AGREEMENT AND PLAN OF
MERGER
BATTLE MOUNTAIN GOLD EXPLORATION
CORP.,
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
”).
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:
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.
1.2
Closing; Closing Date .
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
”).
1.4
Effect of the Merger .
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.
1.5
Articles of Incorporation; Bylaws .
(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
Directors and Officers .
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 their respective
successors are duly elected or appointed and qualified or until the
earlier of their death, resignation or removal.
1.7
Taking of Necessary Action; Further Action .
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.
MERGER CONSIDERATION; CONVERSION OF
SECURITIES
2.1
Merger Consideration .
(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
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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
.”
2.2
Effect on Capital Stock .
(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
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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
5
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
Contingent Stock Arrangement .
(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
7
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.
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.
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(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.
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) by
mutual written consent of Acquiror and the Company;
(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
10
(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).
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.
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.
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.
11
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
12
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.
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.
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:
13
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.
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.
14
(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).
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
”).
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
15
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.
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
16
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
17
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.
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;
18
(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.
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
19
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
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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.
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(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.
5.12
Material Contracts .
(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;
(iv) Stock
purchase, stock option or any other similar plans;
(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;
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(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;
(xv) Royalty
Agreements of the Company or any Subsidiary; or
(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.
5.13
Labor and Employment .
(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.
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(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.
5.14
Pension and Benefit Plans .
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 ”).
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