EXECUTION
VERSION
AGREEMENT AND PLAN OF
MERGER
by and among
BATTLE MOUNTAIN GOLD EXPLORATION
CORP.,
ROYAL GOLD, INC.,
and
ROYAL BATTLE MOUNTAIN,
INC.
Dated as of April 17,
2007
AGREEMENT AND PLAN OF
MERGER
This AGREEMENT AND PLAN OF
MERGER (this “ Agreement ”), dated as of
April 17, 2007, is entered into by and among Battle Mountain Gold
Exploration Corp., a Nevada corporation (the “ Company
”), Royal Gold, Inc., a Delaware corporation (the “
Acquiror ”), and Royal Battle Mountain, Inc., a Nevada
corporation (the “ Acquiror Sub ”) (the Company,
Acquiror and Acquiror Sub are individually hereinafter referred to
as “ Party ” and collectively as the “
Parties ”).
W I T N E S S E T H:
WHEREAS , Acquiror Sub, upon the terms and subject to
the conditions of this Agreement and in accordance with the
corporations law and the laws affecting mergers, conversions,
exchanges and domestications of the State of Nevada (collectively,
“ Nevada Law ”), will merge with and into
Company (the “ Merger ”);
WHEREAS , the Boards of Directors of the Company,
Acquiror and Acquiror Sub have determined that the Merger is
advisable and fair to their respective companies and shareholders
and approved and adopted this Agreement and the transactions
contemplated hereby;
WHEREAS , the Parties desire to make certain
representations, warranties and agreements in connection with the
Merger and also to prescribe certain conditions to the
Merger;
WHEREAS , Mark Kucher and IAMGOLD Corporation, who are
certain Shareholders of the Company, have entered into Option and
Support Agreements setting forth their obligations to approve this
Agreement and the transactions contemplated hereby;
WHEREAS , certain terms used in this Agreement are
defined in Article X ; and
WHEREAS , for federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization under
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Code.
NOW, THEREFORE
, in consideration of the premises
and the mutual covenants and agreements hereinafter contained, the
Parties hereby agree as follows:
ARTICLE I
THE MERGER
On the terms and subject to the
conditions set forth in this Agreement, and in accordance with
Nevada Law, at the Effective Time, Acquiror Sub shall be merged
with and into the Company, with the Company being the surviving
corporation (the “ Surviving Corporation ”) in
the Merger. Upon consummation of the Merger, the separate corporate
existence of Acquiror Sub shall cease, and the Surviving
Corporation shall continue to exist as a Nevada
corporation.
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1.2
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Closing; Closing Date
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Subject to the terms and conditions
of this Agreement, the closing of the Merger (the “
Closing ”) shall take place at the offices of Hogan
& Hartson L.L.P., located at One Tabor Center, 1200 Seventeenth
Street, Suite 1500, Denver, Colorado 80202 (or at such other place
as the Parties may designate in writing) at 10:00 a.m. (Mountain
time) on a date to be specified by the Parties (the “
Closing Date ”), which date shall be no later than the
third Business Day after satisfaction or waiver of the conditions
set forth in Article VIII (other than conditions that by
their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions at such time), unless
another time, date or place is agreed to in writing by the Parties
hereto.
Subject to the provisions of
Section 1.2 , as promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth
in Article VIII , the Surviving Corporation shall cause the
Merger to be consummated by filing the articles of merger, in such
form as required by, and executed in accordance with the relevant
provisions of, Nevada Law (the “ Articles of Merger
”) with the Secretary of State of the State of Nevada and any
other appropriate documents. The Merger shall become effective at
such date and time as the Articles of Merger are filed with the
Secretary of State of the State of Nevada or at such subsequent
date and time as Acquiror and the Company shall mutually agree and
as shall be specified in the Articles of Merger (the date and time
of such filing at which the Merger becomes effective being the
“ Effective Time ”).
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1.4
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Effect of the Merger .
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At the Effective Time, the effect of
the Merger shall be as set forth under Nevada Law. Without limiting
the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Acquiror Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the
Company and Acquiror Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
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1.5
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Articles of Incorporation;
Bylaws .
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(a) At
the Effective Time, the articles of incorporation of the Company as
the Surviving Corporation shall be amended and restated to read the
same as the articles of incorporation of Acquiror Sub in effect
immediately prior to the Effective Time, except that Section 1 of
the amended and restated articles of incorporation of the Surviving
Corporation shall read as follows: “The name of this
corporation is Battle Mountain Gold Exploration
Corp.”
(b) At
the Effective Time, the bylaws of the Company as the Surviving
Corporation shall be amended and restated to read the same as the
bylaws of Acquiror Sub in effect immediately prior to the Effective
Time, except that all references to Acquiror Sub in the amended and
restated bylaws of the Surviving Corporation shall be changed to
refer to Battle Mountain Gold Exploration Corp.
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1.6
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Directors and Officers
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At the Effective Time, the officers
and directors of Acquiror Sub immediately prior to the Effective
Time shall be the officers and directors of the Surviving
Corporation, in each case until heir respective successors are duly
elected or appointed and qualified or until the earlier of their
death, resignation or removal.
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1.7
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Taking of Necessary Action; Further
Action .
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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 the Surviving Corporation
with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and
Acquiror Sub, the officers and directors of the Company, Acquiror
and Acquiror Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all
such lawful and necessary action.
ARTICLE II
MERGER CONSIDERATION; CONVERSION OF
SECURITIES
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2.1
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Merger Consideration
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(a) The
maximum consideration shall be a number of shares of common stock,
par value $0.01 per share, of Acquiror (the “ Acquiror
Common Stock ”) calculated as of the Closing Date as
follows:
(i)
if the Acquiror Stock Price is
greater than or equal to $30.18, then the number of shares of
Acquiror Common Stock shall be 1,570,507;
(ii) if
the Acquiror Stock Price is both (x) less than $30.18 and (y)
greater than or equal to $29.00, then the number of shares of
Acquiror Common Stock shall be equal to the quotient of (A)
$47,397,901.26, divided by (B) the Acquiror Stock Price;
or
(iii) if the Acquiror Stock Price is less than $29.00,
then the number of shares of Acquiror Common Stock shall be
1,634,410.
The number of shares of Acquiror
Common Stock calculated in accordance with Section 2.1(a)(i)
, (ii) or (iii) is referred to herein as the “
Maximum Merger Consideration .” The amount per share
of Common Stock determined by dividing (I) the Maximum Merger
Consideration by (II) the sum of (X) the total number of
issued and outstanding shares of Common Stock immediately prior to
the Effective Time, plus (Y) 3,000,000 is referred to herein as the
“ Maximum Per Share Merger Consideration .” If
prior to the Effective Time, Acquiror should split or combine the
Acquiror Common Stock, or pay a dividend in shares of Acquiror
Common Stock or other distribution in such shares of Acquiror
Common Stock (but excluding any dividends or other distributions of
cash or other property in which case there shall not be any
adjustment to the 1,570,507 and 1,634,410 shares of Acquiror Common
Stock in clause (i) and
(iii) above or the per share prices
of $30.18 and $29.00 in clauses (i) through (iii)), then the
1,570,507 and 1,634,410 shares of Acquiror Common Stock in clause
(i) and (iii) above and the per share prices of $30.18 and $29.00
in clauses (i) through (iii) above shall be appropriately adjusted
to reflect such split, combination, dividend or distribution;
provided , however that the $47,397,901.26 in clause
(ii) above shall not be adjusted in the event of any such split,
combination, dividend or distribution.
(b) The
Maximum Merger Consideration shall be reduced by the amount of any
Pre-Closing Settlement Proceeds calculated and paid in accordance
with Section 7.13(a) and any Contingent Shares calculated
and withheld in accordance with Section 7.13(b) , which
reduced amount is referred to herein as the “ Effective
Time Merger Consideration .”
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2.2
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Effect on Capital
Stock .
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(a) As
of the Effective Time, by virtue of the Merger and without any
action on the part of the Company, Acquiror, Acquiror Sub or the
holders of any shares of common stock, par value $0.001 per share,
of the Company (the “ Common Stock ”), each
issued and outstanding share of Common Stock prior to the Effective
Time (excluding shares held by shareholders who perfect their
dissenters’ rights as provided in Section 2.2(f) and
shares to be cancelled pursuant to Section 2.2(e) hereof)
shall be converted into the right to receive a number of shares of
Acquiror Common Stock determined by dividing (i) the number of
shares of Acquiror Common Stock representing the Effective
Time Merger Consideration by (ii) the total number of issued
and outstanding shares of Common Stock immediately prior to the
Effective Time (the “ Effective Time Issued and
Outstanding Shares ”), provided , however
that if the Closing condition with respect to the conversion of
each of the Company’s convertible securities set forth in
Section 8.2(n) has not been satisfied and Acquiror decides
to waive compliance with such Closing condition and proceed with
the Closing, then each issued and
outstanding share of Common Stock prior to the Effective Time
(excluding shares held by shareholders who perfect their
dissenters’ rights as provided in Section 2.2(f) and
shares to be cancelled pursuant to Section 2.2(e) hereof)
shall be converted into the right to receive a number of shares of
Acquiror Common Stock determined by dividing (x) the number of
shares of Acquiror Common Stock representing the Effective
Time Merger Consideration by (y) the sum of (A) the
Effective Time Issued and Outstanding Shares plus (B) the
total number of shares of Common Stock issuable upon the exercise
or conversion of each convertible security of the Company that is
not exercised or converted prior to the Effective Time. The number
of shares of Acquiror Common Stock issued for each share of Common
Stock pursuant to the preceding sentence is referred to herein as
the “ Per Share Merger Consideration .” The
aggregate number of shares of Acquiror Common Stock constituting
the Effective Time Merger Consideration plus any Contingent Shares
in accordance with Section 2.3 is referred to herein as the
“ Total Merger Consideration .”
(b) At
the Effective Time, each option granted by the Company under the
Company’s 2004-2005 Non-Qualified Stock Option Plan (the
“ Company Equity Incentive Plan ”), any other
stock option plan or similar employee benefit plan or arrangement
maintained or sponsored by the Company providing for equity
compensation to any Person or otherwise pursuant to certain
inducement grants to purchase Common Stock (each a “
Company Option ” and collectively, the “
Company Options ”) that is outstanding and unexercised
immediately prior
to the Effective Time, by virtue of
the Merger and without any action on the part of the Company,
Acquiror, Acquiror Sub or any of the holders thereof, shall be
cancelled and terminated. Prior to the Effective Time, the Company
and its Board shall take any and all actions necessary to
effectuate this Section 2.2(b) , including providing any
notices to holders of Company Options and the approval of any
amendments to the Company Equity Incentive Plan and, including, but
not limited to, satisfaction of the requirements of Rule 16b-3(e)
under the Exchange Act. In connection with the exercise of any
Company Options, the Company shall comply with all applicable
requirements relating to the collection or withholding of Taxes,
such as withholding of Taxes from the wages of Employees or former
Employees. Further, the Company shall ensure that following the
Effective Time no participant in the Company Equity Incentive Plan
or other plans, programs or arrangements or other holder of Company
Options shall have any right thereunder to acquire any equity
securities of the Company, the Surviving Corporation or any
Subsidiary.
(c) At
the Effective Time, each convertible security, warrant, option or
other right to purchase or to subscribe for any shares of capital
stock or other securities of the Company or its Subsidiaries
(including, but not limited to, all unpaid balances due under that
certain 6% Exchangeable Secured Subordinated Debenture of 1212500
Alberta Ltd. due April 25, 2008) that is outstanding and
unexercised immediately prior to the Effective Time (other than (i)
the Company Options that are addressed in Section 2.2(b) ,
and (ii) the conversion option of Acquiror under the Bridge
Financing Facility Agreement), by virtue of the Merger and without
any action on the part of the Company, Acquiror, Acquiror Sub or
any of the holders thereof, shall be cancelled and terminated.
Prior to the Effective Time, the Company and its Board shall take
any and all actions necessary to effectuate this Section
2.2(c) . Further, the Company shall ensure that following the
Effective Time no holder of any convertible security, warrant,
option or other right to purchase or to subscribe for any shares of
capital stock or other securities of the Company or its
Subsidiaries shall have any right thereunder to acquire any capital
stock or other securities of the Company, the Surviving Corporation
or any Subsidiary.
(d) Upon
the Effective Time, by virtue of the Merger and without any action
on the part of the Company, Acquiror, Acquiror Sub or the holders
thereof, all Common Stock and the Company Options shall no longer
be outstanding and shall automatically be canceled and shall cease
to exist, and each certificate (a “ Certificate
”) previously representing any such Common Stock and each
agreement (an “ Option Agreement ”) previously
representing any such Company Options that are properly exercised
prior to the Effective Time shall thereafter represent only the
right to receive the Per Share Merger Consideration and a Pro Rata
Share (as defined below) of any Contingent Shares. Payments made in
respect of the Company Options that are properly exercised prior to
the Effective Time shall be in full satisfaction of all obligations
under the Company Equity Incentive Plan and the Option
Agreements.
(e) At
the Effective Time, by virtue of the Merger and without any action
on the part of the Company, Acquiror, Acquiror Sub or any holder
thereof, and notwithstanding any other provision hereof that may be
to the contrary, all Common Stock that is owned directly by the
Company (or held in the Company’s treasury) shall be canceled
and shall cease to exist and no Acquiror Common Stock or other
consideration shall be delivered in exchange therefor.
(f) Notwithstanding
any other provision hereof that may be to the contrary, any
Shareholder who has not voted such shares in favor of the Merger
and who has demanded or may properly demand dissenters’
rights in the manner provided by Section 92A.440 of Nevada Law
(“ Dissenting Shares ”) shall not be converted
into a right to receive a portion of the Total Merger Consideration
unless and until the Effective Time has occurred and the holder of
such Dissenting Shares becomes ineligible for such
dissenters’ rights. The holders of Dissenting Shares shall be
entitled only to such rights as are granted by Nevada Law. Each
holder of Dissenting Shares who becomes entitled to payment for
such shares pursuant to Nevada Law shall receive payment therefor
from Acquiror in accordance with Nevada Law; provided ,
however , that (i) if any such holder of Dissenting Shares
shall have failed to establish entitlement to dissenters’
rights as provided in Section 92A.440 of Nevada Law, (ii) if any
such holder of Dissenting Shares shall have effectively withdrawn
demand for appraisal of such shares or lost the right to appraisal
and payment for shares under Nevada Law or (iii) if neither any
holder of Dissenting Shares nor Surviving Corporation shall have
filed a petition demanding a determination of the value of all
Dissenting Shares within the time provided under Nevada Law, such
holder of Dissenting Shares shall forfeit the right to appraisal of
such shares and each such Dissenting Share shall be treated as if
it had been, as of the Effective Time, converted into a right to
receive the applicable portion of the Total Merger Consideration,
without interest thereon, as provided in this Section 2.2 of
this Agreement. The Company shall give Acquiror prompt notice of
any demands received by the Company for appraisal of any shares of
Common Stock, and Acquiror shall have the right to participate in
all negotiations and proceedings with respect to such demands. The
Company shall not, except with the prior written consent of
Acquiror, make any payment with respect to, or settle or offer to
settle, any such demands, with respect to any holder of Dissenting
Shares before the Effective Time.
(g) At
the Effective Time, by virtue of the Merger and without any action
on the part of the Company, Acquiror, Acquiror Sub or any holder
thereof, each share of common stock, par value $0.001 per share, of
Acquiror Sub issued and outstanding immediately prior to the
Effective Time shall be converted into one fully paid and
nonassessable share of common stock, par value $0.001 per share, of
the Surviving Corporation.
(h) All
shares of Acquiror Common Stock paid in respect of the surrender
for exchange of shares of Common Stock in accordance with the terms
hereof shall be deemed to be in full satisfaction of all rights
pertaining to such shares of Common Stock. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in
this Article.
(i) Notwithstanding
any other provision of this Agreement, no fractional shares of
Acquiror Common Stock shall be issued upon the conversion and
exchange of Certificates, and no holder of Certificates shall be
entitled to receive a fractional share of Acquiror Common Stock. In
the event that any holder of Common Stock would otherwise be
entitled to receive a fractional share of Acquiror Common Stock
(after aggregating all shares and fractional shares of Acquiror
Common Stock issuable to such holder), then such holder will
receive an amount of cash (rounded to the nearest whole cent) equal
to the fair market value of the Acquiror Common Stock (as
determined by the Acquiror) multiplied by the fraction of a share
of Acquiror Common Stock to which such person would otherwise be
entitled.
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2.3
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Contingent Stock Arrangement
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(a) At
the Effective Time, the number of shares of Acquiror Common Stock
issuable pursuant to Section 2.2 to the Shareholders
shall be reduced, on a pro rata basis, based upon the number of
shares of Acquiror Common Stock such Shareholder is entitled to
receive pursuant to Section 2.2 with respect to the
shares of Common Stock of the Company (other than Dissenting
Shares) relative to the number of shares all such Shareholders are
entitled to receive pursuant to Section 2.2 with respect to
their shares of Common Stock of the Company (other than Dissenting
Shares) (“ Pro Rata Share ”), by the number
of Contingent Shares.
(b) The
Shareholders shall not be entitled to any voting rights with
respect to the Contingent Shares, until such time or times that the
Contingent Shares are issued in accordance with this Section
2.3 .
(c) By
approving the Merger and/or accepting the consideration set forth
in Section 2.2 , the Shareholders will have (i) irrevocably
and unconditionally approved the retention by Acquiror of any
Contingent Shares in satisfaction of the Schedule 5.8 Claim in
accordance with Section 7.13 , and (ii) irrevocably and
unconditionally agreed to take such other actions, if any, with
respect to the issuance (or non-issuance and retention by Acquiror)
of the Contingent Shares as may be necessary, in Acquiror’s
reasonable opinion, to effect the proper treatment of the
Contingent Shares pursuant to the terms of this
Agreement.
(d) Subject
to Section 2.3(c) , if the number of Contingent Shares
initially withheld by Acqurior on the Closing Date pursuant to
Section 7.13(b) exceeds the number of Contingent Shares
finally retained by Acquiror in settlement of the Schedule 5.8
Claim pursuant to Section 7.13(c) , then such excess
Contingent Shares shall be distributed as follows. Within 15
Business Days following the final settlement of the Schedule 5.8
Claim, Acquiror shall cause the Exchange Agent (as defined below)
to issue a certificate to each holder of a Certificate who has
properly completed a letter of transmittal in accordance with
Article III at the address specified in the holder’s
letter of transmittal and, in each case, representing the excess
Contingent Shares in accordance with such holder’s respective
Pro Rata Share. In the event that any holder would otherwise be
entitled to receive a fractional share of Acquiror Common Stock
(after aggregating all shares and fractional shares of Acquiror
Common Stock issuable to such holder) under this Section 2.3
, then such holder will receive an amount of cash (rounded to the
nearest whole cent) equal to the fair market value of the Acquiror
Common Stock (as determined by Acquiror) multiplied by the fraction
of a share of Acquiror Common Stock to which such person would
otherwise be entitled.
(e) No
Contingent Shares or any beneficial interest therein may be
pledged, encumbered, sold, assigned or transferred (including any
transfer by operation of law) by any Shareholder or be taken or
reached by any legal or equitable process in satisfaction of any
debt or other liability of any Shareholder prior to the issuance
and payment by Acquiror to the Shareholders of Contingent Shares,
in accordance with this Agreement, except that Shareholders shall
be entitled to assign their rights to the Contingent Shares by will
or by the laws of intestacy.
(f) In
holding and administering the Contingent Shares, Acquiror will
incur no liability with respect to any action taken (or not taken)
or suffered by it in reliance upon any
notice, direction, instruction,
consent, statement or other document believed by it to be genuine
and to have been signed or approved by the Representative (and
shall have no responsibility to determine the authenticity
thereof), nor for any other action or inaction, except
Acquiror’s own willful misconduct or gross negligence. In all
questions arising under this Agreement with respect to the
Contingent Shares, Acquiror may rely on the written opinion of
counsel, and Acquiror will not be liable to anyone for anything
done, omitted or suffered in good faith by Acquiror based on such
advice.
(g) In
the event that prior to the date of issuance of the Contingent
Shares, Acquiror should split or combine the Acquiror Common Stock,
or pay a dividend in shares of Acquiror Common Stock or other
distribution in such shares of Acquiror Common Stock (but excluding
any dividends or other distributions of cash or other property in
which case there shall not be any adjustment), then the number of
Contingent Shares shall be appropriately adjusted to reflect such
split, combination, dividend or distribution and thereafter all
references to the Contingent Shares shall be deemed to be such
consideration as so adjusted.
ARTICLE III
EXCHANGE PROCEDURES
Acquiror shall select a Person
reasonably acceptable to the Company (the “ Exchange
Agent ”), on a timely basis, if and when needed for the
benefit of the holders of Certificates. There shall be a written
agreement between Acquiror and the Exchange Agent in which the
Exchange Agent expressly undertakes, on reasonably customary terms,
the obligation to pay the aggregate Per Share Merger Consideration
and any Contingent Shares as provided herein. The Company shall
have a reasonable opportunity, but in any event at least five
Business Days, to review and comment on the agreement with the
Exchange Agent prior to it being finalized.
(a) As
soon as practicable, but no more than three Business Days, after
the Effective Time, provided that Company has cooperated to
make the necessary information available thereto a sufficient time
in advance, the Exchange Agent shall mail to each holder of record
of a Certificate or Certificates a form letter of transmittal
(which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent) and instructions for use
in effecting the surrender of the Certificates in exchange for
payment of the Per Share Merger Consideration pursuant to this
Agreement. Additionally, the Exchange Agent shall provide a form of
the letter of transmittal to the Company prior to the Closing Date.
Upon surrender of a Certificate for exchange and cancellation to
the Exchange Agent, together with such letter of transmittal, duly
executed, the holder (or any agent thereof) of such Certificate
shall be entitled to receive promptly in exchange therefor a
certificate issued to such holder (or any agent thereof)
representing the number of shares of Acquiror Common Stock to which
such holder shall have become entitled pursuant to the provisions
of Article II hereof, and the Certificate so surrendered
shall forthwith be canceled.
(b) As
of the Effective Time, there shall be no transfers on the stock
transfer books of the Company of the Common Stock that were issued
and outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be
canceled and exchanged for the Per Share Merger Consideration as
provided in this Article III .
(c) Acquiror,
any Affiliate of Acquiror, any Affiliated Person or the Exchange
Agent will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement or the
transactions contemplated hereby to any holder of Common Stock or
the Company Options such amounts as Acquiror (or any Affiliate of
Acquiror or Affiliated Person) or the Exchange Agent are required
to deduct and withhold with respect to the making of such payment
under Nevada Law, or any applicable provision of U.S. federal,
state, local or non-U.S. tax law. To the extent that such amounts
are properly withheld by Acquiror (or any Affiliate of Acquiror or
Affiliated Person) or the Exchange Agent and paid over to the
appropriate taxing authority, such withheld amounts will be treated
for all purposes of this Agreement as having been paid to the
holder of the Common Stock or the Company Options in respect of
whom such deduction and withholding were made by such
Person.
(d) In
the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate (whether the record holder or any
agent thereof) to be lost, stolen or destroyed, and, if required by
Acquiror, the posting by such Person of a bond in such amount as
Acquiror may determine is reasonably necessary as indemnity against
any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue to the holder (or any
agent thereof) in exchange for such lost, stolen or destroyed
Certificate a certificate representing the number of shares of
Acquiror Common Stock to which such holder shall have become
entitled in respect thereof pursuant to this Agreement. If payment
of the Per Share Merger Consideration is to be made to any Person
other than the registered holder of the Certificate surrendered in
exchange therefor, it shall be a condition of the payment or
issuance thereof that the Certificate so surrendered shall be
properly endorsed (or accompanied by an appropriate instrument of
transfer) and otherwise in proper form for transfer, and that the
Person requesting such exchange shall pay to the Exchange Agent in
advance any transfer or other similar taxes required by reason of
the payment of the Per Share Merger Consideration to any Person
other than the registered holder of the Certificate surrendered, or
required for any other reason relating to such holder or requesting
Person, or shall establish to the reasonable satisfaction of
Acquiror and the Exchange Agent that such tax has been paid or is
not payable.
ARTICLE IV
TERMINATION
This Agreement may be terminated at
any time (except where otherwise indicated) prior to the Closing,
whether before or after approval of this Agreement (unless
otherwise set forth below), as follows:
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(a)
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by mutual written consent of
Acquiror and the Company;
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(b) by
Acquiror, (i) if there has been a breach or failure to perform any
covenant or agreement on the part of the Company that causes any of
the conditions provided in Section 8.2 not to be met and
such breach or failure has not been cured (if curable) within 10
Business Days following receipt by the Company of written notice of
such breach describing the extent and nature thereof in reasonable
detail, or (ii) if there has been any event, change, occurrence or
circumstance that renders the conditions set forth in Section
8.2(a) incapable of being satisfied by October 1, 2007
(the “ Outside Date ”);
(c) by
the Company, (i) if there has been a breach or failure to perform
any covenant or agreement on the part of Acquiror or Acquiror Sub
that causes any of the conditions provided in Section 8.3
not to be met and such breach or failure has not been cured (if
curable) within 10 Business Days following receipt by Acquiror of
written notice of such breach describing the extent and nature
thereof in reasonable detail, or (ii) there has been any event,
change, occurrence or circumstance that renders the conditions set
forth in Section 8.3(a) incapable of being satisfied by the
Outside Date;
(d) by
either Acquiror or the Company if there shall be in effect a final,
unappealable Order restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby;
provided , however , that the party seeking to
terminate this Agreement pursuant to this Section 4.1(d)
shall not have initiated such proceeding or taken any action in
support of such proceeding (it being agreed that the Parties shall
use their commercially reasonable efforts to promptly appeal any
such Order that is not unappealable and diligently pursue such
appeal);
(e) by
either Acquiror or the Company on or after the Outside Date if the
Closing shall not have occurred by the close of business on such
date (unless the failure to consummate the Closing is attributable
to a breach of this Agreement on the part of the Party seeking to
terminate this Agreement); provided , however , that
the terminating party is not in material default of any of its
obligations hereunder;
(f) by
Acquiror if, the Board shall have (i) endorsed, approved or
recommended any Acquisition Proposal in accordance with Section
7.8 , other than that contemplated by this Agreement, (ii)
effected a Change in Recommendation, (iii) resolved to do any of
the foregoing, or (iv) failed to reconfirm the Company Board
Recommendation within five Business Days after Acquiror requests in
writing that the Board do so;
(g) by
Acquiror if (i) the Company shall have entered into a definitive
agreement with respect to an Acquisition Proposal, (ii) a tender
offer or exchange offer for outstanding shares of the Common Stock
is commenced (other than by Acquiror or an Affiliate of Acquiror)
and the Board recommends that the Shareholders tender their shares
in such tender or exchange offer or, within ten days after such
tender or exchange offer, fails to recommend against acceptance of
such offer or takes no position with respect to the acceptance
thereof or (iii) for any reason if the Company fails to either
receive written consents from its Shareholders constituting the
Requisite Shareholder Approval by July 5, 2007, or fails to hold
the Special Meeting by July 5, 2007; or
(h) by
the Company if, at any time prior to receiving the Requisite
Shareholder Approval, the Board authorizes the Company, subject to
complying with the terms of this Agreement, to terminate this
Agreement in order to enter into a binding, definitive agreement
with respect to a Superior Proposal; provided that the
Company shall have first paid to Acquiror the Additional Acquiror
Termination Fee; and provided , further , that (i)
the Board after consultation with its outside legal counsel and
financial advisors, concludes in good faith that an Acquisition
Proposal constitutes a Superior Proposal (and after giving effect
to any proposed modifications to this Agreement or the Merger which
may be offered by Acquiror), (ii) the Company has notified Acquiror
by written notice pursuant to this Section 4.1(h) , at least
four Business Days in advance, of its Board’s intention to
effect a Change in Recommendation (as defined below), specifying
the material terms and conditions of such Superior Proposal and the
identity of the party making such Superior Proposal, and furnishing
to Acquiror a copy of any relevant proposed transaction agreements
with the party making such Superior Proposal and any other material
documents received by it or its representatives, and (iii) prior to
effecting such a Change in Recommendation, the Board has, and has
caused its financial and legal advisors to, negotiate with Acquiror
in good faith to make such adjustments in the terms and conditions
of this Agreement such that such Acquisition Proposal would no
longer constitute a Superior Proposal, it being understood that the
Company shall not enter into any such binding, definitive agreement
during such four-Business Day period (the Company agrees to notify
Acquiror promptly if its intention to enter into any such agreement
referred to in Section 4.1(h)(ii) shall change at any time
after giving such notification).
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4.2
|
Procedure Upon
Termination .
|
In the event of termination and
abandonment by Acquiror or the Company, or both, pursuant to
Section 4.1 hereof, written notice thereof shall forthwith
be given to the other Party or Parties and this Agreement shall
terminate, and the Merger shall be abandoned, without further
action by Acquiror or the Company.
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4.3
|
Effect of Termination
.
|
Upon the termination of this
Agreement in accordance with Sections 4.1 and 4.2
hereof, Acquiror and the Company shall be relieved of any further
duties and obligations under this Agreement after the date of such
termination; provided , that no such termination shall
relieve any Party hereto from Liability for any willful breach or
fraud by a Party of this Agreement; provided ,
further , that the obligations of the Parties set forth in
Section 4.5 , Section 4.6 , Articles IX and
XI hereof shall survive any such termination and shall be
enforceable after such termination.
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4.4
|
Frustration of Conditions
.
|
Neither Acquiror or Acquiror Sub, on
the one hand, nor the Company, on the other, may rely on the
failure of any condition set forth in Sections 8.1 ,
8.2 , or 8.3 to be satisfied if such failure was
caused by such Party’s failure to comply with or perform any
of its covenants or obligations set forth in this
Agreement.
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4.5
|
Acquiror Fees and
Expenses .
|
(a) The
Company agrees that, in order to compensate Acquiror for the direct
and substantial damages suffered by Acquiror in the event of
termination of this Agreement under certain circumstances, which
damages cannot be determined with reasonable certainty, the Company
shall pay to Acquiror the Acquiror Termination Fee (as defined
below) upon the termination of this Agreement by Acquiror pursuant
to Section 4.1(b)(i) or (ii) . For purposes of this
Agreement, the term “ Acquiror Termination Fee ”
means an amount equal to $1,000,000.00, plus any Acquiror Expenses
payable by the Company to Acquiror under Section 4.5(c)
.
(b) The
Company agrees that, in order to compensate Acquiror for the direct
and substantial damages suffered by Acquiror in the event of
termination of this Agreement under certain circumstances, which
damages cannot be determined with reasonable certainty, the Company
shall pay to Acquiror an amount equal to the Additional Acquiror
Termination Fee (as defined below) upon the termination of this
Agreement by (i) Acquiror pursuant to Section 4.1(f) or
Section 4.1(g) , or (ii) the Company pursuant to Section
4.1(h) . For purposes of this Agreement, the term “
Additional Acquiror Termination Fee ” means an amount
equal to $2,500,000.00, plus any Acquiror Expenses payable by the
Company to Acquiror under Section 4.5(c) . Any Additional
Acquiror Termination Fee payable under this Section 4.5(b)
shall be in addition to any Acquiror Termination fee otherwise
payable by the Company to Acquiror under Section 4.5(a)
.
(c) Upon
any termination of this Agreement for which an Acquiror Termination
Fee is due and payable under Section 4.5(a) and/or an
Additional Acquiror Termination Fee is due and payable under
Section 4.5(b) , the Company shall reimburse Acquiror and
its Affiliates for 100% of their Acquiror Expenses (as defined
below). For purposes of this Agreement, the term “
Acquiror Expenses ” means all actual and documented
out-of-pocket expenses of Acquiror and its Affiliates in connection
with this Agreement and the transactions contemplated hereby,
including, without limitation, fees and expenses of accountants,
attorneys and financial advisors, and all costs of Acquiror and its
Affiliates relating to the financing of the Merger (including,
without limitation, advisory and commitment fees and reasonable
fees and expenses of counsel to potential lenders).
(d) The
Acquiror Termination Fee, Additional Acquiror Termination Fee
and/or Acquiror Expenses, shall be paid by the Company as directed
by Acquiror in writing in immediately available funds on the
date(s) specified above, or, if no such date is specified, not
later than three Business Days after the date of the event giving
rise to the obligation to make such payment.
(e) The
Company acknowledges that the agreements contained in this
Section 4.5 are an integral part of the transactions
contemplated by this Agreement. In the event that the Company shall
fail to pay the Acquiror Termination Fee, Additional Acquiror
Termination Fee and/or Acquiror Expenses when due, the Company
shall reimburse Acquiror for all reasonable costs and expenses
actually incurred or accrued by Acquiror (including reasonable fees
and expenses of counsel) in connection with the collection under
and enforcement of this Section 4.5 , together with interest
on such amounts (or any unpaid portion thereof) from the date
such
payment was required to be made
until the date such payment is received by Acquiror and its
Affiliates at the prime rate of Citibank, N.A. as in effect from
time to time during such period.
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4.6
|
Company Fees and
Expenses .
|
(a) Acquiror
agrees that, in order to compensate the Company for the direct and
substantial damages suffered by the Company in the event of
termination of this Agreement under certain circumstances, which
damages cannot be determined with reasonable certainty, Acquiror
shall pay to the Company the Company Termination Fee (as defined
below) upon the termination of this Agreement by the Company
pursuant to Section 4.1(c) . For purposes of this Agreement,
the term “ Company Termination Fee ” means an
amount equal to $1,000,000.00, plus any Company Expenses payable by
Acquiror to the Company under Section 4.6(b) .
(b) Upon
any termination of this Agreement for which a Company Termination
Fee is due and payable under Section 4.6(a) , Acquiror shall
reimburse the Company and its Affiliates for 100% of their Company
Expenses (as defined below). For purposes of this Agreement, the
term “ Company Expenses ” means all actual and
documented out-of-pocket expenses of the Company and its Affiliates
in connection with this Agreement and the transactions contemplated
hereby, including, without limitation, fees and expenses of
accountants, attorneys and financial advisors.
(c) The
Company Termination Fee and/or Company Expenses, shall be paid by
Acquiror as directed by the Company in writing in immediately
available funds on the date(s) specified above, or, if no such date
is specified, not later than three Business Days after the date of
the event giving rise to the obligation to make such
payment.
(d) Acquiror
acknowledges that the agreements contained in this Section
4.6 are an integral part of the transactions contemplated by
this Agreement. In the event that Acquiror shall fail to pay the
Company Termination Fee and/or Company Expenses when due, Acquiror
shall reimburse the Company for all reasonable costs and expenses
actually incurred or accrued by the Company (including reasonable
fees and expenses of counsel) in connection with the collection
under and enforcement of this Section 4.6 , together with
interest on such amounts (or any unpaid portion thereof) from the
date such payment was required to be made until the date such
payment is received by the Company and its Affiliates at the prime
rate of Citibank, N.A. as in effect from time to time during such
period.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
Except as specifically set forth in
the Schedules (with specific references to the Section or
subsection of this Agreement to which the information stated in
such disclosure relates), the Company hereby represents, warrants
to and agrees with Acquiror as follows, in each case as of the date
of this Agreement and as of the Closing Date:
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5.1
|
Organization and
Qualification .
|
The Company is a corporation duly
organized, validly existing and in good standing under Nevada Law,
and has all requisite corporate power and authority to own, operate
and lease its assets, to carry on the Business, to execute and
deliver this Agreement and to carry out the transactions
contemplated hereby. The Company is duly qualified or authorized to
conduct business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or
authorization necessary other than where the failure to be so
qualified, authorized or in good standing would not have a Material
Adverse Effect.
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|
5.2
|
Authority; Binding Obligation
.
|
The Company has all requisite power,
authority and legal capacity to execute and deliver this Agreement
and each of the other agreements, documents, certificates or other
instruments contemplated hereby and thereby (the “ Company
Documents ”), to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company
of this Agreement, the execution, delivery and performance by the
Company of the Company Documents, and the consummation by the
Company of the transactions contemplated hereby and thereby, have
been duly authorized and approved by all necessary corporate
action, and no other corporate proceeding on the part of the
Company is necessary to authorize this Agreement and the Company
Documents, or to consummate the transactions contemplated hereby
and thereby, other than the approval and adoption of this Agreement
by the Requisite Shareholder Approval. The Requisite Shareholder
Approval is the only vote of the holders of any of the
Company’s capital stock necessary in connection with the
consummation of the Merger under Nevada Law, the Company’s
articles of incorporation and bylaws or otherwise. This Agreement
has been, and the Company Documents will be at or prior to the
Closing, duly executed and delivered by the Company. This Agreement
constitutes, and the Company Documents when so executed and
delivered, will constitute a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws, affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to general principles
of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought
in a proceeding at law or in equity); provided ,
however , that the Merger will not become effective until
the Articles of Merger are filed with the office of the Secretary
of State of the State of Nevada.
At a meeting duly called and held,
the Board has unanimously determined that this Agreement and the
transactions contemplated hereby are fair to and in the best
interests of the Shareholders, unanimously approved and adopted
this Agreement and the transactions contemplated hereby and
unanimously resolved (subject to Section 7.8 ) to recommend
approval and adoption of this Agreement by the Shareholders (the
“ Company Board Recommendation ”).
(a) The
Company has furnished to Acquiror a true and complete copy of the
articles of incorporation of the Company and a true and complete
copy of the Company’s
amended and restated bylaws dated
effective March 31, 2006, each as in effect on the date of this
Agreement.
(b) The
books of account, stock records, minute book and other corporate
and financial records of the Company are complete and correct in
all material respects and have been maintained in accordance with
reasonable business practices for companies similar to the Company,
and the Company will have prior to Closing prepared and made
available to Acquiror the minutes for all meetings of the Board
and/or shareholders of the Company held as of the date hereof (or
written consents in lieu of such meetings).
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5.4
|
No Conflict; Required Filings and
Consents .
|
(a) None
of the execution, delivery and performance by the Company of this
Agreement or the Company Documents, the fulfillment of and
compliance with the respective terms and provisions hereof or
thereof, or the consummation by the Company of the transactions
contemplated hereby and thereby, will conflict with, or violate any
provision of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination or
cancellation under, any provision of (i) the articles of
incorporation or bylaws of the Company, (ii) any material Contract
or material Permit to which the Company is a party or bound, (iii)
any Order of any Governmental Body applicable to the Company or by
which the Company is bound or (iv) any applicable Law.
(b) No
consent, waiver, approval, Order, Permit or authorization of, or
filing with, or notification to, any Person or Governmental Body is
required on the part of the Company in connection with the
execution and delivery of this Agreement, the compliance by the
Company with any of the provisions hereto, or the consummation of
the transactions contemplated hereby and thereby, except for (i)
compliance with the applicable requirements of the HSR Act and (ii)
the filing with the SEC of either (A) an information statement in
definitive form relating to the approval of this Agreement and the
transactions contemplated by this Agreement (as amended or
supplemented, the “ Information Statement ”) or
(B) a proxy statement in definitive form relating to a Special
Meeting to be held in connection with this Agreement and the
transactions contemplated by this Agreement (as amended or
supplemented, the “ Proxy Statement
”).
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5.5
|
Capitalization; Owners of
Shares .
|
(a) The
authorized capital stock of the Company consists of (i) 200,000,000
shares of Common Stock, of which 68,909,330 shares of Common Stock
are issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable and (ii) 10,000,000
shares of preferred stock, par value $0.001 per share , none
of which shares of preferred stock have been designated or are
issued and outstanding. Schedule 5.5(a) sets forth the names
and addresses of all holders of record of Common Stock and the
number and class of shares held by each such holder. Except as set
forth in Section 5.5(b) and Section 5.5(c) , no other
shares of Common Stock have been reserved for any
purpose.
(b) Except
for the Company Equity Incentive Plan, neither the Company nor any
of its Subsidiaries has ever adopted, sponsored or maintained any
stock option plan or any
other plan or agreement providing
for equity compensation to any Person. The Company Equity Incentive
Plan has been duly authorized, approved and adopted by the Board
and the Shareholders and is in full force and effect. The Company
has reserved a total of 3,500,000 shares of the Common Stock for
issuance under the Company Equity Incentive Plan, of which as of
the date hereof (i) 3,200,000 shares are issuable upon the exercise
of outstanding, unexercised Company Options, (ii) 300,000 shares
are available for grant but have not yet been granted pursuant to
the Company Equity Incentive Plan, and (iii) zero shares have been
issued and are outstanding pursuant to the prior exercise of stock
options or other stock rights granted pursuant to the Company
Equity Incentive Plan. No outstanding Company Option permits
payment of the exercise price therefor by any means other than
cash, check, cashless exercise or with certain shares of the Common
Stock that have been owned by the optionee for at least six months.
All outstanding Company Options have been offered, issued and
delivered by the Company in compliance in all material respects
with all applicable Laws and with the terms and conditions of the
Company Equity Incentive Plan. Schedule 5.5(b) sets forth
for each outstanding Company Option, the name of the record holder
of such Company Option (and, to the Company’s Knowledge, the
name of the beneficial holder, if different), the domicile address
of such holder as set forth on the books of the Company, an
indication of whether such holder is an Employee, the date of grant
or issuance of such option, the number of shares of Common Stock
subject to such option, the exercise price of such option, the
vesting schedule for such option, including the extent vested as of
the date of this Agreement and whether and to what extent the
exercisability of such option will be accelerated and become
exercisable as a result of the transactions contemplated by this
Agreement, and whether such option is a nonstatutory option or an
incentive stock option as defined in Section 422 of the Code. All
outstanding unexercised Company Options will be accelerated and
become exercisable as a result of the transactions contemplated by
this Agreement.
(c) Except
for the Company Options or as otherwise set forth on Schedule
5.5(c) , there are no outstanding securities convertible into
or exchangeable for Common Stock, any other securities of the
Company or any of its Subsidiaries and no outstanding options,
rights (preemptive or otherwise), or warrants to purchase or to
subscribe for any shares of such stock or other securities of the
Company or any of its Subsidiaries. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation,
or other similar rights with respect to the Company or any of its
Subsidiaries. Except for the Option and Support Agreements and the
Bridge Financing Facility Agreement, there are no outstanding
Contracts affecting or relating to the voting, issuance, purchase,
redemption, registration, repurchase or transfer of Common Stock,
any other securities of the Company or any of its Subsidiaries (the
items described in Schedule 5.5(c) being, collectively, the
“ Rights Agreements ”). On or prior to the
Effective Time, all Rights Agreements shall have been terminated
and of no further force or effect. Each of the outstanding shares
of Common Stock, Company Options and other outstanding securities
convertible into or exchangeable for Common Stock was issued in
compliance with all applicable federal and state Laws concerning
the issuance of securities.
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5.6
|
Company Reports and Financial
Statements .
|
(a) The
Company has timely filed all Company Reports required to be filed
with the SEC on or prior to the date hereof and will timely file
all Company Reports required to be filed with the SEC after the
date hereof and prior to the Effective Time. No Subsidiary of
the
Company is subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act. Each
Company Report filed since December 31, 2003, has complied, or will
comply as the case may be, in all material respects with the
applicable requirements of the Securities Act, and the rules and
regulations promulgated thereunder, or the Exchange Act, and the
rules and regulations promulgated thereunder, as applicable, each
as in effect on the date so filed. None of the Company Reports
(including any financial statements or schedules included or
incorporated by reference therein) filed since December 31, 2003,
contained or will contain, as the case may be, when filed (and, in
the case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively) any
untrue statement of a material fact or omitted or omits or will
omit, as the case may be, to state a material fact required to be
stated or incorporated by reference therein or necessary to make
the statements therein, in the light of the circumstances under
which they were or are made, not misleading.
(b) Each
of the Chief Executive Officer and Chief Financial Officer of the
Company has made all certifications required by Rules 13a-14 and
15d-14 under the Exchange Act and Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to the applicable Company Reports
filed prior to the date hereof (collectively, the “
Certifications ”) and the statements contained in such
Certifications are accurate in all material respects as of the
filing thereof.
(c) The
Company has made available to Acquiror all of the Company Financial
Statements. All of the Company Financial Statements comply with
applicable requirements of the Exchange Act and have been prepared
in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of
the Company at the respective dates thereof and the consolidated
results of its operations and changes in cash flows for the periods
indicated (subject, in the case of unaudited statements, to normal
year-end audit adjustments consistent with GAAP).
(d) The
Company and its Subsidiaries have implemented and maintain a system
of internal accounting controls sufficient to provide reasonable
assurances regarding the reliability of financial reporting and the
preparation of financial statements in accordance with GAAP. The
Company has implemented and maintains disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Exchange Act)
designed to ensure that information relating to the Company,
including its consolidated Subsidiaries, required to be disclosed
in the reports the Company files or submits under the Exchange Act
is made known to the Chief Executive Officer and the Chief
Financial Officer of the Company by others within those
entities.
(e) The
Company is, and since the enactment of the Sarbanes-Oxley Act has
been, in compliance in all material respects with the applicable
provisions of the Sarbanes-Oxley Act.
(f) There
are no outstanding loans or other extensions of credit made by the
Company or any of its Subsidiaries to any executive officer (as
defined in Rule 3b-7 under the Exchange Act) or director of the
Company. The Company has not, since the enactment of the
Sarbanes-Oxley Act, taken any action prohibited by Section 402 of
the Sarbanes-Oxley Act.
(g) There
are no Liabilities of the Company or any of its Subsidiaries of any
kind whatsoever, whether or not accrued and whether or not
contingent or absolute, that are material to the Company, other
than (i) Liabilities disclosed and provided for in the Company
Balance Sheet or in the notes thereto; or (ii) Liabilities incurred
in the Ordinary Course of Business consistent with past practice
since the date of the Company Balance Sheet, none of which are
material to the Company in amount or significance; or (iii)
Liabilities incurred on behalf of the Company under this
Agreement.
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5.7
|
Absence of Certain
Developments .
|
Except for the transactions
contemplated hereby, since December 31, 2006, the Company has
not:
(a) suffered
a Material Adverse Effect;
(b) incurred
any Liability or entered into any other transaction except in the
Ordinary Course of Business;
(c) suffered
any material adverse change in its relationship with any of the
suppliers, customers, distributors, lessors, licensors, licensees
or other third parties that are material to the Company;
(d) increased
the rate or terms of compensation or benefits payable to or to
become payable by it to its key Employees or increased the rate or
terms of any bonus, pension or other employee benefit plan covering
any of its key Employees, except in each case increases of not more
than 5% annually occurring in the Ordinary Course of Business
(including normal periodic performance reviews and related
compensation and benefits increases);
(e) waived
any claim or rights of material value other than in the Ordinary
Course of Business;
(f) sold,
leased, licensed or otherwise disposed of any of its material
assets, other than in the Ordinary Course of Business;
(g) entered
into any transaction or Material Contract, or modified or
terminated any Material Contract, other than in the Ordinary Course
of Business;
(h) made
any capital expenditure in excess of $50,000.00;
(i) adopted
or amended any Employee Plan;
(j) made
any adjustment or change in the price or other change in the terms
of any options, warrants or convertible securities of the Company
(including the Company Options);
(k) made
any material payments for purposes of settling any
disputes;
(l) split,
combined, or reclassified any of its outstanding shares, or
repurchased, redeemed or otherwise acquired any of shares of
capital stock, or declared or paid any dividend on its capital
stock;
(m) changed
the accounting or Tax reporting principles, methods or
policies;
(n) entered
into, modified or terminated any Royalty Agreement; or
(o) committed
pursuant to a legally binding agreement to do any of the things set
forth in clauses (a) through (n) above.
Except as set forth on Schedule
5.8 , there are no Legal Proceedings pending or, to the
Company’s Knowledge, material Legal Proceedings threatened
against Company (including, but not limited to, with respect to the
Company’s issued and outstanding shares of capital stock or
options, warrants or other securities to purchase shares of the
Company’s capital stock), or which question the validity or
enforceability of this Agreement or any action contemplated herein.
The Company is not operating under or subject to, or in default
with respect to any Order of any Governmental Body. There are no
agreements entered into by the Company or its Subsidiaries settling
or otherwise terminating actions, suits, claims, governmental
investigations or arbitration proceedings against the Company, or
which question the validity or enforceability of this Agreement or
any action contemplated herein.
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5.9
|
Compliance with Laws;
Permits .
|
(a) The
Company and its Subsidiaries have complied and is in material
compliance in all respects with all Laws applicable to the Company
and its Subsidiaries. Neither the Company nor any of its
Subsidiaries have been cited, fined or otherwise notified of any
asserted past or present failure to comply, in any material
respect, with any Laws and, to the Company’s Knowledge, no
investigation or proceeding with respect to any such violation is
pending or threatened.
(b) The
Company and its Subsidiaries currently have all Permits required
for the operation of the Company and its Subsidiaries as presently
conducted in the Ordinary Course of Business, other than those the
failure of which to possess is immaterial. All Permits are valid
and in full force and effect, the Company and its Subsidiaries are
in compliance with their requirements, and neither the Company nor
any Subsidiary is in default or violation (and no event has
occurred which, with notice or the lapse of time or both, would
constitute a default or violation), in any material respect of any
term, condition or provision of any Permit, and no proceeding is
pending or, to the Company’s Knowledge, threatened to revoke
or amend any of the Permits.
(a)
Schedule 5.10(a) contains (i) a true and complete list
of all real property owned, leased, subleased, licensed or
otherwise occupied by the Company or any of its Subsidiaries
(collectively, the “ Real Property ”);
(ii) a true and complete list of all other rights
and interests in real property owned
or controlled by the Company or any of its Subsidiaries (whether
such rights and interests are characterized as real or personal
property by the jurisdictions where the real property in which such
rights and interests were created is situated), including without
limitation all royalty interests, rights to production payments,
and other rights of any kind or nature, whether present or future,
to receive payments based on the removal and sale of minerals or
mineral products from real property (the “ Royalty
Interests ”); and (iii) a true and complete legal
description of (A) all Real Property and (B) all real property in
which the Company or any of its Subsidiaries own Royalty Interests
(the “ Royalty Properties ”).
(b) The
Company has delivered, or caused to be delivered, to Acquiror
complete and accurate copies of (i) all leases and subleases
of all leased Real Property, and any amendments, modifications,
guaranties or addendums thereto (each a “ Lease
” and collectively, the “ Leases ”);
(ii) all agreements, contracts, letter agreements, deeds,
licenses, assignments and other instruments, correspondence or
documents evidencing the Royalty Interests and the ownership
thereof by the Company or any Subsidiary (each a “ Royalty
Agreement ” and collectively, the “ Royalty
Agreements ”) (other than Royalty Agreements with respect
to the Excluded Royalty Interests); and (iii) all title
opinions, title reports, title policies and documents referenced
therein, surveys, plans, correspondence, and other documents in the
Company’s possession with respect to the Real Property and
the Royalty Properties (other than such documents with respect to
the Excluded Royalty Interests).
(c) With
respect to Real Property owned by the Company or any of its
Subsidiaries, either the Company or one of its Subsidiaries owns
good and marketable title to such Real Property, free and clear of
all Encumbrances as of the Closing, other than (i) real estate
Taxes and installments of special assessments not yet delinquent,
(ii) easements, covenants, conditions and restrictions of
record, which do not have a material adverse effect on the
Company’s or Subsidiary’s use of, or interest in, any
portion of the owned Real Property, (iii) other Encumbrances
and exceptions set forth on Schedule 5.10(c) , and
(iv) Permitted Encumbrances.
(d) With
respect to the Real Property in which the Company or any of its
Subsidiaries hold an interest under Leases: (i) the Company or
its Subsidiary is in exclusive possession of such Real Property;
(ii) the Company and its Subsidiaries have not received any
notice of default of any of the terms or provisions of the Leases;
(iii) to the Company’s Knowledge, all Leases are valid
and are in good standing, and the Company or one of its
Subsidiaries holds a valid and existing leasehold interest under
each such Lease; (iv) to the Company’s Knowledge, no act
or omission or any condition on the leased Real Property which
could be considered or construed as a default under any Lease, and
to the Company’s Knowledge, no event has occurred which (with
notice, lapse of time or both) would constitute a material breach
or default under any Lease by any party; (v) to the
Company’s Knowledge, all of the leased Real Property is free
and clear of all Encumbrances or defects in title except for those
specifically identified in Schedule 5.10(d) ; (vi) the
Company and its Subsidiaries have the authority under the Leases to
perform fully its or their obligations under this Agreement;
(vii) no consent, waiver, approval or authorization is
required from the lessor or lessee under any Lease as a result of
the execution of this Agreement or the consummation of the
transactions contemplated hereby; and (viii) there are no
outstanding options, rights of first offer or rights of first
refusal to purchase the leased Real Property, or any portion
thereof or interest therein.
(e) To
the Company’s Knowledge, with respect to the Royalty
Properties (other than the Excluded Royalty Interests), except as
set forth in Schedule 5.10(e) , the owners and/or operators
of the Royalty Properties either: (i) own the Royalty
Properties free and clear of all Encumbrances as of the Closing,
other than (A) applicable real estate taxes and assessments
not yet delinquent, (B) valid easements, covenants, conditions
and other restrictions, and (C) other Encumbrances, in each
case where the same do not have a material adverse effect on the
Company’s or a Subsidiary’s Royalty Interest, or on the
ability of such owners and/or operators of the Royalty Properties
to conduct their business and operations thereon; or (ii) own
and maintain all valid legal rights and permits required by
applicable Law to hold and use such Royalty Properties for mining
and related purposes pursuant to valid lease, contract,
application, permit, claim, tenement or concession, or other legal
means valid in the relevant jurisdiction. To the Company’s
Knowledge, the owners and/or operators of the Royalty Properties
(other than with respect to the Excluded Royalty Interests) have
reasonably adequate rights of ingress and egress with respect to
their respective Royalty Properties and the improvements situated
thereon.
(f) Except
as described on Schedule 5.10(f) : (i) no consent, waiver,
approval or authorization is required from any Person who is a
party to any Royalty Agreement as a result of the execution of this
Agreement or the consummation of the transactions contemplated
hereby; (ii) the Royalty Agreements are in full force and effect,
and the Company or one of its Subsidiaries holds a valid and
existing interest under each such Royalty Agreement; (iii) there
are no existing material defaults under any Royalty Agreement by
the Company or any Subsidiary (as applicable) or, to the
Company’s Knowledge, the other parties to such Royalty
Agreements; (iv) to the Company’s Knowledge, no event has
occurred which (with notice, lapse of time or both) would
constitute a material breach or default under any Royalty Agreement
by any party; and (v) all Royalty Interests are free and clear of
any defects in title and other Encumbrances, other than Permitted
Encumbrances.
(g) There
are no outstanding options, rights of first offer or rights of
first refusal to purchase the owned Real Property or any Royalty
Interest, or any portion thereof or interest therein.
(h)
Schedule 5.10(h) sets forth the address and record owner of
all leased Real Property and all Royalty Properties.
(i) There
does not exist any pending or threatened condemnation, eminent
domain, expropriation or other proceeding having similar legal
effect, Laws, lawsuits or administrative proceedings that affect
any owned or leased Real Property, the Royalty Interests, or the
Royalty Properties, and neither the Company nor any of its
Subsidiaries has received any written notice of the intention of
any Governmental Body or other Person to take, condemn, expropriate
or use any owned or leased Real Property, any Royalty Property or
any Royalty Interests.
(a)
Schedule 5.11(a) sets forth all leases of personal property
to which the Company is a party as of the date hereof involving
annual payments in excess of $50,000.00 (the “ Leased
Personal Property ”). The Company has not received or
given any written notice of any
default or event that with notice or
lapse of time or both would constitute a material default by the
Company under any lease entered into in connection with the Leased
Personal Property and, to the Company’s Knowledge, no other
party is in material default or default thereunder.
(b) All
tangible personal property which is material in the operation of
the Company has been maintained in reasonable operating condition
in the Ordinary Course of Business in a manner consistent with past
maintenance practices of the Company. The Company has good and
valid title to, or a valid leasehold interest in, all of the
tangible properties and assets which it purports to own or lease.
All properties and assets reflected in the Company Balance Sheet
are free and clear of all Encumbrances, other than Permitted
Encumbrances.
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5.12
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Material Contracts
.
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(a)
Schedule 5.12(a) lists each Contract to which the Company or
any of its Subsidiaries is a party or by which the Company, any of
its Subsidiaries, or any of their assets, is bound, except for
non-customer Contracts pursuant to which the obligations, of either
party thereto are, or are contemplated to be, $50,000.00 or less
(each, a “ Material Contract ”), including
without limitation the following Material Contracts:
(i) Contracts
with any Affiliate, Employee, current or former officer or director
of the Company or any Subsidiary or any of their
Affiliates;
(ii) Collective
bargaining agreements or other Contracts with any labor union or
association representing any Employees;
(iii) Bonus,
pension, profit sharing, retirement or other forms of deferred
compensation plans;
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(iv)
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Stock purchase, stock option or any
other similar plans;
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(v) Contracts
relating to incurrence of Indebtedness, the making of any loans,
Hedging Arrangements or otherwise placing an Encumbrance on any
portion of the assets of the Company or its
Subsidiaries;
(vi) Contracts
related to the guaranty of any obligation of any third Person by
the Company or its Subsidiaries;
(vii) Contacts
or purchase orders for capital expenditures or the acquisition or
construction of fixed assets which involve the expenditure of more
than $50,000.00;
(viii) Contracts
granting any Person (other then Acquiror) an option or a first
offer, first refusal or similar right to purchase or acquire any
asset of the Company or its Subsidiaries;
(ix) Contracts
relating to the lease of any real or personal property, including
without limitation any mineral leases;
(x) Contracts
that create a partnership, joint venture or similar
arrangement;
(xi) Contracts
that limit the freedom of the Company or any Subsidiary to compete
in any line of business or with any Person in any area;
(xii) Contracts
(other than Contracts made in the Ordinary Course of Business)
which involve the expenditure of more than $50,000.00 in the
aggregate or require performance by any party more than one year
from the date hereof that, in either case, are not terminable by
the Company without penalty on notice of 180 days or
less;
(xiii) Contracts
(other than the Option and Support Agreements) relating to the
voting or any rights or obligations of any Shareholder;
(xiv) Contracts
regarding the acquisition, issuance or transfer of any shares of
capital stock or other securities of the Company or any Subsidiary,
including without limitation any restricted stock agreements,
options, warrants or escrow agreements;
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(xv)
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Royalty Agreements of the Company or
any Subsidiary; or
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(xvi) Other
Contracts not made in the Ordinary Course of Business that are
material to the Company’s Business.
(b) Each
Material Contract is legal, valid, binding on the Company (or its
Subsidiary), enforceable and in full force and effect and to the
Company’s Knowledge, each Material Contract will continue to
be legal, valid, binding on the other parties thereto, enforceable
and in full force and effect on identical terms following the
consummation of the transactions contemplated by this Agreement and
following delivery of any consents or approval contemplated
hereby.
(c) The
Company has not received any written notice of any default or event
that with notice or lapse of time or both would constitute a
material default by the Company under any Material
Contract.
(d) All
of the Contracts to which the Company is a party or by which its
assets are bound that are required to be described in the Company
Reports (or to be filed as exhibits thereto) are so described or
filed and are enforceable and in full force and effect.
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5.13
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Labor and Employment
.
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(a)
Collective Bargaining . There are no collective bargaining
or other labor union agreements to which the Company is a party and
there are no labor or collective bargaining agreements which
pertain to the Employees. There is no union organization activity
involving any of the Employees pending or, to the Company’s
Knowledge, threatened, nor has there ever been union representation
involving any of the Employees. There are no strikes, slowdowns,
lockdowns, arbitrations, work stoppages or material grievances or
other labor disputes pending or, to the Company’s Knowledge,
threatened or reasonably anticipated between the Company and
(i) any current or former Employees of the Company or
(ii) any union or other
collective bargaining unit
representing such Employees. There has been no “mass
layoff” or “plant closing” (as defined by WARN)
with respect to the Company.
(b)
Employment Terms . Schedule 5.13(b) is a true and
complete list containing the names and positions of all Employees,
together with (i) each Employee’s current annual salary or
wage, (ii) the amount and date of any scheduled salary increase for
each Employee, (iii) commissions due and draws outstanding for each
Employee and (iv) other advances or receivables owing to the
Company from each Employee.
(c) Subject
to the payments set forth in Schedule 5.13(f) , the Company
has the right to terminate the employment of each of its Employees
at will and to terminate the engagement of any of its independent
contractors without payment to such Employee or independent
contractor other than for services rendered through termination and
without incurring any penalty or Liability.
(d) The
Company is in compliance, in all material respects, with all Laws
relating to employment practices.
(e) The
Company has not experienced any labor problem that was or is
material to it. To the Company’s Knowledge, the
Company’s relations with its Employees are currently on a
good and normal basis.
(f) Except
as set forth on Schedule 5.13(f) , no severance or other
payment to an Employee will become due or employee benefits or
compensation increase or accelerate as a result of the transactions
contemplated by this Agreement, solely or together with any other
event, including a subsequent termination of employment.
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5.14
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Pension and Benefit
Plans .
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The Company hereby represents and
warrants to Acquiror that:
(a)
Schedule 5.14(a) contains a correct and complete list
identifying each material “employee benefit plan,” as
defined in Section 3(3) of ERISA, each employment, severance,
change in control or similar contract, plan, arrangement or policy
and each other plan or arrangement providing for compensation,
profit-sharing, stock option or other stock-related rights or other
forms of incentive or deferred compensation, insurance (including
any self-insured arrangements), health or medical benefits,
disability or sick leave benefits, post-employment or retirement
benefits and fringe benefits (each, an “ Employee Plan
”) which is maintained, administered or contributed to by the
Company or any ERISA Affiliate and covers any Employee or Former
Employee of the Company or any ERISA Affiliate. Copies of such
plans and arrangements (and, if applicable, related trust or
funding agreements or insurance policies) and all amendments
thereto and written interpretations thereof have been furnished to
Acquiror. Such plans are referred to collectively herein as the
“ Employee Plans .”
(b) None
of the Company, any of its ERISA Affiliates and any predecessor
thereof sponsors, maintains or contributes to, or has in the past
sponsored, maintained or contributed to, any Employee Plan subject
to Title IV of ERISA or any defined benefit plan.
(c) None
of the Company, any ERISA Affiliate of the Company and any
predecessor thereof contributes to, or has in the past contributed
to, any Multiemployer Plan, as defined in Section 3(37) of ERISA (a
“ Multiemployer Plan ”).
(d) Neither
the Company nor any ERISA Affiliate sponsors any Employee
Plans.
(e) There
is no current or projected Liability in respect of post-employment
or post-retirement health or medical or life insurance
bene
