AGREEMENT AND PLAN OF MERGER
DATED AS OF _____________________, 1998
BY AND AMONG
ALCHEMY HOLDINGS, INC.,
CIGARETTE BOATS, INC.
AND CIGARETTE RACING TEAM, INC.
TABLE OF CONTENTS
ARTICLE I......................................................................1
THE MERGER...............................................................1
Section 1.1 The Merger............................................1
Section 1.2 Closing; Effective Time of the Merger.................2
Section 1.3 Effects of Merger.....................................2
Section 1.4 Directors and Officers. .............................2
ARTICLE II.....................................................................2
CONVERSION OF SECURITIES.................................................2
Section 2.1 Conversion of Capital Stock. ........................2
Section 2.2 Exchange of Certificates. ...........................3
ARTICLE III....................................................................3
REPRESENTATIONS AND WARRANTIES OF CIGARETTE..............................3
Section 3.2 Cigarette Subsidiaries and Joint Ventures. ..........4
Section 3.3 Cigarette Capital Structure. ........................4
Section 3.4 Authority; No Conflict; Required Filings and
Consents..............................................5
Section 3.5 SEC Filings; Financial Statements.....................6
Section 3.6 Absence of Undisclosed Liabilities. .................7
Section 3.7 Absence of Certain Changes or Events..................7
Section 3.8 Taxes.................................................7
Section 3.9 Properties............................................8
Section 3.11 Agreements, Contracts and Commitments. ..............9
Section 3.12 Litigation. .........................................9
Section 3.13 Environmental Matters................................10
Section 3.14 Compliance with Laws. ..............................10
Section 3.15 Pooling of Interests. ..............................10
Section 3.16 Interested Party Transactions........................10
Section 3.17 Registration Statement; Proxy Statement/Prospectus...10
Section 3.18 Payments Resulting from Mergers......................11
Section 3.19 Option of Financial Advisor..........................11
Section 3.20 Business Combination.................................11
ARTICLE IV....................................................................12
REPRESENTATIONS AND WARRANTIES OF ALCHEMY AND MERGER SUB ...............12
Section 4.1 Organization.........................................12
Section 4.2 Alchemy Subsidiaries and Joint Ventures..............12
Section 4.3 Alchemy Capital Structure............................13
Section 4.4 Authority; No Conflict; Required Filings and
Consents.............................................13
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Section 4.4 SEC Filings; Financial Statements....................14
Section 4.6 Absence of Undisclosed Liabilities...................15
Section 4.7 Absence of Certain Changes or Events.................15
Section 4.8 Taxes................................................16
Section 4.9 Properties. .........................................16
Section 4.10 Intellectual Property................................16
Section 4.11 Agreements, Contracts and Commitments................17
Section 4.12 Litigation...........................................17
Section 4.13 Environmental Matters................................17
Section 4.14 Compliance with Laws.................................18
Section 4.15 Pooling of Interests.................................18
Section 4.16 Interested Party Transactions........................18
Section 4.17 Registration Statement; Proxy Statement/Prospectus...18
Section 4.18 Interim Operations of Merger Sub.....................19
ARTICLE V.....................................................................19
CONDUCT OF BUSINESS.....................................................19
Section 5.1 Covenants of Cigarette...............................19
Section 5.2 Covenants of Alchemy.................................20
Section 5.3 Cooperation..........................................22
ARTICLE VI....................................................................22
ADDITIONAL AGREEMENTS...................................................22
Section 6.1 No Solicitation......................................22
Section 6.2 Proxy Statement/Prospectus; Registration Statement...23
Section 6.3 Consents.............................................24
Section 6.4 Current OTC Bulletin Board Listing...................24
Section 6.5 Access to Information................................24
Section 6.6 Shareholder Meetings.................................25
Section 6.7 Legal Conditions to Merger. .......................25
Section 6.8 Public Disclosure....................................26
Section 6.9 Tax-Free Reorganization..............................26
Section 6.10 Pooling Accounting...................................26
Section 6.11 Affiliate Agreements.................................26
Section 6.12 OTC Bulletin Board Listing...........................27
Section 6.13 Brokers or Finders...................................27
Section 6.14 Indemnification......................................27
Section 6.15 Additional Agreements; Reasonable Efforts............29
Section 6.16 Notification of Certain Matters......................30
ARTICLE VII...................................................................30
CONDITIONS TO MERGER....................................................30
Section 7.1 Conditions to Each Party's Obligation to Effect
The Merger...........................................30
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(a) Shareholder Approvals.......................................30
(b) HSR Act.....................................................30
(c) Approvals...................................................30
(d) Registration Statement......................................30
(e) No Injunctions or Restraints; Illegality....................30
(f) Pooling.....................................................31
(g) OTC Bulletin Board Listing. ...............................31
(h) Tax Opinions................................................31
Section 7.2 Additional Conditions to Obligations of Alchemy and
Merger Sub..................................................31
(a) Representations and Warranties..............................31
(b) Performance of Obligations..................................32
(c) Affiliate and Other Agreements..............................32
(d) Absence of Cigarette Material Adverse Effect................32
Section 7.3 Additional Conditions to obligations of Cigarette........32
(a) Representations and Warranties..............................32
(b) Performance of Obligations..................................32
(c) Absence of Alchemy Material Adverse Effect.................32
ARTICLE VIII..................................................................32
TERMINATION AND AMENDMENT...............................................32
Section 8.1 Termination..........................................32
Section 8.2 Effect of Termination................................34
Section 8.3 Fees and Expenses....................................34
Section 8.4 Amendment............................................36
Section 8.5 Extension; Waiver....................................36
ARTICLE IX....................................................................36
MISCELLANEOUS...........................................................36
Section 9.1 Nonsurvival of Representations, Warranties and
Agreements...........................................36
Section 9.2 Notices..............................................36
Section 9.3 Interpretation; Certain Definitions..................37
Section 9.4 Counterparts.........................................38
Section 9.5 Entire Agreement; No Third-Party Beneficiaries.......38
Section 9.6 Governing Law........................................38
Section 9.7 Specific Performance.................................38
Section 9.8 Assignment...........................................38
Section 9.9 Severability.........................................39
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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 pooling of interests;
NOW, THEREFORE, the parties, intending to be legally bound, hereby agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Subject to the provisions of this Agreement and in
accordance with the Florida General Corporation Act (the "FGCA"), 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.
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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 FGCA (the
"certificate of Merger") shall be duly prepared, executed and acknowledged by
Cigarette and simultaneously with or as soon as practicable following the
Closing delivered to the Secretary of State of the State of Florida 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 the State of Florida 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 Cigarette as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation and Bylaws of the Surviving
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 FGCA.
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
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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, $.001 par
value per share, of Alchemy ("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 the right to receive one (1) (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) 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.
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 607.247 of the Florida
General 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 FGCA Section 607.247(c), 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.
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(b) Within 10 days after the date on which the vote is taken approving the
Merger, such shareholder must make written demand on Alchemy for payment
of the fair value of such shareholder's shares.
Within 10 days after the Merger is effected, Alchemy shall give written notice
thereof to each dissenting shareholder who has satisfied paragraphs (a) and (b)
hereof, and Alchemy shall make a written offer to each such shareholder to pay
for such shares at a specified price deemed by Alchemy to be the fair value
thereof.
In the event that Alchemy and the dissenting shareholder(s) does not agree with
the value Alchemy places on such shareholder's shares, then Alchemy, 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 Alchemy fails to initiate such a proceeding, then any
dissenting shareholder may do so in the name of the corporation.
Notwithstanding the foregoing, a dissenting shareholder may withdraw his
appraisal demand so long as Alchemy consents thereto.
FAILURE BY A SHAREHOLDER TO FOLLOW THE STEPS REQUIRED BY FLORIDA LAW 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) as
disclosed or incorporated by reference in the Cigarette SEC Reports (as defined
in Section 3.5(a)) filed prior to this Agreement; (ii) 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 (iii) as set forth on the disclosure schedule delivered by
Cigarette to Alchemy prior to execution of this Agreement (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
4
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.
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
entity 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. In a pledge agreement
dated May 26, 1994 between ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and Cigarette Racing team, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ pledged 100% (2601) shares of the Common Stock of New CRT, Inc., the
predecessor of Cigarette Racing Team, Inc.
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 December 31, 1997, (i) 3,601,000 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) 6,399,000 shares of Cigarette Common Stock were held in the
treasury of Cigarette or by Subsidiaries, if any, of Cigarette. As of
December 31, 1997 (i) 100 shares of Cigarette Preferred Stock, Series A
were issued and outstanding, all of which issued and outstanding shares
are validly issued, fully paid and non-assessable; and (ii) 900 shares of
Cigarette Preferred Stock Series A, were held in the treasury of Cigarette
or by
5
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 for the pledge agreements set forth in Section 3.2, there
are no equity securities of any class of Cigarette or any of its
Subsidiaries, if any, or any security exchangeable into or exercisable for
such equity securities, issued, reserved for issuance or outstanding.
Except as set forth in Section 3.2, there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character to
which Cigarette or any of its Subsidiaries, if any, is a party or by which
it is bound obligating Cigarette or any of its Subsidiaries, if any, 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 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 and shareholder 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 FGCA. 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)
6
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, if applicable, of a premerger
notification report under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), (ii) the filing by Alchemy of the
Registration Statement (as defined in Section 3.17) with the Securities
and Exchange Commission (the "SEC") in accordance with the Securities Act
of 1933, as amended (the "Securities Act"), (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Florida
in accordance with the FGCA, and (iv) 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, as amended (the
"Exchange Act").
SECTION 3.5 SEC Filings; Financial Statements.
(a) Cigarette has filed all forms, reports and documents, if any,
required to be filed by Cigarette with the SEC since __________________
and has made available to Alchemy all of the same so filed (collectively,
the "Cigarette SEC Reports"). The Cigarette SEC Reports (i) at the time
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 Cigarette SEC Reports or
necessary in order to make the statements in such Cigarette SEC Reports,
in light of the circumstances under which they were made, not misleading.
None of Cigarette's Subsidiaries, if any, 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 Cigarette SEC
Reports, including any Cigarette SEC Reports filed after the date of this
Agreement prior to the Closing (the "Cigarette Financial Statements"),
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 was or will be prepared in accordance with U.S. generally
accepted accounting principles ("GAAP")
7
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 Form 10- Q promulgated by the
SEC), and fairly presented or will fairly present 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 were or are subject to
normal and recurring year-end adjustments which were not 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 December 31, 1997 (the
"Cigarette Balance Sheet") (which as of the date of this Agreement had not been
filed with the SEC), and (ii) normal or recurring liabilities incurred since
December 31, 1997, in the ordinary course of business consistent with past
practices.
SECTION 3.7 Absence of Certain Changes or Events. Since 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.
8
(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 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. 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 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
9
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 agreement,
contract or commitment that (i) is filed as an exhibit to a Cigarette SEC Report
or (ii) with respect to agreements, contracts or commitments entered into by
Cigarette since _______________________, would have been required to be filed as
an exhibit to a Cigarette SEC Report had they been entered into prior to such
date ("Cigarette material Contracts") 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 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. 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.
If, however, there exists an 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, such
10
information shall be listed and submitted to Alchemy and Merger Sub prior to the
execution of this Agreement and shall be annexed hereto as a separate schedule.
SECTION 3.13 Environmental Matters. Due to the manufacturing process
employed by Cigarette, the Company 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 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
Cigarette 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 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 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 Pooling of Interests. 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 pooling of interests.
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
11
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 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 make 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 contained in the FGCA 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
12
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 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.
13
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 par value ("Alchemy Preferred Stock"). As of , 1998: (i)
shares of Alchemy Common Stock and 100,000 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 , 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.
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
14
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, contractor 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, if applicable, of a pre-merger notification report under the HSR
Act, (ii) the filing of the registration statement with the SEC in
accordance with the Securities Act, (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of Florida, (iv) 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, (v) the filing
of the Registration Statement and the Proxy Statement with the SEC in
accordance with the Securities Act and the Exchange Act and (vi) 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 4.4 SEC Filings; Financial Statements.
(a) Alchemy has filed all forms, reports and documents required to
be filed by Alchemy with the SEC since , 1998 (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
15
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 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 unaudited
consolidated balance sheet of Alchemy as of December 31, 1997 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 Alchemy or its operations and such Returns
are true and correct in all material respects.
16
(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,
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
17
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 a Alchemy SEC Report or (ii)
with respect to agreements, contracts or commitments entered into by Alchemy
since ________________, 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 Cigarette, the Company 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 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 Cigarette 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
18
result in a Material Adverse Effect. 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 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 Pooling of Interests. 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 pooling of interests.
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 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
19
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 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 ▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(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 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, 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
21
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;
(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 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
22
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 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 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
23
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 such company'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 the
HSR Act and state takeover laws (the "Other Filings"), if applicable. 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 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
24
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
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
25
of Alchemy 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 which may be imposed on itself with respect to the Merger (which
actions shall include furnishing all information required under the HSR Act, if
applicable, and 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 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
26
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 Pooling 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 a s a pooling of interests, 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 pooling of interests. Each of
Cigarette and Alchemy 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 _____ days from the date hereof from each of the Affiliates of Cigarette,
an executed Affiliate Agreement, substantially in the form attached hereto as
Exhibit B, 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,
27
subject to official notice of issuance, prior to the Closing Date.
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 our of, or
pertaining to this Agreement or the transactions contemplated hereby, in
each case to the full extent a corporation is permitted under the FGCA 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 FGCA). 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
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 6.14, 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 6.14 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 FGCA. 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
28
positions of any two or more Indemnified Parties. The obligations of the
parties set forth in this Section 6.14(a) shall be in the furtherance of
and not in limitation of the succeeding paragraphs of this Section 6.14.
(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 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 6.14(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 6.15 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, including cooperating fully
with the other party, including by provision of information and making all
necessary filings under the HSR Act, if applicable. Alchemy and Cigarette will
use their reasonable best efforts to resolve any competitive issues relating to
or arising under the HSR Act or any other federal or state antitrust or fair
trade law raised by any Governmental Entity. If such offers are not accepted by
such Governmental Entity, Alchemy (with Cigarette's cooperation) shall pursue
all litigation resulting from such issues. The parties hereto will consult and
cooperate with one another, and consider in good faith the views of one another,
in connection with any analysis, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or any
other federal or state antitrust or fair trade law. In the event of a challenge
to the transactions contemplated by this Agreement pursuant to the HSR ACT,
Alchemy
29
and Cigarette shall use their reasonable best efforts to defeat such challenge,
including by institution and defense of ligation, or to settle such challenge on
terms that permit the consummation of the Merger; provided, however, that
nothing herein shall require either party to agree to divest or hold separate
any portion of its business or otherwise take action that could reasonably be
expected to have a Cigarette Material Adverse Effect or an Alchemy Material
Adverse Effect. Without limiting the foregoing, in the event that either the
Federal Trade Commission or the Antitrust Division of the United States
Department of Justice should issue a Request for Additional Information or
Documentary Material under 17 C.F.R. Section 803.20 (a "Second Request"), then
Alchemy and Cigarette each agree to use their reasonable best efforts to respond
fully to such Second Request within 20 days after its receipt and shall promptly
make any further filings or information submissions and make any employee
available for interview or testimony pursuant to the foregoing (both before and
after any Second Request) that may be necessary, proper or advisable. In case at
any time after the effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals, immunities and
franchises of either of the Constituent Corporations, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
SECTION 6.16 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 6.19 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 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 FGCA 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 FGCA, the Certificate of
Incorporation of Alchemy and the regulations of the OTC Bulletin Board.
(b) HSR Act, if applicable. The waiting period applicable to the
consummation of the Merger
30
under the HSR Act, if applicable, shall have expired or been terminated,
and no action shall have been instituted by the Department of Justice or
Federal trade Commission challenging or seeking to enjoin the consummation
of the Merger, which action shall not have been withdrawn or terminated.
(c) 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.
(d) 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.
(e) 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.
(f) Pooling. Alchemy shall have received a letter from its
independent accountants, dated the Closing date, in form and substance
reasonably satisfactory to Alchemy and Cigarette, stating that they concur
with the conclusion of Alchemy's management that the Merger will qualify
as a pooling of interests transaction under Accounting Principles Board
Opinion No. 16 and applicable SEC regulations, if the Merger is
consummated in accordance with this Agreement. Cigarette shall have
received a letter from its independent accountants, dated the Closing
Date, in form and substance reasonably satisfactory to Cigarette and
Alchemy, stating that they concur with the conclusion of Cigarette's
management that the Merger will qualify as a pooling of interests
transaction under Accounting Principles Board Opinion No. 16 and
applicable SEC regulations, if the Merger is consummated in accordance
with this Agreement.
(g) OTC Bulletin Board Listing. The shares of Alchemy Common Stock
to be issued in the Merger shall have been approved for listing on the OTC
Bulletin Board.
(h) 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
31
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.
(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.
32
(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 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 , 1998; provided, however, that if the Merger shall
not have been consummated due to the waiting period, if applicable (or any
extension thereof) under the HSR Act not having expired or been
terminated, or due to an action having been instituted by the Department
of Justice or Federal Trade Commission challenging or seeking to enjoin
the consummation of the Merger, then such date shall be extended to
, 1998; provided, further, 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 Section 6.7 or 6.15 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
33
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 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 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
34
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 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
35
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, 6.19 and 8.3, the last sentence of Section 6.15, the
last sentence of Section 8.4, and Article IX, and the agreements of the
Affiliates of Cigarette delivered pursuant to 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.
with a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Cigarette, to: Cigarette Racing Team, Inc.
with a copy to: ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
36
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 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 interest in such partnership).
37
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 is 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 would be held in any jurisdiction to be invalid, prohibited or
unenforceable 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.
38
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:________________________________
39