AGREEMENT AND PLAN OF MERGER
DATED AS OF _____________________, 1998
BY AND AMONG
ALCHEMY HOLDINGS, INC.,
CIGARETTE BOATS, INC.
AND CIGARETTE RACING TEAM, INC.
ARTICLE I......................................................................1
THE MERGER................................................................1
Section 1.1..........................................................2
Section 1.2..........................................................2
Section 1.3..........................................................2
Section 1.4..........................................................3
ARTICLE II.....................................................................3
CONVERSION OF SECURITIES..................................................3
Section 2.1 Conversion of Capital Stock. ........................3
Section 2.2 Exchange of Certificates. ...........................5
Section 2.3 Dissenter's Rights....................................5
ARTICLE III....................................................................7
REPRESENTATIONS AND WARRANTIES OF CIGARETTE...............................7
Section 3.1 Organization..........................................8
Section 3.2 Cigarette Subsidiaries and Joint
Ventures. ...........................................8
Section 3.3 Cigarette Capital Structure. ........................8
Section 3.4 Authority; No Conflict; Required Filings
and Consents..........................................9
Section 3.5 SEC Filings; Financial Statements....................11
Section 3.6 Absence of Undisclosed Liabilities...................11
Section 3.7 Absence of Certain Changes or
Events ..............................................11
Section 3.8 Taxes................................................12
Section 3.9 Properties...........................................13
Section 3.10 Intellectual Property................................13
Section 3.11 Agreements, Contracts and
Commitments..........................................14
Section 3.12 Litigation. ........................................15
Section 3.13 Environmental Matters................................15
Section 3.14 Compliance with Laws. ..............................15
Section 3.15 Reverse Acquisition. ...............................16
Section 3.16 Interested Party Transactions........................16
Section 3.17 Registration Statement; Proxy
Statement/Prospectus.................................16
Section 3.18 Payments Resulting from Mergers......................17
Section 3.19 Option of Financial Advisor..........................17
Section 3.20 Business Combination.................................17
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ARTICLE IV....................................................................18
REPRESENTATIONS AND WARRANTIES OF ALCHEMY AND
MERGER SUB...........................................18
Section 4.1 Organization.........................................19
Section 4.2 Alchemy Subsidiaries and
Joint Ventures ......................................19
Section 4.3 Alchemy Capital Structure............................19
Section 4.4 Authority; No Conflict;
Required Filings and Consents........................21
Section 4.5 SEC Filings; Financial Statements....................22
Section 4.6 Absence of Undisclosed Liabilities...................23
Section 4.7 Absence of Certain Changes or
Events...............................................23
Section 4.8 Taxes................................................23
Section 4.9 Properties. .........................................24
Section 4.10 Intellectual Property................................24
Section 4.11 Agreements, Contracts and
Commitments..........................................25
Section 4.12 Litigation...........................................26
Section 4.13 Environmental Matters................................26
Section 4.14 Compliance with Laws.................................27
Section 4.15 Reverse Acquisition..................................27
Section 4.16 Interested Party Transactions........................27
Section 4.17 Registration Statement; Proxy
Statement/Prospectus.................................27
Section 4.18 Interim Operations of Merger Sub.....................28
ARTICLE V.....................................................................28
CONDUCT OF BUSINESS......................................................28
Section 5.1 Covenants of Cigarette...............................28
Section 5.2 Covenants of Alchemy.................................30
Section 5.3 Cooperation..........................................32
ARTICLE VI....................................................................32
ADDITIONAL AGREEMENTS....................................................32
Section 6.1 No Solicitation......................................32
Section 6.2 Proxy Statement/Prospectus;
Registration Statement...............................34
Section 6.3 Consents.............................................35
Section 6.4 Current OTC Bulletin Board Listing...................35
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Section 6.5 Access to Information................................35
Section 6.6 Shareholder Meetings.................................37
Section 6.7 Legal Conditions to Merger. .......................37
Section 6.8 Public Disclosure....................................38
Section 6.9 Tax-Free Reorganization..............................38
Section 6.10 Reverse Acquisition Accounting.......................38
Section 6.11 Affiliate Agreements.................................39
Section 6.12 OTC Bulletin Board Listing...........................39
Section 6.13 Indemnification......................................40
Section 6.14 Additional Agreements;
Reasonable Efforts...................................42
Section 6.15 Notification of Certain Matters......................42
ARTICLE VII...................................................................42
CONDITIONS TO MERGER.....................................................42
Section 7.1 Conditions to Each Party's Obligation to
Effect The Merger....................................43
(a) Shareholder Approvals.....................................43
(b) Approvals.................................................43
(c) Registration Statement....................................43
(d) No Injunctions or Restraints;
Illegality................................................43
(e) OTC Bulletin Board Listing. .............................43
(f) Tax Opinions..............................................44
Section 7.2 Additional Conditions to Obligations
of Alchemy and Merger Sub............................44
(a) Representations and Warranties............................44
(b) Performance of Obligations................................44
(c) Affiliate and Other Agreements............................44
(d) Absence of Cigarette Material
Adverse Effect............................................45
Section 7.3 Additional Conditions to obligations
of Cigarette...............................................45
(a) Representations and Warranties.............................45
(b) Performance of Obligations.................................45
(c) Absence of Alchemy Material Adverse
Effect.....................................................45
ARTICLE VIII..................................................................45
TERMINATION AND AMENDMENT................................................45
Section 8.1 Termination..........................................45
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Section 8.2 Effect of Termination................................47
Section 8.3 Fees and Expenses....................................48
Section 8.4 Amendment............................................49
Section 8.5 Extension; Waiver....................................49
ARTICLE IX....................................................................49
MISCELLANEOUS........................................................49
Section 9.1 Nonsurvival of Representations,
Warranties and Agreements............................49
Section 9.2 Notices..............................................50
Section 9.3 Interpretation;
Certain Definitions..................................50
Section 9.4 Counterparts.........................................52
Section 9.5 Entire Agreement; No Third-Party
Beneficiaries........................................52
Section 9.6 Governing Law........................................52
Section 9.7 Specific Performance.................................52
Section 9.8 Assignment...........................................52
Section 9.9 Severability.........................................52
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
_______________, 1998 among Alchemy Holdings, Inc., a Florida corporation
("Alchemy"), Cigarette Boats, Inc., a Delaware corporation and a wholly-owned
subsidiary of Alchemy ("Merger Sub"), and Cigarette Racing Team, Inc., a Florida
corporation ("Cigarette").
RECITALS
WHEREAS, the Boards of Directors of Alchemy, Merger Sub and Cigarette (i)
deem it advisable and in the best interest of each corporation and its
respective shareholders that Alchemy and Cigarette combine in order to advance
their long-term business interests and (ii) have approved this Agreement, the
Merger (as defined below) and the other transactions contemplated by this
Agreement;
WHEREAS, the combination of Alchemy and Cigarette shall be effected by the
terms of this Agreement through a transaction in which Merger Sub will merge
with and into Cigarette, Cigarette will become a wholly-owned subsidiary of
Alchemy and the shareholders of Cigarette will become shareholders of Alchemy
(the "Merger");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, the parties intend that the Merger shall
be accounted for as a reverse acquisition;
NOW, THEREFORE, the parties, intending to be legally bound, hereby agree as
follows:
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ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Subject to the provisions of this Agreement and in
accordance with the Florida Business Corporation Act (the "FBCA") and the
Delaware General Corporation Law ("DGCL"), Merger Sub shall be merged with and
into Cigarette. As a result of the Merger, the outstanding shares of capital
stock of the Merger Sub and Cigarette shall be converted or canceled in the
manner provided in Article II of this Agreement; the separate corporate
existence of Merger Sub shall cease, and Cigarette shall be the surviving
corporation in the Merger.
SECTION 1.2 Closing; Effective Time of the Merger. Unless this Agreement
shall have been terminated pursuant to Section 8.1, the closing of the Merger
(the "Closing") will take place at 10 a.m., Florida time, on a date to be
specified by Alchemy and Cigarette (the "Closing Date"), which shall be no later
than the second business day after satisfaction (or waiver in accordance with
Section 8.5) of all conditions set forth in Article VII at the offices of
Cigarette Racing Team, Inc., unless another date or place is agreed to in
writing by Alchemy and Cigarette. Subject to the provisions of this Agreement, a
certificate of merger meeting the applicable requirements of the FBCA and the
DGCL (the "certificate of Merger") shall be duly prepared, executed and
acknowledged by Cigarette and Merger Sub and simultaneously with or as soon as
practicable following the Closing delivered to the Secretary of State of each of
the State of Florida and the State of Delaware for filing. The Merger shall
become effective upon the date and time of the filing of the Certificate of
Merger with the Secretary of State of each of the State of Florida and the State
of Delaware or at such other date and time as is provided in the Certificate of
Merger (the "Effective Time").
SECTION 1.3 Effects of Merger.
(a) At the Effective Time: (i) the separate existence of Merger Sub
shall cease and Merger Sub shall be merged with and into Cigarette (Merger
Sub and Cigarette are sometimes referred to collectively herein as the
"Constituent Corporations" and Cigarette is sometimes referred to herein as
the "Surviving Corporation"); (ii) the Certificate of Incorporation and
Bylaws of Merger Sub as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation and Bylaws of the Surviving
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Corporation until amended in accordance with the terms thereof and in
accordance with applicable law; provided, however, that, notwithstanding
the foregoing, Article I of the Certificate of Incorporation of Merger Sub
shall be amended to read as follows: "The name of the Corporation is
"Cigarette Racing Team, Inc."
(b) The Merger shall have the effects set forth in this Agreement and
in the FBCA and the DGCL.
SECTION 1.4 Directors and Officers. The directors and officers of Merger
Sub immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, and shall hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.1 Conversion of Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Constituent
Corporations or the holder of any shares of Common Stock, $0.01 par value per
share, of Cigarette ("Cigarette Common Stock") or capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
the capital stock of Merger Sub shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Alchemy-Owned Stock. All shares
of Cigarette Common Stock that are owned by Cigarette as treasury stock or
by any Subsidiary of Cigarette and any shares of Cigarette Common Stock
owned by Alchemy, Merger Sub or any other wholly-owned Subsidiary (as
defined in Section 9.3) of Alchemy shall be canceled and retired and shall
cease to exist and no stock of Alchemy or other consideration shall be
delivered in exchange therefor. All shares of Common Stock, $0.001 par
value per share, of Alchemy
3
("Alchemy Common Stock") owned by Cigarette shall remain unaffected by the
Merger.
(c) Exchange Ratio for Cigarette Common Stock. Subject to Section 2.2,
each issued and outstanding share of Cigarette Common Stock (other than
shares to be canceled in accordance with Section 2.1(b)) shall be converted
into one (1) share of (the "Conversion Number") fully paid and
nonassessable share of Alchemy Common Stock. All such shares of Cigarette
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
Alchemy Common Stock to be issued in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without
interest.
(d) Restriction On Transfer. All Alchemy shares of Common Stock
received by Cigarette shareholders as a result of the Merger shall be
restricted from transfer for a period of twelve months commencing as of the
Effective Time as defined in Section 1.2 hereof (the "Lockup Period").
During the Lockup Period the Board of Directors of the Surviving
Corporation shall have the exclusive right to release any or all of the
shareholders of the newly issued Alchemy Common Stock for any necessary
reason.
(e) Adjustment of Exchange Ratio. If, between the date of this
Agreement and the Effective Time, the outstanding shares of Alchemy Common
Stock or Cigarette Common Stock shall have changed into a different number
of shares or a different class by reason of any reclassification,
recapitalization, split-up, stock dividend, stock combination, exchange of
shares, readjustment or otherwise, then the Conversion Number shall be
correspondingly adjusted; provided, however, that any such changes shall be
subject to Sections 5.1 and 5.2. No adjustment will be made as a result of
the exchange prior to the Effective Time by Cigarette of Cigarette Common
Stock for outstanding indebtedness of Cigarette, including without
limitation, indebtedness owed by Cigarette to Central Manufacturing, Inc.,
an Alabama corporation ("Central").
4
(f) Exchange Agreement. However, pursuant to the terms of the Exchange
Agreement between Central, Cigarette and Alchemy, Central shall receive
1,000,000 shares of Alchemy Common Stock and $1,000,000 of Alchemy
Preferred Stock, Series B upon the effectiveness of the Merger.
(g) Exchange Ratio for Preferred Stock. Subject to Section 2.2, each
issued and outstanding share of Cigarette Preferred Stock shall be
converted into one fully paid and nonassessable share of Alchemy Preferred
Stock of the same series with similar terms and conditions. All such shares
of Cigarette Preferred Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares
shall cease to have any rights with respect thereto, except the right to
receive the shares of Alchemy Preferred Stock to be issued in consideration
therefor upon the surrender of such certificate in accordance with Section
2.2, without interest.
SECTION 2.2 Exchange of Certificates. The procedures for exchanging
outstanding shares of Cigarette Common Stock for Alchemy Common Stock pursuant
to the Merger are set forth in Exhibit A hereto, which is incorporated by
reference as if set forth in full herein.
SECTION 2.3 Dissenter's Rights. Pursuant to Section 607.1302(a) of the
Florida Business Corporation Act, a copy of which is attached hereto as Exhibit
_____, any holder of Cigarette Common Stock who objects to the Merger will be
entitled to dissent and exercise appraisal rights. That section enables an
objecting shareholder to be paid, in cash, the value of his Cigarette Common
Stock as determined by FBCA Section 607.1301, provided that the following
conditions are satisfied:
(a) Such shareholder must not vote in favor of the Merger, nor submit a
proxy in which directions are given to vote in favor of the Merger. Failure
to vote against the Merger shall constitute a waiver of that shareholder's
appraisal rights.
(b) Within 10 days after the date on which the vote is taken approving the
Merger, such shareholder must make written
5
demand on Cigarette for payment of the fair value of such shareholder's
shares.
Within 10 days after the Merger is effected, Cigarette shall give written notice
("Notice") thereof to each dissenting shareholder who has satisfied paragraphs
(a) and (b) hereof, and Cigarette shall make a written offer to each such
shareholder to pay for such shares at a specified price deemed by Cigarette to
be the fair value thereof.
Cigarette shall also notify each dissenting shareholder that within 20 days
after Cigarette gives Notice, any dissenting shareholder(s) must file with
Cigarette a notice of such election, stating the name and address, the number,
classes, and series of shares as to which he dissents, and a demand for payment
of the fair value of his shares in order to perfect his rights. Any shareholder
failing to file such election to dissent within the period set forth shall be
bound by the terms of the proposed corporate action. Any shareholder filing an
election to dissent shall deposit his certificates for certified shares with
Cigarette simultaneously with the filing of the election to dissent. Cigarette
may restrict the transfer of uncertified shares from the date of the
shareholder's election to dissent is filed with the corporation.
In the event that Cigarette and the dissenting shareholder(s) do not agree with
the value Cigarette places on such shareholder's shares, then Cigarette, within
30 days after the receipt of a written demand from any such shareholder given
within 60 days after the date on which the Merger was effected, shall, or at its
election at any time within such period of 60 days may, file an action in any
court of competent jurisdiction in the county in Florida where the registered
office of Alchemy is located requesting that the fair value of such shares be
found and determined. If Cigarette fails to initiate such a proceeding, then any
dissenting shareholder may do so in the name of the corporation.
The Florida Business Corporation Act does not distinguish between publicly held
and closely held corporations. Additionally, neither Cigarette's nor Alchemy's
articles of incorporation provide otherwise. Thus, the rights of holders of
Alchemy and Cigarette securities do not materially differ.
6
Notwithstanding the foregoing, a dissenting shareholder may withdraw his
appraisal demand so long as Cigarette consents thereto.
THE ABOVE SECTION IS A ONLY A SUMMARY OF FLORIDA LAW REGARDING DISSENTER'S
RIGHTS. FAILURE BY A SHAREHOLDER TO FOLLOW THE REQUIRED PROCEDURE AS DETERMINED
BY SECTIONS 607.1301-1320 OF THE FLORIDA BUSINESS CORPORATION ACT FOR PERFECTING
HIS DISSENTER'S RIGHTS WILL RESULT IN THE LOSS OF SUCH RIGHTS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CIGARETTE
Cigarette represents and warrants to Alchemy and Merger Sub that the
statements contained in this Article III are true and correct, except (i) in the
case of the representations and warranties in Sections 3.1, 3.2, 3.4(b), 3.5
through 3.14 and 3.16, where the failure to be true and correct would not,
either individually or in the aggregate, have a Cigarette Material Adverse
Effect (as defined below), or (ii) as set forth on the disclosure schedule
attached hereto(the "Cigarette Disclosure Schedule"). When used in connection
with Cigarette or any of its Subsidiaries, if any, the term "Cigarette Material
Adverse Effect" means any change, event or effect that is materially adverse to
the business, assets (including intangible assets), liabilities, financial
condition, operations or results of operations of Cigarette and its
Subsidiaries, if any, taken as a whole; provided, however, that the following
shall not be deemed to constitute a "Cigarette Material Adverse Effect": (i) an
adverse change in or effect on the financial condition, revenues or gross
margins of Cigarette (or the direct consequences thereof) following the date of
this Agreement to the extent attributable to (A) a delay of, reduction in or
cancellation or change in the terms of product licenses by customers of
Cigarette, (B) a slow down in the activity of Cigarette's sales organization or
(C) the loss of any officer or key employee of Cigarette which is directly and
primarily attributable to the transactions contemplated by this Agreement; (ii)
an adverse change in or effect on the market price of Cigarette Common Stock
between the date of this Agreement and the Closing Date; or (iii) the outcome of
any litigation disclosed pursuant to Section 3.12.
7
SECTION 3.1 Organization. Each of Cigarette and its Subsidiaries, if any,
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate power
to own, lease and operate its property and to carry on its business as now being
conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a Cigarette Material Adverse Effect. Neither Cigarette nor any of its
Subsidiaries, if any, directly or indirectly owns any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for any such
equity or similar interest in, any corporation, limited liability company,
partnership, joint venture or other business association or entity, excluding
securities of any publicly traded company held for investment by Cigarette and
comprising less than five percent of the outstanding stock of such company.
SECTION 3.2 Cigarette Subsidiaries and Joint Ventures. All of the issued
and outstanding shares of capital stock of each Subsidiary are owned by
Cigarette or by a Subsidiary of Cigarette (other than directors' qualifying
shares in the case of foreign Subsidiaries, if any,) and are validly issued,
fully paid, and nonassessable, and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants with respect to
any such Subsidiary's capital stock, including any right obligating any such
Subsidiary to issue, deliver, or sell additional shares of its capital stock
other than those mentioned below in this paragraph 3.2.
SECTION 3.3 Cigarette Capital Structure.
(a) The authorized capital stock of Cigarette consists of 10,000,000
shares of Cigarette Common Stock $.01 par value per share and 1,000 shares
of Preferred Stock. As of October 31,1998, (i) 3,641,000 shares of
Cigarette Common Stock were issued and outstanding, all of which issued and
outstanding shares are validly issued, fully paid and nonassessable; and
(ii) no shares of Cigarette Common Stock were held in the treasury of
Cigarette or by Subsidiaries, if any, of Cigarette. As of October 31, 1998
(i) 100 shares of Cigarette Preferred Stock, Series A were issued and
outstanding, all of which issued and outstanding shares are validly issued,
fully
8
paid and non-assessable; and (ii) no shares of Cigarette Preferred Stock,
were held in the treasury of Cigarette or by subsidiaries, if any, of
Cigarette. There are no obligations, contingent or otherwise, of Cigarette
or any of its Subsidiaries, if any, to repurchase, redeem or otherwise
acquire any shares of Cigarette Common Stock , Cigarette Preferred Stock
Series A or the capital stock of any Cigarette Subsidiary or make any
investment (in the form of a loan, capital contribution or otherwise) in
any such Subsidiary or any other entity other than guarantees of debt
obligations of such Subsidiaries, if any, entered into in the ordinary
course of business. All of the outstanding shares of capital stock of each
Subsidiary of Cigarette are duly authorized, validly issued, fully paid and
nonassessable, and all such shares (other than directors' qualifying shares
in the case of foreign Subsidiaries, if any) are owned by Cigarette or
another Cigarette Subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations on Cigarette's voting
rights, charges or other encumbrances of any nature.
(b) Except as set forth in section 3.3(a) there are no equity
securities of any class of Cigarette or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except for the Exchange Agreement among Alchemy, Cigarette and
Central, there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which Cigarette is a party or
by which it is bound obligating Cigarette to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock
of Cigarette or any of its Subsidiaries, if any, or obligating Cigarette or
any of its Subsidiaries, if any, to grant, extend, accelerate the vesting
of or enter into any such option, warrant, equity security, call, right,
commitment or agreement, and, except for the proxies contemplated by this
Agreement, there are no proxies or other agreements or understandings with
respect to the shares of capital stock of Cigarette.
SECTION 3.4 Authority; No Conflict; Required Filings and Consents.
(a) Cigarette has all requisite corporate power and
9
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Cigarette,
subject only (in the case of this Agreement and certain of the transactions
contemplated hereby) to the approval of the Merger by Cigarette and
Alchemy's shareholders in accordance with the FBCA. This Agreement has been
duly executed and delivered by Cigarette and constitute the valid and
binding obligations of Cigarette, enforceable in accordance with their
respective terms.
(b) The execution and delivery of this Agreement by Cigarette does
not, and the consummation of the transactions contemplated hereby will not,
(i) conflict with, or result in any violation or breach of any provision of
the Certificate of Incorporation or Bylaws of Cigarette or any of its
Subsidiaries, if any, (in each case as heretofore amended), (ii) result in
any violation or breach of, or constitute (with or without notice or lapse
of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Cigarette or any of its Subsidiaries, if any, is a
party or by which any of them or any of their respective properties or
assets may be bound, or (iii) conflict with or violate any permit,
concession, franchise, license, judgement, order, decree, statute, law,
ordinance, rule or regulation applicable to Cigarette or any of its
Subsidiaries, if any, or any of their respective properties or assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency, commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Cigarette or any of its Subsidiaries, if
any, in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing by Alchemy of the Registration Statement (as defined in Section
10
3.17) with the Securities and Exchange Commission (the "SEC") in accordance
with the Securities Act of 1933, as amended (the "Securities Act"), (ii)
the filing of the Certificate of Merger with the Secretary of State of each
of the State of Florida and State of Delaware in accordance with the FBCA
and the DGCL, and (iii) the filing of the Proxy Statement (as defined in
Section 3.17) and related proxy materials with the SEC in accordance with
the Securities Exchange Act of 1934(the "Exchange Act").
SECTION 3.5 SEC Filings; Financial Statements.
(a) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Cigarette financial
statements(the "Cigarette Financial Statements"), complies as to form in
all material respects with the applicable published rules and regulations
of the SEC with respect thereto and was prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the
notes to such financial statements or, in the case of unaudited statements,
as permitted by the SEC), and fairly presents in all material respects, the
consolidated financial position of Cigarette and its Subsidiaries, if any,
as at the respective dates and the consolidated results of its operations
and cash flows for the periods indicated, except that the unaudited interim
financial statements are subject to normal and recurring year-end
adjustments which are or are not expected to be material in amount.
SECTION 3.6 Absence of Undisclosed Liabilities. Cigarette and its
Subsidiaries, if any, do not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements, including the
notes thereto, in accordance with GAAP), and whether due or to become due, which
individually or in the aggregate, are or would be reasonably likely to have a
Cigarette Material Adverse Effect, other than (i) liabilities reflected in the
unaudited consolidated balance sheet of Cigarette as of September 30, 1998 (the
"Cigarette Balance Sheet"), and (ii) normal or recurring liabilities incurred
since September 30, 1998, in the ordinary course of business consistent with
past practices.
SECTION 3.7 Absence of Certain Changes or Events. Since
11
the date of the Cigarette Balance Sheet, Cigarette and its Subsidiaries, if any,
have conducted their businesses only in the ordinary course, in a manner
consistent with past practice, and there has not been: (i) any Cigarette
Material Adverse Effect; (ii) any damage, destruction or loss (whether or not
covered by insurance) with respect to Cigarette or any of its Subsidiaries, if
any, having a Cigarette Material Adverse Effect; (iii) any material change by
Cigarette or any of its subsidiaries, if any, in its accounting methods,
principles or practices to which Alchemy has not previously consented in
writing; (iv) any revaluation by Cigarette or any of its Subsidiaries, if any,
of any of its assets having a Cigarette Material Adverse Effect, including
writing off notes or accounts receivable, other than in the ordinary course of
business consistent with past practice, unless Alchemy has previously consented
in writing thereto; or (v) any other action or event that would have required
the consent of Alchemy pursuant to Section 5.1 had such action or event occurred
after the date of this Agreement and that could reasonably be expected to result
in a Cigarette Material Adverse Effect.
SECTION 3.8 Taxes.
(a) For purposes of this Agreement, a "Tax" or, collectively, "Taxes"
means any and all material federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise
and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor entity.
(b) Each of Cigarette and its Subsidiaries, if any, has accurately
prepared and timely filed all material federal, state, local and foreign
returns, estimates, information statements and reports required to be filed
at or before the Effective Time ("Returns") relating to any and all Taxes
concerning or attributable to Cigarette or any of its Subsidiaries, if any,
or to their operations, and such Returns
12
are true and correct in all material respects.
(c) each of Cigarette and its Subsidiaries, if any, as of the
Effective Time: (i) will have paid all Taxes it is required to pay prior to
the Effective Time, and (ii) will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld, except where any failure to make such payment or
withholding would not be reasonably likely to have a Cigarette Material
Adverse Effect.
(d) There is no Tax deficiency outstanding, proposed or assessed
against Cigarette or any of its Subsidiaries, if any, that is not reflected
as a liability on the Cigarette Balance Sheet nor has Cigarette or any of
its Subsidiaries, if any, executed any waiver of any statute of limitations
on or extending the period for the assessment or collection of any Tax
(other than Taxes in the ordinary course of business in an amount that is
not material to Cigarette and its Subsidiaries, if any, taken together as a
whole).
(e) neither Cigarette nor any of its Subsidiaries, if any, has any
material liability for unpaid Taxes that has not been accrued for or
reserved on the Cigarette Balance Sheet, whether asserted or unasserted,
contingent or otherwise.
SECTION 3.9 Properties. Except as set forth in the Disclosure Schedule, all
material real property leases ("Material Lease(s)") of Cigarette and its
Subsidiaries, if any, are in good standing, valid and effective in accordance
with their respective terms, and neither Cigarette nor its Subsidiaries, if any,
is in default under any of such leases, except where the lack of such good
standing, validity or effectiveness or the existence of such default would not
be reasonably likely to have a Cigarette Material Adverse effect.
SECTION 3.10 Intellectual Property.
(a) Cigarette and its Subsidiaries, if any, own or are licensed or
otherwise possess legally enforceable rights to use, all patents,
trademarks, trade names, service marks and copyrights, any applications for
and registrations of such patents, trademarks, trade names, service marks,
copyrights
13
and mask works, and all processes, formulae, methods, schematics,
technology, know-how and tangible or intangible proprietary information or
material that are necessary to conduct the business of Cigarette and its
Subsidiaries, if any, as currently conducted, or planned to be conducted,
the absence of which would be reasonably likely to have a Cigarette
Material Adverse Effect (the "Cigarette Intellectual Property Rights").
(b) Neither Cigarette nor any of its Subsidiaries, if any, is, or will
as a result of the execution and delivery of the Agreement or the
performance of Cigarette's obligations under this Agreement or otherwise
be, in breach of any license, sublicense or other agreement relating to the
Cigarette Intellectual Property Rights, or any material licenses,
sublicenses and other agreements as to which Cigarette or any of its
Subsidiaries, if any, is a party and pursuant to which Cigarette or any of
its Subsidiaries, if any, is authorized to use any third party patents,
trademarks or copyrights ("Cigarette Third Party Intellectual Property
Rights") which is used in the manufacture of, incorporated in, or forms a
part of any product sold by or expected to be sold by Cigarette or any of
its Subsidiaries, if any, the breach of which would be reasonably likely to
have a Cigarette Material Adverse Effect.
(c) All patents, registered trademarks, service marks and copyrights
which are held by Cigarette or any of its Subsidiaries, if any, and which
are material to the business of Cigarette and its Subsidiaries, if any,
taken as a whole, are valid and subsisting. Cigarette (i) has not been sued
in any suit, action or proceeding which involves a claim or infringement of
any patents, trademarks, service marks, copyrights or violation of any
trade secret or other proprietary right of any third party, which
infringement would reasonably be expected to have a Cigarette Material
Adverse Effect.
SECTION 3.11 Agreements, Contracts and Commitments. Neither Cigarette nor
any of its Subsidiaries, if any, has breached, or received in writing any claim
or threat that it has breached, any of the terms or conditions of any material
agreement, contract or commitment("Cigarette Material Contracts") in such a
manner as
14
would permit any other party to cancel or terminate the same or would permit any
other party to collect material damages from Cigarette or any of its
Subsidiaries, if any, under any Cigarette Material Contract. Each Cigarette
Material Contract that has not expired or been terminated in accordance with its
terms is in full force and effect and is not subject to any material default
thereunder of which Cigarette is aware by any party obligated to Cigarette or
any of its Subsidiaries, if any, pursuant to such Cigarette Material Contract.
To the knowledge of Cigarette, none of the parties to the Cigarette Material
Contracts have terminated, or in any way expressed an intent to materially
reduce or terminate, the amount of business with Cigarette and its Subsidiaries,
if any, in the future.
SECTION 3.12 Litigation. Except as set forth in the Disclosure Schedule,
there is no action, suit or proceeding, claim, arbitration or investigation
against Cigarette or any of its Subsidiaries, if any, pending or as to which
Cigarette has received any notice of assertion, which, if decided adversely to
Cigarette or any Subsidiary, if any, would be reasonably expected to have a
Cigarette Material Adverse Effect, or a material adverse effect on the ability
of Cigarette to consummate the transactions contemplated by this Agreement.
SECTION 3.13 Environmental Matters. Due to the manufacturing process
employed by it, Cigarette has been directly involved in the storage and use of a
number of hazardous materials. At all times that hazardous materials were either
stored or used, Cigarette and its subsidiaries believe that they held all of the
required environmental permits for the storage and use of such materials (as
defined in section 9.3). No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending or, to the knowledge of
Cigarette, threatened concerning any Environmental Permit or any Hazardous
Materials Activity of Cigarette or any of its Subsidiaries, if any. Cigarette is
not aware of any fact or circumstance which could involve Cigarette or any of
its Subsidiaries, if any, in any environmental litigation or impose upon
Cigarette or any of its Subsidiaries, if any, any environmental liability which
would be reasonably likely to have a Cigarette Material Adverse Effect.
SECTION 3.14 Compliance with Laws. Each of Cigarette and its Subsidiaries,
if any, has complied in all material respects
15
with all applicable federal, state, local and foreign statutes, laws and
regulations, and is not in violation of, and has not received any notices of
violation with respect to, any such statute, law or regulation, with respect to
the conduct of its business or the ownership or operation of its business,
including the federal Foreign Corrupt Practices Act and all United States
statutes, laws and regulations as from time to time govern the license and
delivery of technology and products abroad by persons subject to the
jurisdiction of the United States.
SECTION 3.15 Reverse Acquisition. Neither Cigarette nor, to its knowledge,
any of its Affiliates (as defined in Section 6.11) has, through the date of this
Agreement, taken or agreed to take any action which could affect the ability of
Alchemy to account for the business combination to be effected by the Merger as
a reverse acquisition.
SECTION 3.16 Interested Party Transactions. If applicable, since the date
of Cigarette's most recent proxy statement to its shareholders, if any, no event
has occurred that would be required to be reported by Cigarette as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
SECTION 3.17 Registration Statement; Proxy Statement/Prospectus. The
information supplied to Alchemy by Cigarette expressly for inclusion in the
registration statement on Form S-4 pursuant to which shares of Alchemy Common
Stock to be issued in the Merger will be registered with the SEC (the
"Registration Statement") does not, and at the time the Registration Statement
is declared effective by the SEC shall not, contain any untrue statement of a
material fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading. The information supplied to Alchemy by Cigarette expressly
for inclusion in the proxy statement/prospectus (the "Proxy Statement") to be
sent to the shareholders of Cigarette in connection with the special meeting of
Cigarette's shareholders to consider this Agreement and the Merger (the
"Cigarette Shareholder Meeting") and to the shareholders of Alchemy in
connection with the meeting of Alchemy shareholders to approve the issuance of
Alchemy Common Stock in connection with the
16
meeting of Alchemy shareholders to approve the issuance of Alchemy Common Stock
in connection with the transactions contemplated by this Agreement (the "Alchemy
Shareholder Meeting") shall not, on the date the Proxy Statement is first mailed
to shareholders of Cigarette and shareholders of Alchemy, at the time of the
Cigarette Shareholder Meeting, the Alchemy Shareholder Meeting or at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it was made, is false or misleading with respect to
any material fact, or omit to state any material fact necessary in order to make
the statements made in the Proxy Statement not false or misleading or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Cigarette
Shareholders Meeting or the Alchemy Shareholders Meeting which has become false
or misleading. If at any time prior to the Effective Time any event relating to
Cigarette or any of its Affiliates, officers or directors should be discovered
by Cigarette which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, Cigarette shall promptly
notify Alchemy of such event in reasonable detail.
SECTION 3.18 Payments Resulting from Mergers. Except as provided in this
Agreement, the consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in any (i) material payment (whether of
severance pay or otherwise) becoming due from Cigarette or any of its
Subsidiaries, if any, to any officer, employee, former employee or director
thereof or to the trustee under any management, employment, deferred
compensation, severance (including any payment, right or benefit resulting from
a change in control), bonus or other contract for personal services with any
officer, director or employee or any plan, agreement or understanding similar to
any of the foregoing, or any "rabbi trust" or similar arrangement, or (ii)
material benefit under any Cigarette benefit plan being established or becoming
accelerated, vested or payable.
SECTION 3.19 Option of Financial Advisor. As of the date hereof, Cigarette
has not yet determined who will serve as financial advisor to the merger
contemplated herein.
SECTION 3.20 Business Combination. The Board of Directors of Cigarette has
taken all actions so that the restrictions
17
contained in the FBCA applicable to a "business combination" will not apply to
the execution, delivery or performance of this Agreement or consummation of the
Merger or other transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ALCHEMY AND MERGER SUB
Alchemy and Merger Sub represent and warrant to Cigarette that the
statements contained in this Article IV are true and correct, except (i) as
disclosed or incorporated by reference in the Alchemy SEC Reports (as defined in
Section 4.4 (a)) filed prior to the date of this Agreement (ii) in the case of
the representations and warranties in Sections 4.1, 4.2, 4.4(b), 4.5 through
4.14 and 4.17, where the failure to be true and correct would not, either
individually or in the aggregate, have an Alchemy Material Adverse Effect (as
defined below), or (iii) as set forth on the disclosure schedule, if any,
delivered by Alchemy to Cigarette prior to execution of this Agreement (the
"Alchemy Disclosure Schedule"). When used in connection with Alchemy or any of
its Subsidiaries, the term "Alchemy Material Adverse Effect" means any change,
event or effect that is materially adverse to the business, assets (including
intangible assets) liabilities, financial condition, operations or results of
operations of Alchemy and its Subsidiaries, taken as a whole; provided, however,
that the following shall not be deemed to constitute an "Alchemy Material
Adverse Effect": (i) an adverse change in or effect on the financial conditions,
revenues or gross margins of Alchemy (or the direct consequences thereof)
following the date of this Agreement to the extent attributable to (A) a delay
of, reduction in or cancellation or change in the terms of product licenses by
customers of Alchemy , (B) a slow down in the activity of Alchemy's sales
organization or (C) the loss of any officer or key employee of Alchemy to the
extent attributable directly and primarily to the transactions contemplated by
this Agreement; (ii) an adverse change in or effect on the market price of
Alchemy Common Stock between the date of this Agreement and the Closing Date;
(iii) a failure of quarterly results of operations for any quarter between the
date of this Agreement and the Closing Date to meet generally analysts'
expectations as reflected in the First Call Consensus estimate, if
18
any; or (iv) the outcome of any litigation disclosed pursuant to Section 4.12.
SECTION 4.1 Organization. Each of Alchemy, Merger Sub and the other
Subsidiaries of Alchemy is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite power to own lease and operate its property and to carry on its
business as now being conducted and as proposed to be conducted and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the failure to be so qualified would have an Alchemy
Material Adverse Effect. Neither Alchemy nor any of its Subsidiaries directly or
indirectly owns any equity, or similar interest in, or any interest convertible
into or exchangeable or exercisable for any such equity or similar interests in
any corporation, limited liability company, partnership, joint venture or other
business association or entity, excluding securities of any publicly traded
company held for investment by Alchemy and comprising less than five percent of
the outstanding stock of such company.
SECTION 4.2 Alchemy Subsidiaries and Joint Ventures. All issued and
outstanding shares of capital stock of each Subsidiary are owned by Alchemy or a
Subsidiary of Alchemy and are validly issued, fully paid and nonassessable, and
there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants with respect to any such Subsidiary's capital
stock, including any right obligating any such Subsidiary to issue, deliver or
sell additional shares of its capital stock.
SECTION 4.3 Alchemy Capital Structure.
(a) The authorized capital stock of Alchemy consists of 50,000,000
shares of Alchemy Common Stock and 10,000,000 shares of Preferred Stock,
$0.001 and $10,000.00 par value, respectively ("Alchemy Preferred Stock").
As of October 31, 1998: (i)2,702,394 shares of Alchemy Common Stock and no
shares of Alchemy Preferred were issued and outstanding, all of which are
validly issued, fully paid and nonassessable; and (ii) no shares of Alchemy
Common Stock were held in the treasury of Alchemy or by Subsidiaries of
Alchemy. No material change in such capitalization has occurred between
19
October 31, 1998 and the date of this Agreement. As of the date of this
Agreement, 100,000 shares of Alchemy Preferred Stock are issued and
outstanding. All the shares of Alchemy Common Stock subject to issuance as
specified above, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of Alchemy, or any of its Subsidiaries to
repurchase, redeem, or otherwise acquire any shares of Alchemy Common Stock
or the capital stock of any Alchemy Subsidiary or to provide funds or to
make any investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or entity other than guarantees of debt
obligations of such Subsidiaries entered into in the ordinary course of
business. All of the outstanding shares of capital stock of each Subsidiary
of Alchemy are duly authorized, validly issued, fully paid and
nonassessable, and all such shares (other than directors' qualifying shares
in the case of foreign Subsidiaries) are owned by Alchemy or another
Alchemy Subsidiary free and clear of all security interests, liens, claims,
pledges, agreements, limitations on the voting rights of Alchemy, charges
or other encumbrances of any nature.
(b) Except as contemplated by this Agreement, there are no equity
securities of any class of Alchemy or any of its Subsidiaries or any
security exchangeable for such equity securities, issued, reserved for
issuance, or outstanding. Except as contemplated by this Agreement, there
are no options, warrants, securities, calls, rights, commitments or
agreements of any character to which Alchemy or any of its Subsidiaries is
a party or by which it is bound obligating Alchemy or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of any capital stock of Alchemy or any of its
Subsidiaries or obligating Alchemy or any of its Subsidiaries to grant,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment, or agreement, and to the best knowledge
of Alchemy, there are no voting trusts, proxies or other agreements or
understandings with respect to the shares of the capital stock of Alchemy,
except for those found on Exhibit _____, attached hereto.
20
SECTION 4.4 Authority; No Conflict; Required Filings and Consents.
(a) Alchemy has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all corporate and shareholder action on the part of Alchemy, subject only
to the approval by Alchemy shareholders of the issuance of the shares of
Alchemy Common Stock issued pursuant to this Agreement. This Agreement has
been duly executed and delivered by Alchemy and constitutes the valid and
binding obligation of Alchemy, enforceable in accordance with the terms
hereof and thereof.
(b) The execution and delivery of this Agreement by Alchemy does not,
and the consummation of the transactions contemplated hereby will not (i)
conflict with, or result in any violation or breach of any provision with
the Articles of Incorporation or Bylaws of Alchemy or any of its
Subsidiaries (in each case as heretofore amended (ii) result in any
violation or breach of, or constitute (with or without notice, or lapse of
time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or any loss of benefit)
under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Alchemy or any of its Subsidiaries is a party or by
which any of them or any of their respective properties or assets may be
bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgement, order, decree, statute, law, ordinance, rule or
regulation applicable to Alchemy or any of its Subsidiaries or any of its
or their respective properties or assets.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Alchemy or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the
registration statement with the SEC in accordance with the
21
Securities Act, (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Florida, (iii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
as may be required under applicable federal and state securities laws and
the laws of any foreign country, (iv) the filing of the Registration
Statement and the Proxy Statement with the SEC in accordance with the
Securities Act and the Exchange Act and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained
or made, would not be reasonably likely to have an Alchemy Material Adverse
Effect or a material adverse effect on the ability of Alchemy to consummate
the transactions contemplated by this Agreement.
SECTION 4.5 SEC Filings; Financial Statements.
(a) Alchemy has filed all forms, reports and documents required to be
filed by Alchemy with the SEC since ___________, 1989 (collectively, the
"Alchemy SEC Reports") and has made available to Cigarette all of the same
so filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may
be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Alchemy SEC
Reports or necessary in order to make the statements in the in such Alchemy
SEC Reports, in the light of the circumstances under which they were made,
not misleading. No Alchemy Subsidiary is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Alchemy SEC Reports filed
after the date of this Agreement prior to the Closing, complied or will
comply as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as to be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted
by Form 10-Q
22
promulgated by the SEC) and fairly presented or will present, in all
material respects, the consolidated financial position of Alchemy and its
Subsidiaries as at the respective dates of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year end adjustments
which were not or are not expected to be material in amount.
SECTION 4.6 Absence of Undisclosed Liabilities. Alchemy and its
Subsidiaries do not have any liabilities, either accrued or contingent (whether
or not required to be reflected in financial statements, including the notes
thereto, in accordance with GAAP), and whether due or to become due, which
individually or in the aggregate would be reasonably likely to have an Alchemy
Material Adverse Effect, other than (i) liabilities reflected in the audited
consolidated balance sheet of Alchemy as of September 30, 1998 in the ordinary
course of business consistent with past practices.
SECTION 4.7 Absence of Certain Changes or Events. Since the date of the
Alchemy Balance Sheet, Alchemy and its Subsidiaries have conducted their
business only in the ordinary course, in a manner consistent with past practice,
and there has not been: (i) any Alchemy Material Effect; (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to
Alchemy or any of its Subsidiaries having a Alchemy Material Adverse Effect;
(iii) any material change by Alchemy in its accounting methods, principles or
practices to which Cigarette has not previously consented in writing; (iv) any
reevaluation by Alchemy of any of its assets having an Alchemy Material Adverse
Effect, including writing down the value of capitalized software or inventory or
writing off notes or accounts receivable other than in the ordinary course of
business consistent with past practice, unless Cigarette has previously
consented in writing thereto; or (v) any such action or event that would have
required the consent of Cigarette pursuant to Section 5.2 had such action or
event occurred after the date of this Agreement and that could reasonably be
expected to result in an Alchemy Material Adverse Effect.
SECTION 4.8 Taxes.
(a) Each of Alchemy and its Subsidiaries has accurately prepared and
timely filed all material required Returns relating to any and all Taxes
concerning or attributable to
23
Alchemy or its operations and such Returns are true and correct in all
material respects.
(b) Each of Alchemy and its Subsidiaries as of the Effective Time: (i)
will have paid all Taxes it is required to pay prior to the Effective Time
and (ii) will have withheld with respect to its employees all federal and
state income taxes, FICA, FUTA and other Taxes required to be withheld,
except where any failure to make payment or withholding would not be
reasonably likely to have an Alchemy Material Adverse Effect.
(c) There is no Tax deficiency outstanding, proposed or assessed
against Alchemy or any of its Subsidiaries that is not reflected as a
liability on the Alchemy Balance Sheet nor has Alchemy or any of its
Subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax (other
than Taxes in the ordinary course of business in an amount that is not
material to Alchemy and its Subsidiaries taken as a whole).
(d) Neither Alchemy nor any of its Subsidiaries has any material
liability for unpaid Taxes that have not been accrued for or reserved on
Alchemy Balance Sheet, whether asserted or unasserted, contingent or
otherwise.
SECTION 4.9 Properties. All Material Leases under which Alchemy and its
Subsidiaries lease real property are in good standing, valid and effective in
accordance with their respective terms, and neither Alchemy nor any of its
Subsidiaries is in default under any material provision of such Material Leases,
except where the lack of such good standing, validity and effectiveness or the
existence of such default would not be reasonably likely to have an Alchemy
Material Adverse Effect.
SECTION 4.10 Intellectual Property.
(a) Alchemy and its Subsidiaries own, or are licensed or otherwise
possess legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights and mask works, any applications for and
registrations of such patents, trademarks, trade names, service marks,
copyrights and mask works, and all processes, formulae, methods,
24
schematics, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or
material that are necessary to conduct the business of Alchemy and its
subsidiaries as currently conducted or planned to be conducted, the absence
of which would be reasonably likely to have an Alchemy Material Adverse
Effect (the "Alchemy Intellectual Property Rights").
(b) Neither Alchemy nor any of its Subsidiaries has or will it be as a
result of the execution and delivery of this Agreement or the performance
of its obligations under this Agreement, in breach of any license,
sublicense or other agreement relating to the Alchemy Intellectual Property
Rights or any material license, sublicense or other agreement pursuant to
which Alchemy is authorized to use any third party patents, trademarks or
copyrights, including software, which is used in the manufacture of,
incorporated in, or forms a part of any Alchemy product sold or expected to
be sold by Alchemy or any of its Subsidiaries, the breach of which would be
reasonably likely to have an Alchemy Material Adverse Effect.
(c) All patents, registered trademarks, service marks and copyrights
which are held by Alchemy or any of its Subsidiaries and which are material
to the business of Alchemy and its Subsidiaries, taken as a whole, are
valid and subsisting. Alchemy (i) has not been sued in any suit, action or
proceeding which involves a claim of infringement of any patents,
trademarks, service marks, copyrights or violation of any trade secret or
other proprietary right of any third party; and (ii) has no knowledge that
the manufacturing, marketing, licensing or sale of its products infringes
any patent, trademark, service ▇▇▇▇, copyright, trade secret or other
proprietary right of any third party, which infringement would be
reasonably likely to have an Alchemy Material Adverse Effect.
SECTION 4.11 Agreements, Contracts and Commitments. Neither Alchemy nor any
of its Subsidiaries has breached, or received in writing any claim or threat
that it has breached, any of the terms or conditions of any agreement, contract
or commitment that (i) is filed as an exhibit to an Alchemy SEC Report or (ii)
with respect to agreements, contracts or commitments entered into by Alchemy
25
since ________________, 1989 would have been required to be filed as an exhibit
to an Alchemy SEC Report if they had been entered into prior to such date
("Alchemy Material Contacts") in such a manner as would permit any other party
to cancel or terminate the same or would permit any other party to collect
material damages from Alchemy under any Alchemy Material Contract. Each Alchemy
Material Contract that has not expired or been terminated in accordance with its
terms is in full force and effect and is not subject to any material default
thereunder of which Alchemy is aware by any party obligated to Alchemy pursuant
to such Alchemy Material Contract. To the knowledge of Alchemy, none of the
parties to the Alchemy Material Contracts have terminated or in any way
expressed an intent to materially reduce or terminate the amount of business
with Alchemy or its Subsidiaries in the future.
SECTION 4.12 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against Alchemy pending or as to which Alchemy has
received any written notice of assertion, which would be reasonably expected to
have an Alchemy Material Adverse Effect or a material adverse effect on the
ability of Alchemy to consummate the transactions contemplated by this
Agreement.
SECTION 4.13 Environmental Matters. As of the date hereof, to its
knowledge, no underground storage tanks are present under any property that
Alchemy or any of its Subsidiaries currently occupies, or that Alchemy or any of
its Subsidiaries has at anytime owned, operated, occupied or leased. Due to the
manufacturing process employed by Alchemy, Alchemy has been directly involved in
the storage and use of a number of hazardous materials. At all times that
hazardous materials were either stored or used, Alchemy and it subsidiaries
believe that they held all of the required environmental permits for the storage
and use of such materials (as defined in section 9.3). If it is subsequently
determined that Alchemy and its subsidiaries, if any, did not hold a required
Environmental Permits (as defined in Section 9.3), the absence of such would
most likely result in a Material Adverse Effect. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is pending
or, to the knowledge of Alchemy, threatened concerning any Environmental Permit
or any Hazardous Materials Activity of Alchemy or any of its Subsidiaries, if
any. Alchemy is not aware of any fact or circumstance which could involve
Alchemy or any of its Subsidiaries, if any, in any
26
environmental litigation or impose upon Alchemy or any of its Subsidiaries, if
any, any environmental liability which would be reasonably likely to have an
Alchemy material Adverse Effect.
SECTION 4.14 Compliance with Laws. Each of Alchemy and its Subsidiaries has
complied with all federal, state, local and foreign statutes, laws and
regulations, and, is not in violation of, and has not received any notices of
violation with respect to, any such statute, law or regulation, with respect to
the conduct of its business or the ownership or operation of its business,
including the federal Foreign Corrupt Practices Act and all United States
statutes, laws and regulations as from time to time govern the license and
delivery of technology and products abroad by persons subject to the
jurisdiction of the United States, except for failures to comply or violations
which would not be reasonably likely to have an Alchemy Material Adverse Effect.
SECTION 4.15 Reverse Acquisition. Neither Alchemy nor, to its knowledge,
any of its Affiliates (as defined in Section 6.11) has, through the date of this
Agreement, taken or agreed to take any action which would affect the ability of
Alchemy to account for the business combination to be effected by the Merger as
a reverse acquisition.
SECTION 4.16 Interested Party Transactions. Since the date of the most
recent proxy statement of Alchemy to its shareholders, no event has occurred
that would be required to be reported by Alchemy as a Certain Relationship or
Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
SECTION 4.17 Registration Statement; Proxy Statement/Prospectus. The
information supplied by Alchemy expressly for inclusion in the Registration
Statement shall not at the time the Registration Statement is declared effective
by the SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied to Cigarette by Alchemy expressly for inclusion in the Proxy Statement
shall not, on the date the Proxy Statement is first mailed to shareholders of
Cigarette, at the time of the Cigarette Shareholders Meeting or at the Effective
Time, contain any statement which, at such time and
27
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Proxy Statement not false
or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Cigarette Shareholders Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to
Alchemy or any of its affiliates, officers or directors should be discovered by
Alchemy which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, Alchemy shall promptly inform Cigarette.
SECTION 4.18 Interim Operations of Merger Sub. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
ARTICLE V
CONDUCT OF BUSINESS
SECTION 5.1 Covenants of Cigarette. Except as expressly contemplated by
this Agreement, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement pursuant to Section 8.1
or the Effective Time, Cigarette agrees as to itself and its Subsidiaries, if
any, except to the extent that Alchemy shall otherwise consent in writing (which
consent shall not be unreasonably withheld or delayed), to carry on its business
in the usual, regular and ordinary course in substantially the same manner as
previously conducted, to pay its debts and taxes when due, subject to good faith
disputes over such debts or taxes, to pay or perform its other obligations when
due, and to use all reasonable efforts consistent with past practices and
policies to (i) preserve intact its present business organization, (ii) keep
available the services of its present officers and key employees and (iii)
preserve its relationships with customers, suppliers, distributors, licensors,
licensees and others having business dealings with it. Without limiting the
generality of the foregoing, Cigarette shall not (and shall not permit any of
its Subsidiaries, if any, to), without prior written consent of Alchemy (which
consent shall not be unreasonably
28
withheld or delayed):
(a) transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Cigarette Intellectual Property Rights
other than in the ordinary course of business consistent with past
practices;
(b) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service by such party;
(c) issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership or other business
organization or division, except as set forth in the Cigarette Disclosure
Schedule;
(e) sell, lease, license or otherwise dispose of any of its properties
or assets which are material, individually or in the aggregate, to the
business of Cigarette and its Subsidiaries, if any, taken as a whole,
except for transactions entered into in the ordinary course of Cigarette's
business consistent with past practice;
(f) take any action to: (i) increase or agree to increase the
compensation payable or to become payable to its officers or employees,
except for increases in salary or wages of
29
employees in accordance with agreements entered into before the date of
this Agreement or otherwise in the ordinary course of Cigarette's business
consistent with past practices, (ii) grant any additional severance or
termination pay to, or enter into any employment or severance agreement,
with any employee, except in accordance with agreements entered into before
the date of this Agreement or otherwise in the ordinary course of
Cigarette's business consistent with past practices, (iv) enter into any
collective bargaining agreement, or (v) establish, adopt, enter into or
amend in any material respect any bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, trust,
fund, policy or arrangement for the benefit of any directors, officers or
employees;
(g) amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement; or
(h) take, or agree in writing or otherwise to take, any of the actions
described in the foregoing clauses (a) through (h), or any action which is
reasonably likely to make any of Cigarette's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on
the date made (to the extent so limited) or as of the Effective Time.
SECTION 5.2 Covenants of Alchemy. During the period from the date of this
Agreement and continuing until the earlier of the termination of the Agreement
pursuant to Section 8.1 or the Effective Time, except as expressly contemplated
by this Agreement, Alchemy shall not, without the prior written consent of
Cigarette (which consent shall not be unreasonably withheld or delayed):
(a) declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than stock splits of
the Alchemy Common Stock or stock dividends payable in shares of Alchemy
Common Stock), or purchase or otherwise acquire,
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directly or indirectly, any shares of its capital stock except from former
employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination
of service by such party;
(b) issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or securities
convertible into shares of its capital stock, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or convertible securities,
other than (i) the issuance of such shares or convertible securities
pursuant to a transaction in which Alchemy acquires or agrees to acquire by
merging or consolidating with, or by purchasing a substantial equity
interest in or substantial portion of the assets of, or otherwise, any
business or any corporation, partnership or other business organization or
division, for consideration having a fair market value (at the time of the
public announcement of such acquisition or agreement) of less than $100
million, or (ii) the grant to employees, directors or consultants of
options to purchase Alchemy Common Stock in the ordinary course of business
consistent with past practices pursuant to agreements and plans entered
into or established before the date of this Agreement or otherwise in the
ordinary course of business consistent with past practices, or (iii) as
contemplated in this Agreement;
(c) amend or propose to amend its Certificate of Incorporation or
Bylaws, except as contemplated by this Agreement;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or otherwise, any business or any corporation, partnership
or other business organization or division, for consideration having a fair
market value (at the time of the public announcement of such acquisition or
agreement) in excess of ten million dollars;
(e) sell, lease, license or otherwise dispose of any of its properties
or assets which are material, individually or in the aggregate, to the
business of Alchemy and its
31
Subsidiaries, taken as a whole, except for transactions entered into in the
ordinary course of business; or
(f) take, or agree in writing or otherwise to take, any of the actions
described in clauses (a) through (e) above, or any action which is
reasonably likely to make any representations or warranties of Alchemy
contained in this Agreement untrue or incorrect in any material respect on
the date made (to the extent so limited) or as of the Effective Time.
SECTION 5.3 Cooperation. Subject to compliance with applicable law, from
the date hereof until the Effective Time, each of Alchemy and Cigarette shall
confer on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general status
of ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger and the transactions contemplated
hereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, Cigarette shall not, directly or indirectly, through any officer,
director, employee, representative or agent, (i) solicit, initiate or
encourage any inquiries or proposals that constitute, or could reasonably
be expected lead to, a proposal or offer for a merger, consolidation, share
exchange, business combination, sale of substantial assets, sale of shares
of capital stock (including without limitation pursuant to a tender offer)
or similar transaction or series of transactions involving Cigarette, other
than the transactions contemplated by this Agreement (any of the foregoing
inquiries or proposals being referred to in this Agreement as an
"Acquisition Proposal"), or (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
32
relating to, any Acquisition Proposal, or (iii) agree to, approve or
recommend any Acquisition Proposal; provided however, that nothing
contained in this Agreement shall prevent Cigarette or its Board of
Directors from (A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity (including a new and
unsolicited Acquisition proposal received by Cigarette after the execution
of this Agreement from a person or entity whose initial contact with
Cigarette may have been solicited by Cigarette prior to the execution of
this Agreement) or recommending such an unsolicited bona fide written
Acquisition Proposal to the shareholders of Cigarette, if and only to the
extent that (1) the Board of Directors of Cigarette believes in good faith
(after consultation with and based upon the advice of its financial
advisor) that such Acquisition Proposal would, if consummated, result in a
transaction more favorable to Cigarette shareholders from a financial point
of view than the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal") and the Board of Directors of Cigarette determines in
good faith after consultation with and based upon the advice of outside
legal counsel that such action is necessary for Cigarette to comply with
its fiduciary duties to its shareholders under applicable law and (2) prior
to furnishing such non-public information to, or entering into discussions
or negotiations with, such person or entity, such Board of Directors
receives from such person or entity an executed non-disclosure agreement or
(B) complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal.
(b) Upon compliance with the foregoing, following receipt of a
Superior Proposal, Cigarette shall be entitled to (i) withdraw, modify or
refrain from making its recommendation referred to in Section 6.2 and
approve and recommend to the shareholders of Cigarette a Superior Proposal
and (ii) enter into an agreement with such third party concerning a
Superior Proposal provided that Cigarette shall concurrently make payment
in full to Alchemy of the fee provided in Section 8.3(b) below.
(c) Cigarette shall notify Alchemy within 24 hours after
33
receipt by Cigarette (or its advisors) of any Acquisition Proposal or any
request for non-public information in connection with an Acquisition
Proposal or for access to the properties, books or records of Cigarette by
any person or entity that informs Cigarette that it is considering making,
or has make, an Acquisition Proposal. Such notice shall be made orally and
in writing ans shall indicate in reasonable detail the identity of the
offeror and the terms and conditions of such proposal, inquiry or contact.
Cigarette shall notify Alchemy of any discussions with any such offeror
within 24 hours of such discussions and shall disclose to Alchemy within
such 24-hour period the substance of such discussions in reasonable detail.
(d) Cigarette shall be entitled to provide copies of this Section 6.1
to third parties who, on an unsolicited basis after the date of this
Agreement, contact Cigarette regarding an Acquisition Proposal, provided
that Alchemy shall concurrently be notified of such contact and delivery of
such copy.
SECTION 6.2 Proxy Statement/Prospectus; Registration Statement. As promptly
as practicable after the execution of this Agreement, Alchemy and Cigarette
shall prepare and file with the SEC a preliminary Proxy Statement in form and
substance satisfactory to each of Cigarette and Alchemy, and Alchemy shall
prepare and file with the SEC the Registration Statement, in which the Proxy
Statement will be included. Each of Alchemy and Cigarette shall use its
reasonable efforts to respond to any comments of the SEC, to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and to cause the Proxy Statement to be mailed
to Alchemy and Cigarette's shareholders at the earliest practicable time. As
promptly as practicable after the date of this Agreement, Alchemy and Cigarette
shall prepare and file any other filings required under the Exchange Act, the
Securities Act or any other federal or state securities laws relating to the
Merger and the transactions contemplated by this Agreement including under state
takeover laws (the "Other Filings"). Alchemy shall also take any action (other
than qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
of Alchemy Common
34
Stock in the Merger, and Cigarette shall furnish all information concerning
Cigarette and the holders of Cigarette Common Stock as may be reasonably
required in connection with any such action. Each of Alchemy and Cigarette will
notify the other promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff or any other government
officials, on the other hand, with respect to the Registration Statement and the
Other Filings shall comply in all material respects with all applicable
requirements of law. Whenever any event occurs which is required to be set forth
in an amendment or supplement to the Proxy Statement, the Registration Statement
or any Other Filing, Alchemy or Cigarette, as the case may be, shall promptly
inform the other of such occurrence, provide the other party reasonable
opportunity to review and comment, and cooperate in filing with the SEC or its
staff or any other government officials, and/or mailing to shareholders of
Alchemy and shareholders of Cigarette, such amendment or supplement. The Proxy
Statement shall include the recommendations of the Board of Directors of Alchemy
in favor of the issuance of Alchemy Common Stock in connection with the Merger
and of the Board of Directors of Cigarette in favor of the Merger and this
Agreement.
SECTION 6.3 Consents. Each of Alchemy and Cigarette shall use all
reasonable efforts to obtain all necessary, consents, waivers and approvals, and
to make all necessary notifications or filings under any of Alchemy's or
Cigarette's material agreements, contracts, licenses or leases as may be
necessary or advisable to consummate the Merger and the other transactions
contemplated by this Agreement.
SECTION 6.4 Current OTC Bulletin Board Listing. Alchemy agrees to continue
the listing of the Alchemy Common Stock on the OTC Bulletin Board until the
Closing or the earlier termination of this Agreement pursuant to Section 8.1.
SECTION 6.5 Access to Information.
(a) Upon reasonable notice, Cigarette shall (and shall cause each of
its Subsidiaries, if any, to) afford (i) to the officers, employees,
independent auditors, legal counsel (including outside legal counsel) and
other representatives of Alchemy, reasonable access, during normal business
hours during the period prior to the Effective Time, to all of
35
Cigarette and its Subsidiaries', if any, properties, books, contracts,
commitments and records in order that such Alchemy representatives have a
full opportunity to make such investigation as they reasonably desire to
make of Cigarette and its Subsidiaries, if any, and, (ii) to the
independent auditors of Alchemy, reasonable access to the audit work papers
and other records of the independent auditors of Cigarette and its
Subsidiaries, if any. Additionally, Cigarette and its Subsidiaries, if any,
will permit such Alchemy representatives to make such reasonable
inspections of Cigarette and its Subsidiaries, if any, and their respective
operations during normal business hours as Alchemy may reasonably require
and Cigarette and its Subsidiaries, if any, will cause its officers and the
officers of its Subsidiaries, if any, to furnish Alchemy with such
financial and operating data and other information with respect to the
business and properties of Cigarette and its Subsidiaries, if any, as
Alchemy may from time to time reasonably request. During the period prior
to the Effective Time or the earlier termination of this agreement pursuant
to Section 8.1, Cigarette shall (and shall cause each of its Subsidiaries,
if any, to) furnish promptly to Alchemy (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws
and (ii) all other information concerning its business, properties and
personnel as Alchemy may reasonably request.
(b) Upon reasonable notice, Alchemy shall (and shall cause each of its
Subsidiaries to) afford (i) to the officers, employees, independent
auditors, legal counsel (including outside legal counsel) and other
representatives of Cigarette, reasonable access, during normal business
hours during the period prior to the Effective Time, to all of Alchemy and
its Subsidiaries' properties, books, contracts, commitments and records in
order that such Cigarette representatives have a full opportunity to make
such investigation as they reasonably desire to make of Alchemy and its
Subsidiaries and, (ii) to the independent auditors of Cigarette, reasonable
access to the audit work papers and other records of the independent
auditors of Alchemy and its Subsidiaries. Additionally, Alchemy and its
Subsidiaries will permit such Cigarette representatives to make such
reasonable inspections of Alchemy
36
and its Subsidiaries and their respective operations during normal business
hours as Cigarette may reasonably require and Alchemy and its Subsidiaries
will cause its officers and the officers of its Subsidiaries to furnish
Cigarette with such financial and operating data and other information with
respect to the business and properties of Alchemy and its Subsidiaries as
Cigarette may from time to time reasonably request. During the period prior
to the Effective Time or the earlier termination of this agreement pursuant
to Section 8.1, Alchemy shall (and shall cause each of its Subsidiaries to)
furnish promptly to Cigarette (i) a copy of each report, schedule,
registration statement and other document filed or received by it during
such period pursuant to the requirements of federal securities laws and
(ii) all other information concerning its business, properties and
personnel as Cigarette may reasonably request.
(c) No information or knowledge obtained in any investigation pursuant to
this Section 6.5 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations
of the parties to consummate the Merger.
SECTION 6.6 Shareholder Meetings. As promptly as practicable after the date
hereof, Cigarette shall duly call, give notice of, convene and hold a meeting of
its shareholders for the purpose of voting upon the Merger and this Agreement
and Alchemy shall duly call, give notice of, convene and hold a meeting of its
shareholders for the purpose of voting upon the issuance of the shares of
Alchemy Common Stock in connection with the Merger. Cigarette and Alchemy shall
coordinate and cooperate with respect to the timing of such meetings and shall
use their respective reasonable efforts to hold such meetings on the same day as
soon as practicable after the date hereof.
SECTION 6.7 Legal Conditions to Merger. Each of Alchemy and Cigarette will
take all reasonable actions necessary to comply promptly with all legal
requirements regarding each entity with respect to the Merger (which actions
shall include furnishing all information required in connection with approvals
of or filings with any other Governmental Entity) and will promptly cooperate
with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their
37
Subsidiaries, if any, in connection with the Merger. Each of Alchemy and
Cigarette will, and will cause its Subsidiaries, if any, to, take all reasonable
actions necessary (i) to obtain (and to cooperate with each other in obtaining)
any consents, authorization, order or approval of, or any exemption by, any
governmental entity or other public third party, required to be obtained or made
by Cigarette, Alchemy or any of their Subsidiaries, if any, in connection with
the Merger of the taking of any action contemplated by this Agreement, (ii) to
lift, rescind or mitigate the effect of any injunction or restraining order or
other order adversely affecting its ability to consummate the transactions
contemplated hereby, (iii) to fulfill all conditions applicable to Alchemy,
Cigarette or Merger Sub pursuant to this Agreement, and (iv) to prevent, with
respect to a threatened or pending temporary, preliminary or permanent
injunction or other order, decree or ruling or statute, rule regulation or
executive order, the entry, enactment or promulgation thereof, as the case may
be.
SECTION 6.8 Public Disclosure. Except as otherwise required by law, court
process or the rules of the OTC Bulletin Board or as provided elsewhere herein,
prior to the closing or the earlier termination of this Agreement pursuant to
Section 8.1, neither Cigarette nor Alchemy shall, or shall permit any of its
Subsidiaries, if any, to, issue or cause the publication of any press release or
other public announcement with respect to the transactions contemplated by this
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld or delayed.
SECTION 6.9 Tax-Free Reorganization. Alchemy and Cigarette shall take no
action to cause the Merger to fail to be treated as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 6.10 Reverse Acquisition Accounting. Alchemy and Cigarette each
agrees not to take any action after the date of this Agreement that would
adversely affect the ability of Alchemy to treat the business combination to be
effected by the Merger as a reverse acquisition, and each of Alchemy and
Cigarette agrees to take such action as may be reasonably required to negate the
impact of any past actions that would adversely impact the ability of Alchemy to
treat the business combination to be effected by the Merger as a reverse
acquisition. Each of Cigarette and Alchemy
38
shall use all reasonable efforts to cause its respective Affiliates, as defined
in Section 6.11, and Subsidiaries, if any, not to take any action that would
adversely affect the ability of Alchemy to account for the business combination
to be effected by the Merger as a pooling of interests.
SECTION 6.11 Affiliate Agreements. As soon as practicable following the
date hereof, Cigarette will provide Alchemy a list of those persons who are, in
the respective reasonable knowledge and judgment of Cigarette, after
consultation with legal counsel, "affiliates" of Cigarette, within the meaning
of Rule 145 (each such person who is an "affiliate" of Cigarette within the
meaning of rule 145 is referred to herein as an "Affiliate") promulgated under
the Securities Act ("Rule 145"). Cigarette shall provide Alchemy such
information and documents as the other shall reasonably request for purposes of
reviewing such list and shall notify Alchemy in writing regarding any change in
the identity of such Affiliates prior to the Closing Date. Cigarette shall use
its reasonable efforts to deliver or cause to be delivered to Alchemy no later
than 30 days from the date hereof from each of the Affiliates of Cigarette, an
executed Affiliate Agreement, substantially in the form attached hereto as
Exhibit _______, which each such Affiliate of Cigarette agrees to, among other
things, comply with the applicable requirements of Rule 145 (an "Affiliate
Agreement"). Alchemy shall be entitled to place appropriate legends on the
certificates evidencing any Alchemy Common Stock to be received by such
Affiliates of Cigarette pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Alchemy
Common Stock, consistent with the terms of the Affiliate Agreements. Following
the Effective Time, Alchemy shall use all reasonable efforts to cause its
"affiliates" within the meaning of Rule 145 (its "Affiliates") to make any
dispositions of Alchemy Common Stock in accordance with the applicable
provisions of Rule 145 under the Exchange Act.
SECTION 6.12 OTC Bulletin Board Listing. Alchemy shall use its best efforts
to cause the shares of Alchemy Common Stock to be issued in the Merger, and
those required to be reserved for issuance in connection with the Merger, to be
approved for listing on the OTC Bulletin Board, subject to official notice of
issuance, prior to the Closing Date.
39
SECTION 6.13 Indemnification.
(a) Cigarette shall and, from and after the Effective Time, Alchemy
and the Surviving Corporation shall, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer, director
or employee of Cigarette or any of its Subsidiaries, if any (the
"Indemnified Parties"), against all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement
with the approval of the indemnifying party (which approval shall not be
unreasonably withheld or delayed) of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer, or employee of Cigarette or any of its Subsidiaries, if
any, whether pertaining to any matter existing or occurring at or prior to
the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities") including all losses,
claims, damages, costs, expenses, liabilities or judgments based in whole
or in part on, or arising in whole or in part of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent a corporation is permitted under the FBCA to indemnify its own
directors, officers and employees, as the case may be (Cigarette, Alchemy
and the Surviving Corporation, as the case may be, will pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law upon receipt of any
undertaking Party to the full extent permitted by law upon receipt of any
undertaking contemplated by the FBCA). Without limiting the foregoing, in
the event any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising before or after the
Effective time), (i) the Indemnified Parties may retain counsel
satisfactory to them and Cigarette (or them and Alchemy and the Surviving
Corporation after the Effective Time), (ii) Cigarette (or after the
Effective Time, Alchemy and the Surviving Corporation) shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefore are received, and (iii) Cigarette (or
after the Effective Time, Alchemy and the
40
Surviving Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that none of the Cigarette,
Alchemy or the Surviving Corporation shall be liable for any settlement of
any claim effected without its written consent, which consent, however,
shall not be unreasonably withheld or delayed. Any Indemnified Party
wishing to claim indemnification under this Section 6.13, upon learning of
any such claim, action, suit, proceeding or investigation, shall promptly
notify Cigarette, Alchemy or the Surviving Corporation (but the failure to
so notify an Indemnifying Party shall not relieve it from any liability
which it may have under this Section 6.13 except to the extent such failure
prejudices such party), and shall deliver to Cigarette (or after the
Effective time, Alchemy and the Surviving Corporation) the undertaking
contemplated by the FBCA. The Indemnified Parties as a group may retain
only one law firm to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more Indemnified
Parties. The obligations of the parties set forth in this Section 6.13(a)
shall be in the furtherance of and not in limitation of the succeeding
paragraphs of this Section 6.13.
(b) From and after the Effective Time, the Surviving Corporation and
Alchemy will fulfill, assume and honor in all respects the obligations of
Cigarette pursuant to Cigarette's Certificate of Incorporation, Bylaws and
any indemnification agreement between Cigarette and Cigarette's directors
and officers existing and in force as of the Effective Time.
(c) Alchemy and the Surviving Corporation shall, until the sixth
anniversary of the Effective Time or such earlier date as may be mutually
agreed upon by Alchemy, the Surviving Corporation and the applicable
Indemnified Party, cause to be maintained in effect, to the extent
available, the policies of directors' and officers' liability insurance
maintained by Cigarette and its Subsidiaries as of the date hereof (or
policies of directors' and officers' liability insurance maintained by
Cigarette and its Subsidiaries as of the date hereof (or policies of at
least the same coverage and amounts containing terms that are no less
advantageous to the insured parties) with respect to claims arising from
facts or events
41
that occurred on or prior to the Effective Time, In lieu of the purchase of
such insurance by Alchemy or the Surviving Corporation, Cigarette may
purchase a six-year extended reporting period endorsement ("reporting tail
coverage") under its existing directors' and liability insurance coverage.
(d) The provisions of this Section 6.13(i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) may not be amended or
repealed without the written consent of any affected, indemnified party.
SECTION 6.14 Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of shareholders of Cigarette and
shareholders of Alchemy described in Section 6.6.
SECTION 6.15 Notification of Certain Matters. Cigarette shall give prompt
notice to Alchemy, and Alchemy and Merger Sub shall give prompt notice to
Cigarette, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be likely to cause (a) any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time, or (b) any material failure of Cigarette or Alchemy and Merger Sub, as the
case may be, or of any officer, director, employee or agent thereof, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement. The delivery of any notice pursuant to
this Section 6.16 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
ARTICLE VII
CONDITIONS TO MERGER
SECTION 7.1 Conditions to Each Party's Obligation to Effect
42
The Merger. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Shareholder Approvals. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of holders of Cigarette
Common Stock pursuant to the FBCA and the Certificate of Incorporation of
Cigarette and the issuance of Alchemy Common Stock in connection with the
Merger shall have been approved by the requisite vote of the holders of
Alchemy Common Stock pursuant to the FBCA, the Certificate of Incorporation
of Alchemy and the regulations of the OTC Bulletin Board.
(b) Approvals. All authorizations, consents, orders or approvals of
any Governmental Entity required to consummate the transactions
contemplated by this Agreement, the absence of which would be reasonably
likely to have an Alchemy Material Adverse effect of a Cigarette Material
Adverse Effect, shall have been obtained and be in effect.
(c) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order.
(d) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or
restricting Alchemy's conduct or operation of the business of Alchemy or
Cigarette after the Merger shall have been issued and be in effect, nor
shall any proceeding brought by a domestic administrative agency or
commission or other domestic Governmental entity, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable
to the Merger which makes the consummation of the Merger illegal or
prevents or prohibits the Merger.
(e) OTC Bulletin Board Listing. The shares of Alchemy Common Stock to
be issued in the Merger shall have been
43
approved for listing on the OTC Bulletin Board.
(f) Tax Opinions. Alchemy and Cigarette shall each have received
written opinions from their respective counsel, in form and substance
reasonably satisfactory to them to the effect that the Merger will be
treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code. In rendering such opinions,
counsel may rely upon, and Alchemy and Cigarette shall be required to make,
reasonable representations regarding certain factual matters.
SECTION 7.2 Additional Conditions to Obligations of Alchemy and Merger Sub.
The obligations of Alchemy and Merger Sub to effect the Merger are subject
to the satisfaction of each of the following conditions, any of which may
be waived, in writing, exclusively by Alchemy:
(a) Representations and Warranties. The representations and warranties
of Cigarette set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the
extent such representations and warranties expressly speak as of an earlier
date) as of the Closing date as though made on and as of the Closing Date,
except (i) for changes contemplated by this Agreement or (ii) where the
failure to be true and correct would not be reasonably likely to have a
Cigarette Material Adverse Effect, and Alchemy shall have received a
certificate signed on behalf of Cigarette by the chief executive officer
and the chief financial officer of Cigarette to such effect.
(b) Performance of Obligations. Cigarette shall have performed all
obligations required to be performed by it under this Agreement at or prior
to the Closing Date; and Alchemy shall have received a certificate signed
on behalf of Cigarette by the chief executive officer and the chief
financial officer of Cigarette to such effect.
(c) Affiliate and Other Agreements. An Affiliate Agreement shall have
been executed and delivered to Alchemy by each director and officer and
each applicable Affiliate of Cigarette; and each Affiliate Agreement shall
be in full force and effect.
44
(d) Absence of Cigarette Material Adverse Effect. No Cigarette
Material Adverse Effect shall have occurred since the date of this
Agreement.
SECTION 7.3 Additional Conditions to obligations of Cigarette. The
obligation of Cigarette to effect the Merger is subject to the satisfaction of
each of the following conditions, any of which may be waived, in writing,
exclusively by Cigarette:
(a) Representations and Warranties. The representations and warranties
of Alchemy and Merger Sub set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and
(except to the extent such representation speak as of an earlier date) as
of the closing date as though made on and as of the Closing date, except
(i) for changes contemplated by this Agreement or (ii) where the failure to
be true and correct would not be reasonably likely to have an Alchemy
Material Adverse Effect, and Cigarette shall have received a certificate
signed on behalf of Alchemy and Merger sub by the chief executive officer
and the chief financial officer of Alchemy and merger Sub to such effect.
(b) Performance of Obligations. Alchemy and Merger Sub shall have
performed all obligations required to be performed by them under this
Agreement at or prior to the Closing Date; and Cigarette shall have
received a certificate signed on behalf of Alchemy and Merger Sub by the
chief executive officer and the chief financial officer of Alchemy and
Merger sub to such effect.
(c) Absence of Alchemy Material Adverse Effect. No Alchemy Material
Adverse effect shall have occurred since the date of this Agreement.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time (with respect to Sections 8.1(b) through 8.1(f)), by
written notice by the terminating party to the other party), whether before or
after approval of the
45
matters presented in connection with the Merger by the shareholders of Alchemy
or shareholders of Cigarette:
(a) by mutual written consent of Alchemy and Cigarette;
or
(b) by either Alchemy or Cigarette if the Merger shall not have been
consummated by March 31, 1999; provided, however, that the right to
terminate this Agreement under this Section 8.1(b) shall not be available
to any party whose failure to fulfill any obligation under this Agreement
has been the cause of or resulted in the failure of the Merger to occur on
or before such date; or
(c) by either Alchemy or Cigarette if a court of competent
jurisdiction or other Governmental entity shall have issued a nonappealable
final order, decree or ruling or taken any other action, in each case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, except, if the party relying on such order, decree
or ruling or other action has not complied with its obligations under
Article VI of this Agreement; or
(d) by either Alchemy or Cigarette if the required approvals of the
shareholders of Alchemy or of Cigarette contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the
required vote upon a vote taken at a meeting of such shareholders duly
convened therefor or at any adjournment thereof; provided, however, that
the right to terminate this Agreement under this Section 8.1(d) shall not
be available to any party where the failure to obtain approval of such
party's shareholders shall have been caused by the action or failure to
obtain approval of such party's shareholders shall have been caused by the
action or failure to act of such party in breach of this Agreement; or
(e) by Alchemy, if (i) the Board of Directors of Cigarette shall have
withdrawn or modified its recommendation of this Agreement in a manner
adverse to Alchemy or shall have publicly announced its intention to do any
of the foregoing; (ii) an Alternative transaction (as defined in clauses
(ii) or (iii) of Section 8.3(d)) shall have taken place (including
execution of an agreement to engage in the same) or the Board
46
of Directors of Cigarette shall have recommended to the shareholders of
Cigarette an Alternative Transaction; (iii) a tender offer or exchange
offer for 20% or more of the outstanding shares of Cigarette Common Stock
is commenced (other than by Alchemy or an affiliate of Alchemy) and the
Board of Directors of Cigarette has not recommended that the shareholders
of Cigarette not tender their shares in such tender or exchange offer
within the time period prescribed by Rule 14e-2 promulgated under the
Exchange Act; or
(f) by Alchemy or Cigarette, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach causes the conditions set
forth in Section 7.2(a) or 7.2(b) (in the case of termination by Alchemy)
or 7.3(a) or 7.3(b) (in the case of termination by Cigarette) not to be
satisfied as of the time of such breach, provided that if such breach by
such party is curable by such party through the exercise of its reasonable
efforts and for so long as such party continues to exercise such reasonable
efforts, the other party may not terminate this Agreement under this
Section 8.1(f); or
(g) by Cigarette, in the event of (i) a merger or consolidation to
which Alchemy is a party, if the shareholders of Alchemy immediately prior
to the effective date of such merger or consolidation have beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of less than 50
percent of the total combined voting power for election of directors of the
surviving corporation following the effective date of such merger or
consolidation, (ii) the acquisition or direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) in the
aggregate of securities of Alchemy representing more than 50 percent of the
total combined voting power of Alchemy's then issued and outstanding voting
securities by any person, entity or group, as shown on a Schedule 13D filed
with the SEC pursuant to the Exchange Act; or (iii) the sale of all or
substantially all of the assets of Alchemy to any person or entity that is
not a Subsidiary of Alchemy.
SECTION 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1(b) through
47
8.1(g), this Agreement shall be of no further force and effect, except Section
8.2, Section 8.3 and Article IX of this Agreement and the Non-Disclosure
Agreement shall remain in full force and effect and survive any termination of
this Agreement and nothing herein shall relieve any party from liability for any
breach of this Agreement. In the event of termination of this Agreement as
provided in Section 8.1(a), there shall be no liability or obligation on the
part of any party hereto, or any of its officers, directors, shareholders or
affiliates except as set forth in Section 8.3; provided, however, that the
provisions of Section 6.13 and 8.3 and Article IX of this Agreement shall remain
in full force and effect and survive any termination of this Agreement.
SECTION 8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated; provided, however, that Alchemy
and Cigarette shall share equally all fees and expenses, other than
attorneys' fees, incurred in relation to the printing and filing of the
Proxy Statement (including any related preliminary materials) and the
Registration Statement (including financial statements and exhibits) and
any amendments or supplements.
(b) As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) other
than Alchemy or its affiliates (a "Third Party"), acquires more than 20% of
the outstanding shares of Cigarette Common Stock, pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger or other business
combination involving Cigarette pursuant to which any Third Party acquires
more than 20% of the outstanding equity securities of Cigarette or the
entity surviving such merger or business combination, (iii) any other
transaction pursuant to which any Third Party acquires control of assets
(including for this purpose the outstanding equity securities of
Subsidiaries of Cigarette, if any, and the entity surviving any merger or
business combination including any of them, if applicable) of Cigarette
have a fair market value (as determined by the Board of Directors of
Cigarette in good
48
faith) equal to more than 20% of the fair market value of all the assets of
Cigarette immediately prior to such transaction ("Material Assets"), or
(iv) any public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
(c) Payment of the fees described in Section 8.3(b) above shall not be
in lieu of damages incurred in the event of breach of this Agreement.
SECTION 8.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. This
Agreement may be amended by the parties hereto, by action taken or authorized by
their respective Boards of Directors, at any time before or after approval of
the matters presented in connection with the Merger by the shareholders of
Cigarette and Alchemy, but, after any such approval, no amendment shall be made
which by law requires further approval by such shareholders without such further
approval.
SECTION 8.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing and
the Effective Time, except for the agreements contained in Section 1.3, 1.4,
Article II, 6.13, 6.14 and 8.3, the last sentence of Section 8.4, and Article
IX, and the agreements of the Affiliates of Cigarette delivered pursuant to
49
this Agreement.
SECTION 9.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed), sent by nationally-recognized overnight courier or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Alchemy
or Merger Sub, to: Alchemy Holdings, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) if to Cigarette, to: Cigarette Racing Team,
Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(c) with a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.3 Interpretation; Certain Definitions.
(a) When a reference is made in this Agreement to a section, such
reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include,"
"includes," or "including" are used in this Agreement they shall be deemed
to be followed by the words "without limitation." The phrase "made
available" in this Agreement shall mean that the information referred to
has been make available if requested by the party whom such
50
information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to ___________, 1998.
(b) "Environmental Permits" means environmental approvals, permits,
licenses, clearances and consents.
(c) "Hazardous Material" means substance that has been designated by
any Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to said laws.
(d) "Hazardous Materials Activities" means the transportation,
storage, use, manufacture, disposal of, release or exposure of employees or
others to Hazardous Materials.
(e) "Joint Venture" means, with respect to any party, any corporation,
limited liability company, partnership, joint venture or other entity in
which (i) such party, directly or indirectly, owns or control more than
five percent and less than a majority of any class of the outstanding
voting securities or economic interests, or (ii) such party or a Subsidiary
of such party is a general partner.
(f) "Subsidiary" means, with respect to any party, any corporation,
limited liability company, partnership, joint venture, or other business
association or entity, (i) at least a majority of the voting securities or
economic interests of which is directly or indirectly owned or controlled
by such party or by anyone or more of its Subsidiaries, or (ii) of which
such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by
such party or any Subsidiary of such party do not have a majority of the
voting
51
interest in such partnership).
SECTION 9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart.
SECTION 9.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the Exhibits hereto, and other documents and the instruments referred
to herein) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) except as provided in Section 6.14
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
SECTION 9.6 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida without regard to any
applicable conflicts of law.
SECTION 9.7 Specific Performance. Without limiting the rights and
remedies otherwise available to Alchemy, Cigarette (i) acknowledges that the
remedy at law for damages resulting from its breach of its obligations under
this Agreement may be inadequate and (ii) consents to the institution of an
action for specific performance in the event of such a breach.
SECTION 9.8 Assignment. 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) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
SECTION 9.9 Severability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement is held in any jurisdiction to be invalid, prohibited or unenforceable
52
for any reason, such provision, as to such jurisdiction, shall be ineffective,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
IN WITNESS WHEREOF, Alchemy, Merger Sub and Cigarette have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
ALCHEMY HOLDINGS, INC.
By:___________________________________
Title:________________________________
CIGARETTE BOATS, INC.
By:___________________________________
Title:________________________________
CIGARETTE RACING TEAM, INC.
By:___________________________________
Title:________________________________
53