PLAN OF REORGANIZATION AND
AGREEMENT AMONG
CHAPEAU, INC.
(Purchaser)
CHAPEAU NEVADA, INC.
(Merger Subsidiary)
AND
SPECIALIZED ENERGY PRODUCTS, INC.
(Company)
This Plan of Reorganization and Agreement is made this _____ day of
February, 2001, by and among CHAPEAU, INC. (the Purchaser), a Utah corporation,
CHAPEAU NEVADA, INC. (the Merger Subsidiary), a Nevada corporation and a
wholly-owned subsidiary of the Purchaser and SPECIALIZED ENERGY PRODUCTS, INC.
(the Company), a Nevada corporation, and provides for the Company to become a
wholly-owned subsidiary of the Purchaser by merger of the Merger Subsidiary with
and into the Company, and for the stockholders of the Company, by such merger,
to become stockholders instead of the Purchaser.
WHEREAS, the Purchaser desires to acquire, on the terms and subject to the
conditions reflected below, the business of the Company; and
WHEREAS, the Company believes that it is desirable and in the best
interests of the Company that its business be combined with that of the
Purchaser by merger of the Merger Subsidiary with and into the Company so that
the Company will become a wholly-owned subsidiary of the Purchaser as below
provided;
NOW, THEREFORE, THE PARTIES TO THIS PLAN OF REORGANIZATION AND AGREEMENT
do hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the terms identified below in this Article I
shall have the meanings indicated, unless a different and common meaning of the
term is clearly indicated by the context.
1.1 Affiliate: When used with respect to a person, an "affiliate" of that
person is a person Controlling, Controlled by, or under common Control with that
person.
1.2 Agreement: This Plan of Reorganization and Agreement, including all of
its schedules and exhibits and all other documents specifically referred to in
this Agreement that have been or are to be delivered by a party to this
Agreement to another such party in connection with the Transaction or this
Agreement, and including all duly adopted amendments, modifications, and
supplements to or of this Agreement and such schedules, exhibits, and other
documents.
1.3 Audited Financial Statements: The balance sheet, income statement,
statement of stockholders' equity, and statement of cash flows or, in each
instance, equivalent statements as commonly provided to shareholders, as at
December 31, 2000, and for the two (2) years then ended in the case of the
Company and as at December 31, 2000, and for the two (2) years then ended in the
case of the Purchaser, in each instance as reported on by Auditors.
1.4 Auditors: With respect to the Company, ___________________, and with
respect to the Purchaser, Hansen, Barnett & Maxwell, Salt Lake City, Utah in
each instance, independent certified public accountants currently being retained
for the purpose of auditing financial statements of that party.
1.5 Business Day: Any day that is not a Saturday, Sunday, or a day on which
banks in the State of California are authorized to close.
1.6 Closing: The completion of the Transaction, to take place as described
in Article II.
1.7 Closing Date: The date on which the Closing actually occurs, which
shall be March ___________, 2001, unless otherwise agreed by the parties, but
shall not in any event be prior to satisfaction or waiver of the conditions to
Closing set forth in Article VIII hereof.
1.8 Closing Time: The time at which the Closing actually occurs. All events
that are to occur at the Closing Time shall, for all purposes, be deemed to
occur simultaneously, except to the extent, if at all, that a specific order of
occurrence is otherwise described.
1.9 Code: The Internal Revenue Code of 1986, as amended and in effect at
the time of execution of the Agreement.
1.10 Company: SPECIALIZED ENERGY PRODUCTS, INC. a Nevada corporation which
will, pursuant to the transactions described in this Agreement, become a
wholly-owned subsidiary of the Purchaser.
1.11 Company Balance Sheet: The most recent Balance Sheet included in the
Audited Financial Statements of the Company.
1.12 Company Disclosure Document: The document delivered by the Company to
the Purchaser containing certain disclosures regarding the Company as described
in Article ___ hereof.
1.13 Company Facilities: Any business location of the Company, whether
owned, leased, borrowed or occupied by consent of the owner, including but not
limited to, the Company's principal place of business at
_____________________________.
1.14 Consideration: THREE MILLION FIVE HUNDRED THOUSAND (3,500,000) shares
of common stock of the Purchaser, into which all the shares of common stock of
the Company outstanding immediately prior to the consummation of the Transaction
will be converted by reason of the Merger.
1.15 Contingent Consideration: In addition, Purchaser shall, within sixty
(60) days after each Triggering Event, issue and transfer to the shareholders of
the Company pro rata additional shares of the common stock of the Purchaser in
the amounts set forth below upon the occurrence of the following described
Triggering Events:
a. One Million (1,000,000) shares upon Company's initial receipt of
revenues from the sale of its engine product;
b. One Million (1,000,000) shares upon the Company's realizing gross
revenues of not less than $2,000,000 in any fiscal quarter;
c. One Million (1,000,000) shares upon the Company's realizing gross
revenues of not less than $4,000,000 in any fiscal quarter.
Each of the foregoing Triggering Events is independent of the others;
nothing shall prevent the payment of the Contingent Consideration for more
than one Triggering Event in any reporting period. For purposes of
determining whether a Triggering Event has occurred, the Company's books
shall be prepared and evaluated according to GAAP.
1.16 Control: Generally, the power to direct the management or affairs of
an Entity.
1.17 Counsel to the Company: Gerald H. Dorn, Esq. of Anderson, Dorn &
Schulze, Ltd., Reno, Nevada.
1.18 Counsel to the Purchaser: Craig G. Christensen, Esq. of Christensen
and Barrus, Inc., Roseville, California.
1.19 Entity: A corporation, partnership, sole proprietorship, joint venture
or other form of organization formed for the conduct of a business whether
active or passive.
1.20 Exchange Act: The Securities Exchange Act of 1934, as amended to the
date as of which any reference thereto is relevant under this Agreement,
including any substitute or replacement statute adopted in place or lieu
therefor.
1.21 GAAP: Generally Accepted Accounting Principles, as in effect on the
date of any statement, report or determination that purports to be, or is
required to be, prepared or made in accordance with GAAP. All references herein
to financial statements prepared in accordance with GAAP shall mean in
accordance with GAAP consistently applied throughout the periods to which
reference is made.
1.22 Inventories: The stock of raw materials, work-in-process, and finished
goods, including, but not limited to, finished goods purchased for resale, held
by the Company for manufacturing, assembly, processing, finishing, sale, or
resale to others, from time to time in the ordinary course of the business of
the Company in the form in which such inventories then are held or after
manufacturing, assembling, finishing, processing, incorporating with other goods
or items, refining, or the like.
1.23 IRS: The Internal Revenue Service.
1.24 Liabilities: At any point in time (the Determination Time), the
obligations of a person or Entity, whether known or unknown, contingent or
absolute, recorded on its books or not, arising or resulting in any way from
facts, events, agreements, obligations or occurrences that existed or transpired
at a prior point in time, or resulted from the passage of time to the
Determination Time.
1.25 Merger: The merger of the Merger Subsidiary into the Company, as
provided in the Merger Agreement.
1.26 Merger Agreement: The form of Agreement of Merger providing for the
merger of the Merger Subsidiary with and into the Company as attached hereto as
Exhibit A.
1.27 Merger Subsidiary: CHAPEAU NEVADA, INC. a Nevada corporation.
1.28 Parent: With respect to any corporation, partnership, joint venture or
other entity, an Entity of which that Entity is, directly or indirectly through
one or more other Parents, a Subsidiary.
1.29 Payables: Liabilities of a party arising from the borrowing of money
or the incurring of obligations for merchandise or goods purchased.
1.30 Projections: The projections of economic results of the Company,
prepared quarterly through December 31, 2000 and delivered to the Purchaser
pursuant to the terms of this Agreement. The Purchaser acknowledges that
projections of future economic performance are necessarily unreliable and
subject to the occurrence or nonoccurrence of a variety of events, but the
Company represents that the Projections have been prepared on the basis of
assumptions that are, in the judgment of the Company, reasonable in all respects
and are not to the knowledge of the Company contrary to fact or to events that
have occurred or are presently in existence in any material respect.
1.31 Proprietary Rights: Trade secrets, copyrights, patents, trademarks,
service marks, supply agreements, licensing agreements, customer lists,
know-how, and all similar types of intangible property developed, created, or
owned by the Company in connection with its business, whether or not the same
are entitled to legal protection.
1.32 Purchaser: CHAPEAU, INC., a Utah corporation that, under the terms of
this Agreement is acquiring all of the outstanding common stock of the Company.
1.33 Purchaser Balance Sheet: The most recent Balance Sheet included in the
Audited Financial Statements of the Purchaser.
1.34 Purchaser's Securities (1): Shares of Common Stock, $0.001 par value,
of the Purchaser into the right to receive which the outstanding shares of
common stock are to be converted pursuant to the Merger.
1.35 Receivables: Accounts Receivable, notes receivable, and other
obligations, if any, appearing as assets on the books of the Company, and
customarily reflected as assets in balance sheets of entities prepared in
accordance with GAAP, indicating moneys owed to the entity.
1.36 Registration: Registration under the Securities Act.
1.37 Registration Rights Agreement: The agreement, in the form of Exhibit
_____ to this Agreement, providing for the Registration, under the circumstances
provided therein, of the Purchasers' Securities.
1.38 SEC: The Securities and Exchange Commission.
1.39 Securities Act: The Securities Act of 1933, as amended to the date as
of which any reference thereto is relevant under this Agreement, including any
substitute or replacement statute adopted in place or lieu thereof
1.40 Sellers: The shareholders of the Company who are executing this
Agreement and thereby agreeing to be bound by certain provisions of it as
specified in Articles VIII and IX.
1.41 Subsidiary: With respect to any Entity, another Entity of which fifty
percent (50%) or more of the effective voting power, or the effective power to
elect a majority of the board of directors or similar governing body, or fifty
percent (50%) or more of the true equity interest is owned by such first Entity,
directly or indirectly.
1.42 Transaction: The Merger and the related transactions contemplated by
this Agreement.
1.43 Unaudited Financial Statements: The balance sheet, income statement,
statement of stockholders' equity and statement of cash flows or, in each
instance, equivalent statements as commonly prepared, as at ........... 200__and
for the ..........months then ended in the case of the Company and as at
.......... .........., 200__ ..........and for the ..........months then ended
in the case of the Purchaser, with, in each case, comparable statements for the
similar period of the prior fiscal year.
ARTICLE II
THE TRANSACTION
2.1 The Transaction. On the Closing Date, and at the Closing Time, subject
in all instances to each of the terms, conditions, provisions and limitations
contained in this Agreement, the Merger Subsidiary will merge with and into the
Company, by the filing with the Secretary of State of the state of Nevada the
fully executed Merger Agreement, in the form attached hereto as Exhibit 2.1 in
all material respects, and such other documents as may be required by applicable
law to effectuate the Merger, (1) the shares of common stock of the Company
outstanding prior to the Transaction will, by said occurrence and with no
further action on the part of the holder(s) thereof, be transformed and
converted into the right to receive, upon surrender of the certificate for such
shares of common stock of the Company, the Consideration, without interest or
any similar payment thereon or with respect thereto; (2) each share of common
stock of the Merger Subsidiary outstanding prior to the Merger will, by said
occurrence and with no further action on the part of the holder thereof, be
transformed and converted into ______shares of common stock of the Company, so
that thereafter the Purchaser will be the sole and exclusive owner of equity
securities of the Company; (3) the officers of the Company immediately prior to
the effectiveness of the Merger will continue to hold such offices immediately
after the effectiveness of the Merger, and thereafter subject at all times to
the discretion of the board of directors of the Company and their superior
officers, if any, to whom the power to terminate employment has been delegated;
(4) the board of directors of the Merger Subsidiary immediately prior to the
effectiveness of the Merger will be the board of directors of the Company
immediately after the Merger; (5) the Company, as the surviving Entity of the
Merger, shall be the owner of all of the business, assets, rights and other
attributes theretofore held by either the Merger Subsidiary or the Company; and
(6) the name of the Company shall thereafter be the same as the name of the
Company prior to the Transaction.
2.2 Consideration. Pursuant to the Transaction the holder(s) of shares of
Common Stock of the Company immediately prior to the Merger shall be entitled to
receive, from and after the effectiveness of the Merger, in respect of each
share of Common Stock of the Company outstanding immediately prior to the
Transaction owned by such holder (and upon surrender of the certificate(s)
therefor, duly endorsed and in all respects in proper form for transfer), the
Consideration.
In addition, within sixty (60) days after the occurrence of any Triggering
Event, as such term is defined in Section 1.15, the holders of Common Stock of
the Company shall be entitled to receive the applicable Contingent
Consideration. The Contingent Consideration shall not be payable at Closing,
unless a Triggering Event shall have occurred prior to the Closing.
2.3 Closing. The Closing hereunder shall take place at the offices of
Anderson, Dorn & Schulze, Ltd., 294 East Moana Lane, Suite B-27, Reno, Nevada,
or at such other place as the Purchaser and the Company may agree upon, on the
Closing Date.
2.4 Parties to the Agreement and Transaction. To the extent that any
provision of this Agreement calls for agreement by the Company as a party
hereto, such provision shall mean the Company as it exists prior to the
consummation of the Merger. If, after such consummation, such a provision
requires amendment, modification, interpretation, etc., the same may be
accomplished by (but only by) a majority in interest of those receiving the
Consideration as a result of the Transaction, and not by the Company.
2.5 Composition of Purchaser's Board of Directors. The Purchaser's Board of
Directors currently consists of three (3) persons. At the Closing, Purchaser
shall deliver to Company a certified resolution of the Purchaser's Board of
Directors authorizing expansion of the number of Board members to five (5)
persons. Said resolution shall also appoint two (2) persons nominated by Company
to fill the additional Board positions pending the next shareholders' meeting of
Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company and to the Sellers:
3.1 Organization and Qualification. Each of the Purchaser and the Merger
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and each
has the requisite corporate power and authority to carry on its business as it
is now being conducted.
3.2 Authority Relative To This Agreement. Each of the Purchaser and the
Merger Subsidiary has the requisite corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized and approved by the governing body of Purchaser
and of the Merger Subsidiary and by the shareholder of the Merger Subsidiary and
no other corporate proceedings on the part of the Purchaser or the Merger
Subsidiary are necessary to approve and adopt this Agreement or to approve the
consummation of the Transactions contemplated hereby, including delivery of the
Consideration. This Agreement has been duly and validly executed and delivered
by the Purchaser and the Merger Subsidiary and constitutes a valid and binding
Agreement of the Purchaser and of the Merger Subsidiary, enforceable in
accordance with its terms.
3.3 Absence of Breach; No Consents. The execution, delivery, and
performance of this Agreement, and the performance by Purchaser and the Merger
Subsidiary of their obligations hereunder (except for compliance with the HSR
Act, and compliance with any regulatory or licensing laws applicable to the
business of the Purchaser, all of which, to the extent applicable to Purchaser
or the Merger Subsidiary (and to the extent within the control of either), will
be satisfied in all material respects prior to the Closing) do not, except as
disclosed in Schedule 3.3, (1) conflict with, and will not result in a breach
of, any of the provisions of the Articles of Incorporation or Bylaws of
Purchaser or the Merger Subsidiary.
3.4 Brokers. Except as set forth in the Disclosure Statement, no broker,
finder, or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with this Agreement or the Transaction or any
related transaction based upon any agreements, written or oral, made by or on
behalf of Purchaser or the Merger Subsidiary. The Disclosure Statement shall
include a description of the investment banking agreement entered into between
Purchaser and Capital Bay Financial, Inc., which is contingent upon the Closing
of this Transaction.
3.5 Disclosure. The Purchaser has heretofore delivered to the Company each
of the following
(1) Annual report of the Purchaser to its shareholders for its fiscal
year ended the date of the Purchaser Balance Sheet;
(2) Annual report of the Purchaser on Form 10-K as filed with the
Securities and Exchange Commission (SEC) for the Purchaser's fiscal year
ended the date of the Purchaser Balance Sheet;
(3) Proxy Statement of the Purchaser relating to its most recent
annual meeting of shareholders; and
(4) Quarterly reports of the Purchaser on Form 10-Q as filed with the
SEC for each of the first three fiscal quarters of the Company of each
fiscal year, including the Unaudited Financial Statements of the Purchaser
therein, to the extent that such reports have been filed with the SEC after
the filing of the report referred to in (2) above and prior to the
execution hereof.
Each of such documents, at the time it was prepared, and all of such
documents taken together, did not and do not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. All of the financial statements contained in the foregoing
documents were prepared from the books and records of the Company. The Audited
Financial Statements were prepared in accordance with GAAP, and fairly and
accurately reflect the financial position and condition of the Company as at the
dates and for the periods indicated. The Unaudited Financial Statements were
prepared in a manner not inconsistent with the basis of presentation used in the
Audited Financial Statements, and fairly present the financial position and
condition of the Company as at and for the periods indicated, subject to normal
yearend adjustments, none of which will be material.
3.6 Capitalization. The authorized capital stock of the Purchaser consists
of 325,000,000 shares of Common Stock, $0.001 par value and 5,000,000 shares of
Preferred Stock, $0.001 par value. There is no other capital stock authorized
for issuance. 8,500,000 shares of Common Stock are validly issued and
outstanding, fully paid, and nonassessable, no shares of Common Stock or
Preferred Stock are held in the Purchaser's treasury, and no shares are reserved
for issuance, nor are there outstanding any options, warrants, convertible
instruments or other rights, agreements or commitments to acquire Common Stock
or Preferred Stock of the Purchaser, except as fully and completely described on
Schedule 4.2 hereto. Since the date of the Company Balance Sheet, no shares of
the Company's capital stock, or options, warrants, or other rights, agreements
or commitments (contingent or otherwise) obligating the Company or any of its
Subsidiaries to issue shares of capital stock, have been executed or issued
except as fully and completely described on Schedule 4.2 hereto.
The authorized capital stock of the Merger Subsidiary consists of ______
shares of Common Stock, $0.001 par value and no shares of Preferred Stock. 100
shares of the Common Stock are validly issued and outstanding, fully paid, and
nonassessable. No shares of Common Stock or Preferred Stock are held in the
Purchaser's treasury, and no shares are reserved for issuance, nor are there
outstanding any options, warrants, convertible instruments or other rights,
agreements or commitments to acquire Common Stock or Preferred Stock of the
Merger Subsidiary, except as fully and completely described on Schedule 4.2
hereto.
3.7 Absence of Material Differences From Disclosure Document. Except as
specifically disclosed in the Purchaser's Disclosure Document:
(1) No Undisclosed Liabilities. The Purchaser and the Merger
Subsidiary have no Liabilities which are not adequately reflected or
reserved against on the face of the Purchaser's Balance Sheet, except
Liabilities incurred since the date of the Purchaser's Balance Sheet in the
ordinary course of business and consistent with past practice. Without
limiting the foregoing, (a) there are no unpaid leasehold improvements at
any of the Purchaser's facilities or locations for which the Purchaser is
or will be responsible, and (b) there are no deferred rents due to lessors
at or with respect to any of such facilities or locations, and (c) the
Purchaser Disclosure Document sets forth, as a part thereof, each Liability
of the Purchaser in an amount in excess of $5,000.00 and the aggregate
amount of Liabilities to each person to whom such aggregate exceeds
$5,000.00.
(2) No Material Adverse Change, Etc. Since the date of the Purchaser
Balance Sheet, other than as contemplated or caused by this Agreement,
there has not been (a) any material adverse change in the business,
condition (financial or otherwise), operations, or prospects of the
Purchaser; (b) any damage, destruction, or loss, whether covered by
insurance or not, having a material adverse effect on the business,
condition (financial or otherwise), operations, or prospects of the
Purchaser or the Merger Subsidiary; (c) any entry into or termination of
any material commitment, contract, agreement, or transaction (including,
without limitation, any material borrowing or capital expenditure or sale
or other disposition of any material asset or assets) of or involving the
Purchaser other than this Agreement and agreements executed in the ordinary
course of business; (d) any redemption, repurchase, or other acquisition
for value of its capital stock by the Purchaser, or any issuance of capital
stock of the Purchaser or any Subsidiary of the Purchaser or of securities
convertible into or rights to acquire any such capital stock or any
dividend or distribution declared, set aside, or paid on capital stock of
the Purchaser; (e) any transfer of or right granted under any material
lease, license, agreement, patent, trademark, trade name, or copyright of
the Purchaser; (f) any sale or other disposition of any asset of the
Purchaser or of any Subsidiary of the Purchaser, or any mortgage, pledge,
or imposition of any lien or other encumbrance on any asset of the
Purchaser, other than in the ordinary course of business, or any agreement
relating to any of the foregoing; or (g) any default or breach by the
Purchaser or any Subsidiary of the Purchaser in any material respect under
any contract, license or permit. Since the date of the Purchaser Balance
Sheet, the Purchaser and its Subsidiaries have conducted their businesses
only in the ordinary and usual course, and, without limiting the foregoing,
no changes have been made in (a) executive compensation levels, (b) the
manner in which other employees of the Purchaser and its Subsidiaries are
compensated, (c) supplemental benefits provided to any such executives or
other employees, or (d) inventory levels in relation to sales levels,
except, in any such case, in the ordinary course of business and, in any
event, without material adverse effect on the business, condition
(financial or otherwise), operations, or prospects of the Purchaser.
(3) Taxes. The Purchaser and the Merger Subsidiary have properly filed
or caused to be filed all federal, state, local, and foreign income and
other tax returns, reports, and declarations that are required by
applicable law to be filed by them, and have paid, or made full and
adequate provision for the payment of, all federal, state, local, and
foreign income and other taxes properly due for the periods covered by such
returns, reports, and declarations, except such taxes, if any, as are
adequately reserved against in the Purchaser Balance Sheet.
(4) Litigation. (a) No material investigation or review by any
governmental entity with respect to the Purchaser or Merger Subsidiary is
pending or, to the best of the knowledge of the Purchaser, threatened
(other than inspections and reviews customarily made of businesses such as
that of the Purchaser), nor has any governmental entity indicated to the
Purchaser an intention to conduct the same, and (b) there is no action,
suit, or proceeding pending or, to the best of the knowledge of the
Purchaser, threatened against or affecting the Purchaser or the Merger
Subsidiary at law or in equity, or before any federal, state, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality. The Purchaser Disclosure Document includes a brief
description of each litigation matter included therein except claims for
amounts of less than $5,000.00.
(5) Employees, Etc. Neither Purchaser nor the Merger Subsidiary has
any employees and there are no agreements, understandings or arrangements
of any kind (contingent or otherwise) to which the Purchaser or the Merger
Subsidiary are obligated for the benefit of any person or entity.
(6) Compliance With Laws. The Purchaser is in substantial compliance
with all, and has received no notice of any violation of any, laws or
regulations applicable to its operations, including without limitation the
use of premises occupied by it, or with respect to which compliance is a
condition of engaging in any aspect of the business of the Purchaser and
its Subsidiaries and each has all permits, licenses, zoning rights, and
other governmental authorizations necessary to conduct its business as
presently conducted.
(7) Ownership of Assets. The Purchaser has no real property and is not
a party to any leases of real or personal property.
(8) Proprietary Rights. The Purchaser has no long-term licenses or
proprietary rights of any kind.
(9) Trade Names. The Purchaser Disclosure Document identifies each
trade name, fictitious business name, or other similar name under which the
Seller has conducted any part of its business during the ten (10) years
preceding the date of this Agreement.
(10) Employee Benefit Plans. Except as disclosed in the Purchaser
Disclosure Document, the Purchaser neither maintains nor contributes to any
Pension Plan or any Welfare Plan, nor is the Purchaser presently, nor has
it been within the last six years, a participating employer in any
Multiemployer Plan.
(11) Facilities. The Purchaser neither owns nor leases any physical
plant or facility, nor any vehicles or other equipment.
(12) Accounts Receivable. The Purchaser has no accounts receivable.
(13) Inventories. The Purchaser has no inventory.
(14) Contracts. Except as identified in the Purchaser Disclosure
Document, the Purchaser and the Merger Subsidiary have no contracts,
agreements, or understandings, whether express or implied, written or
verbal, except as set forth in the Purchaser Disclosure Document.
(15) Accounts Payable. The accounts payable reflected on the Purchaser
Balance Sheet do, and those reflected in the most recent balance sheet
included in the Unaudited Financial Statements do, and those reflected on
the books of the Purchaser at the time of the Closing will, reflect all
amounts owed by the Purchaser in respect of trade accounts due and other
Payables, and the actual Liability of the Purchaser in respect of such
obligations was not, and will not be, on any of such dates, in excess of
the amounts so reflected on the balance sheets or the books of the
Purchaser, as the case may be.
(16) Insurance. The Purchaser has no insurance policies in force.
(17) Real Properties. The Purchaser neither owns nor leases any real
property.
Full Disclosure. The documents, certificates, and other writings furnished
or to be furnished by or on behalf of the Purchaser to the Company pursuant to
the provisions of this Agreement, taken together in the aggregate, do not and
will not contain any untrue statement of a material fact, or omit to state any
material fact necessary to make the statements made, in the light of the
circumstances under which they are made, not misleading.
3.8 Actions Since Balance Sheet Date. Except as set forth on the Purchaser
Disclosure Document, since the date of the Purchaser Balance Sheet, the
Purchaser has taken no actions that would be prohibited under the provisions of
this Agreement (without the prior consent of the Company) after the date of this
Agreement
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
4.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has the requisite corporate power and authority to carry on its
business as it is now being conducted. The Company not required to be qualified
as a foreign corporation to do business in any other state or jurisdiction.
4.2 Capitalization. The authorized capital stock of the Company consists of
100,000 shares of Common Stock, $0.25 par value. There is no other capital stock
authorized for issuance. As of the date of the Company Balance Sheet 400 shares
of Common Stock were validly issued and outstanding, fully paid, and
nonassessable, no shares of Common Stock were held in the Company treasury, and
no shares were reserved for issuance, nor were there outstanding any options,
warrants, convertible instruments or other rights, agreements or commitments to
acquire Common Stock of the Company, except as fully and completely described on
Schedule 4.2 hereto. Since the date of the Company Balance Sheet, no shares of
the Company's capital stock, or options, warrants, or other rights, agreements
or commitments (contingent or otherwise) obligating the Company or any of its
Subsidiaries to issue shares of capital stock, have been executed or issued.
4.3 Authority Relative To This Agreement. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding Agreement of the Company enforceable in accordance with its terms,
subject, however, to the approval of shareholders of Seller as provided for
elsewhere in this Agreement. The Company has all requisite corporate power and
authority to enter into this Agreement and to carry out the Transaction
contemplated hereby, and its doing so has been duly and sufficiently authorized,
subject only to shareholder approval and to and to any required governmental
regulatory approvals.
4.4 Absence of Breach; No Consents. The execution, delivery, and
performance of this Agreement, and the performance by the Company of its
obligations hereunder do not, except as disclosed in Schedule 4.4, (1) conflict
with or result in a breach of any of the provisions of the Articles of
Incorporation or Bylaws of the Company or of any of its Subsidiaries; (2)
contravene any law, ordinance, rule, or regulation of any State or Commonwealth
or political subdivision of either or of the United States (except for the HSR
Act and compliance with regulatory or licensing laws all of which, to the extent
applicable to the Company (and to the extent within the control of the Company),
will be satisfied in all material respects prior to the Closing), or of any
applicable foreign jurisdiction, or contravene any order, writ, judgment,
injunction, decree, determination, or award of any court or other authority
having jurisdiction, or cause the suspension or revocation of any authorization,
consent, approval, or license, presently in effect, which affects or binds, the
Company or any of its material properties, except in any such case where such
contravention will not have a material adverse effect on the business, condition
(financial or otherwise), operations or prospects of the Company and its
Subsidiaries, taken as a whole, and will not have a material adverse effect on
the validity of this Agreement or on the validity of the consummation the
Transaction; (3) conflict with or result in a material breach of or default
under any material indenture or loan or credit agreement or any other material
agreement or instrument to which the Company is a party or by which it or they
or any of its or their material properties may be affected or bound; (4) other
than consents disclosed on the Company Disclosure Document, require the
authorization, consent, approval, or license of any third party; or (5)
constitute grounds for the loss or suspension of any permits, licenses, or other
authorizations used in the business of the Company.
4.5 Brokers. No broker, finder, or investment banker is entitled to any
brokerage, finder's, or other fee or commission in connection with this
Agreement or the Transaction or any related transaction based upon any
agreements, written or oral, made by or on behalf of Company or any of its
Subsidiaries. The Company does not have any obligation to pay finder's or
broker's fees or commissions in connection with the exercise of options to renew
or extend real estate leases to which the Company is a party.
4.6 Financial Statements. The Company has heretofore delivered to the
Purchaser the following:
(1) The Audited Financial Statements of the Company;
(2) The Unaudited Financial Statements of the Company;
(3) All documents (if any) of the Company filed with the SEC within
the four years preceding the date of execution of this Agreement; (4) The
Projections.
All of the historical financial statements contained in such documents were
prepared from the books and records of the Company. The Audited Financial
Statements were prepared in accordance with GAAP, and fairly and accurately
reflect the financial position and condition of the Company as at the dates and
for the periods indicated. Without limiting the foregoing, at the date of the
Company Balance Sheet, the Company owned each of the assets included in
preparation of the Company Balance Sheet, and the valuation of such assets in
the Company Balance Sheet is not more than their fair saleable value (on an
item-by-item basis) at that date; and the Company had no Liabilities other than
those included in the Company Balance Sheet, nor any Liabilities in amounts in
excess of the amounts included for them in the Company Balance Sheet. The
Unaudited Financial Statements included in the documents described above in this
Section were prepared in a manner consistent with the basis of presentation used
in the Audited Financial Statements, and fairly present the financial position
and condition of the Company as at and for the periods indicated, subject to
normal yearend adjustments, none of which will be material. The Projections
reasonably reflect the results of operations that the Company expects it will
achieve absent extraordinary events or unusual conditions of which it is not
presently on notice. From the date hereof through the Closing Date the Company
will continue to prepare financial statements on the same basis that it has done
so in the past, will promptly deliver the same to the Purchaser, and agrees that
from and after such delivery the foregoing representations will be applicable to
each financial statement so prepared and delivered.
4.7 Absence of Material Differences From Disclosure Document. Except as
specifically disclosed in the Company Disclosure Document:
(1) No Undisclosed Liabilities. The Company has no Liabilities which
are not adequately reflected or reserved against on the face of the Company
Balance Sheet, except Liabilities incurred since the date of the Company
Balance Sheet in the ordinary course of business and consistent with past
practice. Without limiting the foregoing, (a) there are no unpaid leasehold
improvements at any of the Company's facilities or locations for which the
Company is or will be responsible, and (b) there are no deferred rents due
to lessors at or with respect to any of such facilities or locations, and
(c) the Company Disclosure Document sets forth, as a part thereof, each
Liability of the Company in an amount in excess of $5,000.00 and the
aggregate amount of Liabilities to each person to whom such aggregate
exceeds $5,000.00.
(2) No Material Adverse Change, Etc. Since the date of the Company
Balance Sheet, other than as contemplated or caused by this Agreement,
there has not been (a) any material adverse change in the business,
condition (financial or otherwise), operations, or prospects of the
Company; (b) any damage, destruction, or loss, whether covered by insurance
or not, having a material adverse effect on the business, condition
(financial or otherwise), operations, or prospects of the Company; (c) any
entry into or termination of any material commitment, contract, agreement,
or transaction (including, without limitation, any material borrowing or
capital expenditure or sale or other disposition of any material asset or
assets) of or involving the Company other than this Agreement and
agreements executed in the ordinary course of business; (d) any redemption,
repurchase, or other acquisition for value of its capital stock by the
Company, or any issuance of capital stock of the Company or any Subsidiary
of the Company or of securities convertible into or rights to acquire any
such capital stock or any dividend or distribution declared, set aside, or
paid on capital stock of the Company; (e) any transfer of or right granted
under any material lease, license, agreement, patent, trademark, trade
name, or copyright of the Company; (f) any sale or other disposition of any
asset of the Company or of any Subsidiary of the Company, or any mortgage,
pledge, or imposition of any lien or other encumbrance on any asset of the
Company, other than in the ordinary course of business, or any agreement
relating to any of the foregoing; or (g) any default or breach by the
Company or any Subsidiary of the Company in any material respect under any
contract, license or permit. Since the date of the Company Balance Sheet,
the Company and its Subsidiaries have conducted their businesses only in
the ordinary and usual course, and, without limiting the foregoing, no
changes have been made in (a) executive compensation levels, (b) the manner
in which other employees of the Company and its Subsidiaries are
compensated, (c) supplemental benefits provided to any such executives or
other employees, or (d) inventory levels in relation to sales levels,
except, in any such case, in the ordinary course of business and, in any
event, without material adverse effect on the business, condition
(financial or otherwise), operations, or prospects of the Company.
(3) Taxes. The Company has properly filed or caused to be filed all
federal, state, local, and foreign income and other tax returns, reports,
and declarations that are required by applicable law to be filed by them,
and have paid, or made full and adequate provision for the payment of, all
federal, state, local, and foreign income and other taxes properly due for
the periods covered by such returns, reports, and declarations, except such
taxes, if any, as are adequately reserved against in the Company Balance
Sheet.
(4) Litigation. (a) No material investigation or review by any
governmental entity with respect to the Company is pending or, to the best
of the knowledge of the Company, threatened (other than inspections and
reviews customarily made of businesses such as that of the Company), nor
has any governmental entity indicated to the Company an intention to
conduct the same, and (b) there is no action, suit, or proceeding pending
or, to the best of the knowledge of the Company, threatened against or
affecting the Company at law or in equity, or before any federal, state,
municipal, or other governmental department, commission, board, bureau,
agency, or instrumentality. The Company Disclosure Document includes a
brief description of each litigation matter included therein except claims
for amounts of less than $5,000.00.
(5) Employees, Etc. There are, except as disclosed on the Company
Disclosure Document, no collective bargaining, bonus, profit sharing,
compensation, or other plans, agreements, trusts, funds, or arrangements
maintained by the Company for the benefit of their directors, officers, or
employees, and there are no employment, consulting, severance, or
indemnification arrangements, agreements or understandings between the
Company or any of its Subsidiaries, on the one hand, and any current or
former directors, officers, or other employees (or Affiliates thereof) of
the Company. The Company Disclosure Document identifies each person whose
income from the Company in the fiscal year ended on the date of the Company
Balance Sheet exceeded, or whose income from the Company in the fiscal year
begun immediately thereafter is at a rate exceeding, $1,000 per annum, and
describes any contractual arrangement for the employment or compensation of
each such person. The Company is not, and following the Closing will not
be, bound by any express or implied contract or agreement to employ,
directly or as a consultant or otherwise, any person for any specific
period of time or until any specific age except as specified in agreements
in writing identified in the Company Disclosure Document or executed
pursuant to the provisions hereof, if any.
(6) Compliance With Laws. The Company is in substantial compliance
with all, and has received no notice of any violation of any, laws or
regulations applicable to its operations, including without limitation the
use of premises occupied by it, or with respect to which compliance is a
condition of engaging in any aspect of the business of the Company it has
all permits, licenses, zoning rights, and other governmental authorizations
necessary to conduct its business as presently conducted.
(7) Ownership of Assets. The Company has good, marketable title to its
Assets, which are completely described in the Company Balance Sheet or the
Company Disclosure Document, free and clear of all liens, claims,
encumbrances, and charges, except liens for taxes not yet due and minor
imperfections of title and encumbrances, if any, which singly and in the
aggregate are not substantial in amount and do not materially detract from
the value of the property subject thereto or materially impair the use
thereof. The Company does not know of any potential action by any party,
governmental or other, and no proceedings with respect thereto have been
instituted of which the Company has notice, that would materially affect
the Company's ability to use and to utilize each of such assets in its
business.
(8) Proprietary Rights. The Company possesses full ownership of, or
adequate and enforceable long-term licenses or other rights to use (without
payment), all Proprietary Rights owned by or registered in the name of the
Company or used in the business of the Company; the Company has not
received any notice of conflict which asserts the rights of others with
respect thereto; and the Company has in all material respects performed all
of the obligations required to be performed by it, and is not in default in
any material respect, under any agreement relating to any Proprietary
Right.
(9) Trade Names. The Acquired Business Disclosure Document identifies
each trade name, fictitious business name, or other similar name under
which the Seller has conducted any part of the Acquired Business or in
which the Seller has utilized any of the Acquired Assets during the ten
(10) years preceding the date of this Agreement.
(10) Employee Benefit Plans. The Company does not now and never has
maintained any Employee Benefit Plan.
(11) Facilities. The Company Facilities (whether leased or used with
consent of the owner) are structurally sound and none of the Company
Facilities, nor any of the vehicles or other equipment used by the Company
in connection with its business, has any material defects and all of them
are in all material respects in good operating condition and repair and are
adequate for the uses to which they are being put; none of such Company
Facilities, vehicles or other equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs which are not
material in nature or cost.
(12) Accounts Receivable. The Company has no accrued or unaccrued
accounts receivableof any type whatsoever.
(13) Inventories. Except for a prototype machine, the Company has no
inventory of any kind.
(14) Contracts. Except as identified in the Company Disclosure
Document, the Company has no contracts, agreements, or understandings,
whether express or implied, written or verbal, provided, however, that the
Company may have, and the Company Disclosure Document need not identify,
any such contracts, agreements, or understandings that fall into one of the
following categories: (a) those that are terminable on notice of less than
thirty- two (32) days and do not involve payments or obligations of more
than $5,000.00 in any period of thirty-one (31) days or less (on
termination or otherwise); or (b) those that involve aggregate payments or
obligations of less than $5,000.00. The Company Disclosure Document shall,
however, identify each contract otherwise exempt from disclosure by (b)
above if the Company's obligations, in the aggregate, under all such
contracts, agreements or understandings with persons or entities similarly
situated (e.g., all nonunion employees, all suppliers, all licensees, or
all landlords) exceeds $5,000.00 per annum. The Company Disclosure Document
includes a brief summary of each such contract, agreement or understanding
identified therein, or of the type of such contracts and the aggregate
exposure or commitment under similar contracts in the case of contracts
included by reason of the preceding sentence. Without in any respect
limiting the foregoing, the Company Disclosure Document contains a
description of all leases of properties by the Company, including all
amendments, supplements, extensions, and modifications thereof,
identifying, inter alia, the date each such document was executed and its
effective period.
(15) Accounts Payable. The accounts payable reflected on the Company
Balance Sheet do, and those reflected in the most recent balance sheet
included in the Unaudited Financial Statements do, and those reflected on
the books of the Company at the time of the Closing will, reflect all
amounts owed by the Company in respect of trade accounts due and other
Payables, and the actual Liability of the Company in respect of such
obligations was not, and will not be, on any of such dates, in excess of
the amounts so reflected on the balance sheets or the books of the Company,
as the case may be.
(16) Labor Matters. Except as set forth in the Company Disclosure
Document, there are no activities or controversies, including, without
limitation, any labor organizing activities, election petitions or
proceedings, proceedings preparatory thereto, unfair labor practice
complaints, labor strikes, disputes, slowdowns, or work stoppages, pending
or, to the best of the knowledge of the Company, threatened, between the
Company and any of its employees.
(18) Insurance. The Company does not now have and never has had any
policy of insurance of any kind.
(19) Title to and Utilization of Real Properties. The Company neither
owns nor leases any real property.
4.8 Full Disclosure. The documents, certificates, and other writings
furnished or to be furnished by or on behalf of the Company to the Purchaser
pursuant to the provisions of this Agreement, taken together in the aggregate,
do not and will not contain any untrue statement of a material fact, or omit to
state any material fact necessary to make the statements made, in the light of
the circumstances under which they are made, not misleading.
4.9 Actions Since Balance Sheet Date. Except as set forth on the Company
Disclosure Document, since the date of the Company Balance Sheet, the Company
has taken no actions that would be prohibited under the provisions of this
Agreement (without the prior consent of the Purchaser) after the date of this
Agreement.
ARTICLE V
COVENANTS OF THE PURCHASER AND THE MERGER SUBSIDIARY
5.1 Affirmative Covenants. >From the date hereof through the Closing Date,
the Purchaser and the Merger Subsidiary will take every action reasonably
required of either of them in order to satisfy the conditions to closing set
forth in this Agreement and otherwise to ensure the prompt and expedient
consummation of the Transaction substantially as contemplated hereby, and will
exert all reasonable efforts to cause the Transaction to be consummated,
provided in all instances that the representations and warranties of the Company
and the Sellers in this Agreement are and remain true and accurate and that the
covenants and agreements of the Company and of the Sellers in this Agreement are
honored and that the conditions to the obligations of the Purchaser and the
Merger Subsidiary set forth in this Agreement are not incapable of satisfaction.
5.2 Cooperation. The Purchaser shall cooperate with the Company and its
counsel, accountants and agents in every way in carrying out the transactions
contemplated herein, and in delivering all documents and instruments deemed
reasonably necessary or useful by Counsel to the Company.
5.3 Expenses. Whether or not the Transaction is consummated, all costs and
expenses incurred by the Purchaser and the Merger Subsidiary in connection with
this Agreement and the Transactions contemplated hereby shall be paid by the
Purchaser except as otherwise provided (directly or indirectly) herein.
5.4 Officers' and Directors' Insurance and Indemnity. Following the
Closing, and for a period of at least three years thereafter, the Purchaser
agrees to maintain in full force and effect current policies providing insurance
to officers and directors of the Company for their errors, omissions, and
similar sources of potential liability and current policies of the Company as to
indemnification of such persons against liability for actions or inactions in
their capacity as officers or directors of the Company, or their actions on
behalf or the Company with respect to other Entities.
5.5 Publicity. Prior to the Closing any written news releases by the
Purchaser pertaining to this Agreement or the Transaction shall be submitted to
the Company for review and approval prior to release by the Purchaser, and shall
be released only in a form approved by the Company, provided, however, that (1)
such approval shall not be unreasonably withheld and (2) such review and
approval shall not be required of releases by the Purchaser if prior review and
approval would prevent the timely and accurate dissemination of such press
release as required to comply, in the judgment of counsel, with any applicable
law, rule, or policy.
5.6 Updating of Exhibits and Disclosure Documents. The Purchaser shall
notify the Company of any changes, additions or events which may cause any
change in or addition to any Schedules or Exhibits delivered by it under this
Agreement, promptly after the occurrence of the same and at the Closing by the
delivery of updates of all Schedules and Exhibits. No notification made pursuant
to this Section shall be deemed to cure any breach of any representation or
warranty made in this Agreement unless the Company specifically agrees thereto
in writing nor shall any such notification be considered to constitute or give
rise to a waiver by the Company of any condition set forth in this Agreement.
5.7 Registration. The Purchaser and the Merger Subsidiary agree that
promptly following the execution hereof, the Purchaser and the Merger Subsidiary
will commence preparation of a registration statement on Form S-3 (or such other
form as may be appropriate) under the Securities Act, and will otherwise proceed
promptly to satisfy the requirements of the Securities Act with respect to the
Transaction, including those of Rule 145. The Purchaser represents that, insofar
as the information contained in the same relates to the Purchaser (including
information incorporated therein by reference), the Prospectus contained in said
registration statement will (1) comply as to form with the relevant requirements
of the form on which it is filed, and (2) not contain, as of the effective date
thereof, any untrue statement of a material fact or any omission to state a
material fact necessary to make the statements contained therein, in light of
the circumstances under which they are made, not misleading.
5.8 Access and Information. The Purchaser shall afford to the Company and
to the Company's accountants, counsel and other representatives reasonable
access during normal business hours throughout the period prior to the Closing
to all of its properties, books, contracts, commitments, records (including, but
not limited to, tax returns), and personnel, and, during such period, the
Purchaser shall furnish promptly to the Company (1) all written communications
to its directors or to its shareholders generally, (2) internal monthly
financial statements when and as available, and (3) all other information
concerning its or any of its subsidiaries' business, properties, and personnel
as the Company may reasonably request, but no investigation pursuant to this
Section 5.8 shall affect any representations or warranties of the Purchaser, or
the conditions to the obligations of the Purchaser to consummate the Transaction
contained in this Agreement. In the event of the termination of this Agreement,
the Purchaser will, and will cause its representatives to, deliver to the
Company or destroy all documents, work papers and other material, and all copies
thereof, obtained by it or on its behalf from the Company (or any subsidiary) as
a result of this Agreement or in connection herewith, whether so obtained before
or after the execution hereof, and will hold in confidence all confidential
information that has been designated as such by the Company in writing or by
appropriate and obvious notation, and will not use any such confidential
information except in connection with the Transaction, until such time as such
information is otherwise publicly available. Purchaser and its representatives
shall assert their rights hereunder in such manner as to minimize interference
with the business of the Company.
5.9 No Solicitation. The Purchaser, and those acting on its behalf will
not, and the Purchaser will use its best efforts to cause its officers,
employees, agents, and representatives (including any investment banker) not,
directly or indirectly, to solicit, encourage, or initiate any discussions with,
or negotiate or otherwise deal with, or provide any information to, any person
or Entity other than the Company and its officers, employees, and agents,
concerning any merger, sale of substantial assets, or similar transaction
involving the Purchaser or division of the Purchaser or any sale of any of its
capital stock or of any subsidiary or division. The Purchaser will notify the
Company immediately upon receipt of any inquiry, offer or proposal relating to
any of the foregoing. None of the foregoing shall prohibit providing information
to others in a manner in keeping with the ordinary conduct of the Purchaser's
business, or providing information to government authorities.
5.10 Conduct of Business Pending the Transaction. The Purchaser and the
Merger Subsidiary covenant and agree with the Company that, prior to the
consummation of the Transaction or the termination of this Agreement pursuant to
its terms, unless the Company shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed, and except as otherwise
contemplated by this Agreement or disclosed in the Purchaser Disclosure
Document, they will comply with each of the following:
(1) Their business shall be conducted only in the ordinary and usual
course, they shall use reasonable efforts to keep intact their business
organizations and goodwill, keep available the services of their officers
and employees and maintain good relationships with suppliers, lenders,
creditors, distributors, employees, customers, and others having business
or financial relationships with them, and they shall immediately notify the
Company of any event or occurrence or emergency material to, and not in the
ordinary and usual course of business of, it.
(2) They shall not (a) amend their respective Articles of
Incorporation or Bylaws, or (b) split, combine, or reclassify any of their
outstanding securities or declare, set aside, or pay any dividend or other
distribution on or make or agree or commit to make any exchange for or
redemption of any such securities payable in cash, stock, or property.
(3) They shall not (a) issue or agree to issue any additional shares
of, or rights of any kind to acquire any shares of, its capital stock of
any class, or (b) enter into any contract, agreement, commitment, or
arrangement with respect to any of the foregoing.
(4) They shall not create, incur, or assume any long-term or
short-term indebtedness for money borrowed or make any capital expenditures
or commitment for capital expenditures, except in the ordinary course of
business and consistent with past practice.
(5) They shall not (a) adopt, enter into, or amend any bonus,
profit-sharing, compensation, stock option, warrant, pension, retirement,
deferred compensation, employment, severance, termination, or other
employee benefit plan, agreement, trust fund, or arrangement for the
benefit or welfare of any officer, director or employee, except as provided
in Section 6.2 hereof; or (b) agree to any material (in relation to
historical compensation) increase in the compensation payable or to become
payable to, or any increase in the contractual term of employment of, any
officer, director, or employee except, with respect to employees who are
not officers or directors, in the ordinary course of business in accordance
with past practice.
(6) They shall not sell, lease, mortgage, encumber, or otherwise
dispose of or grant any interest in any of its assets or properties except
for sales, encumbrances, and other dispositions or grants in the ordinary
course of business and consistent with past practice and except for liens
for taxes not yet due or liens or encumbrances that are not material in
amount or effect and do not impair the use of the property, or as
specifically provided for or permitted in this Agreement.
(7) They shall not enter into, or terminate, any material contract,
agreement, commitment, or understanding.
(8) They shall not enter into any agreement, commitment, or
understanding, whether in writing or otherwise, with respect to any of the
foregoing.
(9) They will not hold any meetings of its board of directors, or any
committee thereof, or of its shareholders, without inviting a
representative selected by the Company to attend the same (although the
Purchaser may request that such representative absent himself or herself
during that portion of any such meeting that pertains to issues arising
under this Agreement).
(10) They will continue properly and promptly to file when due all
federal, state, local, foreign, and other tax returns, reports, and
declarations required to be filed by them, and will pay, or make full and
adequate provision for the payment of, all taxes and governmental charges
due from or payable by them.
(11) They will comply with all laws and regulations applicable to it
and its operations.
ARTICLE VI
COVENANTS OF THE COMPANY
6.1 Affirmative Covenants. >From the date hereof through the Closing Date,
the Company will take every action reasonably required of it to satisfy the
conditions to closing set forth in this Agreement and otherwise to ensure the
prompt and expedient consummation of the Transaction substantially as
contemplated hereby, and will exert all reasonable efforts to cause the
Transaction to be consummated, provided in all instances that the
representations and warranties of the Company in this Agreement are and remain
true and accurate and that the covenants and agreements of the Company in this
Agreement are honored and that the conditions to the obligations of the Company
set forth in this Agreement are not incapable of satisfaction.
6.2 Access and Information. The Company shall afford to the Purchaser and
to the Purchaser's accountants, counsel and other representatives reasonable
access during normal business hours throughout the period prior to the Closing
to all of its properties, books, contracts, commitments, records (including, but
not limited to, tax returns), and personnel, and, during such period, the
Company shall furnish promptly to the Purchaser (1) all written communications
to its directors or to its shareholders generally, (2) internal monthly
financial statements when and as available, and (3) all other information
concerning its or any of its subsidiaries' business, properties, and personnel
as the Purchaser may reasonably request, but no investigation pursuant to this
Section 6.2 shall affect any representations or warranties of the Company, or
the conditions to the obligations of the Purchaser to consummate the Transaction
contained in this Agreement. In the event of the termination of this Agreement,
the Purchaser will, and will cause its representatives to, deliver to the
Company or destroy all documents, work papers and other material, and all copies
thereof, obtained by it or on its behalf from the Company (or any subsidiary) as
a result of this Agreement or in connection herewith, whether so obtained before
or after the execution hereof, and will hold in confidence all confidential
information that has been designated as such by the Company in writing or by
appropriate and obvious notation, and will not use any such confidential
information except in connection with the Transaction, until such time as such
information is otherwise publicly available. Purchaser and its representatives
shall assert their rights hereunder in such manner as to minimize interference
with the business of the Company.
6.3 No Solicitation. The Company, and those acting on its behalf will not,
and the Company will use its best efforts to cause its officers, employees,
agents, and representatives (including any investment banker) not, directly or
indirectly, to solicit, encourage, or initiate any discussions with, or
negotiate or otherwise deal with, or provide any information to, any person or
Entity other than the Purchaser and its officers, employees, and agents,
concerning any merger, sale of substantial assets, or similar transaction
involving the Company or division of the Company or any sale of any of its
capital stock or of any subsidiary or division. The Company will notify the
Purchaser immediately upon receipt of any inquiry, offer or proposal relating to
any of the foregoing. None of the foregoing shall prohibit providing information
to others in a manner in keeping with the ordinary conduct of the Company's
business, or providing information to government authorities.
6.4 Conduct of Business Pending the Transaction. The Company covenants and
agrees with the Purchaser that, prior to the consummation of the Transaction or
the termination of this Agreement pursuant to its terms, unless the Purchaser
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed, and except as otherwise contemplated by this Agreement or
disclosed in the Company Disclosure Document, the Company will comply with each
of the following:
(1) Its business shall be conducted only in the ordinary and usual
course, it shall use reasonable efforts to keep intact its and their
business organizations and goodwill, keep available the services of its
officers and employees and maintain good relationships with suppliers,
lenders, creditors, distributors, employees, customers, and others having
business or financial relationships with them, and it shall immediately
notify the Purchaser of any event or occurrence or emergency material to,
and not in the ordinary and usual course of business of, it.
(2) It shall not (a) amend its Articles of Incorporation or Bylaws, or
(b) split, combine, or reclassify any of its outstanding securities or
declare, set aside, or pay any dividend or other distribution on or make or
agree or commit to make any exchange for or redemption of any such
securities payable in cash, stock, or property.
(3) It shall not (a) issue or agree to issue any additional shares of,
or rights of any kind to acquire any shares of, its capital stock of any
class, or (b) enter into any contract, agreement, commitment, or
arrangement with respect to any of the foregoing.
(4) It shall not create, incur, or assume any long-term or short-term
indebtedness for money borrowed or make any capital expenditures or
commitment for capital expenditures, except in the ordinary course of
business and consistent with past practice.
(5) It shall not (a) adopt, enter into, or amend any bonus,
profit-sharing, compensation, stock option, warrant, pension, retirement,
deferred compensation, employment, severance, termination, or other
employee benefit plan, agreement, trust fund, or arrangement for the
benefit or welfare of any officer, director or employee, except as provided
in Section 6.2 hereof; or (b) agree to any material (in relation to
historical compensation) increase in the compensation payable or to become
payable to, or any increase in the contractual term of employment of, any
officer, director, or employee except, with respect to employees who are
not officers or directors, in the ordinary course of business in accordance
with past practice.
(6) It shall not sell, lease, mortgage, encumber, or otherwise dispose
of or grant any interest in any of its assets or properties except for
sales, encumbrances, and other dispositions or grants in the ordinary
course of business and consistent with past practice and except for liens
for taxes not yet due or liens or encumbrances that are not material in
amount or effect and do not impair the use of the property, or as
specifically provided for or permitted in this Agreement.
(7) It shall not enter into, or terminate, any material contract,
agreement, commitment, or understanding.
(8) It shall not enter into any agreement, commitment, or
understanding, whether in writing or otherwise, with respect to any of the
foregoing.
(9) It will not hold any meetings of its board of directors, or any
committee thereof, or of its shareholders, without inviting a
representative selected by the Purchaser to attend the same (although the
Company may request that such representative absent himself or herself
during that portion of any such meeting that pertains to issues arising
under this Agreement).
(10) It will continue properly and promptly to file when due all
federal, state, local, foreign, and other tax returns, reports, and
declarations required to be filed by it, and will pay, or make full and
adequate provision for the payment of, all taxes and governmental charges
due from or payable by it.
(11) It will comply with all laws and regulations applicable to it and
its operations.
6.6 Cooperation. The Company will cooperate with the Purchaser and its
counsel, accountants and agents in every way in carrying out the transactions
contemplated by this Agreement and in delivering all documents and instruments
deemed reasonably necessary or useful by the Purchaser.
6.7 Expenses. Whether or not the Transaction is consummated, all costs and
expenses incurred by the Company in connection with this Agreement and the
Transactions shall be paid by the Company except as otherwise provided (directly
or indirectly) herein.
6.8 Publicity. Prior to the Closing, any written news releases by the
Company pertaining to this Agreement or the Transaction shall be submitted to
the Purchaser for review and approval prior to release by the Company, and shall
be released only in a form approved by the Purchaser, provided, however, that
(1) such approval shall not be unreasonably withheld and (2) such review and
approval shall not be required of releases by the Company if prior review and
approval would prevent the timely and accurate dissemination of such press
release as required to comply, in the judgment of counsel, with any applicable
law, rule, or policy.
6.9 Updating of Exhibits and Disclosure Documents. The Company shall notify
the Purchaser of any changes, additions, or events which may cause any change in
or addition to the Company Disclosure Document or any Schedules or Exhibits
delivered by it under this Agreement promptly after the occurrence of the same
and again at the Closing by delivery of appropriate updates to the Company
Disclosure Document and to all such Schedules and Exhibits. No such notification
made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement unless the Purchaser
specifically agrees thereto in writing nor shall any such notification be
considered to constitute or give rise to a waiver by the Purchaser of any
condition set forth in this Agreement.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to Obligation of Purchaser. The obligation of the Purchaser
to effect the Transaction shall be subject to the fulfillment at or prior to the
Closing of the following conditions, unless Purchaser shall waive such
fulfillment:
(1) This Agreement and the transactions contemplated hereby shall have
received all approvals, consents, authorizations, and waivers from
governmental and other regulatory agencies and other third parties required
to consummate the Transaction And
(2) There shall not be in effect a preliminary or permanent injunction
or other order by any federal or state court which prohibits the
consummation of the Transaction. And
(3) The Company shall have performed in all material respects each of
its agreements and obligations contained in this Agreement and required to
be performed on or prior to the Closing and shall have complied with all
material requirements, rules, and regulations of all regulatory authorities
having jurisdiction relating to the Transaction. And
(4) No material adverse change shall, in the reasonable judgment of
the Purchaser, have taken place in the business, condition (financial or
otherwise), operations, or prospects of the Company since the date of the
Company Balance Sheet other than those, if any, that result from the
changes permitted by, and transactions contemplated by, this Agreement. And
(5) The representations and warranties of the Company set forth in
this Agreement shall be true in all material respects as of the date of
this Agreement and, except in such respects as, in the reasonable judgment
of the Purchaser, do not materially and adversely affect the business,
condition (financial or otherwise), operations, or prospects of the
Company, as of the Closing Time as if made as of such time. And
(6) The Purchaser shall have received from the Company an officer's
certificate, executed by the Chief Executive Officer and the Chief
Financial Officer of the Company (in their capacities as such) dated the
Closing Date, as to the satisfaction of the conditions in paragraphs (3),
(4), and (5) above. And
(7) The Purchaser shall have received, on and as of the Closing Date,
an opinion of Counsel to the Company, substantially as to the matters set
forth in Sections 4.1, 4.2, 4.3, 4.4 (to the best of the knowledge of such
counsel as to parts (2), (3), (4), and (5)), and 4.7 (4 through 11, 14, 16,
and 18) (to the best of the knowledge of such counsel) of this Agreement,
and as to the Proxy Statement referred to in Section 8.2 below and the
compliance of that document with the requirements of the Exchange Act, and
to the effect that, in the opinion of such counsel, the Transaction will be
a "reorganization" within the meaning of Section 368(a)(1) of the Code, all
subject to customary limitations reasonably acceptable to Counsel to the
Purchaser, and which may be based on opinions of Local Counsel to the
extent such Counsel is not admitted to practice in a jurisdiction relevant
to such opinion, provided such opinion of Local Counsel is delivered to the
Purchaser; a customary comfort letter from the Company's Auditors; and such
other closing documents and instruments as Purchaser shall reasonably
request, in each case reasonably satisfactory in form and substance to
Purchaser and its counsel. And
(8) The number of shares of common stock of the Company owned by
persons who have indicated a desire to exercise dissenters' rights of
appraisal shall not exceed five percent (5%) of the outstanding shares of
common stock of the Company.
7.2 Conditions to Obligation of the Company. The obligation of the Company
to effect the Transaction shall be subject to the fulfillment at or prior to the
Closing of the following conditions, unless the Company shall waive such
fulfillment:
(1) This Agreement and the Transaction shall have received all
approvals, consents, authorizations, and waivers from governmental and
other regulatory agencies and other third parties (including lenders,
holders of debt securities, lessors, and shareholders of the Company)
required by law to consummate the Transaction. And
(2) There shall not be in effect a preliminary or permanent injunction
or other order by any federal or state authority that prohibits the
consummation of the Transaction. And
(3) The Purchaser shall have performed in all material respects its
agreements and obligations contained in this Agreement required to be
performed on or prior to the Closing. And
(4) The representations and warranties of the Purchaser set forth in
this Agreement shall be true in all material respects as of the date of
this Agreement and, except in such respects as do not materially and
adversely affect the business of the Purchaser and its Subsidiaries, taken
as a whole, as of the Closing Date as if made as of such time. And
(5) The Company shall have received from the Purchaser an officers'
certificate, executed by the Chief Financial Officer and the Chief
Executive Officer of the Purchaser (in their capacities as such), dated as
of the Closing Date, as to the satisfaction of the conditions of paragraphs
(3) and (4) above (to the best of their knowledge where appropriate). And
(6) The Company shall have received, on and as of the Closing Date, an
opinion of Counsel to the Purchaser, substantially as to the matters set
forth in Sections 3.1, 3.2 and 3.3 (to the best of the knowledge of such
Counsel), and as to the registration statement and prospectus referred to
in Section 5.8 above and the compliance thereof with the Securities Act,
and to the effect that, in the opinion of such counsel, the Transaction
will be a "reorganization" within the meaning of Section 368(a)(1) of the
Code, all subject to customary limitations, reasonably satisfactory in form
and substance to the Company, and its counsel, and which may be based on
opinions of Local Counsel to the extent such Counsel is not admitted to
practice in a jurisdiction relevant to such opinion, provided such opinion
of Local Counsel is delivered to the Company, and such other closing
documents and instruments as the Company shall reasonably request, in each
case reasonably satisfactory in form and substance to the Company and its
counsel.
ARTICLE VIII
SECURITIES AND SECURITY HOLDERS
8.1 Meeting of Shareholders. The Company agrees that, as soon as
practicable after the execution of this Agreement, it will, in conjunction with
and subject to the oversight and control of the Purchaser and its counsel,
commence activities toward convening a meeting of shareholders of the Company to
vote upon the approval by such shareholders of the Transaction. Such activities
shall include taking all action required by law to authorize the consummation of
the Transaction insofar as authorization thereof by shareholders is required.
8.2 Investment Representation. Each of the undersigned Sellers, each a
shareholder of the Company who is signing this Agreement, severally and not
jointly, represents and confirms to the Purchaser that he, she, or it (1) is an
accredited investor within the meaning of Rule 501(a) under the Securities Act
or, if not such an accredited investor, has, alone or together with a purchaser
representative within the meaning of Rule 501(h) under the Securities Act, such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of an investment in securities of the Purchaser
of the type contemplated by this Agreement; (2) is aware of the limits on resale
imposed by virtue of the nature of the Transaction; and (3) is receiving the
Consideration hereunder, to the extent that such Consideration consists of
securities issued without registration under the Securities Act in reliance on
the exemption from registration contained in Section 4(2) of the Securities Act,
which securities are identified for this purpose on Schedule 8.2 hereto, for
investment, and without any view to the sale, resale or other distribution
thereof in any manner that is in violation of the Securities Act. The
certificates representing such securities, when delivered to the shareholders of
the Company at the Closing, may have appropriate orders restricting transfer
placed against them on the records of the transfer agent for such securities,
and may have placed upon them the following legend:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS THE
TRANSFEROR FIRST SATISFIES THE ISSUER THAT THE PROPOSED TRANSFER, IN THE
MANNER PROPOSED, DOES NOT VIOLATE THE REGISTRATION REQUIREMENTS OF SAID
ACT.
Each Seller agrees not to attempt any transfer of any such securities
without first complying with the substance of said legend, and agrees that
satisfaction of the issuer may, if the Purchaser or the Company so requests,
include an opinion of counsel acceptable in form and substance to the issuer, a
no-action letter of the SEC, or equivalent evidence. Each of the undersigned
shareholders acknowledges, without limitation, that the foregoing agreement and
representation shall apply to Consideration delivered to such person as a result
either of the Closing hereunder or of the exercise of the option granted by such
Seller pursuant to Section 9.7 hereof.
ARTICLE IX
TERMINATION, AMENDMENT, WAIVER
9.1 Termination. This Agreement and the Transaction may be terminated at
any time prior to the Closing, whether before or after any approval by
shareholders:
(1) By mutual consent of the Purchaser and the Company; or
(2) By either Purchaser or the Company, upon written notice to the
other, if the conditions to such party's obligations to consummate the
Transaction, in the case of Purchaser, as provided in Section 7.1, or, in
the case of the Company, as provided in Section 7.2, were not, or cannot
reasonably be, satisfied on or before ____________, 2001unless the failure
of condition is the result of the material breach of this Agreement by the
party seeking to terminate.
9.2 Amendment. This Agreement may be amended by the Company and the
Purchaser by action taken at any time, but after the Transaction has been
approved by the shareholders of the Company no amendment shall be made which
materially reduces the Consideration or which in any way materially and
adversely affects the rights of the Company or its shareholders without the
further approval of such shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of the Company and the Purchaser.
By executing this Agreement, each Seller appoints the Company the agent and
attorney-in-fact of such Seller to the extent (but only to the extent) necessary
to bind the Seller to amendments to this Agreement approved by the Company to
the limited extent set forth in this Section 9.2.
9.3 Waiver. At any time prior to the Closing Date, the Purchaser or the
Company, by action taken by their respective Boards of Directors, may (1) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (2) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, or (3)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
9.4 Option. Each of the undersigned Sellers, severally, hereby grants to
the Purchaser the right, upon twenty-four (24) hours' written notice delivered
to such Seller at the address set forth for such purpose on Schedule 9.4 hereto,
at any time until seventy-two (72) hours after termination of this Agreement, to
purchase from him, her or it the number of shares of stock of the Company owned
by such Seller as specified on Schedule 9.4 hereto, against delivery to such
Seller of an amount equal to the Consideration per share payable hereunder times
the number of such shares of stock with respect to which such option is being
exercised. Each Seller, with respect to such shares identified on Schedule 9.4,
(1) agrees not to sell, transfer, pledge, hypothecate, or otherwise transfer
such shares, or enter into any agreement to do the same, prior to the date of
expiration of the option herein granted, (2) grants to the Purchaser, for so
long as the option herein granted shall remain in effect, the sole and exclusive
right and power to vote the shares with respect to which the option is granted,
with power and right of substitution, and (3) in all respects appoints the
Purchaser, with power of substitution, as the proxy and attorney-in-fact of such
Seller to vote such shares in the place of Seller and with respect to any such
vote the power to execute any and all documents and instruments in respect
thereof in all respects with all right, power, and authority that the Seller
himself, herself or itself could exercise. The Seller agrees to provide any and
all documents, evidences of authority, resolutions, and so forth, necessary to
enable Purchaser to exercise the power and authority herein granted. The
Purchaser agrees not to exercise any power herein granted in any manner
inconsistent with the operation of the Company in the future in the same manner
that it has been operated in the past, with the same directors, except that the
Purchaser may vote such shares in favor of the Transaction.
ARTICLE X
GENERAL PROVISIONS
10.1 Arbitration. In the event that there shall be a dispute arising out of
or relating to this Agreement, the Transaction, any document referred to herein
or centrally related to the subject matter hereof, or the subject matter of any
of the same, the parties agrees that such dispute shall be submitted to binding
arbitration in Sacramento, California, under the auspices of, and pursuant to
the rules of, the American Arbitration Association as then in effect, or such
other procedures as the parties may agree to at the time, before a tribunal of
three arbitrators, one of which shall be selected by each of the parties to the
dispute and the third of which shall be selected by the two arbitrators so
selected. Any award issued as a result of such arbitration shall be final and
binding between the parties, and shall be enforceable by any court having
jurisdiction over the party against whom enforcement is sought.
10.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice given at least five (5) Business Days prior thereto):
If to the Purchaser, or the Merger Subsidiary:
Attention:.........
with a copy to:....
Attention:.........
If to the Company, the Sellers, any of them or any Affiliate of any of
them:
Attention:.........
with a copy to:....
Attention:.........
10.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.4 Survival of Representations, Warranties, Et Cetera. The
representations, warranties, covenants, and agreements of the parties contained
herein shall survive the Closing and any investigation of the other party made
prior thereto. Representations and warranties shall so survive for a period of
three (3) years from the Closing. Covenants and agreements shall survive for the
longer of three (3) years from the Closing or one (1) year after they were to
have been performed and were capable of performance.
10.5 De Minimis Claims. No party shall bring any action against any other
party hereto with respect to the subject matter hereof unless the aggregate
amount of all claims so brought in relation to the subject matter of this
Agreement exceeds $50,000.00, provided, however, that the foregoing shall not
prevent or preclude actions seeking injunctive or other equitable forms of
relief.
10.6 Miscellaneous. This Agreement (1) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
between the parties, with respect to the subject matter hereof, except as
specifically provided otherwise or referred to herein, so that no such external
or separate agreements relating to the subject matter of this Agreement shall
have any effect or be binding, unless the same is referred to specifically in
this Agreement or is executed by the parties after the date hereof; (2) is not
intended to confer upon any other person any rights or remedies hereunder; (3)
shall not be assigned by operation of law or otherwise except for assignment of
all or any part of the rights of the Purchaser hereunder, which may be freely
assigned by the Purchaser so long as the obligations of the Purchaser under this
Agreement remain obligations of, or their performance is guaranteed by, the
Purchaser; and (4) shall be governed in all respects, including validity,
interpretation and effect, by the internal laws of the State of ..........,
without regard to the principles of conflict of laws thereof. This Agreement may
be executed in two or more counterparts which together shall constitute a single
agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed
on the date first written above by their respective officers thereunto duly
authorized.
The Purchaser:
CHAPEAU, INC.
A Utah corporation
By:
- -------------------------
- -------------------------
Merger Subsidiary:
CHAPEAU NEVADA, Inc.
By:
- -------------------------
- -------------------------
The Company:
SPECIALIZED ENERGY PRODUCTS, INC.
A Nevada corporation
By:
- -------------------------
- -------------------------
Sellers (executing solely for purposes of those provisions applicable to them,
and not as guarantors of the Company's obligations).
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Exhibit A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (the Agreement) is made as of February ___, 2001,
by and among SPECIALIZED ENERGY PRODUCTS, INC.(the Company), a Nevada
corporation, CHAPEUA, INC. (the Purchaser), a Utah corporation, and CHAPEAU
NEVADA, Inc. (the Merger Subsidiary), a Nevada corporation.
WHEREAS, the parties hereto have entered into an Plan of Reorganization and
Agreement (the Plan and Agreement) containing various representations,
warranties, covenants, and conditions relating to, among other things, the
merger of the Merger Subsidiary with and into the Company (the Merger); NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, the parties hereby agree as follows:
ARTICLE I
1. Constituent Corporations and Surviving Corporation. The Company and the
Merger Subsidiary shall be the constituent corporations to the Merger (the
Constituent Corporations). The Merger Subsidiary shall be merged with and into
the Company, which shall be the surviving corporation of the Merger (the
Surviving Corporation). The identity, existence, rights, privileges, powers,
franchises, properties, and assets of the Company shall continue unaffected and
unimpaired by the Merger. At the Effective Time (hereinafter defined) of the
Merger, the identity and separate existence of the Merger Subsidiary shall cease
and all of the rights, privileges, powers, franchises, properties and assets of
the Merger Subsidiary shall be vested in the Company in accordance with the
provisions of the General Corporation Law of the State of Nevada. The name of
the Surviving Corporation shall continue to be SPECIALIZED ENERGY PRODUCTS, INC.
2. Effective Time. The date and time when the Merger becomes effective are
herein referred to as the "Effective time" of the Merger. The Effective Time
shall be the time of filing of this Agreement with the Secretary of State of the
State of Nevada.
ARTICLE II
1. Articles of Incorporation. The Articles of Incorporation of the Company,
as in effect immediately prior to the Effective Time of the Merger, shall
thereafter continue in full force and effect as the Articles of Incorporation of
the Surviving Corporation.
2. Bylaws. The Bylaws of the Company as in effect immediately prior to the
Effective Time of the Merger shall be the Bylaws of the Surviving Corporation,
until amended or repealed.
3. Officers and Directors. The officers of the Company at the Effective
Time of the Merger shall be the officers of the Surviving Corporation, each to
hold office in accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation. The directors of the Merger Subsidiary at the Effective
Time of the Merger shall be the directors of the Surviving Corporation, until
their successors have been duly elected and qualified in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE III
1. Conversion of the Company Common Stock.
(a) Each share of Common Stock, $0.25 par value (the Shares), of the
Company issued and outstanding immediately prior to the Effective Time
(other than Shares held by stockholders who properly exercise any
dissenters' rights available under the applicable state law) shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive __________shares of $0.001
par value Common Stock of the Purchaser per share (the Merger
Consideration) upon surrender of the certificate representing such share.
(b) Each share of Common Stock of the Merger Subsidiary (the Merger
Subsidiary Common Stock) issued and outstanding immediately prior to the
Effective Time of the Merger, shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into and become
one fully paid and nonassessable share of Common Stock of the Surviving
Corporation (Surviving Corporation Common Stock). From and after the
Effective Time of the Merger, each outstanding certificate which
theretofore represented shares of the Merger Subsidiary Common Stock shall
be deemed for all purposes to evidence ownership of and to represent that
number of shares of Surviving Corporation Common Stock into which the
shares of the Merger Subsidiary Common Stock represented thereby shall have
been converted.
2. Dissenting Shares. Each outstanding share of the Company Common Stock
held by a holder who has demanded and perfected his right to an appraisal of his
shares in accordance with Section ..........et seq. of the General Corporation
Law of the State of Nevada Code and who has not effectively withdrawn or lost
his right to such appraisal (Dissenting Shares) shall not be converted into or
represent the right to receive the Merger Consideration, pursuant to Section 1
of this Article III, but the holder thereof shall be entitled only to such
rights as are granted by said Section ..........et seq. of the General
Corporation Law of the State of Nevada. Each holder of Dissenting Shares who
becomes entitled to payment for his shares of Common Stock of the Company
pursuant to the aforementioned sections of the General Corporation Law of the
State of Nevada shall receive payment therefor from the Surviving Corporation in
accordance with such sections. If any holder of Common Stock of the Company who
demands appraisal of his shares in accordance with said provisions of law shall
effectively withdraw or lose (through failure to perfect or otherwise) his right
to appraisal, each share of the Company Common Stock held by such holder shall
automatically be converted into the right to receive the Merger Consideration,
without interest thereon or any other payment with respect thereto, pursuant to
Section 1 of this Article III.
3. Delivery of Merger Consideration; Stock Transfer Books.
(a) Promptly after the Effective Time of the Merger, the Purchaser, on
behalf of the Merger Subsidiary (or the Company, as the Surviving
Corporation) shall make available to _________or such other transfer agent
as the parties hereto mutually select (the Transfer Agent), for a period
ending six (6) months after the Effective Time of the Merger, such shares
of Common Stock of the Purchaser as are necessary for the Transfer Agent to
make deliveries of such shares against surrender of certificates for shares
of the Company's Common Stock, or shall make such other arrangements with
respect thereto as shall be satisfactory to the Company and to the Transfer
Agent. Promptly after the Effective Time of the Merger, the Transfer Agent
shall transmit to each record holder of an outstanding certificate which
prior thereto represented shares of the Company Common Stock, a form of
letter of transmittal and instructions for use in effecting the surrender
of such certificate for receipt of the Merger Consideration. Upon surrender
to the Transfer Agent of such certificate, together with such letter of
transmittal, duly executed, the Transfer Agent shall promptly cause to be
delivered to the person entitled thereto the number of shares of the Common
Stock of the Purchaser to which such person is entitled. If shares are to
be issued to a person other than the person in whose name the surrendered
certificate is registered, it shall be a condition of such issuance and
delivery that the surrendered certificate shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
issuance shall pay any transfer or other taxes required by reason of the
issuance and delivery to a person other than the registered holder of the
surrendered certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. The Surviving
Corporation shall pay all charges of the Transfer Agent in connection with
the exchange of the Merger Consideration for certificates representing
formerly outstanding shares of the Company Common Stock. Until surrendered
in accordance with the provisions of this Section 3(a), each certificate
which immediately prior to the Effective Time of the Merger represented
issued and outstanding shares of the Company Common Stock shall represent
for all purposes solely the right to receive the Merger Consideration
multiplied by the number of shares of the Company Common Stock which prior
to the Effective Time of the Merger were represented by such certificate.
Any holders of certificates representing outstanding shares of the Company
Common Stock who shall not have surrendered such certificates during the
six (6) months immediately following the Effective Time of the Merger shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration, and shall have no rights against the Transfer Agent with
respect thereto.
(b) After the Effective Time of the Merger, there shall be no
transfers on the stock transfer books of the Surviving Corporation of the
shares of Common Stock that were outstanding immediately prior to the
Effective Time of the Merger. If, after the Effective Time of the Merger,
certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the Merger Consideration as provided herein,
and the Purchaser shall provide the Surviving Corporation with sufficient
shares of the Common Stock of the Purchaser to accomplish such exchanges.
ARTICLE IV
1. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one agreement.
2. Governing Law. This Agreement shall be governed in all respects,
including, but not limited to, validity, interpretation, effect and performance,
by the internal laws of the State of Nevada without regard to the principles of
conflicts of law thereof.
3. Section Headings. The section headings contained in this Agreement have
been inserted for convenience of reference only and shall not affect the meaning
or interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement,
as of the date first herein written.
The Purchaser:
CHAPEAU, INC.
A Utah corporation
By:
- -------------------------
- -------------------------
Merger Subsidiary:
CHAPEAU NEVADA, Inc.
A Nevada corporation
By:
- -------------------------
- -------------------------
The Company:
SPECIALIZED ENERGY PRODUCTS, INC.
A Nevada corporation By:
- -------------------------
- -------------------------
Sellers (executing solely for purposes of those provisions applicable to them,
and not as guarantors of the Company's obligations).
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- -----------------------
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