SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant (X)
Filed by a party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential for Use of the
Commission Only (as permitted)
by Rule 14a-6(e)(2)
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AMERICAN EDUCATIONAL PRODUCTS, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
( ) No fee required.
(X) Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common stock, par value $0.05
2) Aggregate number of securities to which transaction applies: 545,779
shares (to be converted into the right to receive cash consideration
in the transaction)
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $10.00 per
share, payable in cash pursuant to an Agreement and Plan of Merger
dated August 14, 2000
4) Proposed maximum aggregate value of transaction: $5,457,790
5) Total fee paid: $1,091.56
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
AMERICAN EDUCATIONAL PRODUCTS, INC.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
To Our Shareholders:
You are cordially invited to attend a Special Meeting of Shareholders
of American Educational Products, Inc. ("AMEP" or the "Company") to be held at
the offices of Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South,
Suite 430, Denver, Colorado 80209 on ________, the ___ day of _________, 2001 at
____ o'clock in the _______, Mountain Standard Time.
The purpose of the Special Meeting is to consider and vote upon a merger of
the Company and G.C. Sub Corporation ("GC SUB"), which will be formed as a
wholly owned subsidiary of G.C. Associates Holdings Corp., a Delaware
corporation ("GC"). GC owns approximately 55% of the Company's common stock. If
the merger is consummated, GC will acquire all of the issued and outstanding
common stock held by shareholders other than GC at a price of $10.00 per share.
The merger will be effected by having GC SUB merge with and into the Company.
The Company will be the surviving corporation in the merger and will become a
wholly owned subsidiary of GC.
Consummation of the merger is subject to certain conditions, including
receipt of approval of a majority of all of the votes entitled to be cast at the
meeting and approval of a majority of votes cast by shareholders other than GC
or Geneve Corporation, GC's parent company. Only shareholders of record on the
close of business on RECORD DATE will be entitled to notice of and to vote at
the Special Meeting. GC will vote shares representing approximately 55% of the
votes entitled to be cast in favor of the merger and merger agreement.
An independent financial advisor, D.A. Davidson & Co., Inc. ("Davidson")
was hired by the Board of Directors of the Company to review the merger proposal
by GC. Davidson has rendered its opinion to the Board of Directors of the
Company that, as of the date of the opinion, the aggregate consideration to be
received by shareholders of the Company in the merger is fair, from a financial
point of view, to the shareholders of the Company, other than GC or its
affiliates. The written opinion of Davidson, dated August 14, 2000, is attached
as Exhibit B to the enclosed Proxy Statement, and you should read it carefully.
The Board of Directors of the Company believes that the terms of the merger and
merger agreement are fair to, and in the best interests of, the Company's
shareholders.
The accompanying Proxy Statement provides a description of the proposed
merger and additional information that you may wish to consider in deciding how
to vote. Please give this information your careful attention.
Whether or not you plan to attend, it is important that your shares are
represented and voted at the Special Meeting. Accordingly, please promptly
complete, sign and date the enclosed proxy card and return it in the envelope
provided.
Very truly yours,
Clifford C. Thygesen,
President and Chief Executive Officer
_________ ___, 2001
American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
-----------------------------------
Notice of Special Meeting of Shareholders
____________, 2001
-----------------------------------
To the Shareholders of AMERICAN EDUCATIONAL PRODUCTS, INC.:
Notice is hereby given that a Special Meeting of shareholders of American
Educational Products, Inc. ("AMEP" or the "Company") will be held at the offices
of Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430,
Denver, Colorado 80209 on __________, the ___ day of __________, 2001 at ______
o'clock in the ___________, Mountain Standard Time to consider and vote on a
proposal to approve a merger and the related Agreement and Plan of Merger dated
as of August 14, 2000 between G.C. Associates Holdings Corp. ("GC") and the
Company. The merger agreement provides for the merger of GC SUB, which will be
formed as a wholly owned subsidiary of GC, with and into the Company. After
completion of the merger, the Company will survive as a wholly owned subsidiary
of GC. Shareholders, other than GC, will receive $10.00 in cash for each share
of the Company's common stock that they own.
Details respecting these matters are set forth in the proxy statement. Only
shareholders of record at the close of business on RECORD DATE will be entitled
to notice of and to vote at the Special Meeting. Approval of the merger and
merger agreement requires the affirmative vote of at least a majority of all of
the votes entitled to be cast on the matter by holders of the Company's common
stock, and a majority of votes cast by shareholders other than GC or Geneve
Corporation, GC's parent company. Each share of common stock owned on RECORD
DATE entitles the holder of record thereof to one vote.
The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at the Special Meeting will constitute a quorum
for the transaction of business at the Special Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED. WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE PAID, ADDRESSED
ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY GIVING WRITTEN
NOTICE TO THE PRESIDENT OF THE COMPANY AT THE ADDRESS ABOVE, BY EXECUTING AND
DELIVERING A LATER DATED PROXY OR BY ATTENDING AND VOTING AT THE SPECIAL
MEETING.
By order of the Board of Directors,
------------------
_________ ___, 2001 Frank L. Jennings, Secretary
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
AMERICAN EDUCATIONAL PRODUCTS, INC.
PROXY STATEMENT
For Special Meeting of Shareholders
to Be Held _____________, 2001
SUMMARY
The following is a summary of the main terms of the merger. You should read
this entire document and the documents to which it refers carefully for a
complete description of the merger. This summary includes page references in
parentheses to direct you to more complete descriptions of the topics presented
in this summary.
Board recommendation- The Board of Directors of AMEP recommends a vote FOR
the approval of the merger and the merger agreement. (page __)
Shareholder vote - You are being asked to approve the merger and merger
agreement by which AMEP will be acquired by a wholly owned subsidiary of
GC. Approval of the merger will require the approval of a majority of the
votes entitled to be cast at the meeting, and a majority of the votes cast
by shareholders other than GC or Geneve Corporation, GC's parent company.
Payment of $10.00 for each share of AMEP - Each share of common stock that
you own will convert into the right to receive $10.00 in cash as a result
of the merger. (page __)
The merger is taxable - You will recognize taxable gain or loss in the
amount of the difference between $10.00 and your adjusted tax basis for
each share of AMEP common stock that you own. (page __)
Conditions - The merger is subject to AMEP shareholder approval as well as
other conditions. (page __)
After the merger - AMEP will be a wholly owned subsidiary of GC. (page __)
GC's current relationship with AMEP - GC currently owns approximately 55%
of the AMEP common stock. Mr. Richard J. Ciurczak and Mr. John J. Crawford,
members of the Board of Directors of AMEP, are representatives of GC. (page
__)
Shareholders have a right to dissent- As a shareholder, you have a right to
dissent from the merger and obtain payment for the fair value of your
shares. (page __)
GC will vote in favor of the merger- As the largest shareholder of AMEP, GC
has the ability to vote approximately 55% of the outstanding common stock.
GC intends to vote all of its stock in favor of the merger. GC's votes in
favor of the merger, however, are not conclusive. The merger cannot be
approved without a majority of the votes cast by shareholders other than GC
or Geneve Corporation, GC's parent company. (page __)
Fairness opinion- The Board of Directors of AMEP has received the opinion
of an independent financial advisor that, subject to certain assumptions
and factors, as of the date of the merger agreement, the consideration to
be received by the shareholders was fair, from a financial point of view.
(page __)
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: If the merger is completed, what will I receive for my AMEP common stock?
A. You will receive $10.00 in cash for each share of AMEP common stock that
you own.
Q: Who is entitled to vote at the Special Meeting?
A: Holders of record of AMEP common stock as of the close of business on
(RECORD DATE), 2001 are entitled to vote at the Special Meeting. Each
holder of common stock has one vote per share on the merger and merger
agreement.
Q: How do I vote?
A: After you read this document, please complete, sign, date and mail your
proxy card in the enclosed return envelope, as soon as possible, so that
your shares may be represented and voted at the Special Meeting. Please
sign and mail your proxy as instructed on your proxy card even if you
currently plan to attend the meeting in person. Delivery of your proxy card
will not in any way affect your right to attend the Special Meeting in
person.
Q: What do I do if I want to change my vote?
A: Just send in a later dated, signed proxy card to AMEP's President, Clifford
C. Thygesen. You may also attend the Special Meeting in person and vote, or
revoke your proxy by sending a notice of revocation to AMEP's President at
AMEP's headquarters.
Q: If my broker holds my shares in "street name," will my broker vote my
shares for me?
A: Your broker will vote your shares only if you provide instructions on how
to vote. You should instruct your broker how to vote your shares by
following the directions your broker provides to you. If you do not provide
instructions to your broker, your shares will not be voted, and this will
have the effect of a vote against the merger and merger agreement. However,
your failure to vote will have no effect on whether the merger is approved
by a majority of votes cast by shareholders other than GC or Geneve
Corporation, GC's parent company.
Q: May I attend the Special Meeting in person?
A: You may attend the Special Meeting in person if you have shares registered
in your name or if you have a valid proxy in your favor from the registered
holder. If the shares are registered in the name of a corporation or other
organization, bring a letter from an authorized agent of that corporation
or organization giving you authority to vote its shares.
Q: If I have shares registered in my name or if I have a proxy in my favor
from a registered holder, what do I need to do to attend the Special
Meeting in person?
A: Just bring proper photographic identification to the meeting, such as a
driver's license, passport or United States military identification.
Q: When should I send in my stock certificate(s)?
A: You will receive separate instructions for surrendering stock
certificate(s) following the Special Meeting. You should not send in your
stock certificate(s) until you receive these instructions.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as quickly as possible. We hope to
complete the merger as soon as practical after the Special Meeting,
assuming the required shareholder approval and other conditions are
obtained or met.
ii
Q: Whom can I contact if I have additional questions or would like additional
copies of the proxy statement or proxy card?
A: American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
Attn: Clifford C. Thygesen, President
(303) 527-3230
iii
TABLE OF CONTENTS
Section Page
- ------- ----
SUMMARY...................................................................1
FORWARD-LOOKING INFORMATION...............................................4
MARKET PRICE AND DIVIDEND INFORMATION.....................................6
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF AMEP.......................7
THE SPECIAL MEETING.......................................................9
SPECIAL FACTORS..........................................................10
THE MERGER...............................................................19
THE MERGER AGREEMENT.....................................................25
SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT......33
WHERE YOU CAN FIND MORE INFORMATION......................................33
---------
Agreement and Plan of Merger dated as of August 14, 2000 Exhibit A
between G.C. Associates Holdings Corp.
and American Educational Products, Inc.
Opinion of D. A. Davidson & Co. Exhibit B
Article 113 of the Colorado Business Corporation Appendix A
Act, "Dissenters' Rights"
iv
SUMMARY
This summary highlights information from the proxy statement that AMEP
believes is important information about the Merger. You should read this entire
document carefully and the documents to which it refers for a complete
description of the Merger.
The Parties to the Merger
American Educational Products, Inc. (AMEP) G.C. Associates Holdings Corp. (GC)
American Educational Products, Inc. is a G.C. Associates Holdings Corp. is a
Colorado corporation headquartered in private Delaware corporation
Boulder, Colorado. AMEP manufactures and headquartered in Connecticut. GC
distributes a line of educational products owns approximately 55% of the AMEP
and learning aids to educational common stock. G.C. Sub Corporation
institutions throughout the United States. (GC SUB) will be formed as a wholly
AMEP's common stock is traded on the NASDAQ owned Colorado subsidiary of GC,
SmallCap Market under the symbol "AMEP" for the sole purpose of being
and on the Pacific Exchange under the merged with and into AMEP.
symbol "EP."
AMEP's corporate address is: GC's corporate address is:
American Educational Products, Inc. G.C. Associates Holdings Corp.
6550 Gunpark Drive, Suite 200 96 Cummings Point Road
Boulder, Colorado 80301 Stamford, Connecticut 06902
The phone number is: (303) 527-3230. The phone number is: (203) 358-8000
The Merger
The merger will be effected by having GC SUB, which will be formed as a
wholly owned subsidiary of GC, merge with and into AMEP. AMEP will continue as
the surviving corporation and will become a wholly owned subsidiary of GC.
Public trading of AMEP common stock will cease and AMEP common stock will
be delisted from the NASDAQ SmallCap Market ("NASDAQ") and the Pacific Exchange
(the "Pacific"). Shareholders other than GC will no longer have any ownership
interest in AMEP and will no longer participate in the future earnings of AMEP
or benefit from any increase in the value of AMEP common stock should any
increase occur.
What Shareholders Will Receive
Upon completion of the merger, you will be entitled to receive $10.00 in
cash for each share of AMEP common stock you own.
Certain Federal Income Tax Consequences
You will recognize taxable gain or loss, as of the date of the merger,
equal to the difference between the amount of cash you receive in the merger for
your shares that are surrendered and your adjusted tax basis in those shares.
The gain or loss will be a long-term capital gain or loss if, as of the date of
the merger, your holding period for your shares is more than one year.
Unless you comply with the required reporting or certification procedures,
you may be subject to withholding tax of 31% with respect to any cash payments
you receive pursuant to the merger.
1
Market Price of Common Stock
AMEP common stock is listed on the NASDAQ and the Pacific under the ticker
symbols "AMEP" and "EP," respectively.
On June 22, 2000, the last full trading day prior to AMEP's public
announcement of its receipt of an offer from GC the closing sales price of AMEP
common stock reported on the NASDAQ and the Pacific was $9.50 per share.
Therefore, the price per share to be paid in the merger represents a premium of
approximately 5% (together with the $.645 special cash dividend per share,
approximately 12%) of the closing price of the AMEP common stock on June 22,
2000. On August 11, 2000, the last full trading day prior to the public
announcement of the signing of the merger agreement, the closing sale price of
AMEP common stock reported on the NASDAQ was $9.938. On _______________, 2001,
the most recent practicable date prior to the printing of this proxy statement,
the closing price of AMEP common stock reported on the NASDAQ and the Pacific
was ______ per share.
Historically, the market prices of AMEP common stock have fluctuated, and
we expect such fluctuations to continue. These fluctuations may affect your
determination as to the attractiveness of the merger. You are urged to obtain
current market quotations for AMEP common stock prior to making any decision
with respect to the merger.
The Special Meeting
AMEP will hold a Special Meeting of shareholders to vote on the merger and
merger agreement at the offices of Corporate Stock Transfer, Inc., 3200 Cherry
Creek Drive South, Denver on ____________, __________, 2001 at ____ o'clock in
the _________, Mountain Standard Time, subject to adjournments or postponements.
At the Special Meeting, AMEP will ask you to approve the merger and merger
agreement.
Record Date; Stock Entitled to Vote
You are entitled to vote at the Special Meeting if you owned AMEP common
stock at the close of business on _____________, 2001.
On ______, 2001, there were ________ shares of AMEP common stock
outstanding and held by ________ record holders. Of those shares, GC
beneficially owned 666,961 shares or approximately 55% of the outstanding common
stock.
Required Vote
The approval of the merger and merger agreement requires the affirmative
vote of a majority of all of the votes entitled to be cast on the matter by the
holders of common stock. The approval also requires the affirmative vote of a
majority of votes cast by shareholders other than GC or Geneve Corporation, GC's
parent company. Each share of common stock entitles the holder of record thereof
to one vote on the merger and merger agreement. GC will vote its shares of AMEP
common stock owned on the record date, representing approximately 55% of all of
the votes entitled to be cast at the Special Meeting, in favor of the merger and
merger agreement. Nevertheless, the merger will not be approved unless a
majority of votes cast by shareholders other than GC are also in favor of the
merger.
Dissenters' Rights
Under Colorado law, AMEP's shareholders will have dissenters' rights in
connection with the merger. Shareholders who do not wish to vote in favor of the
merger are entitled to dissent and receive payment for the fair value of their
stock, if and when the merger is effected. In order to exercise dissenters'
rights, an interested shareholder must: (i) cause AMEP to receive before the
vote is taken at the meeting, written notice of the shareholder's intention to
demand payment for the shareholder's shares if the merger is effected; and (ii)
not vote the shares in favor of the merger. If the merger is approved by the
requisite vote of shareholders, AMEP will deliver to each shareholder entitled
to dissent a Dissenter's Notice stating where and when the demand for payment
should be sent by the shareholder. At the time of filing a demand for payment,
the dissenting shareholder must also deposit all AMEP stock certificates. Any
shareholder who fails to make such written demand or deliver the certificates
for such shareholder's stock by the date specified in the Dissenter's Notice,
shall be bound by the terms of the merger. A copy of Article 113 of the Colorado
Business Corporation Act, which describes a shareholder's right to dissent and
be paid fair value for such shareholder's stock, is attached hereto as Appendix
A, and incorporated by reference herein.
2
Treatment of Outstanding Stock Options
Upon completion of the merger, each outstanding stock option to purchase
AMEP common stock, whether or not exercisable, will be deemed converted into,
and the holders of each such option will be entitled to receive upon surrender
of the option for cancellation, an amount of cash equal to the product of (i)
the positive difference, if any, between $10.00 and the exercise price of such
option; and (ii) the number of shares of common stock purchasable upon exercise
of such option.
Opinion of AMEP's Financial Advisor
AMEP's financial advisor, D. A. Davidson & Co., has rendered its opinion to
the AMEP Board that, as of August 14, 2000, based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the
aggregate consideration to be received by AMEP shareholders in the merger is
fair, from a financial point of view, to the AMEP shareholders other than GC and
its affiliates. The full text of the written opinion of Davidson, dated August
14, 2000, is attached to this document as Exhibit B. AMEP encourages you to read
this opinion carefully in its entirety for a description of the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken. Davidson's opinion is addressed to AMEP's Board of Directors and
does not constitute a recommendation to any shareholder as to how that
shareholder should vote on the merger and merger agreement. AMEP has agreed to
pay Davidson a fee of $60,000 for its services, $20,000 of which is contingent
upon completion of the merger.
AMEP's Reasons for the Merger; Recommendation of AMEP's Board
After considering the fairness opinion received from Davidson, the AMEP
Board approved the merger and merger agreement and determined that the terms of
the merger with GC were advisable and fair to, and in the best interest of,
AMEP's minority shareholders. The AMEP Board recommends that you vote in favor
of the merger and merger agreement.
Shareholder Litigation
Two class action civil lawsuits were filed by AMEP shareholders in
opposition to the merger.
On November 13, 2000, an agreement-in-principle was reached by all parties
to settle the shareholder class action civil lawsuits filed in connection with
the merger. The agreement-in-principle provides in material part that: (i) the
vote necessary to approve the merger must include a majority of the votes cast
by shareholders other than GC or Geneve, altering the originally proposed vote
requirement that only required a majority of the votes entitled to be cast by
all shareholders; (ii) the class action plaintiffs and their counsel shall have
an opportunity to review and comment upon the proxy statement and all other
materials concerning the merger which are to be mailed to public shareholders
and filed with the Commission to ensure that adequate disclosures are made to
allow the shareholders to cast an informed vote; and (iii) the Company will pay
plaintiff's counsel fees and expenses to be awarded by the court. The
agreement-in-principle is subject to court approval of a formal settlement
agreement as well as consummation of the merger.
Purpose of the Merger
AMEP's purpose of the merger is to provide the public shareholders a fair
price for their shares, and GC's purpose of the merger is to acquire the
remaining equity interest in AMEP not already owned by GC and thereby avoid
potential conflicts of interest and facilitate greater operating flexibility in
the management of AMEP's business.
Conditions to the Merger
To complete the merger:
- the AMEP shareholders must approve the merger and merger agreement;
- no preliminary or permanent injunction, decree or other order issued
by any governmental entity or other legal restraint or prohibition may
prevent the completion of the merger and no law shall have been
enacted or adopted that enjoins, prohibits or makes illegal the
completion of the merger;
3
- each of AMEP and GC must certify to the other that its representations
and warranties contained in the merger agreement are true and correct
in all material respects. Each must also certify to the other that it
has performed all of its material obligations under the merger
agreement; and
- approval of a formal settlement agreement in the pending litigation
which is not subject to appeal.
There are additional conditions specific to the obligations of AMEP and GC
that must be satisfied or waived prior to completion of the merger.
Interests of Certain Persons in the Merger
One or more of the executive officers and directors of AMEP may have
interests in connection with the merger that are in addition to or different
from your own interests as a shareholder. Mr. Thygesen (but neither of the other
directors) holds stock options for the purchase of 37,400 shares at per share
prices ranging from $3.875 to $9.125, and certain other executives also hold
stock options. The AMEP Board of Directors was aware of these interests and
considered them in addition to other matters in recommending the merger.
Terminating the Merger Agreement; Expenses
AMEP or GC may be entitled to terminate the merger agreement at any time
before the merger is completed if one of the termination conditions in the
merger agreement occurs, either before or after shareholder approval. Other than
as described below, each party will pay its own costs and expenses incurred in
connection with the merger and merger agreement.
The merger agreement provides for a termination fee of $475,000 plus
reasonable expenses that AMEP must pay to GC if the merger agreement is
terminated and AMEP consummates a competing transaction. In addition, GC must
pay up to $10,000 to AMEP for expenses incurred in connection with the merger in
the event that the merger is terminated due to pending litigation related to the
merger against either GC, AMEP or certain of their affiliates.
Accounting Treatment
In accordance with accounting principles generally accepted in the United
States, the merger will be accounted for under the purchase method of
accounting.
Regulatory Approvals
The merger agreement provides that AMEP and GC will use their reasonable
best efforts to cause the merger to be consummated, including obtaining all
necessary waivers, permits, authorizations, orders and consents of third
parties, whether private or governmental, in connection with the merger.
Subject to the foregoing, except for filing the articles of merger with the
Secretary of State of Colorado after shareholder approval of the merger and
merger agreement , compliance with federal and state securities laws and after
the proposed agreement to settle litigation claims asserted by AMEP shareholders
is approved by the District Court, County of Boulder, Colorado and is not
subject to appeal, neither AMEP nor GC is aware of any material U.S. federal,
state or foreign governmental regulatory requirement that must be complied with,
or approval that must be obtained, in order to complete the merger.
FORWARD-LOOKING INFORMATION
This proxy statement contains or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). When used in this document, the words "anticipate," "believe,"
"estimate," "expect," "plan," and "intend" and similar expressions, as they
relate to AMEP or its management, are intended to identify forward-looking
statements. These forward-looking statements are based on current management
assumptions and are subject to uncertainties and inherent risks that could cause
actual results to differ materially from those contained in any forward-looking
statement. AMEP has identified factors that could cause actual plans or results
to differ substantially from those included in any forward-looking statements.
These risk factors include, but are not limited to:
4
- increasing competition in the educational marketplace, including
foreign manufacturers;
- challenge of successfully integrating newly acquired businesses;
- a demand for payment under the existing borrowing arrangement;
- increase in cost of raw materials or labor; changes in governmental
funding of educational institutions; and
- increased regulatory burdens;
- AMEP's continued ability to access capital markets and commercial bank
financing on favorable terms and conditions.
Although AMEP believes that the expectations reflected by such forward-
looking statements are reasonable based on information currently available to
AMEP, no assurances can be given that such expectations will prove to have been
correct. All forward-looking statements included in this proxy statement and all
subsequent, oral forward-looking statements attributable to AMEP or persons
acting on its behalf are expressly qualified in their entirety by these
cautionary statements. Except as required by applicable law or agreement, AMEP
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on any forward-looking
statements, which speak only as of their particular dates.
Because the merger is a "going private" transaction within the meaning of
Rule 13e-3 under the Exchange Act, the safe harbor provided in Section 21E of
the Private Securities Litigation Reform Act of 1995 does not apply to this
proxy statement or to information incorporated in this proxy statement by
reference to other documents.
5
MARKET PRICE AND DIVIDEND INFORMATION
AMEP common stock is listed on the NASDAQ SmallCap Market ("NASDAQ") under
the ticker symbol "AMEP" and the Pacific Exchange under the symbol "EP." The
following table sets forth the range of high and low bid information for AMEP
common stock for each quarter within the last two fiscal years and the interim
period for the year 2000 through the date of this proxy statement as reported by
NASDAQ. Quotations represent prices between dealers, do not include retail
mark-up, mark-down or commission and may not represent actual transactions.
2000 1999 1998
High Low High Low High Low
---- --- ---- --- ---- ---
First Quarter $10.94 $9.00 $11.50 $9.25 $ 8.38 $5.38
Second Quarter 10.69 8.25 10.63 8.44 10.63 8.25
Third Quarter 10.06 9.19 10.69 8.50 10.63 7.88
Fourth Quarter 9.50(1) 9.13(1) 12.88 10.13 10.81 9.00
Yearly _____ _____ 12.88 $ 8.44 $10.81 $5.38
- -----------------------------
1 Includes prices reported through ___________________, the last day prior to
printing of this proxy statement for which prices were available.
- ------------------------------
On July 10, 2000, the last full trading day prior to AMEP's public
announcement of its acceptance of an agreement in principle for a potential
transaction between AMEP and GC, and the proposed special cash dividend in
connection with such transaction, the closing sale price of AMEP common stock
reported on the NASDAQ and the Pacific was $9.438 per share. On August 11, 2000,
the last full trading day prior to the public announcement of the execution of
the merger agreement, the closing sale price of AMEP common stock reported on
the NASDAQ and the Pacific was $9.938 per share. On _______________, 2001, the
most recent practicable date prior to the printing of this proxy statement, the
closing sale price of AMEP common stock reported on the NASDAQ and the Pacific
was $_______ per share.
Historically, the market prices of AMEP common stock have fluctuated, and
we expect such fluctuations to continue. These fluctuations may affect your
determination as to the attractiveness of the merger. You are urged to obtain
current market quotations for AMEP common stock prior to making any decision
with respect to the merger.
The number of shareholders of AMEP common stock based on the number of
record holders on RECORD DATE was [ ]. The estimated number of beneficial
shareholders of AMEP common stock is 1,500.
Dividend Policy
On July 10, 2000, the Board of Directors of AMEP adopted a resolution
declaring a special cash dividend in the aggregate amount of $780,750 to be
distributed on October 30, 2000 to all shareholders of record as of August 18,
2000. Based upon the number of shares outstanding on August 18, 2000, the cash
distribution was equal to $0.645 per share. The resolution followed negotiations
with GC and was adopted contemporaneously with the agreement of the Board to
approve the merger in principle. Other than the special cash dividend, AMEP had
not paid any cash dividend on its common stock during the previous five years.
The payment of future cash dividends will rest in the discretion of the Board of
Directors and is dependent upon, among other things, future earnings, capital
requirements and AMEP's overall financial condition.
6
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF AMEP
The selected consolidated financial data for AMEP set forth below for the
nine months ended September 30, 2000 and 1999 and each of the five years in the
period ended December 31, 1999 should be read in conjunction with the
Consolidated Financial Statements included in AMEP's Quarterly Report on Form
10-QSB for the nine months ended September 30, 2000 and 1999 and its Annual
Report on Form 10-KSB for the year ended December 31, 1999, previously filed
with the Securities and Exchange Commission ("Commission") and incorporated in
this proxy statement by reference. See "WHERE YOU CAN FIND MORE INFORMATION".
Nine Months Ended
September 30, Year Ended December 31,
------------- -----------------------
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
OPERATING DATA:
(in thousands of dollars)
Sales and operating revenues $12,827 $12,157 $14,964 $11,675 $8,392 $8,501 $20,333
Gross profit 5,259 5,055 5,972 4,832 3,160 2,915 8,348
Operating income 957 1,239 877 1,239 837 (370) (3,898)
Special charges (a) (765)
Interest expense (345) (285) (350) (358) (323) (418) (874)
Income tax benefit (expense) 59 0 575 (31) 0 0 620
Net income (loss) (94) 954 1,102 850 514 (1,095) (2,976)
PER SHARE DATA:
Basic earnings (loss) per share $(0.09) $0.89 $1.03 $0.85 $0.56 $(1.29) $(3.61)
Basic shares outstanding (000's) 1,106 1,070 1,071 1,000 918 852 825
Diluted earnings (loss) per share $(0.09) $0.84 $0.95 $0.79 $0.53 $(1.29) $(3.61)
Diluted shares outstanding (000's) 1,106 1,136 1,161 1,138 962 852 825
Book value per share (b) $6.40 $6.71 $6.87 $5.88 $5.11 $4.55 $5.83
OTHER DATA
(in thousands of dollars, except for
ratio)
Total assets $13,804 $12,439 $12,631 $11,202 $7,251 $7,556 $11,240
Long-term debt 449 960 894 1,087 - 907 2,360
Ratio of earnings to fixed charges .6 4.3 2.5 3.5 2.6 -1.6 -3.1
(c)
- ------------------------
7
(a) Special charges represent amount paid to the resigning directors for
acquisition of previously granted stock options plus a stipend for services
rendered, together with certain costs related to the proposed merger.
(b) Book value per common share represents total assets less total liabilities
divided by the number of common shares outstanding at the end of the
period.
(c) Ratio of earnings to fixed charges represents (i) income before income tax
plus interest expense; divided by (ii) interest expense.
- ------------------------------
For additional financial information regarding AMEP, see AMEP's quarterly
report on Form 10-QSB for the period ended September 30, 2000 and its annual
report on Form 10-KSB for the year ended December 31, 1999, each of which are
incorporated in this proxy statement by reference.
8
THE SPECIAL MEETING
Date, Time and Place
The Special Meeting will be held at the offices of Corporate Stock
Transfer, Inc., 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209
on __________, _________, 2001 at ____ o'clock in the __________, Mountain
Standard Time.
Purpose of the Special Meeting
At the Special Meeting, holders of AMEP common stock will be asked to vote
on a proposal to approve the merger of GC SUB with and into AMEP pursuant to the
merger agreement dated August 14, 2000 between AMEP and GC. Colorado law and
AMEP's bylaws do not permit any matters to be presented at the Special Meeting
other than those described in this proxy statement and procedural matters
relating to the meeting.
Record Date
AMEP's Board of Directors has fixed the close of business on ____________,
2001 as the record date for the determination of the shareholders entitled to
notice of, and to vote at, the Special Meeting. Accordingly, only holders of
record of common stock, par value $0.05 per share, at the close of business on
the record date are entitled to notice of the Special Meeting and to attend and
vote at the Special Meeting. On the record date, there were _________ shares of
AMEP common stock outstanding. No other voting securities of AMEP are
outstanding.
The presence, in person or by proxy, of shares representing a majority of
the votes entitled to be cast at the Special Meeting will constitute a quorum
for the transaction of business at the Special Meeting. The vote by GC of
approximately 55% of the outstanding common stock will ensure that a quorum is
present at the meeting.
Required Vote
AMEP's shareholders must approve the merger and merger agreement by the
affirmative vote of a majority of all of the votes entitled to be cast on the
matter and by a majority of votes cast by shareholders other than GC or Geneve
Corporation, GC's parent company. In all proceedings in which action of the AMEP
shareholders is to be taken, each share of common stock entitles the holder of
record thereof to one vote.
Pursuant to the merger agreement, GC will vote shares representing
approximately 55% of all of the votes entitled to be cast on the matter, in
favor of the merger and merger agreement.
Proxies, Voting and Revocation
Shares of common stock represented by properly executed proxies which are
received by AMEP's transfer agent, Corporate Stock Transfer, Inc. prior to or at
the Special Meeting will, unless the proxies have been properly revoked, be
voted in accordance with the instructions indicated on the proxies, or, if no
instructions are indicated, will be voted for approval of the merger and merger
agreement, and in the best judgment of the individuals named in the accompanying
proxy on any other matter that may properly come before the Special Meeting.
Holders of AMEP common stock are requested to complete, sign, date and return
promptly the enclosed proxy card in the postage paid envelope provided for this
purpose in order to ensure that their shares are voted. Brokers who hold AMEP
common stock in "street name" will not be permitted to vote that stock in the
absence of instructions from the beneficial owner of such common stock. Broker
non-votes will have the same effect as a vote against the merger. However,
broker non-votes will have no effect on whether the merger is approved by a
majority of the votes cast by shareholders other than GC or Geneve.
Execution and return of the accompanying proxy card will not in any way
affect a shareholder's right to attend and to vote in person at the Special
Meeting. Any proxy may be revoked by the shareholder giving it, at any time
prior to its being voted, by filing a notice of revocation or a duly executed
proxy bearing a later date with the President of AMEP at 6550 Gunpark Drive,
Suite 200, Boulder, Colorado 80301. A notice of revocation need not be on any
specific form. Any proxy may also be revoked by the shareholder's attendance at
the Special Meeting and voting in person. Attendance at the Special Meeting will
not by itself constitute revocation of a proxy.
9
Abstentions may be specified with respect to the approval of the merger and
merger agreement by properly marking the "abstain" box on the proxy, and will be
counted as present for the purpose of determining the existence of a quorum.
Abstentions will have the effect of a vote against the merger and merger
agreement, but no effect with respect to the calculation of whether a majority
of votes cast by shareholders other than GC or Geneve have approved the merger.
Solicitation of Proxies
Proxies are being solicited by and on behalf of AMEP's Board. This proxy
statement and a form of proxy will first be mailed to shareholders on or about
____________, 2001. AMEP will pay the expenses related to printing this proxy
statement as well as all mailing and Securities and Exchange Commission filing
fees incurred in connection with this proxy statement. AMEP does not intend to
engage the services of an independent entity to assist in soliciting proxies on
behalf of the Board of Directors. Rather, officers, directors and employees of
AMEP will solicit proxies from shareholders. In addition to soliciting proxies
by mail, officers, directors and employees of AMEP, without receiving additional
compensation, may solicit proxies by telephone, telegraph, in person or by other
means. Arrangements also will be made with brokerage firms and other custodians,
nominees and fiduciaries to forward proxy solicitation material to the
beneficial owners of AMEP common stock, and AMEP will reimburse brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection with forwarding proxy solicitation materials.
SPECIAL FACTORS
Background of the Merger
On November 14, 1999, GC's parent company, Geneve Corporation ("Geneve"),
delivered to AMEP a letter expressing its intent to offer to purchase all of the
assets and substantially all of the liabilities (exclusive of indebtedness) of
AMEP. The letter stated that, based on the latest financial information then
available, the purchase price would be $17 million in cash. The letter assumed
that the purchase price would be allocated to AMEP's outstanding indebtedness,
common stock, warrants and stock options, and indicated Geneve's amenability to
restructure the transaction as a cash merger or similar stock transaction with
an adjustment in the purchase price. The letter also provided that in case the
proposed transaction did not close because AMEP's Board of Directors elected to
pursue an offer that it deemed to be superior, AMEP would pay a fee of $475,000
to Geneve.
On that same date, GC reported this offer in an amendment to its Schedule
13-D filed with the Securities and Exchange Commission. It also announced that
if AMEP determined not to pursue the proposed offer, GC might consider taking
other action which could result in the acquisition or disposition of securities
of AMEP or a change in AMEP's present Board of Directors or management. On that
date, GC's holdings in AMEP consisted of 393,290 shares of common stock and
279,840 common stock purchase warrants, constituting 37% (or, if GC were to
exercise such number of warrants and no other warrants were exercised, 50%) of
the outstanding shares of common stock of AMEP.
On November 23, 1999, AMEP's Board of Director rejected Geneve's offer. On
January 28, 2000, Geneve responded that it would give serious consideration to
any offer for its holdings in AMEP, in the event that a greater value than that
proposed by Geneve could be obtained by all shareholders.
On December 20, 1999, GC reported that its holdings in AMEP had increased
to 410,390 shares of common stock and 279,840 common stock purchase warrants,
constituting 38% (or, if GC were to exercise such number of warrants and no
other warrants were exercised, 51%) of the outstanding shares of common stock of
AMEP.
On January 28, 2000, GC submitted to AMEP a proposal under Rule 14a-8 of
the Securities Exchange Act of 1934 to amend AMEP's articles of incorporation.
The amendment would require the Board of Directors of AMEP, upon receipt of an
appropriate offer to purchase AMEP, to give the shareholders of AMEP the right
to determine whether to accept such offer. The amendment would also require the
Board of Directors of AMEP to take certain other actions, including the
retention of an investment banking firm, the establishment of an independent
committee of the Board of Directors, the solicitation of other offers to
purchase AMEP and the submission of the best offer to shareholders of AMEP for a
vote.
On that date, GC reiterated its opinion that AMEP should be sold, and
stated that another significant shareholder concurred with its view. The basis
of GC's position was that, upon a review of AMEP's performance, both
fundamentally
10
and on the stock market, it appeared that AMEP might be operated more
appropriately as a private company, thereby benefiting from the associated
cost-savings.
On March 28, 2000, GC reported that its holdings in AMEP had increased to
622,121 shares of common stock and 279,840 common stock purchase warrants,
constituting 58% (or, if GC were to exercise such number of warrants, and no
other warrants were exercised, 66%) of the outstanding shares of common stock of
AMEP. On that date, GC reported that it had acquired an additional 211,731
shares of AMEP common stock for a purchase price of $10.71875 per share, thereby
obtaining a majority of AMEP's outstanding common stock.
On April 7, 2000, at the request of GC, representatives of AMEP and GC held
a meeting, at which GC proposed that the Board of Directors of AMEP be
restructured to reflect GC's ownership position. On April 10, 2000, GC reported
to the Commission the occurrence of this meeting and its intent to participate
actively in the affairs of AMEP so as to maximize value to all shareholders.
On April 20, 2000, the number of directors on the Board of Directors of
AMEP was restructured from seven to three as a result of the resignation of four
members. Representatives of GC now constitute two of the remaining three
members. In connection with the resignation of the directors, AMEP agreed to
redeem outstanding stock options held by the directors and to pay a stipend to
the directors. AMEP incurred costs approximating $350,000 in this regard.
On April 28, 2000, GC reported that its holdings in AMEP had increased to
656,661 shares of common stock and 279,840 common stock purchase warrants,
constituting 61% (or if GC were to exercise such number of warrants, and no
other warrants were exercised, 69%) of the outstanding shares of common stock of
AMEP. On that date, GC also reported that it had acquired an additional 34,540
shares of AMEP common stock from the departing directors for a purchase price of
$9.25 per share.
On April 28, 2000, GC agreed to purchase, from four senior managers of
AMEP, an aggregate of 46,709 shares of common stock at a price per share, in
cash, of $9.25 (the last trade price of the common stock on NASDAQ prior to
April 28, 2000), upon the request of such managers subsequent to August 15,
2000. As of the date of this proxy statement, none of these shares have been
purchased by GC.
On May 9, 2000, AMEP was notified by NASDAQ that its common stock would be
delisted due to a failure to satisfy the continued listing requirements. The
deficiency allegedly pertained to the number of shares of AMEP trading in the
public market. By letter dated May 18, 2000, AMEP notified NASDAQ of various
steps it was taking to address the alleged deficiency. AMEP has received no
formal response since that date, although NASDAQ has indicated that it may defer
any formal action pending a vote by the AMEP shareholders on the merger. While
the number of shares trading in the public market has increased due to the
exercise of previously outstanding common stock purchase warrants, the increase
may not be sufficient to meet NASDAQ's public float requirements. Accordingly,
there is no assurance that AMEP's common stock will continue quotation on the
NASDAQ. If the stock is delisted, the quotation price may be adversely affected.
On June 22, 2000, the Board of Directors of AMEP received a letter from GC
offering to purchase all of the common stock not already owned by GC for a cash
payment of $10.00 per share. GC filed the correspondence with the Commission on
an amendment to its Schedule 13D. Following receipt of that offer, the Board of
Directors of AMEP met to discuss the terms and conditions of the proposed
transaction. Simultaneously, the Board of Directors authorized the Company to
retain a financial advisor to consider the fairness of the offer to AMEP
shareholders from a financial point of view.
On July 10, 2000, the Board of Directors of AMEP agreed in principle to the
terms of GC's offer. Formal acceptance of the offer was contingent upon numerous
conditions, including review and execution of a definitive merger agreement and
receipt of a fairness opinion from the financial advisor. Simultaneously, and
following discussion with GC, the Board of Directors approved a cash dividend to
all common shareholders of record as of August 18, 2000 in the aggregate amount
of $780,750, payable on October 30, 2000. After taking into account the exercise
of previously outstanding common stock purchase warrants, the per share cash
distribution was $0.645.
AMEP selected D.A. Davidson & Co., Inc. ("Davidson") as its financial
advisor for purposes of the proposed merger. AMEP selected Davidson as its
financial advisor upon the recommendation of its chief executive officer after
soliciting requests for proposals from other firms and based on Davidson's
experience, reputation, and familiarity with
11
AMEP's business. Davidson is regularly engaged in the valuation of businesses
and securities in connection with merger and acquisitions, leveraged buy-outs,
competitive biddings, private placements and valuations for corporate and other
purposes. The Board of Directors of AMEP considered Davidson's experience and
expertise in selecting it as its financial advisor. Pursuant to a letter
agreement dated June 29, 2000 between AMEP and Davidson, AMEP has agreed to pay
Davidson a fee of $60,000 for its services, $20,000 of which has previously been
paid and $20,000 of which is contingent upon completion of the merger.
Following the decision by AMEP's Board of Directors to accept GC's offer in
principle, the parties proceeded to prepare and negotiate the terms and
conditions of the merger agreement. A draft of the proposed merger agreement was
prepared by legal counsel for GC and submitted to AMEP for review. Following a
detailed review by AMEP and its legal counsel, who had been selected by AMEP's
chief executive officer, comments were delivered to GC. The parties also
proceeded to negotiate various aspects of the transaction as described in the
draft merger agreement. Subsequently, numerous drafts of the merger agreement
were exchanged between the parties.
On August 4, 2000, the AMEP Board met to consider the final terms and
conditions of the merger and the merger agreement. Subject to finalization and
acceptance of certain schedules incorporated into the merger agreement, the AMEP
Board, upon the recommendation of its chief executive officer, approved the
execution, and upon the receipt of a fairness opinion of its financial advisor,
the delivery of the merger agreement following reclusal of two of AMEP's three
Board members. On August 11, 2000, the AMEP Board of Directors received verbal
confirmation from its financial advisor that, subject to certain assumptions and
special factors, the consideration to be received by the shareholders of AMEP
was fair, from a financial point of view. On August 14, 2000, the merger
agreement, including all exhibits, was fully executed by the parties.
Effective December 1, 2000, all then-outstanding common stock purchase
warrants of AMEP expired in accordance with their terms. As of the date of this
proxy statement, GC owns 666,961 shares of common stock, constituting 55% of the
outstanding shares of common stock of AMEP.
Purpose of the Merger
The purpose of the merger is to provide the public shareholders with a fair
price for their shares, for GC to acquire 100% ownership of AMEP and to
terminate the status of AMEP as a publicly traded company. The transaction has
been structured as a cash merger in order to provide the public shareholders of
AMEP with cash for all of their shares, to provide a prompt and orderly transfer
of complete ownership of AMEP with a minimized risk that the contemplated
transactions will not be finalized and to reduce transaction costs.
Recommendation of AMEP's Board of Directors
On August 4, 2000, the AMEP Board met and, after considering the
preliminary indication of fairness received from Davidson, approved the merger
and determined that the terms of the merger with GC were fair, from a financial
point of view, to AMEP's minority shareholders. Certain members of the
management and the AMEP Board have interests which presented them with potential
or actual conflicts of interest in connection with this recommendation and the
merger. These matters are discussed in "THE MERGER - Interests of Certain
Persons in the Merger" on page __. As a result, certain AMEP Board members with
potentially conflicting interests and obligations, the two representatives of
GC, reclused themselves from the Board vote on the merger. AMEP's remaining
Board member voted in favor of the merger. The Board has approved, subject to
shareholder approval, the merger agreement, the merger and the transactions
contemplated therein and recommends that the holders of AMEP common stock vote
FOR approval of these matters at the special meeting.
AMEP's Reasons for the Merger
The AMEP Board of Directors believes that the merger is fair to, and in the
best interest of, AMEP and its shareholders. This belief is based primarily on
the Board's determination that the consideration to be received by the
shareholders other than GC is fair, from a financial point of view and that
sufficient procedural safeguards were in place to insure the fairness of the
transaction from a procedural point of view. In reaching this decision, the AMEP
Board considered many factors, including the results of operation of AMEP for
the past several years; the opinion of its financial advisor; the declining
interest in the NASDAQ SmallCap market as a whole, and by institutional
investors in particular; previous unsuccessful efforts at selling the Company
and issuance of the dividend recently declared by the Board of Directors after
discussion with GC. The AMEP Board also considered the educational products
market where the Company operates, which, while presenting the opportunity for
sustained growth, did not indicate the Company's potential for significant
12
growth on a level with other companies competing for investors' interest. The
Board did not assign any relative weight to these factors, but determined that
all of them were material to consideration of the merger.
In reaching its determinations referred to above, the AMEP Board considered
the following factors, each of which, in the view of the Board, supported such
determinations:
Past efforts at marketing the Company. Beginning in approximately 1997, the
AMEP Board and its officers conducted concerted efforts at selling the
Company to a third party in an effort to maximize shareholder value. Such
efforts were conducted with and without the assistance of business brokers
and other financial intermediaries. During the time between approximately
1997 and prior to executing the merger agreement, the AMEP Board and its
officers conducted discussions with numerous individuals and entities with
regard to a possible merger or acquisition of the Company. These
discussions intensified in the Fall of 1999, following receipt of an offer
to purchase the assets of AMEP from Geneve, GC's parent company. At that
time, AMEP retained the services of a business broker to locate prospective
purchasers for AMEP, approximately 50 entities were contacted and packets
containing information about AMEP were sent to approximately 24 entities
whom the broker thought might be interested in acquiring AMEP. Discussions
were held with both private and public entities, generally within the
educational products industry. In response to the efforts of the business
broker, AMEP received responses from approximately 11 entities. None of
these contacts resulted in an offer to purchase the Company.
Trading of AMEP's securities on the NASDAQ Small Cap Market. On January 31,
1997, the Company's common stock was moved from the NASDAQ National Market
System and became listed on the NASDAQ SmallCap Market. As a result,
management of AMEP believes that its visibility as a public company was
reduced. Institutional investors which AMEP had hoped to attract are
generally reluctant to acquire securities of companies with the more
limited liquidity characteristic of those listed in the SmallCap Market.
Management of AMEP also believes that the perception of its shares was
negatively impacted by the attraction of investors to new economy "dot-com"
stocks with a concurrent decrease in interest in old economy companies. All
of these factors in the opinion of the AMEP Board negatively affected the
perception of AMEP stock.
Historical results of operations. During 1995 and 1996, AMEP experienced
losses from operations. These losses, in the opinion of the AMEP Board,
were a result of cyclicality in the educational products industry, of
steady but not rapid growth in that industry and lower than expected profit
margins in acquired businesses. As a result of these losses, prospective
purchasers of the Company were reluctant to assign greater values to the
stock.
Fairness Opinion. The Board received the opinion of Davidson to the effect
that, based upon the assumptions made, matters and limits of review as set
forth in such opinion, the consideration to be received by the shareholders
of AMEP, other than GC, is fair from a financial point of view.
The lack of other offers following rejection of a previous purchase offer
from Geneve. In November 1999, the Company received from Geneve an offer to
purchase all of the assets of the Company, net of indebtedness, for $17
million. Based on information available at that time, including the
estimated income tax effect of the sale and the estimated net proceeds to
shareholders, the AMEP Board rejected the offer as not in the best interest
of the Company or its other shareholders. Subsequent to receipt of AMEP's
rejection, Geneve indicated that it would entertain offers to buy GC's
interest in the Company for a price higher than its offer. With one
exception, GC received no offer, and AMEP has received no offers since that
time. The one indication of a potential offer received by GC was only for
its block of controlling shares (and not for those of other shareholders),
from a company of questionable financial ability, and was subject to
certain conditions and contingencies which have yet to be satisfied.
The AMEP Board believes that sufficient procedural safeguards were and are
present to ensure fairness of the merger and to permit the Board of Directors to
represent effectively the interests of the public shareholders. The AMEP Board
reached its conclusion as to the procedural fairness because:
- The Board had engaged in numerous and prolonged efforts to sell AMEP
to third parties beginning in 1997 and had contacted numerous entities
to solicit interest in the Company. These efforts intensified in the
Fall of 1999, following receipt by AMEP of an offer to purchase its
assets from Geneve.
13
- The Company had previously retained the services of a business broker
to assist in marketing the Company to third parties. This broker spent
considerable time and effort marketing AMEP to third parties, but
received no offers, despite having contacted approximately 50
entities.
- The Company had publicized the offer from Geneve in November of 1999,
and the willingness of Geneve to accept any reasonable price in excess
of that amount for GC's holdings and the holdings of all other
shareholders.
- The Company has retained the services of an independent financial
advisor to render its opinion as to fairness, from a financial point
of view, of the merger to the minority shareholders.
Opinion of D.A. Davidson & Co.
D.A. Davidson & Co., Inc. ("Davidson") has acted as AMEP's exclusive
financial advisor in connection with the merger. AMEP selected Davidson based on
the recommendation of its chief executive officer, Davidson's experience,
reputation, and familiarity with AMEP's business. Davidson is regularly engaged
in the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. In light of the foregoing, the
Board of Directors believes that Davidson is well qualified to provide the Board
with independent, quality financial assistance and advice, including the
delivery of the fairness opinion.
In connection with Davidson's engagement, AMEP requested that Davidson
evaluate the fairness, from a financial point of view, to the shareholders of
AMEP, other than GC and its affiliates, of the aggregate consideration to be
received by shareholders of AMEP in the merger. On August 11, 2000, at a meeting
of the AMEP Board held to consider the merger, Davidson rendered to the AMEP
Board an oral opinion, subsequently confirmed by delivery of a written opinion
dated August 14, 2000, to the effect that, as of that date and based on and
subject to the matters described in its opinion, the aggregate consideration to
be received by AMEP shareholders in the merger was fair, from a financial point
of view, to the shareholders of AMEP, other than GC and its affiliates.
The full text of Davidson's opinion sets forth assumptions made, matters
considered and qualifications and limitations on the review undertaken, among
other things. The full text of that opinion is attached hereto as Exhibit B and
is incorporated herein by reference. AMEP shareholders are urged to read the
opinion in its entirety. The opinion to the AMEP Board addressed only the
fairness to the holders of AMEP common stock, other than GC, from a financial
point of view, of the consideration to be paid by GC for the AMEP common stock
pursuant to the merger agreement. The opinion was rendered to the AMEP Board of
Directors for its consideration in determining whether to approve the merger
agreement. The opinion does not constitute a recommendation to any AMEP
shareholder as to how such shareholder should vote. The following summary of the
opinion is qualified in its entirety by reference to the full text of the
opinion. No limitations were imposed by AMEP on the scope of Davidson's
investigation or the procedures to be followed by Davidson in rendering its
opinion. The form and amount of consideration to be paid by GC to AMEP in the
merger was determined through negotiations between the parties. Davidson was not
requested to opine as to, and its opinion does not address, AMEP's underlying
business decision to proceed with or effect the merger.
During the course of the engagement, Davidson reviewed and analyzed
material bearing on the financial and operating conditions of AMEP and material
prepared in connection with the proposed merger, including the following:
- the merger agreement;
- certain publicly available information concerning AMEP, including
financial statements for each of the years ended 1997, 1998, 1999 and
for the three months ended March 31, 2000;
- certain internal reports, including draft financial statements for the
six months ended June 30, 2000 and financial projections for AMEP;
- the nature and terms of recent sale and merger transactions involving
education related companies that Davidson considered relevant;
14
- financial and common stock performance information of certain
publicly-traded education related companies that Davidson considered
relevant; and
- financial and other information provided by the management of AMEP.
Davidson also discussed with AMEP management the business and prospects of
AMEP.
In arriving at its opinion, Davidson assumed and relied upon the accuracy
and completeness of the financial and other information used by it without
assuming any responsibility for independent verification of such information,
and further relied upon the assurances of management of AMEP that it was not
aware of any facts or circumstances that would make such information inaccurate
or misleading. With respect to any financial projections reviewed by Davidson,
Davidson assumed that such projections were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of AMEP.
In arriving at is opinion, Davidson did not conduct a physical inspection
of all the properties and facilities of AMEP and did not make or obtain any
evaluations or appraisals of the assets or liabilities of AMEP. Davidson's
opinion necessarily was based upon market, economic and other conditions as
existed on, and could be evaluated as of, the date of Davidson's opinion.
The following is a summary of the analyses Davidson performed in arriving
at its opinion as to the fairness of the merger consideration, from a financial
point of view, to shareholders of AMEP other than GC. Davidson performed a
variety of financial and comparative analyses, as described below. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial and comparative analysis and the
application of those methods to the particular circumstances. Therefore, such an
opinion is not readily susceptible to summary description. Furthermore, in
arriving at its opinion, Davidson did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly,
Davidson believes that its analyses must be considered as a whole and that
considering any portion of such analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
process underlying its opinion. In its analyses, Davidson made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of AMEP. Any
estimates contained in these analyses were not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth herein. In addition, analyses relating
to the value of businesses did not purport to be appraisals or to reflect the
prices at which business may actually be sold.
Under the terms of the merger, the holders of AMEP common stock will
receive $10.00 per share in cash. It should also be noted that under the terms
of the merger, all debt and obligations of AMEP shall be assumed by GC.
Public Company Analysis
-----------------------
Using publicly available information, including estimates in published
third-party research reports, Davidson reviewed and compared actual and
projected financial, operating and stock market information pertaining to
certain publicly-traded education related companies, including Educational
Development Corporation, The Millbrook Press Inc., School Specialty, Inc. and
Educational Insights Inc. Davidson calculated trailing twelve month, current
year and forward year price-to-earnings multiples for this group. Applying the
average multiples derived from Davidson's analysis of the comparable companies
to AMEP's trailing and projected earnings, Davidson calculated a range of
implied equity value per share of AMEP of $10.91 - $12.32. In addition, Davidson
calculated the total enterprise value ("TEV"), determined as equity market value
plus net debt, as multiples of trailing twelve months sales and earnings before
interest, taxes, depreciation and amortization ("EBITDA"). Applying the average
derived from Davidson's analysis of the comparable companies to AMEP's trailing
twelve months sales and EBITDA, Davidson calculated a range of implied equity
value per share of $2.25 - $9.49.
Precedent Transaction Analysis
------------------------------
Davidson reviewed certain publicly available information regarding the
terms and financial characteristics of 28 selected business combination
transactions involving education related companies that were announced or took
place from January 1996 through July 2000, which Davidson believed to be
relevant to the merger. For the selected transactions,
15
Davidson determined transaction values as multiples of trailing twelve months
sales, earnings, EBITDA and book value. Applying average multiples derived from
Davidson's analysis of the selected transactions to AMEP's trailing twelve
months sales, earnings, EBITDA and book value, Davidson calculated a range of
implied equity value per share of $5.28 - $9.05.
Discounted Cash Flow Analysis
-----------------------------
Using a discounted cash flow methodology, Davidson calculated the net
present value of AMEP based upon projections provided by AMEP's management. In
evaluating these projections, Davidson applied various assumptions to growth
rates, discounted rates, and capitalization rates. After-tax cash flows for the
six year period beginning on January 1, 2000 and ending December 31, 2005 were
calculated as after-tax earnings plus depreciation and amortization less capital
expenses and net changes in working capital. Davidson calculated terminal values
for AMEP in 2006 by applying to projected after-tax cash flow a range of
capitalization factors of 10% - 14%. The cash flow streams and terminal values
were discounted to present values using a range of discounted rates from 14% -
16%, which were chosen based on several factors, such as the inflation rate,
interest rates, the inherent business risk in the business of AMEP and
comparable companies and the cost of equity to AMEP and comparable companies.
From this analysis, Davidson calculated a range of implied equity value per
share of $6.44 - $13.28.
GC's Purposes and Reasons for the Merger
----------------------------------------
GC and its predecessors have held a significant interest in AMEP since May,
1997. In addition, two persons who have business relationships with GC, Messrs.
Richard Ciurczak and John Crawford, are currently serving and have served in the
past as directors of AMEP. See "THE MERGER - Interests of Certain Persons in the
Merger" on page __ and "RELATED PARTY TRANSACTIONS" on page __.
GC seeks to acquire the remaining equity interest it does not already own
in AMEP so as to facilitate greater operating flexibility in the management of
the business, to avoid conflicts of interest and to take advantage of the cost
savings that would result from assuming private status. See "GC's Plans for AMEP
after the Merger" on page __.
GC's Statement as to the Fairness of the Merger
In addition to the factors identified above under "GC's Purposes and
Reasons for the Merger," GC believes that the merger and the terms of the merger
agreement, are fair to AMEP and its public shareholders based on the following
factors:
After GC acquired its initial position in AMEP in 1997, it opposed the
action of the Directors in awarding stock options to themselves. The two
representatives of GC then on the Board, alone among its members, returned the
stock options awarded to them. The Board continued to attempt to grant its
members an inordinate (in GC's view) number of stock options, even though such
grants were (to GC) counterproductive to economic value for shareholders and
were explicitly rejected by shareholders; moreover the Company's common stock
had consistently underperformed market indices and its peer group. According to
the Company's annual report for 1998, as of December 1998, the Company had a
total of 58,750 incentive stock options and 160,000 non-qualified stock options
outstanding and unexercised. These options represented an amount equal to
approximately 20% of the Company's then outstanding shares of common stock.
At the Company's Annual Meeting of Shareholders in 1998, shareholders
rejected a request of the Board to increase by an additional 200,000 the number
of shares which the Company was authorized to issue pursuant to the exercise of
options granted under the Company's 1997 Stock Incentive Plan - approximately
another 20% of the Company's then outstanding shares.
GC was among the shareholders of the Company who voted against the Board's
proposed increase. At the time, two persons designated by Geneve served as
members of the Board and likewise opposed the increase supported by the
remaining five Board members.
Notwithstanding shareholder rejection of the proposed increase, the Board
persisted and adopted the Company's 1998 Non-Qualified Stock Option Plan (the
"1998 Plan"), again over the objection of the Board representatives of GC.
Essentially, the 1998 Plan authorized what shareholders had rejected - an
additional 200,000 stock options.
16
At the Company's 1999 Annual Meeting of Shareholders, the Board again asked
the shareholders to authorize the grant under the 1997 Stock Incentive Plan of
an additional 200,000 options (to replace those authorized under the 1998 Plan).
GC again voted against, and the shareholders again defeated the proposal.
By reason of its concerns with the judgment and persistence of the Board,
both in this regard and in respect of acquisitions consummated by AMEP which GC
regarded as less than successful, Geneve sought a mechanism whereby it could
extricate itself, as the largest (but a non-controlling) AMEP shareholder, from
what appeared to be a continuing conflict with management. It therefore offered,
in November 1999, to purchase all of the assets and substantially all of the
liabilities (exclusive of indebtedness) of AMEP for $17 million, pursuant to a
proposal which assumed that the purchase price would be allocated to AMEP's
debt, common stock, warrants and stock options; a per share price was not
specified. The offer was based upon a forecasted increase in 1999 calendar year
sales over 1998, and was conditioned upon receipt of audited financial
statements for 1999.
The Board rejected Geneve's offer shortly after receiving the views of a
broker representative of shareholders who, though independent, in aggregate held
the second largest bloc of shares. In response, Geneve indicated that it would
be amenable to joining with other shareholders in a sale of AMEP if a higher
price could be obtained. Accordingly, in January 2000, GC submitted a proposal
under Rule 14a-8 of the Securities Exchange Act of 1934 to amend AMEP's charter.
If adopted by shareholders, the amendment would have required the Board, upon
receipt of an appropriate offer to purchase the Company, to give shareholders
the right to determine whether to accept the offer. GC remained concerned that
the AMEP Board might attempt, without seeking shareholder approval, to
consummate acquisitions that in GC's view were ill advised.
At the same time as it sought out potential acquisition candidates,
management, in late 1999, retained a business broker to "shop" the company.
Approximately 50 potential purchasers of AMEP were solicited, including 24 who
received information packages about AMEP, and several met with management or
visited AMEP. Although the solicitation was based upon projections which
management had shared confidentially with potential buyers, no offers were
received. In fact, those projections were not met, neither for 1999 nor the
first quarter of 2000. The 1999 financial statements indicated significantly
lower earnings than management had anticipated. When the previously optimistic
representative of the second largest bloc of shares solicited GC's interest in a
purchase, GC did so with the knowledge that it would be paying a premium in
order to increase its ownership to a majority of the outstanding shares.
Principally by reason of the foregoing, GC believes that its offer is fair
to the minority shareholders of AMEP. Other considerations which form the basis
of GC's belief of the fairness of its offer include that the merger
consideration of $10.00 each per share (together with the special cash dividend
of $.645 per share paid on October 30, 2000 to all common shareholders of record
as of August 18, 2000) reflects a value of AMEP of about 8.8 times 1999 EBITDA
of $1,813,000. Further, the Company's results of operations (excluding special
charges) for the six months ended June 30, 2000, were substantially below its
budgeted projections for that period, and its results for the nine months ended
September 30, 2000 (excluding special charges) continued to be disappointing
relative to management's expectations, as well as trailing the comparable period
of 1999 even though those results include an operation acquired by the Company
in September 1999.
In connection with its determination of the fairness of the consideration
to be received by the public shareholders of AMEP under the merger agreement,
the GC board has adopted the conclusions as to fairness set forth under "-
AMEP's Reasons for the Merger and Statement as to the Fairness of the Merger" on
page __, and the analyses underlying such conclusions of the AMEP Board, based
upon the views of the members of GC's board as to the reasonableness of such
analyses. GC did not find it suitable to and did not assign relative weights to
the individual factors considered in reaching its conclusion as to fairness.
However, the GC board believes that each of the factors is material to its
determination that the merger is fair, and has characterized as positive each of
the factors characterized as positive by the AMEP Board. GC would consider the
sale of its holding in AMEP under various conditions at a higher price than the
merger consideration.
Effects of the Merger
Geneve is exploring an option, prior to the merger, of merging GC with
Nasco International, Inc., a subsidiary of Geneve. In the event that transaction
is completed, AMEP will become a wholly owned subsidiary of Nasco. All shares of
AMEP stock not owned by GC and not owned by individuals who dissent from the
merger will be converted into the right to receive $10.00 per share in cash. The
AMEP common stock will no longer be listed on any stock exchange and will not be
publicly traded. The AMEP common stock will cease to be registered under the
Exchange Act. Accordingly, holders of AMEP
17
common stock, other than GC, will cease to hold AMEP common stock as a result of
the merger, and AMEP will no longer prepare or file reports with the SEC with
respect to the AMEP common stock.
GC's Plans for AMEP after the Merger
Geneve is the parent company of Nasco International, Inc., one of the
nation's leading manufacturers and suppliers of supplementary educational
materials to the K - 12 marketplace, including specialty math and science
products. Nasco and AMEP have both purchased from and sold products to each
other for many years. Geneve believes that Nasco's superior resources,
experience and business and marketing leadership in the school market will
enhance AMEP's proprietary product offerings.
There will be significant costs savings attributed to AMEP no longer being
a public stock, including legal and other fees and administrative expenses of
personnel relating to the filing of public documents, and maintenance of a board
of directors and committees thereof required under federal securities laws and
the rules and regulations of NASDAQ. Further, being a member of the Geneve group
of companies will allow for the restructuring of credit facilities that provide
more favorable terms and conditions than currently exist under AMEP's credit
facilities.
AMEP will be the surviving corporation of the merger. The articles of
incorporation and bylaws of GC SUB immediately prior to the effective time will
become the articles and bylaws of AMEP. The directors and the officers of GC SUB
immediately prior to the effective time of the merger will become the directors
and the officers of AMEP after the completion of the merger, with each director
to hold office in accordance with the charter and bylaws of AMEP after the
merger, in each case until their respective successors are duly elected or
appointed and qualified. After the merger, AMEP's parent company may elect
certain individuals to the AMEP Board to replace the current directors.
Other than by virtue of the merger and except as otherwise described above
or elsewhere in this proxy statement, GC has no current plans or proposals which
relate to or would result in:
- any extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving AMEP or any of its
subsidiaries;
- any purchase, sale or transfer of a material amount of assets of AMEP
or any of its subsidiaries;
- any material change in AMEP's capitalization, dividend rate or policy,
or indebtedness;
- any change in the management of AMEP, the composition of the AMEP
Board or any change in any material term of the employment
arrangements of any executive officer; or
- any other material change in AMEP's corporate structure or business.
Certain Federal Income Tax Consequences
The following discussion is a summary of material U.S. federal income tax
consequences of the merger to holders of common stock who are U.S. persons and
hold their shares as capital assets. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), U.S. Treasury regulations,
administrative pronouncements of the U.S. Internal Revenue Service (the "IRS")
and judicial decisions in effect on the date hereof, all of which are subject to
change, retroactively and prospectively, and to possibly differing
interpretations. For purposes hereof, a U.S. person is (i) a U.S. citizen or
resident alien individual, (ii) a corporation created or organized in or under
the laws of the United States or any state, (iii) an estate the income of which
is subject to U.S. federal income tax without regard to the source and (iv) a
trust if a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have authority
to control all substantial decisions relating to the trust. The discussion set
forth below is for general information only and, thus, does not address all of
the U.S. federal income tax consequences of the merger that may be relevant to
the holders of AMEP common stock based upon their particular circumstances.
Moreover, this summary does not apply to certain categories of holders of common
stock that may be subject to special tax rules, including, but not limited to,
banks, tax-exempt organizations, insurance companies, regulated investment
companies, non-U.S. persons and holders who acquired such shares pursuant to the
exercise of employee stock options or otherwise as compensation. In addition,
the discussion does not address the state, local or foreign tax consequences of
the merger.
18
EACH HOLDER OF COMMON STOCK IS URGED TO CONSULT SUCH SHAREHOLDERS' TAX ADVISOR
WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
MERGER.
General Federal Income Tax Consequences of the Merger. The receipt of cash
in exchange for common stock pursuant to the merger would be a taxable sale for
U.S. federal income tax purposes. Accordingly, an AMEP shareholder who receives
cash pursuant to the merger will recognize taxable gain or loss equal to the
difference between the amount of cash received and the shareholder's adjusted
tax basis in the shares surrendered therefor. The gain or loss will be a
long-term capital gain or loss if, as of the date of the sale, such
shareholder's holding period for such shares is more than one year. Under
current law, an individual is subject to a maximum federal income tax rate of
20% on any net long-term capital gains, and a corporation is subject to a
maximum U.S. federal income tax rate of 35% on any net capital gain. Short term
capital gain is taxed to individuals at the same rate as the individual's
ordinary income. If the receipt of cash in exchange for shares results in
recognition of a capital loss, deductibility of such loss may be subject to
limitation.
Backup Withholding. Unless an AMEP shareholder complies with certain
reporting or certification procedures or is an "exempt recipient" (in general,
corporations and certain other entities) under applicable provisions of the Code
and Treasury regulations, such shareholder may be subject to withholding tax of
31% with respect to any cash payments received pursuant to the merger. Backup
withholding is not an additional tax. Any amount withheld under these rules will
be credited against a shareholder's U.S. federal income tax liability provided
such shareholder furnishes the required information to the IRS. If a shareholder
does not comply with the backup withholding rules, such holder may be subject to
penalties imposed by the IRS. A non-U.S. AMEP shareholder should consult such
shareholder's tax advisor with respect to the application of withholding rules
to such shareholders with respect to any cash payments received pursuant to the
merger.
THE MERGER
Merger Consideration
The merger will become effective when the articles of merger are filed
with, and are accepted for record by, the Secretary of State of Colorado. At the
time of the merger, GC SUB will be merged with and into AMEP. The separate
corporate existence of GC SUB will cease, and AMEP will continue as the
surviving corporation and become a wholly owned subsidiary of GC.
The merger will have the following effects:
- Each outstanding share of AMEP common stock will be converted into the
right to receive $10.00 in cash as merger consideration. The merger
consideration will be payable without any interest once the AMEP stock
certificate that formerly evidenced such share of AMEP common stock
has been duly surrendered. The conversion described in this paragraph
will not apply to the shares owned by GC.
- Each outstanding share of common stock of GC SUB will be converted
into one share of common stock of AMEP as the surviving corporation.
- Each share of AMEP common stock owned by GC will automatically be
cancelled, and no payment will be made with respect thereto.
Dissenting shareholders have a statutory right to seek a determination of
the fair value of their shares of AMEP common stock under Colorado corporate
law. See "- Dissenters' Rights" on page __.
Payment Procedure
On or before the closing date of the merger, GC will enter into an
agreement with a bank or trust company to serve as a paying agent selected by GC
and reasonably acceptable to AMEP. Upon effectiveness of the merger, GC will
deposit for the account of the paying agent, in trust for the benefit of the
holders of AMEP common stock who are to receive merger consideration, an amount
in cash equal to the aggregate merger consideration. This amount will be used as
the exchange fund for the merger.
19
The paying agent will mail to you a letter of transmittal after the merger
becomes effective. The letter of transmittal will contain instructions that
explain how you should return AMEP stock certificate(s) in order to receive the
merger consideration. You should not return your AMEP stock certificate(s) until
you receive the letter of transmittal. If you own your stock in street name
through a brokerage firm, that firm should contact you with instructions about
how to receive the merger consideration.
Upon returning your AMEP stock certificate(s), together with your letter of
transmittal, duly completed and validly executed in accordance with the paying
agent's instructions, the paying agent will pay you an amount in cash equal to
the product of the merger consideration multiplied by the number of shares of
AMEP common stock formerly represented by such AMEP stock certificate(s). Upon
payment, all returned AMEP stock certificate(s) will be cancelled.
Until you return your AMEP stock certificate(s), they will only represent
the right to receive the merger consideration. No interest will be paid or
accrued on the merger consideration. If the merger consideration (or any portion
thereof) is to be paid to any person other than you, then the stock
certificate(s) must be properly endorsed or otherwise be in proper form for
transfer. The person surrendering such AMEP stock certificate(s) will pay to the
paying agent any transfer or other similar taxes required. Alternatively, you
may establish to the satisfaction of the surviving corporation that such tax has
been paid or is not applicable.
After the six-month anniversary of the merger, the surviving corporation
will be entitled to require the paying agent to return to the surviving
corporation any portion of the exchange fund (including, without limitation, all
interest and other income received by the paying agent in respect of all funds
made available to it) which remains undistributed to the holders of AMEP stock
certificates and any other documents in its possession relating to the merger,
and the paying agent's duties will terminate. If you have not received payment
of the merger consideration by this time, then you may look only to the
surviving corporation for payment. You may obtain payment from the surviving
corporation by surrendering your AMEP stock certificate(s) to the surviving
corporation and complying with other instructions received from the surviving
corporation.
After the merger, the stock transfer books of AMEP will be closed. There
will be no further registration of transfers on the stock transfer books of the
surviving corporation of any shares of AMEP common stock that were outstanding
immediately before the merger. AMEP stock certificates presented to the
surviving corporation or the paying agent after the merger will be surrendered
and cancelled in return for the payment of the merger consideration represented
thereby, as provided above and pursuant to the terms of the merger agreement.
You will cease to have any rights with respect to shares of AMEP common
stock after the merger, except the right to receive the merger consideration.
The paying agent and the surviving corporation will be entitled to deduct
and withhold tax amounts from the merger consideration otherwise payable to you
as required under the Code, or any applicable provision of state, local or
foreign tax law. Any withheld tax amounts which are actually paid to the
appropriate taxing authorities will be treated as having been paid to you.
You will need to provide an affidavit if you have lost your AMEP stock
certificate(s) or if your certificate(s) have been stolen or destroyed. The
paying agent or surviving corporation may require you to post a bond of a
reasonable amount as indemnity against any claim that may be made with respect
to any missing AMEP stock certificate. The paying agent will issue in exchange
for such lost, stolen or destroyed AMEP stock certificate(s) the merger
consideration to which you are entitled pursuant to the merger agreement.
Treatment of Stock Options and Stock Grants
At the time of the merger and pursuant to AMEP's stock plans, each option
to purchase shares of AMEP common stock, whether or not exercisable, will be
deemed converted into, and the holders of each such option will be entitled to
receive upon surrender of the option for cancellation, an amount of cash equal
to the product of (i) the positive difference, if any, between $10.00 and the
exercise price of such option; and (ii) the number of shares of common stock
covered by such option. AMEP will take all necessary action to approve the
disposition of the options in connection with the transactions contemplated by
the merger agreement to the extent necessary to exempt such dispositions and
acquisitions under Rule 16b-3 of the Exchange Act. Any payments related to the
cancellation of options would be subject to all applicable federal, state and
local tax withholding requirements.
20
Merger Financing; Expenses of the Merger
The total amount of funds required by GC to acquire all of the outstanding
shares of AMEP common stock not owned by GC and to pay related fees and expenses
is estimated to be approximately $___ million.
The merger agreement provides that, with certain limited exceptions, all
costs and expenses incurred in connection with the merger will be paid by the
party incurring such expenses, whether or not the merger is consummated. AMEP is
required under the merger agreement to pay GC a "break-up" fee of $475,000 and
to reimburse GC's reasonable and documented expenses incurred in connection with
the merger agreement if:
- AMEP or GC terminates the merger agreement due to the failure of
AMEP's shareholders to approve the merger and merger agreement;
- at the time of such failure to approve the merger and merger
agreement, there exists a publicly announced competing transaction to
that of GC;
- within 12 months of the termination of the merger agreement with GC,
AMEP enters into an agreement with a third party with respect to a
competing transaction; and
- the competing transaction is subsequently consummated.
The following is an estimate of expenses to be incurred in connection with the
merger.
EXPENSES TO BE PAID BY AMEP:
Financial advisory fees and expenses $60,000
Legal fees and expenses $30,000
Printing and mailing fees $10,000
Filing fees (SEC) $ 1,100
Miscellaneous $ 8,900
-------
Total $110,000
EXPENSES TO BE PAID BY GC:
Legal fees and expenses $[______]
Miscellaneous $[______]
---------
Total $[______]
Interests of Certain Persons in the Merger
In considering the merger, you should be aware that certain members of
AMEP's management and Board may have interests in the merger that are different
from, or in addition to, their interests solely as shareholders of AMEP.
21
These interests are described below. The AMEP Board was aware of these potential
or actual conflicts of interest and considered them along with the other matters
described under "SPECIAL FACTORS - Recommendation of AMEP's Board of Directors"
on page __.
Mr. Richard J. Ciurczak has been President and Chief Operating Officer of
Nasco International, Inc. since October 1996. Nasco International, Inc. is a
subsidiary of Geneve, the parent company of GC.
Mr. John J. Crawford has been President and Chief Executive Officer of The
Aristotle Corporation since April 2, 1990, and Chairman of its Board since April
1993. Geneve holds a 50.4% ownership interest in The Aristotle Corporation.
Mr. Ciurczak and Mr. Crawford, as a result of their positions with AMEP,
owe fiduciary duties to the shareholders of AMEP, in addition to the fiduciary
duties they owe to the shareholders of GC. At times, they may be confronted by
issues, including the merger, that present them with potentially conflicting
interests and obligations. Consequently, AMEP's chief executive officer chose
the independent financial advisor and company counsel for the merger and such
choice was approved by Messrs. Ciurczak and Crawford upon the chief executive
officer's recommendation. In addition, although the terms of the merger were
recommended and approved by the chief executive officer of AMEP, Messrs.
Ciurczak and Crawford recused themselves from the Board vote on the merger.
GC has a Schedule 13D as amended on file with the SEC with respect to its
stockholdings in AMEP. See "SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS
AND MANAGEMENT - Owners of More than Five Percent" on page __.
Effects of the Merger on Interested Persons' Stock Options. Certain of
AMEP's directors and executive officers hold options to purchase shares of AMEP
common stock pursuant to its Stock Option Plan.
The following table sets forth the value of the options outstanding under
AMEP's stock plans (based on the prices to be paid for the cancellation of each
option) held by AMEP's chief executive officer and four other most highly
compensated executive officers and all of the executive officers as a group:
AMEP Executive Officers Option Value
- ----------------------- ------------
Clifford C. Thygesen, President, Chief Executive
Officer and Director $147,000
Frank L. Jennings, Chief Financial Officer and
Vice President of Finance $24,000
All executive officers as a group (2 individuals) $171,000
Accounting Treatment
The merger will be accounted for by GC under the purchase method of
accounting in accordance with accounting principles generally accepted in the
United States. Under this accounting method, AMEP's historical results for the
periods before the merger will remain unchanged. In addition, the aggregate
consideration paid by GC in connection with the merger, together with the direct
costs of acquisition, will be allocated to AMEP's assets and liabilities and
measured at their fair values. The excess of the investment cost over the net
assets' fair value will be recognized as an intangible asset (goodwill). AMEP's
pre-merger earnings will be excluded from the net income of the combined
enterprise. AMEP's retained earnings will not carry over to the combined
enterprise. Costs incurred to effect the merger will be capitalized by adding to
the investment cost.
Regulatory Approvals
The merger agreement provides that GC and AMEP will use their reasonable
best efforts to cause the merger to be consummated, including the obtaining of
all necessary consents, waivers, permits, authorizations, orders and consents of
third parties, whether private or governmental, in connection with the merger.
22
Except for the filing of articles of merger with the Secretary of State of
Colorado, after AMEP's shareholder approval of the merger and merger agreement,
compliance with federal and state securities laws and after the proposed
agreement to settle litigation claims asserted by AMEP shareholders is approved
by the District Court, County of Boulder, Colorado and is not subject to appeal,
neither GC nor AMEP is aware of any material U.S. federal or state or foreign
governmental regulatory requirement that must be complied with, or approval that
must be obtained, in connection with the merger.
Dissenters' Rights
If you decide to vote against the merger and merger agreement, i.e.,
dissent or withhold your vote, you will be entitled to seek statutory
dissenters' rights under Colorado Law. If the holders of more than 5% of the
outstanding common stock of AMEP other than shares held by GC exercise their
dissenters' rights, GC may terminate the merger. See "Conditions to the Merger"
on page __.
Right to Dissent. AMEP shareholders are entitled to dissent from the Merger
and obtain payment of the fair value of their shares if and when the Merger is
effected. Under CBCA Article 113, a shareholder entitled to dissent and obtain
payment for the shares may not challenge the corporate action creating the right
to dissent unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
Under CBCA Section 7-113-103, a record shareholder may assert dissenters'
rights as to fewer than all the shares registered in the record shareholder's
name only if the record shareholder dissents with respect to all shares
beneficially owned by any one person and causes the corporation to receive
written notice which states such dissent and the name, address and federal
taxpayer identification number, if any, of each person on whose behalf the
record shareholder asserts dissenters' rights.
CBCA Section 7-113-103(2) provides that a beneficial shareholder may assert
dissenters' rights as to the shares held on the beneficial shareholder's behalf
only if (a) the beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights and (b) the beneficial
shareholder dissents with respect to all shares beneficially owned by the
beneficial shareholder.
AMEP will require that, when a record shareholder dissents with respect to
the shares held by any one or more beneficial shareholders, each such beneficial
shareholder must certify to AMEP that the beneficial shareholder and the record
shareholder or shareholders of all shares owned beneficially by the beneficial
shareholder have asserted, or will timely assert, dissenters' rights as to all
such shares as to which there is no limitation on the ability to exercise
dissenters' rights.
Procedure for Exercise of Dissenters' Rights. The notice accompanying this
Proxy Statement states that shareholders of AMEP are entitled to assert
dissenter's rights under CBCA Article 113. An AMEP shareholder who wishes to
assert dissenters' rights must: (a) cause AMEP to receive before the vote is
taken on the Merger at the Special Meeting, written notice of the shareholder's
intention to demand payment for the shareholder's shares if the Merger is
effected; and (b) not vote the shares in favor of the Merger. AN AMEP
SHAREHOLDER WHO DOES NOT SATISFY THE FOREGOING REQUIREMENTS WILL NOT BE ENTITLED
TO DEMAND PAYMENT FOR HIS OR HER SHARES UNDER CBCA ARTICLE 113.
If the Merger is approved at the Special Meeting, AMEP will send written
notice to dissenters who are entitled to demand payment for their shares. The
notice required by AMEP will be given no later than 10 days after the effective
time of the merger and: (a) state that the merger was authorized and state the
effective time or proposed effective date of the merger; (b) set forth an
address at which AMEP will receive payment demands and the address of a place
where certificates must be deposited; (c) inform holders of uncertificated
shares to what extent transfer of the shares will be restricted after the
payment demand is received; (d) supply a form demanding payment, which form will
request a dissenter to state an address to which payment is to be made; (e) set
the date by which AMEP must receive the payment demand and certificates for
shares, which date will not be less than 30 days after the date the notice is
given; (f) state that if a record AMEP shareholder dissents with respect to the
shares held by any one or more beneficial shareholders each such beneficial
shareholder must certify to AMEP that the beneficial shareholder and the record
shareholder or the record shareholders of all shares owned beneficially by the
beneficial shareholder have asserted, or will timely assert, dissenters' rights
as to all such shares as to which there is no limitation of the ability to
exercise dissenters' rights; and (g) be accompanied by a copy of CBCA Article
113.
A shareholder who is given a dissenters' notice and who wishes to assert
dissenters' rights must, in accordance with the terms of the dissenters' notice,
(a) cause AMEP to receive a payment demand (which may be a demand form
23
supplied by AMEP and duly completed or other acceptable writing) and (b)
deposit the shareholders' stock certificates. A shareholder who demands payment
in accordance with the foregoing retains all rights of a shareholder, except the
right to transfer the shares until the effective time, and has only the right to
receive payment for the shares after the effective time. A demand for payment
and deposit of certificates is irrevocable except that if the effective time
does not occur within 60 days after the date set by AMEP by which it must
receive the payment demand, AMEP will return the deposited certificates and
release the transfer restrictions imposed. If the effective time occurs more
than 60 days after the date set by AMEP by which it must receive the payment
demand, then AMEP shall send a new dissenters' notice. AN AMEP SHAREHOLDER WHO
DOES NOT DEMAND PAYMENT AND DEPOSIT SUCH SHAREHOLDER'S AMEP SHARE CERTIFICATES
AS REQUIRED BY THE DATE OR DATES SET FORTH IN THE DISSENTERS' NOTICE WILL NOT BE
ENTITLED TO DEMAND PAYMENT FOR SUCH SHAREHOLDERS AMEP SHARES UNDER CBCA ARTICLE
113, IN WHICH CASE, SUCH SHAREHOLDER'S WILL RECEIVE CASH AS PROVIDED BY THE
MERGER AGREEMENT.
At the effective time or upon receipt of a payment demand, whichever is
later, AMEP will pay each dissenter who complied with the notice requirements
referenced in the preceding paragraph, the AMEP estimate of the fair value of
the dissenter's shares plus accrued interest. Payment shall be accompanied by an
audited balance sheet as of the end of the most recent fiscal year of AMEP or,
if that is not available, AMEP's balance sheet as of the end of the fiscal year
not ending more than sixteen months before the date of payment, and an audited
income statement for that year, and an audited statement of changes in
shareholders' equity for that year and an audited statement of cash flow for
that year, as well as the latest available financial statements, if any, for the
interim period, which interim financial statements will be unaudited. Payment
will also be accompanied by a statement of the estimate of AMEP of the fair
value of the shares and an explanation of how the interest was calculated, along
with a statement of the dissenter's right to demand payment and a copy of CBCA
Article 113.
If a dissenter disagrees with the AMEP payment or offer, such dissenter may
give notice to AMEP in writing of the dissenter's estimate of fair value of the
dissenter's shares and of the amount of interest due and may demand payment of
such estimate, less any payment made prior thereto, or reject the offer of AMEP
and demand payment of the fair value of the shares and interest due if: (a) the
dissenter believes that the amount paid or offered is less than the fair value
of the shares or that the interest due was incorrectly calculated, (b) AMEP
fails to make payment within 60 days after the date set by AMEP by which it must
receive the payment demand or (c) AMEP does not return deposited certificates in
the event the effective time is 60 days after the date set by AMEP by which the
payment demand must be received by the shareholder asserting dissenters' rights.
A DISSENTER WAIVES THE RIGHT TO DEMAND PAYMENT UNDER THIS PARAGRAPH UNLESS SUCH
DISSENTER CAUSES AMEP TO RECEIVE THE NOTICE REFERENCED IN THIS PARAGRAPH WITHIN
30 DAYS AFTER AMEP MAKES OR OFFERS PAYMENT FOR THE SHARES OF THE DISSENTER, IN
WHICH EVENT, SUCH DISSENTER WILL RECEIVE CASH AS PROVIDED BY THE MERGER
AGREEMENT.
Judicial appraisal of Shares. If a demand for payment made by a dissenter
as set forth above is unresolved, AMEP may, within 60 days after receiving the
payment demand, commence a proceeding and petition a court to determine the fair
value of the shares and accrued interest. If AMEP does not commence the
proceeding within the 60 day period, it must pay to each dissenter whose demand
remains unresolved the amount demanded. AMEP must commence the proceeding
described above in the District Court of the County of Boulder, Colorado. AMEP
must make all dissenters whose demands remain unresolved parties to the
proceeding as in an action against their shares, and all parties must be served
with a copy of the petition. Jurisdiction in which the proceeding is commenced
is plenary and exclusive. One or more persons may be appointed by the court as
appraisers to receive evidence and recommend a decision on the question of fair
value. The appraisers will have the powers described in the court order
appointing them. The parties to the proceeding will be entitled to the same
discovery rights as parties in other civil proceedings. Each dissenter made a
party to the proceeding will be entitled to judgment for the amount, if any, by
which the court finds the fair value of the dissenter's shares, plus interest,
to exceed the amount paid by AMEP, or for the fair value, plus interest, of a
dissenter's shares for which AMEP elected to withhold payment.
The court in an appraisal proceeding will determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court will assess the costs against AMEP, except
that the court may assess costs against all or some of the dissenters, in the
amount the court finds equitable, to the extent the court finds that the
dissenters acted arbitrarily, vexatiously or not in good faith in demanding
payment. The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (a) against
AMEP and in favor of any dissenters if the court finds that AMEP did not
substantially comply with the procedures for exercise of dissenters' rights set
forth in CBCA Article 113; or (b) against either AMEP or one or more dissenters,
24
in favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in good
faith with respect to the rights provided by CBCA Article 113. If the court
finds that the services of counsel for any dissenter were of substantial benefit
to the other dissenters similarly situated, and that the fees for those services
should not be assessed against AMEP, the court may award to such counsel
reasonable fees to be paid out of the amounts awarded to the dissenters who were
benefited.
Delisting and Deregistration of AMEP Common Stock after the Merger
AMEP common stock is currently listed on the NASDAQ and the Pacific.
Because all of the AMEP common stock outstanding immediately prior to the date
of completion of the merger will be cancelled in exchange for the right to
receive the merger consideration as a result of the merger, the AMEP common
stock will be delisted from the NASDAQ and the Pacific if the merger is
approved.
AMEP common stock is currently registered under the Exchange Act. GC has
stated its intention to terminate registration of AMEP common stock under the
Exchange Act following the merger. The termination of registration of the common
stock under the Exchange Act will reduce the information required to be
furnished to the SEC and will make certain of the provisions of the Exchange
Act, such as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy or information statement in connection with
shareholders meetings, no longer applicable.
THE MERGER AGREEMENT
The merger agreement provides for the merger of GC SUB with and into AMEP,
with AMEP continuing as the surviving corporation after the merger. This section
of the proxy statement describes material provisions of the merger agreement.
Because the description of the merger agreement contained in this proxy
statement is a summary, it does not contain all of the information that may be
important to you. You should carefully read the entire copy of the merger
agreement attached as Exhibit A to this proxy statement before you decide how to
vote. The merger agreement attached as Exhibit A to this proxy statement
qualifies the description of the merger agreement contained in this document in
its entirety and is incorporated by reference into this proxy statement.
Completion of the Merger
Closing. Unless the parties agree otherwise, the closing of the merger will
take place as promptly as practicable and no later than the second business day
after the date on which certain closing conditions have been satisfied or waived
or any other time as agreed to in writing by GC and AMEP.
Effective Time of the Merger. The merger will be effective upon the filing
of the articles of merger with the Secretary of State of Colorado, or at such
time not to exceed 30 days after acceptance for record as agreed to by GC and
AMEP. See "- Conditions to the Merger" on page __.
Effect of Merger. At the effective time, all outstanding shares, other than
shares held by GC, of common stock will be converted into the right to receive
$10.00 per share in cash. Following the merger, AMEP will become a wholly owned
subsidiary of GC.
Representations and Warranties of AMEP and GC
The merger agreement contains various representations and warranties of
AMEP relating to:
- proper organization and good standing of AMEP and its subsidiaries;
- the charter and bylaws of AMEP; the capitalization of AMEP;
- the corporate authorization and enforceability of the merger
agreement;
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- compliance with laws;
- the filing of SEC reports and the preparation of financial statements;
- the absence of certain material adverse changes or events;
- employee benefit plans and labor matters; material contracts and debt
instruments; litigation;
- environmental matters; trademarks, patents and copyrights; taxes;
- title to personal property, real property and leases;
- insurance;
- AMEP Board recommendation;
- brokers;and
- required shareholder vote to approve the merger and merger agreement
and state takeover statutes.
The merger agreement contains various representations and warranties of GC
and GC SUB relating to:
- proper organization and good standing of GC;
- compliance with laws;
- absence of litigation;
- brokers;
- purpose of GC SUB; and
- financing of the merger.
Certain Covenants
The merger agreement contains certain covenants relating to:
- filing of this proxy statement and a transaction statement on Schedule
13E-3;
- AMEP's obligation to call a shareholders' meeting to vote on the
approval of the merger and merger agreement;
- access to information and confidentiality of information;
- election of directors of the surviving corporation after the merger;
26
- directors' and officers' indemnification and insurance;
- further actions, consents and filings; and
- public announcements.
No Solicitation of Acquisition Transactions
The merger agreement provides that AMEP and its subsidiaries, officers,
directors, employees, agents or other representatives will not initiate, solicit
or encourage any inquiries or the making of any proposal or offer with respect
to:
- a merger, reorganization, business combination, liquidation,
dissolution or other similar transaction involving AMEP;
- the purchase or sale of all or any significant portion of the assets
of AMEP and its subsidiaries, taken as a whole; or
- the purchase or sale of any equity securities of AMEP.
AMEP, its subsidiaries and their officers, directors, employees, agents or
other representatives will not have any discussion with or provide any
confidential information relating to AMEP or its subsidiaries to any person
relating to a competing transaction or engage in or facilitate any negotiations
concerning a competing transaction unless:
- AMEP concludes in good faith, after consultation with independent
financial advisors, that such competing transaction would, if
consummated, be more favorable to AMEP's shareholders than the merger
(a "Superior Proposal");
- the AMEP Board determines in good faith, after consultation with
independent legal counsel, that such action is necessary for the AMEP
Board to act consistently with its fiduciary duty;
- prior to providing any AMEP confidential information in response to
such Superior Proposal, AMEP receives a confidentiality agreement with
such person; and
- prior to providing any AMEP confidential information or entering into
any discussions with such person making a Superior Proposal, AMEP
gives notice to GC of the identity of the person making, and the terms
of, the Superior Proposal.
Conduct of the Business of AMEP before the Merger
Pursuant to the merger agreement, AMEP has agreed that, among other things,
from August 14, 2000 and prior to the merger, unless GC will otherwise consent
in writing, which consent will not be unreasonably withheld or delayed, it will,
and, where applicable, will cause each of its subsidiaries to:
- conduct its business in the ordinary course of business and consistent
with past practice;
- use its reasonable best efforts to keep available the services of the
present officers, significant employees and consultants of AMEP and
its subsidiaries and to preserve the current relationship with
customers, suppliers and others having significant business relations
with them, in order to preserve substantially intact its business
organization;
- not amend organizational documents;
- not issue, sell, dispose of, or otherwise encumber any shares of
capital stock, any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any
other ownership interest, of AMEP or any of its subsidiaries, except
for the issuance of any shares of capital stock issuable pursuant to
27
the exercise of any AMEP stock options and any AMEP warrants
outstanding as of August 14, 2000;
- not issue, sell, dispose of, or otherwise encumber any property or
assets of AMEP or its subsidiaries, except in the ordinary course of
business and in a manner consistent with past practice, provided that
the aggregate amount of any such sale or disposition or pledge, grant,
transfer, lease, license, guarantee or encumbrance of the property or
assets will not exceed $50,000;
- not declare, set aside, make or pay any dividend or distribution
payable in cash, stock, property or otherwise, other than the dividend
in the aggregate amount of $780,750 as previously announced;
- not reclassify, combine, split, subdivide, redeem, purchase or
otherwise acquire its outstanding capital stock;
- not acquire any interest in any business organization other than
acquisitions of assets in the ordinary course of business consistent
with past practice which are not, in the aggregate, in excess of
$50,000 or purchases of inventory for resale in the ordinary course of
business and consistent with past practice;
- not terminate, cancel or request or agree to any material change in
any material contract of AMEP, or enter into any contract or agreement
material to the business, results of operations or financial condition
of AMEP and its subsidiaries, other than in the ordinary course of
business and consistent with past practice;
- not make or authorize certain capital expenditures;
- not enter into or amend any contract or arrangement that, if fully
performed, would not be permitted under the previous four provisions;
- not increase the compensation of officers or employees, except for
increases in accordance with past practices in salaries of employees
who are not officers of AMEP;
- not grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of AMEP or its subsidiaries not already contracted for;
- not establish, adopt, enter into or amend any employee benefit
agreement, except as required by the merger agreement or the terms of
a collective bargaining agreement or a contractual obligation existing
on the date of the merger agreement;
- not take any action with respect to modifying accounting policies or
procedures, other than actions in the ordinary course of business,
consistent with past practice or the requirements of accounting
principles generally accepted in the United States and as advised by
AMEP's regular certified independent public accountants;
- not waive, release, assign, settle or compromise any material claims
or litigation involving money damages in excess of $50,000;
- not make any material tax election or settle any material tax
liability.;
- not authorize or enter into any formal or informal agreement or commit
to do any of the foregoing or permit any subsidiary to do any of the
foregoing;
- not take any action that will likely result in the representations and
warranties becoming false;
- not enter into any transaction other than in the ordinary course of
business or as permitted above; and
- not take any action that could reasonably be expected to have a
materially adverse effect.
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Pursuant to the merger agreement, each of AMEP and GC will give prompt
notice to the other of:
-any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
merger;
- any notice or other communication from any governmental entity in
connection with the merger;
- any actions or proceedings commenced or, to the best of the party's
knowledge, threatened in writing against or relating to GC, AMEP or
their subsidiaries that relate to the completion of the merger;
- the occurrence of a default or event that will become a default under
any of AMEP's material contracts; and
- any change that is reasonably likely to result in a material adverse
effect under the merger agreement or is likely to delay or impede the
ability of either GC or AMEP to complete the transactions contemplated
in the merger agreement or to fulfill its obligations under the merger
agreement.
Employee Stock Plans
Effective as of the completion of the merger, each outstanding AMEP stock
option, whether or not exercisable, will be deemed converted into, and the
holders of each such option will be entitled to receive upon surrender of the
option for cancellation, an amount of cash equal to the product of (i) the
positive difference, if any, between $10.00 and the exercise price of such
option; and (ii) the number of shares of common stock purchasable upon exercise
of such option.
Indemnification and Insurance
Following the merger, the articles and bylaws of the surviving corporation
will contain the provisions regarding liability of directors and indemnification
of directors and officers that are set forth, as of August 14, 2000, in thE
articles and bylaws of AMEP. For a period of six years from the completion of
the merger those provisions will not be amended, replaced or otherwise modified
in a manner that would affect adversely the rights of individuals who at or
prior to the completion of the merger were directors, officers, employees,
fiduciaries or agents of AMEP. In addition, for a period of three years from the
completion of the merger, the surviving corporation will maintain insurance
policies for directors and officers with coverage relating to claims arising
from facts or events that occurred prior to the completion of the merger as
extensive as AMEP's existing policies.
The merger agreement provides that, except as otherwise agreed, following
the merger, the surviving corporation will indemnify each present and former
director and officer of AMEP for all costs incurred in connection with any
claim, action, suit, proceeding or investigation, arising out of matters
existing or occurring at or prior to the completion of the merger.
Conditions to the Merger
Conditions to Each Party's Obligation to Complete the Merger. The
respective obligation of AMEP and GC to effect the merger is subject to the
satisfaction of the following conditions, unless waived by the parties:
- Shareholders Approval. The merger and merger agreement will have been
approved by the requisite affirmative vote of the shareholders of AMEP
under applicable law, and a majority of the votes cast by shareholders
other than GC or Geneve.
- No Proceedings. No preliminary or permanent injunction, decree or
other order issued by any governmental entity or other legal restraint
or prohibition preventing the completion of the merger will be in
effect, and no law will have been enacted or adopted that enjoins,
prohibits or makes illegal the completion of the merger.
Additional Conditions to the Obligation of GC. The obligation of GC to
effect the merger is further subject to the satisfaction of the following
additional conditions, unless waived by GC:
29
- Representations and Warranties. The representations and warranties of
AMEP contained in the merger agreement will be true and correct in all
material respects as of the time of the merger as if made at and as of
such time, except that the representations and warranties that address
matters only as of a particular date will remain true and correct in
all material respects as of such date.
- Performance of Obligations. AMEP will have performed or complied in
all material respects with all agreements and covenants required by
the merger agreement.
- Governmental Approvals. All consents, approvals, waivers and
authorizations required to be obtained to complete the merger will
have been obtained from all governmental entities, except if the
failure to obtain any such consents would not result in a material
adverse effect under the merger agreement.
- Third Party Consents. All consents, approvals, waivers and
authorizations of third parties the failure of which to obtain would
result in a material adverse effect under the merger agreement will
have been obtained.
- Any litigation commenced against GC, AMEP or certain of their
affiliates and relating to the merger is concluded in a manner
satisfactory to GC. See "Regulatory Approvals" on page __.
- Dissenters. The holders of not more than 5% of the outstanding common
stock of AMEP other than Geneve or GC shall have exercised their
dissenters' rights demanding payment under the Colorado statute.
Additional Conditions to the Obligations of AMEP. The obligation of AMEP to
effect the merger is further subject to the satisfaction of the following
additional conditions, unless waived by AMEP:
- Performance of Obligations/Representations and Warranties. GC will
have performed or complied in all material respects with all of their
agreements and covenants in the merger agreement, and the
representations and warranties of GC will be true and correct in all
material respects as of the time of the merger as if made at and as of
such time, except that those representations and warranties that
address matters only as of a particular date will remain true and
correct in all material respects as of such date.
Organization of the Business of the Surviving Corporation after the Merger
Following the merger between GC SUB and AMEP, AMEP will be a wholly owned
subsidiary of GC. Pursuant to the merger agreement, the articles of
incorporation of GC SUB, as in effect immediately prior to the time of the
merger, will be the articles of AMEP following the merger, except that it will
be amended to provide that the name of the surviving corporation will be
"American Educational Products, Inc." Pursuant to the merger agreement, the
bylaws of GC SUB, as in effect immediately prior to the time of the merger will
be the bylaws of AMEP following the merger. After the merger and subject to the
provisions of the merger agreement, the organizational documents may be amended
as provided by applicable law and by the organizational documents of AMEP.
Geneve is exploring an option, prior to the merger, of merging GC with
Nasco International, Inc., a subsidiary of Geneve. In the event that transaction
is completed, AMEP will become a wholly owned subsidiary of Nasco.
Termination, Amendment or Waiver
Termination. The merger agreement may be terminated at any time prior to
the merger, whether before or after the approval by the shareholders of AMEP:
- by the mutual written consent of the boards of directors of AMEP and
GC;
- by either GC or AMEP if:
- the merger is not completed by October 30, 2000, so long as the
delay or default was not on the part of the terminating party;
- the merger is restrained, enjoined or otherwise prohibited by a
court order or any law is enacted that enjoins, prohibits or
makes illegal completion of the merger; or
30
- any required approval of the merger or merger agreement by the
shareholders of AMEP is not obtained due to the failure to obtain
the required vote at AMEP's shareholders meeting; or
- by GC upon a breach of, or failure to perform in any material respect,
any representation, warranty, covenant or agreement on the part of
AMEP contained in the merger agreement, which had caused certain
conditions to the obligation of AMEP to effect the merger to be
incapable of being satisfied, provided that this breach or failure
cannot be or has not been cured within 30 days after the giving of
notice of such breach or failure;
- by AMEP upon a breach of, or failure to perform in any material
respect, any representation, warranty, covenant or agreement on the
part of GC contained in the merger agreement, which had caused certain
conditions to the obligation of GC to effect the merger to be
incapable of being satisfied, provided that this breach or failure
cannot be or has not been cured within 30 days after the giving of
notice of such breach or failure;
by GC if:
- the AMEP Board withdraws, modifies or changes its recommendation of
the merger agreement in a manner adverse to GC or resolves to do so;
- after receiving a proposal relating to a competing transaction the
AMEP Board refuses to affirm its recommendation of the merger
agreement with GC upon request by GC;
- the AMEP Board recommends to its shareholders a competing transaction
or resolves to do so;
- the holders of more than 5% of the outstanding common stock of AMEP
(other than shares held by GC and all of its affiliates), shall have
exercised their dissenters' rights demanding payment under Colorado
law; or
- any litigation pending against GC, AMEP or certain of their affiliates
and relating to the merger is not terminated to the satisfaction of
GC.
Amendment. The merger agreement may be amended by action taken by the
parties' respective boards of directors, at any time prior to the time of the
merger. Following the approval of the merger agreement by AMEP shareholders, no
amendment will be made which would reduce the amount of or change the type of
consideration into which each share of AMEP common stock will be converted upon
the completion of the merger.
Waiver. At any time prior to the time of the merger, either party to the
merger agreement may, in writing:
- extend the time for the performance of any obligation or other act of
the other party to the merger agreement;
- waive any inaccuracy in the representations and warranties contained
in the merger agreement or in any document delivered pursuant to the
merger agreement; and
- waive compliance with any agreement or condition contained in the
merger agreement.
Expenses and Termination Fee
Expenses. The merger agreement provides that all costs and expenses
incurred in connection with the merger and merger agreement will be paid by the
party incurring those expenses, whether or not the merger is completed, except:
- if AMEP or GC terminates the merger agreement due to the failure of
AMEP's shareholders to approve the merger and merger agreement and at
the time of such failure there exists a publicly announced competing
transaction with respect to AMEP and within 12 months of the
termination of the merger agreement, AMEP
31
enters into an agreement with any third party with respect to a
competing transaction, which transaction is subsequently completed,
then AMEP will reimburse all reasonable documented expenses of GC
simultaneously with the consummation of such transaction, plus a
break-up fee in an amount of $475,000.
- If GC terminates the merger as a result of any litigation pending
against GC, AMEP or certain of their affiliates and relating to the
merger, GC shall reimburse AMEP for any costs incurred in connection
with the merger, up to the amount of $10,000.
The merger agreement provides that such reimbursements will be the sole and
exclusive remedy of the parties upon a termination of the merger agreement due
to failure of AMEP's shareholders to approve the merger and merger agreement;
provided however, that nothing in the merger agreement relieves any party from
liability for the willful breach of any of its representations or warranties,
and the breach of any of its covenants or agreements set forth in the merger
agreement.
32
SECURITY OWNERSHIP OF FIVE PERCENT BENEFICIAL OWNERS AND MANAGEMENT
Owners of More than Five Percent
The following table sets forth the class of shares of AMEP common stock,
and the amount and percentage of that class, beneficially owned by all persons
known by AMEP to be the beneficial owners of more than 5% of the shares of any
class of AMEP common stock on ______________, 2001:
NAME AND ADDRESS OF PERCENT
BENEFICIAL OWNER AMOUNT OF CLASS
- ---------------- ------ --------
G.C. Associates Holdings Corp............ 666,961 55%
Nicholas Fegen........................... 75,000 6%
Directors and Officers
The following table sets forth the number of shares of each class of AMEP
stock and the percentage of each class beneficially owned by each of the
directors, by certain executive officers and by all directors and officers as a
group on ________________, 2001:
COMMON STOCK
Amount %
------ ----
Clifford C. Thygesen 65,200(1) 5%
Frank L. Jennings 27,059(2) 2%
All officers and directors as
a group ( 4 persons) 82,259 7%
1 Includes 37,400 shares underlying stock options immediately exercisable at
prices ranging from $3.875 to $9.125 per share.
2 Includes 14,000 shares underlying stock options immediately exercisable at
prices ranging from $3.875 to $9.125 per share.
WHERE YOU CAN FIND MORE INFORMATION
AMEP files annual, quarterly and special reports, proxy statements and
other information with the Commission. In addition, because the merger is a
"going private" transaction, AMEP and GC have filed a Rule 13e-3 Transaction
Statement on Schedule 13E-3 with respect to the merger. The Schedule 13E-3 and
such reports, proxy statements and other information contain additional
information about AMEP. You may read and copy any reports, statements or other
information filed by AMEP at the Commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, New York, New York 10048. Please call the
Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Commission filings of AMEP are also available to the
public from commercial document retrieval services and at the website maintained
by the Commission - "http://www.sec.gov".
The Commission allows AMEP to "incorporate by reference" information
into this proxy statement. This means that AMEP can disclose important
information by referring to another document filed separately with the
Commission. The information incorporated by reference is considered to
be part of this proxy statement, and later information filed with the
SEC will update and supercede the information in this proxy statement.
AMEP incorporates by reference each document it files pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy
statement and prior to the Special Meeting. AMEP also incorporates by reference
33
into this proxy statement the following documents filed by it with the
Commission (File No. 1-13799) pursuant to the Exchange Act:
- AMEP's Annual Report on Form 10-KSB for the year ended December 31,
1999;
- AMEP's Quarterly Report on Form 10-QSB for the quarter ended September
30, 2000; and
- AMEP's Current Reports on Form 8-K, filed on April 24, 2000, May 4,
2000 and August 29, 2000. All subsequent documents filed by AMEP with
the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this proxy statement and prior to the date of
the Special Meeting will be deemed to be incorporated by reference
into this proxy statement and to be a part of it from the date of
filing of those documents.
AMEP undertakes to provide without charge to each person to whom a copy of
this proxy statement has been delivered, upon request, a copy of any or all of
the documents incorporated by reference herein, other than the exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the information that this proxy statement incorporates. Requests for copies
should be directed to American Educational Products, Inc., 6550 Gunpark Drive,
Suite 200, Boulder, Colorado 80301, Attention: Frank L. Jennings, Secretary
(Telephone number: (303) 527-3230).
If you would like to request documents from AMEP, please do so by
____________, 2001 to receive them before the Special Meeting.
AMEP's Board does not intend to bring any other matters to the shareholders
for consideration at the Special Meeting.
The proxy statement does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities, or the solicitation of a proxy, in any
jurisdiction to or from any person to whom it is not lawful to make any offer or
solicitation in such jurisdiction. The delivery of this proxy statement will not
create an implication that there has been no change in the affairs of AMEP since
the date of this proxy statement or that the information herein is correct as of
any later date.
You should rely on the information contained or incorporated by reference
in this proxy statement. AMEP has not authorized anyone to provide you with
information that is different from what is contained in this proxy statement.
This proxy statement is dated _____________, 2001. You should not assume that
the information contained in this proxy statement is accurate as of any date
other than such date, and the mailing of this proxy statement will not create
any implication to the contrary.
By Order of the Board of Directors
/s/ Frank L. Jennings
-----------------------------------------------
Frank L. Jennings, Secretary
______________, 2001
34
Exhibit A
AGREEMENT AND PLAN OF MERGER
Between
G.C. ASSOCIATES HOLDINGS CORP.
and
AMERICAN EDUCATIONAL PRODUCTS, INC.
Dated as of August 14, 2000
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Glossary of Defined Terms
ARTICLE I THE MERGER..........................................................1
SECTION 1.01.The Merger...................................................1
SECTION 1.02.Effective Time; Closing......................................1
SECTION 1.03.Effect of the Merger.........................................2
SECTION 1.04.Charter; Bylaws..............................................2
SECTION 1.05.Directors and Officers of the Surviving Corporation..........2
ARTICLE II CONVERSION OF SECURITIES IN THE MERGER..............................2
SECTION 2.01.Conversion of Capital Stock..................................2
SECTION 2.02.Payment for Shares...........................................3
SECTION 2.03.Employee Stock Options.......................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................5
SECTION 3.01.Organization and Qualification; Subsidiaries.................5
SECTION 3.02.Charter and Bylaws...........................................6
SECTION 3.03.Capitalization...............................................6
SECTION 3.04.Authority Relative to This Agreement.........................7
SECTION 3.05.No Conflict; Required Filings and Consents...................7
SECTION 3.06.Permits; Compliance..........................................8
SECTION 3.07.SEC Filings; Financial Statements............................8
SECTION 3.08.Absence of Certain Changes or Events.........................9
SECTION 3.09.Employee Benefit Plans; Labor Matters.......................10
SECTION 3.10.Contracts; Debt Instruments.................................12
SECTION 3.11.Absence of Litigation.......................................14
SECTION 3.12.Environmental Matters.......................................14
SECTION 3.13.Trademarks, Patents and Copyrights..........................16
SECTION 3.14.Taxes.......................................................17
SECTION 3.15.Property and Leases.........................................17
SECTION 3.16.Insurance...................................................18
SECTION 3.17.Board Recommendation........................................18
SECTION 3.18.Brokers.....................................................18
SECTION 3.19.Vote Required; State Takeover Statutes......................18
i
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........19
SECTION 4.01.Organization and Qualification..............................19
SECTION 4.02.No Conflict; Required Filings and Consents..................19
SECTION 4.03.Absence of Litigation.......................................20
SECTION 4.04.Brokers.....................................................20
SECTION 4.05.No Activities...............................................20
SECTION 4.06.Financing...................................................20
ARTICLE V COVENANTS..........................................................20
SECTION 5.01.Conduct of Business by the Company Pending the Closing......20
SECTION 5.02.Formation of New Subsidiary.................................23
SECTION 5.03.Notices of Certain Events...................................23
SECTION 5.04.Contractual Consents........................................23
ARTICLE VI ADDITIONAL AGREEMENTS..............................................23
SECTION 6.01.Proxy Statement; Schedule 13E-3.............................23
SECTION 6.02.Company Shareholders' Meeting...............................24
SECTION 6.03.Access to Information; Confidentiality......................25
SECTION 6.04.No Solicitation of Transactions.............................26
SECTION 6.05.Election of Directors.......................................27
SECTION 6.06.Directors' and Officers' Indemnification and Insurance......27
SECTION 6.07.Further Action; Consents; Filings...........................29
SECTION 6.08.Public Announcements........................................29
ARTICLE VII CONDITIONS TO THE MERGER.........................................29
SECTION 7.01.Conditions to the Obligations of Each Party to Consummate
the Merger..................................................29
SECTION 7.02.Conditions to the Obligations of the Company................30
SECTION 7.03.Conditions to the Obligations of Parent and Merger Sub......30
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...............................31
SECTION 8.01.Termination.................................................31
SECTION 8.02.Notice of Termination; Effect of Termination................32
SECTION 8.03.Amendment...................................................32
SECTION 8.04.Waiver......................................................33
SECTION 8.05.Expenses....................................................33
ARTICLE IX GENERAL PROVISIONS................................................34
SECTION 9.01.Non-Survival of Representations, Warranties and Agreements..34
SECTION 9.02.Notices.....................................................34
SECTION 9.03.Certain Definitions.........................................35
SECTION 9.04.Severability................................................36
ii
SECTION 9.05.Assignment; Merger Sub; Binding Effect; Benefit.............36
SECTION 9.06.Incorporation of Exhibits...................................36
SECTION 9.07.Specific Performance........................................36
SECTION 9.08.Governing Law...............................................36
SECTION 9.09.Submission to Jurisdiction; Venue...........................36
SECTION 9.10.Headings....................................................37
SECTION 9.11.Counterparts................................................37
SECTION 9.12.Entire Agreement............................................37
SECTION 9.13.Waiver of Jury Trial........................................37
iii
GLOSSARY OF DEFINED TERMS
Affiliate (S) .......................................... 9.03(a)
Agreement .......................................... Preamble
Articles of Merger.......................................... (S) 1.02
business day .......................................... (S) 9.03(c)
Common Stock .......................................... Recitals
Closing .......................................... (S) 1.02
Closing Date .......................................... (S) 1.02
Code .......................................... (S) 2.02(e)
Company .......................................... Preamble
Company Board .......................................... Recitals
Company Certificates........................................ (S) 2.02(a)
Company Common Stock........................................ Recitals
Company Option .......................................... (S) 2.03(a)
Company SEC Reports......................................... (S) 3.07(a)
Company Stock Plans......................................... (S) 2.03(a)
Company Shareholders' Meeting............................... (S) 6.01(a)
Company Subsidiaries........................................ (S) 3.01(a)
Competing Transaction....................................... (S) 6.04
Control .......................................... (S) 9.03(d)
controlled by .......................................... (S) 9.03(d)
Costs .......................................... (S) 6.06(d)
Disclosure Schedule......................................... (S) 3.01(a)
Effective Time .......................................... (S) 1.02
Environmental Claims........................................ (S) 3.12(b)
Environmental Laws.......................................... (S) 3.12(b)
Environmental Permit........................................ (S) 3.12(b)
ERISA .......................................... (S) 3.09(a)
Exchange Act .......................................... (S) 3.05(b)(i)
Expenses .......................................... (S) 8.05(a)
Governmental Entity......................................... (S) 3.05(b)
Hazardous Material.......................................... (S) 3.12(b)
Indemnified Parties......................................... (S) 6.06(d)
IRS .......................................... (S) 3.09(a)(iii)
Knowledge .......................................... (S) 9.03(e)
Law .......................................... (S) 3.05(a)(ii)
Letter of Transmittal....................................... (S) 2.02(b)
Material Adverse Effect..................................... (S) 3.01(a)
Material Contract .......................................... (S) 3.10(a)
Merge .......................................... Recitals
Merger Consideration........................................ (S) 2.01(a)
Merger Sub .......................................... Preamble
Multiemployer Plan.......................................... (S) 3.09(b)
Multiple Employer Plan...................................... (S) 3.09(b)
Order .......................................... (S) 7.01(b)
Parent .......................................... Preamble
iv
Paying Agent .......................................... (S) 2.02(a)
Permits .......................................... (S) 3.06
Person .......................................... (S) 9.03(f)
Plans .......................................... (S) 3.09(a)
Preferred Stock .......................................... (S) 3.03(c)
Proxy Statement .......................................... (S) 6.01(a)
Real Property .......................................... (S) 3.12(a)(ii)
Release .......................................... (S) 3.12(b)
Remedial Action .......................................... (S) 3.12(b)
Representatives .......................................... (S) 6.02(a)
Schedule 13E-3 .......................................... (S) 6.01(a)
SEC .......................................... (S) 3.07(a)
subsidiary(ies) .......................................... (S) 9.03(g)
Superior Proposal .......................................... (S) 6.04
Surviving Corporation....................................... (S) 1.01
Tax Returns .......................................... (S) 3.14
Taxes .......................................... (S) 3.14
Third Party Provision....................................... (S) 9.05
under common control with................................... (S) 9.03(d)
U.S. GAAP .......................................... (S) 3.07(b)
Waivers .......................................... (S) 3.23
v
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 14, 2000 (this
"Agreement"), between G.C. ASSOCIATES HOLDINGS CORP., a Delaware corporation
("Parent") and AMERICAN EDUCATIONAL PRODUCTS, INC., a Colorado corporation (the
"Company").
Upon the terms and subject to the conditions of this Agreement and in
accordance with the Colorado Business Corporation Act (the "CBCA"), Parent will
form a wholly owned subsidiary ("Merger Sub") and Parent will acquire, pursuant
to the merger (the "Merger") of Merger Sub with and into the Company, all of the
issued and outstanding shares of the Company's common stock, par value $.05 per
share (the "Company Common Stock"), at a price of $10.00 per share;
The Board of Directors of the Company (the "Company Board") has (i)
approved and deemed the Merger advisable upon the terms and subject to the
conditions set forth in this Agreement and (ii) recommended the approval of the
Merger and this Agreement by the shareholders of the Company; and
The Board of Directors of Parent has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Parent
and has approved and adopted this Agreement, the Merger and the other
transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending legally to be bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Provided that this Agreement shall not have been
terminated in accordance with Section 8.01, upon the terms and subject to
the conditions set forth in Article VII, and in accordance with the CBCA,
at the Effective Time (as defined below), Merger Sub shall be merged with
and into the Company. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. Provided that this Agreement shall not
have been terminated in accordance with Section 8.01, as promptly as
practicable and in no event later than the second business day following
the satisfaction or, if permissible, waiver of the conditions set forth in
clauses (a) through (c) of Section 7.01 (or such other date as may be
agreed to in writing by each of the parties hereto), the parties hereto
shall cause the Merger to be consummated by filing the articles of merger
(the "Articles of Merger") with the Secretary of State of Colorado (the
"SSC") in such form as is required by, and executed in accordance with, the
relevant provisions of the CBCA. The term "Effective Time" means the date
and time of the filing with, and the acceptance for record by, the SSC of
the Articles of Merger (or such later time, not to exceed 30 days after
such acceptance for record, as may be agreed in writing by each of the
parties hereto and specified in the Articles of Merger). Immediately prior
to the filing of the Articles of Merger, a closing (the "Closing") will be
held on the Closing Date at the offices of Kramer Levin Naftalis & Frankel
LLP, 919 Third Avenue, New York, New York (or such other place as the
parties hereto may agree).
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the CBCA.
Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all of the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of each of the Company and Merger Sub shall become
the debts, liabilities, obligations, restrictions, disabilities and duties
of the Surviving Corporation.
SECTION 1.04. Charter; Bylaws. At the Effective Time, (a) subject to the
provisions of Section 6.05(a), the charter of Merger Sub as in effect
immediately prior to the Effective Time shall be the charter of the
Surviving Corporation until thereafter amended as provided by law, the
bylaws and such charter of the Surviving Corporation, except that Article I
shall be amended to provide that the name of the Surviving Corporation
shall be "American Educational Products, Inc." and (b) the bylaws of Merger
Sub 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 charter of the Surviving Corporation and such bylaws.
SECTION 1.05. Directors and Officers of the Surviving Corporation. The directors
of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, each to hold office in accordance
with the charter and bylaws of the Surviving Corporation, and the officers
of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES IN THE MERGER
SECTION 2.01. Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:
(a) each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Common
Stock to be canceled pursuant to Section 2.01(b) hereof) shall be
converted into the right to receive $10.00 in cash (the "Merger
Consideration"), payable without interest to the holder of such share
of Company Common Stock, upon surrender of the Company Certificate
that formerly evidenced such share of Company Common Stock;
-2-
(b) each share of Company Common Stock owned by Parent or owned by any
direct or indirect wholly owned subsidiary of the Company or Parent
shall be canceled and extinguished without any conversion thereof and
no payment shall be made with respect thereto; and
(c) each issued and outstanding share of common stock, par value $.05 per
share, of Merger Sub will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving
Corporation.
SECTION 2.02. Payment for Shares.
(a) From and after the Effective Time, a bank or trust company designated
by Parent and reasonably acceptable to the Company shall act as paying
agent (the "Paying Agent") in effecting the payment of the Merger
Consideration in respect of certificates that, prior to the Effective
Time, represented shares of Company Common Stock entitled to payment
of the Merger Consideration pursuant to Section 2.01(a) (the "Company
Certificates"). From and after the Effective Time, Parent shall cause
to be provided to the Paying Agent cash in amounts necessary to pay
for all of the shares of Company Common Stock pursuant to Section
2.01.
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of a Company Certificate (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected,
and risk of loss and title to the Company Certificate shall pass, only
upon delivery of the Company Certificate to the Paying Agent) (the
"Letter of Transmittal") and (ii) instructions for use in surrendering
such Company Certificate in exchange for payment therefor. Upon the
surrender of each such Company Certificate, together with such Letter
of Transmittal, duly completed and validly executed in accordance with
the instructions therein, and such other documents as may be required
pursuant to such instructions, the Paying Agent shall pay the holder
of such Company Certificate an amount in cash equal to the product of
the Merger Consideration multiplied by the number of shares of Company
Common Stock formerly represented by such Company Certificate, in
consideration therefor, and such Company Certificate shall forthwith
be cancelled. Until so surrendered, each such Company Certificate
(other than Company Certificates representing shares of Company Common
Stock to be canceled pursuant to Section 2.01(b)) shall represent
solely the right to receive the aggregate Merger Consideration
represented thereby. No interest shall be paid or accrued on the
Merger Consideration. If the Merger Consideration (or any portion
thereof) is to be paid to any person other than the person in whose
name the Company Certificate surrendered is registered, it shall be a
condition to such right to receive such payment that the Company
Certificate so surrendered shall be properly endorsed or otherwise be
in proper form for transfer and that the person surrendering such
Company Certificate shall pay to the Paying Agent any transfer or
other similar Taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the
Company Certificate surrendered, or shall establish to the
satisfaction of the Surviving Corporation that such Tax has been paid
or is not applicable.
(c) At any time following the six-month anniversary of the Effective Time,
the Surviving Corporation shall be entitled to require the Paying
Agent to direct the delivery of any funds which previously had been
made available to the Paying Agent and were not disbursed to holders
of shares of Company Common Stock (including, without limitation, all
interest and other income received by the Paying Agent in respect of
all funds made available to it), Company Certificates and other
-3-
documents in its possession relating to the Merger, and the Paying
Agent's duties shall terminate. Thereafter, each holder of a Company
Certificate may surrender such Company Certificate to the Surviving
Corporation and receive in consideration therefor the aggregate Merger
Consideration relating thereto, without any interest. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent
shall be liable to any holder of a share of Company Common Stock for
any Merger Consideration delivered in respect of such share to a
public official pursuant to any abandoned property, escheat or other
similar law.
(d) At the close of business on the day of 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 any shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Company Certificates are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and
cancelled in return for the payment of the aggregate Merger
Consideration represented thereby, as provided in this Article II.
From and after the Effective Time, the holders of shares of Company
Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company Common
Stock, except as otherwise provided herein or by applicable law.
(e) The Surviving Corporation shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock such amounts as it is
required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or any applicable provision of state, local or foreign Tax
law. To the extent that amounts are so withheld by the Surviving
Corporation and paid to the applicable taxing authorities, such
withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by
the Surviving Corporation.
(f) If any Company Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming
such Company Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with
respect to such Company Certificate, the Paying Agent will issue in
exchange for such lost, stolen or destroyed Company Certificate the
Merger Consideration to which the holder thereof is entitled pursuant
to Section 2.01(a).
SECTION 2.03. Employee Stock Options.
(a) At the Effective Time, each option to purchase shares of Company
Common Stock (a "Company Option") outstanding and whether or not
exercisable as of the Effective Time granted pursuant to the Company's
Stock Option Plan, as amended through the date of this Agreement will
be deemed converted into, and the holder of each such option will be
entitled to receive from the Paying Agent upon surrender of the Option
for cancellation, an amount of cash equal to the product of (i) the
positive difference, if any, between the Merger Consideration and the
exercise price of each such Company Option; and (ii) the number of
shares of Company Common Stock covered by such Company Option.
-4-
Any payments related to such sale of Company Options shall be
subject to all applicable federal, state and local tax withholding
requirements.
(b) Prior to the Effective Date, the Company will have entered into
consulting agreements with certain individuals named in Section 2.03
of the Disclosure Schedule attached hereto, dated as of the date
hereof and forming a part of this Agreement (the "Disclosure
Schedule") to provide ongoing consulting services to the Company.
SECTION 2.04 Warrants. Each of the warrants of the Company, dated May 25, 2000,
to purchase Company Common Stock at a price of $8.00 per share subject to
adjustment, and the warrants of the Company, dated November 26, 1997 to
purchase Company Common Stock at a price of $10.00 per share subject to
adjustment (the "Company Warrants"), shall be exercisable at the respective
exercise price of each, from and after the Effective Time until the
respective expiration dates. Upon such exercise, if any, such Company
Warrants shall be entitled to receive an amount of cash equal to the Merger
Consideration multiplied by the number of Common Shares for which such
warrant was exercisable immediately prior to the Effective Time. Except as
aforesaid, the exercise of any Company Warrant shall remain subject to all
terms and conditions provided in the applicable Company Warrant and/or
Warrant Agreement. Each of the Company and Parent shall take all action
necessary to provide that, upon consummation of the Merger, all Company
Warrants outstanding immediately prior to the Effective Time shall be
exercisable for a cash amount as aforesaid and that full disclosure is
provided to the Warrant holders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries.
(a) Except as set forth in Section 3.01(a) of the Disclosure Schedule
attached hereto, dated as of the date hereof and forming a part of
this Agreement (the "Disclosure Schedule"), the Company and each
subsidiary of the Company (the "Company Subsidiaries") has been duly
organized, and is validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, as the case
may be, and has the requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of the Company and each of the Company Subsidiaries is
duly qualified or licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for
such failures to be so qualified or licensed and in good standing that
would not materially delay consummation of the Merger and would not
have a Material Adverse Effect. For purposes of this Agreement,
"Material Adverse Effect" means any event, circumstances, change in or
effect on the business of the Company and the Company Subsidiaries,
taken as a whole, that, when taken together with all other events,
circumstances, changes and effects occurring after the date hereof
that do not individually have a Material Adverse Effect and all other
-5-
circumstances that would, but for the fact that they do not
individually have a Material Adverse Effect, constitute a breach of
any representation or warranty made by the Company in this Agreement,
is, or is reasonably likely to be, materially adverse to the business,
financial condition, results of operations or prospects of the Company
and the Company Subsidiaries taken as a whole, and that, taken as a
whole, is, or is reasonably likely to result in a loss of not less
than $50,000 to the Company and the Company Subsidiaries.
(b) A true and complete list of all the Company Subsidiaries, together
with the jurisdiction of incorporation or organization of each Company
Subsidiary and the percentage of the outstanding capital stock of each
Company Subsidiary owned by the Company and each other Company
Subsidiary, is set forth in Section 3.01(b) of the Disclosure
Schedule. Except as disclosed in Section 3.01(b) of the Disclosure
Schedule, 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.
SECTION 3.02. Charter and Bylaws. The copies of the Company's charter and
bylaws, each as amended and restated, that are set forth as exhibits to the
Company's Form 10-Q for the quarter ended March 31, 2000 and the Form 10-K
for the year ended December 31, 1999, respectively, are complete and
correct copies thereof. Such charter and bylaws are in full force and
effect. The Company is not in violation of any of the provisions of its
charter or bylaws.
SECTION 3.03. Capitalization. The authorized capital stock of the Company
consists of (a) 100,000,000 shares of Common Stock, par value $0.05, and
(b) 50,000,000 shares of preferred stock, par value $0.01 (the "Preferred
Stock"). At the close of business on June 30, 2000, (i) 1,085,540 shares of
Common Stock, all of which were validly issued, fully paid and
nonassessable and no shares of Preferred Stock were issued and outstanding,
(ii) no shares of Common Stock were held in the treasury of the Company or
by the Company Subsidiaries, and (iii) 1,191,656 shares of Common Stock
were reserved for issuance in connection with the exercise of outstanding
Company Options and Company Warrants in the amounts and at the exercise
prices set forth in Section 3.03 of the Disclosure Schedule. Except as set
forth in Section 3.03 of the Disclosure Schedule, all publicly traded
shares of Common Stock and the warrants of the Company dated November 26,
1997 to purchase Company Common Stock at a price of $10.00 per share are
authorized for listing on the NASDAQ Small Cap Market ("NASDAQ") and the
Pacific Exchange ("Pacific"). Except as forth in Section 3.03 of the
Disclosure Schedule, from December 31, 1999 through the date hereof, the
Company has not issued any additional shares of capital stock, except
pursuant to the exercise of Company Options or the Employee Stock Purchase
Plan, nor has the Company granted any additional options, warrants or other
rights or entered into any agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company
-6-
or any Company Subsidiary or obligating the Company or any Company
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any Company Subsidiary. Except as issued
pursuant to the Company Stock Plans, pursuant to agreements or arrangements
described in Section 3.03 of the Disclosure Schedule or as set forth in the
Company SEC Reports (as defined herein), there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to
which the Company is a party or by which the Company is bound relating to
the issued or unissued capital stock of the Company or any Company
Subsidiary or obligating the Company or any Company Subsidiary to issue or
sell any shares of capital stock of, or other equity interests in, the
Company or any Company Subsidiary. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance prior to the Effective Time
on the terms and conditions specified in the instruments pursuant to which
they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 3.03 of the Disclosure
Schedule, there are no outstanding contractual obligations of the Company
or any Company Subsidiary to repurchase, redeem or otherwise acquire any
shares of Common Stock or any capital stock of any Company Subsidiary. Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and, except as set
forth in Section 3.03 of the Disclosure Schedule, each such share owned by
the Company or another Company Subsidiary is free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Company Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever,
except where failure to own such shares free and clear would not,
individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in Section 3.03 of the Disclosure Schedule, there are no material
outstanding contractual obligations of the Company or any Company
Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any Company Subsidiary or any
other person, other than obligations arising in the ordinary course of
business and obligations disclosed in the Company SEC Reports.
SECTION 3.04. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions (including, without limitation, the Merger) contemplated
herein to be consummated by the Company. The execution and delivery of this
Agreement by the Company and the consummation by the Company of such
transactions have been duly and validly authorized by all necessary
corporate action, including the unanimous approval of the Company Board,
and no other corporate proceedings on the part of the Company are necessary
to authorize this Agreement or to consummate such transactions (other than
the adoption of this Agreement by the requisite affirmative vote of the
shareholders of the Company as required by the CBCA). This Agreement has
been duly and validly executed and delivered by the Company and (assuming
due authorization, execution and delivery by Parent and Merger Sub)
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i)
conflict with or violate any provision of the charter or bylaws of the
Company or any equivalent organizational documents of the Company or
any Company Subsidiary, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.05(b) have
been obtained and all filings and obligations described in Section
3.05(b) have been made, conflict with or violate any United States or
non-United States or supranational law, statute, ordinance, rule,
regulation, code, executive order, injunction, judgment, decree or
other order ("Law") applicable to the Company or any Company
Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is bound or affected, or (iii) except as set forth
in Section 3.05(a)(iii) of the Disclosure Schedule, result in any
breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
-7-
any right of termination, amendment, acceleration or cancellation of,
or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any Company Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except,
with respect to clause (iii), for any such conflicts, violations,
breaches, defaults, or other occurrences which would not reasonably be
expected to (A) have a Material Adverse Effect or (B) prevent or
materially delay the performance of this Agreement by the Company.
(b) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any United States federal, state, county or local or
non-United States or supranational government, governmental,
regulatory or administrative authority, agency, instrumentality or
commission or any court, tribunal or judicial or arbitral body
("Governmental Entity"), except (i) for applicable requirements of the
Securities Exchange Act of 1934, as amended (together with the rules
and regulations promulgated thereunder, the "Exchange Act"), and the
NASDAQ and the Pacific; (ii) for applicable requirements relating to
the filing and recordation of appropriate merger documents pursuant to
the CBCA and as set forth in Section 3.05(b) of the Disclosure
Schedule; and (iii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
would not reasonably be expected to (A) prevent or materially delay
consummation of the Merger or (B) have a Material Adverse Effect.
SECTION 3.06. Permits; Compliance. Except as set forth in Section 3.06 of the
Disclosure Schedule, each of the Company and the Company Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and
orders of any Governmental Entity necessary for the Company or any Company
Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Permits"), except where the
failure to have, or the suspension or cancellation of, any of the Permits
would not reasonably be expected to (a) have a Material Adverse Effect or
(b) prevent or materially delay the performance of this Agreement by the
Company, and no suspension or cancellation of any of the Permits is pending
or, to the knowledge of the Company, threatened. Neither the Company nor
any Company Subsidiary is in conflict with, or in default or violation of,
(i) any Law applicable to the Company or any Company Subsidiary or by which
any property or asset of the Company or any Company Subsidiary is bound or
affected or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, Permit, franchise or other instrument or obligation to
which the Company or any Company Subsidiary is a party to or by which the
Company or any Company Subsidiary is bound by, except for any such
conflicts, defaults or violations that would not reasonably be expected to
(A) have a Material Adverse Effect or (B) prevent or materially delay the
performance of this Agreement by the Company.
SECTION 3.07. SEC Filings; Financial Statements.
(a) Except as set forth in Section 3.07 of the Disclosure Schedule, the
Company has timely filed all forms, reports and documents required to
be filed by it with the Securities and Exchange Commission ("SEC")
since January 1, 1993 through the date of this Agreement (all of the
above, including the forms, reports and documents set forth in Section
3.07 of the Disclosure Schedule, the "Company SEC Reports"). The
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Company SEC Reports and all forms, reports and documents to be filed
by the Company after the date hereof and prior to the Closing (i) were
or will be prepared in all material respects in accordance with the
requirements of the Exchange Act and the rules and regulations
promulgated thereunder, (ii) did or will not, as of their respective
dates, 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 made therein, in light of the
circumstances under which they were made, not misleading, and (iii)
did not and will not omit any document required to be filed as an
exhibit thereto. No Company Subsidiary is required to file any form,
report or other document with the SEC.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Company SEC Reports and each of the
financial statements to be included in forms, reports and documents to
be filed with the SEC after the date hereof and prior to the Closing,
was or will be prepared in accordance with United States generally
accepted accounting principles as promulgated by the American
Institute of Certified Public Accountants and as interpreted from time
to time by the staff of the SEC ("U.S. GAAP"), applied on a consistent
basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly or will present fairly,
the consolidated financial position, results of operations and cash
flow of the Company, and the consolidated Company Subsidiaries as at
the respective dates thereof and for the respective periods indicated
therein in all material respects, except as otherwise noted therein in
accordance with U.S. GAAP (subject, in the case of unaudited
statements, to normal year-end adjustments which were not and are not
expected to have a Material Adverse Effect).
(c) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the Company Subsidiaries as of December 31,
1999, including the notes thereto, or in any of the Company SEC
Reports filed subsequent to December 31, 1999 or in Section 3.07(c) of
the Disclosure Schedule, neither the Company nor any Company
Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in
accordance with U.S. GAAP, except for liabilities or obligations
incurred in the ordinary course of business since December 31, 1999
that would not reasonably be expected to, individually or in the
aggregate, (i) have a Material Adverse Effect or (ii) prevent or
materially delay the performance of this Agreement by the Company.
(d) The Company has heretofore furnished to Parent a complete and correct
copy of any amendment or modification, that has not yet been filed
with the SEC, to agreements, documents or other instruments that
previously have been filed by the Company with the SEC pursuant to the
Exchange Act.
SECTION 3.08. Absence of Certain Changes or Events. Since December 31, 1999,
except as contemplated by or as set forth in Section 3.08 of the Disclosure
Schedule or as expressly contemplated by this Agreement or as specifically
disclosed in the Company SEC Reports filed subsequent to December 31, 1999,
the Company and the Company Subsidiaries have conducted their businesses
only in the ordinary course and in a manner consistent with past practice,
except for a special cash dividend in the aggregate amount of $780,500
payable on October 30, 2000 prorata to holders of the Company's Common
Stock of record on August 18, 2000 (the "Cash Dividend"), and, since such
date, (a) there has not been any change, condition, event or development
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that has had a Material Adverse Effect, (b) there has not been any event
that could reasonably be expected to prevent or materially delay the
performance of this Agreement by the Company and (c) none of the Company or
any Company Subsidiary has taken any action that, if taken after the date
of this Agreement, would constitute a breach of any of the covenants set
forth in Section 5.01.
SECTION 3.09. Employee Benefit Plans; Labor Matters.
(a) Section 3.09(a) of the Disclosure Schedule lists each employee benefit
plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and each other plan,
policy, program, practice, agreement, understanding or arrangement
providing compensation or other benefits to any employee, former
employee or independent contractor of the Company (or to any dependent
or beneficiary thereof) which the Company maintains or under which the
Company has or could have any obligation or liability, whether
directly or as a member of a controlled group of corporations, a
controlled group of trades or businesses or an affiliated service
group within the meaning of Section 414 of the Code (whether
contingent or actual) (each, a "Plan"). No Plan is or was subject to
Title IV of ERISA. Each Plan is in writing and the Company has
furnished or made available to Parent a true and complete copy of each
material Plan and has delivered or made available to Parent a true and
complete copy of each material document, if applicable, prepared in
connection with each such Plan, including, without limitation, (A) a
copy of each trust or other funding arrangement, (B) each summary plan
description and summary of material modifications, (C) the most
recently filed Internal Revenue Service ("IRS") Form 5500, (D) the
most recently received IRS determination letter for each such Plan,
and (E) the most recently prepared actuarial report and financial
statement in connection with each such Plan. Neither the Company nor
any Company Subsidiary has any express or implied commitment, whether
legally enforceable or not, (i) to create, incur liability with
respect to or cause to exist any other employee benefit plan, program
or arrangement, (ii) to enter into any contract or agreement to
provide compensation or benefits to any individual, or (iii) to
modify, change or terminate any Plan, other than with respect to a
modification, change or termination required by ERISA or the Code.
(b) Except as set forth in Section 3.09(b) of the Disclosure Schedule,
none of the Plans (i) provides for the payment of separation,
severance, termination or similar-type benefits to any person, (ii)
obligates or obligated the Company or any Company Subsidiary to pay,
or segregate any funds to pay (into a trust or otherwise), separation,
severance, termination or similar-type benefits solely or partially as
a result of any transaction contemplated by this Agreement, or (iii)
obligates or obligated the Company or any Company Subsidiary to make
any payment, or segregate any funds to pay (into a trust or
otherwise), or provide any benefit as a result of a "change in
control", within the meaning of such term under Section 280G of the
Code solely or partially as a result of any transaction contemplated
by this Agreement. Except as set forth in Section 3.09(b) of the
Disclosure Schedule, none of the Plans provides for or promises
retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company or any Company
Subsidiary. Each of the Plans is subject only to the Laws of the
United States or a political subdivision thereof.
(c) Each Plan is now and always has been operated in all material respects
in accordance with its terms and the requirements of all applicable
Law including, without limitation, ERISA and the Code. The Company and
the Company Subsidiaries have performed all obligations required to be
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performed by them under, are not in material default under or in
violation of, and have no knowledge of any default or violations by
any party to, any Plan. No action is pending or, to the knowledge of
the Company, threatened with respect to any Plan (other than claims
for benefits in the ordinary course), and, to the Company's knowledge,
no fact or event exists that could reasonably be expected to give rise
to any such action.
(d) Each Plan that is intended to be qualified under Section 401(a) or
Section 401(k) of the Code has heretofore been determined by the IRS
so to qualify, and if submitted and assuming all amendments required
by the IRS were made, the Company believes that such Plans would
receive a favorable determination letter from the IRS with respect to
the changes required by the Small Business Job Protection Act of 1996,
the General Agreement on Tariffs and Trade, the Tax Reform Act of
1997, and the Uniformed Services Employment and Reemployment Rights
Act of 1994, and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under
Section 501(a) of the Code has received a determination letter from
the IRS that it is so exempt, and no fact or event has occurred since
the date of such determination letter or letters from the IRS to
adversely affect the qualified status of any such Plan or the exempt
status of any such trust.
(e) There has not been any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) for which an
exemption is not available with respect to any Plan. Neither the
Company nor any Company Subsidiary has incurred any liability under,
arising out of or by operation of Title IV of ERISA, including,
without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to
Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan
or Multiple Employer Plan, and no fact or event exists which could
reasonably be expected to give rise to any such liability.
(f) All contributions, premiums or payments required to be made with
respect to any Plan have been made on or before their due dates. All
such contributions have been fully deducted for income tax purposes to
the extent permitted by applicable Law and no such deduction has been
challenged or disallowed by any Governmental Entity and, to the
Company's knowledge, no fact or event exists which could reasonably be
expected to give rise to any such challenge or disallowance.
(g) Except as set forth in Section 3.09(g) of the Disclosure Schedule, all
directors and officers of the Company and the Company Subsidiaries are
under written obligation to the Company and the Company Subsidiaries
to maintain in confidence all confidential or proprietary information
acquired by them in the course of their employment and to assign to
the Company and the Company Subsidiaries all inventions made by them
within the scope of their employment during such employment and for a
reasonable period thereafter.
(h) Except as set forth in Section 3.09(h) of the Disclosure Schedule or
as disclosed in the Company SEC Reports, (i) there are no
controversies pending or, to the knowledge of the Company, threatened
between the Company or any Company Subsidiary and any of their
respective employees; (ii) neither the Company nor any Company
Subsidiary is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or
any Company Subsidiary, nor, to the knowledge of the Company, are
-11-
there any activities or proceedings of any labor union to organize any
such employees; (iii) neither the Company nor any Company Subsidiary
has breached or otherwise failed to comply with any provision of any
such agreement or contract, and there are no grievances outstanding
against the Company or any Company Subsidiary under any such agreement
or contract; (iv) there are no unfair labor practice complaints
pending against the Company or any Company Subsidiary before the
National Labor Relations Board or any current union representation
questions involving employees of the Company or any Company
Subsidiary; and (v) there is no strike, slowdown, work stoppage or
lockout, or, to the knowledge of the Company, threat thereof, by or
with respect to any employees of the Company or any Company
Subsidiary. The consent of the labor unions which are a party to the
collective bargaining agreements listed in Section 3.09(h) of the
Disclosure Schedule is not required to consummate the Merger.
(i) Except as set forth in Section 3.09(i) of the Disclosure Schedule or
as disclosed in the Company SEC Reports, the Company and the Company
Subsidiaries are in material compliance with all applicable laws
relating to the employment of labor, including those relating to
wages, hours, collective bargaining and the payment and withholding of
taxes and other sums as required by the appropriate Governmental
Entity and has withheld and paid to the appropriate Governmental
Entity or are holding for payment not yet due to such Governmental
Entity all amounts required to be withheld from employees of the
Company or any Company Subsidiary and are not liable for any
significant arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing. The Company and the
Company Subsidiaries have paid in full to all employees or adequately
accrued for in accordance with U.S. GAAP consistently applied all
wages, salaries, commissions, bonuses, benefits and other compensation
due to or on behalf of such employees, and there is no claim with
respect to payment of wages, salary or overtime pay that has been
asserted or is now pending or, to the Company's knowledge, threatened
before any Governmental Entity with respect to any persons currently
or formerly employed by the Company or any Company Subsidiary. Except
as set forth in Section 3.09(i) of the Disclosure Schedule, neither
the Company nor any Company Subsidiary is a party to, or otherwise
bound by, any consent decree with, or citation by, any Governmental
Entity relating to employees or employment practices. Except as set
forth in Section 3.09(i) of the Disclosure Schedule, there is no
charge or proceeding with respect to a violation of any occupational
safety or health standards that has been asserted or is now pending
or, to the Company's knowledge, threatened with respect to the
Company. Except as set forth in Section 3.09(i) of the Disclosure
Schedule or as disclosed in the Company SEC Reports, there is no
charge of discrimination in employment or employment practices, for
any reason, including, without limitation, age, gender, race, religion
or other legally protected category, which has been asserted or is now
pending or, to the knowledge of the Company, threatened before the
United States Equal Employment Opportunity Commission, or any other
Governmental Entity in any jurisdiction in which the Company or any
Company Subsidiary have employed or employ any person.
SECTION 3.10. Contracts; Debt Instruments.
(a) Set forth in subsections (i) through (viii) of Section 3.10(a) of the
Disclosure Schedule is a true and accurate list of all contracts and
agreements of the types described in such subsections to which the
Company or any Company Subsidiary is a party as of the date hereof
(such contracts, agreements and arrangements as required to be set
forth in Section 3.10(a) of the Disclosure Schedule, together with
those listed in Section 3.09(a) of the Disclosure Schedule,
-12-
and subject to the proviso at the end of paragraph (a) of this Section
3.10 being the "Material Contracts"):
(i) as of the date of this Agreement, each contract and agreement
which (A) is likely to involve consideration of more than
$50,000, in the aggregate, during the calendar year ending
December 31, 2000 or (B) is likely to involve consideration of
more than $100,000, in the aggregate, over the remaining term of
such contract, except for purchase orders arising in the usual
and ordinary course of business and consistent with past
practices (provided that in any case and without regard to the
proviso at the end of paragraph (a) of this Section 3.10, the top
15 purchase orders are set forth in Section 3.10(a)(i) of the
Disclosure Schedule) and which, in either case, cannot be
canceled by the Company or any Company Subsidiary without penalty
or further payment and without more than 90 days' notice;
(ii) all material broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contracts and
agreements to which the Company or any Company Subsidiary is a
party, in each case, not cancelable without penalty on not more
than 90 days' notice;
(iii)all material management contracts (excluding contracts for
employment) and contracts with other consultants, including any
contracts involving the payment of royalties or other amounts
calculated based upon the revenues or income of the Company or
any Company Subsidiary or income or revenues related to any
product of the Company or any Company Subsidiary to which the
Company or any Company Subsidiary is a party;
(iv) all material contracts and agreements evidencing indebtedness of
the Company or any Company Subsidiary;
(v) as of the date hereof, all material contracts and agreements with
any Governmental Entity to which the Company or any Company
Subsidiary is a party;
(vi) all contracts and agreements that materially limit, or purport to
materially limit, the ability of the Company or any Company
Subsidiary to compete in any line of business or with any person
or entity or in any geographic area or during any period of time;
(vii)all material contracts or arrangements that result in any person
or entity holding a power of attorney from the Company or any
Company Subsidiary that relates to the Company, any Company
Subsidiary or their respective businesses; and
(viii) all other contracts and agreements, whether or not made in the
ordinary course of business, which are material to the Company
and any Company Subsidiary or the conduct of its businesses, or
the absence of which would prevent or materially delay
consummation of the Merger or otherwise prevent or materially
delay the Company from performing its obligations under this
Agreement or would have a Material Adverse Effect.
With respect to Sections 3.10
(a) (i) through (v) and Section 3.10(a)(viii), all contracts involving
consideration or the payment of less than $50,000 shall be deemed to
be not material; provided, however, that any contract in excess of
$50,000 is not necessarily material.
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(b) Except as would not prevent or materially delay consummation of the
Merger or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement and would not have a
Material Adverse Effect, (i) each Material Contract is a legal, valid
and binding agreement, and, to the Company's knowledge, none of the
Material Contracts is in default by its terms or has been canceled by
the other party; (ii) to the Company's knowledge, no other party is in
breach or violation of, or default under, any Material Contract; (iii)
the Company and the Company Subsidiaries are not in receipt of any
claim of default under any Material Contract; and (iv) except as set
forth in Section 3.10(b)(iv) of the Disclosure Schedule, neither the
execution of this Agreement nor the consummation of any transaction
contemplated hereby shall constitute a default, give rise to
cancellation rights, or otherwise materially and adversely affect any
of the Company's rights under any Material Contract. The Company has
furnished or made available to Parent true and complete copies of all
Material Contracts, including any amendments thereto.
(c) Set forth in Section 3.10(c) of the Disclosure Schedule is a
description of any material changes to the amount and material terms
of the indebtedness of the Company and the Company Subsidiaries as
described in the notes to the financial statements incorporated in, or
otherwise disclosed in, the Company's Form 10-K for the year ended
December 31, 1999.
SECTION 3.11. Absence of Litigation. Except as set forth in Section 3.11 of the
Disclosure Schedule or as specifically disclosed in the Company SEC
Reports, there is no litigation, suit, claim, action, proceeding,
arbitration, review or investigation pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary or any
property or asset of the Company or any Company Subsidiary before any
Governmental Entity that is reasonably likely to have a Material Adverse
Effect or seeks to materially delay or prevent the consummation of the
Merger or otherwise prevent or materially delay the Company from performing
its obligations under this Agreement. Except as set forth in Section 3.11
of the Disclosure Schedule or as disclosed in the Company SEC Reports,
there has been no change since December 31, 1999 in the status of any
litigation, suit, claim, action, proceeding or investigation relating to
the Company or any Company Subsidiary that would be reasonably likely to
have a Material Adverse Effect. Except as disclosed in the Company SEC
Reports or as set forth in Section 3.11 of the Disclosure Schedule, neither
the Company nor any Company Subsidiary is subject to any outstanding Order
(as defined below), writ, injunction or decree which, insofar as can be
reasonably foreseen, would have a Material Adverse Effect.
SECTION 3.12. Environmental Matters.
(a) Except as disclosed in Section 3.12 of the Disclosure Schedule or as
disclosed in the Company SEC Reports or as would not reasonably be
expected to have a Material Adverse Effect, to the best knowledge of
the Company:
(i) The Company is in compliance with all applicable Environmental
Laws and all Environmental Permits. All past noncompliance with
Environmental Laws or Environmental Permits identified by the
Company has been resolved without any pending, ongoing or future
obligation, cost or liability, and, to the Company's actual
knowledge, there is no requirement proposed as of the date hereof
that is reasonably expected to be adopted or implemented and give
rise to liability under any Environmental Law or Environmental
Permit;
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(ii) Except as expressly authorized under any Environmental Law or
Environmental Permit, there has been no Release of Hazardous
Materials on any of the real property owned or leased by the
Company or any Company Subsidiary (the "Real Property") or,
during the Company's ownership or occupancy of such property, on
any property formerly owned, leased, used or occupied by the
Company;
(iii)The Company is not conducting, and has not undertaken or
completed, any Remedial Action relating to any Release or
threatened Release on the Real Property or at any other site,
location or operation, either voluntarily or pursuant to the
order of any Governmental Entity or the requirements of any
Environmental Law or Environmental Permit;
(iv) To the Company's knowledge, there is no asbestos or
asbestos-containing material on any of the Real Property;
(v) None of the Real Property is listed or proposed for listing, or,
to the Company's knowledge, adjoins any other property that is
listed or proposed for listing, on the National Priorities List
or the Comprehensive Environmental Response, Compensation and
Liability Information System under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA")
or any analogous federal, state or local list;
(vi) There are no Environmental Claims pending or, to the Company's
knowledge, threatened against the Company or the Real Property,
and, to the Company's knowledge, there are no circumstances that
can reasonably be expected to form the basis of any such
Environmental Claim, including, without limitation, with respect
to any off-site disposal location presently or formerly used by
the Company or any of its predecessors or with respect to any
previously owned or operated facilities;
(vii)Under current Law, the Company can maintain present production
levels, or any planned expansion of production levels upon which
financial projections provided to Parent have been based, in
compliance with applicable Environmental Laws without a material
increase in capital or operating expenditures and without
modifying any Environmental Permits or obtaining any additional
Environmental Permits;
(viii) The Company has provided Parent or made available copies of (i)
any environmental assessment or audit reports or other similar
studies or analyses relating to the Real Property or the Company,
and (ii) all insurance policies issued in the past five years
that may provide coverage to the Company for environmental
matters; and
(ix) Neither the execution of this Agreement nor the consummation of
the transactions contemplated herein will require any Remedial
Action or notice to or consent of Governmental Entities or third
parties pursuant to any applicable Environmental Law or
Environmental Permit.
(b) For purposes of this Agreement:
"Environmental Claims" means any and all actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
notices of liability or potential liability, investigations, proceedings,
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consent orders or consent agreements relating in any way to any
Environmental Law, any Environmental Permit or any Hazardous Materials.
"Environmental Law" means any Law in effect and as amended as of the
Effective Time, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of the environment, health, safety or
natural resources, including, without limitation, those relating to the
use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any applicable
Environmental Law.
"Hazardous Material" means (i) petroleum and petroleum products,
by-products or breakdown products, radioactive materials,
asbestos-containing materials and polychlorinated biphenyls and (ii) any
other chemical, material or substance defined or regulated as toxic or
hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the
like into or upon any land or water or air or otherwise entering into the
environment.
"Remedial Action" means all action to (i) clean up, remove, treat or
handle in any other way Hazardous Materials in the environment; (ii)
restore or reclaim the environment or natural resources; (iii) prevent the
Release of Hazardous Materials so that they do not migrate or endanger or
threaten to endanger public health or the environment; or (iv) perform
remedial investigations, feasibility studies, corrective actions, closures
and postremedial or postclosure studies, investigations, operations,
maintenance and monitoring on, about or in any Real Property.
SECTION 3.13. Trademarks, Patents and Copyrights. Except as set forth in Section
3.13 of the Disclosure Schedule, and except to the extent the inaccuracy of
any of the following (or the circumstances giving rise to such inaccuracy)
would not reasonably be expected to have a Material Adverse Effect, the
Company and each of the Company Subsidiaries own or possess adequate
licenses or other legal rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade dress, trade name rights,
copyrights, service marks, trade secrets, applications for trademarks and
for service marks, mask works, know-how and other proprietary rights and
information used or held for use in connection with the businesses of the
Company and the Company Subsidiaries as currently conducted or as
contemplated to be conducted, and, to the Company's knowledge, there is no
assertion or claim challenging the validity of any of the foregoing.
Neither the Company nor any of the Company Subsidiaries has infringed or is
infringing in any way any patent, patent right, license, trademark,
trademark right, trade dress, trade name, trade name right, service mark,
mask work or copyright of any third party that would reasonably be expected
to have a Material Adverse Effect. To the Company's knowledge, there are no
infringements of any proprietary rights owned by or licensed by or to the
Company or any Company Subsidiary that could reasonably be expected to have
a Material Adverse Effect.
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SECTION 3.14. Taxes. Except as set forth in Section 3.14 of the Disclosure
Schedule, (a) the Company and the Company Subsidiaries have timely filed or
will timely file all federal, state, local and foreign Tax Returns required
to be filed by them with any taxing authority with respect to Taxes for any
period ending on or before the Effective Time, taking into account any
extension of time to file granted to or obtained on behalf of the Company
and the Company Subsidiaries, and all such Tax Returns are complete and
correct in all material respects; (b) all Taxes that are shown as due on
such Tax Returns have been or will be timely paid; (c) no deficiency for
any material amount of Tax has been asserted or assessed in writing by a
taxing authority against the Company or any of the Company Subsidiaries for
which there are not adequate reserves; (d) the Company and the Company
Subsidiaries have provided adequate reserves in accordance with U.S. GAAP
in their financial statements for any Taxes that have not been paid,
whether or not shown as being due on any returns; (e) as of the date
hereof, the Company and the Company Subsidiaries have neither extended nor
waived any applicable statute of limitations with respect to Taxes and have
not otherwise agreed to any extension of time with respect to Tax
assessment or deficiency; (f) none of the Company and the Company
Subsidiaries is a party to any Tax sharing agreement or arrangement other
than with each other; (g) as of the date hereof, there are no pending or
threatened in writing material audits, examinations, investigations,
litigation, or other proceedings in respect of Taxes of the Company or any
Company Subsidiary; (h) no liens for Taxes exist with respect to any of the
assets or properties of the Company or the Company Subsidiaries, except for
statutory liens for Taxes not yet due or payable or that are being
contested in good faith for which there are adequate reserves; (i) all
Taxes which the Company or any Company Subsidiary are required to withhold
or to collect for payment have been duly withheld and collected, and have
been paid or accrued, reserved against and entered on the books of the
Company; and (j) none of the Company or any Company Subsidiary has been a
member of any group or corporation filing Tax Returns on a consolidated,
combined, unitary or similar basis other than each such group of which it
is currently a member. As used in this Agreement, "Taxes" shall mean any
and all taxes, fees, levies, duties, tariffs, imposts, and other charges of
any kind (together with any and all interest, penalties, additions to tax
and additional amounts imposed with respect thereto) imposed by any
Governmental Entity, including, without limitation: taxes or other charges
on or with respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth;
taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added, or gains taxes; license, registration and
documentation fees and customs duties, tariffs, and similar charges.
"Tax Returns" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes filed with a
taxing authority, including any schedule or attachment thereto, and
including any amendment thereof.
SECTION 3.15. Property and Leases.
(a) The Company and the Company Subsidiaries have sufficient title to all
their properties and assets to conduct their respective businesses as
currently conducted or as contemplated to be conducted, with only such
exceptions as would not have a Material Adverse Effect.
(b) No parcel of real property owned or leased by the Company or any
Company Subsidiary is subject to any governmental decree or order to
be sold or is being condemned, expropriated or otherwise taken by any
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public authority with or without payment of compensation therefor,
nor, to the knowledge of the Company, has any such condemnation,
expropriation or taking been proposed other than as could not
reasonably be expected to have a Material Adverse Affect.
(c) Except as set forth in Section 3.15(c) of the Disclosure Schedule,
there are no contractual or legal restrictions that preclude or
restrict the ability to use any real property owned or leased by the
Company or any Company Subsidiary for the purposes for which it is
currently being used other than preclusions or restrictions which do
not preclude or restrict or otherwise adversely affect the actual use
which the Company or Company Subsidiary is making of the real property
on the date of this Agreement but which may or would preclude or
restrict any expansion or enhancement or change in such use. There are
no material latent defects or material adverse physical conditions
affecting the real property, and improvements thereon, owned or leased
by the Company or any Company Subsidiary other than those that would
not prevent or materially delay consummation of the Merger or
otherwise prevent or materially delay the Company from performing its
obligations under this Agreement and would not have a Material Adverse
Effect.
SECTION 3.16. Insurance. The Company and the Company Subsidiaries have in effect
insurance coverage with reputable insurers or are self-insured, which, in
respect of amounts, premiums, types and risks insured, constitutes
reasonable coverage for the risks customarily insured against by companies
engaged in the industries in which the Company and the Company Subsidiaries
are engaged and comparable in size and operations to the Company and the
Company Subsidiaries. The Company's current annual premiums for directors'
and officers' liability insurance is approximately $14,000 per year, and,
as of the date of this Agreement, the Company has made arrangements to
acquire tail coverage for the six year period beginning August 2, 2000.
SECTION 3.17. Board Recommendation. Those members of the Company Board permitted
under applicable law to vote on this Agreement, at a meeting duly called
and held, have by unanimous vote approved and deemed it advisable that the
Company and its shareholders consummate the Merger, upon the terms and
subject to the conditions set forth in this Agreement.
SECTION 3.18. Brokers. Set forth in Section 3.18 of the Disclosure Schedule is a
description of all contracts, agreements or understandings which may form
the basis for a claim against the Company for the payment of brokerage,
finder's or other fees or commissions in connection with the transactions
contemplated hereby and there are no other arrangements which may obligate
the Company to the payment of any such fees; provided that the Parent has
notified the Company that it disputes the basis for any claim against the
Company in connection with the item disclosed in such Schedule.
SECTION 3.19. Vote Required; State Takeover Statutes. The only vote of the
holders of any class or series of capital stock of the Company necessary to
approve the Merger, this Agreement or the transactions contemplated by this
Agreement is the affirmative vote by the Company's shareholders
representing a majority of the outstanding shares of the Company's Common
Stock, with each outstanding share of Common Stock representing one vote.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and warrant to
the Company, that:
SECTION 4.01. Organization and Qualification. Each of Parent and Merger Sub has
been duly organized and is validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate
the transactions contemplated hereby to be consummated by Parent and Merger
Sub (including, without limitation, the Merger). The execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent
and Merger Sub of such transactions have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on the
part of Parent and Merger Sub are necessary to authorize this Agreement or
to consummate such transactions. This Agreement has been duly authorized
and validly executed and delivered by each of Parent and Merger Sub and
constitutes (assuming due authorization, execution and delivery by the
Company) a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, subject to bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and the
availability of equitable remedies.
SECTION 4.02. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub
will not, (i) conflict with or violate any provision of the charter
and bylaws of Parent or Merger Sub, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section
4.02(b) have been obtained and all filings and obligations described
in Section 4.02(b) have been made, conflict with or violate any Law
applicable to Parent or Merger Sub or by which any property or asset
of Parent or Merger Sub is bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except, with respect to
clause (iii) for any such conflicts, violations, breaches, defaults,
or other occurrences which would not reasonably be expected to prevent
or materially delay the performance of this Agreement by either Parent
or Merger Sub.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub do not, and the performance of this Agreement by Parent and
Merger Sub will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity,
except (i) for applicable requirements of the Exchange Act and the
filing and recordation of appropriate merger documents as required by
the CBCA and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
would not reasonably be expected to prevent or materially delay
consummation of the Merger.
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SECTION 4.03. Absence of Litigation. Except as set forth in Section 4.03 of the
Disclosure Schedule, there is no litigation, suit, claim, action,
proceeding or investigation pending or, to the best knowledge of Parent,
threatened against Parent or Merger Sub or any of their respective
properties or assets before any court, arbitrator or Governmental Entity
which seeks to delay or prevent or would result in the material delay of or
would prevent the consummation of any of the transactions contemplated
hereby. Neither Parent nor Merger Sub or any property or asset of Parent or
Merger Sub is subject to any continuing order of, consent decree,
settlement agreement or similar written agreement with, or, to the
knowledge of Parent, continuing investigation by, any Governmental Entity
or any order, writ, judgment, injunction, decree, determination or award of
any governmental or regulatory authority or any arbitrator which would
prevent Parent or Merger Sub from performing their respective material
obligations under this Agreement or prevent or materially delay the
consummation of any of the transactions contemplated hereby.
SECTION 4.04. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Merger based upon arrangements made by or on behalf of Parent.
SECTION 4.05. No Activities. Merger Sub will be formed solely for the purpose of
engaging in the Merger. Except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement, Merger Sub will not have any obligations or
liabilities of any nature (whether accrued, absolute, contingent or
otherwise) and will not engage in any business activities of any type or
kind whatsoever or enter into any agreements or arrangements with any
person.
SECTION 4.06. Financing. At or prior to the Closing Date, Parent will cause
Merger Sub to have, and Merger Sub will have, all of the financing required
to consummate the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
SECTION 5.01. Conduct of Business by the Company Pending the Closing. The
Company agrees that, between the date of this Agreement and the Effective
Time, except as set forth in Section 5.01 of the Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Parent shall
consent in writing, (1) the businesses of the Company and the Company
Subsidiaries shall be conducted only in, and the Company and the Company
Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (2) the Company shall use its
reasonable best efforts to keep available the services of such of the
current officers, significant employees and consultants of the Company and
the Company Subsidiaries and to preserve the current relationships of the
Company and the Company Subsidiaries with such of the customers, suppliers
and other persons with which the Company or any Company Subsidiary has
significant business relations in order to preserve substantially intact
its business organization. By way of amplification and not limitation,
except as set forth in Section 5.01 of the Disclosure Schedule or as
contemplated by any other provision of this Agreement, the Company shall
not, and shall neither cause nor permit any Company Subsidiaries or any of
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the Company's affiliates (over which it exercises control), or any of its
or their officers, directors, employees and agents (in each case, in their
capacities as such) to, between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the
following, without the prior written consent of Parent:
(a) amend or otherwise change its charter or bylaws or equivalent
organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license, guarantee or encumbrance
of, (i) any shares of capital stock of the Company or any Company
Subsidiary of any class, or securities convertible or exchangeable or
exercisable for any shares of such capital stock, or any options,
warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without
limitation, any phantom interest), of the Company or any Company
Subsidiary (except for the issuance of any shares of capital stock
issuable pursuant to the exercise of any Company Options or Company
Warrants outstanding on the date of this Agreement); or (ii) any
property or assets of the Company or any Company Subsidiary, except in
issuing Company Common Stock as required upon the exercise of a
Company Warrant by a holder, and except in all cases in the ordinary
course of business and in a manner consistent with past practice;
provided that the aggregate amount of any such sale or disposition
(other than a sale or disposition of products or other inventory in
the ordinary course of business consistent with past practice, as to
which there shall be no restriction on the aggregate amount), or
pledge, grant, transfer, lease, license, guarantee or encumbrance of
such property or assets of the Company or any Company Subsidiary shall
not exceed $25,000;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of
its capital stock, other than dividends paid by any of the wholly
owned Company Subsidiaries to the Company in the ordinary course of
business consistent with past practice and other than the Cash
Dividend;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest in any corporation,
partnership, other business organization, person or any division
thereof or any assets, other than (x) acquisitions of any assets in
the ordinary course of business consistent with past practice that are
not, in the aggregate, in excess of $50,000 or (y) purchases (whether
for cash or pursuant to an exchange) of inventory for resale in the
ordinary course of business and consistent with past practice; (ii)
incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person for borrowed
money, except for indebtedness for borrowed money incurred in the
ordinary course of business and consistent with past practice; (iii)
terminate, cancel or request any material change in, or agree to any
material change in any Material Contract or enter into any contract or
agreement material to the business, results of operations or financial
condition of the Company and the Company Subsidiaries taken as a
whole, in either case other than in the ordinary course of business,
consistent with past practice; (iv) make or authorize any capital
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expenditure, other than as set forth in Section 5.01(e)(iv) of the
Disclosure Schedule; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 5.01(e);
(f) increase the compensation payable or to become payable to its officers
or employees, except for increases in accordance with past practices
or with the prior approval of Parent, which shall not be unreasonably
withheld, in salaries or wages of employees of the Company or any
Company Subsidiary who are not officers of the Company, or grant any
rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other
employee of the Company or any Company Subsidiary, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option (including, without
limitation, the granting of stock options, stock appreciation rights,
stock option appreciation unit awards, performance awards or
performance restricted stock awards), stock purchase, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer or employee, except as contemplated
by this Agreement or to the extent required by applicable Law or the
terms of a collective bargaining agreement or a contractual obligation
existing on the date hereof;
(g) take any action with respect to modifying accounting policies or
procedures, other than actions in the ordinary course of business,
consistent with past practice or the requirements of U.S. GAAP and as
advised by the Company's regular certified independent public
accountants;
(h) waive, release, assign, settle or compromise any material claims or
litigation involving money damages in excess of $25,000, except for
claims asserted by the Company or the applicable Company Subsidiary;
(i) make any material Tax election or settle or compromise any material
federal, state, local or foreign Tax liability;
(j) authorize or enter into any formal or informal agreement or otherwise
make any commitment to do any of the foregoing;
(k) take any action that will be likely to result in the representations
and warranties set forth in Article III becoming false or inaccurate
in any material respect (or, with respect to any representation and
warranty already qualified by materiality, false or inaccurate in any
respect);
(l) enter into or carry out any other transaction other than in the
ordinary and usual course of business or other than as permitted
pursuant to the other clauses in this Section 5.01;
(m) take any action or fail to take any action that could reasonably be
expected to have or result in a Material Adverse Effect; or
(n) permit or cause any Company Subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing.
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SECTION 5.02. Formation of New Subsidiary. Prior to the Effective Time, Parent
will form a wholly owned subsidiary, known as Merger Sub. Merger Sub will
be merged into the Company at the Effective Time.
SECTION 5.03. Notices of Certain Events. Each of Parent and the Company shall
give prompt notice to the other of (i) any notice or other communication
from any person alleging that the consent of such person is or may be
required in connection with the Merger, (ii) any notice or other
communication from any Governmental Entity in connection with the Merger,
(iii) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened in writing against, relating to
or involving or otherwise affecting Parent, the Company or their
subsidiaries that relate to the consummation of the Merger or the
transactions contemplated by this Agreement; (iv) the occurrence of a
default or event that, with notice or lapse of time or both, will become a
default under any Material Contract; and (v) any change that is reasonably
likely to result in a Material Adverse Effect or is likely to delay or
impede the ability of either Parent or the Company to consummate the
transactions contemplated by this Agreement or to fulfill its obligations
set forth herein.
SECTION 5.04. Contractual Consents. Except as set forth in Section 5.04 of the
Disclosure Schedule, prior to or at the Effective Time each of the parties
hereto shall use its reasonable best efforts to prevent the occurrence, as
a result of the Merger, of the triggering of a change of control or similar
clause or any event which constitutes a default (or an event which with
notice or lapse of time or both would become a default) under any material
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which it or any of its subsidiaries is a party.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Proxy Statement; Schedule 13E-3.
(a) As promptly as practicable after the execution of this Agreement, (i)
the Company shall prepare (in consultation with Parent) and file with
the SEC a proxy statement (together with any amendments thereof or
supplements thereto, the "Proxy Statement") relating to the meeting of
the Company's shareholders (the "Company Shareholders' Meeting") to be
held to consider approval of this Agreement and the Merger, and (ii)
Parent, Merger Sub and the Company shall if required by the Exchange
Act, prepare and file with the SEC a Rule 13e-3 Transaction Statement
on Schedule 13E-3 (together with all amendments and supplements
thereto, the "Schedule 13E-3") relating to the Merger and the other
transactions contemplated by this Agreement. The Company shall furnish
all information concerning the Company that Parent may reasonably
request in connection with such actions and the preparation of the
Proxy Statement and Schedule 13E-3, if any.
(b) Subject to the fiduciary duties of the Company Board, as described in
the following proviso, the Proxy Statement shall include a unanimous
recommendation of those members of the Company Board permitted under
applicable law to make such recommendation to the shareholders of the
Company to vote in favor of approving of the Merger and this
Agreement; provided, however, that such members of the Company Board
may, at any time prior to the date of the Company Shareholders'
Meeting, withdraw, modify or change any such recommendation to the
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extent that the Company Board determines in good faith after
consultation with independent legal counsel that the failure to so
withdraw, modify or change their recommendation could cause the
Company Board to breach its fiduciary duties to the Company's
shareholders under applicable law.
(c) No amendment or supplement to the Proxy Statement or the Schedule
13E-3, if any, will be made or filed with the SEC by Company or
Parent, as the case may be, without the approval of the other party
(which will not be unreasonably withheld). The Company and Parent each
will advise the other, promptly after they receive notice thereof of
any request by the SEC for amendment of the Proxy Statement or the
Schedule 13E-3 or comments thereon and responses thereto or requests
by the SEC for additional information.
(d) The information supplied by Parent for inclusion in the Proxy
Statement and the Schedule 13E-3 shall not, at (i) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first
mailed to the shareholders of the Company and (ii) the time of the
Company Shareholders' Meeting, contain any untrue statement of a
material fact or fail to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If,
at any time prior to the date of the Company Shareholders' Meeting,
any event or circumstance relating to Parent, or its officers or
directors, is discovered by Parent that should be set forth in an
amendment or a supplement to the Proxy Statement or the Schedule
13E-3, Parent shall promptly inform the Company. The Schedule 13E-3
will comply as to form and substance in all material aspects with the
applicable requirements of the Exchange Act.
(e) The information supplied by the Company for inclusion in the Proxy
Statement and the Schedule 13E-3 shall not, at (i) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first
mailed to the shareholders of the Company and (ii) the time of the
Company Shareholders' Meeting, contain any untrue statement of a
material fact or fail to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. If,
at any time prior to the date of the Company Shareholders' Meeting,
any event or circumstance relating to the Company or any Company
Subsidiary, or their respective officers or directors, is discovered
by the Company that should be set forth in an amendment or a
supplement to the Proxy Statement or the Schedule 13E-3, the Company
shall promptly inform Parent. The Proxy Statement will comply as to
form and substance in all material respects with the applicable
requirements of the Exchange Act.
SECTION 6.02. Company Shareholders' Meeting.
(a) The Company shall call and hold the Company Shareholders' Meeting as
promptly as practicable for the purpose of voting upon the approval of
this Agreement and the Merger.
(b) The Company shall use all commercially reasonable efforts to solicit
from its shareholders proxies in favor of the approval of this
Agreement and the Merger, and shall take all other action necessary or
advisable to secure the vote or consent of its shareholders required
by the CBCA and the rules of the NASDAQ and the Pacific to obtain such
approvals.
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(c) Parent shall cause all shares of the Company Common Stock held by it
or any of its affiliates to be voted in favor of the Merger and this
Agreement.
SECTION 6.03. Access to Information; Confidentiality.
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which the Company or any of the
Company Subsidiaries is a party or pursuant to applicable Law from the
date of this Agreement to the Effective Time, the Company shall (and
shall cause the Company Subsidiaries to): (i) provide to Parent (and
its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives, collectively,
"Representatives") reasonable access at reasonable times, upon prior
notice to the Company, to the officers, employees, agents, properties,
offices and other facilities of the Company and the Company
Subsidiaries and to the books and records thereof (including, without
limitation, access to the Company's accountants, any correspondence
between the Company and such accountants and work papers prepared with
respect to the Company by such accountants), (ii) provide to Parent
and its Representatives access to the Real Property for Parent to
conduct any environmental site assessment that Parent deems
appropriate, including, without limitation, access to enter upon and
investigate and collect air, surface water, groundwater and soil
samples, and (iii) furnish promptly such information concerning the
business, properties, contracts, assets, liabilities, personnel and
other aspects of the Company and the Company Subsidiaries as Parent or
their respective Representatives may reasonably request. No
investigation conducted pursuant to this Section 6.03 shall affect or
be deemed to modify any representation or warranty made in this
Agreement.
(b) Unless (i) otherwise expressly provided in this Agreement, (ii)
required by applicable Law or any listing agreement with, or the rules
and regulations of, NASDAQ or the Pacific Exchange or (iii) consented
to in writing by Parent and the Company, all information (whether oral
or written) and documents furnished in connection herewith together
with analyses, compilations, studies or other documents prepared by
such party which contain or otherwise reflect such information shall
be kept strictly confidential by the Company, Parent, Merger Sub and
their respective officers, directors, employees and agents. Prior to
any disclosure permitted pursuant to the preceding sentence, the party
intending to make such disclosure shall consult with the other party
regarding the nature and extent of the disclosure. Nothing contained
herein shall preclude disclosures to the extent necessary to comply
with accounting, SEC and other disclosure obligations imposed by
applicable Law. In the event the transactions contemplated by this
Agreement are not consummated, each party shall return to the other
any documents furnished by the other and all copies thereof that any
of them may have made and will hold in confidence any information
obtained from the other party except to the extent (a) such party is
required to disclose such information by Law or such disclosure is
necessary or desirable in connection with the pursuit or defense of a
claim, (b) such information was known by such party prior to such
disclosure (and provided that, except with respect to information
referred to in the following clause (c), such party shall have advised
the other party of such knowledge upon or promptly after its receipt
of such information) or was thereafter developed or obtained by such
party independent of such disclosure or (c) such information is or
becomes generally available to the public other than by breach of this
Section 6.03. Prior to any disclosure of information pursuant to the
exception in clause (a) of the preceding sentence, the party intending
to disclose the same shall so notify the party which provided the same
in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
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SECTION 6.04. No Solicitation of Transactions. The Company agrees that, from and
after the date hereof until the earlier of the Effective Time or the
termination of this Agreement in accordance with Article VIII, neither it
nor any Company Subsidiary shall, and that it shall cause its and each
Company Subsidiary's Representatives not to, except as contemplated by this
Agreement, directly or indirectly, initiate, solicit or encourage any
inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase or sale of all or any significant portion of the
assets of the Company and the Company Subsidiaries, taken as a whole, or
any of the equity securities of the Company (any such proposal or offer
being hereinafter referred to as a "Competing Transaction"). The Company
further agrees that neither it nor any Company Subsidiary shall, and that
it shall cause its and each Company Subsidiary's Representatives not to,
directly or indirectly, have any discussion with or provide any
confidential information or data relating to the Company or any Company
Subsidiary to any person relating to a Competing Transaction or engage in
any negotiations concerning a Competing Transaction, or otherwise
facilitate any effort or attempt to make or implement a Competing
Transaction or accept a Competing Transaction; provided, however, that
nothing contained in this Section 6.04 shall prevent the Company or the
Company Board from (i) engaging in any discussions or negotiations with, or
providing any information to, any person in response to an unsolicited
written Competing Transaction by any such person; or (ii) recommending such
an unsolicited written Competing Transaction to the holders of Company
Common Stock if, in any such case as is referred to in clause (i) or (ii),
(A) the Company Board concludes in good faith (after consultation with
independent financial advisors) that such Competing Transaction would, if
consummated, result in a transaction more favorable to holders of Company
Common Stock than the transaction contemplated by this Agreement (any such
more favorable Competing Transaction being referred to in this Agreement as
a "Superior Proposal"), (B) the Company Board determines in good faith
after consultation with independent legal counsel that such action is
necessary for the Company Board to act in a manner consistent with its
fiduciary duties under applicable Law, (C) prior to providing any
information or data regarding the Company to any person or any of such
person's Representatives in connection with a Superior Proposal by such
person, the Company receives from such person an executed confidentiality
agreement and (D) prior to providing any information or data to any person
or any of such person's Representatives or entering into discussions or
negotiations with any person or any of such person's Representatives in
connection with a Superior Proposal by such person, the Company notifies
Parent promptly of the receipt of such Superior Proposal indicating, in
connection with such notice, the name of such person and attaching a copy
of the proposal or offer or providing a complete written summary thereof.
The Company agrees that it shall keep Parent informed, on a current basis,
of the status and terms of any discussions or negotiations related to such
Superior Proposal. The Company agrees that it will take the necessary steps
to promptly inform each Company Subsidiary and each Representative of the
Company or any Company Subsidiary of the obligations undertaken in this
Section 6.04. Immediately following the execution of this Agreement, the
Company shall terminate and cause the Company Subsidiaries to terminate any
existing activities, discussions or negotiations with any third parties
that may be ongoing with respect to any Competing Transaction and promptly
after the public announcement of the execution of this Agreement shall use
all reasonable efforts to request that all confidential information
previously furnished to any such third parties be returned promptly.
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Nothing contained in this Agreement shall prohibit the Company or the
Company Board from taking or disclosing to its shareholders a position
contemplated by Rules 14d-9 and 14e-(2)(a) promulgated under the Exchange
Act.
SECTION 6.05. Election of Directors. Prior to the Effective Time, in accordance
with the CBCA, the Company Board shall take all further action necessary to
ensure that the directors of Merger Sub shall become directors of the
Surviving Corporation and by accommodating the election by the sole
shareholder of the Surviving Corporation of a new board of directors of the
Surviving Corporation after the Effective Time.
SECTION 6.06. Directors' and Officers' Indemnification and Insurance.
(a) The charter and bylaws of the Surviving Corporation shall contain the
provisions regarding liability of directors and indemnification of
directors and officers that are set forth, as of the date of this
Agreement, in the charter and the bylaws, respectively, of the
Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of
individuals who at or at any time prior to the Effective Time were
directors, officers, employees, fiduciaries or agents of the Company.
(b) For a period of three years after the Effective Time, the Surviving
Corporation shall use best efforts to cause to be maintained in effect
policies of directors' and officers' liability insurance with coverage
in amount and scope at least as favorable as the Company's existing
policies with respect to claims arising from facts or events that
occurred prior to the Effective Time; provided, however, that the
Surviving Corporation shall not be required to pay any premium for
directors' and officers' liability insurance that would exceed the
amount being paid by the Company as of the date hereof. If the
Surviving Corporation cannot maintain such policies as provided in the
preceding sentences, the Surviving Corporation will cause to be
maintained in effect tail policies of directors' and officers'
liability insurance for a period of at least three years from the
Effective Time.
(c) This Section 6.06 is intended to be for the benefit of, and shall be
enforceable by, the indemnified parties, their heirs and personal
representatives and shall be binding on the Surviving Corporation and
its respective successors and assigns.
(d) From and after the Effective Time, the Surviving Corporation agrees
that it shall indemnify and hold harmless each present director and
officer of the Company, determined as of the Effective Time (the
"Indemnified Parties"), from and against any costs, judgments, fines,
losses, obligations, claims, damages, liabilities, or expenses
(including interest, penalties, reasonable out-of-pocket expenses and
reasonable attorneys' fees incurred in the investigation or defense of
any of the same or in asserting any of their rights hereunder)
(collectively, "Costs") incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of, resulting from, or
pertaining to matters existing or occurring at or prior to the
Effective Time (including, without limitation, the transactions
contemplated by this Agreement), whether asserted or claimed prior to,
at or after the Effective Time, to the fullest extent that the Company
would have been permitted or required under Colorado laws and under
the Company's charter documents (as in effect on the date hereof) to
indemnify such Indemnified Parties (and the Surviving Corporation
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shall advance expenses as incurred to the fullest extent permitted
under applicable Law; provided that the Indemnified Party to whom
expenses are advanced provides an undertaking to repay such advances
if it is ultimately determined that such Indemnified Party is not
entitled to indemnification); provided that any determination required
to be made with respect to whether an officer's or director's conduct
complies with the standards set forth under Colorado law and the
Company's charter documents shall be made by independent counsel
selected by the Surviving Corporation.
(e) Any Indemnified Party wishing to claim indemnification under paragraph
(d) of this Section 6.06, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent
thereof, but the failure to so notify shall not relieve the Surviving
Corporation of any liability it may have to such Indemnified Party,
except to the extent that such failure materially prejudices the
Surviving Corporation. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the
Effective Time), (i) the Surviving Corporation shall have the right to
assume the defense thereof, with counsel selected by Parent and
reasonably acceptable to the Indemnified Party, and the Surviving
Corporation shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently
incurred by such Indemnified Parties in connection with the defense
thereof, except that if the Surviving Corporation elects not to assume
such defense or counsel for the Indemnified Parties advises that there
are issues which raise conflicts of interest between the Surviving
Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received;
provided, however, that the Surviving Corporation shall be obligated
pursuant to this paragraph (e) to pay for only one firm of counsel for
all Indemnified Parties in any jurisdiction unless the use of one
counsel for such Indemnified Parties would present such counsel with a
conflict of interest, (ii) the Indemnified Parties will cooperate in
the defense of any such matter and (iii) the Surviving Corporation
shall not be liable for any settlement effected without the prior
written consent of Parent; and provided further that the Surviving
Corporation shall not have any obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated
hereby is prohibited by applicable Law. The Surviving Corporation
shall not, in the defense of any claim or litigation, except with the
consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed), consent to entry of judgment or
enter into any settlement that provides for injunctive or other
nonmonetary relief affecting the Indemnified Party or that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability
with respect to such claim or litigation.
(f) If the Surviving Corporation or any of its successors or assigns shall
(i) consolidate with or merge into any other corporation or entity and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfer all or substantially all of
its properties and assets or outstanding voting securities to any
individual, corporation or other entity, then and in each such case,
proper provisions shall be made so that the successors and assigns of
the Surviving Corporation shall expressly assume all of the
obligations set forth in this Section 6.06.
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SECTION 6.07. Further Action; Consents; Filings. Upon the terms and subject to
the conditions hereof, each of the parties hereto shall use its reasonable
best efforts to (i) take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the Merger,
(ii) obtain from Governmental Entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or
made by Parent or the Company or any of their subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger, (iii) make all necessary filings, and
thereafter make any other submissions either required or deemed appropriate
by each of the parties, with respect to this Agreement and the Merger
required under (A) the Exchange Act, (B) the rules of the NASDAQ and the
Pacific or (C) any other applicable Law. The parties hereto shall cooperate
and consult with each other in connection with the making of all such
filings, including by providing copies of all such documents to the
nonfiling party and its advisors prior to filing, and none of the parties
will file any such document if any of the other parties shall have
reasonably objected to the filing of such document. No party to this
Agreement shall consent to any voluntary extension of any statutory
deadline or waiting period or to any voluntary delay of the consummation of
the Merger at the behest of any Governmental Entity without the consent and
agreement of the other parties to this Agreement, which consent shall not
be unreasonably withheld or delayed. Without limiting the foregoing, each
of the parties hereto shall, and shall cause each of its subsidiaries to,
use its reasonable best efforts to obtain (and to cooperate and coordinate
with the other parties to obtain) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity that is required
to be obtained in connection with the Merger and to take all actions
reasonably necessary to satisfy any applicable regulatory requirements
relating thereto. Each of the parties shall promptly take, in the event
that any permanent or preliminary injunction or other order is entered or
becomes reasonably foreseeable to be entered in any proceeding that would
make consummation of the transaction contemplated hereby in accordance with
the terms of this Agreement unlawful or that would prevent or delay
consummation of the transaction contemplated hereby, any and all steps
necessary to vacate, modify or suspend such injunction or order so as to
permit such consummation prior to the deadline specified in Section
8.01(b).
SECTION 6.08. Public Announcements. After the issuance of the initial press
release, Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statement with
respect to this Agreement or any transaction contemplated hereby and shall
not issue any such press release or make any such public statement prior to
such consultation, except to the extent required by applicable Law or the
requirements of the NASDAQ or the Pacific, in which case the issuing party
shall consult with the other party before issuing any such release or
making any such public statement.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party to Consummate the
Merger. The obligations of Parent, the Company and Merger Sub to effect the
Merger shall be subject to the satisfaction or, if permitted by applicable
Law, waiver prior to the Closing Date of the following conditions:
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(a) this Agreement and the transactions contemplated hereby shall have
been approved and adopted by the requisite affirmative vote of the
shareholders of the Company in accordance with the CBCA; and
(b) no preliminary or permanent injunction, decree or other order (an
"Order"), issued by any Governmental Entity or other legal restraint
or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect, and no Law shall
have been enacted or adopted that enjoins, prohibits or makes illegal
consummation of any of the transactions contemplated hereby.
SECTION 7.02. Conditions to the Obligations of the Company. The obligations of
the Company to effect the Merger shall be subject to the satisfaction or,
if permitted by applicable Law, waiver, prior to the Closing Date, of the
following further conditions:
(a) each of the representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all material
respects as of the Effective Time, as though made on and as of the
Effective Time, except that those representations and warranties that
address matters only as of a particular date shall remain true and
correct in all material respects as of such date;
(b) Parent and Merger Sub shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement
to be performed or complied with by them on or prior to the Effective
Time; and
(c) the Company shall have received a written opinion of an independent
financial advisor to the effect the Merger Consideration to be
received by the shareholders of the Company is fair, from a financial
point of view, to the Company's shareholders (other than Parent and
its affiliates). The Company shall have delivered a signed copy of
such written opinion to Parent.
SECTION 7.03. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger shall be subject
to the satisfaction or, if permitted by applicable Law, waiver prior to the
Closing Date of the following further conditions:
(a) each of the representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects as
of the Effective Time, as though made at and as of the Effective Time,
except that those representations and warranties that address matters
only as of a particular date shall remain true and correct in all
material respects as of such date (provided that any representation or
warranty that is qualified by materiality (including, without
limitation, qualification by reference to a Material Adverse Effect)
shall be true in all respects as of the Effective Time or as of such
particular date, as the case may be);
(b) the Company shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time;
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(c) all consents, approvals, waivers and authorizations required to be
obtained to effect the Merger shall have been obtained from all
Governmental Entities, except if the failure to obtain any such
consents, approvals and authorizations would not result in a Material
Adverse Effect;
(d) all consents, approvals, waivers and authorizations (including,
without limitation, waivers of termination rights) of third parties
(other than Governmental Entities) the failure of which to obtain
would result in a Material Adverse Effect shall have been obtained;
(e) holders of not more than 5% of the outstanding Company Common Stock
(other than shares held by Parent and all of its affiliates), shall
have exercised their dissenters' rights demanding payment under ss.
7-113 of the CBCA; and
(f) any litigation initiated against the Company or any of its affiliates,
members of the Board of Directors of the Company or any of its
affiliates or any officers or employees of the Company or any of its
affiliates, or the Parent or Merger Sub or any of their affiliates,
members of the Board of Directors of the Parent or Merger Sub or any
of their affiliates or any officers or employees of the Parent or
Merger Sub or any of their affiliates challenging any aspect of this
Merger shall be resolved in a manner that is satisfactory to the
Parent on or prior to the Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement, as follows:
(a) by mutual written consent duly authorized by each of the Company Board
and the Board of Directors of Parent;
(b) by either Parent or the Company, if the Effective Time shall not have
occurred on or before October 30, 2000; provided, however, that the
right to terminate this Agreement under this Section 8.01(b) shall not
be available to the party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by either Parent or the Company, if any Order or other legal restraint
or prohibition preventing the consummation of the Merger shall have
been entered by any Governmental Entity or any Law shall have been
enacted or adopted that enjoins, prohibits or makes illegal
consummation of the Merger;
(d) by Parent, if (i) the Company Board withdraws, modifies or changes its
recommendation of this Agreement in a manner adverse to Parent, or
shall have resolved to do so, (ii) after receiving a bona fide
proposal or offer relating to a Competing Transaction, the Company
Board shall have refused to affirm its recommendation of this
Agreement as promptly as practicable (but in any case within ten
business days) after receipt of any written request from Parent, (iii)
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the Company Board shall have recommended to the shareholders of the
Company a Competing Transaction, or shall have resolved to do so, or
(iv) a tender offer or exchange offer for 15% or more of the
outstanding shares of capital stock of the Company is commenced, and
the Company Board fails to recommend against acceptance of such tender
offer or exchange offer by its shareholders (including not taking a
position with respect to the acceptance of such tender offer or
exchange offer by its shareholders);
(e) by Parent or the Company, if this Agreement shall fail to receive the
requisite vote for adoption at the Company Shareholders' Meeting or
any adjournment or postponement thereof;
(f) by Parent, upon a breach of, or failure to perform in any material
respect (which breach or failure cannot be or has not been cured
within 30 days after the giving of notice of such breach or failure),
any representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement, such that the conditions set
forth in clause (a) or (b) of Section 7.03 would not be satisfied;
(g) by Parent, upon the continuance of any litigation initiated against
the Company or any of its affiliates, members of the Board of
Directors of the Company or any of its affiliates or any officers or
employees of the Company or any of its affiliates, or the Parent or
Merger Sub or any of their affiliates, members of the Board of
Directors of the Parent or Merger Sub or any of their affiliates or
any officers or employees of the Parent or Merger Sub or any of their
affiliates challenging any aspect of this Merger; and
(h) by the Company, upon a breach of, or failure to perform in any
material respect (which breach or failure cannot be or has not been
cured within 30 days after the giving of notice of such breach or
failure), any representation, warranty, covenant or agreement on the
part of Parent set forth in this Agreement, such that the conditions
set forth in Section 7.02 would not be satisfied.
SECTION 8.02. Notice of Termination; Effect of Termination. In the event of
termination of this Agreement by either Parent or the Company pursuant to
Section 8.01 hereof, the terminating party shall give prompt written notice
thereof to the nonterminating party. Except as provided in Section 9.01, in
the event of termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under
this Agreement on the part of Parent, the Company or Merger Sub or any of
their respective officers or directors, and all rights and obligations of
each party hereto shall cease, subject to the remedies of the parties set
forth in Section 8.05(b), (c) and (d); provided, however, that nothing
herein shall relieve any party from liability for the breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by mutual agreement of
the parties hereto by action taken by or on behalf of their respective
Boards of Directors at any time prior to the Effective Time; provided,
however, that after the approval of this Agreement by the shareholders of
the Company, no amendment may be made that would reduce the amount or
change the type of consideration into which each share of Company Common
Stock shall be converted upon consummation of the Merger.
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SECTION 8.04. Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for the performance of any obligation or other act
of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant
hereto, and (c) waive compliance with any agreement or condition contained
herein. Any waiver of a condition set forth in Section 7.01 will be
effective only if made in writing by each of the Company and Parent and,
unless otherwise specified in such writing, shall thereafter operate as a
waiver of such condition for any and all purposes of this Agreement. Any
such extension or waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
SECTION 8.05. Expenses.
(a) Except as otherwise set forth in this Section 8.05, all Expenses (as
defined below) incurred in connection with this Agreement and the
Merger shall be paid by the party incurring such expenses, whether or
not the Merger is consummated. "Expenses," as used in this Agreement,
shall consist of all out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates)
reasonably incurred by a party or on its behalf in connection with, or
related to the authorization, preparation, negotiation, execution and
performance of, this Agreement, the preparation, printing, filing and
mailing of the Proxy Statement, the solicitation of shareholder
approvals and all other matters related to the consummation of the
Merger.
(b) The parties agree that if the Company or Parent shall terminate this
Agreement pursuant to Section 8.01(e) due to the failure of the
Company's shareholders to approve and adopt this Agreement and (i) at
the time of such failure to so approve and adopt this Agreement there
shall exist a Competing Transaction (which Competing Transaction shall
have become the subject of a public announcement or any person shall
have publicly announced an intention to make a proposal or offer
relating thereto) with respect to the Company and (ii) within 12
months of the termination of this Agreement, the Company enters into
an agreement with any third party with respect to a Competing
Transaction, which transaction is subsequently consummated, then the
Company shall reimburse all reasonable and documented Expenses of
Parent and Merger Sub simultaneously with the consummation of such
transaction, plus a Break-Up Fee in an amount of $475,000 (the
"Break-Up Fee").
(c) The parties agree that the payment of Expenses and Break-Up Fee
provided for in Section 8.05(b) shall be the sole and exclusive remedy
of the parties upon a termination of this Agreement pursuant to
Section 8.01(e), and such remedy shall be limited to the payments
stipulated in Section 8.05(b); provided, however, that nothing herein
shall relieve any party from liability for the willful breach of any
of its representations and warranties or the breach of any of its
covenants or agreements set forth in this Agreement.
(d) Any payment of Expenses and Break-Up Fee required to be made pursuant
to Section 8.05(b) shall be made by wire transfer of immediately
available funds to an account designated in writing by the party
entitled to receive payment.
(e) In the event that the Company shall fail to pay any Expenses of Parent
in accordance with Section 8.05(b) when due, the amount of any such
Expenses shall be increased to include the costs and expenses actually
incurred or accrued by Parent, acting together (including, without
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limitation, fees and expenses of counsel) in connection with the
collection under and enforcement of this Section 8.05.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall terminate at the Effective Time
or upon the termination of this Agreement pursuant to Section 8.01, as the
case may be, except that the agreements set forth in Articles I and II,
Section 6.06 and this Article IX shall survive the Effective Time and those
set forth in Sections 6.03(b) and 8.05 and this Article IX shall survive
termination. Each party agrees that, except for the representations and
warranties contained in this Agreement and the Disclosure Schedule, no
party hereto has made any other representations and warranties, and each
party hereby disclaims any other representations and warranties made by
itself or any of its officers, directors, employees, agents, financial and
legal advisors or other representatives with respect to the execution and
delivery of this Agreement or the transactions contemplated herein,
notwithstanding the delivery or disclosure to any other party or any
party's representatives of any documentation or other information with
respect to any one or more of the foregoing.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy and facsimile or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 9.02):
if to Parent:
G.C. Associates Holdings Corp.
96 Cummings Point Road
Stamford, Connecticut 06902
Attention: Steven B. Lapin
Telephone: (203) 358-8000
Facsimile: (203) 348-3103
with a copy (which shall not constitute notice to Parent) to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
Attention: Ezra G. Levin, Esq.
Telephone: (212) 715-9100
Facsimile: (212) 715-8000
if to the Company:
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American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
Attention: President
Telephone: (303) 527-3230
Facsimile: (303) 527-3235
with copies (which shall not constitute notice to the Company) to:
Overton, Babiarz & Associates, P.C.
7720 Bellview Avenue
Suite 200
Englewood, Colorado 80111
Attention: David J. Babiarz, Esq.
Telephone: (303) 779-5900
Facsimile: (303) 779-6006
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" of a specified person means a person who, directly or
indirectly through one or more intermediaries, controls, is controlled
by or is under common control with such specified person;
(b) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings or, in the case of
determining a date when any payment is due, any day on which banks are
not required or authorized to close in the State of Colorado;
(c) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership
of voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(d) "knowledge" means, with respect to any matter in question, that the
executive officers of Parent or the Company, as the case may be, (i)
have knowledge of such matter, or (ii) after reasonable due
investigation, should have known of such matter;
(e) "person" means an individual, corporation, company, limited liability
company, partnership, limited partnership, syndicate, person
(including, without limitation, a "person" as defined in section
13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government; and
(f) "subsidiary" or "subsidiaries" of any person means any corporation,
limited liability company, partnership, joint venture or other legal
entity of which such person (either alone or through or together with
any other subsidiary) owns, directly or indirectly, more than 50% of
the stock or other equity interests, the holders of which are
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generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
SECTION 9.04. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect, as long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible, in a mutually acceptable manner, in order that the transactions
contemplated hereby be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. Assignment; Merger Sub; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of Law or
otherwise), other than by Parent to one of its affiliates, without the
prior written consent of the other parties. Notwithstanding anything to the
contrary contained in this Agreement, Parent may transfer the shares of
Merger Sub to one of its subsidiaries prior to the consummation of the
Merger. Subject to the preceding sentences, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns. Notwithstanding anything contained in
this Agreement to the contrary, except for the provisions of Section 6.06
(the "Third Party Provision"), nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto
or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third
Party Provision may be enforced by the beneficiaries thereof.
SECTION 9.06. Incorporation of Exhibits. The Disclosure Schedule and any
exhibits attached hereto and referred to herein are hereby incorporated
herein and made a part of this Agreement for all purposes as if fully set
forth herein.
SECTION 9.07. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any
other remedy at law or equity.
SECTION 9.08. Governing Law. Except to the extent that the Merger is mandatorily
governed by, or pursuant to the terms of this Agreement is subject to, the
CBCA, this Agreement shall be governed by, and construed in accordance
with, the laws of the State of Colorado applicable to contracts executed in
and to be performed in that State, without regard to any conflicts of laws
principles otherwise applicable. No provision of this Agreement shall be
construed to require any of the parties hereto or any of their respective
subsidiaries, affiliates, directors, officers, employees or agents to take
any action that would violate any applicable Law.
SECTION 9.09. Submission to Jurisdiction; Venue. The parties hereto
unconditionally and irrevocably agree and consent to the exclusive
jurisdiction of, and service of process and venue in, the United States
District Court for the Southern District of New York and the courts of the
-36-
State of New York and waive any objection with respect thereto, for the
purpose of any action, suit or proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby; the parties further
agree not to commence any such action, suit or proceeding except in any
such court. Each party irrevocably waives any objections or immunities to
jurisdiction to which it might otherwise be entitled or become entitled in
any legal suit, action or proceeding against it arising out of or relating
to this Agreement or the transactions contemplated hereby which is
instituted in any such court.
SECTION 9.10. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.11. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original but all of which,
taken together, shall constitute one and the same agreement.
SECTION 9.12. Entire Agreement. This Agreement (including the exhibits attached
hereto and the Disclosure Schedule) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless it is made in writing and signed by all parties
hereto.
SECTION 9.13. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE ACTIONS OF ANY PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
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IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
G.C. ASSOCIATES HOLDINGS CORP.
By:
Name: /s/ Steven B. Lapin
----------------------------------
Title: President
---------------------------------
AMERICAN EDUCATIONAL PRODUCTS, INC.
By: Name: /s/ Clifford C. Thygesen
-------------------------
Title: Clifford C. Thygesen, President
--------------------------------
Exhibit B
D.A. Davidson + Co.
8 Third Street North
Great Falls, Montana 59401
August 14, 2000
Board of Directors
American Educational Products, Inc.
6550 Gunpark Drive, Suite 200
Boulder, Colorado 80301
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the shareholders of American Educational Products, Inc. ("AMEP") of the
consideration to be delivered to such shareholders by G.C. Associates Holdings
Corp. ("GC"), in connection with the proposed acquisition (the "Acquisition") of
all of the issued and outstanding shares of AMEP that GC does not already own.
We understand that GC currently owns approximately 61% of the issued and
outstanding shares of AMEP.
We have assumed that the terms of the Acquisition are as set forth in the
Agreement and Plan of Acquisition (the "Agreement") between GC and AMEP dated as
of August 14, 2000. We understand that all shareholders of AMEP common stock
will receive $10.00 per share in cash. It should also be noted that under the
terms of the Acquisition, all debt and obligations of AMEP shall be assumed by
GC.
In arriving at our opinion, we have reviewed various financial and operating
information relating to AMEP, including, and without limitation, historical
financial reports of AMEP, reports filed with the SEC, internal operating
reports and analyses, and related information. We have also held discussions
with AMEP's management regarding the business, its recent operating results and
future prospects.
We have additionally examined and considered financial and stock market data for
similar public companies, the publicly available financial terms of certain
other similar business combinations, and other analyses and considerations that
we deemed relevant.
Board of Directors
American Educational Products, Inc.
August 14, 2000
Page Two
In conducting our review and arriving at our opinion, we have relied, without
independent investigation, upon the accuracy and completeness of all financial
and other information publicly available or provided to us by AMEP. We have also
assumed the reasonableness of and relied upon the estimates and judgements of
management of AMEP as to the future business and financial prospects. We have
not made an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of AMEP, nor have we been furnished with any such
evaluations or appraisals. Our opinion is necessarily based upon economic,
market, financial and other conditions as they exist and can be evaluated on the
date hereof and the information provided to us through the date hereof.
D.A. Davidson & Co. is engaged in the valuation of companies and their
securities in the course of its business as an investment firm. For our services
in connection with rendering this opinion, we will receive a fee from AMEP.
It is understood that this letter is intended solely for the benefit and use of
the Board of Directors of AMEP in its consideration of the Acquisition and is
not intended to be and does not constitute a recommendation to any shareholder
as to how such shareholder should vote with respect to the Acquisition.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be delivered to the shareholders of AMEP in
connection with the Acquisition is fair, from a financial point of view, to such
shareholders.
Very truly yours,
D.A. Davidson & Co.
By:
- ---------------------
Daren J. Shaw
Managing Director
Appendix A
Colorado Dissenters' Rights Statute
Colorado Revised Statutes Article 113 (Sections 7-113-101 to 7-113-203)
Part 1. Right of Dissent - Payment for Shares
7-113-101. Definitions For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
Section 7-113-102. Right to dissent
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event of
any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
if:
(I) Approval by the shareholders of that corporation is required for the
merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation; or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to
vote upon the consent of the corporation to the disposition pursuant
to section 7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any class or
series of shares which either were listed on a national securities exchange
registered under the federal "Securities Exchange Act of 1934", as amended,
[FN1] or on the national market system of the national association of securities
dealers automated quotation system, or were held of record by more than two
thousand shareholders, at the time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders' meeting
at which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the corporate
action; or
(c) The effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's shares, pursuant
to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan of
merger or share exchange;
(b) Shares of any other corporation which at the effective date of the
plan of merger or share exchange either will be listed on a national
securities exchange registered under the federal "Securities Exchange
Act of 1934", as amended, or on the national market system of the
national association of securities dealers automated quotation system,
or will be held of record by more than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu of
fractional shares.
(2) Deleted by Laws 1996, H.B.96-1285, s 30, eff. June 1, 1996.
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of a reverse split that reduces the number of shares owned by the
shareholder to a fraction of a share or to scrip if the fractional share or
scrip so created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
Section 7-113-103. Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of different
shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
Section 7-113-201. Notice of dissenters' rights
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7- 113-202(1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7- 113-202(2).
Section 7-113-202. Notice of intent to demand payment
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting and if
notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201(1), a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated;
and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 and if notice of dissenters' rights has been given to such
shareholder in connection with the action pursuant to section 7-113-201(2) a
shareholder who wishes to assert dissenters' rights shall not execute a writing
consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
Section 7-113-203. Dissenters' notice
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the effective
date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment demands
and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment demand
and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1)
of this section is given;
(f) State the requirement contemplated in section 7-113-103(3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
Section 7-113-204. Procedure to demand payment
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113- 203 and who wishes to assert dissenters' rights shall, in accordance with
the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the shareholder's exercise of dissenters' rights and has only the right
to receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
Section 7-113-205. Uncertificated shares
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
Section 7-113-206. Payment
(1) Except as provided in section 7-113-208, upon the effective date of the
corporate action creating dissenters' rights under section 7-113-102 or upon
receipt of a payment demand pursuant to section 7-113-204, whichever is later,
the corporation shall pay each dissenter who complied with section 7-113-204, at
the address stated in the payment demand, or if no such address is stated in the
payment demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares, the
amount the corporation estimates to be the fair value of the dissenter's shares,
plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen
months before the date of payment, an income statement for that year,
and, if the corporation customarily provides such statements to
shareholders, a statement of changes in shareholders' equity for that
year and a statement of cash flow for that year, which balance sheet
and statements shall have been audited if the corporation customarily
provides audited financial statements to shareholders, as well as the
latest available financial statements, if any, for the interim or
full-year period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under section
7- 113-209; and
(e) A copy of this article.
Section 7-113-207. Failure to take action
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after the date
set by the corporation by which the corporation must receive the payment demand
as provided in section 7-113-203, the corporation shall return the deposited
certificates and release the transfer restrictions imposed on uncertificated
shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment demand as
provided in section 7-113-203, then the corporation shall send a new dissenters'
notice, as provided in section 7-113-203, and the provisions of sections
7-113-204 to 7-113-209 shall again be applicable.
Section 7-113-208. Special provisions relating to shares acquired after
announcement of proposed corporate action
(1) The corporation may, in or with the dissenters' notice given pursuant
to section 7-113-203, state the date of the first announcement to news media or
to shareholders of the terms of the proposed corporate action creating
dissenters' rights under section 7-113-102 and state that the dissenter shall
certify in writing, in or with the dissenter's payment demand under section
7-113-204, whether or not the dissenter (or the person on whose behalf
dissenters' rights are asserted) acquired beneficial ownership of the shares
before that date. With respect to any dissenter who does not so certify in
writing, in or with the payment demand, that the dissenter or the person on
whose behalf the dissenter asserts dissenters' rights acquired beneficial
ownership of the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment if the
dissenter agrees to accept it in full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
Section 7-113-209. Procedure if dissenter is dissatisfied with payment or offer
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section 7-113-206 or
offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206 within
sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or release
the transfer restrictions imposed on uncertificated shares as required
by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required by
subsection (1) of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
Section 7-113-301. Court action
(1) If a demand for payment under section 7-113-209 remains unresolved, the
corporation may, within sixty days after receiving the payment demand, commence
a proceeding and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state where the
corporation's principal office is located or, if the corporation has no
principal office in this state, in the district court of the county in which its
registered office is located. If the corporation is a foreign corporation
without a registered office, it shall commence the proceeding in the county
where the registered office of the domestic corporation merged into, or whose
shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of shareholders
for the record shareholder holding the dissenter's shares, or as provided by
law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
Section 7-113-302. Court costs and counsel fees
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation; except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the court
finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and
that the fees for those services should not be assessed against the
corporation, the court may award to said counsel reasonable fees to be
paid out of the amounts awarded to the dissenters who were benefitted.