1
EXHIBIT 2.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of April 13, 2000 is made
and entered into by and among Eco Form International, a Delaware corporation
("Parent"), and Eco-form, Inc., a Massachusetts corporation (the "Company").
WHEREAS, the Boards of Directors of Parent and the Company have each
determined that it is advisable and in the best interests of their respective
stockholder to consummate, and have approved, the business combination
transaction provided for herein in which Company would merge with and into the
Parent (the "Merger"); and
WHEREAS, Parent and the Company desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
I.1 The Merger. At the Effective Time (as defined in Article I.2), upon
the terms and subject to the conditions of this Agreement, Company shall be
merged with and into the Parent in accordance with the General Corporation Law
of the State of Delaware (the "DGCL") and the Delaware Code, Corporations (the
"Delaware Code"). The Parent shall be the surviving corporation in the Merger
(the "Surviving Corporation"). Parent and the Company are sometimes referred to
herein as the "Constituent Corporations." As a result of the Merger, the
outstanding shares of capital stock of the Company shall be converted or
canceled in the manner provided in Article II.
I.2 Effective Time. Prior to the Closing (as defined in Article I.3),
an agreement of merger (the "Agreement of Merger") shall be duly prepared and
executed by the Company and the Surviving Corporation and thereafter delivered
to and filed with the Secretary of State of the State of Delaware (the
"Secretary of State"), provided in Section 251(c) of the Delaware Code,
provided, however, that the Agreement of Merger must be filed with the Secretary
of State no later than the Closing Date (as defined in Article I.3). The Merger
shall become effective at the time the Agreement of Merger is filed with the
Secretary of State (the date and time so provided in the Agreement of Merger
being referred to herein as the "Effective Time").
I.3 Closing. The closing of the Merger (the "Closing") will take place
at 10:00 a.m., local time, at the offices of Eco-form, Inc., 24 Walpole Park
South, Walpole, Massachusetts, or at such other place as the parties hereto
mutually agree, on such date as is the first business day after the day of
satisfaction or, to the extent permitted hereunder, waiver of all the conditions
to each party's obligation to consummate the Merger set forth in Article VIII or
on such other date as the parties hereto mutually agree (the "Closing Date"). At
the Closing there shall be delivered to Parent and the Company the
-1-
2
certificates and other documents and instruments required to be delivered under
Article VIII. The Last Closing Date (as defined in Article IX.1(b)) shall be
April 24, 2000.
I.4 Articles of Incorporation and Bylaws of the Surviving Corporation.
At the Effective Time, (a) the Certificate of Incorporation of Parent as in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and (b) the Bylaws of Parent as in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the Articles
of Incorporation of the Surviving Corporation and such Bylaws.
I.5 Directors and Officers of the Surviving Corporation. The directors
of Parent and the officers of Parent shall, from and after the Effective Time,
be the directors and officers, respectively, of the Surviving Corporation until
their successors shall have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Articles of Incorporation and Bylaws.
I.6 Effects of the Merger. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the Delaware Code.
I.7 Further Assurances. Each party hereto will execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other purposes of this Agreement.
ARTICLE II
EXCHANGE OF SHARES
II.1 Exchange of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
(a) Cancellation of Treasury Stock and Stock Owned by Parent. All
shares of common stock, no par per share, of the Company ("Company Common
Stock") that are owned by the Company as treasury stock or any other shares of
capital stock of the Company shall be canceled and retired and shall cease to
exist and no stock of Parent or other consideration shall be delivered in
exchange therefor.
(b) Exchange Consideration for the Company Capital Stock. The
consideration (the "Exchange Consideration") for all the issued and outstanding
shares of Company Common Stock (other than shares to be canceled in accordance
with Article II.l(a)), including shares issued pursuant to vested options to
purchase Company Common Stock which are exercised prior to Closing, and for all
issued and outstanding shares of Common Stock of the Company shall be a number
of shares of fully paid and nonassessable shares of common stock, and the
consideration paid to the Shareholders (the "Purchase Price") shall be Three
Million Seven Hundred Fifty Thousand (3,750,000) shares of treasury stock from
Eco-form International, Inc., as adjusted as indicated in Article II.1(c).
Shareholders and the shareholders of the Parent shall also enter into a
Shareholder Agreement containing provisions regarding board membership, voting
rights, sale restrictions and other terms and conditions customary in a
2
3
transaction of this type (the "Shareholder Agreement"). Moreover, if the average
market price for the first Three Hundred Thousand (300,000) shares of Successor
that are used to make market is below the average threshold amount of Two U.S.
Dollars ($2.00 U.S.D.), the Surviving Corporation and Shareholders agree, in
good faith, to determine a mathematical formula to account for the share value
reduction below the average threshold amount of Two U.S. Dollars ($2.00 U.S.D.).
In addition, for five (5) years, beginning on the date of the execution of the
Shareholder Agreement ("Term"), Three Million Four Hundred Thousand (3,400,000)
additional shares of Eco-form International, Inc., with One Million Seven
Hundred Thousand (1,700,000) shares currently held in name of Howard Keep and
One Million Seven Hundred Thousand (1,700,000) shares currently held in name of
Terrance Keep (collectively "the Keeps") will be proxied to Muammad Salahuddin
Khan, Fuad Khan and Muammad Jalaluddin Khan (collectively "the Khans"),
pro-rated as determined solely by the Khans and provided to the Keeps in writing
prior to the Closing Date ("Proxied Shares"). During the Term, and as provided
in the Shareholder Agreement, said Proxied Shares shall be voted by the Khans,
as pro-rated above, and this voting right may not be sold, transferred, assigned
or otherwise delegated to any other individual than those named in the
Shareholder Agreement. Said Proxied Shares may be alienated, but not encumbered,
by Howard Keep and/or Terrance Keep, provided that the Proxied Shares shall be
alienated subject to a restriction that the shares' voting rights have been
proxied to the Khans for the Term.
(c) Escrow of Parent Common Stock. At the Effective Time, ten percent
(10%) of the Purchase Price, or Three Hundred Seventy Five Thousand (375,000)
shares, of the Exchange Consideration consisting of shares of Parent Common
Stock payable to existing Shareholders ("Holders") of the Company (the "Escrow
Shares") shall be issued to an escrow agent pursuant to the terms of an escrow
agreement substantially in the form of Exhibit A hereto (the "Escrow Agreement")
by and among the Parent, the Holders (or a representative of the Company's
Holders elected by a majority of the Company Common Stock, (the "Company
Representative") and an escrow agent (the "Escrow Agent"), which agreement shall
permit the sale of such escrowed shares so long as the proceeds from such sale
remain subject to the Escrow Agreement. Said Escrow Shares will proxied and
pro-rated among the Holders as determined solely by the Holders, and provided to
the Parent in writing prior to the Closing ("Proxy Right"). Said Proxy Right
shall be held by the Holders and may not be sold, transferred, assigned or
otherwise delegated to any other individual. Said Proxy Right shall be
forfeited, adjusted or reduced immediately by the Holders in the same pro-rated
amount as the Hold-Back Shares when deemed forfeited, adjusted or reduced
pursuant to the Escrow Agreement.
II.2 Procedures for Payment of Exchange Consideration.
(a) Exchange Agent. On the Closing Date, Parent shall make available
for deposit with Signature Stock Transfer, Inc., 14675 Midway Road, Suite 221,
Addison, Texas 75001, or any other bank or trust company designated before the
Effective Time by Parent and reasonably acceptable to the Company (the "Exchange
Agent"), certificates representing the number of duly authorized whole shares of
Parent Common Stock issuable in connection with the Merger, to be held for the
benefit of and distributed in accordance with this Article. The Exchange Agent
shall agree to hold such shares of Parent Common Stock (such shares of Parent
Common Stock, together with earnings thereon, being referred to herein as the
"Exchange Fund") for delivery as contemplated by this Article II and upon such
additional terms as may be agreed upon by the Exchange Agent, the Company and
Parent before the Effective Time.
3
4
(b) Exchange Procedures. Subject to the provisions of this Article II,
as soon as reasonably practicable after the Effective Time, Parent shall cause
the Exchange Agent to mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock, (individually, a "Certificate" and
collectively, the "Certificates") whose shares are to be exchanged pursuant to
this Article II into the right to receive shares of Parent Common Stock (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and completed in accordance with its terms, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock, which such
holder has the right to receive pursuant to the provisions of this Article II
and the Certificate so surrendered shall forthwith be canceled. In no event
shall the holder of any Certificate be entitled to receive interest on any funds
to be received in the Merger. In the event of a transfer of ownership of Company
Common Stock which is not registered in the transfer records of the Company, a
certificate representing that number of whole shares of Parent Common Stock, may
be issued to a transferee if the Certificate representing such Company Common
Stock is presented to the Exchange Agent accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Article
II, each Certificate shall be deemed at any time after the Effective Time for
all corporate purposes of Parent, except as limited by paragraph (c) below, to
represent ownership of the number of shares of Parent Common Stock into which
the number of shares of Company Common Stock shown thereon have been converted
as contemplated by this Article II.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date on or after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the shares
of Parent Common Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate in accordance with this Article.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions, if any, with a record date on or after the Effective Time
which theretofore became payable, but which were not paid by reason of the
immediately preceding sentence, with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date on or after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Stock. All shares of Parent
Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been issued at the
Effective Time in full satisfaction of all rights pertaining to the shares of
Company Stock represented thereby. From and after the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
4
5
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
III.1 Organization and Qualification. Except as disclosed in the
Company Disclosure Letter (as defined in this Article III.1), the Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has full corporate power and authority
to conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties, except for such failures to be so organized,
existing and in good standing or to have such power and authority which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the Company. Except as disclosed
in the Company Disclosure Letter (as defined in this Article III.1), the Company
is duly qualified, licensed or admitted to do business and is in good standing
in each jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the Company taken as a whole. As used in this
Agreement, any reference to any event, change or effect being "material" or
"materially adverse" or having a "material adverse effect" on or with respect to
an entity (or group of entities taken as a whole) means such event, change or
effect is material or materially adverse, as the case may be, to the business,
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities (including contingent liabilities), or results of
operations of such entity (or, if with respect thereto, of such group of
entities taken as a whole). The Company shall submit a letter dated the date
hereof and deliver to the Parent as a condition to Closing as set forth in
Article VIII (the "Company Disclosure Letter"), which will, among other things,
disclose the items as described in this Agreement. Except as disclosed in the
Company Disclosure Letter, the Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
III.2 Capital Stock.
(a) The authorized capital stock of the Company consists solely of Five
Hundred Thousand (500,000) shares of Company Common Stock, no par per share
("Company Stock"). As of April 13, 2000, Five Hundred Thousand (500,000) shares
of Company Common Stock were issued and outstanding, and no shares were held in
the treasury of the Company. There has been no change in the number of issued
and outstanding shares of Company Common Stock, shares of Company Common Stock
held in treasury or shares of Company Preferred Stock since such date. All of
the issued and outstanding shares of Company Common Stock are, and all shares
reserved for issuance will be, upon issuance in accordance with the terms
specified in the instruments or agreements pursuant to which they are issuable,
duly authorized, validly issued, fully paid and non-assessable. Except pursuant
to this Agreement and except as set forth in the Company Disclosure Letter,
there are no outstanding
5
6
subscriptions, options, warrants, rights (including "phantom" stock rights),
preemptive rights or other contracts, commitments, understandings or
arrangements, including any right of conversion or exchange under any
outstanding security, instrument or agreement (together, "Options"), obligating
the Company to issue or sell any shares of capital stock of the Company or to
grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in the Company Disclosure Letter, all of the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and non-assessable and are owned, beneficially and of record,
by the Company wholly owned, directly or indirectly, by the Company, free and
clear of any liens, claims, mortgages, encumbrances, pledges, security
interests, equities and charges of any kind (each a "Lien"). Except as disclosed
in the Company Disclosure Letter, there are no (i) outstanding Options
obligating the Company to issue or sell any shares of the Company or to grant,
extend or enter into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any person
other than the Company wholly owned, directly or indirectly, by the Company with
respect to the voting of or the right to participate in dividends or other
earnings on any capital stock of the Company.
(c) Except as disclosed in the Company Disclosure Letter, there are no
outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or to provide funds to, or
make any investment (in the form of a loan, capital contribution or otherwise)
in the Company or any other person.
III.3 Authority Relative to this Agreement. The Company has full
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and, subject to obtaining the Company Shareholders'
Approval (as defined in Article VII.3), to consummate the transactions
contemplated hereby. Parent acknowledges that the Company's obligations
hereunder are subject to receipt of the consent of the requisite number of the
Company's shareholders. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of the Company, the Board of Directors of the Company has agreed to
recommend adoption of this Agreement by the shareholder of the Company and
directed that this Agreement be submitted to the shareholders of the Company for
their consideration, and no other corporate proceedings on the part of the
Company or its shareholder are necessary to authorize the execution, delivery
and performance of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby, other than obtaining the
Company Shareholders' Approval. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
III.4 Non-Contravention; Approvals and Consents.
(a) Except as disclosed in the Company Disclosure Letter, the execution
and delivery of this Agreement by the Company does not, and the performance by
the Company of its obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result
6
7
in or give to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of the Company
under, any of the terms, conditions or provisions of (i) subject to the
obtaining of the Company Shareholders' Approval, the certificates or articles of
incorporation or bylaws (or other comparable charter documents) of the Company,
or (ii) subject to the obtaining of the Company Shareholders' Approval and the
taking of the actions described in paragraph (b) of this Article, (x) any
statute, law, rule, regulation or ordinance (together, "Laws"), or any judgment,
decree, order, writ, permit or license (together, "Orders"), of any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States or any state, county, city or other
political subdivision (a "Governmental or Regulatory Authority"), applicable to
the Company or any of its respective assets or properties, or (y) any note,
bond, mortgage, security agreement, indenture, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind (together, "Contracts") to which the Company is a party or by which the
Company or any of its respective assets or properties is bound, excluding from
the foregoing clauses (x) and (y) conflicts, violations, breaches, defaults,
payments or reimbursements, terminations, cancellations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, could not be reasonably expected to have a material adverse
effect on the Company or on the ability of the Company to consummate the
transactions contemplated by this Agreement.
(b) Except (i) as may be required for the filing of a pre-merger
notification report by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), (ii) any required filings with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Act of 1933, as amended, and
the rules and regulations thereunder (the "Securities Act"), and filings with
any state securities authorities that are required in connection with the
transactions contemplated by this Agreement, (iii) for the filing of the
Agreement of Merger and other appropriate merger documents required by the
Delaware Code with the Secretary of State and appropriate documents with the
relevant authorities of other states in which the Constituent Corporations are
qualified to do business, (iv) filings required by the Delaware Division of
Corporations and any other state regulatory body, (v) the receipt of all
necessary shareholder consents, and (vi) as disclosed in the Company Disclosure
Letter, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority or other public or private third party is
necessary or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any Contract to
which the Company is a party or by which the Company or any of its respective
assets or properties is bound for the execution and delivery of this Agreement
by the Company, the performance by the Company of its obligations hereunder or
the consummation of the transactions contemplated hereby, other than such
consents, approvals, actions, filings and notices which the failure to make or
obtain, as the case may be, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the Company taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement.
III.5 Financial Statements. The Company delivered to Parent prior to
the execution of this Agreement true and complete copies of the trial balance as
of August 31, 1999 and the trial balance as of February 29, 2000 (collectively
the "Company Financial Statements") for each of the fiscal years then ended,
together with a true and correct copy of the report on such information by
Lawrence Pober, C.P.A., P.C. The trial balances included in the Company
Financial Statements (i) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto), (ii) fairly
present to normal,
7
8
recurring year-end audit adjustments which are not expected to be, individually
or in the aggregate, materially adverse to the Company and to the absence of
footnotes) the financial position of the Company as at the respective dates
thereof and the results of its operations and cash flows for the respective
periods then ended and (iii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
III.6 Absence of Certain Changes or Events. Except for matters
reflected or reserved against in the balance sheet as of February 29, 2000,
included in the Company Financial Statements, or as disclosed in the Company
Disclosure Letter, the Company has conducted its respective business only in the
ordinary course, consistent with past practice and there has not occurred or
arisen any event, individually or in the aggregate, having or which would have a
material adverse effect on the Company, other than those occurring as a result
of general economic or financial conditions or other developments that are not
unique to the Company but also affect other persons who participate or are
engaged in the lines of business in which the Company is engaged.
III.7 Absence of Undisclosed Liabilities. Except for matters reflected
or reserved against in the balance sheet as of February 29, 2000 included in the
Company Financial Statements, or as disclosed in the Company Disclosure Letter,
the Company had at such date, or has incurred since that date, no liabilities or
obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature that would be required by generally
accepted accounting principles to be reflected on a balance sheet of the Company
(including the notes thereto), except liabilities or obligations (a) which were
incurred in the ordinary course of business consistent with past practice or (b)
which have not been, and could not be reasonably expected to be, individually or
in the aggregate, materially adverse to the Company.
III.8 Legal Proceedings. Except as disclosed in the Company Disclosure
Letter, (a) there are no actions, suits, arbitrations or proceedings pending or,
to the knowledge of the Company, threatened against, relating to or affecting,
nor are there any Governmental or Regulatory Authority investigations or audits
pending or to the knowledge of the Company threatened against, relating to or
affecting, the Company or any of its respective assets and properties which,
individually or in the aggregate, could be reasonably expected to have a
material adverse effect on the Company taken as a whole or on the ability of the
Company to consummate the transactions contemplated by this Agreement, and (b)
the Company is not subject to any Order of any Governmental or Regulatory
Authority which, individually or in the aggregate, is having or could be
reasonably expected to have a material adverse effect on the Company taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement.
III.9 [Reserved].
III.10 Taxes. Except as disclosed in the Company Disclosure Letter, the
Company has filed all tax returns that are required to have been filed by it in
any jurisdiction for all periods ending on or prior to the date this
representation is made and such tax returns are true, correct and complete in
all material respects, and the Company has paid all taxes shown to be due and
payable on such returns and all other taxes and assessments payable by it to the
extent the same have become due and payable and before they have become
delinquent, except for any taxes and assessments the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the
8
9
Company has set aside on its books reserves (segregated to the extent required
by generally accepted accounting principles, consistently applied throughout the
specified period and in the immediately comparable period ("GAAP")) deemed by it
in its reasonable discretion to be adequate. Except as disclosed in the Company
Disclosure Letter, the Company has no knowledge of any proposed material tax
assessment, obligation or other claim against the Company, and in the opinion of
the Company all tax liabilities of the Company are adequately provided for on
the books of the Company. Except as disclosed in the Company Disclosure Letter,
there are no material liens for taxes upon any property or assets of the
Company, except for liens for taxes not yet delinquent. Except as disclosed in
the Company Disclosure Letter, there are no unresolved issues of law or fact
arising out of a notice of deficiency, proposed deficiency or assessment from
the Internal Revenue Service ("IRS") or any other governmental taxing authority
with respect to taxes of the Company which, if decided adversely, singly or in
the aggregate, would have a material adverse effect on the business, operations,
properties, assets, condition (financial or other) or results of operations of
the Company. Except as disclosed in the Company Disclosure Letter, the Company
has not, with regard to any assets or property held, acquired or to be acquired
by it, filed a consent to the application of Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code").
III.11 [Reserved]
III.12 Vote Required. The affirmative vote of at least a majority of
the outstanding shares of outstanding stock of the Company with respect to the
adoption of this Agreement is the only vote required to adopt this Agreement and
approve the Merger and the other transactions contemplated hereby.
III.13 Accounting Matters. To the knowledge of the Company, the Company
has not taken or agreed to take any action that (without giving effect to any
action taken or agreed to be taken by Parent) would prevent Parent from
accounting for the business combination to be effected by the Merger as a
pooling of interests.
III.14 [Reserved]
III.15 [Reserved].
III.16 Title to Assets. Except as disclosed in the Company Disclosure
Letter, the Company is in possession of and have good title to, or have valid
leasehold interests in or valid rights under Contract to use, all of their
respective properties and assets primarily used in their respective businesses
and material to the condition (financial or other) of such businesses taken as a
whole, free and clear of all mortgages, liens, pledges, charges or encumbrances
of any nature whatsoever, except (a) the lien for current taxes, payments of
which are not yet delinquent, or (b) such imperfections in title and easements
and encumbrances, if any, as do not materially detract from the value of or
interfere with the present use of the property subject thereto or affected
thereby, or otherwise materially impair the Company's business operations (in
the manner presently carried on by the Company), and except for such matters
which, singly or in the aggregate, would not materially and adversely affect the
business, operations, properties, assets, condition (financial or other) or
results of operations of the Company. All leases under which the Company leases
any substantial amount of real property have been, or prior to the Closing will
be made available to Parent, and there is not under any of such leases, (i) any
existing default or event which with notice or lapse of time or both would
become a default by the Company other than defaults under such
9
10
leases which in the aggregate would not materially and adversely affect the
condition of the Company, taken as a whole, or (ii) to the knowledge of the
Company, any existing default or event which with notice or lapse of time or
both would become a default by any party, other than the Company, to the lease,
other than defaults under such leases which in the aggregate would not
materially and adversely affect the condition of the Company. The Company has
not received written notice of a default under any lease by any party thereto.
III.17 Permits, Etc. Except as disclosed in the Company Disclosure
Letter, the Company owns or validly holds all licenses, permits, certificates of
authority, registrations, franchises and similar consents granted or issued by
any applicable Governmental or Regulatory Authority, used or held for use which
are required to conduct and material to the condition of its business.
III.18 Contracts and Commitments.
(a) The Company Disclosure Letter shall contain a true and complete
list of each of the following written, or to the Company's knowledge, oral,
contracts (the "Material Contracts") to which the Company is a party: (i) all
Contracts (excluding Contracts which can be terminated at will without
subjecting the Company to cost or penalty) providing for a commitment for
employment or consultation services for a specified or unspecified term or
otherwise relating to employment or the termination of employment of, any
Employee; (ii) all Contracts with any Person containing any provision or
covenant prohibiting or limiting the ability of the Company to engage in any
business activity or compete with any Person in connection with their respective
businesses or prohibiting or limiting the ability of any Person to compete with
the Company in connection with their respective businesses; (iii) all
partnership, joint venture, shareholder' or other similar Contracts with any
Person in connection with the Company's; (iv) all Contracts relating to the
future disposition or acquisition of any assets of the Company, other than
dispositions or acquisitions in the ordinary course of business; and (v) all
other Contracts (other than real property leases and insurance policies) with
respect to the Company that (A) involve the payment or potential payment,
pursuant to the terms of any such Contract, by or to the Company of more than
Five Thousand Dollars ($5,000) annually or (B) cannot be terminated within sixty
(60) days after giving notice of termination without resulting in any material
cost or penalty to the Company. Except as disclosed in the Company Disclosure
Letter, there is no default or event that with notice or lapse of time, or both,
would constitute a material default by the Company under any of the Material
Contracts to which it is a party. Except as disclosed in the Company Disclosure
Letter, the Company has not received written notice of a default under any
Material Contract by any other party thereto.
(b) Each of the Material Contracts is enforceable against the Company,
as the case may be, in accordance with its terms, except as such enforceability
may be limited by general principles of equity or by bankruptcy, insolvency or
other similar laws relating to rights of creditors. Except as disclosed in the
Company Disclosure Letter, the Company has not received written notice that any
party to any of the Material Contracts intends to cancel or terminate any of the
Material Contracts or to exercise or not exercise any options under any of the
Material Contracts.
III.19 Intellectual Property. Except as disclosed in the Company
Disclosure Letter, the Company does not have any patents, trademarks, service
marks, trade names, corporate names (including all registrations and
applications therefor) and copyright registrations and applications that are
material to the business or condition of the Company.
10
11
III.20 Tax-Free Reorganization. The Company has not taken and has not
agreed to take any action that would interfere with the ability of Parent to
treat the Merger as a tax-free reorganization within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(E), and 368(a)(1)(B) of the Code.
III.21 Compliance with Laws. Except as disclosed in the Company
Disclosure Letter, the Company is not in violation of, or has violated, any
applicable provisions of any Laws or any term of any Order binding against it,
except for violations which do not have and would not have, individually or in
the aggregate, a material adverse effect on the Company.
III.22 Full Disclosure. No information furnished by or on behalf of the
Company to the Parent pursuant to this Agreement and any information contained
in the Company Disclosure Letter and other Schedules to this Agreement, at any
time prior to the Closing Date, contains nor will it contain any untrue
statement of a material fact and does not and will not omit to state any
material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrant to the Company as follows:
IV.1 Organization and Qualification. Except as disclosed in the Parent
Disclosure Letter (as defined in this Article IV.1), Parent is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties, except for such failures to be so organized,
existing and in good standing or to have such power and authority which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on Parent taken as a whole. Except as
disclosed in the Parent Disclosure Letter (as defined in this Article IV.1),
Parent is duly qualified, licensed or admitted to do business and is in good
standing in each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures to be
so qualified, licensed or admitted and in good standing which, individually or
in the aggregate, are not having and could not be reasonably expected to have a
material adverse effect on Parent. The Parent shall submit a letter dated the
date hereof and deliver to the Company as a condition to Closing as set forth in
Article VIII (the "Parent Disclosure Letter"), which will, among other things,
disclose the items as described in this Agreement. Except as disclosed in the
Parent Disclosure Letter, the Parent does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
IV.2 Capital Stock.
(a) The authorized capital stock of Parent consists solely of Seventy
Five Million (75,000,000) shares of Parent Common Stock, par value $.01 per
share ("Parent Common Stock"). As of April 1, 2000 Eleven Million Eight Hundred
Seventy Five Thousand Five Hundred (11,875,500) shares of Parent Common Stock
were issued and outstanding, Sixty Three Million One Hundred Twenty Four
Thousand Five Hundred (63,124,500) shares were held in the treasury of Parent.
All of the issued and outstanding
11
12
shares of Parent Common Stock are, and all shares reserved for issuance will be,
upon issuance in accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable (including pursuant to this
Agreement), duly authorized, validly issued, fully paid and non-assessable.
(b) Except as disclosed in the Parent Disclosure Letter, there are no
outstanding contractual obligations of Parent to repurchase, redeem or otherwise
acquire any shares of Parent Common Stock or to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other person.
IV.3 Authority Relative to this Agreement. Except as disclosed in the
Parent Disclosure Letter, Parent has full corporate power and authority to enter
into this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Company and the consummation by Parent of
the transactions contemplated hereby have been duly and validly approved by its
Board of Directors and no other corporate proceedings on the part of Parent or
its stockholder are necessary to authorize the execution, delivery and
performance of this Agreement by Parent and the consummation by Parent of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and constitutes a legal, valid and binding
obligation of Parent enforceable against Parent in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
IV.4 Non-Contravention; Approvals and Consents.
(a) Except as disclosed in the Parent Disclosure Letter, the execution
and delivery of this Agreement by Parent does not, and the performance by Parent
of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of
Parent under, any of the terms, conditions or provisions of (i) the certificates
or articles of incorporation or bylaws (or other comparable charter documents)
of Parent, or (ii) subject to the taking of the actions described in Article
IV.4 (b), (x) any Laws or Orders of any Governmental or Regulatory Authority
applicable to Parent or any of respective assets or properties, or (y) any
Contracts to which Parent is a party or by which Parent or any of its respective
assets or properties is bound, excluding from the foregoing clauses (x) and (y)
conflicts, violations, breaches, defaults, terminations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, could not be reasonably expected to have a material adverse
effect on Parent taken as a whole or on the ability of Parent to consummate the
transactions contemplated by this Agreement.
(b) Except (i) as may be required for the filing of a pre-merger
notification report by Parent under the HSR Act, (ii) for filings with any state
securities authorities that are required in connection with the transactions
contemplated by this Agreement, (iii) for the filing of the Certificate of
Merger and other appropriate merger documents required by the Delaware Code with
the Secretary of State and appropriate documents with the relevant authorities
of other states in which the Constituent Corporations are qualified to do
business, no consent, approval or action of, filing with or notice to any
Governmental
12
13
or Regulatory Authority or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any Law or Order of
any Governmental or Regulatory Authority or any Contract to which Parent is a
party or by which Parent or any of its respective assets or properties is bound
for the execution and delivery of this Agreement by Parent, the performance by
Parent of its obligations hereunder or the consummation of the transactions
contemplated hereby, other than such consents, approvals, actions, filings and
notices which the failure to make or obtain, as the case may be, individually or
in the aggregate, could not be reasonably expected to have a material adverse
effect on Parent taken as a whole or on the ability of Parent to consummate the
transactions contemplated by this Agreement.
IV.5 Absence of Certain Changes or Events. Except as disclosed in the
Parent Disclosure Letter, the Parent has conducted its respective business only
in the ordinary course, consistent with past practice and there has not occurred
or arisen any event, individually or in the aggregate, having or which would
have a material adverse effect on the Parent, other than those occurring as a
result of general economic or financial conditions or other developments that
are not unique to the Parent but also affect other persons who participate or
are engaged in the lines of business in which the Parent is engaged.
IV.6 Legal Proceedings. Except as disclosed in the Parent Disclosure
Letter, (a) there are no actions, suits, arbitrations or proceedings pending or,
to the knowledge of the Parent, threatened against, relating to or affecting,
nor are there any Governmental or Regulatory Authority investigations or audits
pending or to the knowledge of the Parent threatened against, relating to or
affecting, the Parent or any of its respective assets and properties which,
individually or in the aggregate, could be reasonably expected to have a
material adverse effect on the Parent taken as a whole or on the ability of the
Parent to consummate the transactions contemplated by this Agreement, and (b)
the Parent is not subject to any Order of any Governmental or Regulatory
Authority which, individually or in the aggregate, is having or could be
reasonably expected to have a material adverse effect on the Parent taken as a
whole or on the ability of the Parent to consummate the transactions
contemplated by this Agreement.
IV.7 Taxes. Except as disclosed in the Parent Disclosure Letter, the
Parent has filed all tax returns that are required to have been filed by it in
any jurisdiction for all periods ending on or prior to the date this
representation is made and such tax returns are true, correct and complete in
all material respects, and the Parent has paid all taxes shown to be due and
payable on such returns and all other taxes and assessments payable by it to the
extent the same have become due and payable and before they have become
delinquent, except for any taxes and assessments the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Parent has set aside on its books
reserves (segregated to the extent required by generally accepted accounting
principles, consistently applied throughout the specified period and in the
immediately comparable period ("GAAP")) deemed by it in its reasonable
discretion to be adequate. Except as disclosed in the Parent Disclosure Letter,
the Parent has no knowledge of any proposed material tax assessment, obligation
or other claim against the Parent, and in the opinion of the Parent all tax
liabilities of the Parent are adequately provided for on the books of the
Parent. Except as disclosed in the Parent Disclosure Letter, there are no
material liens for taxes upon any property or assets of the Parent, except for
liens for taxes not yet delinquent. Except as disclosed in the Parent Disclosure
Letter, there are no unresolved issues of law or fact arising out of a notice of
deficiency, proposed deficiency or assessment from the Internal Revenue Service
("IRS") or any other governmental taxing authority with respect to taxes of the
Parent which, if decided adversely, singly or in the aggregate, would have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations
13
14
of the Parent. Except as disclosed in the Parent Disclosure Letter, the Parent
has not, with regard to any assets or property held, acquired or to be acquired
by it, filed a consent to the application of Section 341(f) of the Code.
IV.8 Vote Required. The affirmative vote of at least a majority of the
outstanding shares of outstanding stock of the Parent with respect to the
adoption of this Agreement is the only vote required to adopt this Agreement and
approve the Merger and the other transactions contemplated hereby.
IV.9 Permits, Etc. Except as disclosed in the Parent Disclosure Letter,
the Parent owns or validly holds all licenses, permits, certificates of
authority, registrations, franchises and similar consents granted or issued by
any applicable Governmental or Regulatory Authority, used or held for use which
are required to conduct and material to the condition of its business.
IV.10 Compliance with Laws. Except as disclosed in the Parent
Disclosure Letter, the Company is not in violation of, or has violated, any
applicable provisions of any Laws or any term of any Order binding against it,
except for violations which do not have and would not have, individually or in
the aggregate, a material adverse effect on the Merger.
IV.11 Full Disclosure. No information furnished by or on behalf of the
Parent to the Company pursuant to this Agreement and any information contained
in the Parent Disclosure Letter, at any time prior to the Closing Date, contains
nor will it contain any untrue statement of a material fact and does not and
will not omit to state any material fact necessary to make any statement, in
light of the circumstances under which such statement is made, not misleading.
ARTICLE V
COVENANTS OF THE COMPANY
V.1 Covenants of the Company. Except as disclosed in the Company
Disclosure Letter, at all times from and after the date hereof until the
Effective Time, the Company covenants and agrees that (except as expressly
contemplated or permitted by this Agreement, or to the extent that the Parent
shall otherwise consent in writing):
(a) Ordinary Course. The Company shall conduct its businesses only in,
and none of the Company shall take any action except in, the ordinary course
consistent with past practice.
(b) Prohibited Actions. Without limiting the generality of Article
V.1(a), except as otherwise disclosed in the Company Disclosure Letter, as
applicable, (i) the Company shall use all commercially reasonable efforts to
preserve intact in all material respects its present business organizations and
reputation, to keep available the services of its key officers and employees, to
maintain its assets and properties in good working order and condition, ordinary
wear and tear excepted, to maintain insurance on its tangible assets and
businesses in such amounts and against such risks and losses as are currently in
effect, to preserve its relationships with customers and suppliers and others
having significant business dealings with them and to comply in all material
respects with all Laws and Orders of all Governmental or Regulatory Authorities
applicable to them, and (ii) the Company shall not:
14
15
(A) amend or propose to amend its certificate or articles of
incorporation or bylaws (or other comparable corporate charter
documents);
(B) (w) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, (x) split,
combine, reclassify or take similar action with respect to any of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (y) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (z) directly or indirectly
redeem, repurchase or otherwise acquire any shares of its capital stock
or any Option with respect thereto;
(C) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or any
Option with respect thereto (other than (y) the modification or
amendment of any right of any holder of outstanding shares of capital
stock or Options with respect thereto;
(D) acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner) any business or any corporation,
partnership, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the Company;
(E) other than dispositions of assets which are not,
individually or in the aggregate, material to the Company, sell, lease,
grant any security interest in or otherwise dispose of or encumber any
of its assets or properties;
(F) except to the extent required by applicable law or
existing commitment, (x) permit any material change in (1) any pricing,
marketing, purchasing, investment, accounting, financial reporting,
inventory, credit, allowance or tax practice or policy or (2) any
method of calculating any bad debt, contingency or other reserve for
accounting, financial reporting or tax purposes or (y) make any
material tax election or settle or compromise any material income tax
liability with any Governmental or Regulatory Authority;
(G) (x) incur (which shall not be deemed to include entering
into credit agreements, lines of credit or similar arrangements until
borrowings are made under such arrangements) any indebtedness for
borrowed money or guarantee any such indebtedness other than in the
ordinary course of its business consistent with past practice in an
aggregate principal amount exceeding Five Thousand Dollars ($5,000) (in
each case net of any amounts of any such indebtedness discharged during
such period), or (y) voluntarily purchase, cancel, prepay or otherwise
provide for a complete or partial discharge in advance of a scheduled
repayment date with respect to, or waive any right under, any
indebtedness for borrowed money other than in the ordinary course of
its business consistent with past practice in an aggregate principal
amount exceeding Five Thousand Dollars ($5,000);
15
16
(H) enter into any contract or amend or modify any existing
contract, or engage in any new transaction, outside the ordinary course
of business consistent with past practice or not on an arm's length
basis, with any affiliate of such;
(I) make any capital expenditures or commitments for additions
to plant, property or equipment constituting capital assets except in
the ordinary course of business consistent with past practice in an
aggregate amount exceeding One Hundred Dollars ($100);
(J) make any change in the lines of business in which it
participates or is engaged;
(K) enter into any contract, agreement, commitment or
arrangement to do or engage in any of the foregoing; or
(L) take any action to cause the Merger not to be treated as a
tax-free reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(E), and Section 368(a)(1)(B) of the Code.
(c) Advice of Changes. Each party shall confer on a regular and
frequent basis with the other with respect to its business and operations and
other matters relevant to the Merger; provided, however, that the foregoing
obligation shall not apply to matters disclosed in the Company Disclosure
Letter, and each party shall promptly advise the other, orally and in writing,
of any change or event, including, without limitation, any complaint,
investigation or hearing by any Governmental or Regulatory Authority (or
communication indicating the same may be contemplated) or the institution or
threat of litigation, having, or which, insofar as can be reasonably foreseen,
could have, a material adverse effect on the Company or Parent, as the case may
be, or on the ability of the Company or Parent, as the case may be, to
consummate the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF THE PARENT
VI.1 Covenants of the Parent. Except as disclosed in the Parent
Disclosure Letter, at all times from and after the date hereof until the
Effective Time, the Parent covenants and agrees that (except as expressly
contemplated or permitted by this Agreement, or to the extent that the Company
shall otherwise consent in writing):
(a) Cooperation. Parent shall use all reasonable efforts to take all
such actions as are necessary to effectuate the transactions contemplated hereby
and to fulfill and cause to be fulfilled the conditions to closing under this
Agreement.
(b) Tax-Free Reorganization. Parent shall not, to take any action to
cause the Merger not to be treated as a tax-free reorganization within the
meaning of Section 368(a)(1)(A) and Section 368(a)(2)(E), and Section
368(a)(1)(B) of the Code.
16
17
(c) Prohibited Actions. Without limiting Parent's operation in the
ordinary course of business, and except as otherwise disclosed in the Parent
Disclosure Letter, as applicable, (i) the Parent shall use all commercially
reasonable efforts to preserve intact in all material respects its present
business organizations and reputation, to keep available the services of its key
officers and employees, to maintain its assets and properties in good working
order and condition, ordinary wear and tear excepted, to maintain insurance on
its tangible assets and businesses in such amounts and against such risks and
losses as are currently in effect, to preserve its relationships with customers
and suppliers and others having significant business dealings with them and to
comply in all material respects with all Laws and Orders of all Governmental or
Regulatory Authorities applicable to them, and (ii) the Parent shall not:
(1) enter into any contract or amend or modify any existing
contract, or engage in any new transaction, outside the ordinary course
of business consistent with past practice or not on an arm's length
basis, with any affiliate of such;
(2) make any material changes in the lines of business in
which it participates or is engaged; or
(3) enter into any contract, agreement, commitment or
arrangement to do or engage in any of the foregoing.
(d) Advice of Changes. Each party shall confer on a regular and
frequent basis with the other with respect to its business and operations and
other matters relevant to the Merger; provided, however, that the foregoing
obligation shall not apply to matters disclosed in the Parent Disclosure Letter,
and each party shall promptly advise the other, orally and in writing, of any
change or event, including, without limitation, any complaint, investigation or
hearing by any Governmental or Regulatory Authority (or communication indicating
the same may be contemplated) or the institution or threat of litigation,
having, or which, insofar as can be reasonably foreseen, could have, a material
adverse effect on the Company or Parent, as the case may be, or on the ability
of the Company or Parent, as the case may be, to consummate the transactions
contemplated hereby.
ARTICLE VII
ADDITIONAL AGREEMENTS
VII.1 Access to Information; Confidentiality.
(a) Each of the Company and Parent shall, throughout the period from
the date hereof to the Effective Time, (i) provide the other party and its
directors, officers, employees, legal, investment, banking and financial
advisors, accountants and any other agents and representatives (collectively,
"Representatives") with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants of the
Company or Parent, as the case may be, and their respective assets, properties,
books and records, but only to the extent that such access does not unreasonably
interfere with the business and operations of the Company or Parent, as the case
may be, and (ii) furnish promptly to such persons (x) a copy of each report,
statement, schedule and other document filed or received by the Company or
Parent, as the case may be, pursuant to the requirements of federal or state
securities laws or filed with any other Governmental or Regulatory Authority,
and (y) all other information and data (including, without limitation, copies of
other books and records and
17
18
contracts, provided, however, that neither Parent nor Company will without the
approval of the other party contact a party to any such contract) concerning the
business and operations of the Company or Parent, as the case may be, as the
other party or any of such other persons reasonably may request. No
investigation pursuant to this paragraph or otherwise shall affect any
representation or warranty contained in this Agreement or any condition to the
obligations of the parties hereto.
(b) Each party will hold, and will use its best efforts to cause its
Representatives to hold, in strict confidence, unless (i) compelled to disclose
by judicial or administrative process or by other requirements of applicable
Laws of Governmental or Regulatory Authorities (including, without limitation,
in connection with obtaining the necessary approvals of this Agreement or the
transactions contemplated hereby of Governmental or Regulatory Authorities);
provided such party shall inform the disclosing party prior to any such
disclosure and provide the disclosing party an opportunity to contest such
disclosure, or (ii) disclosed in an action or proceeding brought by a party
hereto in pursuit of its rights or in the exercise of its remedies hereunder,
all documents and information concerning the other party furnished to it by such
other party or its Representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such documents or
information can be shown to have been (x) previously known by the Company or
Parent, as the case may be, or its Representatives, (y) in the public domain
(either prior to or after the furnishing of such documents or information
hereunder) through no fault of the Company or Parent, as the case may be, and
its Representatives or (z) later acquired by the Company or Parent, as the case
may be, or its Representatives from another source if such source is under an
obligation to the Company or Parent, as the case may be, to keep such documents
and information confidential. In the event that this Agreement is terminated
without the transactions contemplated hereby having been consummated, upon the
request of the Company or Parent, as the case may be, the other party will, and
will cause its Representatives to, promptly (and in no event later than five (5)
days after such request) redeliver or cause to be redelivered all copies of
documents and information furnished by the Company or Parent, as the case may
be, or its Representatives to such party and its Representatives in connection
with this Agreement or the transactions contemplated hereby and destroy or cause
to be destroyed all notes, memoranda, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by the Company or
Parent, as the case may be, or its Representatives.
VII.2 [Reserved]
VII.3 Approval of Company Shareholder. The Company shall use all
reasonable efforts to obtain approval of this Agreement by its shareholder (the
"Company Shareholders' Approval") as soon as reasonably practicable after the
date hereof. Subject to the exercise of fiduciary obligations under applicable
law as advised by independent counsel, the Company shall, through its Board of
Directors, to the shareholder of the Company that it is in the best interest of
the shareholder that the shareholder of the Company approve this Agreement, and
shall use its best efforts to obtain such approval.
VII.4 Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement and without limiting the provisions of this Article
VII, each of the Company and Parent will proceed diligently and in good faith
and will use all commercially reasonable efforts to do, or cause to be done, all
things necessary, proper or advisable to, as promptly as practicable, (a) obtain
all consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other public or private
third parties required of Parent, the Company to consummate the Merger and the
other matters contemplated hereby, and (b) provide such other information and
communications to such
18
19
Governmental or Regulatory Authorities or other public or private third parties
as the other party or such Governmental or Regulatory Authorities or other
public or private third parties may reasonably request in connection therewith;
notwithstanding the foregoing, the parties agree to make any necessary filings
under the HSR Act within fifteen (15) days of the date hereof. In addition to
and not in limitation of the foregoing, each of the parties will (x) take
promptly all actions necessary to make the filings required of Parent and the
Company or their affiliates under the HSR Act, (y) comply at the earliest
practicable date with any request for additional information received by such
party or its affiliates from the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust Division")
pursuant to the HSR Act, and (z) cooperate with the other party in connection
with such party's filings under the HSR Act and in connection with resolving any
investigation or other inquiry concerning the Merger or the other matters
contemplated by this Agreement commenced by either the FTC or the Antitrust
Division or state attorneys general.
VII.5 Expenses. If the Merger is not consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such cost or expense.
If the Merger is consummated, Parent agrees to pay Company for all of it's
accounting and legal costs and expenses incurred in connection with the Merger
and the transactions contemplated hereby, in an amount not to exceed Thirty Five
Thousand Dollars ($35,000.00).
VII.6 Pooling of Interests. From and after the date hereof and until
the Effective Time, neither Parent nor the Company or other affiliates shall
knowingly take any action, or knowingly fail to take any action, that would
jeopardize the treatment of Parent's acquisition of the Company as a "pooling of
interests" for accounting purposes. Following the Effective Time, Parent shall
use its best efforts to conduct the business of the Surviving Corporation, and
shall cause the Surviving Corporation to use its best efforts to conduct its
business, in a manner that would not jeopardize the characterization of the
Merger as a "pooling of interests" for accounting purposes. The Parent agrees
that on or prior to June 15, 2000, Parent shall cause publication of the
combined results of operations of Parent and the Company for a period of the
first thirty (30) days of combined operations of the Company and the Parent (the
"Combined Results"). For purposes of this Article VII.6, the term "publication"
shall have the meaning provided in the SEC Accounting Series Release No. 135
("ASR 135").
VII.7 Brokers or Finders. Each of Parent and the Company represents, as
to itself and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any broker's
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, whose fees and expenses will be
paid by the Company in accordance with the Company's agreement with such firm (a
true and complete copy of which has been delivered by the Company to Parent
prior to the execution of this Agreement), and each of the Parent and the
Company shall indemnify and hold the other harmless from and against any and all
claims, liabilities or obligations with respect to any other such fee or
commission or expenses related thereto asserted by any person on the basis of
any act or statement alleged to have been made by such party or its affiliate.
VII.8 [Reserved.]
VII.9 Notice and Cure. Each of Parent and the Company will notify the
other in writing of, and contemporaneously will provide the other with true and
complete copies of any and all information or documents relating to, and will
use best efforts to cure before the Closing, any event, transaction or
19
20
circumstance, as soon as practical after it becomes known to such party,
occurring after the date of this Agreement that causes or will cause any
covenant or agreement of Parent or the Company, as the case may be, under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of Parent or the Company, as the case may be,
contained in this Agreement as if the same were made on or as of the date of
such event, transaction or circumstance. Each of Parent and the Company also
will notify the other in writing of, and will use best efforts to cure, before
the Closing, any violation or breach, as soon as practical after it becomes
known to such party, of any representation, warranty, covenant or agreement made
by Parent or the Company, as the case may be, in this Agreement, whether
occurring or arising prior to, on or after the date of this Agreement. No notice
given pursuant to this Article VII shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein.
VII.10 Fulfillment of Conditions. Subject to the terms and conditions
of this Agreement, each of Parent and the Company will take or cause to be taken
all steps necessary or desirable and proceed diligently and in good faith to
satisfy each condition to the other's obligations contained in this Agreement
and to consummate and make effective the transactions contemplated by this
Agreement, and neither Parent nor the Company will, take or fail to take any
action that could be reasonably expected to result in the non-fulfillment of any
such condition.
VII.11 No Solicitations. Prior to the Effective Time, the Company
agrees (a) that it shall use its best efforts to not cause their respective
Representatives not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its shareholder) with
respect to a merger, consolidation or other business combination including the
Company any acquisition or similar transaction (including, without limitation, a
tender or exchange offer) involving the purchase of (i) all or any significant
portion of the assets of the Company, (ii) one percent (1%) or more of the
outstanding shares of Company Common Stock or (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal"), or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person or group relating to an Alternative
Proposal (excluding the transactions contemplated by this Agreement), or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal; (b) that it will notify Parent immediately if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such negotiations or discussions are sought to be initiated or continued
with, it or any such person or group; and (c) that it will, prior to accepting
any Alternative Proposal, (i) receive a determination from an independent
financial advisor that such Alternative Proposal is more favorable (from a
financial point of view) to the Company's shareholder than the Merger, (ii)
determine in the exercise of its fiduciary obligations under applicable law as
advised by independent counsel that such Alternative Proposal is more favorable
to the Company's shareholder than the Merger, and (iii) deliver to Parent a
definitive agreement of such Alternative Proposal or a description of the
material terms thereof and, except as would violate a fiduciary or contractual
obligation, a copy of any information provided by such person or group,
including the identity of such person or group, and give Parent at least
fourteen (14) days to offer a counterproposal prior to executing such definitive
agreement; provided, however, that nothing contained in this Article VII shall
prohibit the Board of Directors of the Company from (A) furnishing information
to or entering into discussions or negotiations with any person or group that
makes an unsolicited bona fide Alternative Proposal, if, and only to the extent
that, (1) the Board of Directors of the Company, based upon the written opinion
of outside counsel (a copy of which shall be provided promptly to Parent),
determines in good faith that such action is required or appropriate for the
Board of Directors to
20
21
comply with its fiduciary duties to shareholder imposed by law, (2) the Board of
Directors has reasonably concluded in good faith that the person or group making
such Alternative Proposal will have adequate sources of financing to consummate
such Alternative Proposal and that such Alternative Proposal is more favorable
to the Company's shareholder than the Merger and (3) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or group, the Company provides written notice to Parent to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or group; and (B) to the extent applicable, complying with Rule
14e-2 promulgated under the Exchange Act with regard to an Alternative Proposal.
ARTICLE VIII
CONDITIONS
VIII.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing Date, of each of the following
conditions:
(a) Company Shareholders' Approval. Company Shareholders' Approval of
this Agreement shall have been obtained.
(b) State Securities Laws. As necessary or required, all filings with
the SEC with respect to the shares being issued in connection with the Merger
shall have been made; and Parent shall have received all state securities or
"Blue Sky" permits and other authorizations, if any, necessary to issue the
Parent Common Stock pursuant to this Agreement after the Merger.
(c) Company Disclosure Letter. Company shall have provided the Company
Disclosure Letter to the Parent.
(d) HSR Act. Any waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired or been
terminated.
(e) No Injunctions or Restraints. No court of competent jurisdiction or
other competent Governmental or Regulatory Authority shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
illegal or otherwise restricting, preventing or prohibiting consummation of the
Merger or the other transactions contemplated by this Agreement.
(f) Employment Agreements. Employment Agreements for Fuad Khan,
Muhammad Jalaluddin Khan, Howard Keep and Terrance Keep shall have been fully
executed.
(g) Governmental and Regulatory Consents and Approvals. Other than the
filing provided for by this Agreement, all consents, approvals and actions of,
filings with and notices to any Governmental or Regulatory Authority or any
other public or private third parties required of Parent, the Company to
consummate the Merger and the other matters contemplated hereby, the failure of
which to be obtained or taken could be reasonably expected to have a material
adverse effect on Parent or the Surviving Corporation, in each case taken as a
whole, or on the ability of Parent and the Company to consummate the
transactions contemplated hereby shall have been obtained.
21
22
(h) Shareholder Agreement. The Shareholder Agreement for the Parent or
the Surviving Corporation shall have been fully executed.
(i) The Stock Option Agreement. The Stock Option Agreement for the
Parent or the Surviving Corporation shall have been fully executed.
(j) Parent Disclosure Letter. Parent shall have provided the Parent
Disclosure Letter to Company.
(k) Consulting Agreement. The Consulting Agreement for Muhammad
Salahuddin Khan shall have been fully executed.
(l) Board Resolutions. Parent and Company shall have fully executed
and exchanged copies of their respective Board Resolutions approving the Merger.
(m) Shareholder Approvals. The shareholders of Parent and Company
shall have fully excuted and exchanged copies of their respective Shareholder
Approvals ("Approval") approving the Merger.
(n) Shareholder Affiliate Letters. All Shareholders of Company shall
have fully executed a Shareholder Affiliate Letter substantially in the form as
described in Exhibit C to this Agreement.
VIII.2 Conditions to Obligation of Parent to Effect the Merger. The
obligation of Parent to effect the Merger is further subject to the fulfillment,
at or prior to the Closing Date, of each of the following additional conditions
(all or any of which may be waived in whole or in part by Parent in their sole
discretion):
(a) Representations and Warranties. Except as disclosed in the Company
Disclosure Letter, each of the representations and warranties made by the
Company in this Agreement shall be true and correct in all material respects
(except for such representations and warranties that are qualified by their
terms by a reference to materiality, which representations and warranties as so
qualified shall be true in all respects) as of the Closing Date as though made
on and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, and the Company shall have delivered to Parent a certificate,
dated the Closing Date and executed on behalf of the Company by its Chairman of
the Board, President or any Executive or Senior Vice President, to such effect.
(b) Performance of Obligations. Except as disclosed in the Company
Disclosure Letter, the Company shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company at or prior to the
Closing, and the Company shall have delivered to Parent a certificate, dated the
Closing Date and executed on behalf of the Company by its Chairman of the Board,
President or any Executive or Senior Vice President, to such effect.
(c) Dissenters' Rights. Holders of less than fifteen percent (15%) of
the outstanding shares of capital stock of the Company, shall have exercised,
nor shall they have any continued right to exercise,
22
23
any appraisal, dissenters' or similar rights under applicable law with respect
to their shares by virtue of the Merger.
(d) Orders and Laws. Except as disclosed in the Company Disclosure
Letter, there shall not have been issued, enacted, promulgated or deemed
applicable to the Company, the Surviving Corporation or the transactions
contemplated by this Agreement any Order or Law of any Governmental or
Regulatory Authority which is then in effect and which could be reasonably
expected to result in a material diminution of the benefits of the Merger to
Parent, and there shall not be pending or threatened on the Closing Date any
action, suit or proceeding in, before or by any Governmental or Regulatory
Authority which could be reasonably expected to result in any such issuance,
enactment, promulgation or deemed applicability of any such Order or Law or of
any Order or Law referred to in this Agreement.
(e) Contractual Consents. Except as disclosed in the Company
Disclosure Letter, the Company shall have received all consents (or in lieu
thereof waivers) from parties to each Contract disclosed pursuant to the
Agreement.
(f) Proceedings. All proceedings to be taken on the part of the
Company in connection with the transactions contemplated by this Agreement and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Parent, and Parent shall have received copies of all such documents
and other evidences as Parent may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
(g) Opinion of Counsel. Parent shall have received the opinion of
Lawrence Pober, Esq., P.C., counsel to the Company, dated the Closing Date, in
substantially the form attached hereto as Exhibit B.
(h) Contractual Consents. Except as disclosed in the Company
Disclosure Letter, Parent shall have received all consents (or in lieu thereof
waivers) from parties to each Contract disclosed pursuant to this Agreement.
(i) No Material Adverse Change. Since the date of this Agreement,
there shall have been no changes in the business, condition (financial or
otherwise), properties, assets (including intangible assets), liabilities
(including contingent liabilities) or results of operations of the Company,
which have had or may be reasonably expected to have a material adverse effect
on the Company.
VIII.3 Conditions to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing Date, of each of the following
additional conditions (all or any of which may be waived in whole or in part by
the Company in its sole discretion):
(a) Representations and Warranties. Each of the representations and
warranties made by Parent in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) as of the Closing
Date as though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date earlier than the
Closing Date, on and as of such earlier date, and Parent shall each have
delivered to the Company a certificate, dated the Closing Date and executed on
behalf of Parent by its Chairman of the Board, President or any Executive or
Senior Vice President to such effect.
23
24
(b) Performance of Obligations. Except as disclosed in the Parent
Disclosure Letter, Parent shall have performed and complied with, in all
material respects, each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by Parent at or prior to the
Closing, and Parent shall each have delivered to the Company a certificate,
dated the Closing Date and executed on behalf of Parent by its Chairman of the
Board, President or any Executive or Senior Vice President.
(c) Orders and Laws. Except as disclosed in the Parent Disclosure
Letter, there shall not have been issued, enacted, promulgated or deemed
applicable to the Parent, or the transactions contemplated by this Agreement any
Order or Law of any Governmental or Regulatory Authority which is then in effect
and which could be reasonably expected to result in a material diminution of the
benefits of the Merger to the Company, and there shall not be pending or
threatened on the Closing Date any action, suit or proceeding in, before or by
any Governmental or Regulatory Authority which could be reasonably expected to
result in any such issuance, enactment, promulgation or deemed applicability of
any such Order or Law or of any Order or Law.
(d) Contractual Consents. Except as disclosed in the Parent Disclosure
Letter, Parent shall have received all consents (or in lieu thereof waivers)
from parties to each Contract disclosed pursuant to this Agreement.
(e) Proceedings. All proceedings to be taken on the part of Parent in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company, and the Company shall have received copies of all such
documents and other evidences as the Company may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
IX.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether prior to or after the Company Shareholders' Approval:
(a) by mutual written agreement of the parties hereto duly authorized
by action taken by or on behalf of their respective Boards of Directors;
(b) by either the Company or Parent upon notification to the
non-terminating party by the terminating party:
(i) at any time after April 24, 2000 (the "Last Closing
Date") if the Merger shall not have been consummated on or prior to
such date and such failure to consummate the Merger is not caused by a
breach of this Agreement by the terminating party (unless the failure
to so consummate the Merger is due to lack of receipt of required
Regulatory Approvals which are being pursued in good faith, in which
case the Last Closing Date shall be April 24, 2000);
24
25
(ii) if the Company Shareholders' Approval shall not be
obtained by reason of the failure to obtain the requisite vote upon a
vote held at a meeting of such shareholder, or any adjournment thereof,
called therefor;
(iii) if any Governmental or Regulatory Authority, the taking
of action by which is a condition to the obligations of either the
Company or Parent to consummate the transactions contemplated hereby,
shall have determined not to take such action and all appeals of such
determination shall have been taken and have been unsuccessful;
(iv) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement which breach has not
been cured within five (5) business days following receipt by the
non-terminating party of notice of such breach from the terminating
party or assurance of such cure reasonably satisfactory to the
terminating party shall not have been given by or on behalf of the
non-terminating party within such five (5) business day period; or
(v) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an Order making
illegal or otherwise restricting, preventing or prohibiting the Merger
and such Order shall have become final and non-appealable; or
IX.2 Effect of Termination. If this Agreement is validly terminated by
either the Company or Parent pursuant to Article IX.1, this Agreement will
forthwith become null and void and there will be no liability or obligation on
the part of either the Company or Parent (or any of their respective
Representatives or affiliates), except (a) that the provisions of Articles
VII.1, VII.5, VII.8, XI.2, IX.4, XI.8, XI.9, XI.11, XI.12, XI.13 and Article X
in its entirety will continue to apply following any such termination and (b)
that nothing contained herein shall relieve any party hereto from liability for
willful breach of its representations, warranties, covenants or agreements
contained in this Agreement.
IX.3 Amendment. This Agreement may be amended, supplemented or
modified by action taken by or on behalf of the respective Boards of Directors
of the parties hereto at any time prior to the Effective Time, whether prior to
or after the Company Shareholders' Approval, but after such Company
Shareholders' Approval, only to the extent permitted by applicable law. No such
amendment, supplement or modification shall be effective unless set forth in a
written instrument duly executed by or on behalf of each party hereto.
IX.4 Waiver. At any time prior to the Effective Time any party hereto,
by action taken by or on behalf of its Board of Directors, may to the extent
permitted by applicable law (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party extending the time of performance or waiving any such inaccuracy or
non-compliance. No waiver by any party of any term or
25
26
condition of this Agreement, in any one or more instances, shall be deemed to be
or construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion.
ARTICLE X
INDEMNIFICATION AND ESCROW
X.1 Survival of Representations and Warranties
(a) The representations and warranties contained in Article III and
Article IV of this Agreement shall not survive the Merger but shall terminate at
the Effective Time, except for the representations and warranties (each as
modified by the Company and Parent Disclosure Letters), which shall survive the
Effective Time. The waiver of any condition based on the accuracy of any
representation or warranty, or the performance or compliance of any covenant or
obligation, will not affect the right to indemnification set forth in this
Article X.
(b) Except as provided in Article X, no shareholder or optionholder of
the Company or the Parent shall have any liability hereunder except for his or
her own personal, actual fraud.
X.2 Indemnification of Parent.
(a) Subject to the provisions of this Article X, the Parent shall be
indemnified by Shareholders ad provided in the Escrow Agreement after the
Effective Time from and against any and all damage, loss, liability and expense
(including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and reasonable expenses in connection with any
action, suit or proceeding) incurred or suffered or reasonably expected to be
incurred or suffered by the Parent arising out of any breach of the
representations, warranties, covenants or agreements of the Company set forth
herein (the "Parent Indemnifiable Damages"). Notwithstanding the foregoing,
Parent shall not be entitled to indemnification hereunder until the Parent
Indemnifiable Damages exceed Five Thousand Dollars ($5,000) and thereafter shall
be entitled to indemnification for all Parent Indemnifiable Damages subject to
the provisions hereof. Subject to the terms of Articles X.3(b) and X.5 of this
Agreement, upon compliance with the terms hereof and the terms of the Escrow
Agreement, Parent shall be entitled to obtain indemnification from the Escrow
Fund (as defined in Article X.3) of all Parent Indemnifiable Damages.
(b) Parent agrees that the sole and exclusive remedy of Parent against
the Company and its Shareholders for any damage, loss, liability or expense
under this Agreement or in connection with the transactions contemplated
hereunder shall be limited to the Escrow Fund.
X.3 Escrow Fund.
(a) The Escrow Shares shall be registered in the names of the
shareholder of the Company or in the name of the Company Representative, as
agent for such shareholder, but shall be deposited (together with assignments in
blank executed by the registered holder(s) of the Company) with an institution
selected by Parent with the reasonable consent of the Company Representative or
a majority in interest of the Company's shareholder as the Escrow Agent, such
deposits to constitute, respectively, an escrow fund to be governed by the terms
set forth herein and in the Escrow Agreement (the "Escrow Fund"), a
26
27
copy of which is attached hereto as Exhibit A. The adoption and approval of this
Agreement by the Company's shareholder shall constitute approval of each of the
Escrow Agreement and of all of the arrangements relating thereto, including
without limitation the placement of the Escrow Shares in escrow and the
appointment of the Company Representative to act for and on behalf of the
shareholder of the Company to give and receive notices and communications, to
authorize delivery of any of the Escrow Shares from the Escrow Fund as the case
may be, in satisfaction of claims by the Parent, to object to such deliveries,
to agree to, negotiate and enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of such representative for the accomplishment of the foregoing.
(b) At any time on or before ninety (90) days after the Effective Date
(the "Indemnification Period"), if Parent makes a claim for Parent Indemnifiable
Damages and is entitled to indemnification pursuant to Article X.2 hereof, the
Escrow Agent shall, upon compliance with the procedures set forth in the Escrow
Agreement, release to Parent such amount from the Escrow Fund that is equal in
value to such Parent Indemnifiable Damages. Escrow Shares so released shall be
valued as set forth in Article II of the Escrow Agreement. Upon a distribution
by the Escrow Agent to Parent pursuant to this Article, the Escrow Fund will be
correspondingly reduced.
X.4 Indemnification by Parent. Subject to the provisions of this
Article X, the Parent agrees to indemnify the shareholder of Company after the
Effective Time from and against any and all damage, loss, liability and expense
(including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and reasonable expenses in connection with any
action, suit or proceeding) incurred or suffered or reasonably expected to be
incurred or suffered by the shareholder of the Company arising out of any breach
of the representation and warranty of the Parent contained in Article IV hereof
(the "Company Indemnifiable Damages"). Parent shall reimburse the shareholder of
the Company for any Company Indemnifiable Damages to which this Article X.4
relates only if a claim for indemnification is made by the shareholder of the
Company within the Indemnification Period.
X.5 Indemnification Procedure. A party seeking indemnification (the
"Indemnitee") shall use its best efforts to minimize any liabilities, damages,
deficiencies, claims, judgments, assessments, costs and expenses in respect of
which indemnity may be sought under this Agreement. The Indemnitee shall give
prompt written notice to the party from whom indemnification is sought (the
"Indemnitor") of the assertion of a claim for indemnification, but in no event
longer than (a) thirty (30) days after service of process in the event
litigation is commenced against the Indemnitee by a third party, or (b) sixty
(60) days after the assertion of such claim, or (c) ninety (90) days after the
Effective Date, whichever shall first occur. No such notice of assertion of a
claim shall satisfy the requirements of Articles X.3(b) and X.5 unless it
describes in reasonable detail and in good faith the facts and circumstances
upon which the asserted claim for indemnification is based. If any action or
proceeding shall be brought in connection with any liability or claim to be
indemnified hereunder, the Indemnitee shall provide the Indemnitor twenty (20)
calendar days to decide whether to defend such liability or claim. During such
period, the Indemnitee shall take all necessary steps to protect the interests
of itself and the Indemnitor, including the filing of any necessary responsive
pleadings, the seeking of emergency relief or other action necessary to maintain
the status quo, subject to reimbursement from the Indemnitor of its expenses in
doing so. The Indemnitor shall (with, if necessary, reservation of rights)
defend such action or proceeding at its expense, using counsel selected by the
insurance company insuring against any such claim and undertaking to defend such
claim, or by other counsel selected by it and approved by the
27
28
Indemnitee, which approval shall not be unreasonably withheld or delayed. The
Indemnitor shall keep the Indemnitee fully apprised at all times of the status
of the defense and shall consult with the Indemnitee prior to the settlement of
any indemnified matter. The Indemnitee agrees to use reasonable efforts to
cooperate with the Indemnitor in connection with its defense of indemnifiable
claims. In the event the Indemnitee has a claim or claims against any third
party arising out of or connected with the indemnified matter, then upon receipt
of indemnification, the Indemnitee shall fully assign to the Indemnitor the
entire claim or claims to the extent of the indemnification actually paid by the
Indemnitor and the Indemnitor shall thereupon be subrogated with respect to such
claim or claims of the Indemnitee.
ARTICLE XI
GENERAL PROVISIONS
XI.1 Knowledge. With respect to any representations or warranties
contained herein which are made to the knowledge of the Company or Parent, as
the case may be, the knowledge of the officers, directors and employees of the
Company or Parent, as the case may be, shall be imputed to the Company or
Parent.
XI.2 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Parent to:
Eco-form International, Inc.
Attention: Howard Keep
Terrance Keep
1040 Riverside Drive, Unit 33
London, Ontario, CANADA N6H5H1
Facsimile: (519) 471-4203
with a copy to its counsel:
The Summit Law Corporation
Attention: Cynthia Futter, Esq.
Julie Barker, Esq.
2121 Cloverfield Blvd., Suite 116
Santa Monica, California 90404
Facsimile: (310) 586-6846
If to the Company:
Eco-form, Inc.
Attention: Mr. Muhammad Salahuddin Khan
Mr. Muhammad Jalaluddin Khan
Mr. Fuad Khan
24 Walpole Park South
28
29
Walpole, Massachusetts 02081
Facsimile: (508) 660-1011
with a copy to its counsel:
Lawrence S. Pober, Esq., P.C.
103 Court Street
Plymouth, Massachusetts 02360
Facsimile: (508) 746-2652
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Article, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided in this Article, be deemed given upon receipt, and (c) if delivered by
mail in the manner described above to the address as provided in this Article,
be deemed given upon receipt (in each case regardless of whether such notice,
request or other communication is received by any other person to whom a copy of
such notice, request or other communication is to be delivered pursuant to this
Article). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
XI.3 Integration. This Agreement, with accompanying Exhibits,
constitutes the entire agreement between the Parent and Company and supersedes
all prior negotiations, representations, understandings, and agreements (oral or
written) related to or concerning the subject matter hereof. No amendment to,
consent provided for, or waiver of any provision of this Agreement shall be
effective unless in writing and signed by the Parent and the Company. This
Agreement represents the full and complete understanding between the Parent and
the Company with respect to the subject matter hereof and supersedes all prior
representations and understandings, whether oral or written.
XI.4 Public Announcements. Except as otherwise required by law or the
rules of the Nasdaq National Market, so long as this Agreement is in effect,
Parent and the Company will not, and will not permit any of their respective
Representatives to, issue or cause the publication of any press release or make
any other public announcement with respect to the transactions contemplated by
this Agreement without the consent of the other party, which consent shall not
be unreasonably withheld. Parent and the Company will cooperate with each other
in the development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.
XI.5 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in Articles
II and VII (which are intended to be for the benefit of the persons entitled to
therein, and may be enforced by any of such persons) it is not the intention of
the parties to confer third-party beneficiary rights upon any other person.
XI.6 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void. Subject to the preceding sentence, this Agreement is
29
30
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
XI.7 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
XI.8 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) -such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
XI.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof. Venue and Jurisdiction shall, at all times be the
County of Detroit, State of Michigan.
XI.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
XI.11 Arbitration. All disputes or controversies arising under or in
connection with this Agreement shall be settled exclusively by final and binding
arbitration in Detroit, State of Michigan which arbitration shall be in
accordance with the rules of the American Arbitration Association ("AAA"),
except as modified herein, and as such rules shall be in effect on the date of
delivery of demand for arbitration (as described below). The arbitration of such
issues, including the determination of the amount of any damages suffered by any
party, shall be to the exclusion of any court of law. In the event of a timely
demand for arbitration, Parent shall provide the Company with a list of three
arbitrators from the AAA listing of arbitrators and the Company shall select the
arbitrator from such list of three. The decision of the arbitrator shall be
final and binding upon the parties and their respective personal
representatives, heirs, devisees, successors and assigns. A party wishing to
submit a dispute or controversy to arbitration must submit a written demand for
arbitration to the other party to this Agreement (and deliver a copy of such
demand to the Escrow Agent) not less than thirty (30) days after the
transaction, occurrence or event giving rise to such dispute or controversy.
Such written demand for arbitration shall be provided to the arbitrator and
shall contain a statement of the matter in dispute and a statement of the facts
the party demanding arbitration is relying on to support his or its position.
Judgment may be entered on the arbitrator's award in any court having proper
jurisdiction. The costs of arbitration, including attorneys' fees, shall be
awarded by the arbitrator to the prevailing party.
XI.12 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
30
31
XI.13 Waiver of Jury Trial. PARENT AND COMPANY, EACH HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, THE OTHER EXHIBITS, OR THE MERGER ITSELF. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY TO CONSUMMATE THE MERGER.
XI.14 Monetary Denominations. All monies referred to in this Agreement
shall be deemed to be in the lawful currency of the United States of America.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
Eco-form International, Inc. (PARENT)
By:____________________________________
Title:_________________________________
Date: _________________________________
Eco-form, Inc. (COMPANY)
By:____________________________________
Title:_________________________________
Date: _________________________________
31
32
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement"), made as of April 24, 2000, by
and among Eco-form International, Inc., a Delaware corporation ("Parent"),
Eco-form, Inc., a Massachusetts corporation ("Company"), the persons listed on
the signature pages hereto (collectively, the "Holders"), Fuad Khan, the Company
Representative (as defined in Section 7, below) and Northwest Trustee and
Management Services, the Escrow Agent (as defined in Section 6, below).
W I T N E S S E T H
WHEREAS, Eco-form International, Inc., a Delaware corporation
("Parent"), and Eco-form, Inc., a Massachusetts corporation ("Company"), have
entered into an Agreement and Plan of Merger dated as of April 13, 2000 (the
"Merger Agreement"), a copy of which has been delivered to the Escrow Agent and
to the Company (all capitalized terms not otherwise defined in this Agreement
having the meanings set forth in the Merger Agreement of even date herewith);
and
WHEREAS, Article X.3 of the Merger Agreement provides that Parent will
issue the Escrow Shares in the names of the Holders and deliver them to the
Escrow Agent to be held in the Escrow Fund (as defined in such Article X.3 of
the Merger Agreement) for the purpose of securing Parent's claims for
indemnification pursuant to Article X.2 of the Merger Agreement; and
WHEREAS, the Escrow Agent is willing to act as escrow agent for Parent
and the Company on the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual covenants, agreements
and conditions set forth herein, the parties agree as follows:
1. Establishment of Escrow, Escrow Share Certificates. Promptly after
the Effective Time and in accordance with the exchange procedures set forth in
the Merger Agreement, Parent will issue the Escrow Shares in the names of the
Company and/or Holders [or in the name of the Company Representative (as defined
in Section 7 below), as agent for the Company,] and cause them to be delivered
(together with assignments in blank to be executed by the Company, or the
Company Representative, as applicable with each assignment to include a
signature guarantee containing an affixed medallion certifying the authenticity
of the signature) to the Escrow Agent. The Escrow Shares shall be held by the
Escrow Agent in escrow subject to the terms and conditions set forth herein.
Parent will cooperate with the Escrow Agent, including making any written
instructions required by its stock transfer agent, to permit the Escrow Agent to
make any necessary exchanges of Parent stock certificates so as to facilitate
any distribution of Escrow Shares pursuant to this Agreement. The Escrow Agent
agrees to sell any Escrow Shares upon instruction of the registered owner
thereof, and the proceeds of any such sale plus interest earned thereon shall be
a part of the Escrow Fund.
The Company shall deliver to Parent's stock transfer agent at or
shortly after the Closing a letter, substantially in the form of Exhibit I
hereto instructing the transfer agent to distribute all distributions in
33
respect of the Escrow Shares, other than taxable dividends, to the Escrow Agent
pursuant to Section 3 of this Agreement.
2. Claims Against Escrow Fund.
Pursuant to Article X.2 of the Merger Agreement, Parent is entitled to
make claims against the Escrow Fund for Parent Indemnifiable Damages. Unless
this Agreement is terminated at an earlier date, Parent shall be entitled to
make claims against the Escrow Fund for such purpose at any time through and
including July 20, 2000 (the "Escrow Period"), (unless this Agreement is
terminated at an earlier date pursuant to Section 5 hereof), but not thereafter.
Any claim by Parent against the Escrow Fund for Parent Indemnifiable Damages
during the above time period shall be presented to the Escrow Agent as follows:
(a) Parent shall notify the Escrow Agent and the Company Representative
in writing of any Parent Indemnifiable Damages that Parent claims are subject to
indemnification under Article X.2 of the Merger Agreement. The notice shall
describe the claim and specify the amount thereof.
(b) The Company Representative may contest Parent's claim on behalf of
the Company by giving the Escrow Agent and Parent written notice of such contest
within twenty (20) business days after receipt of such claim for
indemnification. If Parent's indemnification claim remains in dispute and
unresolved for thirty (30) days following Parent's receipt of the written notice
of contest, the disputed claim shall be submitted to arbitration in accordance
with Section 8 below.
(c) If the Company do not contest Parent's indemnification claim
pursuant to Section 2(b) above, then the Escrow Agent shall deliver to Parent an
amount from the Escrow Fund equal to the dollar amount of the Parent
Indemnifiable Damages claimed by Parent in its written notice. For this purpose,
Escrow Shares so delivered shall be valued at the Indemnity Closing Price (as
defined in Section 2(e) below) as of the date of the delivery to Parent.
(d) If the Company contests Parent's indemnification claim pursuant to
Section 2(b) above, the Escrow Agent shall deliver an amount from the Escrow
Fund to Parent upon receipt of either:
(i) a copy of a written settlement agreement signed by both Parent
and the Company Representative, or
(ii) a copy of a final and nonappealable arbitration award pursuant to
the arbitration procedure in Section 8 below.
(iii) The amount to be delivered to Parent by the Escrow Agent under
this Section 2(d) shall he equal to the dollar amount of Parent Indemnifiable
Damages, as set forth in the settlement agreement or the arbitration award, as
applicable, determined using the Indemnity Closing Price, and shall be delivered
in the manner set forth in Section 2(c).
(e) In this Agreement, the "Indemnity Closing Price" as of a particular
date shall mean the average closing price of the Parent Common on the Nasdaq
National Market for the twenty (20) trading days ending two (2) trading days
before such date. In the event that the Indemnity Closing Price is not set forth
in any notice or certificate delivered to the Escrow Agent with respect to a
distribution of
34
Escrow Shares to Parent under this Section 2, the Escrow Agent shall accept a
certificate from an executive officer of Parent certifying as to the Indemnity
Closing Price for the date of such distribution, unless such certificate is
contested by the Company Representative.
3. Dividends, Stock Splits and Other Distributions. Other than taxable
dividends (which shall be distributed to the Company and/or Holders and shall
not be made part of the Escrow Fund), distributions declared in respect of the
Escrow Shares (including without limitation stock splits and non-taxable stock
dividends) during the term of this Agreement shall be made part of the Escrow
Fund. If the Escrow Shares are reclassified or changed into other securities or
property pursuant to a reclassification of all shares of Parent Common or a
merger of Parent, then such reclassified shares or other securities or property,
as the case may be, shall be made part of the Escrow Fund.
4. Voting Rights of Escrow Shares. Each Holder shall have the right to
vote his or her pro rata number of Escrow Shares in the Escrow Fund (as set
forth in Schedule A of this Agreement) on any issues that come for a vote before
the stockholders of Parent. Prior to any vote of Parent stockholders during the
term of this Agreement, Parent shall cause to be delivered to the Holders
appropriate voting and proxy materials in the same manner as provided to other
stockholder of Parent so as to permit the Company and/or Holders to exercise
their voting rights with respect to the Escrow Shares.
5. Termination. This Agreement shall terminate and the Escrow Agent
shall have no further responsibilities hereunder upon the earliest to occur of
(a) the expiration of the Escrow Period set forth in Section 2 above and (b)
Parent's delivery to the Escrow Agent of written notice that Parent has elected
to terminate this Agreement (which election shall be at Parent's sole option and
in its sole discretion). Upon the occurrence of such an event, (x) the Escrow
Agent shall reserve from the Escrow Fund an amount sufficient to pay any
outstanding claims ("Reserve Claims") of Parent against the Escrow Fund on that
date. For purposes of establishing the reserve, any Escrow Shares so reserved
shall be valued at the Indemnity Closing Price as of the date of termination.
This Agreement shall continue in force as to the amount so reserved until the
resolution of such Reserve Claims in accordance with the terms hereof. The
Escrow Agent shall distribute to the Company and/or Holders all amounts (if any)
in the Escrow Fund not so reserved, and the Escrow Agent shall thereafter have
no responsibilities with respect to such distributed amounts. Upon the final
resolution of each Reserve Claim, on a claim-by-claim basis, the Escrow Agent
shall distribute to Parent the amount that Parent is entitled to receive with
respect to such Reserve Claim. Escrow Shares so delivered shall be valued at the
Indemnity Closing Price as of the date of such final resolution. Upon the final
resolution of all Reserve Claims and the distribution to Parent of all reserved
amounts to which Parent is entitled pursuant to such claims, all remaining
reserved amounts shall be promptly distributed to the Company and/or Holders.
Any distribution of any portion of the Escrow Fund held in the name of the
Company Representative shall be made to the Company and/or Holders according to
the percentages shown in Exhibit I.
6. The Escrow Agent.
(a) Parent shall pay the Escrow Agent's fee for its ordinary services
under this Agreement in accordance with the fee schedule set forth on Schedule B
attached hereto.
(b) In performing any duties under this Agreement, the Escrow Agent
shall not be liable for damages, losses, or expenses, except for gross
negligence or willful misconduct on the part of the Escrow Agent. The Escrow
Agent shall not incur any such liability for (i) any act or failure to act made
or
35
omitted in good faith, or (ii) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in this
Agreement that such agent shall in good faith believe to be genuine, nor will
the Escrow Agent be liable or responsible for forgeries, fraud, impersonations,
or determining the scope of any representative authority. In addition, the
Escrow Agent may consult with legal counsel in connection with its duties under
this Agreement and shall be fully protected in any act taken, suffered, or
permitted by it in good faith in accordance with the advice of counsel. The
Escrow Agent is not responsible for determining and verifying the authority of
any such person acting or purporting to act on behalf of any party to this
Agreement.
(c) If any controversy arises between the parties to this Agreement, or
with any other party, concerning the subject matter of this Agreement, its terms
or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold the
Escrow Fund and may wait for settlement of any such controversy by arbitration
pursuant to Section 8 hereof, by final appropriate legal proceedings or other
means as, in the Escrow Agent's discretion, may be required, despite what may be
set forth elsewhere in this Agreement. In such event, the Escrow Agent will not
be liable for interest or damage. Furthermore, the Escrow Agent may at its
option, file an action of interpleader requiring the parties to answer and
litigate any claims and rights among themselves. The Escrow Agent is authorized
to deposit with the clerk of the court the entire Escrow Fund, except for such
part of the Escrow Fund as shall reimburse the Escrow Agent for all costs,
expenses, charges and reasonable attorney fees incurred by the Escrow Agent due
to the interpleader action and which the parties jointly and severally agree to
pay. Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liabilities imposed by the terms of
this Agreement, except for obligations or liabilities arising by reason of the
prior gross negligence or willful misconduct on the part of the Escrow Agent.
(d) The Company (to the extent of the Escrow Fund only) and Parent
shall jointly and severally indemnify and hold harmless the Escrow Agent for any
and all losses, claims, damages, liabilities and expenses (including reasonable
costs of investigation and attorneys' fees) which it may incur or which may be
imposed on it in connection with the performance of the Escrow Agent's duties
under this Agreement, including but not limited to any litigation arising from
this Agreement, except losses, claims, damages, liabilities or expenses arising
out of gross negligence or willful misconduct on the part of the Escrow Agent.
(e) The Escrow Agent may resign at any time upon giving at least thirty
(30) days' written notice to the parties; provided, however, that no such
resignation shall become effective until the appointment of a successor escrow
agent which shall be accomplished as follows: The parties shall use their best
efforts to mutually agree on a successor escrow agent within thirty (30) days
after receiving such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the state of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment, and it shall, without further acts, be vested with all the
estates, properties, rights, powers and duties of the predecessor Escrow Agent
as if originally named as the Escrow Agent. Upon such appointment, the
predecessor Escrow Agent shall be discharged from any further duties and
liability under this Agreement, except for obligations or liabilities arising by
reason of the prior gross negligence or willful misconduct on the part of the
Escrow Agent.
36
7. Company Representative. The Company or such successor as may be
agreed upon by a majority in interest of the Company and identified to Parent by
such Company in writing, shall act as representative of the Company and/or
Holders (the "Company Representative"). The Company Representative may, but
shall not be required to, take any and all action that may be necessary or
appropriate on behalf of the Company and/or Holders with respect to this
Agreement, including, without limitation, objecting to any claim by Parent
against the Escrow Fund, engaging counsel to represent the Company and/or
Holders in connection with any such claim, engaging any other professionals or
other consultants in connection with any such claim, negotiating and settling
any such claim, supervising and directing counsel and any other professionals or
other consultants in connection with any such claim, and authorizing the sale of
any of the Escrow Shares. The Company Representative shall also be authorized to
disburse any shares held in the Escrow Fund in payment of any fees or expenses
incurred by the Company Representative on behalf of the Company and/or Holders
in taking any of the foregoing actions; provided, however, that the maximum
amount of shares which the Company Representative may order so disbursed from
the Escrow Fund prior to the end of the Escrow Period shall be five percent (5%)
of the amount of shares held in the Escrow Fund, or Eighteen Thousand Seven
Hundred Fifty (18,750) shares, and the maximum amount of shares which the
Company Representative may order so disbursed from the Escrow Fund after the end
of the Escrow Period shall be the greater of (1) ten percent (10%) of the amount
of shares held in the Escrow Fund, or Thirty Seven Thousand Five Hundred
(37,500) shares, minus amounts so disbursed prior to the end of the Escrow
Period, or (2) an amount equal to the aggregate value of the Escrow Fund minus
the total amount of Parent's indemnification claims then pending, both as of the
time of any such disbursement. To the extent the fees or expenses incurred by
the Company Representative on behalf of the Company intaking any of the
foregoing actions exceed the amount the Company Representative may obtain from
the Escrow Fund, the Company and/or Holders shall indemnify the Company
Representatives. The Company Representative may, on behalf of the Company and/or
Holders, take any action that the Company Representative in good faith deems to
be in the best interests of the Company and/or Holders and shall, on behalf of
the Company, take any action that the Company Representative may be instructed
or expressly authorized to take by a majority in interest of the Company and/or
Holders, including contesting or settling any claim by Parent. To the maximum
extent permitted by law, the Company Representative shall have no liability of
any kind or nature whatsoever with respect to any action or omission taken by
the Company Representative on behalf of the Company and/or Holders, where such
action is taken either with the consent or the express authorization of a
majority in interest of the Company and/or Holders or is otherwise taken in good
faith on behalf of the Company and/or Holders.
8. Arbitration. All disputes or controversies arising under or in
connection with this Agreement shall be settled exclusively by final and binding
arbitration in County of Detroit, State of Michigan which arbitration shall be
in accordance with the rules of the American Arbitration Association ("AAA"),
except as modified herein, and as such rules shall be in effect on the date of
delivery of demand for arbitration (as described below). The arbitration of such
issues, including the determination of the amount of any damages suffered by any
party, shall be to the exclusion of any court of law. In the event of a timely
demand for arbitration, Parent shall provide the Company Representative with a
list of three arbitrators from the AAA listing of arbitrators and the Company
Representative shall select the arbitrator from such list of three. The decision
of the arbitrator shall be final and binding upon the parties and their
respective personal representatives, heirs, devisees, successors and assigns. A
party wishing to submit a dispute or controversy to arbitration must submit a
written demand for arbitration to the other party to this Agreement (and deliver
a copy of such demand to the Escrow Agent) not less than thirty (30) days after
the transaction, occurrence or event giving rise to such dispute or controversy.
Such written
37
demand for arbitration shall be provided to the arbitrator and shall contain a
statement of the matter in dispute and a statement of the facts the party
demanding arbitration is relying on to support his or its position. Judgment may
be entered on the arbitrator's award in any court having proper jurisdiction.
The costs of arbitration, including attorneys' fees, shall be awarded by the
arbitrator to the prevailing party.
9. Tax Reporting. Parent shall prepare and file all tax reports on
Internal Revenue Service Form 1099-B that are required to be filed periodically
with respect to the issuance of Escrow Shares in the Company names, and the
Escrow Agent shall have no obligation to prepare any such tax reports.
10. Governing Law. This Agreement shall be governed by the laws of the
State of Delaware without regard to principles of conflicts of laws. Venue and
Jurisdiction shall be, at all time, the County of Detroit, State of Michigan.
11. Amendments; Modifications. This Agreement may not be amended or
modified except pursuant to a written agreement signed by each of the parties
hereto.
12. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given on the same day if delivered personally, or by
facsimile transmission with voice confirmation of receipt, or shall be deemed
given on the date receipt is confirmed if mailed by registered or certified mail
or commercial overnight courier (e.g., Federal Express, DHL, Network Courier,
Sonic, etc.), return receipt or confirmation of delivery requested, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
If to Parent:
Eco-form International, Inc.
Attention: Howard Keep
Terrance Keep
1040 Riverside Drive, Unit 33
London, Ontario, CANADA N6H5H1
Facsimile: (519) 471-4203
with a copy to its counsel:
The Summit Law Corporation
Attention: Cynthia Futter, Esq.
Julie Barker, Esq.
2121 Cloverfield Blvd., Suite 116
Santa Monica, California 90404
Facsimile: (310) 586-6846
38
If to the Company:
Eco-form, Inc.
Attention: Mr. Muhammad Salahuddin Khan
Mr. Muhammad Jalaluddin Khan
Mr. Fuad Khan
24 Walpole Park South
Walpole, Massachusetts 02081
Facsimile: (508) 660-1011
with a copy to its counsel:
Lawrence S. Pober, Esq., P.C.
103 Court Street
Plymouth, Massachusetts 02360
Facsimile: (508) 746-2652
If to the Holders:
Mr. Muhammad Salahuddin Khan
24 Walpole Park South
Walpole, Massachusetts 02081
Facsimile: (508) 660-1011
Mr.Muhammad Jalaluddin Khan
24 Walpole Park South
Walpole, Massachusetts 02081
Facsimile: (508) 660-1011
Mr. Fuad Khan
24 Walpole Park South
Walpole, Massachusetts 02081
Facsimile: (508) 660-1011
Biosphere International Group Company Limited
83 Navatanee, Soi 5
Buanggom
Sukai, Bangkok, Thailand
Mr. Rungyos Chantapasa
83 Navatanee, Soi 5
Buanggom
Sukai, Bangkok, Thailand
If to the Company
Representative: Mr. Fuad Khan
24 Walpole Park South
39
Walpole, Massachusetts 02081
Facsimile: (508) 660-1011
If to the
Escrow Agent: Northwest Trustee and Management Services
Attention: Mr. Stephen Trefs
7307 N. Division, Suite 303
Spokane, Washington 99208
Facsimile: (509) 468-2577
13. Effect on Successors in Interest, Assignees. This Agreement shall
inure to the benefit of and be binding upon the heirs, administrators,
executors, assignees and successors of each of the parties hereto.
14. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
15. Waiver of Jury Trial. THE PARTIES, EACH HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT, THE OTHER EXHIBITS, OR THE MERGER ITSELF. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY TO CONSUMMATE THE MERGER AND
THIS ESCROW AGREEMENT.
16. No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided for in this
Agreement it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
17. No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void. Subject to the preceding sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and assigns.
18. Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
19. Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) -such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added
40
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
20. Effect of Termination. If this Agreement is validly terminated by
any of the Parties, this Agreement will forthwith become null and void and there
will be no liability or obligation on the part of any of the Parties (or any of
their respective Representatives or affiliates), except (a) that the provisions
of Sections 8, 10, 15, 20 and 22 will continue to apply following any such
termination and (b) that nothing contained herein shall relieve any party hereto
from liability for willful breach of its representations, warranties, covenants
or agreements contained in this Agreement.
21. Waiver. No waiver by any Party of any term or condition of this
Agreement, in any one or more instances, shall be deemed to be or construed as a
waiver of the same or any other term or condition of this Agreement on any
future occasion.
22. Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
23. Integration. This Agreement is intended by the parties as a final
expression of their agreement and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and the escrow rights granted by the Company
with respect to the Parent Common Stock pursuant to the Merger Agreement. Except
as provided in the Merger Agreement, there are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to the escrow rights granted by the Company with respect to the
Parent Common Stock. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such escrow rights.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Eco-form International, Inc. ("Parent")
---------------------------------------------
By: Howard Keep
Its: Chairman, C.E.O., President
Date:
---------------------------------------
Eco-form, Inc. ("Company")
---------------------------------------------
By: Muhammad Salahuddin Khan
Its: Chairman
41
Date:
---------------------------------------
COMPANY REPRESENTATIVE on behalf of himself
and as representative of the individual
shareholders and optionholders of Eco-form,
Inc.
---------------------------------------------
Fuad Khan
Date:
---------------------------------------
HOLDERS
---------------------------------------------
Muhammad Salahuddin Khan
Date:
---------------------------------------
---------------------------------------------
Fuad Khan
Date:
---------------------------------------
---------------------------------------------
Muhammad Jalaluddin Khan
Date:
---------------------------------------
---------------------------------------------
Rungyos Chantapasa
Date:
---------------------------------------
Biosphere International Group Company Limited
---------------------------------------------
By: Rungyos Chantapasa
Its: President
42
Date:
---------------------------------------
ESCROW AGENT:
Northwest Trustee and Management Services
---------------------------------------------
By: Stephen Trefs
Its:
--------------------------------
Date:
---------------------------------------