from March 31 through June 24, 2000
(collectively, the "REAL GOODS MOST RECENT FINANCIALS"). The
Real Goods Most Recent Financials fairly present, in all material
respects, the financial position of Real Goods at June 24, 2000,
and the results of operations of Real Goods for the period then
ended, and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis,
except that such financial statements will not include any
footnote disclosures that might otherwise be required to be
included by generally accepted accounting principles, and shall
also be subject to normal non-recurring year-end audit
adjustments. The Real Goods Balance Sheet reflects all
liabilities of Real Goods, whether absolute, accrued or
contingent, as of the date thereof of the type required to be
reflected or disclosed on a balance sheet prepared in accordance
with generally accepted accounting principles (applied in a
manner consistent with the notes of the financial statements
included in Real Goods 10-K).
SECTION 3.9. DISCLOSURE DOCUMENTS. None of the information
supplied or to be supplied by or on behalf of Real Goods for
inclusion or incorporation by reference in the registration
statement to be filed with the SEC by Gaiam in connection with
the issuance of shares of Gaiam Class A in the Merger (the
"REGISTRATION STATEMENT") will, at the time the Registration
Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. None of the information supplied
or to be supplied by or on behalf of Real Goods for inclusion or
incorporation by reference in the proxy statement/prospectus, in
definitive form, relating to the Real Goods Shareholder Meeting
(as hereinafter defined), or in the related proxy and notice of
meeting, or soliciting material used in connection therewith
(referred to herein collectively as the "PROXY STATEMENT") will,
at the dates mailed to shareholders and at the time of the Real
Goods Shareholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. Real Goods will promptly inform Gaiam of the
happening of any event prior to the Effective Time which would
render such information regarding Real Goods incorrect in any
material respect or require the amendment of the Proxy Statement.
The Proxy Statement (except for information relating solely to
Gaiam and Gaiam Subsidiary) will comply as to form in all
material respects with the provisions of the Securities Act and
the Exchange Act.
SECTION 3.10. ABSENCE OF CERTAIN CHANGES. Except for this
Agreement and except as set forth in Section 3.10 of the
Disclosure Schedule, since the date of the Real Goods Balance
Sheet, Real Goods and its Subsidiaries have conducted their
business in all material respects in the ordinary course
consistent with past practice and there has not been:
(a) any event, occurrence or development (including the
commencement of any action, suit or proceedings or, to the
Knowledge of Real Goods, any investigation) of a state of
circumstances or facts which, individually or together with other
similar events, has had or reasonably would be expected to have a
Real Goods Material Adverse Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of Real Goods, or any repurchase, redemption (other
than the receipt of Real Goods Common Shares in payment of the
exercise price of employee or director stock options and Taxes in
respect of such exercise) or other acquisition by Real Goods or
any of its Subsidiaries of any outstanding shares of capital
stock or other securities of, or other ownership interests in,
Real Goods or any of its Subsidiaries;
(c) any amendment of any material term of any
outstanding security of Real Goods or any of its Subsidiaries
other than amendments to the terms of the existing credit
facilities of Real Goods or its Subsidiaries or borrowings under
such facilities;
(d) any incurrence, assumption or guarantee by Real
Goods or any of its Subsidiaries of any indebtedness for borrowed
money other than in the ordinary course of business and in
amounts and on terms consistent with past practices;
(e) any creation or assumption by Real Goods or any of
its Subsidiaries of any Lien (other than Permitted Encumbrances)
on any material asset of Real Goods or any of its Subsidiaries
other than in the ordinary course of business consistent with
past practices;
(f) any making of any loan, advance or capital
contribution to or investment in any Person other than loans,
advances or capital contributions to or investments in
wholly-owned Subsidiaries made in the ordinary course of business
consistent with past practices;
(g) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or
assets of Real Goods or any of its Subsidiaries which,
individually or in the aggregate, has had or would reasonably be
expected to have a Real Goods Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by Real Goods or any of its Subsidiaries
relating to its assets or business (including the acquisition or
disposition of any assets) or any relinquishment by Real Goods or
any of its Subsidiaries of any contract or other right, in either
case, material to Real Goods and its Subsidiaries taken as a
whole, other than transactions and commitments in the ordinary
course of business consistent with past practice and those
contemplated by this Agreement;
(i) any change in any method of accounting or accounting
practice by Real Goods or any of its Subsidiaries, whether or not
any such change is required by reason of a concurrent change in
generally accepted accounting principles;
(j) any (i) grant of any severance or termination pay
to any director, officer or employee of Real Goods or any of its
Subsidiaries, (ii) entering into of any employment, deferred
compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer or employee
of Real Goods or any of its Subsidiaries, (iii) increase in
benefits payable under any existing severance or termination pay
policies or employment agreements or (iv) increase in
compensation, bonus or other benefits payable to directors,
officers or employees of Real Goods or any of its Subsidiaries
except for such grants, payments, increases or changes in the
ordinary course of business consistent with past practice; or
(k) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of Real Goods or
any of its Subsidiaries, which employees were not subject to a
collective bargaining agreement at the date of the Real Goods
Balance Sheet, or any lockouts, strikes, slowdowns, work
stoppages or threats thereof by or with respect to such
employees, which in any such case would reasonably be expected to
have a Real Goods Material Adverse Effect.
During the period from June 24, 2000 to the date of this
Agreement, neither Real Goods nor any of its Subsidiaries has
engaged in any conduct that is proscribed during the period from
the date of this Agreement to the Effective Time by Section 5.3
or agreed in writing during such period prior to the date of this
Agreement to engage in any such conduct.
SECTION 3.11. LITIGATION; COMPLIANCE.
Except as set forth in Section 3.11 of the Disclosure Schedule:
(a) There is no action, suit or proceeding pending
against, or (to the Knowledge of Real Goods) threatened against
or affecting, or (to the Knowledge of Real Goods) any pending
investigation against, Real Goods or any of its Subsidiaries or
any of their respective properties before any court or arbitrator
or any governmental body, agency or official which would
reasonably be expected, individually or in the aggregate, to have
a Real Goods Material Adverse Effect or which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay
the Merger or any of the other transactions contemplated by this
Agreement.
(b) Real Goods and its Subsidiaries are in substantial
compliance with all applicable Laws and Regulations and are not
in default with respect to any Order applicable to Real Goods or
any of its Subsidiaries, except such events of noncompliance or
defaults that, individually or in the aggregate, would not
reasonably be expected to have a Real Goods Material Adverse
Effect.
SECTION 3.12. TAXES. (a) Real Goods and its Subsidiaries
have timely filed all required Tax Returns and such Tax Returns
are true, complete and correct, and Real Goods and its
Subsidiaries have timely paid and discharged all Taxes due in
connection with or with respect to the periods or transactions
covered by such Tax Returns and have paid all other Taxes as are
due, except such as are being contested in good faith by
appropriate proceedings (to the extent that any such proceedings
are required) and there are no other Taxes that would be due if
asserted by a taxing authority, except Taxes with respect to
which Real Goods is maintaining reserves to the extent required
by generally accepted accounting principles, except where the
failure of any of the foregoing to be true would not,
individually or in the aggregate, reasonably be expected to have
a Real Goods Material Adverse Effect. Except as does not involve
or would not result in liability to Real Goods or any of its
Subsidiaries that would reasonably be expected to have a Real
Goods Material Adverse Effect, (i) there are no Tax Liens on any
assets of Real Goods or any of its Subsidiaries (other than
Permitted Encumbrances); and (ii) there is no written claim
against Real Goods or any of its Subsidiaries for any Taxes, and
no assessment, deficiency or adjustment has been asserted or
proposed with respect to any Tax Return. The accruals and
reserves (including deferred taxes) reflected in the Real Goods
Balance Sheet are in all material respects adequate to cover all
Taxes accruable through the date thereof (including interest and
penalties, if any, thereon and Taxes being contested) in
accordance with generally accepted accounting principles.
(b) Neither Real Goods nor any of its Subsidiaries is
obligated under any agreement with respect to industrial
development bonds or other obligations with respect to which the
excludability from gross income of the holder for federal or
state income tax purposes could be affected by the transactions
contemplated by this Agreement, and to the Knowledge of Real
Goods, neither Real Goods nor any of its Subsidiaries owns any
property of a character, the indirect transfer of which, as a
consequence of the Merger, would give rise to any material
documentary, stamp or other transfer tax.
(c) Real Goods is not a United States real property
holding corporation (as defined in Section 897(c)(2) of the
Code).
SECTION 3.13. ERISA. Except as set forth in SECTION 3.13
of the Disclosure Schedule:
(a) Each Real Goods Employee Plan has been administered
and is in compliance with the terms of such plan and all
applicable laws, rules and regulations where the failure
thereof would result in liability that would be reasonably
expected to have a Real Goods Material Adverse Effect. Each Real
Goods Employee Plan intended to be qualified has received a
favorable determination from the IRS and, to Real Goods'
Knowledge, nothing has occurred since that would adversely affect
such qualification. No litigation or administrative or other
proceeding involving any Real Goods Employee Plans has occurred
or, to Real Goods' Knowledge, is threatened where an adverse
determination would result in liability that would be reasonably
expected to have a Real Goods Material Adverse Effect. Real
Goods has not contributed to any "multiemployer plan", within the
meaning of section 3(37) of ERISA. No condition exists and no
event has occurred that would be expected to constitute grounds
for termination of any Real Goods Employee Plan and neither Real
Goods nor any of its affiliates has incurred any liability
arising in connection with the termination of, or complete or
partial withdrawal from, any plan covered or previously covered
by Title IV of ERISA. For purpose of this Section, "affiliate" of
any Person means any other Person which, together with such
Person, would be treated as a single employer under Section 414
of the Code.
(b) Each enforceable employment, severance or other
similar contract, arrangement or policy and each plan or
arrangement providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not a Real Goods Employee Plan, (ii) is
entered into, maintained or contributed to, as the case may be,
by Real Goods or any of its affiliates and (iii) covers any
employee or former employee of Real Goods or any of its
affiliates, has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations that are applicable to
such arrangements except for failures to comply which, singly or
in the aggregate, would not have a Real Goods Material Adverse
Effect.
(c) Real Goods has not established, and does not
maintain, any post-retirement benefits for its employees,
including but not limited to post-retirement life insurance or
post-retirement medical.
(d) Real Goods has no agreements that provide for the
payment of income or the provision of benefits (including
vesting, entitlement, receipt, creation or transfer of any
rights, privileges, income or title to property or beneficial
ownership) to any employees of Real Goods as a result of a change
of control of Real Goods.
SECTION 3.14. PERMITS. Real Goods and its Subsidiaries
have all Permits as are necessary to carry on their businesses as
currently conducted, except for any such Permits for which Real
Goods has made due application and except for any such Permits
that the failure to possess which, individually or in the
aggregate, would not reasonably be expected to have a Real Goods
Material Adverse Effect. Real Goods has not received notice from
any Governmental Authority (i) that such Permits are not in full
force and effect or have been violated, in either case in any
respect that would reasonably be expected to have a Real Goods
Material Adverse Effect or (ii) threatening to revoke or suspend
any such Permits which, in any such case, would reasonably be
expected to have a Real Goods Material Adverse Effect.
SECTION 3.15. REQUIRED SHAREHOLDER VOTE. The affirmative
vote by shareholders of Real Goods Common Shares of Real Goods
representing a majority of the outstanding Real Goods Common
Shares is the only vote of Real Goods shareholders required by
Law for the adoption and approval of this Agreement, the Merger
and the transactions contemplated by this Agreement.
SECTION 3.16. FINDERS' FEES. There is no investment banker
broker, finder or other intermediary which has been retained by
or is authorized to act on behalf of Real Goods or any of its
Subsidiaries who might be entitled to any fee or commission from
Gaiam or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement (other than with
respect to the fairness opinion referred to in Section 6.10).
SECTION 3.17. ENVIRONMENTAL MATTERS. Except for matters
that, individually or in the aggregate, would not reasonably be
expected to have a Real Goods Material Adverse Effect, (a) the
properties, operations and activities of Real Goods and its
Subsidiaries are in compliance with all applicable Environmental
Laws; (b) Real Goods and its Subsidiaries and the properties and
operations of Real Goods and its Subsidiaries are not subject to
any existing, pending or, to the Knowledge of Real Goods,
threatened action, suit, or proceeding by or before any Court or
Governmental Authority under any Environmental Law; and (c) all
Permits, if any, required to be obtained or filed by Real Goods
or any of its Subsidiaries under any Environmental Law in
connection with the business of Real Goods and its Subsidiaries
have been obtained or filed and are valid and currently in full
force and effect.
SECTION 3.18. RESTRICTIONS ON BUSINESS ACTIVITIES. Except
for this Agreement, there is no agreement, judgment, injunction,
order or decree binding upon Real Goods or any of its
Subsidiaries which has or would reasonably be expected to have
the effect of prohibiting any acquisition of property by Real
Goods or any of its Subsidiaries or the conduct of business by
Real Goods or any of its Subsidiaries as currently conducted or
as proposed to be conducted by Real Goods, except for any
prohibition or impairment as would not reasonably be expected to
have a Real Goods Material Adverse Effect.
SECTION 3.19. PROPERTY. Real Goods or its Subsidiaries,
individually or together, hold under valid lease agreements all
real and personal properties reflected in the Real Goods 10-K or
the Real Goods 10-Q as being held under capitalized leases, and
all real and personal property that is subject to the operating
leases to which reference is made in the notes to the Real Goods
10-K or the Real Goods 10-Q, and enjoy peaceful and undisturbed
possession of such properties under such leases, other than (i)
any properties as to which such leases have terminated in the
ordinary course of business since the date of the Real Goods 10-K
or the Real Goods 10-Q and (ii) any matters that, individually or
in the aggregate, would not reasonably be expected to have a Real
Goods Material Adverse Effect.
SECTION 3.20. INTERESTED PARTY TRANSACTIONS. Except as a
result of the transactions contemplated by this Agreement or Real
Goods SEC Reports, since June 29, 1999, no event has occurred
that would be required to be reported as a Certain Relationship
or Related Transaction pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
SECTION 3.21. INSURANCE. All insurance policies maintained
by Real Goods or any of its Subsidiaries (i) are with reputable
insurance carriers, (ii) provide adequate coverage for all normal
risks incident to the business of Real Goods and its Subsidiaries
and their respective properties and assets and (iii) are in
character and amount at least equivalent to that carried by
entities engaged in similar businesses and subject to the same or
similar perils or hazards.
SECTION 3.22. INTELLECTUAL PROPERTY. (a) Real Goods and/or
each of its Subsidiaries owns, or is licensed or otherwise
possesses legally enforceable rights to use all patents,
trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary
information or material that are used in the business of Real
Goods and its Subsidiaries as currently conducted, except as
would not reasonably be expected to have a Real Goods Material
Adverse Effect.
(b) Except as would not reasonably be expected to have
a Real Goods Material Adverse Effect: (i) Real Goods is not, nor
will it be as a result of the execution and delivery of this
Agreement or the performance of its obligations hereunder, in
violation of any licenses, sublicenses and other agreements as to
which Real Goods is a party and pursuant to which Real Goods is
authorized to use any Third-Party Intellectual Property Rights;
(ii) no claims with respect to Real Goods Intellectual Property
Rights, any trade secret material to Real Goods, or Third-Party
Intellectual Property Rights to the extent arising out of any
use, reproduction or distribution of such Third-Party
Intellectual Property Rights by or through Real Goods or any of
its Subsidiaries, are currently pending or, to the Knowledge of
Real Goods, are overtly threatened by any Person; and (iii) to
Real Goods' Knowledge, there are no valid grounds for any bona
fide claims (A) to the effect that the manufacture, sale,
licensing or use of any product as now used, sold or licensed or
proposed for use, sale or license by Real Goods or any of its
Subsidiaries infringes on any Third-Party Intellectual Property
Right; (B) against the use by Real Goods or any of its
Subsidiaries of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software
programs and applications used in the business of Real Goods or
any of its Subsidiaries as currently conducted or as proposed to
be conducted; (C) challenging the ownership, validity or
effectiveness of any part of Real Goods Intellectual Property
Rights or other trade secret material to Real Goods, or (D)
challenging the license or legally enforceable right to use of
the Third-Party Intellectual Rights by Real Goods or any of its
Subsidiaries.
(c) (i) All patents, registered trademarks and copyrights
held by Real Goods and its Subsidiaries are valid and subsisting,
except as would not reasonably be expected to have a Real Goods
Material Adverse Effect, and (ii) to Real Goods' Knowledge, there
is no material unauthorized use, infringement or misappropriation
of any of Real Goods Intellectual Property by any third party,
including any employee or former employee of Real Goods or any of
its Subsidiaries.
SECTION 3.23. MATERIAL CONTRACTS. All Material Contracts
relating to Real Goods or any of its Subsidiaries are in full
force and effect, Real Goods and its Subsidiaries have performed
their obligations thereunder to date and, to the Knowledge of
Real Goods, each other party thereto has performed its
obligations thereunder to date, other than any failure of a
Material Contract to be in full force and effect or any
nonperformance thereof that would not reasonably be expected to
have a Real Goods Material Adverse Effect.
SECTION 3.24. BOARD RECOMMENDATION. The Board of Directors
of Real Goods has, by unanimous vote at meetings of such board
duly held on October 6, 2000 and October 11, 2000, approved and
adopted this Agreement and the Merger, determined that the Merger
is fair to the shareholders of the Company, recommended that the
shareholders of the Company approve and adopt this Agreement and
the Merger and rescinded any stock repurchase program previously
approved by the Board of Directors of Real Goods. The Board of
Directors of Real Goods was fully informed, in making such
decisions, of the understanding between John Schaeffer and Gaiam
with respect to employment and the sale of Gaiam Class A to be
received in the Merger.
SECTION 3.25. ABSENCE OF UNDISCLOSED LIABILITIES. Except
as disclosed in the Real Goods 10-K or the Real Goods 10-Q,
neither Real Goods nor any of its Subsidiaries has any
liabilities or obligations of any nature, whether absolute,
accrued, unmatured, contingent or otherwise, or any unsatisfied
judgments or any leases of personalty or realty or unusual or
extraordinary commitments, except the liabilities recorded on the
Real Goods Balance Sheet and any notes thereto, and except for
liabilities or obligations incurred in the ordinary course of
business and consistent with past practice since June 24, 2000
that would not individually or in the aggregate have a Real Goods
Material Adverse Effect or materially impair Real Goods' ability
to consummate the Merger or the other transactions contemplated
hereby.
SECTION 3.26. TAX FREE REORGANIZATION. Neither Real Goods
nor, to the Knowledge of Real Goods, any of its affiliates has
taken, agreed to take, or will take any action that would prevent
the Merger from constituting a reorganization within the meaning
of Section 368(a) of the Code. Neither Real Goods nor, to the
Knowledge of Real Goods, any of its affiliates is aware of any
agreement, plan or other circumstance that would prevent the
Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
SECTION 3.27. GUARANTEES. Neither Real Goods nor any of
Real Goods' Subsidiaries is a guarantor or is otherwise liable
for any liability or obligation (including indebtedness) of any
other person.
SECTION 3.28. LABOR MATTERS. Real Goods and its
Subsidiaries are in compliance with all federal and state laws
relating to employment practices, terms and conditions of
employment, wages and hours, and are not engaged in any unlawful
labor or employment practice. There are no material
controversies outside the ordinary course of business pending or,
to the Knowledge of Real Goods, threatened, between Real Goods or
any of its Subsidiaries and any of their employees. Neither Real
Goods nor any of its Subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to
persons employed by the Real Goods or any of its Subsidiaries.
There are no unfair labor practice complaints pending against the
Real Goods or any of its Subsidiaries before the National Labor
Relations Board. There are no strikes, slowdowns, work
stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Real Goods or any of its Subsidiaries, and
to the Knowledge of the Real Goods, none are threatened. There
have been no strikes, slowdowns, work stoppages, lockouts or
other labor disputes or any threats thereof, by or with respect
to any employees of the Real Goods and its Subsidiaries in two
years prior to the date of this Agreement. To the Knowledge of
Real Goods, no executive, key people, or group of employees has
any plans to terminate employment with the Real Goods or any of
its Subsidiaries.
SECTION 3.29. FULL DISCLOSURE. As of the date hereof and
as of the Effective Time, as the case may be, all statements
contained in any schedule, exhibit, certificate or other
instrument delivered by or on behalf of Real Goods pursuant to
this Agreement are, or, in respect of any such instrument to be
delivered on or prior to the Effective Time, as of its date and
as of the Effective Time will be, accurate and complete in all
material respects, authentic and incorporated herein by reference
and constitute or will constitute the representations and
warranties of Real Goods. No representation or warranty of Real
Goods contained in this Agreement contains any untrue statement
or omits to state a fact necessary in order to make the
statements herein or therein, in light of the circumstances under
which they were made, not misleading in any material respect.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF GAIAM
Gaiam hereby represents and warrants to Real Goods as follows:
SECTION 4.1. CORPORATE EXISTENCE AND POWER. Gaiam is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Colorado, and has all
corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted. Gaiam is duly qualified to do business
as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased
by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a
Gaiam Material Adverse Effect.
SECTION 4.2. CORPORATE AUTHORIZATION. The execution,
delivery and performance by Gaiam of this Agreement and the
consummation by Gaiam of the transactions contemplated by this
Agreement are within Gaiam's corporate powers and have been duly
authorized by all necessary corporate action. This Agreement
constitutes a valid and binding agreement of Gaiam, enforceable
against Gaiam in accordance with its terms, subject to applicable
bankruptcy, insolvency or other similar laws relating to or
affecting the enforcement of creditors' rights generally and to
legal principles of general applicability governing the
application and availability of equitable remedies.
SECTION 4.3. GOVERNMENTAL AUTHORIZATION. The execution,
delivery and performance by Gaiam of this Agreement and the
consummation of the transactions contemplated by this Agreement
by Gaiam require no action or waiting period by or in respect of,
or filing with, any governmental body, agency, official or
authority other than (a) the filing of a certificate of merger
and a tax clearance certificate in accordance with the California
Law (b) compliance with any applicable requirements of the
Securities Act, the Exchange Act or any Blue Sky Laws; and (c)
compliance with those Laws, Regulations and Orders noncompliance
with which would not reasonably be expected to have a Gaiam
Material Adverse Effect or to prevent, impair or result in
significant delay of the consummation of the Merger. Without
limiting the first sentence of this Section 4.3, the execution,
delivery and performance by Gaiam of this Agreement and the
consummation of the transactions contemplated by this Agreement
by Gaiam require no action or waiting period by or in respect of,
or filing with, any governmental body, agency, official or
authority in connection with the HSR Act.
SECTION 4.4. NON-CONTRAVENTION. The execution, delivery
and performance by Gaiam of this Agreement and the consummation
by Gaiam of the transactions contemplated by this Agreement do
not and will not (a) contravene or conflict with the articles of
incorporation or bylaws of Gaiam or (b) assuming effectuation of
all filings and registrations with, the termination or expiration
of any applicable waiting periods imposed by, and receipt of all
Permits and Orders of, Governmental Authorities indicated as
required in Section 4.3, (i) constitute a default under or give
rise to (A) a right of termination, cancellation, acceleration,
amendment or modification with respect to Gaiam or any of its
Subsidiaries, (B) a loss of any benefit to which Gaiam or any of
its Subsidiaries is entitled or (C) an increase in the
obligations of Gaiam or any of its Subsidiaries, in each case,
under any provision of any Material Contract of Gaiam or any of
its Subsidiaries which, in any such case, individually or in the
aggregate, would have a Gaiam Material Adverse Effect, (ii)
result in the creation or imposition of any material Lien (other
than any Permitted Encumbrances) on any material asset of Gaiam
or any of its Subsidiaries or (iii) violate or cause a breach
under any Law, Regulation, Order or Permit applicable to Gaiam,
its Subsidiaries and their respective assets except for any such
matters that would not reasonably be expected, individually or in
the aggregate, to have a Gaiam Material Adverse Effect.
SECTION 4.5. CAPITALIZATION. The authorized capital stock
of Gaiam consists of 250,000,000 shares, consisting of
150,000,000 shares of Gaiam Class A, 50,000,000 shares of class B
common stock, $.0001 par value per share, and 50,000,000 shares
of preferred stock, par value $.0001 per share. As of the date of
this Agreement, there were 5,462,780 shares of Gaiam Class A
outstanding, options to purchase an aggregate of 989,478 shares
of Gaiam Class A, a warrant to purchase 24,000 shares of Gaiam
Class A and 5,400,000 shares of class B common stock outstanding.
As of the date of this Agreement, there were no shares of
preferred stock outstanding and all outstanding shares of capital
stock of Gaiam have been duly authorized and validly issued and
are fully paid and nonassessable.
SECTION 4.6. SUBSIDIARIES. Each of Gaiam's Subsidiaries is
a corporation or other legal entity duly incorporated of
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has all
corporate or entity powers and all governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted, except to the extent the failure to
have such licenses, authorizations, consents and approvals would
not, individually or in the aggregate, have a Gaiam Material
Adverse Effect, and is duly qualified to do business as a foreign
corporation or entity and is in good standing in each
jurisdiction where the character of the property owned or leased
by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failure to be so
qualified would not, individually or in the aggregate, have a
Gaiam Material Adverse Effect.
SECTION 4.7. SEC FILINGS. (a) Gaiam has filed all
required forms, reports and documents with the SEC since October
28, 1999, including, (i) its Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 (the "GAIAM 10-K"), (ii) the
proxy statement relating to Gaiam's 2000 annual meeting of
shareholders, (iii) its Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 2000 and June 30, 2000 (the
"GAIAM 10-QS") and (iv) all other reports or registration
statements filed by Gaiam with the SEC since October 28, 1999
(collectively, the "GAIAM SEC REPORTS") with the SEC, all of
which complied when filed in all material respects with all
applicable requirements of the Securities Act and the Exchange
Act. The audited consolidated financial statements and unaudited
consolidated interim financial statements of Gaiam and its
subsidiaries included or incorporated by reference in such Gaiam
SEC Reports were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and present fairly, in all material respects, the
financial position and results of operations and cash flows of
Gaiam and its Subsidiaries on a consolidated basis at the
respective dates and for the respective periods indicated (and in
the case of all such financial statements that are interim
financial statements, contain all adjustments so to present
fairly). Except to the extent that information contained in any
Gaiam SEC Report was revised or superseded by a later filed Gaiam
SEC Report, none of the Gaiam SEC Reports contained any untrue
statement of a material fact or omitted 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. Gaiam has provided to Real Goods
copies of all other correspondence sent to or received from the
SEC by Gaiam and its Subsidiaries since January 1, 2000 (other
than cover letters).
SECTION 4.8. CONSOLIDATED FINANCIAL STATEMENTS. Gaiam has
provided to Real Goods true and complete copies of the unaudited
consolidated balance sheet of Gaiam at June 30, 2000 (the "GAIAM
BALANCE SHeet") and the unaudited consolidated statements of
income, shareholders' equity and cash flow of Gaiam for the
period from December 31, 1999 through June 30, 2000. Such
financial statements fairly present, in all material respects,
the financial position of Gaiam at June 30, 2000, and the results
of operations of Gaiam for the period then ended, and have been
prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except that such
financial statements will not include any footnote disclosures
that might otherwise be required to be included by generally
accepted accounting principles, and shall also be subject to
normal non-recurring year-end audit adjustments. The Gaiam
Balance Sheet reflects all liabilities of Gaiam, whether
absolute, accrued or contingent, as of the date thereof of the
type required to be reflected or disclosed on a balance sheet
prepared in accordance with generally accepted accounting
principles (applied in a manner consistent with the notes of the
financial statements included in the Gaiam 10-K).
SECTION 4.9. DISCLOSURE DOCUMENTS. None of the information
supplied or to be supplied by or on behalf of Gaiam or Gaiam
Subsidiary for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration
Statement becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The Registration Statement
(except for information relating solely to Real Goods) will
comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act.
SECTION 4.10. ABSENCE OF CERTAIN CHANGES. Except for this
Agreement, since the date of the Gaiam Balance Sheet, Gaiam and
its Subsidiaries have conducted their business in all material
respects in the ordinary course consistent with past practice and
there has not been:
(a) any event, occurrence or development (including t
he commencement of any action, suit or proceedings or, to the
Knowledge of Gaiam, any investigation) of a state of
circumstances or facts which, individually or together with other
similar events, has had or reasonably would be expected to have a
Gaiam Material Adverse Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of Gaiam, or any material repurchase, redemption
(other than the receipt of Gaiam Class A in payment of the
exercise price of stock options and Taxes in respect of such
exercise) or other acquisition by Gaiam of any outstanding shares
of capital stock or other securities of, or other ownership
interests in, Gaiam;
(c) any amendment of any material term of any outstanding
security of Gaiam or any of its Subsidiaries other than
amendments to the terms of the existing credit facilities of
Gaiam or its Subsidiaries or borrowings under such facilities; or
(d) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or
assets of Gaiam or any of its Subsidiaries which, individually or
in the aggregate, has had or would reasonably be expected to have
a Gaiam Material Adverse Effect.
SECTION 4.11. LITIGATION; COMPLIANCE.
(a) There is no action, suit or proceeding pending
against, or (to the Knowledge of Gaiam) threatened against or
affecting, or (to the Knowledge of Gaiam) any pending
investigation against, Gaiam or any of its Subsidiaries or any of
their respective properties before any court or arbitrator or any
governmental body, agency or official which would reasonably be
expected, individually or in the aggregate, to have a Gaiam
Material Adverse Effect or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger or
any of the other transactions contemplated by this Agreement.
(b) Gaiam and its Subsidiaries are in substantial
compliance with all applicable Laws and Regulations and are not
in default with respect to any Order applicable to Gaiam or any
of its Subsidiaries, except such events of noncompliance or
defaults that, individually or in the aggregate, would not
reasonably be expected to have a Gaiam Material Adverse Effect.
SECTION 4.12. TAXES.
(a) Gaiam and its Subsidiaries have timely filed all
required Tax Returns and such Tax Returns are true, complete and
correct, and Gaiam and its Subsidiaries have timely paid and
discharged all Taxes due in connection with or with respect to
the periods or transactions covered by such Tax Returns and have
paid all other Taxes as are due, except such as are being
contested in good faith by appropriate proceedings (to the extent
that any such proceedings are required) and there are no other
Taxes that would be due if asserted by a taxing authority, except
Taxes with respect to which Gaiam is maintaining reserves to the
extent required by generally accepted accounting principles,
except where the failure of any of the foregoing to be true would
not, individually or in the aggregate, reasonably be expected to
have a Gaiam Material Adverse Effect. Except as does not involve
or would not result in liability to Gaiam or any of its
Subsidiaries that would reasonably be expected to have a Gaiam
Material Adverse Effect, (i) there are no Tax Liens on any assets
of Gaiam or any of its Subsidiaries (other than Permitted
Encumbrances); and (ii) there is no written claim against Gaiam
or any of its Subsidiaries for any Taxes, and no assessment,
deficiency or adjustment has been asserted or proposed with
respect to any Tax Return. The accruals and reserves (including
deferred taxes) reflected in Gaiam Balance Sheet are in all
material respects adequate to cover all Taxes accruable through
the date thereof (including interest and penalties, if any,
thereon and Taxes being contested) in accordance with generally
accepted accounting principles.
(b) Neither Gaiam nor any of its Subsidiaries is
obligated under any agreement with respect to industrial
development bonds or other obligations with respect to which the
excludability from gross income of the holder for federal or
state income tax purposes could be affected by the transactions
contemplated by this Agreement, and to the Knowledge of Gaiam,
neither Gaiam nor any of its Subsidiaries owns any property of a
character, the indirect transfer of which, as a consequence of
the Merger, would give rise to any material documentary, stamp or
other transfer tax.
SECTION 4.13. ERISA.
(a) Each Gaiam Employee Plan has been administered and is
in compliance with the terms of such plan and all applicable
laws, rules and regulations where the failure thereof would
result in liability that would be reasonably expected to have a
Gaiam Material Adverse Effect. Each Gaiam Employee Plan intended
to be qualified has received a favorable determination from the
IRS and, to Gaiam's Knowledge, nothing has occurred since that
would adversely affect such qualification. No litigation or
administrative or other proceeding involving any Gaiam Employee
Plans has occurred or, to Gaiam's Knowledge, is threatened where
an adverse determination would result in liability that would be
reasonably expected to have a Gaiam Material Adverse Effect.
Gaiam has not contributed to any "multiemployer plan", within the
meaning of section 3(37) of ERISA. No condition exists and no
event has occurred that would be expected to constitute grounds
for termination of any Gaiam Employee Plan and neither Gaiam nor
any of its affiliates has incurred any liability arising in
connection with the termination of, or complete or partial
withdrawal from, any plan covered or previously covered by Title
IV of ERISA. For purpose of this Section, "affiliate" of any
Person means any other Person which, together with such Person,
would be treated as a single employer under Section 414 of the
Code.
(b) Each enforceable employment, severance or other
similar contract, arrangement or policy and each plan or
arrangement providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation
or benefits which (i) is not a Gaiam Employee Plan, (ii) is
entered into, maintained or contributed to, as the case may be,
by Gaiam or any of its affiliates and (iii) covers any employee
or former employee of Gaiam or any of its affiliates, has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules
and regulations that are applicable to such arrangements except
for failures to comply which, singly or in the aggregate, would
not have a Gaiam Material Adverse Effect.
(c) Gaiam has not established, and does not maintain, any
post-retirement benefits for its employees, including but not
limited to post-retirement life insurance or post-retirement
medical.
SECTION 4.14. PERMITS. Gaiam and its Subsidiaries have all
Permits as are necessary to carry on their businesses as
currently conducted, except for any such Permits for which Gaiam
has made due application and except for any such Permits that the
failure to possess which, individually or in the aggregate, would
not reasonably be expected to have a Gaiam Material Adverse
Effect. Gaiam has not received notice from any Governmental
Authority (i) that such Permits are not in full force and effect
or have been violated, in either case in any respect that would
reasonably be expected to have a Gaiam Material Adverse Effect or
(ii) threatening to revoke or suspend any such Permits which, in
any such case, would reasonably be expected to have a Gaiam
Material Adverse Effect.
SECTION 4.15. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by
or is authorized to act on behalf of Gaiam or any of its
Subsidiaries who might be entitled to any fee or commission from
Real Goods or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement.
SECTION 4.16. ENVIRONMENTAL MATTERS. Except for matters
that, individually or in the aggregate, would not reasonably be
expected to have a Gaiam Material Adverse Effect, (a) the
properties, operations and activities of Gaiam and its
Subsidiaries are in compliance with all applicable Environmental
Laws; (b) Gaiam and its Subsidiaries and the properties and
operations of Gaiam and its Subsidiaries are not subject to any
existing, pending or, to the Knowledge of Gaiam, threatened
action; suit, or proceeding by or before any Court or
Governmental Authority under any Environmental Law; and (c) all
Permits, if any, required to be obtained or filed by Gaiam or any
of its Subsidiaries under any Environmental Law in connection
with the business of Gaiam and its Subsidiaries have been
obtained or filed and are valid and currently in full force and
effect.
SECTION 4.17. RESTRICTIONS ON BUSINESS ACTIVITIES. Except
for this Agreement, there is no agreement, judgment, injunction,
order or decree binding upon Gaiam or any of its Subsidiaries
which has or would reasonably be expected to have the effect of
prohibiting any acquisition of property by Gaiam or any of its
Subsidiaries or the conduct of business by Gaiam or any of its
Subsidiaries as currently conducted or as proposed to be
conducted by Gaiam, except for any prohibition or impairment as
would not reasonably be expected to have a Gaiam Material Adverse
Effect.
SECTION 4.18. PROPERTY. Gaiam or its Subsidiaries,
individually or together, hold under valid lease agreements all
real and personal properties reflected in the Gaiam 10-K or the
Gaiam 10-Q as being held under capitalized leases, and all real
and personal property that is subject to the operating leases to
which reference is made in the notes to the Gaiam 10-K or the
Gaiam 10-Q, and enjoy peaceful and undisturbed possession of such
properties under such leases, other than (i) any properties as to
which such leases have terminated in the ordinary course of
business since the date of the Gaiam 10-K or the Gaiam 10-Q and
(ii) any matters that, individually or in the aggregate, would
not reasonably be expected to have a Gaiam Material Adverse
Effect.
SECTION 4.19. INTERESTED PARTY TRANSACTIONS. Except as a
result of the transactions contemplated by this Agreement or as
disclosed in the Gaiam SEC Reports or the Registration Statement,
since June 30, 2000, no event has occurred that would be required
to be reported as a Certain Relationship or Related Transaction
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 4.20. INSURANCE. All insurance policies maintained
by Gaiam or any of its Subsidiaries (i) are with reputable
insurance carriers, (ii) provide adequate coverage for all normal
risks incident to the business of Gaiam and its Subsidiaries and
their respective properties and assets and (iii) are in character
and amount at least equivalent to that carried by entities
engaged in similar businesses and subject to the same or similar
perils or hazards.
SECTION 4.21. INTELLECTUAL PROPERTY. (a) Gaiam and/or each
of its Subsidiaries owns, or is licensed or otherwise possesses
legally enforceable rights to use all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor,
technology, know-how, computer software programs or applications,
and tangible or intangible proprietary information or material
that are used in the business of Gaiam and its Subsidiaries as
currently conducted, except as would not reasonably be expected
to have a Gaiam Material Adverse Effect.
(b) Except as would not reasonably be expected to have
a Gaiam Material Adverse Effect: (i) Gaiam is not, nor will it be
as a result of the execution and delivery of this Agreement or
the performance of its obligations hereunder, in violation of any
licenses, sublicenses and other agreements as to which Gaiam is a
party and pursuant to which Gaiam is authorized to use any
Third-Party Intellectual Property Rights; (ii) no claims with
respect to Gaiam Intellectual Property Rights, any trade secret
material to Gaiam, or Third-Party Intellectual Property Rights to
the extent arising out of any use, reproduction or distribution
of such Third-Party Intellectual Property Rights by or through
Gaiam or any of its Subsidiaries, are currently pending or, to
the Knowledge of Gaiam, are overtly threatened by any Person; and
(iii) to Gaiam's Knowledge, there are no valid grounds for any
bona fide claims (A) to the effect that the manufacture, sale,
licensing or use of any product as now used, sold or licensed or
proposed for use, sale or license by Gaiam or any of its
Subsidiaries infringes on any Third-Party Intellectual Property
Right; (B) against the use by Gaiam or any of its Subsidiaries of
any trademarks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and
applications used in the business of Gaiam or any of its
Subsidiaries as currently conducted or as proposed to be
conducted; (C) challenging the ownership, validity or
effectiveness of any part of Gaiam Intellectual Property Rights
or other trade secret material to Gaiam, or (D) challenging the
license or legally enforceable right to use of the Third-Party
Intellectual Rights by Gaiam or any of its Subsidiaries.
(c) (i) All patents, registered trademarks and copyrights
held by Gaiam and its Subsidiaries are valid and subsisting,
except as would not reasonably be expected to have a Gaiam
Material Adverse Effect, and (ii) to Gaiam's Knowledge, there is
no material unauthorized use, infringement or misappropriation of
any of Gaiam Intellectual Property by any third party, including
any employee or former employee of Gaiam or any of its
Subsidiaries.
SECTION 4.22. MATERIAL CONTRACTS. All Material Contracts
relating to Gaiam or any of its Subsidiaries are in full force
and effect, Gaiam and its Subsidiaries have performed their
obligations thereunder to date and, to the Knowledge of Gaiam,
each other party thereto has performed its obligations thereunder
to date, other than any failure of a Material Contract to be in
full force and effect or any nonperformance thereof that would
not reasonably be expected to have a Gaiam Material Adverse
Effect.
SECTION 4.23. BOARD APPROVAL. The Board of Directors of
Gaiam has, by unanimous vote at meetings of such board duly held
on October 10, 2000, approved and adopted this Agreement, the
Merger and other transactions contemplated hereby (including,
without limitation, the issuance of Gaiam Class A as a result of
the Merger), and determined that the Merger is fair to the
shareholders of Gaiam Class A.
SECTION 4.24. ABSENCE OF UNDISCLOSED LIABILITIES. Except
as disclosed in Gaiam's SEC Reports, neither Gaiam nor any of its
Subsidiaries has any liabilities or obligations of any nature,
whether absolute, accrued, unmatured, contingent or otherwise, or
any unsatisfied judgments or any leases of personalty or realty
or unusual or extraordinary commitments, except the liabilities
recorded on the Gaiam Balance Sheet any notes thereto, and except
for liabilities or obligations incurred in the ordinary course of
business and consistent with past practice since June 30, 2000
that would not individually or in the aggregate have a Gaiam
Material Adverse Effect or materially impair Gaiam's ability to
consummate the merger or the other transactions contemplated
hereby.
SECTION 4.25. TAX FREE REORGANIZATION. Neither Gaiam nor,
to the Knowledge of Gaiam, any of its affiliates has taken,
agreed to take, or will take any action that would prevent the
Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code. Neither Gaiam nor, to the Knowledge
of Gaiam, any of its affiliates is aware of any agreement, plan
or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code.
SECTION 4.26. LABOR MATTERS. Gaiam and its Subsidiaries
are in compliance with all federal and state laws relating to
employment practices, terms and conditions of employment, wages
and hours, and are not engaged in any unlawful labor or
employment practice, except where failure would not result in a
Gaiam Material Adverse Effect. There are no material
controversies outside the ordinary course of business pending or,
to the Knowledge of Gaiam, threatened, between Gaiam or any of
its Subsidiaries and any of their employees. As of the date of
this Agreement, neither Gaiam nor any of its Subsidiaries is a
party to any collective bargaining agreement or other labor union
contract applicable to persons employed by the Gaiam or any of
its Subsidiaries, there are no unfair labor practice complaints
pending against the Gaiam or any of its Subsidiaries before the
National Labor Relations Board, there are no strikes, slowdowns,
work stoppages, lockouts, or threats thereof, by or with respect
to any employees of the Gaiam or any of its Subsidiaries, and to
the Knowledge of the Gaiam, none are threatened. There have been
no strikes, slowdowns, work stoppages, lockouts or other labor
disputes or any threats thereof, by or with respect to any
employees of the Gaiam and its Subsidiaries in two years prior to
the date of this Agreement. To the Knowledge of Gaiam as of the
date of this Agreement, no executive, key people, or group of
employees has any plans to terminate employment with the Gaiam or
any of its Subsidiaries.
SECTION 4.27. FULL DISCLOSURE. As of the date hereof and
as of the Effective Time, as the case may be, all statements
contained in any schedule, exhibit, certificate or other
instrument delivered by or on behalf of Gaiam pursuant to this
Agreement are, or, in respect of any such instrument to be
delivered on or prior to the Effective Time, as of its date and
as of the Effective Time will be, accurate and complete in all
material respects, authentic and incorporated herein by reference
and constitute or will constitute the representations and
warranties of Gaiam. No representation or warranty of Gaiam
contained in this Agreement contains any untrue statement or
omits to state a fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they
were made, not misleading in any material respect.
ARTICLE 5
COVENANTS OF REAL GOODS AND GAIAM
SECTION 5.1. AFFIRMATIVE COVENANTS OF REAL GOODS. Except
as expressly contemplated by this Agreement or consented to in
writing by Gaiam, during the period from the execution of this
Agreement by Real Goods to the Effective Time, Real Goods will,
and will cause its Subsidiaries to:
(a) operate their businesses in all material respects
in the usual and ordinary course consistent with past practices;
(b) use all reasonable efforts to preserve substantially
intact their business organizations, maintain the rights and
franchises that are material to Real Goods, retain the services
of their officers and maintain the relationships with the
customers and suppliers that are material to Real Goods;
(c) maintain supplies and other inventories in quantities
deemed appropriate by Real Goods;
(d) maintain and keep the properties and assets that are
material to Real Goods in as good repair and condition in all
material respects as on the date of this Agreement, ordinary wear
and tear excepted;
(e) use all commercially reasonable efforts to keep in
full force and effect insurance comparable in amount and scope of
coverage to that set forth in Section 3.20; and
(f) use all commercially reasonable efforts to comply in
all material respects with all applicable Laws, Regulations and
Orders.
SECTION 5.2. NEGATIVE COVENANTS OF REAL GOODS. Except as
expressly contemplated by this Agreement, or otherwise consented
to in writing by Gaiam, from the execution of this Agreement by
Real Goods until the Effective Time, Real Goods will not, and
will not permit any of its Subsidiaries to:
(a) adopt or propose any change in the articles of
incorporation or bylaws of Real Goods or any of its Subsidiaries;
(b) (i) acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of,
or in any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any
assets of any other Person, (ii) incur any Indebtedness or issue
any debt securities or assume, guarantee or endorse or otherwise
become responsible for the obligations of any other Person or
make any loans or advances, except in each case in the ordinary
course of business and consistent with past practice, (iii) make
or authorize any capital expenditures other than capital
expenditures in accordance with Real Goods' existing capital
plan, capital expenditures to repair or replace casualty losses
or other capital expenditures in the ordinary course of Real
Goods' business or (iv) enter into or amend in any material
respect any contract, agreement, commitment or arrangement with
respect to any of the matters set forth in this Section 5.2(b);
(c) sell, lease, license or otherwise dispose of any
material assets or property except (i) pursuant to existing
contracts or commitments, (ii) in the ordinary course consistent
with past practice, and (iii) as contemplated or permitted by
this Agreement;
(d) (i) take or agree or commit to take any action that
would make any representation or warranty of Real Goods hereunder
inaccurate in any respect at, or as of any time prior to, the
Effective Time such that the conditions set forth in Section
7.3(a) would not be satisfied or (ii) omit or agree or commit to
omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect
at any such time such that the conditions set forth in Section
7.3(a) would not be satisfied;
(e) split, combine or reclassify any shares of its
capital stock, declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock (other than
cash dividends and distributions by a wholly owned Subsidiary of
Real Goods to Real Goods or to a Subsidiary, all of the capital
stock of which is owned directly or indirectly by Real Goods), or
redeem, repurchase or otherwise acquire or offer to redeem,
repurchase or otherwise acquire any of its securities or any
securities of its Subsidiaries;
(f) adopt any change in executive compensation except in
the ordinary course consistent with past practices or adjust
or amend any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred
compensation, employment or employee benefit plan, agreement,
trust, plan, fund or other arrangement for the benefit and
welfare of any director, officer or employee (except as
contemplated by this Agreement or as required to comply with
ERISA or to continue then existing tax and securities law
status);
(g) revalue in any material respect any significant
portion of its assets, including, without limitation, writing
down the value of inventory in any material manner or writing-off
of notes or accounts receivable in any material manner except as
required by generally accepted accounting principles;
(h) pay, discharge or satisfy any material claims,
liabilities or obligations (whether absolute, accrued, asserted
or unasserted, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business,
consistent with past practices, of liabilities reflected or
reserved against in the consolidated financial statements of Real
Goods referred to in Section 3.8 or incurred in the ordinary
course of business, consistent with past practices;
(i) make any tax election with respect to or settle or
compromise any material income tax liability;
(j) offer, sell, issue or grant, or authorize the
offering, sale, issuance or grant, of any shares of capital stock
of, or other equity interests in, any securities convertible into
or exchangeable for any shares of capital stock of, or other
equity interests (or phantom equity interests) in, or any
options, warrants or rights of any kind to acquire any shares of
capital stock of, or other equity interests (or phantom equity
interests) in, Real Goods or any of its Subsidiaries (other than
the issuance of Real Goods Common Shares upon the exercise of
outstanding options);
(k) grant any Lien (except Permitted Encumbrances) with
respect to any material assets including any shares of capital
stock of, or other equity interests in, any Subsidiary of Real
Goods;
(l) (i) change any of its policies or practices with
respect to business transactions between Real Goods and its
Subsidiaries, on the one hand, and Real Goods' Affiliates (other
than Real Goods and its Subsidiaries), on the other hand, (ii)
change any of its methods of accounting in effect at June 24,
2000 except as may be required to comply with generally accepted
accounting principles, or (iii) change any of its methods of
reporting income or deductions for federal income tax purposes
from those employed in the preparation of the federal income tax
returns for the taxable year ending March 31, 2000, except, in
each case, as may be required by Law;
(m) except to the extent the Board of Directors of Real
Goods deems it necessary to do so in the exercise of its
fiduciary obligations to its shareholders, adopt any shareholder
rights plan;
(n) enter into or adopt any agreements or arrangements
that provide for the payment of income or the provision of
benefits (including vesting, entitlement, receipt, creation or
transfer of any rights, privileges, income or title to property
or beneficial ownership) to employees of Real Goods as a result
of a change of control of Real Goods;
(o) take, cause or permit to be taken any action, whether
before or after the Effective Time, that could reasonably be
expected to prevent the Merger from constituting a
"reorganization" within the meaning of Section 368(a) of the
Code; or
(p) agree or commit to do any of the foregoing.
SECTION 5.3. NO SOLICITATION. From and after the date of
this Agreement, Real Goods shall not (whether directly or
indirectly through Real Goods' Representatives), and Real Goods
shall not authorize or permit any of Real Goods' Representatives
to (i) solicit, initiate, or encourage the making of, or
negotiate with respect to any Acquisition Proposal; (ii) disclose
any information not customarily disclosed to any Person
concerning Real Goods' business and properties or afford to any
Person access to its properties, books or records; (iii) respond
to inquiries or assist or cooperate with any Person to make any
proposal to consummate an Acquisition Proposal; or (iv) disclose
the existence or content of the discussions between Gaiam and
Real Goods (except to the extent set forth in the Registration
Statement) or the existence of this Agreement (except to the
extent set forth in any press releases issued in accordance with
Section 6.5); provided, however that the foregoing shall not
prohibit Real Goods (either directly or indirectly through any of
Real Goods' Representatives) from (A) furnishing information
pursuant to an appropriate confidentiality letter concerning Real
Goods and its businesses, properties or assets to a third party
(other than Gaiam, Gaiam Subsidiary or any of their respective
affiliates) who has made or is seeking to initiate discussions
with respect to a bona fide Acquisition Proposal, (B) engaging in
discussions or negotiations with such a third party who has made
a bona fide Acquisition Proposal, and/or (C) following receipt of
a bona fide Acquisition Proposal, making disclosure to Real
Goods' shareholders, where the failure to take or permit the
taking of any action specified in the foregoing clauses (A)
through (C) would be a breach of the fiduciary duties of the
Board of Directors of Real Goods. Except to the extent it would
be a breach of the fiduciary duties of the Real Goods' Board of
Directors to do so, in the event that Real Goods or any of Real
Goods' Representatives shall receive any offer or proposal,
directly or indirectly, of the type referred to in clause (i) or
(iii) above, or any request for disclosure or access pursuant to
clause (ii) above, Real Goods shall promptly inform Gaiam of the
receipt of any such Acquisition Proposal including the identity
of the Person or group making such Acquisition Proposal and the
material terms and conditions of such Acquisition Proposal.
Except to the extent it would be a breach of the fiduciary duties
of the Real Goods' Board of Directors not to do so, in no event
shall Real Goods enter into a definitive agreement in connection
with the Acquisition Proposal less than three business days after
Real Goods' notification to Gaiam of an inquiry or proposal
relating to an Acquisition Proposal. Within the three business
day period referred to above, Gaiam may propose an improved
transaction.
SECTION 5.4. SETTLEMENT OF CERTAIN CLAIMS. Without the
prior written agreement of Gaiam, prior to the Effective Time,
Real Goods shall not settle or compromise any claim brought by
any present, former or purported holder or owner of Real Goods
Common Shares or other securities of Real Goods, or by any other
Person, which relates to or seeks to challenge or enjoin the
transactions contemplated by this Agreement.
SECTION 5.5. ANTITAKEOVER STATUTES. If any takeover
statute is or may become applicable to the transactions
contemplated by this Agreement, Real Goods and the members of its
Board of Directors shall use all reasonable efforts to grant such
approvals and to take such actions as are necessary so that the
transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects
of any takeover statute on any of the transactions contemplated
by this Agreement.
SECTION 5.6. COVENANTS OF GAIAM. Except as expressly
contemplated by this Agreement or consented to in writing by Real
Goods, during the period from the execution of this Agreement by
Real Goods to the Effective Time, (a) Gaiam will, and will cause
its Subsidiaries to, use all commercially reasonable efforts to
comply in all material respects with all applicable Laws,
Regulations and Orders, and (b) Gaiam will not, and will not
permit any of its Subsidiaries to (i) take or agree or commit to
take any action that would make any representation or warranty of
Gaiam hereunder inaccurate in any respect at, or as of any time
prior to, the Effective Time such that the conditions set forth
in Section 7.2(a) would not be satisfied, (ii) omit or agree or
commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any respect
at any such time such that the conditions set forth in Section
7.2(a) would not be satisfied, or (iii) take, cause or permit to
be taken any action, whether before or after the Effective Time,
that could reasonably be expected to prevent the Merger from
constituting a "reorganization" within the meaning of Section
368(a) of the Code.
SECTION 5.7. CERTAIN EMPLOYEE MATTERS. Prior to the
Effective Time, Gaiam will consult with Real Goods and will use
reasonable best efforts to identify any Real Goods employees
whose employment will be terminated as a result of the Merger.
Notwithstanding anything to the contrary set forth in this
Agreement, prior to the Effective Time, Real Goods will pay or
arrange for the payment of severance to each Real Goods employee
so identified, provided that such employee has been an employee
of Real Goods for at least one year as of the Effective Time, and
provided further that such employee continues employment until
the date employment is terminated. Such severance shall equal
(a) two weeks of salary, plus (b) one additional week of salary
for each year of employment in excess of one year. For purposes
of this Section, any Real Goods employee who is transferred after
the Merger to a work location more than 75 miles from such
employee's current work location shall be deemed to have been
terminated as a result of the Merger. Gaiam agrees that all Real
Goods employees who continue employment with Gaiam or Real Goods
following the Merger shall be entitled to receive seniority
credit, in any vacation and insurance plans, for any employment
at Real Goods prior to the Merger. Notwithstanding anything to
the contrary set forth in this Agreement, Gaiam consents to the
transfer of all rights under John Schaeffer's split dollar life
insurance policy to Mr. Schaeffer or his insurance trust and to
any amendment or termination of agreements entered into by Real
Goods in connection with such policy.
ARTICLE 6
COVENANTS OF EACH PARTY
Each party agrees that:
SECTION 6.1. PREPARATION OF THE REGISTRATION STATEMENT;
SHAREHOLDER MEETING.
(a) As soon as practicable following the date of this
Agreement, Gaiam and Real Goods shall prepare and file with the
SEC the Registration Statement, in which the Proxy Statement
shall be included. Each of Gaiam and Real Goods shall use
commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly
as practicable after such filing. The Proxy Statement shall
include the recommendation of the Board of Directors of Real
Goods in favor of approval and adoption of this Agreement and the
Merger, except to the extent the Board of Directors of Real Goods
shall have withdrawn or modified its approval or recommendation
of this Agreement or the Merger as permitted by Section 5.3.
Real Goods shall use commercially reasonable efforts to cause the
Proxy Statement to be mailed to its shareholders.
(b) Gaiam and Real Goods shall make all necessary filings
with respect to the Merger and the transactions contemplated
thereby under the Securities Act and the Exchange Act and
applicable state blue sky laws and the rules and regulations
thereunder. Gaiam shall also take any action required to be
taken under any applicable state securities laws in connection
with the issuance of Gaiam Class A in the Merger. No filing of,
or amendment or supplement to, the Registration Statement will be
made by Gaiam without providing Real Goods and its counsel the
opportunity to review and comment thereon. Gaiam will advise
Real Goods, promptly after it receives notice thereof, of the
time when the Registration Statement has become effective or any
supplement or amendment has been filed, the issuance of any stop
order, the suspension of the qualification of the Gaiam Class A
issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the
Registration Statement or comments thereon and responses thereto
or requests by the SEC for additional information. If at any
time prior to the Effective Time any information relating to
Gaiam or Real Goods, or any of their respective affiliates,
officers or directors, should be discovered by Gaiam or Real
Goods which should be set forth in an amendment or supplement to
any of the Registration Statement, so that any of such documents
would not include any misstatement of a material fact or omit to
state any material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading, the party which discovers such information shall
promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the shareholders of Real Goods.
(c) Real Goods shall, as soon as practicable following
the effectiveness of the Registration Statement, duly call, give
notice of, convene and hold a meeting of its shareholders (the
"REAL GOODS SHAREHOLDER MEETING") for the purpose of obtaining
the approval and adoption (the "REAL GOODS SHAREHOLDER APPROVAL")
of the shareholders of Real Goods of this Agreement and the
Merger and shall, through its Board of Directors, recommend to
its shareholders the approval and adoption of this Agreement and
the Merger, and shall use all commercially reasonable efforts to
solicit from its shareholders proxies in favor of approval and
adoption of this Agreement and the Merger; provided, however,
that such recommendation is subject to Section 5.3 hereof.
SECTION 6.2. LETTERS AND CONSENTS OF REAL GOODS'
ACCOUNTANTS. Real Goods shall use all commercially reasonable
efforts to cause to be delivered to Gaiam all consents required
from Real Goods' independent accountants necessary to effect the
registration of the Gaiam Class A and make any required filing
with the SEC in connection with the Merger and the transactions
contemplated thereby.
SECTION 6.3. LETTERS AND CONSENTS OF GAIAM'S ACCOUNTANTS.
Gaiam shall use all commercially reasonable efforts to cause to
be delivered to Gaiam all consents required from its independent
accountants necessary to effect the registration of the Gaiam
Class A and make any required filing with the SEC in connection
with the Merger and the transactions contemplated thereby.
SECTION 6.4. REASONABLE EFFORTS. (a) Subject to the terms
and conditions of this Agreement, each party shall use, and shall
cause each of its respective Subsidiaries to use, all
commercially reasonable efforts (i) to take, or to cause to be
taken, all appropriate action, and to do, or to cause to be done,
all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the transactions
contemplated by this Agreement, (ii) to obtain from any
Governmental Authorities any Licenses, Permits or Orders required
to be obtained by such party or any of its Subsidiaries in
connection with the authorization, execution and delivery of this
Agreement and the performance of its obligations hereunder, (iii)
to make all necessary filings and thereafter to make promptly any
other required submissions, with respect to this Agreement
required under any other applicable Law, Regulation or Order and
(iv) to provide all necessary information for the Registration
Statement; provided, that Gaiam and Real Goods shall cooperate
with each other in connection with the making of all such filings
and in supplying any information requested supplementally or by
second request from any Governmental Authority.
(b) The parties agree to cooperate and to cause their
respective Subsidiaries to cooperate with respect to, and agree
to use all commercially reasonable efforts vigorously to contest
and resist and to have vacated, lifted, reversed or overturned,
any action, including legislative, administrative or judicial
action, including any Order (whether temporary, preliminary or
permanent) of any Governmental Authority, that is in effect and
that restricts, prevents or prohibits the consummation of the
transactions contemplated by this Agreement. Each of the parties
also agrees to take any and all commercially reasonable actions
that may be required by any Governmental Authority as a condition
to the granting of any Permit or Order required in order to
permit the consummation of the transactions contemplated by this
Agreement or as may be required to vacate, lift, reverse or
overturn any administrative or judicial action that would
otherwise cause any condition to the Effective Time not to be
satisfied; provided, however, that in no event shall either party
be required to take any action that could reasonably be expected
to have a Real Goods Material Adverse Effect or a Gaiam Material
Adverse Effect or to result in a breach of this Agreement.
(c) Each of the parties shall use, and shall cause its
Subsidiaries to use, all commercially reasonable efforts to
obtain from all Persons (other than Governmental Authorities) all
consents that are (i) necessary, proper or advisable or (ii)
otherwise required under any contracts, licenses, leases,
easements or other agreements to which such party or any of its
Subsidiaries is a party or by which it is bound, in order to
permit such party to perform its obligations hereunder.
(d) If any party shall fail to obtain any third party
consent described in Section 6.4(c), such party shall use all
commercially reasonable efforts, and shall take any such actions
reasonably requested by the other parties, to limit the adverse
effect upon Gaiam and its Subsidiaries, and Real Goods and its
Subsidiaries, and each of their respective businesses resulting,
or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
(e) Upon learning thereof, each party shall promptly
notify the other parties of (i) any complaints, investigations or
hearings (or communications indicating that the same may be
contemplated) from or by any Governmental Authorities with
respect to the transactions contemplated by this Agreement or
(ii) the institution or the threat of litigation involving this
Agreement or the transactions contemplated by this Agreement.
SECTION 6.5. PUBLIC ANNOUNCEMENTS. No Party shall issue
any press release or make any press release or make any public
announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of the
other Parties; provided, however, that any Party or any affiliate
of such Party may make any public disclosure it believes in good
faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which
case the Party which intends, or which has an affiliate that
intends, to issue such press release or make such public
announcement will advise the other Parties prior to making the
disclosure and provide the other Parties a reasonable opportunity
to comment upon the release or announcement); and PROVIDED,
FURTHER that following the execution hereof Gaiam and Real Goods
may issue a press release mutually acceptable to both parties.
SECTION 6.6. NOTIFICATION OF CERTAIN MATTERS. EACH party
shall use all commercially reasonable efforts to give prompt
notice to the other parties of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty
contained in this Agreement to be materially untrue or
inaccurate, or (ii) any failure of any party materially to comply
with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section shall
not limit or otherwise affect the remedies available hereunder to
the parties receiving such notice; and PROVIDED FURTHER that
failure to give such notice shall not be treated as a breach of
covenant for the purposes of Sections 7.2(a) or 7.3(a) hereof
unless the failure to give such notice results in material
prejudice to the other parties.
SECTION 6.7. ACCESS TO INFORMATION. From the date of this
Agreement until the Effective Time, each party shall (i) afford
the other party and its Representatives, reasonable access at
reasonable times, upon reasonable prior notice, to the officers,
employees, agents, properties, offices and other facilities of
such party and its Subsidiaries and to the books and records
thereof and (ii) furnish promptly to the other party and its
Representatives such information concerning the business,
properties, contracts, records and personnel of such party and
its Subsidiaries (including financial, operating and other data
and information) as may be reasonably requested, from time to
time, by the other party.
SECTION 6.8. NASDAQ LISTING. Gaiam shall cause the Gaiam
Class A to be issued in connection with the Merger to be approved
for listing on the National Market System of The Nasdaq Stock
Market, Inc., subject to official notice of issuance, prior to
the Effective Time.
SECTION 6.9. RULE 145. Real Goods shall cause each person
who is, at the time this Agreement is submitted for adoption by
the shareholders of Real Goods, an "affiliate" of Real Goods for
purposes of Rule 145 under the Securities Act, to deliver to
Gaiam as of the Closing Date, a written agreement substantially
in the form attached as Exhibit A hereto.
SECTION 6.10. FAIRNESS OPINION. Real Goods will deliver to
Gaiam, on or before the date the Proxy Statement is mailed to
Real Goods shareholders (i) an opinion of Real Goods financial
advisor, addressed to Real Goods, as to the fairness of the
Merger to Real Goods shareholders from a financial point of view
and (ii) a letters of Moss Adams LLP and Deloitte and Touche LLP
stating their conclusions as to the accuracy of certain
information derived from the financial records of Real Goods and
its Subsidiaries and contained in the Registration Statement.
Such opinion and letter shall be satisfactory to Gaiam in form
and substance.
ARTICLE 7
CONDITIONS
SECTION 7.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
The obligations of Gaiam and Real Goods to consummate the Merger
are subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have been adopted
and approved by the shareholders of Real Goods in accordance
with the California Law;
(b) no provision of any existing law or regulation
and no judgment, injunction, order or decree shall prohibit or
threaten to prohibit the consummation of the Merger or the other
transactions contemplated by this Agreement;
(c) all material actions by or in respect of or filings
with any governmental body, agency, official or authority
required to permit the consummation of the Merger and the other
transactions contemplated by this Agreement shall have been
obtained;
(d) the Registration Statement shall have become effective
under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order and no stop order or
similar restraining order shall be threatened or entered
by the SEC or any state securities administration preventing the
Merger;
(e) the shares of Gaiam Class A issuable to Real Goods'
shareholders as contemplated by this Agreement shall have been
approved for listing on the National Market System of The Nasdaq
Stock Market, Inc., subject to official notice of issuance;
(f) there shall not be pending any action or proceeding
(or any investigation or other inquiry that might result in such
an action or proceeding) by any governmental authority or
administrative agency before any governmental authority,
administrative agency or court of competent jurisdiction,
domestic or foreign, nor shall there be in effect any judgment,
decree or order of any governmental authority, administrative
agency or court of competent jurisdiction, or any other legal
restraint, (i) preventing or seeking to prevent consummation of
the Merger or the other transactions contemplated by this
Agreement, (ii) prohibiting or seeking to prohibit or limiting or
seeking to limit any party from exercising all material rights
and privileges pertaining to its ownership of Real Goods or any
of its Subsidiaries, or (iii) compelling or seeking to compel
Real Goods, Gaiam or any of their Subsidiaries to dispose of or
hold separate all or any material portion of the business or
assets of Real Goods or any of its Subsidiaries (including the
Surviving Corporation and its Subsidiaries), in each case as a
result of the Merger or the other transactions contemplated by
this Agreement, nor shall there be any threat of any matter of a
type referred to in clauses (ii) or (iii) above which would
reasonably be expected to have a Real Goods Material Adverse
Effect or a Gaiam Material Adverse Effect; and
(g) no statute, rule, regulation or order shall be
enacted, entered, proposed, enforced or deemed applicable to the
Merger which makes the consummation of the transactions
contemplated by this Agreement illegal.
SECTION 7.2. CONDITIONS TO THE OBLIGATIONS OF REAL GOODS.
The obligations of Real Goods to consummate the Merger and the
other transactions contemplated by this Agreement, are subject to
the satisfaction of the following further conditions:
(a) (i) Gaiam shall have performed in all material
respects all of its obligations under this Agreement required to
be performed by it at or prior to the Effective Time, and (ii)
except for such inaccuracies or omissions the consequences of
which would not singly or in the aggregate reasonably be expected
to impede the receipt of the Merger Consideration by Real Goods'
shareholders, the representations and warranties of Gaiam
contained in this Agreement and in any certificate or other
writing delivered by Gaiam pursuant hereto shall be true in all
respects at and as of the Effective Time as if made at and as of
such time (except to the extent such representation or warranty
is made as of an earlier date, in which case the representation
or warranty shall be true in all respects as of such date) and
Real Goods shall have received a certificate signed by an officer
of Gaiam to the foregoing effect;
(b) all consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be
made, by Gaiam for the consummation by it of the transactions
contemplated by this Agreement shall have been obtained and made
by Gaiam, except where the failure to receive such consents, etc.
would not reasonably be expected to impede the receipt of the
Merger Consideration by Real Goods' shareholders;
(c) except as disclosed in the Gaiam Current SEC
Reports, at any time after June 30, 2000, there shall not have
occurred any material adverse change in the general affairs,
management, business, operations, assets, condition (financial or
otherwise) or prospects of Gaiam and its Subsidiaries, taken as a
whole; and
(d) all actions to be taken by Gaiam in connection with
consummation of the transactions contemplated by this Agreement
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated by this
Agreement will be reasonably satisfactory in form and substance
to Real Goods.
Real Goods may waive any condition specified in this
Section 7.2 if it executes a writing so stating at or prior to
the Effective Time.
SECTION 7.3. CONDITIONS TO THE OBLIGATIONS OF GAIAM. The
obligations of Gaiam to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) (i) Real Goods shall have performed in all material
respects all of its obligations under this Agreement required to
be performed by it at or prior to the Effective Time, and (ii)
except for such inaccuracies or omissions the consequences of
which would not singly or in the aggregate constitute a Real
Goods Material Adverse Effect, the representations and warranties
of Real Goods contained in this Agreement and in any certificate
or other writing delivered by Real Goods pursuant hereto shall be
true in all respects at and as of the Effective Time as if made
at and as of such time (except to the extent such representation
or warranty is made as of an earlier date, in which case the
representation or warranty shall be true in all respects as of
such date) and Gaiam shall have received a certificate signed by
an officer of Real Goods to the foregoing effect;
(b) all consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be
made, by Real Goods for the consummation by it of the
transactions contemplated by this Agreement shall have been
obtained and made by Real Goods, except where the failure to
receive such consents, etc. would not reasonably be expected to
have a Real Goods Material Adverse Effect;
(c) except as disclosed in the Real Goods 10-K or the Real
Goods 10-Q, at any time after June 30, 2000, there shall not have
occurred any material adverse change in the general affairs,
management, business, operations, assets, condition (financial or
otherwise) or prospects of Real Goods and its Subsidiaries, taken
as a whole (the recent departure of Real Goods' President and
Chief Financial Officer and Real Goods' operating losses through
September as disclosed to Gaiam shall not be considered a
material adverse change for purposes of this Section 7.3(c));
(d) Gaiam shall have received all documents it may
reasonably request relating to Real Goods, all in form and
substance satisfactory to Gaiam;
(e) no more than 5% of Real Goods Common Shares shall be
Dissenting Shares; and
(f) all actions to be taken by Real Goods in connection
with consummation of the transactions contemplated by this
Agreement and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated by
this Agreement will be reasonably satisfactory in form and
substance to Gaiam.
Gaiam may waive any condition specified in this Section
7.3 if it executes a writing so stating at or prior to the
Effective Time.
ARTICLE 8
TERMINATION
SECTION 8.1. TERMINATION. This Agreement may be terminated
and the Merger and the other transactions contemplated by this
Agreement may be abandoned at any time prior to the Effective
Time (notwithstanding any approval of this Agreement by the
shareholders of Real Goods):
(a) by mutual written consent of Gaiam and Real Goods;
(b) by either Gaiam or Real Goods, if the Merger has
not been consummated within six months of the date of this
Agreement;
(c) by either Gaiam or Real Goods, if there shall be
any law or regulation that makes consummation of the Merger
illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Gaiam or Real Goods from consummating
the Merger is entered and such judgment, injunction, order or
decree shall become final and nonappealable;
(d) by Gaiam, if any Person, entity or Group other than
Gaiam and its Affiliates shall have increased its beneficial
ownership (calculated in accordance with Rule 13d-3 under the
Exchange Act) of Real Goods Common Shares by an amount equal to
15% or more of the outstanding Real Goods Common Shares compared
with its level of ownership on the date of this Agreement;
(e) by Gaiam if any representation or warranty of Real
Goods set forth in this Agreement shall be untrue when made such
that the condition set forth in Section 7.3(a) would not be
satisfied; PROVIDED that, if such representation or warranty is
curable prior to the date 30 days after notice to Real Goods by
Gaiam of such breach, through the exercise by Real Goods of its
reasonable best efforts, so that the condition in Section 7.3(a)
would be satisfied, and for so long as Real Goods continues to
exercise such reasonable best efforts, Gaiam will not have the
right to terminate this Agreement under this Section;
(f) by Gaiam upon a breach of any covenant or agreement on
the part of Real Goods set forth in this Agreement such that the
condition set forth in Section 7.3(a) would not be satisfied;
PROVIDED that, if such breach is curable prior to the date 30
days after notice to Real Goods by Gaiam of such breach, through
the exercise by Real Goods of its reasonable best efforts, so
that the condition in Section 7.3(a) would be satisfied, and for
so long as Real Goods continues to exercise such reasonable best
efforts, Gaiam will not have the right to terminate this
Agreement under this Section;
(g) by Gaiam (i) if the Board of Directors of Real Goods
shall have withdrawn or modified or amended, in a manner adverse
in any material respect to Gaiam, its approval of this Agreement
and the Merger or its recommendation set forth in Section 1.1(g),
(ii) if the Board of Directors of Real Goods shall have approved,
recommended or endorsed any Acquisition Proposal other than the
Merger, (iii) if Real Goods shall have failed to call the Real
Goods Shareholder Meeting within a reasonable time after
completion of the SEC review process or shall have failed as
promptly as reasonably practicable thereafter to mail the
Registration Statement or Proxy Statement to its shareholders or
(iv) if Real Goods shall have failed to include in such Proxy
Statement the recommendation referred to above;
(h) by Real Goods if (i) its Board of Directors determines
in good faith that an Acquisition Proposal is financially
superior to the transactions contemplated by this Agreement and
is reasonably capable of being financed, (ii) Real Goods has
complied with the requirements of Section 5.3, (iii) concurrently
with such termination, Real Goods makes all payments required by
Section 8.3(b), and (iv) concurrently with such termination, Real
Goods enters into a definitive agreement to effect the
financially superior Acquisition Proposal;
(i) by Real Goods or Gaiam if, at a duly held shareholder
meeting of Real Goods or any adjournment thereof at which this
Agreement and the Merger is voted upon, the requisite shareholder
adoption and approval shall not have been obtained;
(j) by Real Goods if any representation or warranty of
Gaiam set forth in this Agreement shall be untrue when made such
that the condition set forth in Section 7.2(a) would not be
satisfied; PROVIDED that, if such representation or warranty is
curable prior to the date 30 days after notice to Gaiam by Real
Goods of such breach, through the exercise by Gaiam of its
reasonable best efforts, so that the condition in Section 7.2(a)
would be satisfied, and so long as Gaiam continues to exercise
such reasonable best efforts, Real Goods will not have the right
to terminate this Agreement under this Section;
(k) by Real Goods upon a breach of any covenant or
agreement on the part of Gaiam set forth in this Agreement such
that the condition set forth in Section 7.2(a) would not be
satisfied; PROVIDED that, if such breach is curable prior to the
date 30 days after notice to Gaiam by Real Goods of such breach,
through the exercise by Gaiam of its reasonable best efforts, so
that the condition in Section 7.2(a) would be satisfied, and for
so long as Gaiam continues to exercise such reasonable best
efforts, Real Goods will not have the right to terminate this
Agreement under this Section;
(l) by Real Goods, if the average closing price of a
share of the Gaiam Class A on the principal trading market on
which the Gaiam Class A shares are then traded over the thirty
(30) days preceding the date of the Real Goods Shareholder
Meeting (the "Average Price") is less than $12 per share;
PROVIDED that, prior to termination under this Section 8.1(l),
Real Goods must give Gaiam two business days notice of its intent
to terminate and if Gaiam agrees to increase the Exchange Ratio
to the Increased Exchange Ratio (as defined below) within such
two business day period, Real Goods shall not have the right to
terminate this Agreement under this Section 8.1(l) and the
Exchange Ratio in that case shall be adjusted to equal the
Increased Exchange Ratio. The "INCREASED EXCHANGE RATIO" shall
equal the Exchange Ratio multiplied by a fraction (1) the
numerator of which is $12 and (2) the denominator of which is the
Average Price; and
(m) by Gaiam, if the Average Price is greater than $22
per share; PROVIDED that, prior to termination under this Section
8.1(m), Gaiam must give Real Goods two business days notice of
its intent to terminate and if Real Goods agrees to decrease the
Exchange Ratio to the Decreased Exchange Ratio (as defined below)
within such two business day period, Gaiam shall not have the
right to terminate this Agreement under this Section 8.1(m) and
the Exchange Ratio in that case shall be adjusted to equal the
Decreased Exchange Ratio. The "DECREASED EXCHANGE RATIO" shall
equal the Exchange Ratio multiplied by a fraction (1) the
numerator of which is $22 and (2) the denominator of which is the
Average Price.
The party desiring to terminate this Agreement pursuant
to clauses 8.1(b) through 8.1(m) shall give written notice of
such termination to the other parties in accordance with Section
8.1.
SECTION 8.2. EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 8.1, this Agreement shall become
void and of no effect with no liability on the part of any party
hereto, except for liability or damages resulting from a willful
breach of this Agreement and except that the agreements contained
in this Section 8.2 and in Sections 8.3 and Article 9 shall
survive the termination hereof.
SECTION 8.3. CERTAIN FEES. (a) Except as provided in
Section 8.3(b), all costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such
cost or expense.
(b) In the event of a termination of this Agreement by
Gaiam pursuant to Section 8.1(g) or by Real Goods pursuant to
Section 8.1(h), then Real Goods shall pay Gaiam by wire transfer
of immediately available funds to an account specified by Gaiam,
within two business days, $1,000,000 to reimburse Gaiam for its
documented fees and expenses (including the fees and expenses of
counsel, accountants, consultants and advisors) incurred in
connection with this Agreement and the transactions contemplated
hereby and as liquidated damages.
(c) In the event of a termination of this Agreement by
Gaiam for any reason other than as set forth in Section 8.1, then
Gaiam shall pay Real Goods by wire transfer of immediately
available funds to an account specified by Real Goods, within two
business days, $1,000,000 to reimburse Real Goods for its
documented fees and expenses (including the fees and expenses of
counsel, accountants, consultants and advisors) incurred in
connection with this Agreement and the transactions contemplated
hereby and as liquidated damages.
(d) By agreeing to liquidated damages in Section 8.3(b)
and 8.3(c), the parties acknowledge that (i) such liquidated
damages are an integral part of the transactions contemplated by
this Agreement and constitute liquidated damages and not a
penalty, and (ii) such liquidated damages are necessary because
actual damages arising from the loss of opportunity would not be
determinable with any degree of certainty. If a party fails to
promptly pay the liquidated damages due under Section 8.3(b) or
8.3(c), the defaulting party shall pay the costs and expenses
(including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate as
reported in The Wall Street Journal from the date such damages
were required to be paid.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing
(including telecopy or similar writing) and shall be given:
if to Gaiam or Gaiam Subsidiary: if to Real Goods:
Gaiam, Inc. Real Goods Trading Corp.
360 Interlocken Blvd. 3440 Airway Drive
Suite 300 Suite E
Broomfield, CO 80021 Santa Rosa, CA 95403
with a copy to: with a copy to:
Thomas R. Stephens Barry Reder
Bartlit Beck Herman Palenchar Coblentz, Patch, Duffy
& Scott & Bass, LLP
1899 Wynkoop Street, Suite 800 222 Kearny St., 7th Fl.
Denver, CO 80202 San Francisco,CA 94108
or such other address or telecopy number as such party may
hereafter specify for the purpose by notice to the other parties
hereto. Each such notice, request or other communication shall be
effective (a) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and
the appropriate telecopy confirmation is received or (b) if given
by any other means, when delivered at the address specified in
this Section.
SECTION 9.2. AMENDMENTS; NO WAIVERS. (a) Any provision of
this Agreement may be amended or waived prior to the Effective
Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the parties hereto, in
the case of a waiver, by the party against whom the waiver is to
be effective; PROVIDED that after the adoption of this Agreement
by the shareholders of Real Goods, no such amendment or waiver
shall, without the further approval of such shareholders, alter
or change (i) the Merger Consideration, (ii) any term of the
articles of incorporation of the Surviving Corporation or (iii)
any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of any
shares of capital stock of Real Goods.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege.
SECTION 9.3. RULES OF CONSTRUCTION. Unless the context
otherwise requires, as used in this Agreement: (i) all defined
terms used herein and not otherwise defined have the meanings
assigned to such terms in Annex I hereto, (ii) an accounting term
not otherwise defined has the meaning ascribed to it in
accordance with generally accepted accounting principles; (iii)
"or" is not exclusive; (iv) "including" means "including, without
limitation," (v) words in the singular include the plural and
words in the plural include the singular, and (vi) masculine
pronouns shall be deemed to include the feminine counterpart and
vice versa.
SECTION 9.4. SUCCESSORS AND ASSIGNS. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the
consent of the other parties hereto.
SECTION 9.5. GOVERNING LAW; ETC. (a) Governing Law.
The terms of this Agreement shall be construed in accordance with
and governed by the law of the State of Colorado (without regard
to principles of conflict of laws).
(b) JURISDICTION. Each of the parties hereto agrees that
any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated by this Agreement
may be brought against any of the parties in the United States
District Court for the District of Colorado or the District of
Colorado or any state court sitting in the City of Denver,
Colorado, and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate
appellate courts) in any such suit, action, or proceeding and
waives any objection to venue laid therein. Process in any suit,
action or proceeding may be served on any party anywhere in the
world, whether within or without the State of Colorado or the
State of Colorado. Without limiting the foregoing, each of the
parties hereto agrees that service of process upon such party at
the address referred to in Section 9.1, together with written
notice of such service to such party, shall be deemed effective
service of process upon such party.
(c) SPECIFIC PERFORMANCE. Each of the parties
acknowledges and agrees that the parties' respective remedies at
law for a breach or threatened breach of any of the provisions of
this agreement would be inadequate and, in recognition of that
fact, each agrees that, in the event of a breach or threatened
breach by any party of the provisions of this Agreement, in
addition to any remedies at law, each party, respectively,
without posting any bond, shall be entitled to obtain equitable
relief in the form of specific performance, a temporary
restraining order, a temporary or permanent injunction or any
other equitable remedy which may then be available.
(d) WAIVER OF JURY TRIAL. Each of the parties hereto
hereby irrevocably waives all right to trial by jury in any
action, proceeding or counterclaim (whether based on contract,
tort or otherwise) arising out of or relating to this Agreement
or the actions of any of them in the negotiation, administration,
performance and enforcement thereof.
SECTION 9.6. COUNTERPARTS; EFFECTIVENESS. This Agreement
may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall
become effective when each party hereto shall have received
counterparts (or signature pages) hereof signed by all of the
other parties hereto.
SECTION 9.7. PARTIES IN INTEREST. Nothing in this
Agreement is intended to or shall confer upon any other Person,
other than the parties hereto and their respective permitted
successors and assigns, any right, benefit or remedy of any
nature or kind whatsoever under or by reason of this Agreement.
SECTION 9.8. SEVERABILITY. If any provisions of this
Agreement or the application thereof to either party or set of
circumstances shall in any jurisdiction and to any extent, be
finally held invalid or unenforceable, such term or provision
shall only be ineffective as to such jurisdiction, and only to
the extent of such invalidity or unenforceability, without
invalidating or rendering unenforceable any other terms or
provisions of this Agreement or under any other circumstances,
and the parties shall negotiate in good faith a substitute
provision which comes as close as possible to the invalidated or
unenforceable term or provision, and which puts each party in a
position as nearly comparable as possible to the position it
would have been in but for the finding of invalidity or
unenforceability, while remaining valid and enforceable.
SECTION 9.9. ENTIRE AGREEMENT. This Agreement constitutes
the entire agreement among the parties to this Agreement with
respect to the subject matter of this Agreement and supersedes
all prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter of this
Agreement.
SECTION 9.10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained herein and in any
certificate or writing delivered pursuant hereto shall not
survive the Effective Time or, if earlier, the termination of
this Agreement.
</PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
GAIAM, INC.
By: [S]JIRKA RYSAVY
Jirka Rysavy
Chief Executive Officer
REAL GOODS TRADING CORPORATION
By: [S]JOHN SCHAEFFER
John Schaeffer
Chief Executive Officer
</PAGE>
ANNEX I
DEFINED TERMS
The following terms when used in the Agreement shall have
the meanings set forth below unless the context shall otherwise
require:
"ACQUISITION PROPOSAL" shall mean any proposal or offer with
respect to (i) a tender or exchange offer, a merger,
consolidation or other business combination involving Real Goods
or any of its Subsidiaries (including a merger of equals of Real
Goods), or (ii) the acquisition of an equity interest in Real
Goods representing in excess of 33% of the power to vote for the
election of a majority of directors of Real Goods or (iii) the
acquisition of assets of Real Goods or its Subsidiaries
(including stock of one or more Subsidiaries of Real Goods)
representing 33% or more of the consolidated assets of Real
Goods, in each case by any Person other than Gaiam or its
Affiliates.
"ADDITIONAL PAYMENTS" shall have the meaning as set forth in
Section 1.3(c) of this Agreement.
"AFFILIATE" shall, with respect to any Person, mean any
other Person that controls, is controlled by or is under common
control with the former. The term "control" and correlative
terms shall have the meanings ascribed to them in Rule 405 under
the Securities Act.
"BLUE SKY LAWS" shall mean any applicable state securities
laws.
"CALIFORNIA LAW" shall have the meaning as set forth in
Section 1.1(a) of this Agreement.
"CERTIFICATES" shall have the meaning as set forth in
Section 1.3(b) of this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"COURT" shall mean any court, federal, state or local, or
arbitration tribunal.
"DECREASED EXCHANGE RATIO" shall have the meaning as set
forth in Section 8.1(m) of this Agreement.
"DISSENTING SHARES" shall have the meaning as set forth in
Section 1.4 of this Agreement.
"EFFECTIVE TIME" shall have the meaning as set forth in
Section 1.1(c) of this Agreement.
"ENVIRONMENTAL LAW OR LAWS" shall mean any and all laws,
statutes, ordinances, rules, regulations, or orders of any
Governmental Authority pertaining to the protection of the
environment, as in effect at the applicable time and that are
applicable to a specified Person and such Person's Subsidiaries,
including the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980
("CERCLA"), as amended, the Federal Water Pollution Control Act,
as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended,
the Toxic Substances Control Act, as amended, the Hazardous &
Solid Waste Amendments Act of 1984, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the
Hazardous Materials Transportation Act, as amended, and any state
laws implementing the foregoing federal laws, and all other
environmental conservation or protection laws. For purposes of
the Agreement, "Environmental Laws" shall not include laws
primarily related to the protection of human health and safety
and the terms "hazardous substance" and "releases" have the
meanings specified in CERCLA (but without regard to the
exclusions set forth in the definition of hazardous substance);
provided, however, that to the extent other federal laws or the
laws of the state in which the property is located establish a
meaning for "hazardous substance" or "release" that is broader
than that specified in CERCLA, such broader meaning shall apply,
and the term "hazardous substance" shall include all dehydration
and treating wastes, and (to the extent in excess of background
levels) radioactive material, even if such items are not
classified as hazardous substances or wastes pursuant to CERCLA,
or RCRA or the analogous statutes of any applicable jurisdiction.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated
thereunder.
"EXCHANGE AGENT" means a national bank or trust company or
other financial institution or transfer agent designated by Gaiam
prior to the Effective Time to act as exchange agent in
exchanging Real Goods Common Shares for the Merger Consideration.
"EXCHANGE FUND" shall have the meaning as set forth in
Section 3.2(a) of this Agreement.
"EXCHANGE RATIO" shall have the meaning as set forth in
Section 1.2(b) of this Agreement.
"EXPENSES" shall mean all of actual, documented and
reasonable out-of-pocket expenses (including all reasonable fees
and expenses of counsel, accountants, investment bankers,
experts and consultants to Gaiam and its Affiliates) incurred by
Gaiam or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and
performance of this Agreement, and all other matters related to
the consummation of the transactions contemplated by this
Agreement.
"GAIAM" shall mean Gaiam, Inc., a Colorado corporation.
"GAIAM 10-K" shall have the meaning as set forth in Section
4.7 of this Agreement.
"GAIAM 10-QS" shall have the meaning as set forth in Section
4.7 of this Agreement.
"GAIAM BALANCE SHEET" shall have the meaning as set forth in
Section 4.8 of this Agreement.
"GAIAM CLASS A" shall mean class A common stock of Gaiam.
"GAIAM EMPLOYEE PLAN" means each "employee benefit plan", as
defined in Section 3(3) of ERISA, which (i) is subject to any
provision of ERISA and (ii) is maintained, administered or
contributed to by Gaiam or any affiliate (as defined in Section
3.13) and covers any director, officer or employee or former
director, officer or employee of Gaiam or of any affiliate, or
under which Gaiam or any affiliate has any liability.
"GAIAM MATERIAL ADVERSE EFFECT" shall mean a material
adverse effect on the condition (financial or otherwise),
business, assets or results of operations or prospects of Gaiam
and its Subsidiaries, taken as a whole, other than changes in
general economic conditions or in the economic conditions
affecting Gaiam's industry.
"GAIAM SEC REPORTS" shall have the meaning as set forth in
Section 4.7 of this Agreement.
"GAIAM SUBSIDIARY" shall have the meaning as set forth in
the recitals to this Agreement.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state or
local governmental agency or authority (other than a Court).
"GROUP" shall have the meaning set forth in Section 13(d)(3)
of the Exchange Act.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"INCREASED EXCHANGE RATIO" shall have the meaning as set
forth in Section 8.1(l) of this Agreement.
"INTELLECTUAL PROPERTY RIGHTS" means patents, registered and
material unregistered trademarks and service marks, registered
copyrights, trade names and any applications therefor and trade
secrets.
"IRS" shall mean the Internal Revenue Service.
"KNOWLEDGE OF GAIAM" (and any other phrase to substantially
similar effect) means the actual knowledge of either Jirka Rysavy
or Lynn Powers, in each case after reasonable inquiry with any
person who is principally responsible for the subject matter of
any representation or warranty given to the Knowledge of Gaiam.
"KNOWLEDGE OF REAL GOODS" (and any other phrase to
substantially similar effect) means the actual knowledge of John
Schaeffer after reasonable inquiry with any person who is
principally responsible for the subject matter of any
representation or warranty given to the Knowledge of Real Goods.
"LAW" shall mean all laws, statutes, ordinances, rules and
regulations of the United States, any foreign country, or any
domestic or foreign state, and any political subdivision or
agency thereof, including all decisions of Courts having the
effect of law in each such jurisdiction.
"LIEN" shall mean, with respect to any asset, any mortgage,
pledge, security interest, encumbrance, lien or charge of any
kind (including any agreement to give any of the foregoing), any
conditional sale or other title retention agreement, any lease in
the nature thereof or the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any
jurisdiction, with respect to such an asset.
"MATERIAL" shall mean material to the condition (financial
and other), results of operations, prospects or business of a
specified Person and its Subsidiaries, if any, taken as a whole.
"MATERIAL CONTRACT" shall mean, as between any Person (the
"Disclosing Person") or any of its Subsidiaries, on the one hand,
and any other Person other than any other member of the group
consisting of the Disclosing Person and its Subsidiaries, on the
other hand:
(1) Any collective bargaining agreement or other agreement
with any labor union;
(2) Any employment or consulting agreement, contract or
commitment between the Disclosing Person or any of its
Subsidiaries and any employee, officer or director thereof (i)
having more than one year to run from the date hereof, (ii)
providing for an obligation to pay or accrue compensation of
$80,000 or more per annum or (iii) providing for the payment or
accrual of any additional compensation upon a change in control
of the Disclosing Person or any of its subsidiaries or upon any
termination of such employment or consulting relationship
following a change in control of the Disclosing Person or any of
its Subsidiaries;
(3) Any agency or representation agreement with any Person
which is not terminable by the Disclosing Person or one of its
Subsidiaries without penalty upon not more than ninety (90) days'
notice providing for the payments to such person of $80,000 or
more;
(4) Any partnership, joint venture or profit sharing
agreement between the Disclosing Person or its Subsidiaries with
any Person involving aggregate payments in excess of $80,000;
(5) Any agreement, contract, commitment, indenture or other
instrument relating to the borrowing of money in a principal
amount of $80,000 or more or any direct or indirect guarantee of
any obligation of any other Person or Governmental Authority for,
or agreement to service the repayment of, borrowed money in a
principal amount of $80,000 or more, including any agreement or
arrangement (i) relating to the maintenance of compensating money
balances, (ii) with respect to lines of credit or letters of
credit, (iii) relating to the purchase or repurchase obligations
of any other Person or Governmental Authority, (iv) to advance or
supply funds to or to invest in any other Person or Governmental
Authority, (v) to pay for property, products or services of any
other Person or Governmental Authority even if such property,
products or services are not conveyed, delivered or rendered and
(vi) to guarantee any lease or other similar periodic payments to
be made by any other Person or Governmental Authority;
(6) Any lease with annual rental payments aggregating
$80,000 or more that is not terminable without premium or penalty
on ninety (90) days' or less notice;
(7) Any agreement, contract or commitment for the
disposition or acquisition of any investment in any Person if
such investment requires payment of $80,000 or more;
(8) Any other agreement, contract or commitment which
involves payment or potential payment, pursuant to the terms of
such agreement, contract or commitment, by or to the Disclosing
Person or any of its Subsidiaries of $80,000 or more within any
twelve month period commencing after the date of the Agreement.
"MERGER" shall have the meaning as set forth in Section
1.1(a) of this Agreement.
"MERGER CONSIDERATION" shall have the meaning as set forth
in Section 1.2(b) of this Agreement.
"ORDER" shall mean any judgment, order or decree of any
court, arbitration tribunal or Governmental Authority, federal,
state or local.
"PERMIT" shall mean any and all permits, licenses,
authorizations, orders, certificates, registrations or other
approvals granted by any federal, state, local or foreign
Governmental Authority.
"PERMITTED ENCUMBRANCES" shall mean the following:
(1) Liens for taxes, assessments and other governmental
charges not delinquent or which are currently being contested in
good faith by appropriate proceedings; provided that, in the
latter case, adequate reserves shall have been set aside with
respect thereto;
(2) all rights, if any, to consent by, required notices to,
filings with, or other actions by any Governmental Authority in
connection with the contribution or the operation of any assets;
(3) mechanics', repairmen's, employees', contractors',
materialmen's or other similar Liens not filed of record and
similar charges not delinquent or which are filed of record but
are being contested in good faith by appropriate proceedings;
provided that, in the latter case, adequate reserves shall have
been set aside with respect thereto;
(4) Liens in respect of judgments or awards currently being
prosecuted in good faith on an appeal or other proceeding for
review and with respect to which a stay of execution pending such
appeal or such proceeding for review shall have been secured;
provided that adequate reserves shall have been set aside with
respect thereto;
(5) easements, leases, reservations or other rights of
others in, or minor defects and irregularities in title to,
property or assets; provided that such easements, leases,
reservations, rights, defects or irregularities do not materially
impair the use of such property or assets for the purposes for
which they are held; and
(6) any lien or privilege vested in any lessor, licensor or
permittor for rent or other obligations, so long as the payment
of such rent or the performance of such obligations is not
delinquent.
"PERSON" shall mean an individual, partnership, limited
liability company, corporation, joint stock company, trust,
estate, joint venture, association or unincorporated
organization, or any other entity or organization, including a
government or political subdivision or any agency or
instrumentality thereof.
"Proxy Statement" shall have the meaning as set forth in Section
3.9 of this Agreement.
"REAL GOODS" shall mean Real Goods Trading Corporation, a
California corporation
"REAL GOODS 10-K" means Real Goods' annual report on Form
10-K for the fiscal year ended March 31, 2000.
"REAL GOODS 10-Q" shall have the meaning as set forth in
Section 3.7 of this Agreement.
"REAL GOODS BALANCE SHEET" shall have the meaning as set
forth in Section 3.8 of this Agreement.
"REAL GOODS COMMON SHARES" shall mean each share of common
stock, no par value, of Real Goods.
"REAL GOODS EMPLOYEE PLAN" means each "employee benefit
plan", as defined in Section 3(3) of ERISA, which (i) is subject
to any provision of ERISA and (ii) is maintained, administered or
contributed to by Real Goods or any affiliate (as defined in
Section 3.13) and covers any director, officer or employee or
former director, officer or employee of Real Goods or of any
affiliate, or under which Real Goods or any affiliate has any
liability.
"REAL GOODS MATERIAL ADVERSE EFFECT" shall mean a material
adverse effect on the condition (financial or otherwise),
business, assets or results of operations or prospects of Real
Goods and its Subsidiaries, taken as a whole, other than changes
in general economic conditions or in the economic conditions
affecting Real Goods' industry.
"REAL GOODS MOST RECENT FINANCIALS" shall have the meaning
as set forth in Section 3.8 of this Agreement.
"REAL GOODS' REPRESENTATIVES" shall mean the officers,
directors, employees, accountants, consultants, legal counsel,
agents and other representatives, including environmental
engineers, of Real Goods.
"REAL GOODS SEC REPORTS" shall have the meaning as set forth
in Section 3.7 of this Agreement.
"REAL GOODS SHAREHOLDER APPROVAL" shall have the meaning as
set forth in Section 6.1(c) of this Agreement.
"REAL GOODS SHAREHOLDER MEETING" shall have the meaning as
set forth in Section 6.1(c) of this Agreement.
"REGISTRATION STATEMENT" shall have the meaning as set forth
in Section 3.9 of this Agreement.
"REGULATION" shall mean any rule or regulation of any
Governmental Authority having the effect of law.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SUBSIDIARY" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or
other persons performing similar functions are directly or
indirectly owned by a Person.
"SURVIVING CORPORATION" shall have the meaning as set forth
in Section 1.1(a) of this Agreement.
"TAX" OR "TAXES" shall mean taxes, fees, levies, duties,
tariffs, imposts, and governmental impositions or charges of any
kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, including
(without limitation) (i) income, franchise, profits, gross
receipts, ad valorem, net worth, value added, sales, use,
service, real or personal property, special assessments, capital
stock, license, payroll, withholding, employment, social
security, workers' compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits,
alternative or add-on minimum, estimated, environmental
(including taxes under Code section 59A), unemployment, transfer
and gains taxes, and (ii) interest, penalties, additional taxes,
fines and other additions to tax imposed with respect thereto and
any interest in respect of such penalties, additional taxes,
fines and other additional amounts; and "Tax Returns" shall mean
returns, reports, and information statements with respect to
Taxes required to be filed with the IRS or any other taxing
authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns (including returns
required in connection with any Gaiam Employee Plan or Real Goods
Employee Plan, as the case may be).
"THIRD-PARTY INTELLECTUAL PROPERTY RIGHTS" means patents,
registered and material unregistered trademarks and service
marks, registered copyrights, trade names and any applications
therefor and trade secrets owned by a Person other than Gaiam and
its Subsidiaries or Real Goods and its Subsidiaries, as the case
may be.
</PAGE>
EXHIBIT A
[FORM OF REAL GOODS AFFILIATE LETTER]
Ladies and Gentlemen:
I have been advised that I may be considered to be an
"affiliate" of Real Goods Trading Corporation, Inc. ("Real Goods"
or the "Company") for purposes of Rule 145 under the Securities
Act of 1933, as amended (the "Securities Act").
Gaiam, Inc. ("Gaiam") and Real Goods have entered into an
Agreement and Plan of Merger dated as of October 13, 2000 (the
"Merger Agreement"). Upon consummation of the transactions
contemplated by the Merger Agreement (the "Merger"), I will
receive shares of capital stock of Gaiam for all of the shares of
capital stock of Real Goods owned by me or as to which I may be
deemed a beneficial owner. I own shares of common stock of
Real Goods. Such shares will be converted in the Merger into
shares of common stock of Gaiam as described in the Merger
Agreement. The shares of Real Goods capital stock and Gaiam
capital stock owned by me or as to which I may deem to be a
beneficial owner prior to the Merger are hereinafter collectively
referred to as the "Pre-Merger Stock" and the shares of Gaiam
capital stock received by me in the Merger are hereinafter
collectively referred to as the "Exchange Stock." This agreement
is hereinafter referred to as the "Letter Agreement."
I represent and warrant to, and agree with, Real Goods and
Gaiam that:
A. I have read this Letter Agreement and the Merger
Agreement and have discussed their requirements and other
applicable limitations upon my ability to sell, transfer or
otherwise dispose of the Pre-Merger Stock and Exchange Stock, to
the extent I felt necessary, with my counsel or counsel for the
Company.
B. The shares of common stock of Gaiam that I shall receive
in exchange for my shares of common stock of the Company are not
being acquired by me with a view to their distribution except to
the extent and in the manner provided for in paragraph (d) of
Rule 145 under the Securities Act.
C. I agree with you not to dispose of any such shares of
common stock of Gaiam in any manner that would violate Rule 145.
I further agree with you that the certificate or certificates
representing such shares of common stock of Gaiam may bear a
legend referring to the restrictions on disposition thereof in
accordance with the provisions of the foregoing paragraph and
that stop transfer instructions may be filed with respect to such
shares with the transfer agent for such shares.
D. I understand that stop transfer instructions will be
given to the Company, Gaiam and their respective transfer agents,
as the case may be, with respect to the shares of Pre-Merger
Stock and the Exchange Stock in connection with the restrictions
set forth herein.
It is understood and agreed that this Letter Agreement shall
terminate and be of no further force and effect if the Merger
Agreement is terminated pursuant to the terms thereof.
The agreements made by me in the foregoing paragraphs are on
the understanding and condition that you agree, in the event that
any shares may be disposed of in accordance with the provisions
of the paragraphs above, to deliver in exchange for the
certificate or certificates representing such shares a new
certificate or certificates representing such shares not bearing
the legend and not subject to the stop transfer instruction
referred to in paragraph D above, and so long as I hold shares of
stock subject to the provisions of this agreement (but not for a
period in excess of two years from the date of consummation of
the Merger) to file with the Securities and Exchange Commission
or otherwise make publicly available all information about Gaiam,
to the extent available to you without unreasonable effort or
expense, necessary to enable me to resell shares under the
provisions of paragraph (d) of Rule 145.
This Letter Agreement shall be binding on my heirs, legal
representatives and successors.
Very truly yours,
[Name of Stockholder]
By:*
Name:
Title:
*To be completed if the stockholder is an entity other than an
individual 46106
