AGREEMENT AND PLAN OF MERGER by and among STRATFORD AMERICAN CORPORATION, STRATFORD HOLDINGS, L.L.C., STRATFORD ACQUISITION, L.L.C., and JDMD INVESTMENTS, L.L.C., dated as of January 31, 2006
EXHIBIT
2.1
by
and among
STRATFORD
AMERICAN CORPORATION,
STRATFORD
HOLDINGS, L.L.C.,
STRATFORD
ACQUISITION, L.L.C.,
and
JDMD
INVESTMENTS, L.L.C.,
dated
as of
January
31, 2006
TABLE
OF CONTENTS
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Page
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ARTICLE
I
THE
MERGER
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Section
1.01
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The
Merger
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2
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Section
1.02
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Effective
Time; Closing
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3
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Section
1.03
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Effects
of the Merger
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3
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Section
1.04
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Articles
of Incorporation
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3
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Section
1.05
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Bylaws
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3
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Section
1.06
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Directors
and Officers
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3
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ARTICLE
II
CONVERSION
OF SECURITIES; EXCHANGE OF CERTIFICATES
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Section
2.01
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Conversion
of Securities
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3
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Section
2.02
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Exchange
of Certificates and Cash
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4
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Section
2.03
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Dissenting
Shares
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6
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ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
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Section
3.01
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Organization
and Qualifications; Subsidiaries
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7
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Section
3.02
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Articles
of Incorporation and Bylaws
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7
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Section
3.03
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Capitalization
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7
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Section
3.04
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Authority
Relative to This Agreement
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7
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Section
3.05
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No
Conflict; Required Filings and Consents
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8
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Section
3.06
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Board
Approval
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8
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Section
3.07
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Brokers
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9
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ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE BUYOUT PARTIES
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Section
4.01
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Organization
and Qualification
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9
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Section
4.02
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Authority
Relative to This Agreement
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9
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Section
4.03
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No
Conflict; Required Filings and Consents
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10
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Section
4.04
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Brokers
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10
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Section
4.05
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Capitalization
of Stratford Acquisition
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10
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Section
4.06
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No
Prior Activities
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11
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Section
4.07
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Investigation
by Stratford Acquisition
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11
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Section
4.08
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No
Conflicting Knowledge
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11
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-i-
TABLE
OF CONTENTS
(continued)
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Page
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ARTICLE
V
COVENANTS
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Section
5.01
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Conduct
of Business by the Company Pending the Merger
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11
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Section
5.02
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Access
to Information; Confidentiality
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12
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Section
5.03
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Third
Party Offers
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12
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Section
5.04
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Directors’
and Officers’ Insurance and Indemnification
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14
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Section
5.05
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Further
Action
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15
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Section
5.06
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Public
Announcements
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15
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Section
5.07
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Notification
of Certain Matters
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16
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Section
5.08
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Anti-takeover
Statutes
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16
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ARTICLE
VI
ADDITIONAL
AGREEMENTS
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Section
6.01
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Shareholder
Approval Required
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16
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Section
6.02
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Covenants
Relating To Proxy Statement
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17
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ARTICLE
VII
CLOSING
CONDITIONS
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Section
7.01
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Conditions
to Obligations of Each Party to Effect the Merger
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18
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Section
7.02
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Additional
Conditions to Obligations of Stratford Acquisition
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18
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ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
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Section
8.01
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Termination
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19
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Section
8.02
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Effect
of Termination
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20
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Section
8.03
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Amendment
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20
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Section
8.04
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Waiver
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20
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Section
8.05
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Fees
and Expenses
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21
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ARTICLE
IX
GENERAL
PROVISIONS
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Section
9.01
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Effectiveness
of Representations, Warranties and Agreements
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21
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Section
9.02
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Notices
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21
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Section
9.03
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Certain
Definitions
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22
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Section
9.04
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Headings
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23
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Section
9.05
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Severability
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23
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-ii-
TABLE
OF CONTENTS
(continued)
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Page
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Section
9.06
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Entire
Agreement
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23
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Section
9.07
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Assignment
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23
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Section
9.08
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Parties
in Interest
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24
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Section
9.09
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Governing
Law
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24
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Section
9.10
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Submission
to Jurisdiction; Waivers
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24
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Section
9.11
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Enforcement
of this Agreement
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24
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Section
9.12
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Counterparts
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24
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-iii-
THIS
AGREEMENT AND PLAN OF MERGER is dated as of January 31, 2006 (this “Agreement”),
by
and among STRATFORD AMERICAN CORPORATION, an Arizona corporation (the
“Company”),
JDMD
INVESTMENTS, L.L.C., an Arizona limited liability company (“JDMD”),
STRATFORD HOLDINGS, L.L.C.,
an Arizona limited liability company (“Stratford Holdings”), and STRATFORD
ACQUISITION, L.L.C.,
an Arizona limited liability company and
a
wholly-owned subsidiary of Stratford Holdings (“Stratford Acquisition” and
together with JDMD and Stratford Holdings, the “Buyout
Parties”
and
each a “Buyout
Party”).
W
I T N E
S S E T H:
WHEREAS,
the Company is no longer actively engaged in any significant operating
activities and manages a small portfolio of working interests in oil and gas
properties (the “Assets”);
WHEREAS,
there is only sporadic trading in the Company’s common stock, $0.01 par value
(the “Common
Stock”);
WHEREAS,
on November 8, 2004, the Board of Directors (the “Board”)
of the
Company engaged Xxxxxxx Oil & Gas Properties, Inc. (“Xxxxxxx”)
to
market for sale the Company’s Assets;
WHEREAS,
as of the date hereof, Xxxxxxx has not identified any third parties willing
to
purchase the Assets for a price that the Board considers to be fair to the
Company and its shareholders from a financial point of view;
WHEREAS,
the Company is faced with the impending regulatory burden of complying with
certain internal control provisions of the Xxxxxxxx-Xxxxx Act of 2002 and the
rules and regulations promulgated thereunder (“SOX”);
WHEREAS,
the Company anticipates that compliance with SOX will consume a substantial
portion of the Company’s cash resources;
WHEREAS,
the Company desires to terminate the Company’s financial and other reporting
obligations under the federal securities laws in order to reduce costs directly
related to such reporting obligations, including without limitation accounting,
legal and other expenses;
WHEREAS,
Xxxxxx Xxxxxxxxx, a director of the Company, Xxxxx Family Trust (“Xxxxx
Trust”),
of
which Xxxxx Xxxxx, the Chief Executive Officer and a director of the Company,
is
a co-trustee, Xxxxxx Family Trust, of which Xxx Xxxxxx, the President and a
director of the Company, is a trustee, and Xxxx Xxxxxx, a director of the
Company, are all the members of JDMD Investments, L.L.C. (“JDMD”);
WHEREAS,
JDMD beneficially owns 3,287,298 shares, or 29.7%, of the Company’s Common Stock
outstanding on the date of this Agreement (the shareholders of the Company
other
than the members of the Buyout Group are referred to herein as the “Disinterested
Shareholders”);
WHEREAS,
based on various analyses, the Buyout Parties believe that the fair market
value
of the Company is approximately $0.80 per share of Common Stock;
WHEREAS,
the Buyout Parties are willing, upon the terms and subject to the conditions
of
this Agreement, to take the Company private by merging Stratford
Acquisition with
and
into the Company, with the Company being the surviving corporation, and paying
to the shareholders of the Company (other than the Buyout Parties and
shareholders who properly exercise dissenters’ rights) cash consideration of
$0.80 per
share
of Common Stock (the “Merger”);
WHEREAS,
pursuant to the terms of this Agreement, the Buyout Parties are willing to
allow
approval of this Agreement and the Merger to be conditioned upon the affirmative
vote of a majority in interest of the Disinterested Shareholders;
WHEREAS,
pursuant to the terms of this Agreement, the Company and the Board will have
the
right to consider competing third party offers and to terminate the Merger
and
pursue any such competing offer, without incurring a termination fee, if the
Board determines in good faith that the competing offer is a superior
alternative to the Merger;
WHEREAS,
the Board has unanimously (i) determined that it would be advisable and fair
to,
and in the best interests of, the Company and its shareholders (other than
the
members of the Buyout Group) to consummate the Merger upon the terms and subject
to the conditions of this Agreement and in accordance with the Arizona Business
Corporation Act (Arizona Revised Statutes §§ 10-120, et al.),
as
amended (the “ABCA”),
(ii)
approved and declared advisable the Merger and this Agreement, and (iii)
resolved to recommend that the Company’s shareholders approve the Merger and
adopt this Agreement if submitted for their approval; and
WHEREAS,
the respective members of Stratford Holdings and Stratford
Acquisition have
approved the Merger and adopted this Agreement.
NOW,
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the parties
hereto agree as follows:
ARTICLE
I
THE
MERGER
Section
1.01 The
Merger.
Upon
the terms and subject to the conditions set forth in this Agreement, and in
accordance with the ABCA, at the Effective Time (as defined in Section
1.02),
Stratford Acquisition shall be merged with and into the Company. Following
the
Merger, the separate existence of Stratford Acquisition shall cease and the
Company shall continue as the surviving corporation of the Merger (the
“Surviving
Corporation”).
Stratford Acquisition may, upon notice to the Company, modify the structure
of
the Merger if Stratford Acquisition determines it advisable to do so because
of
tax or other considerations, and the Company shall promptly enter into any
amendment to this Agreement necessary or desirable to accomplish such structural
modification; provided, however, that no such amendment shall have an adverse
effect upon the shareholders of the Company (other than the members of the
Buyout Group).
2
Section
1.02 Effective
Time; Closing.
As soon
as practicable after the satisfaction or, if permissible, waiver of the
conditions set forth in ARTICLE
VII,
the
parties hereto shall cause the Merger to be consummated by filing a plan of
merger and articles of merger (collectively, the “Plan
of Merger”),
with
the Arizona Corporation Commission (“ACC”)
and by
making any related filings required under the ABCA in connection with the
Merger. The Merger shall become effective at such time as the Plan of Merger
is
duly filed with the ACC or at such later time as is agreed to by the parties
hereto and as is specified in the Plan of Merger (the “Effective
Time”).
Immediately prior to the filing of the Plan of Merger, a closing (the
“Closing”)
will
be held at the offices of Xxxxx & Xxxxxx L.L.P., located at Xxx Xxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxx, 00000 (or such other place as the parties hereto
may
agree).
Section
1.03 Effects
of the Merger.
From
and after the Effective Time, the Merger shall have the effects set forth in
the
ABCA (including, without limitation, Section 10-1106 thereof). Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
all
the properties, rights, privileges, powers and franchises, of a public as well
as a private nature, of the Company and Stratford Acquisition shall vest in
the
Surviving Corporation, and all debts, liabilities and duties of the Company
and
Stratford Acquisition shall become the debts, liabilities and duties of the
Surviving Corporation.
Section
1.04 Articles
of Incorporation.
The
Articles of Incorporation of the Company, as in effect immediately prior to
the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation (the “Surviving
Articles”)
until
thereafter amended in accordance with the ABCA.
Section
1.05 Bylaws.
The
Bylaws of the Company, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended in
accordance with the Surviving Articles and the ABCA.
Section
1.06 Directors
and Officers.
From
and after the Effective Time, until their respective successors are duly elected
or appointed and qualified in accordance with applicable law, (a) the directors
of Stratford Acquisition at the Effective Time shall be the directors of the
Surviving Corporation and (b) the officers of the Company at the Effective
Time
shall be the officers of the Surviving Corporation.
ARTICLE
II
CONVERSION
OF SECURITIES; EXCHANGE OF CERTIFICATES
Section
2.01 Conversion
of Securities.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
any party hereto or the holders of any of the following securities:
(a) Each
share of the Common Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Common Stock to be canceled pursuant
to
Section
2.01(b)
and any
Dissenting Shares (as defined in Section
2.03(a)))
shall
be converted into the right to receive $0.80 in cash, without interest (the
“Merger
Consideration”).
At
the Effective
3
Time,
each share of Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing any such share (other than shares to be
canceled pursuant to Section
2.01(b)
and any
Dissenting Shares) shall thereafter represent only the right to receive, upon
the surrender of such certificate in accordance with the provisions of
Section
2.02,
an
amount in cash per share equal to the Merger Consideration. The holders of
such
certificates previously evidencing such shares of Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Common Stock except as otherwise provided herein
or by
law.
(b) Each
share of capital stock of the Company (i) held in the treasury of the Company
or
by any wholly-owned subsidiary of the Company or (ii) owned by members of the
Buyout Group (except for Xxxxx Trust) shall automatically be canceled, retired
and cease to exist without any conversion thereof and no payment or distribution
shall be made with respect thereto.
(c) Each
unit
of Stratford Acquisition outstanding immediately prior to the Effective Time
shall be converted into and become one share of common stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital stock
of
the Surviving Corporation.
Section
2.02 Exchange
of Certificates and Cash.
(a) Exchange
Agent.
On or
before the Closing Date, Stratford Holdings shall enter into an agreement
providing for the matters set forth in this Section
2.02
(the
“Exchange
Agent Agreement”)
with a
bank or trust company selected by Stratford Holdings and reasonably acceptable
to the Company (the “Exchange
Agent”),
authorizing such Exchange Agent to act as Exchange Agent in connection with
the
Merger. At or promptly following the Effective Time, the Buyout Parties shall
deposit, or shall cause to be deposited, with or for the account of the Exchange
Agent, for the benefit of the holders of shares of Common Stock (other than
Dissenting Shares and shares to be canceled pursuant to Section
2.01(b)),
an
amount in cash equal to the Merger Consideration payable pursuant to
Section
2.01(a)
(such
funds are hereafter referred to as the “Exchange
Fund”).
(b) Exchange
Procedures.
As soon
as reasonably practicable after the Effective Time, Stratford Holdings will
instruct the Exchange Agent to mail to each holder of record (other than members
of the Buyout Group) of a certificate or certificates which immediately prior
to
the Effective Time evidenced outstanding shares of Common Stock (other than
Dissenting Shares and shares to be canceled pursuant to Section
2.01(b))
(the
“Certificates”),
(i) a
form letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and shall be in such form
and
have such other provisions as Stratford Holdings may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be
appointed by Stratford Holdings, together with a letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to
such
instructions (collectively, the “Transmittal
Documents”),
the
holder of such Certificate shall be entitled to receive in exchange therefor
the
Merger Consideration for each
4
share
of
Common Stock formerly represented by such Certificate, without any interest
thereon, less any required withholding of taxes, and the Certificate so
surrendered shall thereupon be canceled. In the event of a transfer of ownership
of shares of Common Stock which is not registered in the transfer records of
the
Company, the Merger Consideration may be issued and paid in accordance with
this
ARTICLE
II
to the
transferee of such shares if the Certificate evidencing such shares of Common
Stock is presented to the Exchange Agent and is properly endorsed or otherwise
in proper form for transfer. The signature on the Certificate or any related
stock power must be properly guaranteed and the Person requesting payment of
the
Merger Consideration must either pay any transfer or other taxes required by
reason of the payment to a Person other than the registered holder of the
Certificate so surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. The Merger
Consideration will be delivered by the Exchange Agent as promptly as practicable
following surrender of a Certificate and the related Transmittal Documents.
Cash
payments may be made by check unless otherwise required by a depositary
institution in connection with the book-entry delivery of securities. No
interest will be payable on such Merger Consideration. Until surrendered in
accordance with this Section
2.02,
each
Certificate shall be deemed at any time after the Effective Time to evidence
only the right to receive, upon such surrender, the Merger Consideration for
each share of Common Stock formerly represented by such Certificate. The
Exchange Fund shall not be used for any purpose other than as set forth in
this
ARTICLE
II.
Any
interest, dividends or other income earned on the investment of cash held in
the
Exchange Fund shall be for the account of the Surviving
Corporation.
(c) Termination
of Exchange Fund.
Any
portion of the Exchange Fund (including the proceeds of any investments thereof)
which remains undistributed to the holders of Common Stock for one year
following the Effective Time shall be delivered to the Surviving Corporation,
upon demand. Any holders of Common Stock who have not theretofore complied
with
this ARTICLE
II
shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration.
(d) No
Liability.
None of
the Buyout Parties, the Surviving Corporation or the Company shall be liable
to
any holder of shares of Common Stock for any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
(e) Withholding
Rights.
The
Surviving Corporation and the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to
any holder of shares of Common Stock such amounts as the Surviving Corporation
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the United States Internal Revenue Code of 1986,
as
amended, or any provision of state, local or foreign tax law. To the extent
that
amounts are so withheld by the Surviving Corporation or the Exchange Agent,
such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or the Exchange
Agent.
(f) Lost,
Stolen or Destroyed Certificates.
In the
event any Certificates evidencing shares of Common Stock shall have been lost,
stolen or destroyed, the holder of such lost, stolen or destroyed Certificate(s)
shall execute an affidavit of that fact upon request. The holder of
any
5
such
lost, stolen or destroyed Certificate(s) shall also deliver a reasonable
indemnity against any claim that may be made against the Buyout Parties or
the
Exchange Agent with respect to the Certificate(s) alleged to have been lost,
stolen or destroyed. The affidavit and any indemnity which may be required
hereunder shall be delivered to the Exchange Agent, who shall be responsible
for
making payment for such lost, stolen or destroyed Certificates(s) pursuant
to
the terms hereof.
(g) Stock
Transfer Books.
At the
Effective Time, the stock transfer books of the Company shall be closed, and
there shall be no further registration of transfers of shares of Common Stock
thereafter on the records of the Company. Any Certificates presented to the
Exchange Agent or the Surviving Corporation for any reason at or after the
Effective Time shall be exchanged for the Merger Consideration pursuant to
the
terms hereof.
Section
2.03 Dissenting
Shares.
(a) Notwithstanding
any other provision of this Agreement to the contrary, shares of Common Stock
that are outstanding immediately prior to the Effective Time and that are held
by shareholders (i) who shall not have voted in favor of adoption of this
Agreement and (ii) who shall be entitled to and shall have demanded properly
in
writing appraisal for such shares in accordance with Arizona Revised Statutes
Sections 10-1301, et seq.
(“Dissenting
Shares”),
shall
not be converted into or represent the right to receive the Merger Consideration
unless such shareholders fail to perfect, withdraw or otherwise lose their
right
to appraisal. Such shareholders shall be entitled to receive payment of the
appraised value of such Dissenting Shares in accordance with the provisions
of
the ABCA. If, after the Effective Time, any such shareholder fails to perfect,
withdraws or loses its right to appraisal, such shares of Common Stock shall
be
treated as if they had been converted as of the Effective Time into a right
to
receive the Merger Consideration, without interest thereon, upon surrender
of
the Certificate or Certificates that formerly evidenced such shares of Common
Stock in the manner set forth in Section
2.02.
(b) The
Company shall give Stratford Holdings prompt notice of any demands for appraisal
received by it, withdrawals of such demands, and any other instruments served
pursuant to the ABCA and received by the Company and relating thereto. Stratford
Holdings shall direct all negotiations and proceedings with respect to demands
for appraisal under the ABCA. The Company shall not, except with the prior
written consent of Stratford Holdings, make any payment with respect to any
demands for appraisal, or offer to settle, or settle, any such
demands.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to the Buyout Parties that:
Section
3.01 Organization
and Qualifications; Subsidiaries.
The
Company and each significant subsidiary of the Company (a “Company
Subsidiary”)
within
the meaning of Rule 1-02(w) of Regulation S-X under the Securities Exchange
Act
of 1934, as amended (the
6
“Exchange
Act”),
is a
corporation duly incorporated, validly existing and in good standing under
the
laws of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate
its
properties and to carry on its business as it is now being conducted, except
where the failure to be so incorporated, existing and in good standing or to
have such governmental approvals would not have a Company Material Adverse
Effect (as defined below). The Company and each Company Subsidiary is duly
qualified or licensed and in good standing to do business in each jurisdiction
where the character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary, except
for such failures to be so qualified or licensed and in good standing that
would
not, individually or in the aggregate, have a material adverse effect on the
business, assets, results of operations or financial condition of the Company
and the Company Subsidiaries, taken as a whole (a “Company
Material Adverse Effect”).
Section
3.02 Articles
of Incorporation and Bylaws.
The
Buyout Parties have been given access by the Company to a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to the
date hereof, of the Company and each Company Subsidiary. Such Articles of
Incorporation and Bylaws are in full force and effect. Neither the Company
nor
any Company Subsidiary is in violation of any provision of its Articles of
Incorporation or Bylaws.
Section
3.03 Capitalization.
The
authorized capital stock of the Company consists of 100,000,000 shares of Common
Stock and 50,000,000 shares of preferred stock, par value $.01 per share
(“Preferred
Stock”).
As of
January 31, 2006, (a) 11,078,105 shares of Common Stock were outstanding, all
of
which were validly issued, fully paid and nonassessable; (b) no shares of
Preferred Stock were issued and outstanding and no action had been taken by
the
Board of Directors of the Company with respect to the designation of the rights
and preferences of any series of Preferred Stock; (c) 1,967 shares of Common
Stock and no shares of Preferred Stock were held in the treasury of the Company;
(d) no Company Subsidiary owns any shares of the Company’s capital stock; and
(e) there are no securities of any Company Subsidiary outstanding which are
convertible into or exercisable or exchangeable for capital stock of the
Company. Except as set forth above, no shares of capital stock or other voting
securities of the Company have been issued, are reserved for issuance or are
outstanding.
Section
3.04 Authority
Relative to This Agreement.
The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
(the
“Company
Requisite Vote”),
and
the filing and publication of appropriate merger documents as required by,
and
in accordance with, the ABCA). This Agreement has been duly and validly executed
and delivered by the Company and, assuming the due authorization, execution
and
delivery by the Buyout Parties, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally
and by general principles of equity.
7
Section
3.05 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the Company’s
Articles of Incorporation, as amended to the date hereof, or its Bylaws, or
the
Articles of Incorporation or Bylaws of any Company Subsidiary, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree applicable
to the Company or any Company Subsidiary or by which any property or asset
of
the Company or any Company Subsidiary is bound or affected, or (iii) subject
to
receipt of the consents listed on Schedule
3.05
hereto,
result in any breach of or constitute a default (or an event which, with notice,
lapse of time or both would become a default) under, result in the loss of
a
material benefit under or give to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the creation
of a lien or other encumbrance on any of the properties or assets of the Company
or any Company Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or any other instrument
or obligation to which the Company or any Company Subsidiary is a party or
by
which any of the Company or any Company Subsidiary or any of their properties
or
assets is bound or affected, except, in the case of clauses (ii) and (iii),
for
any such conflicts, violations, breaches, defaults or other occurrences which
(A) would not prevent or delay consummation of the Merger in any material
respect or otherwise prevent the Company from performing its obligations under
this Agreement in any material respect, and (B) would not, individually or
in
the aggregate, have a Company Material Adverse Effect.
(b) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign (each a “Governmental
Entity”),
except (i) for (A) any applicable requirements of the Exchange Act or the
Securities Act of 1933, as amended (the “Securities
Act”)
and
state takeover laws, (B) the filing and publication of appropriate merger and
similar documents as required by the ABCA, and (C) filings under the rules
and
regulations of the OTC Bulletin Board, and (ii) where the failure to obtain
such
consents, approvals, authorizations or permits, or to make such filings or
notifications, (x) would not prevent or delay consummation of the Merger in
any
material respect or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and (y) would not,
individually or in the aggregate, have a Company Material Adverse
Effect.
Section
3.06 Board
Approval.
The
Board, at a meeting duly called and held, has unanimously (i) determined that
this Agreement and the Merger would be advisable and fair to, and in the best
interests of, the Company’s shareholders (other than members of the Buyout
Group); (ii) approved and declared advisable this Agreement and the transactions
contemplated hereby, including, without limitation the Merger; and (iii)
resolved to recommend that the Company’s shareholders approve the Merger and
adopt this Agreement if submitted for their approval.
8
Section
3.07 Brokers.
No
broker, finder or investment banker, including, without limitation, Xxxxxxx,
is
entitled to any brokerage, finder’s or other fee or in connection with this
Agreement, the Merger and the other transactions contemplated hereby based
upon
arrangements made by or on behalf of the Company; provided, that Xxxxxxx will
be
entitled to a commission if the Assets are sold.
Each
of
the representations and warranties in this ARTICLE
III
is
qualified by and shall be deemed to disclose in qualification thereof, any
facts, circumstances, conditions or events actually known to or by the Buyout
Parties.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF THE BUYOUT PARTIES
Each
of
the Buyout Parties jointly and severally, hereby makes to the Company the
representations and warranties set forth below:
Section
4.01 Organization
and Qualification.
Each of
the Buyout Parties is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite power and authority and
all
necessary governmental approvals to own, lease and operate its properties and
to
carry on its business as it is now being conducted. Stratford Acquisition is
duly qualified or licensed and in good standing to do business in each
jurisdiction where the character of the properties owned, leased or operated
by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a material
adverse effect on the business, results of operations or financial condition
of
Stratford Holdings and Stratford Acquisition and their respective subsidiaries,
taken as a whole (“Acquiror
Material Adverse Effect”).
Section
4.02 Authority
Relative to This Agreement.
Each of
the Buyout Parties has all necessary power and authority to execute and deliver
this Agreement, to perform its respective obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery
of
this Agreement by each of the Buyout Parties and the consummation by each of
them of the transactions contemplated hereby have been duly and validly
authorized by the respective members, managers or trustees, as applicable,
of
each such Buyout Party and no other proceedings on the part of any of them
are
necessary to authorize this Agreement or to consummate such transactions (other
than the filing and publication of appropriate merger documents as required
by
the ABCA). This Agreement has been duly and validly executed and delivered
by
each of the Buyout Parties and, assuming the due authorization, execution and
delivery by the Company, constitutes the legal, valid and binding obligation
of
each of the Buyout Parties, enforceable against each of them in accordance
with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally and by general principles of
equity.
9
Section
4.03 No
Conflict; Required Filings and Consents.
(a) The
execution and delivery of this Agreement by each of the Buyout Parties do not,
and the consummation of Merger and the other transactions contemplated hereby
will not, (i) conflict with or violate the governing documents of any of the
Buyout Parties, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to any of the Buyout Parties or by which any
of
their respective properties or assets are bound or affected, or (iii) result
in
any breach of or constitute a default (or an event which, with notice, lapse
of
time or both, would become a default) under, result in the loss of a material
benefit under or give to others any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the creation
of a lien or other encumbrance on any properties or assets of any of the Buyout
Parties pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or any other instrument or obligation to
which
any of the Buyout Parties is a party or by which any of the Buyout Parties
or
any of their properties or assets is bound or affected, except, in the case
of
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which (A) would not prevent or delay consummation of the
Merger in any material respect or otherwise prevent any of the Buyout Parties
from performing its obligations under this Agreement in any material respect,
and (B) in the case of Stratford Holdings and
Stratford Acquisition, would not, individually or in the aggregate, have an
Acquiror Material Adverse Effect.
(b) The
execution and delivery of this Agreement by each of the Buyout Parties do not,
and the performance of this Agreement and the consummation of the Merger and
the
other transactions contemplated hereby by the Buyout Parties will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) any applicable
requirements, if any, of the Exchange Act, the Securities Act and state takeover
laws, and (B) the filing and publication of appropriate merger and similar
documents as required by the ABCA, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, (x) would not prevent or delay consummation of the Merger in
any
material respect or otherwise prevent any of the Buyout Parties from performing
their respective obligations under this Agreement in any material respect,
or
(y) in the case Stratford Holdings and
Stratford Acquisition would not, individually or in the aggregate, have an
Acquiror Material Adverse Effect.
Section
4.04 Brokers.
No
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with this Agreement, the Merger and the
other transactions contemplated hereby based upon arrangements made by or on
behalf of the members of the Buyout Group.
Section
4.05 Capitalization
of Stratford Acquisition.
As of
the date hereof, 1,000 voting
units of Stratford Acquisition were issued and outstanding, all of which units
are owned by JDMD.
Section
4.06 No
Prior Activities.
Except
for the obligations incurred in connection with their incorporation or
organization or the negotiation and consummation of the transactions
contemplated by this Agreement, each of Stratford Holdings and Stratford
Acquisition has
10
neither
incurred any obligation or liability nor engaged in any business or activity
of
any type or kind whatsoever or entered into any agreement or arrangement with
any Person.
Section
4.07 Investigation
by Stratford Acquisition.
Stratford Acquisition:
(a) acknowledges
that, except as set forth in this Agreement, none of the Company, any Company
Subsidiary or any of their respective directors, officers, employees,
Affiliates, agents or representatives makes any representation or warranty,
either express or implied, as to the accuracy or completeness of any of the
information provided or made available to members of the Buyout Group or their
agents, representatives or financing sources prior to the execution of this
Agreement; and
(b) agrees
that, to the fullest extent permitted by law except as provided by this
Agreement, none of the Company, any Company Subsidiary or any of their
respective directors, officers, employees, shareholders, Affiliates, agents
or
representatives shall have any liability or responsibility whatsoever to
Stratford Acquisition on any basis (including without limitation in contract,
tort or otherwise) based upon any information provided or made available, or
statement made to members of the Buyout Group prior to the execution of this
Agreement.
Section
4.08 No
Conflicting Knowledge.
Each of
the Buyout Parties has reviewed the representations and warranties of the
Company set forth in ARTICLE
II
hereof
and to their actual knowledge such representations and warranties are true
and
correct in all material respects.
ARTICLE
V
COVENANTS
Section
5.01 Conduct
of Business by the Company Pending the Merger.
The
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Stratford Acquisition shall have consented (which consent
shall not be unreasonably withheld), neither the Company nor any Company
Subsidiary shall (except to the extent permitted or otherwise contemplated
by
this Agreement):
(a) conduct
its business in any manner other than in the ordinary course of business
consistent with past practice;
(b) amend
or
propose to amend its Articles of Incorporation or Bylaws;
(c) authorize
for issuance, issue, grant, sell, pledge, redeem or acquire for value any of
its
or their securities, including options, warrants, commitments, stock
appreciation rights, subscriptions, rights to purchase or otherwise (other
than
the issuance of equity securities upon the exercise of options or warrants
outstanding as of the date of this Agreement and in accordance with the terms
of
such options or warrants in effect on the date of this Agreement);
(d) declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property, or otherwise, with respect to any of its capital stock or
other
equity interests, or subdivide, reclassify, recapitalize, split, combine or
exchange any of its shares of capital stock;
11
(e) take
any
action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including tax accounting policies and procedures);
(f) take
any
action that would, or could reasonably be expected to result in, any of its
representations and warranties set forth in this Agreement being untrue or
in
any of the conditions to the Merger set forth in ARTICLE
VII
not
being satisfied; or
(g) authorize
any of, or commit or agree to take any of, the foregoing actions.
Section
5.02 Access
to Information; Confidentiality.
From
the date hereof to the Effective Time, the Company shall (and shall cause the
Company Subsidiaries and the officers, directors, employees, auditors and agents
of the Company and each of the Company Subsidiaries to) afford the officers,
employees and agents of Stratford Acquisition (the “Stratford
Acquisition Representatives”)
reasonable access at all reasonable times to its officers, employees, agents,
properties, offices, plants and other facilities, books and records, and shall
furnish such Stratford Acquisition Representatives with all financial, operating
and other data and information as may from time to time be reasonably requested.
All information provided herein or prior hereto in connection with the
transaction contemplated hereby, to the extent not already publicly available
at
the time such information was provided or subsequently made publicly available
through actions taken by or on behalf of the Company, shall be held in
confidence and used only to evaluate the transaction described herein and for
no
other purpose. Each of the Buyout Parties agrees that it shall not disclose
the
information to any other Person except those who have an actual need to know
the
information for the purpose of evaluating the transaction contemplated hereby,
who are informed of the confidential nature of the information and who agree
to
be bound by this Section
5.02
(“Permitted
Recipients”).
Each
of the Buyout Parties shall be responsible for any breach of any provision
of
this Section
5.02
by its
Permitted Recipients. Each of the Buyout Parties acknowledges and agrees that
any breach or threatened breach of the terms of this Section
5.02
regarding the treatment of confidential information may result in irreparable
damage to the Company for which there may be no adequate remedy at law.
Therefore, each of them agrees that in the event of any breach of this
Section
5.02,
the
Company shall be entitled, in addition to any other rights and remedies
available to it, to specific enforcement of the terms of this Section
5.02
and/or
injunctive relief requiring the immediate return of all such
information.
Section
5.03 Third
Party Offers
(a) The
Company shall advise Stratford Holdings orally
and in writing within twenty-four (24) hours of (i) any Competing Offer (as
defined in Section
9.03(d))
or any
inquiry with respect to or which would reasonably be expected to lead to a
potential Competing Offer that is received by or communicated to any officer
or
director of the Company or, to the knowledge of the Company, any financial
advisor, attorney or other advisor or representative of the Company, (ii) the
material terms of such Competing Offer or inquiry (including a copy of any
written offer) and (iii) the identity of the Person making any such Competing
Offer or inquiry. The Company will keep Stratford Holdings informed
of the status of such Competing Offer or inquiry (including, without limitation,
notifying Stratford Holdings orally
and in writing of any material
12
change
to
the terms of such Competing Offer or inquiry and providing copies of any revised
written proposal within twenty-four (24) hours of the receipt thereof by the
Company).
(b) In
the
event that the Company receives from any Person a Competing Offer after the
date
of this Agreement and prior to the receipt of the Requisite Approval (as defined
in Section
7.01(a))
and the
Company Requisite Vote (as defined in Section
3.04)
and the
Board determines in good faith (after consultation with and taking into account
the advice of its outside legal counsel and any outside financial advisor
engaged by the Company) that any such Competing Offer is a superior alternative
to the Merger, (i) the Company may make such inquiries or conduct such
discussions and negotiations with respect to the Competing Offer that the Board
reasonably determines in good faith (after consultation with and taking into
account the advice of its outside legal counsel) would constitute a breach
of
the fiduciary duties of the Company’s Board to its shareholders under the ABCA
if such actions are not taken and (ii) after giving Stratford
Holdings written
notice of its intention to do so, the Company may provide confidential
information concerning the Company to the Person making the Competing Offer,
but
only if, prior to such inquiries, discussions, negotiations and/or provision
of
information, the Person making such Competing Offer shall have entered into
a
confidentiality agreement containing terms no less restrictive than the terms
set forth in Section
5.02
above;
provided,
that
such confidentiality agreement shall provide that the disclosure to Stratford
Holdings of
the
terms and conditions of such Competing Offer pursuant to Section
5.03(a)
above,
including the identity of the Person making such Competing Offer and any
material changes thereto, shall not be prohibited by such agreement.
(c) Notwithstanding
anything to the contrary in this Agreement, the Board may withdraw its
recommendation of this Agreement and the Merger if it reasonably determines
in
good faith, after consultation with and taking into account the advice of its
outside legal counsel, that such action is necessary in order for the Board
to
comply with its fiduciary duties to the Company’s shareholders under the ABCA;
provided that the Board may not withdraw its recommendation at any time after
the Board has made the determination under Section
5.03(b)
unless
the Company (i) has given written notice to Stratford Holdings of
the
Board’s intention to withdraw its recommendation and (ii) has not received
an offer from Stratford Holdings within five Business Days of Stratford
Holdings’ receipt
of notice of the type described in Section
8.01(h).
(d) Nothing
contained in this Agreement shall prohibit the Company from making any
disclosure to the Company’s shareholders if, in the good faith judgment of the
Board (after consultation with and taking into account the advice of its outside
legal counsel), such disclosure is necessary for the Board to comply with either
the Exchange Act or the Securities Act or the rules and regulations promulgated
thereunder or the Board’s fiduciary duties under the ABCA or other applicable
law.
13
Section
5.04 Directors’
and Officers’ Insurance and Indemnification.
(a) From
and
after the consummation of the Merger, the parties shall, and shall cause the
Surviving Corporation to, indemnify, defend and hold harmless any person who
is
now, or has been at any time prior to the date hereof, or who becomes prior
to
the Effective Time, an officer or director (the “Indemnified
Party”)
of the
Company or its subsidiaries against all losses, claims, damages, liabilities,
costs and expenses (including attorneys’ fees and expenses), judgments, fines,
losses, and amounts paid in settlement, with the written approval of the
Surviving Corporation (which approval shall not be unreasonably withheld),
in
connection with any actual or threatened action, suit, claim, proceeding or
investigation (each a “Claim”)
to the
extent that any such Claim is based on, or arises out of, (i) the fact that
such
person is or was a director, officer, employee or agent of the Company or any
subsidiary or is or was serving at the request of the Company or any of its
subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (ii) this Agreement,
or any of the transactions contemplated hereby, in each case to the extent
that
any such Claim pertains to any matter or fact arising, existing, or occurring
prior to or at the Effective Time, regardless of whether such Claim is asserted
or claimed prior to, at or after the Effective Time, to the full extent
permitted under Arizona law or the Company’s Articles of Incorporation, Bylaws
or indemnification agreements in effect at the date hereof, including provisions
relating to advancement of expenses incurred in the defense of any action or
suit. Without limiting the foregoing, in the event any Indemnified Party becomes
involved in any capacity in any Claim, then from and after consummation of
the
Merger, the parties shall cause the Surviving Corporation to periodically
advance to such Indemnified Party its legal and other expenses (including the
cost of any investigation and preparation incurred in connection therewith),
subject to the provision by such Indemnified Party of an undertaking to
reimburse the amounts so advanced in the event of a final, non-appealable
determination by a court of competent jurisdiction that such Indemnified Party
is not entitled thereto.
(b) In
addition to the foregoing, from and after the consummation of the Merger,
Stratford Acquisition and the Company agree that all rights to indemnification
and all limitations on liability existing in favor of the Indemnified Parties
as
provided in the Company’s Articles of Incorporation and Bylaws or
indemnification agreements as in effect as of the date hereof shall survive
the
Merger and shall continue in full force and effect, without any amendment
thereto, for a period of six years from the Effective Time to the extent such
rights are consistent with the ABCA; provided that in the event any Claim or
Claims are asserted or made within such six year period, all rights to
indemnification in respect of any such Claim or Claims shall continue until
disposition of any and all such Claims; provided further, that any determination
required to be made with respect to whether an Indemnified Party’s conduct
complies with the standards set forth under the ABCA, the Company’s Articles of
Incorporation or Bylaws or such indemnification agreements, as the case may
be,
shall be made by independent legal counsel selected by the Indemnified Party
and
reasonably acceptable to the Surviving Corporation; and, provided further,
that
nothing in this Section
5.04
shall
impair any rights or obligations of any present or former directors or officers
of the Company.
(c) In
the
event the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or
14
substantially
all of its properties and assets to any Person, then, and in each such case,
to
the extent necessary to effectuate the purposes of this Section
5.04,
proper
provision shall be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section
5.04,
and
none of the actions described in clauses (i) or (ii) shall be taken until such
provision is made.
(d) The
parties shall cause the Surviving Corporation to maintain the Company’s existing
officers’ and directors’ liability insurance policy (“D&O
Insurance”)
for a
period of not less than two years after the Effective Date; provided that the
Surviving Corporation may substitute therefor policies of substantially similar
coverage and amounts containing terms no less advantageous to such former
directors or officers so long as such substitution does not result in gaps
or
lapses in coverage; provided further, if the existing D&O Insurance expires
or is cancelled during such period, Stratford Acquisition or the Surviving
Corporation will use its best efforts to obtain substantially similar D&O
Insurance; provided, however, that if the aggregate annual premiums for such
D&O Insurance (or successor insurance policy) at any time during such period
exceed 200% of the per annum rate of premiums currently paid by the Company
for
such insurance on the date of this Agreement, then the parties will cause the
Surviving Corporation to, and the Surviving Corporation will, provide the
maximum coverage that shall then be available at an annual premium equal to
200%
of such rate.
(e) This
Section
5.04
is
intended to be for the benefit of, and shall be enforceable by, the Indemnified
Parties, their heirs and personal representatives, and shall be binding on
the
Surviving Corporation and its respective successors and assigns and shall
survive the Merger.
Section
5.05 Further
Action.
Upon
the terms and subject to the conditions hereof, each of the parties hereto
shall
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate
the
Merger and the other transactions contemplated hereby, including, without
limitation, using its reasonable best efforts to (i) ensure that the conditions
set forth ARTICLE
VII
hereof
are satisfied and (ii) obtain all licenses, permits, waivers, orders, consents,
approvals, authorizations, and qualifications of Governmental Entities and
parties to contracts with the Company and the Company Subsidiaries as are
necessary for the consummation of the Merger and the other transactions
contemplated hereby.
Section
5.06 Public
Announcements.
The
Buyout Parties and the Company shall consult with each other before issuing
any
press release or otherwise making any public statements with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or make any such public statement without the prior consent of
the
other party or parties, which consent shall not be unreasonably withheld;
provided, however, that a party may, without the prior consent of any other
party, issue such press release or make such public statement as may be required
by law, regulation or any listing agreement or arrangement to which the Company
or Stratford Acquisition is a party with a national securities exchange or
the
OTC Bulletin Board if it has used all reasonable efforts to consult with the
other party and to obtain such party’s consent but has been unable to do so in a
timely manner.
15
Section
5.07 Notification
of Certain Matters.
The
Company shall give prompt notice to the Buyout Parties, and the Buyout Parties
shall give prompt notice to the Company, of (i) the occurrence or non-occurrence
of any event known to a party, the occurrence or non-occurrence of which is
reasonably likely to cause any representation or warranty of such party
contained in this Agreement to be materially untrue or inaccurate; (ii) any
failure of the Company or the Buyout Parties, as the case may be, to comply
with
or satisfy, or the occurrence or non-occurrence of any event known to a party,
the occurrence or non-occurrence of which is reasonably likely to cause the
failure by such party to comply with or satisfy any material covenant, condition
or agreement to be complied with or satisfied by it hereunder; (iii) the
occurrence of any other event known to a party which would be reasonably likely
to cause any condition set forth in ARTICLE
VII
to be
unsatisfied in any material respect at any time prior to the closing of the
Merger or the Effective Time, as the case may be; or (iv) any action, suit,
proceeding, inquiry or investigation pending or, to the knowledge of the
Company, threatened which questions or challenges the validity of this
Agreement; provided, however, that the delivery of any notice pursuant to this
Section
5.07
shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section
5.08 Anti-takeover
Statutes.
To the
extent that Chapter 23 of Title 10 of the Arizona Revised Statutes, Corporate
Takeovers, applies in whole or in part to the Merger, each of the Company and
Stratford Acquisition shall use their reasonable best efforts to comply with
the
requirements of such Chapter in a manner that would allow the Merger to be
consummated as provided in this Agreement.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
Section
6.01 Shareholder
Approval Required.
If
required by applicable law in order to consummate the Merger:
(a) The
Company (acting through the Board in accordance with its Articles of
Incorporation and Bylaws) shall take all action necessary to seek approval
of
the Merger and adoption of this Agreement at a duly called and noticed meeting
of the shareholders of the Company, which meeting shall be held as promptly
as
practicable following the preparation of the Proxy Statement (as defined in
Section
6.01(b));
provided, however, that the Board shall not be required to call or hold a
shareholder meeting if the Board determines to terminate this Agreement on
account of a Competing Offer that was not matched by the Buyout Group pursuant
to Section
8.01(h).
Upon
receipt of the Requisite Approval (as defined in Section
7.01(a)),
the
Buyout Parties shall, and shall cause each member of the Buyout Group to, vote
for, with respect to all shares of Common Stock owned by it, the adoption of
this Agreement.
(b) (i)
Stratford Acquisition and the Company shall cooperate in preparing, and the
Company shall cause to be filed with the Securities and Exchange Commission
(the
“SEC”),
a
transaction statement as required by Rule 13e-3 of the Exchange Act (together
with any amendments thereof or supplements thereto, the “Transaction
Statement”)
and a
proxy statement that meets the requirements of the Exchange Act and the
regulations promulgated thereunder (together with any amendments thereof or
supplements thereto, the “Proxy
Statement”)
to
seek
16
the
approval and adoption of this Agreement by the shareholders of the Company.
Each
of Stratford Acquisition and the Company shall furnish all information as the
other parties may reasonably request in connection with such actions and the
preparation of the Proxy Statement and the Transaction Statement.
Section
6.02 Covenants
Relating To Proxy Statement.
If a
Proxy Statement is required pursuant to Section
6.01
hereof:
(a) The
Proxy
Statement shall include the recommendations of the Board to the shareholders
of
the Company to vote in favor of the adoption of this Agreement. The Board not
shall amend, modify, withdraw, condition or qualify its recommendation relating
to this Agreement and the transactions contemplated hereby in a manner adverse
to Stratford Acquisition or take any action or make any statement inconsistent
with such recommendation; provided, however, that subject to Section
5.03,
the
Board may amend, modify, withdraw, condition or qualify its recommendation
if,
based on the advice of outside counsel, the Board concludes that the failure
to
take such action would result in a breach of fiduciary duties under applicable
law.
(b) No
amendment or supplement to the Proxy Statement will be made by the Company
or
Stratford Acquisition without the approval of the other party (such approval
not
to be unreasonably withheld or delayed). Each of the Company and Stratford
Acquisition will advise the other, promptly after it receives notice thereof,
of
any request by the SEC for amendment of the Proxy Statement or comments thereon
and responses thereto or requests by the SEC for additional
information.
(c) The
information supplied by the Company for inclusion in the Proxy Statement or
any
other documents to be filed with the SEC in connection with the Merger shall
not, at the time the Proxy Statement is filed with the SEC and distributed
to
shareholders of the Company or at the time of the meeting of the Company’s
shareholders contemplated by Section
6.01(a),
contain
any untrue statement of a material fact or fail to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to the Company or any of its subsidiaries, or their
respective officers or directors, should be discovered by the Company that,
pursuant to the Securities Act or the Exchange Act, should be set forth in
an
amendment or a supplement to the Proxy Statement, the Company shall promptly
inform Stratford Acquisition thereof. All documents that the Company is
responsible for filing with the SEC in connection with the Merger will comply
as
to form and substance in all material respects with the applicable requirements
of the Securities Act and the Exchange Act.
(d) The
information supplied in writing by the Buyout Parties for inclusion in the
Proxy
Statement or any other documents to be filed with the SEC in connection with
the
Merger shall not, at the time the Proxy Statement is filed with the SEC and
distributed to shareholders of the Company or at the time of the meeting of
the
Company’s shareholders contemplated by Section
6.01(a),
contain
any untrue statement of a material fact or fail to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If, at any time prior to the
17
Effective
Time, any event or circumstance relating to a Buyout Party, or its respective
officers, directors, members or managers, should be discovered by such Buyout
Party that, pursuant to the Securities Act or the Exchange Act, should be set
forth in an amendment or a supplement to the Information Statement, such Buyout
Party shall promptly inform the Company thereof. All documents that the Buyout
Parties are responsible for filing with the SEC in connection with the Merger
will comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.
ARTICLE
VII
CLOSING
CONDITIONS
Section
7.01 Conditions
to Obligations of Each Party to Effect the Merger.
The
respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which
may
be waived, in whole or in part, to the extent permitted by applicable
law:
(a) Shareholder
Approval.
The
Company Requisite Vote shall have been obtained, and the holders of a majority
of the number of shares of Common Stock outstanding as of the date of this
Agreement (excluding shares held by the members of the Buyout Group) shall
have
voted in favor of the Merger (the foregoing approval by the disinterested
shareholders is referred to herein as the “Requisite
Approval”).
(b) No
Order.
No
Governmental Entity or federal or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and which materially
restricts, prevents or prohibits consummation of the Merger or the other
transactions contemplated by this Agreement; provided, however, that the parties
shall use their reasonable best efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted.
Section
7.02 Additional
Conditions to Obligations of Stratford Acquisition.
The
obligation of Stratford Acquisition to effect the Merger is also subject to
satisfaction or waiver of the following conditions:
(a) Dissenting
Shares.
On the
Closing Date, Dissenting Shares shall aggregate no more than five percent
(5%) of
the
then outstanding shares of Common Stock.
(b) Board
Recommendation and Approval.
The
Board shall not have withheld or withdrawn and shall not have modified or
amended in a manner adverse to Stratford Acquisition, the approval, adoption
or
recommendation of the Merger or this Agreement.
(c) Required
Consents.
The
Company shall have procured all of the third party consents and made all of
the
filings specified in Schedule
3.05,
except
where the failure to obtain such consents or make such filings would not have
a
Company Material Adverse Effect.
18
(d) Company
Material Adverse Effect.
Since
the date of this Agreement there shall not have been any state of facts, event,
change, effect, development, condition or occurrence that, individually or
in
the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect.
ARTICLE
VIII
TERMINATION,
AMENDMENT AND WAIVER
Section
8.01 Termination.
This
Agreement may be terminated at any time prior to the Effective Time, whether
before or after adoption of this Agreement by the shareholders of the
Company:
(a) by
mutual
consent of the Company (acting through the Board) and Stratford
Acquisition;
(b) by
Stratford Acquisition if there has been a material breach in the context of
the
transaction of any covenant or agreement made by the Company in this Agreement,
and such breach is not curable or, if curable, is not cured within 15 days
after
written notice thereof is given by the Buyout Parties to the
Company;
(c) by
the
Company if there has been a material breach in the context of the transaction
of
any covenant or agreement made by any of the Buyout Parties in this Agreement,
and such breach is not curable or, if curable, is not cured within 15 days
after
written notice thereof is given by the Company to Stratford Acquisition (acting
as representative to the Buyout Parties);
(d) by
Stratford Acquisition if
there
has been a Company Material Adverse Effect;
(e) by
either
Stratford Acquisition or the Company, if any permanent injunction, order,
decree, ruling or other action by any Governmental Entity preventing the
consummation of the Merger shall have become final and
nonappealable;
(f) by
either
Stratford Acquisition or the Company, if the Merger shall not have been
consummated before May 31, 2006 (provided that the right to terminate this
Agreement under this Section
8.01(f)
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 Effective
Time
to occur on or before such date);
(g) by
Stratford Acquisition if: (i) the Board of Directors of the Company shall
withdraw, modify or change its recommendation so that it is not in favor of
this
Agreement or the Merger or shall have resolved to do any of the foregoing;
or
(ii) either the Company Requisite Vote or Requisite Approval required pursuant
to Section
7.01(a)
shall
not have been obtained by May 31, 2006; and
(h) by
the
Company to accept a Competing Offer, but only if (i) the Company promptly
notifies Stratford Acquisition in writing of its intention to do so (which
notice shall contain all material terms and conditions of such Competing Offer)
and causes its legal counsel,
19
any
outside financial advisor engaged by the Company, and those members of the
Company’s Board who are not part of the Buyout Group, to afford Stratford
Acquisition the
opportunity to match the terms of the Competing Offer and to negotiate with
Stratford Acquisition to
make
other adjustments in the terms and conditions of this Agreement that would
permit the Company’s Board to recommend this Agreement, as revised,
(ii) the Company has not received from Stratford Acquisition, within five
Business Days of Stratford Acquisition’s receipt
of the notice referred to in this Section
8.1(h),
an
offer that the members of the Company’s Board who are not part of the Buyout
Group determine in good faith (after consultation with and taking into account
the advice of the Company’s outside legal counsel and any outside financial
advisors engaged by the Company), matches or exceeds such Competing Offer or
is
otherwise sufficient to permit the Board to continue to recommend this
Agreement, as amended by such offer from Stratford Acquisition, and the Merger,
rather than the Competing Offer (for purposes of such determination, if the
consideration offered in a Competing Offer is other than cash, Stratford
Acquisition shall
be
deemed to have “matched” such Competing Offer if the aggregate consideration
offered by Stratford Acquisition has
a
value that is not less than the value of the consideration offered in the
Competing Offer, as determined in good faith by those members of the Company’s
Board who are not part of the Buyout Group, after consultation with and taking
into account the advice of the Company’s outside legal counsel and any outside
financial advisor engaged by the Company), which right to match any Competing
Offer shall apply equally with respect to any subsequent increase or other
revision of the terms of any Competing Offer, and (iii) the Company pays to
Stratford Holdings the
Termination Expenses as set forth in Section
8.05(b)
below
concurrent with the termination of this Agreement.
The
right
of any party hereto to terminate this Agreement pursuant to this Section
8.01 shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any party hereto, any Person controlling any such party
or any of their respective officers or directors, whether prior to or after
the
execution of this Agreement.
Section
8.02 Effect
of Termination.
Except
as provided in Section
8.05
or
Section
9.01(b),
in the
event of the termination of this Agreement pursuant to Section
8.01,
this
Agreement shall forthwith become void, there shall be no liability on the part
of any party hereto, or any of their respective officers or directors, to the
other and all rights and obligations of any party hereto shall cease; provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
Section
8.03 Amendment.
Before
or after adoption of this Agreement by the shareholders of the Company, this
Agreement may be amended by the parties hereto at any time prior to the
Effective Time; provided, however, that (a) any such amendment shall, on behalf
of the Company, have been approved by the Board and (b) after adoption of this
Agreement by the shareholders of the Company, no amendment which under
applicable law may not be made without the approval of the shareholders of
the
Company may be made without such approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
Section
8.04 Waiver.
At any
time prior to the Effective Time, either the Company (acting through the Board),
on the one hand, or JDMD (acting as representative of the Buyout
20
Parties),
on the other, may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or
in
any document delivered pursuant hereto, and (c) waive compliance by the other
party with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby and, with respect to
extensions or waivers granted by the Company, if the Board shall have approved
such waiver or extension.
Section
8.05 Fees
and Expenses.
(a) Except
as
provided for in Section
8.05(b)
below,
all costs and expenses (including any expenses related to any Claims or
litigation in connection with the transactions contemplated by this Agreement,
or any settlement thereof), including, without limitation, fees and
disbursements of counsel, financial advisors and accountants and other
out-of-pocket expenses, incurred or to be incurred by the parties hereto in
connection with the transactions contemplated hereby (with respect to such
party, its “Expenses”),
shall
be borne solely and entirely by the party which has incurred such Expenses;
provided, however, that all Expenses related to printing and mailing the Proxy
Statement shall be borne by the Company.
(b) In
the
event that the Company terminates
this Agreement pursuant to Section
8.01(h),
then
the Company shall within two days of such termination pay to Stratford Holdings
all Expenses incurred by Stratford Holdings in
connection with this Agreement and the transactions contemplated hereby, in
an
amount not to exceed $200,000 (the “Termination
Expenses”).
ARTICLE
IX
GENERAL
PROVISIONS
Section
9.01 Effectiveness
of Representations, Warranties and Agreements.
(a) Except
as
set forth in Section
9.01(b),
the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect, regardless of any investigation made
by
or on behalf of any other party hereto, any Person controlling any such party
or
any of their respective officers or directors, whether prior to or after the
execution of this Agreement.
(b) The
representations, warranties and agreements in this Agreement shall terminate
at
the Effective Time or upon the termination of this Agreement pursuant to
ARTICLE
VIII,
except
that the agreements set forth in Articles
I,
II
and
IX
and
Sections
5.04
and
8.05
shall
survive the Effective Time and those set forth in Sections
5.02,
8.02
and
8.05
and
ARTICLE
IX
shall
survive termination.
Section
9.02 Notices.
All
notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered or transmitted, and shall be effective upon receipt, if delivered
personally, mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like changes of address) or sent
by
electronic transmission to the telecopier number specified below:
21
| (a) |
If
to the Buyout Parties:
|
|
c/o
JDMD Investments, L.L.C.
2400
E. Arizona Biltmore Circle
Building
Two, Suite 1270
Xxxxxxx,
Xxxxxxx 00000
Telecopier
No.: (000) 000-0000
|
|
with
a copy to:
|
|
Xxxxx
& Xxxxxx, L.L.P.
One
Arizona Center
000
Xxxx Xxx Xxxxx
Xxxxxxx,
Xxxxxxx 00000-0000
Attention:
Xxxxxx X. Xxxxxxx, Esq.
Telecopier
No.: (000) 000-0000
|
| (b) |
If
to the Company:
|
|
Stratford
American Corporation
2400
E. Arizona Biltmore Circle
Building
Two, Suite 1270
Xxxxxxx,
Xxxxxxx 00000
Telecopier
No.: (000) 000-0000
|
|
with
separate copies to:
|
|
Xxxxxxxxx
Xxxxx, P.C.
0000
Xxxxx Xxxxxxx Xxxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxx 00000-0000
Attention:
Xxxxx XxXxxxxxx, Esq.
Telecopier
No.: (000) 000-0000
|
Section
9.03 Certain
Definitions.
For
purposes of this Agreement, the term:
(a) “Affiliate”
means
a
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first mentioned
Person;
(b) “Business
Day”
means
any day other than a day on which (i) banks in the State of Arizona are
authorized or obligated to be closed or (ii) the SEC or the OTC Bulletin Board
is closed;
22
(c) “Buyout
Group”
means
each of the Buyout Parties and their respective Affiliates, other than the
Company and its subsidiaries;
(d) “Competing
Offer”
means
any proposal or offer to acquire in any manner, directly or indirectly, (i)
all
or substantially all of the assets of the Company and its Subsidiaries, taken
as
a whole, or (ii) a majority equity interest in, or any voting securities
representing at least a majority of the voting interests of, the Company, in
each case other than the transactions contemplated by this
Agreement.
(e) “control”
(including the terms “controlled,” “controlled by” and “under common control
with”) means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or polices
of a
Person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise;
(f) “Person”
means
any person or any corporation, partnership, limited liability company or other
legal entity; and
(g) “Subsidiary”
or
“Subsidiaries”
of
any
Person means any corporation, partnership, joint venture or other legal entity
of which such Person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization.
Section
9.04 Headings.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
Section
9.05 Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the
extent possible.
Section
9.06 Entire
Agreement.
This
Agreement, and the other documents delivered in connection herewith, constitutes
the entire agreement of the parties and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
Section
9.07 Assignment.
This
Agreement shall not be assigned by operation of law or otherwise and any
purported assignment shall be null and void, provided that Stratford Acquisition
may assign its rights, but not its obligations, under this Agreement to any
direct or indirect subsidiary of a member of the Buyout Group.
23
Section
9.08 Parties
in Interest.
This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied (other than the
provisions of Section
5.04,
which
provisions are intended to benefit and may be enforced by the beneficiaries
thereof), is intended to or shall confer upon any Person any right, benefit
or
remedy of any nature whatsoever under or by reason of this
Agreement.
Section
9.09 Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Arizona, without regard to the conflict of laws rules
thereof.
Section
9.10 Submission
to Jurisdiction; Waivers.
Each
party hereto irrevocably agrees that any legal action or proceeding with respect
to this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by any other party hereto or its successors or assigns may be
brought and determined in the courts of the State of Arizona, and each party
hereby irrevocably submits with regard to any such action or proceeding for
itself and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the courts of Arizona. Each party hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) the defense of sovereign immunity, (b) any claim that it is
not
personally subject to the jurisdiction of the courts of Arizona for any reason
other than the failure to serve process in accordance with this Section
9.10,
(c)
that it, or its property, is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (d) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in any
such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
Section
9.11 Enforcement
of this Agreement.
The
parties agree that irreparable damage would occur in the event that any of
the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions hereof,
this
being in addition to any other remedy to which they are entitled at law or
in
equity.
Section
9.12 Counterparts.
This
Agreement may be executed by facsimile signature and in one or more
counterparts, and by the different parties hereto in separate counterparts,
each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[SIGNATURE
PAGE FOLLOWS]
24
SIGNATURE
PAGE TO AGREEMENT AND PLAN OF MERGER
IN
WITNESS WHEREOF, the Company and the Buyout Parties have caused this Agreement
to be executed as of the date first written above by their respective duly
authorized officers.
| COMPANY: | ||
|
STRATFORD
AMERICAN
CORPORATION,
an Arizona corporation
|
||
| /s/ Xxxxx X. Xxxxx | ||
|
|
||
|
By:
Xxxxx X. Xxxxx
Its:
Chairman
|
||
| BUYOUT PARTIES: | ||
|
JDMD
INVESTMENTS, L.L.C., an Arizona
limited
liability company
|
||
| /s/ Xxx X. Xxxxxx | ||
|
|
||
|
By:
Xxx
X. Xxxxxx
Its:
Managing
Member
|
||
|
STRATFORD
HOLDINGS, L.L.C.,
an
Arizona
limited liability company
|
||
| By: |
JDMD INVESTMENTS, L.L.C., its
Manager
|
|
| /s/ Xxx X. Xxxxxx | ||
|
|
||
|
By:
Xxx X. Xxxxxx
Its:
Managing Member
|
||
|
STRATFORD
ACQUISITION, L.L.C., an
Arizona
limited liability company
|
||
| By: |
JDMD INVESTMENTS, L.L.C., its
Manager
|
|
| /s/ Xxx X. Xxxxxx | ||
|
|
||
|
By:
Xxx X. Xxxxxx
Its:
Managing Member
|
||
25
