MERGER AGREEMENT
Dated as of June 10, 2004
among
C & D TECHNOLOGIES, INC.
CLETADD ACQUISITION CORPORATION,
and
DATEL HOLDING CORPORATION
MERGER AGREEMENT
This MERGER AGREEMENT, dated as of June 10, 2004 (this "Agreement"), is
among (i) C & D Technologies, Inc., a Delaware corporation (the "Parent"), (ii)
Cletadd Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of the Parent (the "Acquirer"), and (iii) Datel Holding Corporation,
a Delaware corporation, (the "Company").
RECITALS
WHEREAS, the Company has authorized capital stock consisting of (i)
10,000,000 shares of Common Stock, par value $0.01 per share ("Company Common
Stock"), of which 3,925,575 shares are issued and outstanding as of the date
hereof, and (ii) 500,000 shares of Preferred Stock, par value $0.01 per share,
of which 15,000 shares have been designated Class A Preferred Stock ("Company
Preferred Stock"), of which 7,637 shares are issued and outstanding as of the
date hereof;
WHEREAS, the Company has an aggregate of 477,500 outstanding options to
purchase shares of Company Common Stock ("Company Options");
WHEREAS, the Acquirer has an authorized capital of 100 shares of common
stock, par value $0.01 per share, all of which shares are issued and outstanding
and held by the Parent;
WHEREAS, the boards of directors of each of the Parent, the Acquirer, and
the Company believe that the merger of the Acquirer with and into the Company
would be advantageous and beneficial to their respective corporations and
stockholders; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition of and inducement to the Parent and the Acquirer entering into
this Agreement (i) certain beneficial and record holders of Company Common Stock
are entering into an agreement dated as of the date hereof, in the form attached
hereto as Exhibit A (the "Voting Agreement") providing for the vote by such
stockholders in favor of the Merger and the transactions contemplated by this
Agreement and (ii) the Company has approved the execution and delivery of the
Voting Agreement by the stockholders party thereto.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto agree that the Acquirer shall be
merged with and into the Company, and the Company shall continue as the
surviving corporation, in accordance with the laws of the State of Delaware, and
upon the terms and subject to the conditions set forth in this Agreement (the
"Merger").
ARTICLE 1
THE MERGER
Section 1.1 Closing and Effective Date of Merger. Subject to and upon the
terms and conditions set forth in this Agreement, the closing of the
transactions contemplated under this Agreement (the "Closing") will be held at
the office of Brown Rudnick Berlack Israels LLP at One Financial Center, Boston,
Massachusetts 02111, on June 30, 2004, or such other date as may be agreed upon
among the parties hereto (the "Closing Date"). On the Closing Date, the Company
and the Acquirer shall cause to be definitively executed and delivered to each
other a Certificate of Merger, and cause such document to be filed with the
Secretary of State of the State of Delaware in order to cause the Merger to
become effective under, and in accordance with, the laws of the State of
Delaware and this Agreement. The Merger shall become effective on the date and
at the time of filing of the Certificate of Merger with the Secretary of State
for the State of Delaware, or at such other time as shall be agreed upon by the
Company and the Acquirer and as shall be set forth in the Certificate of Merger
(the "Effective Time"). The date on which the Effective Time occurs shall be
referred to herein as the "Effective Date." For all purposes, all of the
document deliveries and other actions to occur at the Closing will be
conclusively presumed to have occurred at the same time, immediately before the
Effective Time.
Section 1.2 Terms and Conditions of Merger. At the Effective Time, pursuant
to this Agreement and the Certificate of Merger, automatically and without
further action:
(a) The Acquirer shall be merged with and into the Company and the
separate existence of the Acquirer shall cease.
(b) The Company shall continue as the surviving corporation in the
Merger (the "Surviving Corporation").
(c) The effect of the Merger will be as provided in the applicable
provisions of the Delaware General Corporation Law, as amended (the
"DGCL").
(d) All of the estate, properties, rights, privileges, powers and
franchises of the Company and the Acquirer and all of their property,
real, personal and mixed, and all debts due on whatever account to
either of the Company or the Acquirer shall vest in the Surviving
Corporation, without further act or deed, except as contemplated by
this Agreement.
(e) The Surviving Corporation shall be responsible for all of the
liabilities and obligations of each of the Company and the Acquirer
and the liabilities of the Company and the Acquirer shall not be
affected nor shall the rights of creditors thereof or of any Persons
dealing with the Company or the Acquirer be impaired.
(f) The Certificate of Incorporation of the Surviving Corporation
shall be the same as the Certificate of Incorporation of the Acquirer
immediately prior to the Effective Time, except that the name of the
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corporation set forth therein shall be changed to the name of the
Company.
(g) The Bylaws of the Surviving Corporation shall be the same as the
Bylaws of the Acquirer immediately prior to the Effective Time, except
that the name of the corporation set forth therein shall be changed to
the name of the Company.
(h) From and after the Effective Time, the board of directors of the
Surviving Corporation will consist of the individuals then serving as
the directors of the Acquirer. Each such director will hold office,
subject to the applicable provisions of the Certificate of
Incorporation and the Bylaws of the Surviving Corporation, until the
next annual meeting of stockholders of the Surviving Corporation and
until its successor shall be duly elected or appointed and shall duly
qualify. If, at or after the Effective Time, a vacancy shall exist in
the board of directors by reason of death or inability to act, or for
any other reason, such vacancy may be filled in the manner provided in
the Bylaws of the Surviving Corporation.
(i) From and after the Effective Time, the individuals set forth on
Schedule 1.2(i) shall be the officers of the Surviving Corporation and
shall act as such and hold the offices set forth opposite their names
until their respective successors are duly elected or appointed and
qualified. If, at or after the Effective Time, a vacancy shall exist
in any of the offices of the Surviving Corporation by reason of death
or inability to act, or for any other reason, such vacancy may be
filled in the manner provided in the Bylaws of the Surviving
Corporation.
(j) Enterprise Value. The enterprise value to be paid by the Parent or
the Acquirer at or immediately prior to the Effective Time in
connection with the transactions contemplated hereby is $74,600,000
(the "Enterprise Value").
Section 1.3 Payment of Enterprise Value; Procedures.
(a) Payment of Transaction Expenses. At or immediately prior to the
Effective Time, the Parent will, or will cause the Acquirer to, pay,
out of the Enterprise Value, by wire transfer of immediately available
funds, the Transaction Expenses. The term "Transaction Expenses" shall
mean all costs, fees and expenses of the Company paid or payable to
America's Growth Capital, Brown Rudnick Berlack Israels LLP, the
Company's accountants, any director or employee of the Company to whom
any fees or reimbursement of expenses are owed in connection with the
transactions contemplated by this Agreement (net of any applicable
withholding required by law, it being understood that any amount so
withheld shall nonetheless be considered as having been paid as part
of Transaction Expenses), and any other Persons as to whom expenses
are incurred who are retained by the Company to assist in the
transactions contemplated by this Agreement, as a result of or in
connection with the negotiation and consummation of the Merger and the
transactions contemplated by this Agreement (including, if elected by
the Stockholder Representatives, any fees and expenses of the
Stockholder Representatives).
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(b) Indebtedness. At or immediately prior to the Effective Time, the
Parent will, or will cause the Acquirer to, out of the Enterprise
Value, pay, or at Parent's election, permit to remain outstanding as
an obligation of the Surviving Corporation the Indebtedness of the
Company outstanding as of the Closing Date. The term "Indebtedness"
shall include, without limitation, any amount outstanding or payable
under the Mortgage, the Master Lease and the Citizens Line.
(c) Payment of Aggregate Merger Consideration. At or immediately prior
to the Effective Time, the Parent will, or will cause the Acquirer to,
deliver, out of the Enterprise Value, an amount equal to (i) the
amount of the Enterprise Value, less (ii) the amount of the
Transaction Expenses, less (iii) the amount of the Indebtedness of the
Company outstanding on the Closing Date (other than any Indebtedness
incurred by the Company to pay the Aggregate Option Consideration),
less (iv) the Escrow Amount, less (v) the Aggregate Option
Consideration (such net amount, the "Aggregate Merger Consideration")
to the Paying Agent, which amount shall be used by the Paying Agent to
make payments as contemplated by the Exchange and Paying Agent
Agreement to the Stockholders. At or immediately prior to the
Effective Time, the Parent will, or will cause the Acquirer, out of
the Enterprise Value, to deliver the Escrow Amount to the Escrow Agent
for deposit in escrow in accordance with the terms of the Escrow
Agreement. Upon receipt by the Paying Agent of the Aggregate Merger
Consideration, and upon receipt by the Escrow Agent of the Escrow
Amount, the Parent and the Acquirer shall not be liable to any party
(including any Company Stockholder) for payment of any portion of the
Aggregate Merger Consideration or the Escrow Amount.
(d) Final Statement.
(i) Within thirty (30) calendar days after the Effective Time,
the Parent shall cause the Surviving Corporation to prepare and
deliver to the Stockholder Representatives an unaudited consolidated
balance sheet of the Company and its consolidated Subsidiaries as of
the Closing Date, and within sixty (60) calendar days after the
Effective Time, the Stockholder Representatives shall cause the Boston
office of PricewaterhouseCoopers LLP (the "Accountants") to audit such
unaudited balance sheet and deliver to the Parent and the Stockholder
Representatives an audited consolidated balance sheet of the Company
and its consolidated Subsidiaries as of the Closing Date (the "Closing
Balance Sheet") and a certified written statement setting forth (x)
the Net Worth of the Company as of the close of business at the
Effective Time and (y) the amount of cash and cash equivalents held by
the Company as of the close of business at the Effective Time (the
"Final Statement"). In connection with the preparation of the Closing
Balance Sheet and the Final Statement, the Surviving Corporation shall
conduct a physical inventory of the Company as of the close of
business at the Effective Time. The physical inventory shall be
conducted in the same manner, follow the same principles, practices,
policies and procedures and shall use the same methodology as the
Company used in its prior physical inventory for the preparation of
the Audited Financial Statements. The Stockholder Representatives and
their representatives and the Accountants shall be entitled to observe
the physical inventory. The physical inventory shall be completed
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within five (5) business days after the Closing Date, but shall be as
of the close of business at the Effective Time. The Closing Balance
Sheet and the Final Statement shall be prepared in accordance with
GAAP applied consistently as reflected in the Audited Financial
Statements, shall follow the same principles, practices, policies and
procedures and shall use the same methodology followed and used by the
Company in the preparation of the Audited Financial Statements,
including inventory valuation policies. For purposes of the
preparation of the Closing Balance Sheet and the Final Statement, (1)
Taxes payable shall be determined in accordance with GAAP, shall
reflect an estimate (consistent with the practices and policies
followed by the Company for estimates used in the preparation of the
Audited Financial Statements) of Taxes due or refundable based on
earnings or losses attributable to the operations of the Company and
its Subsidiaries for all periods, or partial periods, ending on and
including the Closing Date, and (2) federal and state employment Taxes
imposed on the Company in connection with the payment of the Aggregate
Option Consideration in exchange for the cancellation of the Company
Options shall be excluded. The Closing Balance Sheet and the Final
Statement shall be accompanied by reasonable documentation and
associated work papers to enable Parent, the Surviving Corporation,
and the Stockholder Representatives to verify the preparation of the
Closing Balance Sheet, the Final Statement and the calculation of Net
Worth. The Parent and the Surviving Corporation shall provide the
Accountants and the Stockholder Representatives and their
representatives reasonable access, during normal business hours, to
the books, records (including work papers) and facilities and to the
Surviving Corporation's employees for the purpose of the Stockholder
Representatives verifying the preparation of and the Accountants
auditing the Closing Balance Sheet and preparing the Final Statement
and the calculation of Net Worth. The term "Net Worth" shall mean
Total Assets minus Total Liabilities. The terms "Total Assets" and
"Total Liabilities" shall mean total consolidated assets and total
consolidated liabilities of the Company and its consolidated
Subsidiaries, as the case may be; provided, however, that there shall
be no decrease in Net Worth for or on account of: (1) any Transaction
Expenses paid pursuant to Section 1.3(a); or (2) any Indebtedness of
the Company outstanding on the Closing Date, whether paid or agreed to
remain outstanding pursuant to Section 1.3(b); or (3) the Aggregate
Option Consideration to the extent paid by the Company; or (4) any
purchase accounting relating to the Merger and the transactions
contemplated hereby, and any financing activities of the Parent or the
Acquirer in connection with the Merger and the transactions
contemplated hereby; provided further that there shall be no increase
in Net Worth for any reduction in income tax payable or accrued as a
result of any amount of the Transaction Expenses or the Aggregate
Option Consideration being deductible for income tax purposes; and
provided further that there shall be no increase or decrease in Net
Worth from any accounting or federal or state employment Taxes imposed
on the Company from the cancellation of Company Options in exchange
for cash pursuant to Section 1.13 and Section 7.6. The fees and
disbursements of the Stockholder Representatives, including those
incurred in connection with the preparation of the Closing Balance
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Sheet and the Final Statement and the calculation of Net Worth shall
be borne by the Stockholders and Company Optionholders (and, at the
election of the Stockholder Representatives, may be included in
Transaction Expenses, whether paid, payable or estimated by the
Stockholder Representatives). Neither the Parent nor the Surviving
Corporation shall have any liability to any party for any action or
omission of the Stockholder Representatives, including any fees or
expenses paid or payable to the Stockholder Representatives. The fees
and disbursements of the Accountants incurred in connection with their
audit of the Closing Balance Sheet and preparation of the Final
Statement shall be borne 50% by the Surviving Corporation without any
deduction from Net Worth and 50% by the Company as a Transaction
Expense.
(ii) Within thirty (30) calendar days after receipt of the
Closing Balance Sheet and the Final Statement, the Stockholder
Representatives and the Parent shall inform the other in writing that
the Final Statement is acceptable or object to specific items in the
Final Statement (which may be an objection to specific items in the
Closing Balance Sheet affecting the determination of the Final
Statement). If the Stockholder Representatives and the Parent approve
the Final Statement, or if the Stockholder Representatives and the
Parent fail to deliver any objection to the other within such thirty
(30) days, the Final Statement shall be deemed final. If the
Stockholder Representatives and/or the Parent object in writing in
reasonable detail to one or more specific items in the Final
Statement, the Stockholder Representatives and the Parent will use
good faith efforts for twenty (20) days thereafter to resolve such
disagreement. Failing resolution within such twenty (20) days, Ernst &
Young LLP (its Boston office), a nationally recognized accounting
firm, independent of the Company and the Parent (the "Unaffiliated
Firm"), will be retained to review the Final Statement and the matters
objected to by the Stockholder Representatives and/or the Parent, and
make a final determination of the Net Worth of the Company as of the
Effective Time in accordance with the provisions of this Section 1.3.
The Stockholder Representatives, the Accountants and the Parent shall
furnish to the Unaffiliated Firm such work papers and other documents
and information relating to the disputed issues as the Unaffiliated
Firm may request and are available to the Stockholder Representatives,
the Accountants, the Parent and Surviving Corporation, and each of the
Stockholder Representatives and the Parent will be afforded the
opportunity to present to the Unaffiliated Firm any material relating
to the disputed issues and to discuss the disputed issues with the
Unaffiliated Firm, all in accordance with procedures determined by the
Unaffiliated Firm. The Unaffiliated Firm shall follow the same
practices, policies and procedures and shall use the same methodology
followed and used by the Company in the preparation of the Audited
Financial Statements, including inventory valuation policies. The
Unaffiliated Firm may not make any changes to the Final Statement
(including any changes to the Closing Balance Sheet) or Net Worth if
(a) the physical inventory taken by the Accountants was conducted in
the same manner, followed the same principles, practices, policies and
procedures and used the same methodology followed or used by the
Company in its prior physical inventory for the preparation of the
Audited Financial Statements, and (b) if in the preparation of the
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Closing Balance Sheet and the Final Statement, the Accountants
followed the same principles, practices, policies and procedures and
used the same methodology followed and used by the Company in the
preparation of the Audited Financial Statement, including inventory
valuation policies, provided, however, that nothing shall prevent the
Unaffiliated Firm from making changes to the Final Statement
(including any changes to the Closing Balance Sheet) or Net Worth in
the event of manifest error. The Unaffiliated Firm shall make its
determination within the range of the dispute between the Parent and
Surviving Corporation on the one hand and the Stockholder
Representatives on the other. The determination by the Unaffiliated
Firm shall be final and binding. The date of such determination, the
date the parties resolve all objections, or the date thirty (30) days
after the receipt of the Final Statement if the Stockholder
Representatives do not object to the Final Statement, whichever occurs
first, shall be the "Determination Date." The costs of the
Unaffiliated Firm shall be paid by the party whose calculation of the
Net Worth of the Company as of the Effective Time varies the most from
the determination of the Unaffiliated Firm, with the calculation of
each party as first submitted to the Unaffiliated Firm being deemed to
be the position of each party. Once determined according to the
procedures set forth in this Section 1.3, the Net Worth of the Company
as of close of business at the Effective Time shall be deemed the
"Final Net Worth".
(e) Post Effective Time Adjustments.
(i) In the event there is a Net Worth Deficiency (as defined
below) with respect to the Company, the Stockholder Representatives
and the Parent or Surviving Corporation shall instruct the Escrow
Agent to deliver to the Parent as provided in the Escrow Agreement, an
amount equal to the Net Worth Deficiency. If the Net Worth Deficiency
is less than the amount of the Escrow Amount, the Escrow Agent shall
continue to hold the remainder of the Escrow Amount as provided in the
Escrow Agreement. Stockholders' liability for a Net Worth Deficiency,
if any, shall in no event exceed the amount of the Escrow Amount and
Parent's and the Acquirer's sole recourse for any Net Worth Deficiency
shall be limited to the amount of the Escrow Amount.
(ii) The term "Net Worth Deficiency" shall mean the amount, if
any, by which Final Net Worth is less than $19,300,000 plus, without
duplication, the amount, if any, by which the cash and cash
equivalents held by the Company at the Effective Time are less than
$2,000,000.
(f) Estimated Net Worth. Notwithstanding the foregoing in this Section
1.3, no earlier than the fifth and no later than the second business
day prior to the Closing Date, the Company will deliver to the Parent
the Company's good faith estimate of Net Worth and good faith estimate
of the cash and cash equivalents held by the Company as of the
Effective Time ("Estimated Closing Net Worth"), together with (i) a
certificate of the Company's chief financial officer to the effect
that Estimated Closing Net Worth and estimate cash and cash
equivalents were prepared in good faith from the most recent financial
information available to the Company's senior management and (ii)
back-up in reasonable detail showing the Company's calculation
thereof. Absent manifest error, the Company's determination of
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Estimated Closing Net Worth (including estimated cash and cash
equivalents) shall be final and binding. If the sum of (1) the amount,
if any, by which Estimated Closing Net Worth is less than $19,300,000
plus (2) without duplication, the amount, if any, by which the
estimate of the cash and cash equivalents held by the Company as of
the Effective Time are less than $2,000,000, equals or exceeds (3)
$1,000,000, then the Parent shall deduct from the Aggregate Merger
Consideration the amount of such sum (and not just the amount in
excess of $1,000,000). If such sum is less than $1,000,000, then the
Parent shall not make any such deduction from the Aggregate Merger
Consideration. If the Parent makes a deduction from Aggregate Merger
Consideration and if there is a Net Worth Deficiency equal to or in
excess of the amount so deducted, the amount deducted shall be deemed
to have been paid for purposes of Section 1.3(e) so that there is no
duplication of the Parent's recovery. If the Parent makes a deduction
from Aggregate Merger Consideration and if there is no Net Worth
Deficiency or the amount of the Net Worth Deficiency does not equal or
exceed the amount so deducted, the Parent shall pay to the Paying
Agent as part of the Aggregate Merger Consideration the portion of the
amount so deducted in excess of the amount of the Net Worth
Deficiency, if any.
Section 1.4 Payments to Holders of Shares and Conversion of
Shares. Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares in the treasury of the Company, all
of which shall be cancelled, and Dissenting Shares, as hereinafter
defined) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into the right to receive a
Pro Rata Amount of the Aggregate Merger Consideration and the Escrow
Amount (for purposes of the Escrow Agreement, the shares subject to
Eligible Company Options shall be deemed to be Shares), payable as
provided in the Exchange and Paying Agent Agreement and in the Escrow
Agreement. The Paying Agent shall, pursuant to the Stockholder
Representatives' instructions, make such payments to the holders of
the Shares out of the Aggregate Merger Consideration, and the Escrow
Amount, if, as and when instructed by the Stockholder Representatives.
Section 1.5 Conversion of the Acquirer Common Stock. Each share
of common stock of the Acquirer issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without
any action on the part of the holder thereof, be converted into and
represent the right to receive one share of common stock of the
Surviving Corporation.
Section 1.6 Exchange Mechanics. Prior to the Effective Time, the
Company shall designate a bank or trust company reasonably
satisfactory to Parent to act as exchange and paying agent in the
Merger (the "Paying Agent"). The Paying Agent shall make the payments
contemplated by Section 1.4. The Aggregate Merger Consideration shall
not be used for any other purpose. The Paying Agent may invest
portions of the Aggregate Merger Consideration as directed by the
Stockholder Representatives (so long as such directions do not impair
the Paying Agent's ability to make the payments referred to in Section
1.4 or otherwise impair the rights of holders of Shares), provided
that no such investments may be made other than in short term direct
obligations of the United States of America, obligations for which the
full faith and credit of the United States of America is pledged to
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provide for the payment of principal and interest, commercial paper
rated of the highest quality by Moody's Investors Services, Inc. or
Standard & Poor's Corporation, certificates of deposit issued by a
commercial bank having capital exceeding $500,000,000 or mutual funds
which invest solely in any such instruments or obligations. Any such
net earnings produced by such investments after the Effective Time
shall be paid by the Paying Agent to the Company Stockholders pursuant
to the Stockholder Representatives' instructions.
(a) Letter of Transmittal; Surrender and Payment. (i) Prior
to the Effective Time, the Company shall cause the Paying Agent
to mail or otherwise deliver to each record holder of an
outstanding Certificate or Certificates a form letter of
transmittal (the "Letter of Transmittal") and other appropriate
documentation (together with the Letter of Transmittal, the
"Required Documentation") for return to the Paying Agent (which
Letter of Transmittal 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 Paying
Agent) and instructions for use in effecting the surrender of the
Certificates, for payment therefor. Upon surrender to the Paying
Agent of a Certificate, together with the Required Documentation
duly executed, the holder of such Certificate shall be entitled
to receive in exchange therefor a Pro Rata Amount of the
Aggregate Merger Consideration, and, if payable, the Escrow
Amount, payable as provided in the Exchange and Paying Agent
Agreement, and such Certificate shall forthwith be canceled. If
payment is to be made to a person other than the person in whose
name the Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and
that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other
than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 1.6, each
Certificate (other than Dissenting Shares) shall represent, for
all purposes, only the right to receive, in exchange therefor, a
Pro Rata Amount of the Aggregate Merger Consideration, payable as
provided in the Exchange and Paying Agent Agreement and a Pro
Rata Amount of the Escrow Amount, if payable, as provided in the
Escrow Agreement.
(ii) In the case of Company Stockholders, in the event any
Certificate shall have been lost, stolen or destroyed, upon
receipt of an affidavit as to such loss, theft or destruction and
to the ownership of such Certificate by the Company Stockholder
claiming such Certificate to be lost, stolen or destroyed, the
receipt by the Paying Agent of appropriate and customary
indemnification, and the receipt by the Paying Agent of any other
required documents (in each case, as reasonably satisfactory to
the Paying Agent), the Paying Agent will make the payment(s)
otherwise payable to such Company Stockholder pursuant hereto. In
no event shall any Company Stockholder be required to post a bond
or provide any other form of security in connection with any
lost, stolen or destroyed Certificate.
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(iii) Notwithstanding anything in this Agreement to the
contrary, in the event that, prior to or after the Effective
Time, any Person transfers or attempts to transfer all of its
beneficial ownership and interest of and in any shares of Company
Stock to another Person who does not constitute a Company
Stockholder, then any payment in respect of such shares of
Company Stock shall be paid only to the Person who constitutes
the Company Stockholder of such shares and not to the Person who
may have received such shares.
(iv) If any stockholders of the Company exercise, perfect
and/or reserve their appraisal or dissenters rights pursuant to,
and in accordance with, the DGCL and if such stockholders or any
of them do not withdraw such stockholders' or stockholder's
demand for appraisal prior to the expiration of the period of
time during which such stockholders or stockholder are permitted
to effect such withdrawal under the DGCL, then immediately after
the expiration of such period of time, the Paying Agent shall
deliver to the Surviving Corporation, and the Surviving
Corporation shall retain, the amount otherwise payable to such
stockholder pursuant hereto.
(c) Return of Unclaimed Funds. Any cash provided to the Paying Agent
pursuant to this Section 1.6 and not exchanged for Certificates within six
months after the Effective Time will be returned by the Paying Agent to the
Surviving Corporation, which thereafter will act as Paying Agent, and any such
holder who has not exchanged his or her Shares for Merger Consideration in
accordance with this Section 1.6 prior to that time shall thereafter look only
to the Surviving Corporation for payment of Merger Consideration in respect of
his or her Shares.
Section 1.7 Dissenting Shares. Notwithstanding any provision of this
Agreement to the contrary, with respect to any shares of Company Stock held by
stockholders of the Company who have exercised and perfected and/or reserved
their appraisal or dissenters rights (the "Dissenting Shares") in accordance
with the DGCL, such Dissenting Shares shall not be converted into or represent
the right to receive the consideration payable pursuant to this Agreement upon
consummation of the Merger, but, instead, the holders of Dissenting Shares shall
be entitled to payment of the appraised value of such Dissenting Shares in
accordance with the provisions of the DGCL, unless and to the extent that any
such holder of Dissenting Shares shall have irrevocably forfeited its right to
appraisal under the DGCL or irrevocably withdrawn its demand for appraisal. If
any such holder of Dissenting Shares has so irrevocably forfeited or withdrawn
its right to appraisal of Dissenting Shares, then, as of the occurrence of such
event, such holder's Dissenting Shares shall cease to be Dissenting Shares and
shall be converted into and represent the right to receive the consideration
payable in respect of such shares pursuant to this Agreement, which payments
shall be made pursuant to the terms of this Agreement, and the Parent and the
Acquirer shall set aside such amounts as needed to make such payments in
accordance with Section 7.6.
Section 1.8 No Further Transfers. After the Effective Time, there shall be
no further registration of transfer on the stock transfer books of the Company
of any shares of Company Stock. If, after the Effective Time, any Certificate is
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presented (for transfer or otherwise) to the Surviving Corporation, such
Certificate shall be canceled and, subject to this Article I, the Paying Agent
shall pay the consideration provided for in this Agreement in respect of the
number of shares of Company Stock represented by such Certificate.
Section 1.9 Termination of Rights. After the Effective Time, (a) holders of
Company Stock will cease to be, and will have no rights as, stockholders of the
Company, and such holders' rights will consist only of (i) in the case of shares
other than Dissenting Shares, the right to receive the consideration provided
for in this Agreement in respect of such shares, and (ii) in the case of
Dissenting Shares, the rights afforded to the holders thereof under the
applicable provisions of the DGCL, and (b) holders of Company Options
outstanding as of the Effective Time ("Eligible Company Options") shall be
entitled to receive only the consideration provided for in the Exchange and
Paying Agent Agreement in respect of such Eligible Company Options. Until
surrendered for cancellation in accordance with the provisions of this Article
1, each stock certificate representing shares of Company Stock, or the right to
receive shares of Company Stock, shall, from and after the Effective Time,
represent (A) in the case of shares other than Dissenting Shares, the right to
receive the consideration provided for in this Agreement in respect of such
shares and (B) in the case of Dissenting Shares, the rights afforded to the
holders thereof under the applicable provisions of the DGCL.
Section 1.10 No Liability. Notwithstanding anything to the contrary in this
Agreement, none of the Paying Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Company Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
Section 1.11 Appointment of Stockholder Representatives.
(a) In order to efficiently administer the transactions contemplated
hereby, including a review of the Final Statement pursuant to Section
1.3(d), the resolution of disputes set forth in Section 5.9 and the
indemnification provisions set forth in Article 8, each Company Stockholder
and Company Optionholder hereby designates each of Nicholas G. Tagaris,
Leif Jacobsen and Robert C. Caspar, collectively and acting by a majority,
as the "Stockholder Representatives". By virtue of the adoption of this
Agreement and the approval of the Merger by the Company Stockholders at a
meeting of the stockholders of the Company (or by written consent in lieu
of a meeting) pursuant to, and in accordance with, the applicable
provisions of the DGCL, each Company Stockholder (regardless of whether or
not such Company Stockholder votes in favor of the adoption of this
Agreement and the approval of the Merger by written consent) and Company
Optionholder hereby agrees that:
(i) the Parent, the Surviving Corporation, the Paying Agent and
the Escrow Agent shall be able to rely conclusively on the
instructions and decisions of the Stockholder Representatives as to
any actions required or permitted to be taken by the Stockholder
Representatives hereunder, and no party hereunder shall have any cause
of action against the Parent, the Surviving Corporation, the Paying
Agent or the Escrow Agent to the extent the Parent, the Surviving
Corporation, the Paying Agent and the Escrow Agent, respectively, has
11
relied upon the instructions or decisions of the Stockholder
Representatives;
(ii) all actions, decisions and instructions of the Stockholder
Representatives shall be conclusive and binding upon all of the
Company Stockholders and Company Optionholders, and no Company
Stockholder or Company Optionholder shall have any cause of action
against the Stockholder Representatives for any action taken, decision
made or instruction given by the Stockholder Representatives under
this Agreement (or for any failure to take such action, make such
decision or give such instruction), except for fraud or willful
misconduct by the Stockholder Representatives; and that such Company
Stockholder, severally and not jointly, shall indemnify each
Stockholder Representative for any and all claims, liabilities,
losses, damages, costs and expenses which such Stockholder
Representative shall suffer and which relate to or arise, directly or
indirectly, out of any action taken by him in his capacity as a
Stockholder Representative in accordance with the terms of this
Agreement and which are asserted by any other Company Stockholder
against such Stockholder Representative in accordance with the terms
of this Agreement.
(iii) the provisions of this Section 1.11 are independent and
severable, are irrevocable and coupled with an interest, and shall be
enforceable notwithstanding any rights or remedies that any Company
Stockholder or Company Optionholder may have in connection with the
transactions contemplated by this Agreement;
(iv) remedies available at law for any breach of the provisions
of this Section 1.11 are inadequate; therefore, the Parent, the
Acquirer and/or the Surviving Corporation shall be entitled to
temporary and permanent injunctive relief without the necessity of
proving damages if the Parent, the Acquirer and/or the Surviving
Corporation brings an action to enforce the provisions of this Section
1.11; and
(v) the provisions of this Section 1.11 shall be binding upon the
executors, heirs, legal representatives, personal representatives,
successor trustees, and successors of each Company Stockholder and
Company Optionholder, and any references in this Agreement to a
Company Stockholder and Company Optionholder shall mean and include
the successors to such Company Stockholder's or Company Optionholder's
rights hereunder, whether pursuant to testamentary disposition, the
laws of descent and distribution or otherwise.
(b) Each Company Stockholder and Company Optionholder hereby
authorizes the Stockholder Representatives to take any and all action as is
contemplated to be taken by or on behalf of such Company Stockholder or
Company Optionholder, and to assert the Company Stockholders' or Company
Optionholders' rights granted, pursuant to the terms of this Agreement.
12
(c) In the event that any of Nicholas G. Tagaris, Leif Jacobsen or
Robert C. Caspar (or any of their substitutes as Stockholder
Representative) dies, becomes unable to perform his responsibilities
hereunder or resigns from such position, then Lawrence M. Levy (or his
substitute) shall fill such vacancy and shall be deemed to be a Stockholder
Representative for all purposes of this Agreement and the documents
delivered pursuant hereto.
Section 1.12 Effect of Stockholder Approval of Merger. The adoption of
this Agreement and the approval of the Merger by the Company Stockholders
at a meeting of stockholders of the Company (or by written consent in lieu
of a meeting) pursuant to, and in accordance with, the applicable
provisions of the DGCL shall be deemed to constitute approval by each
Company Stockholder individually (regardless of whether or not such Company
Stockholder votes in favor of the adoption of this Agreement and the
approval of the Merger at such meeting or by written consent) to the same
extent as if such Company Stockholder were a party to this Agreement of,
and the execution of the transmittal letter and other required
documentation by a Company Optionholder shall be deemed a consent to, (a)
the appointment of the Stockholder Representatives, (b) the grant to the
Stockholder Representatives of all of the powers, rights and privileges
contemplated under this Agreement, including the right to indemnification
set forth in Section 1.11(a)(ii) hereof, (c) the provisions of this
Agreement concerning the replacement and substitution of the Stockholder
Representatives, and (d) the terms and conditions of this Agreement,
including the indemnification provisions set forth in Article 8 hereof.
Section 1.13 Stock Options.
(a) All outstanding Company Options, pursuant to their terms,
shall vest and become exercisable immediately prior to the Effective
Time. At the Effective Time, each holder of a then outstanding Company
Option shall, in settlement thereof, receive for each share of the
Company Common Stock subject to such Company Option an amount (subject
to any applicable withholding tax) in cash equal to the difference
between (i) the result obtained when the Aggregate Equity Value is
divided by the fully diluted number of shares of Company Common Stock
and (ii) the per Share exercise price of such Company Option to the
extent such difference is a positive number (such amount being
hereinafter referred to as, the "Option Consideration"). The aggregate
amount of Option Consideration payable in respect of all Company
Options is referred to herein as the "Aggregate Option Consideration".
The delivery of the Aggregate Option Consideration shall occur
simultaneously with, or immediately prior to the delivery of the
Aggregate Merger Consideration. Parent, the Acquirer and the Company
shall consistently report for tax purposes that any tax consequences
of the payment of the Aggregate Option Consideration shall be
allocated to the Company in the Company's tax year that closes at the
Effective Time as contemplated by Treasury Regulation
1.1502-76(b)(1)(ii)(A). Upon receipt of the Option Consideration, the
Company Option shall be canceled. The surrender of a Company Option to
the Company in exchange for the Option Consideration shall be deemed a
release of any and all rights the holder had or may have had in
respect of such Company Option other than to receive the Pro Rata
13
Amount of the Escrow Amount that may be paid pursuant to the Escrow
Agreement. Prior to the Effective Time, the Company shall obtain all
necessary consents or releases from holders of Company Options under
the Company Stock Option Plan and take all such other lawful action as
may be necessary to give effect to the transactions contemplated by
this Section 1.13, including but not limited to, to the extent
necessary, amending the Company Stock Option Plan.
Section 1.14 Withholding Taxes. Parent, the Acquirer and the Company
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable to any Person hereunder such amounts as Parent,
Acquirer or the Company may be required to deduct and withhold therefrom
under the Code or under any provision of state, local or foreign tax law.
To the extent that such amounts are so deducted and withheld, such amounts
shall be treated for all purposes under this Agreement as having been paid
to the Person to whom such amounts would otherwise have been paid.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and the
Acquirer as set forth below:
Section 2.1 Incorporation; Authority. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted. The Company has
delivered to the Parent complete and correct copies of the certificate of
incorporation and bylaws (or comparable organizational documents), and all
amendments thereto, of each of the Company and its Subsidiaries.
Section 2.2 Approval, Binding Effect. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform all of its agreements and obligations under, and to consummate the
transactions contemplated by, this Agreement. This Agreement and the
transactions contemplated hereby have been duly authorized by the board of
directors of the Company and no other corporate actions or approvals on the
part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, subject only to the
approval and adoption of this Agreement and the approval of the Merger by
Company Stockholders pursuant to the DGCL and the filing of the Certificate
of Merger pursuant to the DGCL. This Agreement has been duly authorized,
executed and delivered by the Company. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against it
in accordance with its terms, except as such validity, binding effect or
enforceability may be limited by bankruptcy, insolvency and similar laws
affecting creditor's rights generally or equitable principles relating to
the availability of remedies. The board of directors of the Company, at a
meeting duly called and held, has by unanimous votes of those directors
14
present (a) determined that this Agreement and the Voting Agreement and the
transactions contemplated hereby and thereby, including the Merger, are
fair to and in the best interests of the stockholders of the Company, and
(b) resolved to recommend that the holders of shares of Company Stock
approve this Agreement and the transactions contemplated herein, including
the Merger.
Section 2.3 Non-Contravention. Except as set forth on Schedule 2.3,
the execution and delivery of this Agreement, the performance and
compliance by the Company with the terms hereof and the consummation of all
transactions, including the Merger, contemplated hereby will not conflict
with, result in a breach or violation of, constitute a default (with or
without due notice or lapse of time or both) under, or give rise to any
Encumbrance, right of termination, cancellation, acceleration, vesting or
modification of any right or obligation or loss of any benefit under: (a)
any provision of the certificate of incorporation or bylaws (or comparable
organizational documents) of the Company or any of its Subsidiaries; (b)
any statute, rule, regulation, order, law, ordinance or restriction
applicable to the Company or any of its Subsidiaries or their respective
properties or assets; (c) any judgment, order, writ, injunction or decree
of any court or judicial or quasi-judicial tribunal applicable to the
Company or any of its Subsidiaries or their respective properties or
assets; or (d) any contract, commitment, lease, agreement, mortgage, note,
bond, indenture or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which it or its assets are bound,
in each case except to the extent any such breach, violation, creation of
Encumbrance, acceleration, vesting or modification does not, and could not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
Section 2.4 No Consents. Except as set forth on Schedule 2.4, no
consent, notice, approval, waiver, license or other authorization or action
by or filing, registration or qualification with any Governmental Entity or
any other Person (including any party to any agreement with the Company or
any of its Subsidiaries) is required in connection with the execution and
delivery by the Company of this Agreement, the consummation by the Company
of the transactions contemplated hereby, or the performance by the Company
of its obligations hereunder.
Section 2.5 Subsidiaries. Except as set forth on Schedule 2.5, the
Company does not have any Subsidiaries and does not own or hold of record
or beneficially, and is not obligated to acquire, any equity or ownership
interest in any other Person. Except as set forth on Schedule 2.5, all of
the outstanding capital stock of, or other ownership interests in, each
Subsidiary of the Company is directly owned beneficially and of record by
the Company, is duly authorized, validly issued, fully paid, nonassessable
and free and clear of any preemptive rights (other than such rights as may
be held by the Company) or Encumbrances. Schedule 2.5 sets forth the name
of each Subsidiary, its jurisdiction of incorporation, its outstanding
capital stock, and the number of shares held by the Company, directly or
indirectly, and the number of shares held by any other Person.
Section 2.6 Qualification. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the nature of its operations or
properties requires such a qualification, except for where the failure to
15
so qualify, does not, and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
Section 2.7 Capitalization, etc.
(a) The authorized capital stock of the Company consists solely
of (i) 10,000,000 shares of Company Common Stock, 3,925,575 shares of
which are issued and outstanding on the date hereof, and (ii) 500,000
shares of Preferred Stock, $.01 par value, of which 15,000 have been
designated shares of Company Preferred Stock, 7,637 shares of which
are issued and outstanding on the date hereof. All such outstanding
shares of capital stock of the Company are owned of record as of the
date hereof by the stockholders set forth on Schedule 2.7, and are
duly authorized, validly issued, fully paid, nonassessable and free
and clear of any preemptive rights or Encumbrances. Immediately prior
to the Effective Time, there will be no more than 5,166,775 shares of
Company Common Stock outstanding and no shares of Company Preferred
Stock outstanding. As of the date hereof, the Company has an aggregate
of 477,500 outstanding options to purchase shares of Company Common
Stock, which are owned by the optionholders set forth on Schedule 2.7.
At the Effective Time, after payment of the Aggregate Option
Consideration, the Company will have canceled all Company Options and
there shall not be outstanding any option or other right to acquire
Company Common Stock.
(b) Except as set forth on Schedule 2.7, (i) the Company does not
have any shares of capital stock or voting securities reserved for
issuance and (ii) each of the Company and its Subsidiaries does not
have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling
for the Company or its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold any shares of Company Stock or
any other ownership interest of the Company or its Subsidiaries or any
securities convertible into, exchangeable for or representing the
right to subscribe for, purchase or otherwise receive any shares of
Company Stock or any other ownership interest of the Company or its
Subsidiaries or obligating the Company or its Subsidiaries to grant,
extend or enter into any such subscriptions, options, warrants, calls,
commitments or agreements. Except as set forth on Schedule 2.7, as of
the date hereof there are no outstanding contractual obligations of
the Company to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company.
(c) The determination and distribution to the Company
Stockholders of the Aggregate Merger Consideration pursuant to the
Exchange and Paying Agent Agreement complies with the provisions of
the Company's certificate of incorporation and by-laws.
(d) Except as set forth in reasonable detail on Schedule 2.7,
including name, date and repurchase price, the Company has not
redeemed or repurchased any of its capital stock or equity or
ownership interests in the last five (5) years.
16
Section 2.8 Financial Statements. The Company has furnished to the
Parent, and attached as Schedule 2.8 are, true and complete copies of (a)
the audited consolidated balance sheet of the Company and its Subsidiaries
as of the fiscal years ended August 31, 2003, 2002, and 2001 and the
related combined audited income statement, audited statement of cash flows
and audited statement of stockholders' equity of the Company and its
Subsidiaries for the years then ended (the "Audited Financial Statements"),
and (b) the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of March 28, 2004 (the "Balance Sheet") and the related
unaudited combined income statement, unaudited statement of cash flows and
unaudited statement of retained earnings for the seven months then ended
(the "Unaudited Financial Statements" and, together with the Audited
Financial Statements, the "Financial Statements"). Except as set forth on
Schedule 2.8, the Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered
thereby, subject, in the case of the Unaudited Financial Statements, to
normal year-end adjustments and the absence of footnotes thereto. The
Financial Statements fairly present in all material respects the
consolidated financial condition and the results of operations of the
Company and its Subsidiaries as of the dates and for the periods covered
thereby.
Section 2.9 Absence of Certain Changes. Except as set forth on
Schedule 2.9, since August 31, 2003, the Company and its Subsidiaries have
been operated in the ordinary course of business consistent with past
practice and there has not been:
(a) any change in the condition (financial or otherwise), results
of operations, assets, liabilities or business of the Company other
than (i) changes arising in the ordinary course of business, and (ii)
changes which, individually or in the aggregate, have not had or could
not reasonably be expected to have a Material Adverse Effect;
(b) any acquisition or disposition by the Company outside the
ordinary course of business of any asset or property used by the
Company;
(c) any damage, destruction or casualty loss to any asset of the
Company or its Subsidiaries, whether or not covered by insurance,
which has had or could reasonably be expected to have a Material
Adverse Effect;
(d) any (i) increase in the compensation, pension or other
benefits payable or to become payable to any of the present or former
directors, officers, employees, directors, agents or representatives
of the Company or any of its Subsidiaries or any bonus payments or
arrangements made to or with any of them, (ii) grant of any severance
or termination pay to any present or former director, officer or
employee of the Company or any of its Subsidiaries, (iii) loan or
advance of money or other property by the Company to any present or
former director, officer or employee of the Company or any of its
Subsidiaries, (iv) establishment, adoption, entrance into, amendment
or termination of any, collective bargaining agreement, (v) grants of
any equity or equity-based awards;
17
(e) any voluntary forgiveness, cancellation, compromise, release
or waiver of any right or claim (or series of related rights and
claims) of the Company or its Subsidiaries in excess of $10,000
individually or $20,000 in the aggregate or outside the ordinary
course of business, or any voluntary waiver of any right of value
other than immaterial compromises of accounts receivable in the
ordinary course of business consistent with past practice;
(f) the imposition of any Encumbrance on any of the assets of the
Company or its Subsidiaries;
(g) any lapse, termination, acceleration, modification,
cancellation or expiration of any material contract, agreement or
similar arrangement, including, without limitation, any Indebtedness,
any joint venture agreement, teaming agreement, distribution
agreement, supply agreement, marketing services agreement, license
agreement, or real or personal property lease, in each case that are
outside of the ordinary course of business and that involve payments
in excess of $50,000 individually or $100,000 in the aggregate to
which the Company or any of its Subsidiaries has or had been a party
or otherwise bound;
(h) any amendments to the certificate of incorporation or bylaws
(or comparable organizational documents) of the Company or its
Subsidiaries;
(i) any issuance, sale or disposal of any shares of capital stock
or other ownership interest of the Company, or any grant, options,
warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any shares of capital stock or other
ownership interest of the Company;
(j) any capital expenditure (or series of related capital
expenditures) either in excess of $50,000 or outside the ordinary
course of business;
(k) any change in any method of accounting, other than any such
changes required by GAAP;
(l) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash or in kind) on or with respect to,
or redemption, purchase or other acquisition of, any shares of capital
stock of the Company;
(m) the incurrence, assumption or guarantee by the Company or any
of its Subsidiaries of any Indebtedness;
(n) any making of any loan, advance or capital contributions to
or investment in any Person; or
(o) any commitment to do any of the foregoing.
18
Section 2.10 Title to Assets; Material Leases; Tangible Assets.
(a) Except as set forth in Schedule 2.10(a) and except for the Real
Property, each of the Company and its Subsidiaries has good and marketable
title to all of its tangible properties and assets, including, without
limitation, all those reflected in the Balance Sheet (except for properties
or assets sold or otherwise disposed of in the ordinary course of business
since the date of the Balance Sheet), all free and clear of all
Encumbrances.
(b) Except for Real Property, all material tangible properties and
assets reflected on the Balance Sheet are in all material respects in good
operating condition and repair, reasonable wear and tear excepted, and no
material properties or assets necessary for the conduct of the business of
the Company in substantially the same manner as the business of the Company
has heretofore been conducted are in need of replacement or material
maintenance or repair except for routine replacement, maintenance and
repair.
(c) Schedule 2.10(c) sets forth all material personal property leases
to which any of the Company or its Subsidiaries is a party or by which any
of them is bound and that are necessary for the conduct of the business of
the Company and its Subsidiaries in substantially the same manner as the
business of the Company and its Subsidiaries has heretofore been conducted
and all real property leases (the "Leased Real Property") to which any of
the Company or its Subsidiaries is a party or by which any of them is bound
(the "Leases"). Except as disclosed in Schedule 2.10(c), each Lease is the
legal, valid and binding obligation of the Company or its Subsidiaries, and
to the Knowledge of the Company, of each other party thereto, enforceable
against each such party thereto in accordance with its terms. Except as
provided in Schedule 2.10(c), the consummation of the transactions
contemplated by this Agreement will not result in any material default,
penalty, termination, acceleration or modification to any Lease and each
Lease will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms immediately following and after giving
effect to the consummation of the transactions contemplated by this
Agreement. The Company and its Subsidiaries, and to the Knowledge of the
Company, each other party thereto, is not in breach or default of, and no
event has occurred which, with or without notice or lapse of time, would
constitute a breach or default or permit termination, acceleration or
modification under any Lease. Except as disclosed in Schedule 2.10(c), none
of the Leases contains an assignment provision which would be breached or
otherwise require a consent or approval upon consummation of the
transactions contemplated by this Agreement.
(d) All of the real property owned by the Company or any of the
Subsidiaries is identified on Schedule 2.10(d) attached hereto (herein
referred to as the "Owned Real Property" and together with the Leased Real
Property, the "Real Property").
(e) To the Knowledge of the Company, except as set forth on Schedule
2.10(e), each of the Company and the Subsidiaries, as the case may be, has
title to all Owned Real Property, free and clear of all Encumbrances, other
than:
19
(i) Easements, covenants, restrictions, encroachments and similar
encumbrances that do not materially interfere with the use of the
Owned Real Property as currently used and improved;
(ii) the lien, if any, for real estate taxes not yet due and
payable on the date of this Agreement;
(iii) the Permitted Encumbrances;
(iv) provisions of existing building, zoning laws and other
applicable laws, rules, ordinances and regulations;
(v) existing rights and obligations in party walls which are not
the subject of written agreement; and
(vi) any liens for municipal betterments assessed after the date
of this Agreement.
(f) There are no outstanding options or rights of first refusal to
purchase the Owned Real Property or any portion thereof or interest
therein.
(g) The Real Property constitutes all of the real property used or
held for use in connection with the business of the Company and its
Subsidiaries.
(h) There are no proceedings in eminent domain or other similar
proceedings pending or, to the Knowledge of the Company, threatened
affecting any portion of the Owned Real Property.
(i) The Company has not received any written notice that the current
use and operation of the Owned Real Property violates any applicable
building, zoning, subdivision and other land use or similar laws, codes,
ordinances, rules, regulations and orders.
Section 2.11 No Undisclosed Liabilities; Indebtedness. The Company does not
have any liability or obligation (absolute, accrued, contingent or otherwise)
except (a) for liabilities set forth in the Balance Sheet or the notes thereto,
(b) as set forth on Schedule 2.11, (c) for liabilities and obligations incurred
in the ordinary course of business since the date of the Balance Sheet and (d)
for any liabilities and obligations that do not have, nor could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Except for Indebtedness reflected in the Balance Sheet and as set forth on
Schedule 2.11, none of the Company and its Subsidiaries has any Indebtedness
outstanding at the date hereof. Each of the Company and its Subsidiaries is not
in default with respect to any outstanding Indebtedness or any instrument
relating thereto and except as set forth on Schedule 2.11, no such Indebtedness
or any instrument or agreement relating thereto purports to limit the operation
of the business of the Company or its Subsidiaries. Complete and correct copies
of all instruments and agreements (including all amendments, supplements,
waivers and consents) relating to any Indebtedness of the Company and its
Subsidiaries have been furnished to the Parent.
20
Section 2.12 Taxes. Except as set forth on Schedule 2.12,
(a) The Company and each Subsidiary have duly and timely filed all Tax
Returns required to be filed, and the Company and each Subsidiary have
timely paid all Taxes owed (whether or not shown, or required to be shown,
on such Tax Returns). The Company and each Subsidiary have timely withheld
and paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other Person. All Tax Returns filed by the
Company and the Subsidiaries were complete and correct in all respects.
There are no liens for Taxes upon any of the Company's or any Subsidiary's
assets, other than Liens for ad valorem Taxes not yet due and payable.
(b) None of the Tax Returns filed by the Company or any Subsidiary or
Taxes payable by the Company or any Subsidiary have been the subject of an
audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any Tax Authority, and no such audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently
pending or threatened.
(c) Neither the Company nor any Subsidiary is currently the
beneficiary of any extension of time within which to file any Tax Return,
and neither the Company nor any Subsidiary has waived any statute of
limitation with respect to any Tax or agreed to any extension of time with
respect to a Tax assessment or deficiency. Neither the Company nor any
Subsidiary is a party to or bound by any Tax allocation or Tax sharing
agreement (including, but not limited to, any Tax indemnification or
similar agreement). All material elections with respect to Taxes affecting
the Company or any Subsidiary, as of the date hereof, are set forth in the
Financial Statements or in Schedule 2.12.
(d) Neither the Company nor any Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of (i) any "excess parachute
payments" within the meaning of Section 280G of the Code (without regard to
the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the Code)
or (ii) any amount for which a deduction would be disallowed or deferred
under Section 162 or Section 404 of the Code. None of the shares of
outstanding capital stock of the Company or any Subsidiary is or has been
subject to a "substantial risk of forfeiture" or a "restriction which by
its terms will never lapse" within the meaning of Section 83 of the Code.
No portion of the purchase price is subject to the Tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of
the Code or of any other provision of law.
(e) None of the assets of the Company or any Subsidiary directly or
indirectly secures any debt the interest on which is tax exempt under
Section 103(a) of the Code. None of the assets of the Company or any
Subsidiary is "tax-exempt use property" within the meaning of Section
168(h) of the Code. Neither the Company nor any Subsidiary is a party to or
member of any joint venture, partnership, limited liability company or
other arrangement or contract which could be treated as a partnership for
United States federal income tax purposes. Neither the Company nor any
21
Subsidiary is, or has been, a U.S. real property holding company (as
defined in Section 897(c)(2) of the Code) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code. Neither the Company nor
any Subsidiary owns an interest in real property in any jurisdiction in
which a Tax is imposed, or the value of the interest reassessed, on the
transfer of an interest in real property and which treats the transfer of
an interest in an entity that owns an interest in real property as a
transfer of the interest in real property. Neither the Company nor any
Subsidiary has ever been either a "controlled corporation" or a
"distributing corporation" (within the meaning of Section 355(a)(1)(A) of
the Code) with respect to a transaction that was described in, or intended
to qualify as, a tax-free transaction pursuant to Section 355 of the Code.
Neither the Company nor any Subsidiary has net operating losses or other
tax attributes presently subject to limitation under Sections 382, 383 or
384 of the Code, or the federal consolidated return regulations (other than
limitations imposed as a result of the transactions contemplated by this
Agreement). Neither the Company nor any Subsidiary (i) has made or agreed
to make any adjustment under Section 481(a) of the Code (or any
corresponding provision of state, local or foreign Tax law) by reason of a
change in accounting method or otherwise, and will not be required to make
such an adjustment as a result of the transactions contemplated by this
Agreement, or (ii) will be required to include in income in any period
following the Closing Date income economically realized in a period on or
prior to the Closing Date as a result of (A) an agreement entered into with
any Tax Authority, (B) an installment sale or open transaction disposition,
or (C) any prepaid amount received on or prior to the Closing Date. None of
the assets of the Company or any Subsidiary is property which is required
to be treated as being owned by any other Person pursuant to the so-called
"safe harbor lease" provisions of former Section 168(f)(8) of the Code.
Neither the Company nor any Subsidiary has participated in an international
boycott as defined in Section 999 of the Code. Neither the Company nor any
Subsidiary owns, directly or indirectly, any interests in an entity that
has been or would be treated as a "passive foreign investment company"
within the meaning of Section 1297 of the Code or as a "controlled foreign
corporation" within the meaning of Section 957 of the Code. Neither the
Company nor any of its Subsidiaries have any liability to any Person under
foreign, state or local abandoned property or escheat laws or regulations.
(f) Neither the Company nor any Subsidiary has ever been a member of a
group filing a consolidated federal income Tax Return or a combined,
consolidated, unitary or other affiliated group Tax Return for state, local
or foreign Tax purposes (other than a group the common parent of which is
the Company), and neither the Company nor any Subsidiary has any liability
for the Taxes of any Person under Treasury Regulation Section 1.1502-6 (or
any corresponding provision of state, local or foreign Tax law), or as a
transferee or successor, or by contract, or otherwise.
(g) The unpaid Taxes of the Company and its Subsidiaries did not, as
of the date of the Balance Sheet, exceed the reserve for actual Taxes (as
opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the Balance Sheet, and
will not exceed such reserve as adjusted for the passage of time through
the Closing Date in accordance with the reasonable past custom and practice
of the Company and its Subsidiaries in filing Tax Returns. Neither the
Company nor any Subsidiary will incur any liability for Taxes from the
Balance Sheet date through the Closing Date other than in the ordinary
course of business and consistent with reasonable past practice.
22
(h) Schedule 2.12 hereto contains a list of all jurisdictions (whether
foreign or domestic) to which any income Tax is properly payable by the
Company or any Subsidiary. No claim has ever been made by a Tax Authority
in a jurisdiction where the Company or any Subsidiary does not file Tax
Returns that the Company or any Subsidiary is or may be subject to Tax in
that jurisdiction.
(i) Schedule 2.12 hereto lists all income Tax Returns filed with
respect to any of the Company and its Subsidiaries for taxable periods
ended on or after January 1, 1999. The Company has delivered to Parent
correct and complete copies of all income Tax Returns, examination reports,
and statements of deficiencies assessed against or agreed to by any of the
Company and its Subsidiaries since January 1, 1999.
(j) Neither the Company nor any of its Subsidiaries has taken any
action (or failed to take any action) that resulted or would result, at any
time, in any of the Subsidiaries having an investment of earnings in United
States property under Section 956 of the Code, or taken any other action
(or failed to take any other action) that has resulted or would result in a
material inclusion in income under the provisions of Subpart F of Part III
of Subchapter N of the Code (Sections 951-954 of the Code).
Section 2.13 Litigation, Etc. Except as set forth on Schedule 2.13, no
proceeding, arbitration, action, judgment, decision, settlement, writ,
stipulation, decree, lawsuit, claim, complaint, injunction, order or
investigation before any Governmental Entity or arbitral or other forum is
pending or, to the Knowledge of the Company, threatened against the Company
or any of its Subsidiaries. There is no judgment, decree, injunction, or
order of a Governmental Entity outstanding against the Company or any of
its Subsidiaries. Each of the Company and its Subsidiaries has not received
any written notice from any Governmental Entity of any pending or
threatened governmental investigation relating to the Company or any of its
Subsidiaries.
Section 2.14 Labor Relations. Except as set forth on Schedule 2.14,
there is no charge pending or, to the Knowledge of the Company, threatened
against the Company or its Subsidiaries alleging unlawful discrimination in
employment practices before any court or agency and there is no charge of
or proceeding with regard to any unfair labor practice against the Company
or its Subsidiaries pending before any Governmental Entity. There is no
labor strike, dispute, slow-down or work stoppage actually pending or, to
the Knowledge of the Company, threatened against or involving the Company
or its Subsidiaries. No one has petitioned the Company or its Subsidiaries
within the last three (3) years, and no one is now petitioning the Company
or its Subsidiaries, for union representation of any of the employees of
the Company or its Subsidiaries. No grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is pending
against the Company or its Subsidiaries and no claim therefor has been
asserted against the Company or its Subsidiaries. None of the employees of
the Company or its Subsidiaries is covered by any collective bargaining
agreement, and no collective bargaining agreement is currently being
negotiated by the Company or its Subsidiaries. Each of the Company and its
Subsidiaries has not experienced any work stoppage during the last three
(3) years.
23
Section 2.15 Contracts. Except for contracts, commitments, leases,
plans, agreements and licenses listed on Schedule 2.15 (the "Material
Contracts"), the Company or its Subsidiaries is not a party to or otherwise
bound by (whether written or oral):
(a) any contract or purchase order to sell or lease equipment or
provide services to any customer that is made outside of the ordinary
course of business and that (i) provides for payments in excess of
$100,000 in the aggregate or (ii) has a term longer than one (1) year
or (iii) is not terminable on notice of 60 days or less;
(b) any contract or agreement with any director, officer or
stockholder of the Company (or any of their respective Affiliates) or
any entity in which any of the foregoing has a ten percent (10%) or
more direct or indirect interest;
(c) any contract providing for stock awards or other equity-based
compensation awards, bonuses, pensions, deferred or incentive
compensation, retirement or severance payments, profit-sharing,
insurance or other benefit plans or programs for any present or former
officer, consultant, director or employee of the Company or any of its
Subsidiaries, except as otherwise disclosed in any schedule to this
Agreement;
(d) any contract for the lease or sublease as lessee, lessor,
sublessee or sublessor of real or personal property of the Company, or
any license of computer software, requiring payments in excess of
$50,000 in the aggregate;
(e) except for purchase orders issued in the ordinary course of
business consistent with past practice and except for contracts or
commitments for or relating to the purchase of inventory or supplies
in the ordinary course of business consistent with past practice, any
contract requiring payments in excess of $50,000 in the aggregate for
the purchase or sale of any personal property;
(f) any contract or agreement that limits or purports to limit
the ability of the Company or any of its Subsidiaries to compete in
any line of business or with any Person or in any geographic area or
during any period of time or that limits or purports to limit any
other Person's ability to compete with the Company or any of its
Subsidiaries;
(g) any agreement concerning confidentiality, non-competition or
non-solicitation of employees, except the Company's standard form of
agreement, a copy of which has previously been provided to the
Acquirer;
(h) any contract or agreement for guaranty, indemnity or
suretyship of Indebtedness of any Person; and
24
(i) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $100,000.
The Company has delivered or made available to the Parent a correct and
complete copy of each Material Contract. Except as set forth on Schedules 2.3
and 2.4 hereof, each Material Contract is legal, valid, binding, enforceable,
and in full force and effect and will continue to be legal, valid, binding,
enforceable, and in full force and effect immediately following the consummation
of and after giving effect to the transactions contemplated by this Agreement.
Except as set forth on Schedules 2.3 and 2.4 hereof, neither the Company and its
Subsidiaries nor, to the Knowledge of the Company, any other party to any
Material Contract to which the Company or its Subsidiaries is a party, is in
breach or default in any material respect in complying with any provisions
thereof and no event has occurred which with or without notice or lapse of time
would constitute a breach or default, or permit termination, modification, or
acceleration under any Material Contract. Except as set forth on Schedule 2.15,
the Company has not received any written notice of the intention of any party to
terminate any Material Contract, whether as a termination for convenience or for
default of the Company thereunder.
Section 2.16 Pensions and Benefits.
(a) Controlled Group or Affiliated Service Group. Except as
disclosed on Schedule 2.16(a), no entity, other than the Company or
any of its Subsidiaries, would, together with the Company or any of
its Subsidiaries, now or in the past six years constitute a single
employer within the meaning of Section 414 of the Internal Revenue
Code of 1986, as amended (the "Code"). The Company and its
Subsidiaries and any other entities which now or in the past six years
constitute a single employer within the meaning of Code Section 414
are hereinafter collectively referred to as the "Company Group."
(b) List of Employee Benefit Plans. Schedule 2.16(b) contains a
true and complete list of all the following agreements or plans which
are presently in effect or which have previously been in effect at any
time within the prior six years and which cover employees of the
Company or its Subsidiaries, or if such plan is or was subject to
Title IV of ERISA, the employees of any member of the Company Group
("Employees"), and indicating, with respect to each, the plans for
which the Company or any of its Subsidiaries maintain or contribute to
on behalf of their employees:
(i) Any employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
or
(ii) Any other pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus,
vacation, severance, disability, hospitalization, medical, life
insurance or other employee benefit plan, program, policy, or
arrangement, whether written or unwritten, formal or informal, which
any member of the Company Group maintains or to which any member of
the Company Group has any outstanding, present or future obligations
to contribute to, contingent or otherwise, or to which any member of
the Company Group has any liability.
25
The plans, programs, policies, or arrangements described in subparagraph
(i) or (ii) above are hereinafter collectively referred to as the "Company
Plans." The Seller has delivered to Acquirer true and complete copies of all
written plan documents and contracts evidencing the Company Plans, as they may
have been amended to the date hereof, together with the following: (1) all
documents, including any insurance contracts and trust agreements, setting forth
the terms of the Company Plan, or if there are no such documents evidencing the
Company Plan, a description of the material terms of the Company Plan, (2) the
ERISA summary plan description and any other summary of plan provisions provided
to participants or beneficiaries for each such Company Plan, (3) all documents,
including without limitation, Forms 5500, relating to any Company Plans required
to have been filed prior to the date hereof with any Governmental Entity for
each of the three most recently completed plan years with respect to each
Company Plan, (4) the most recent favorable determination letter, opinion or
ruling from the Internal Revenue Service ("IRS") for each Company Plan,
including any outstanding request for a determination letter, if any, (5) each
opinion or ruling from the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC") with respect to such Company Plans, if any, and (6)
financial statements and actuarial reports, if any for each Company Plan for the
three most recently completed plan years.
(c) Qualified Employee Benefit Plans. Each Company Plan which
meets or was intended to meet the requirements of Code Section 401(a)
is identified on Schedule 2.16(c) as a tax-qualified Company Plan
(collectively, the "Company Qualified Plans"). The Internal Revenue
Service has issued favorable determination letters to the effect that
each Company Qualified Plan qualifies under Code Section 401(a) and
that any related trust is exempt from taxation under Code Section
501(a), and such determination letters remain in effect and have not
been revoked. The Company Qualified Plans currently comply in form
with the qualification requirements under Code Section 401(a), other
than changes required by statutes, regulations and rulings for which
amendments are not yet required.
No issue concerning the qualification of the Company Qualified Plans is
pending before or, to the Knowledge of the Company, is threatened by the
Internal Revenue Service. The Company Qualified Plans have been administered in
all material respects according to their terms and in all material respects in
accordance with the requirements of Code Section 401(a). Any Company Qualified
Plan which is required to satisfy Code Section 401(k)(3) and 401(m)(2) has been
tested for compliance with, and has satisfied in all material respects the
requirements of, Code Section 401(k)(3) and 401(m)(2) for each plan year ending
prior to the Closing Date.
26
(d) Compliance with All Statutes, Orders and Rules. Each member
of the Company Group is in material compliance with the requirements
prescribed by any and all statutes, orders, governmental rules and
regulations applicable to the Company Plans and all reports and
disclosures relating to the Company Plans required to be filed with or
furnished to any governmental entity, participants or beneficiaries
prior to the Closing Date have been filed or furnished in a timely
manner and in accordance with applicable law.
(e) Defined Benefit Plans and Money Purchase Plans. No member of
the Company Group maintains or has maintained an "employee benefit
pension plan" within the meaning of ERISA Section 3(2) that is or was
subject to Title IV of ERISA.
(f) Ability to Terminate and Liabilities Upon Termination of
Plans. Except as listed in Schedule 2.16(f), any Company Plan can be
terminated on or prior to the Closing Date without liability to the
Company or any of its Subsidiaries or Acquirer, including without
limitation, any additional contributions, penalties, premiums, fees or
any other charges as a result of the termination, except to the extent
of funds set aside for such purpose or reflected as reserved for such
purpose on the Balance Sheet.
(g) Funding. Except as set forth on Schedule 2.16(g), each member
of the Company Group has made full and timely payment of, or has
accrued pending full and timely payment, all amounts which are
required under the terms of each of the Company Plans and in
accordance with applicable laws to be paid as a contribution to each
Company Plan and no excise taxes are assessable as a result of any
nondeductible or other contributions made or not made to a Company
Plan. The assets of all Company Plans which are required under
applicable laws to be held in trust are in fact held in trust, and the
assets of each such Company Plan equal or exceed the liabilities of
each such plan. Except as set forth on Schedule 2.16(g), the
liabilities of each other plan are properly and accurately reported on
the financial statements and records of the Company. Except as set
forth on Schedule 2.16(g), the assets of each Company Plan are
reported at their fair market value on the books and records of each
plan.
(h) Multiemployer Plans. No member of the Company Group has any
past, present, or future obligation or liability to contribute to any
multiemployer plan as defined in ERISA Section 3(37).
(i) Prohibited Transactions. To the Knowledge of the Company, no
member of the Company Group nor any other "disqualified person" or
"party in interest" (as defined in Code Section 4975 and ERISA Section
3(14), respectively) with respect to the Company Plans, has engaged in
any non-exempt "prohibited transaction" (as defined in Code Section
4975 or ERISA Section 406). All members of the Company Group and all
"fiduciaries" (as defined in ERISA Section 3(21)) with respect to the
Company Plans, including any members of the Company Group which are
fiduciaries as to a Company Plan, have complied in all material
respects with the requirements of ERISA Section 404.
27
(j) COBRA/HIPAA. Each member of the Company Group has complied in
all material respects with the continuation coverage requirements of
Section 1001 of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and ERISA Sections 601 through 608. Each member of
the Company Group has also complied in all material respects with the
portability, access, and renewability provisions of Section K, Chapter
100 of the Code and Section 701 et. seq. of ERISA.
(k) Pending Claims or Suits. Other than routine claims for
benefits, there are no actions, audits, investigations, suits or
claims pending, or, to the Knowledge of the Company, threatened
against any Company Plan, any trust or other funding agency created
thereunder, or against any fiduciary of any Company Plan or against
the assets of any Company Plan.
(l) No Acceleration of Liability Under Plans. Except as disclosed
on Schedule 2.16(l), the consummation of the transactions contemplated
hereby will not accelerate or increase any liability under any Company
Plan because of an acceleration or increase of any of the rights or
benefits to which Employees may be entitled thereunder, except as may
be required by Code Section 411(d)(3).
(m) Retiree Benefits. Except as listed in Schedule 2.16(m), no
member of the Company Group maintains, or has at any time established
or maintained or contributed to any plan which provides
post-retirement medical or health benefits with respect to employees
of the Company, other than as required by law.
(n) Each Subsidiary Employee Plan has been established,
maintained and administered in material compliance with its terms and
conditions and with the requirements prescribed by any and all
applicable laws. No Subsidiary Employee Plan has unfunded liabilities,
that as of the Effective Time, will not be offset by insurance or
fully accrued. For purposes of this Agreement "Subsidiary Employee
Plan" shall mean each Company Plan that has been adopted or maintained
by the Company or any member of the Company Group, whether informally
or formally, or with respect to which the Company or any member of the
Company Group will or may have any material liability, for the benefit
of employees who perform services outside the United States.
(o) Each Subsidiary Employee Plan is amendable and terminable
unilaterally by the Company or any of its Subsidiaries, including
after the Effective Time, without material liability to the Surviving
Corporation or any of its Subsidiaries as a result thereof (other than
for benefits accrued through the date of termination or amendment and
reasonable administrative expenses related thereto), and no Subsidiary
Employee Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to
employees by its terms prohibits the Company or any of its
Subsidiaries from amending or terminating any such Subsidiary Employee
Plan. The investment vehicles used to fund Subsidiary Employee Plans
may be changed at any time without incurring a material sales charge,
surrender fee or other similar expense.
28
Section 2.17 Compliance with Laws, Warranty, Etc. (a) Each of the
Company and its Subsidiaries is in material compliance with all laws,
statutes, rules, ordinances, regulations, codes, judicial or administrative
tribunal orders, judgments, writs and injunctions of any Governmental
Entity applicable to the Company and its Subsidiaries.
(b) Each of the Company's products is, and at all relevant times has
been, (i) in compliance in all material respects with all applicable
federal, state, local and foreign laws and regulations and (ii) fit in all
material respects for the ordinary purposes for which it is intended to be
used and (iii) conforms in all material respects to any promises or
affirmations of fact made by the Company or its Subsidiaries in respect of
such product. To the Knowledge of the Company, each of such products
contains adequate warnings, presented in a reasonably prominent manner, in
accordance in all material respects with applicable laws with respect to
its contents and use.
(c) Except as set forth on Schedule 2.17(c), since August 31, 2001,
neither the Company nor any of its Subsidiaries has had warranty claim(s)
in an aggregate amount exceeding $10,000, product recall or product
liability claim in respect of any of the Company's products.
Section 2.18 Insurance. Schedule 2.18 sets forth a summary of all
insurance policies (including, without limitation, policies providing
theft, fire, liability (including products liability) workers'
compensation, life, property and casualty, directors' and officers', and
bond and surety arrangements) to which the Company or its Subsidiaries is a
party, a named insured, or otherwise the beneficiary of coverage under and
specifies the insurer, the amount of coverage, type of insurance,
expiration date and any retroactive premium adjustments or other loss
sharing agreements. Such policies are in full force and effect on the date
hereof, and will continue to be in full force and effect immediately
following the consummation of the transactions contemplated hereby, and all
due premiums have been timely paid in full and the Company and its
Subsidiaries are otherwise in compliance with the terms and provisions
thereof in all material respects. The Company and its Subsidiaries have
been covered since their inception by insurance in scope and amount
customary and reasonable for the businesses in which they have been engaged
during the aforementioned period.
Section 2.19 Bank Accounts, Signing Authority, Powers of Attorney.
Except as set forth on Schedule 2.19, each of the Company and its
Subsidiaries has no account or safe deposit box in any bank and no person
has any power, whether singly or jointly, to sign any checks on behalf of
the Company or its Subsidiaries, to withdraw any money or other property
from any bank, brokerage or other account of the Company or its
Subsidiaries or to act under any power of attorney granted by the Company
or its Subsidiaries at any time for any purpose. Schedule 2.19 also sets
forth the names of all persons authorized to borrow money or sign notes,
checks, wire instructions and other banking documents on behalf of the
Company or its Subsidiaries.
29
Section 2.20 Proprietary Rights. Except as set forth on Schedule 2.20,
the Company possesses or has adequate rights to use all Proprietary Rights.
Except as set forth on Schedule 2.20, the Company has not received any
notice of any infringement or misappropriation by, or conflict with, any
third party with respect to any of the Proprietary Rights. Except as set
forth on Schedule 2.20, to the Knowledge of the Company, the Company has
not infringed, misappropriated or otherwise conflicted with any proprietary
rights of any Person, nor is the Company aware of any claims of or actual
infringement, misappropriation or conflict which, to the Knowledge of the
Company, will occur as a result of the continued operation of the business
of the Company as currently conducted. Following the consummation of the
transactions contemplated by this Agreement, the Surviving Corporation will
possess or have the right to use all Proprietary Rights to the same extent
as possessed or used by the Company immediately prior to the Effective Time
and without payment of any additional amounts of consideration other than
ongoing fees, royalties or payments that the Company would otherwise be
required to pay. No termination of any contract manufacturing arrangement
will result in the loss of any Proprietary Rights or the right of the
Company or any Subsidiary to sell any products currently sold by such
entities.
Section 2.21 Environmental Matters. Except as set forth on Schedule
2.21, (i) each of the Company and its Subsidiaries is in compliance in all
material respects with all Environmental Laws, (ii) there is no proceeding,
arbitration, action, judgment, decision, settlement, writ, stipulation,
decree, lawsuit, claim, complaint, injunction, order or investigation
before any Governmental Entity or arbitral or other forum pending, or to
the Knowledge of the Company, threatened against the Company or its
Subsidiaries in respect of (A) non-compliance with any Environmental Laws
or (B) the release or threatened release into the environment of any
Hazardous Substance or (C) the handling, storage, use, transportation or
disposal of any Hazardous Substance, (iii) there are and have been no
Hazardous Substances or other condition, at any property currently or
formerly owned, leased, operated or otherwise used by the Company or its
Subsidiaries, or any other location, that would reasonably be expected to
give rise to any liability of the Company or its Subsidiaries and (iv)
neither the Company nor any of its Subsidiaries have or after the Closing
will have any Environmental Liabilities. As used in this Section 2.21,
"Environmental Law" shall mean any federal, state or local law, statute,
ordinance, code, rule or regulation of any Governmental Entity, or any
order, decree, stipulation, judgment, writ, order, injunction,
determination or award issued or entered by any Governmental Entity, in
each case relating to (i) releases or threatened releases of Hazardous
Substances, (ii) the manufacture, handling, transport, use, treatment,
storage or disposal of Hazardous Substances or (iii) protection of the
environment; "Environmental Liabilities" shall mean any claims, demands,
costs, fees, expenses, obligations or liabilities under Environmental Law,
whether vested or unvested, known or unknown, contingent or fixed, which
arise from or relate to actions occurring (including any failure to act) or
conditions existing, in whole or in part, on or before the Effective Date;
and "Hazardous Substance" shall mean any gasoline or petroleum (including
crude oil or any fraction thereof) or petroleum products, polychlorinated
biphenyls, urea-formaldehyde insulation, hazardous wastes, toxic
substances, asbestos, toxic molds, pollutants, or contaminants defined as
such in, or regulated or that could reasonably be expected to result in
liability under, any applicable Environmental Law.
30
Section 2.22 Minute Books. The minute books of the Company and its
Subsidiaries have been made available to the Parent for inspection and
accurately record in all material respects therein all actions taken by the
respective board of directors and stockholders of the Company and its
Subsidiaries. No other minute books of the Company or its Subsidiaries are
kept or exist.
Section 2.23 Brokers. Except for America's Growth Capital LLC, each of
the Company and its Subsidiaries has not retained, utilized or been
represented by any broker, finder, agent or other intermediary in
connection with the negotiation or consummation of this Agreement or the
transactions contemplated hereby.
Section 2.24 Voting Requirements. The affirmative vote or written
consent of (i) the holders of a majority of the outstanding shares of
Company Common Stock, and (ii) the holders of a majority of the outstanding
shares of Company Preferred Stock, are the only votes of the holders of any
class or series of the Company's capital stock necessary, whether under
applicable law or otherwise, to approve and adopt this Agreement and the
transactions contemplated hereby.
Section 2.25 Representations Complete. None of the representations or
warranties made by the Company contained in this Agreement, any Exhibit or
Schedule attached hereto or any officer's certificate delivered pursuant to
this Agreement, contains any untrue statement of a material fact, or omits
to state any material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
STOCKHOLDERS AND COMPANY OPTIONHOLDERS
Each of the Company Stockholders and Company Optionholders, severally
and not jointly, represents and warrants to the Parent and the Acquirer as
set forth below:
Section 3.1 Incorporation; Authority. Such Company Stockholder (other
than an individual) is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and
such Company Stockholder has all requisite corporate power and authority,
or capacity, as the case may be, to own or lease and operate its properties
and to carry on its business as now conducted.
Section 3.2 Approval; Binding Effect. Such Company Stockholder (other
than an individual) has all requisite power and authority, or capacity, as
the case may be, to execute and deliver this Agreement and to perform all
of its agreements and obligations under, and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly authorized,
executed and delivered by such Company Stockholder. This Agreement
constitutes the legal, valid and binding obligation of such Company
Stockholder and Company Optionholder, enforceable against such Company
Stockholder and Company Optionholder in accordance with its terms, except
as such validity, binding effect or enforceability may be limited by
bankruptcy, insolvency and similar laws affecting creditor's rights
generally or equitable principles relating to the availability of remedies.
31
Section 3.3 Non-Contravention. Except as set forth on Schedule 3.3,
the execution and delivery of this Agreement by such Company Stockholder or
Company Optionholder, the performance and compliance by such Company
Stockholder or Company Optionholder with the terms hereof, and the
consummation of all transactions, including the Merger, contemplated hereby
and thereby will not conflict with, result in a breach or violation of,
constitute a default (with or without due notice or lapse of time or both)
under, or give rise to any Encumbrance on the Company Stock or Eligible
Company Options held by such Company Stockholder or Company Optionholder
under: (a) any provision of the charter or bylaws or the comparable
organizational documents, if any, of such Company Stockholder (other than
an individual); (b) any statute, rule, regulation, order, law, ordinance or
restriction applicable to such Company Stockholder or Company Optionholder,
or such Company Stockholder's or Company Optionholder's respective
properties or assets, including the Company Stock held by such Company
Stockholder and the Eligible Company Options held by such Company
Optionholder; (c) any judgment, order, writ, injunction or decree of any
court or judicial or quasi-judicial tribunal applicable to such Company
Stockholder or Company Optionholder, or their respective properties or
assets, including the Company Stock held by such Company Stockholder and
the Eligible Company Options held by such Company Optionholder; or (d) any
contract, commitment, lease, agreement, mortgage, note, bond, indenture or
other instrument or obligation to which such Company Stockholder or Company
Optionholder is a party or by which it or its assets, including the Company
Stock held by such Company Stockholder and the Eligible Company Options
held by such Company Optionholder, is bound.
Section 3.4 No Consents. Except as set forth on Schedule 3.4, no
consent, notice, approval, waiver, license or other authorization or action
by or filing, registration or qualification with any Governmental Entity or
any other Person (including any party to any agreement with such Company
Stockholder or Company Optionholder) is required in connection with the
execution and delivery by such Company Stockholder or Company Optionholder
of this Agreement, the consummation by such Company Stockholder or Company
Optionholder of the transactions contemplated hereby, or the performance by
such Company Stockholder or Company Optionholder of its obligations
hereunder.
Section 3.5 Title to Company Stock. All shares of capital stock and/or
Company Options of the Company set forth opposite such Company
Stockholder's or Company Optionholder's name on Schedule 2.7 are owned
beneficially and of record as of the date hereof by such Company
Stockholder or Company Optionholder, as the case may be, and are free and
clear of any Encumbrances.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE ACQUIRER
The Parent and the Acquirer represent and warrant to the Company as
set forth below:
Section 4.1 Organization and Standing of the Parent and the Acquirer.
The Parent is an entity validly existing and in good standing under the
laws of its jurisdiction of organization and has all requisite corporate or
other power and authority to own or lease and operate its properties and to
carry on its business as now conducted. The Acquirer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware.
Section 4.2 Approval; Binding Effect. Each of the Parent and the
Acquirer has all requisite corporate power and authority to execute and
deliver this Agreement and to perform all of its agreements and obligations
hereunder in accordance with its terms. This Agreement and the transactions
contemplated hereby have been duly authorized by the board of directors
and, stockholders if and to the extent required, of the Parent and the
Acquirer. This Agreement has been duly executed and delivered by each of
the Parent and the Acquirer. This Agreement constitutes the legal, valid
and binding obligation of the Parent and/or the Acquirer, as applicable,
enforceable against the Parent and/or the Acquirer, as applicable, in
accordance with its terms, except as such validity, binding effect or
enforceability may be limited by bankruptcy, insolvency and similar laws
affecting creditor's rights generally or equitable principles relating to
the availability of remedies.
Section 4.3 Non-Contravention. The execution and delivery of this
Agreement, the performance and compliance by the Parent and the Acquirer
with the terms hereof and the consummation of all transactions, including
the Merger, contemplated hereby will not conflict with or result in any
breach or violation of or default (with due notice or lapse of time or
both) or creation of any Encumbrance under, or the acceleration, vesting or
modification of any right or obligation under (a) any provision of the
charter, Bylaws or other organizational documents of the Parent or the
Acquirer, (b) any judgment, order, writ, injunction or decree of any court
or judicial or quasi-judicial tribunal applicable to the Parent or the
Acquirer, (c) any statute, rule, regulation, order, law, ordinance or
restriction applicable to the Parent or the Acquirer or (d) any contract,
commitment, lease, agreement, mortgage, note, indenture or other instrument
or obligation to which the Parent or the Acquirer is a party or by which it
or its assets are bound, in each case except to the extent any such breach,
violation, creation of Encumbrance, acceleration, vesting or modification
does not, and could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
Section 4.4 No Consents. Except as set forth on Schedule 4.4, no
consent, notice, approval, waiver, license or other authorization or action
by or filing with any Governmental Entity or any other Person (including
any party to any agreement with either the Parent or the Acquirer) is
33
required in connection with the execution and delivery by the Parent and
the Acquirer of this Agreement, the consummation by the Parent and the
Acquirer or the transactions contemplated hereby, or the performance by the
Parent and the Acquirer of their obligations hereunder.
Section 4.5 Brokers. Neither the Parent nor the Acquirer has retained,
utilized or been represented by any broker, finder, agent or other
intermediary in connection with the negotiation or consummation of this
Agreement or the transactions contemplated hereby.
Section 4.6 Solvency. Each of the Parent and the Acquirer are not, as
of the date of this Agreement, nor will be rendered by the transactions
contemplated by this Agreement, "insolvent" as such term is defined in
Section 101 of Title 11 of the United States Bankruptcy Code, 11 USC
Section 101 et seq., which generally means that for (a) a Person other than
a partnership or a municipality, a financial condition such that the sum of
such entity's debts is greater than all of such entity's property, at a
fair valuation, exclusive of fraudulently conveyed property and certain
other exempt property, and (b) a Person that is a partnership, a financial
condition such that the sum of such partnership's debts is greater than the
aggregate of all of such partnership's property, exclusive of fraudulently
conveyed property and the sum of the excess of the value of each general
partner's non-partnership property, exclusive of fraudulently conveyed
property, over such partner's non-partnership debts.
ARTICLE 5
CERTAIN OTHER COVENANTS OF THE PARTIES
Section 5.1 Conduct of Business. Except as permitted in Schedule 5.1
or as otherwise consented to by the Acquirer, from the date of this
Agreement and until the Closing, the Company (and the Subsidiaries) shall:
(a) conduct its business only in the ordinary course on a basis
consistent with past practice;
(b) refrain, other than in the ordinary course of business, from
making any purchase, sale or disposition of any material asset or
property, and from mortgaging, pledging, subjecting to a lien or
otherwise placing an Encumbrance on any of its assets except in the
ordinary course of business;
(c) refrain from entering into any employment contract or
granting any bonus or otherwise making any change in the compensation
payable or to become payable to any of its employees, other than
pursuant to compensation programs existing on the date hereof;
(d) use reasonable efforts to keep intact the business
organization of the Company and the Subsidiaries and to keep available
to the Acquirer present employees of the Company and the Subsidiaries;
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(e) refrain from making any dividend or distribution, redemption,
recapitalization or other transaction involving the capital stock of
the Company;
(f) keep in full force and effect the Company's existing
insurance;
(g) maintain their books and records in the normal and customary
manner and not propose or adopt any changes to the accounting methods,
principles or practices used by the Company or its Subsidiaries,
except as otherwise required by law or GAAP;
(h) not amend their certificate of incorporation or by-laws;
(i) not merge or consolidate with, or agree to merge or
consolidate with, or purchase or otherwise acquire, or agree to
purchase or otherwise acquire, any business or any material amount of
assets;
(j) not incur Indebtedness other than Indebtedness incurred in
the ordinary course of business under the Company's existing
facilities;
(k) not make (or commit to make) any loan, advance or capital
contributions or investment in any Person (except that which the
Company makes in any of its Subsidiaries);
(l) continue to make capital expenditures in the ordinary course
of business but not to exceed $50,000.00 in the aggregate;
(m) not make, revoke or amend any material Tax election; not
execute any waiver of restrictions on assessment or collection of any
Tax; and not enter into or amend any agreement or settlement with any
Tax Authority;
(n) not take any action, or omit to take any action, that would
cause the condition contained in Section 6.1 not to be satisfied at,
or as of any time prior to, the Effective Time; and
(o) promptly advise the Parent in writing of any change or effect
that has had or could reasonably be expected to have a Material
Adverse Effect.
Section 5.2 Waivers, Consents and Approvals. Notwithstanding any other
provision of this Agreement, the Company will use commercially reasonable
efforts (not involving the payment by the Company or any of the Subsidiaries of
money to any party to any Material Contract), with the full cooperation of the
Parent and Acquirer, to obtain the consents or approvals of third parties
required under any Material Contracts and from any Governmental Entity which are
listed on Schedule 6.8 or Schedule 7.3 hereof. Provided that the Company shall
have complied with this Section 5.2, Acquirer shall have no right to terminate
this Agreement or to seek damages or other remedies from the Company as a result
of any failure by the Company to obtain any such consent or approval or to
provide any such alternative arrangement with respect to any consents, waivers
or approvals which are listed on Schedule 6.8 or Schedule 7.3 hereof nor shall
35
any such failure relieve Parent or Acquirer of any of their obligations
hereunder; provided that nothing in this Section 5.2 shall be construed to
modify Section 6.8 or Section 7.3 hereof nor require Acquirer or Parent to
consummate the transactions contemplated by this Agreement if Section 6.8 is not
satisfied. Nothing in this Agreement will constitute a transfer or an attempted
transfer of any Material Contracts or Governmental Entity consents, approvals,
waivers, or other authorizations which are listed on Schedule 7.3 hereof which
by its terms or under applicable law or governmental rules or regulations
requires the consent or approval of a third party (including, without
limitation, a Governmental Entity) unless such consent or approval shall have
been obtained.
Section 5.3 Hart-Scott-Rodino Act. As soon as practicable after the date of
the execution and delivery of this Agreement, the parties shall make any filings
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, (the "HSR Act"). In connection therewith, each party shall furnish to
the other such information and reasonable assistance as such party may
reasonably request in connection with its preparation of any additional
necessary filings or submissions to any governmental agency, including, without
limitation, any additional filings necessary under the HSR Act. Each party shall
keep the other parties informed of the status of any inquiries made of any such
party by the Federal Trade Commission, the Antitrust Division of the U. S.
Department of Justice or any other governmental agency or authority or members
of their respective staffs with respect to this Agreement or the transactions
contemplated hereby.
Section 5.4 Further Assurances; Access.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all reasonable efforts to, as promptly as
practicable, 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. In case at any time after the Effective
Time any further action is necessary to carry out the purposes of this
Agreement, the Stockholder Representatives and the proper officers and
directors of each party to this Agreement shall take all such necessary
action.
(b) Prior to the Effective Time, the Company shall, and shall cause
its Subsidiaries, officers, employees, counsel, financial advisors,
accountants and other representatives to, afford to Parent and its
representatives reasonable access during normal business hours to the
properties, books (including management information systems), contracts,
commitments, personnel and records of the Company and each of its
Subsidiaries. The Company shall, and shall cause its Subsidiaries,
officers, employees, counsel, financial advisors, accountants and other
representatives to reasonably cooperate with the Parent and its
representatives in providing the Parent and its representatives such
reasonable access and in understanding the foregoing.
36
Section 5.5 Announcements. Except as otherwise required by law, prior to
the Closing, Company and Parent will cooperate with each other in the
development of a joint communication plan which will address the content and
distribution of all news releases and other announcements with respect to this
Agreement and the transactions contemplated hereby. Except to the extent
otherwise required by law (including the rules and regulations of the Securities
and Exchange Commission and the New York Stock Exchange, NASDAQ or other
self-regulatory organization applicable to the Parent) and except as prescribed
in a joint communication plan of the parties, in no event shall any party to
this Agreement make, issue or release or authorize any of its directors,
officers, employees or agents to make, issue or release any announcement,
statement or acknowledgment of the existence of this Agreement or the
transactions contemplated under this Agreement, or reveal the status of the
transactions provided for herein, regardless of whether such announcement,
statement or acknowledgment is made or directed to the public generally or to
employees, suppliers, customers or other third parties, without first obtaining
the consent of the Parent and the Company, or except as may be required by the
Company to communicate with its stockholders in connection with the transactions
contemplated by this Agreement.
Section 5.6 Stockholders Notice and Stockholders Meeting. Prior to, or as
promptly as practicable following the date of this Agreement, the Company shall
obtain the written consent (the "Written Consent") of its stockholders to
approve this Agreement and the transactions contemplated by this Agreement to
the extent required by the DGCL. The Company will, through its board of
directors, recommend to its stockholders approval of the foregoing matters, as
set forth in the second sentence of Section 2.2 of this Agreement. As promptly
as practicable following the receipt of the Written Consent, the Company shall
provide its stockholders the notices required under Sections 228 and 262 of the
DGCL (the "Requisite Notices"). All information delivered to the stockholders in
connection with obtaining the Written Consent and providing the Requisite
Notices shall be accurate and complete in all material respects as of the date
of its delivery to the stockholders of the Company.
Section 5.7 Directors' and Officers' Indemnification.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
whether asserted or arising before or after the Effective Time and relating
to actions, events or occurrences (or the absence thereof) on or prior to
the Effective Time (each a "D&O Claim"), in which any Person who is or was
a director or officer of the Company or any of its Subsidiaries (the "D&O
Indemnified Parties") is, or is threatened to be, made a defendant arising
out of or as a result of (i) the fact that such D&O Indemnified Party is or
was a director or officer of the Company or any of its Subsidiaries or (ii)
this Agreement or any of the transactions contemplated hereby (excluding
any action by any D&O Indemnified Party hereunder), the Surviving
Corporation shall, after the Effective Time, indemnify and hold harmless,
to the fullest extent permitted by law and to the fullest extent previously
provided for in the Company's certificate of incorporation and bylaws in
effect prior to the Merger, each such D&O Indemnified Party against any
Losses suffered or incurred by such D&O Indemnified Party in connection
with any such D&O Claim.
37
(b) Promptly after a D&O Indemnified Party has received notice of or
has knowledge of any D&O Claim or the commencement of any D&O Claim (a "D&O
Proceeding") for which a D&O Indemnified Party is entitled or may become
entitled to make a claim pursuant to this Section 5.4, such D&O Indemnified
Party shall give the Parent written notice of such D&O Claim or the
commencement of such D&O Proceeding. Any failure to so notify the Parent
shall not limit the right to indemnification hereunder unless (and then
only to the extent) the failure to give such notice materially and
adversely prejudices the Parent or the Surviving Corporation. The Parent
(i) shall have the right to assume control of the defense of the D&O Claim
and/or D&O Proceeding by appropriate proceedings with its counsel and (ii)
shall have the authority to negotiate, compromise and settle such D&O Claim
and/or D&O Proceeding with the consent of the applicable D&O Indemnified
Party, which consent shall not be unreasonably withheld or delayed. Each
D&O Indemnified Party may participate in the defense, at its sole expense,
provided that counsel for the Parent shall act as lead counsel in all
matters pertaining to the defense or settlement of such D&O Claims and/or
D&O Proceedings. The Parent shall not be entitled to control (but shall be
entitled to participate at its own expense in the defense of), and the D&O
Indemnified Parties shall be entitled to have sole control over, the
defense or settlement, compromise, admission, or acknowledgment of any D&O
Proceeding (A) as to which the Parent fails to assume the defense within a
reasonable length of time or (B) to the extent the D&O Proceeding seeks an
order, injunction, or other equitable relief against any D&O Indemnified
Party which, if successful, would materially and adversely affect such D&O
Indemnified Party or (C) to the extent that counsel for the D&O Indemnified
Party reasonably advises the D&O Indemnified Party that there are issues
that raise conflicts of interest between the Parent and the D&O Indemnified
Parties.
(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 substantially
all of its properties and assets to any Person, then, and in each such
case, to the extent necessary, proper provision shall be made so that the
successors and assigns of the Parent and the Surviving Corporation assume
the obligations set forth in this section.
(d) The provisions of this Section 5.7 are intended to be for the
benefit of, and enforceable by, each D&O Indemnified Party and his or her
heirs and assigns, and nothing herein shall affect any indemnification
rights that any D&O Indemnified Party and his or her heirs and assigns may
have under the charter or bylaws of the Company, any contract or applicable
law.
(e) Prior to the Effective Time, subject to the prior written approval
of the Parent, the Company shall purchase a directors and officers "run
off" policy covering the period of time up to and including the Effective
Time, which policy would take effect on and from the Effective Time for a
period of not less than six years. The cost of such policy shall not reduce
Net Worth for purposes of the Final Statement prepared in accordance with
Section 1.3(d) hereof.
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Section 5.8 Treatment of Employees. Except as set forth in Schedule 5.8, at
the Effective Time, the Parent shall cause the Surviving Corporation to offer
employment to all persons who are employees of the Company immediately prior to
the Closing (the "Company Employees") if such offer is necessary as a matter of
law in order for such employees to become employees of the Surviving
Corporation, such employment to be for substantially equivalent positions and on
substantially equivalent wage or compensation rates as such Company Employees
have with the Company and such employment to be at the Company's existing
facilities. As of the Effective Time (or as soon as practicable thereafter), the
Parent shall, at its option, cause the Surviving Corporation to continue the
Company's employee benefit plans or enroll the Company Employees in the Parent's
employee benefit plans, including its (if generally offered by Parent) vacation
plan, medical plan, dental plan, 401(k) plan, life insurance plan and disability
plan, under the same coverage applicable to similarly situated employees of the
Parent, (i) giving such Company Employees service credit for their prior
employment with the Company for eligibility and vesting purposes for all of
Parent's employee benefit plans as if such service had been performed with the
Parent, (ii) waiving all limitations as to preexisting condition exclusions,
evidence of insurability provisions, waiting periods or similar limitations to
the extent such waiver is possible under the Parent's employee benefit plans and
(iii) for purposes of computing deductible amounts, expenses and claims incurred
prior to the Closing Date under the Company's group of medical plans shall be
credited and recognized. Notwithstanding the foregoing, (a) prior to the
Effective Time, the Company will take such action as is necessary to ensure that
only eligible Employees and their dependents are covered by the Company Plans
relating to health or medical benefits, and (b) nothing contained in this
Agreement shall confer upon any Company Employee any right with respect to
continuance of employment by the Surviving Corporation, nor shall anything
herein interfere with the right of the Surviving Corporation to terminate the
employment of any of the Company Employees at any time, with or without cause,
or restrict the Parent or the Surviving Corporation in the exercise of its
independent business judgment in modifying any of the terms and conditions of
the employment (including the employee benefits) of the Company Employees
following the Closing.
Section 5.9 Dispute Resolution. In the event that any dispute, disagreement
or controversy arises among the parties hereto relating to the terms or
interpretation of this Agreement which the parties are unable to resolve
themselves after good faith negotiations, then the parties shall attempt to
resolve such dispute, disagreement or controversy through non-binding mediation
using the non-administered mediation rules of the Center for Public Resources
(the "CPR"). The use of a single mediator is preferred, but if the parties
cannot promptly agree on a mutually acceptable mediator, then the CPR shall
select a mediator. The mediation shall occur in Boston, Massachusetts. The
parties shall bear their own costs and expenses of the mediation; the fees of
the mediator shall be borne equally by the Parent, on the one hand, and the
Company Stockholders, on the other hand. If the parties are unable to resolve
the matter to their mutual satisfaction through such non-binding mediation
within sixty (60) days of failing to resolve the disputed matter themselves or
otherwise referring the disputed matter to the CPR, then the parties shall
submit the disputed matter for settlement by arbitration in accordance with the
then-current Arbitration Rules of the American Arbitration Association (the "AAA
Rules") in effect as of the date of submission of the arbitration demand to the
39
American Arbitration Association ("AAA"); provided, however, the number of
arbitrators shall be one (1) and the arbitrator shall be selected by the AAA if
the parties are unable to agree upon a mutually acceptable arbitrator within
twenty-one (21) days of the submission of the arbitration demand. The
arbitration shall be administered by the AAA and conducted in Boston,
Massachusetts. All decisions of the arbitrator shall be final and binding on all
parties and enforceable in any court of competent jurisdiction. The fees and
expenses of the arbitrator and of the AAA will be borne equally by the Parent,
on the one hand, and the Company Stockholders, on the other hand. The prevailing
party shall be entitled to recover all reasonable legal fees and expenses
incurred in connection with the dispute from the non-prevailing party. For
purposes of this paragraph, the Stockholder Representatives shall have the full
power and authority to represent the interests of the Company Stockholders
pursuant to the procedures set forth herein. Notwithstanding the foregoing,
nothing in this Section 5.9 shall apply to the resolution of any objection to
the Final Statement and the determination of the Net Worth of the Company as of
the Effective Time, as provided in Section 1.3 hereof.
Section 5.10 Resignation of Directors and Officers. Except as set forth on
Schedule 5.10, each Company Stockholder that is a director and officer of the
Company hereby agrees to resign their positions with the Company on or prior to
the Closing Date and shall execute such appropriate documentation with respect
to the transfer or establishment of bank accounts, signing authority, and other
similar matters, as Acquirer reasonably requests consistent with the Parent's
policy.
Section 5.11 Subsidiary Capital Stock Ownership. As of the Closing, if any
Person other than the Company owns or holds of record or beneficially any shares
of capital stock or equity or ownership interest in any Subsidiary of the
Company, the Company will cause such Person to transfer to the Company or as may
be otherwise directed by the Acquirer such shares or equity or ownership
interests.
ARTICLE 6
CONDITIONS PRECEDENT TO
PARENT'S AND ACQUIRER'S OBLIGATIONS
Notwithstanding the provisions of Article 1, the Parent and the Acquirer
shall be obligated to perform the acts contemplated for performance by them
under Article 1 only if each of the following conditions is satisfied at or
prior to the Closing Date, unless any such condition is waived in writing by the
Parent and the Acquirer:
Section 6.1 Accuracy of Representations and Warranties by the Company. Each
representation and warranty of the Company and the Company Stockholders
contained in this Agreement (a) that is qualified as to materiality or Material
Adverse Effect shall be true and correct in all respects as of the Effective
Date and as of the Closing Date as though each such representation and warranty
had been made on and as of the Effective Date and as of the Closing Date, except
to the extent any such representation and warranty expressly speaks only as of
an earlier date (in which case as of such earlier date), and (b) that is not so
qualified shall be true and correct in all material respects as of the Effective
Date and as of the Closing Date as though each such representation and warranty
40
had been made on and as of the Effective Date and as of the Closing Date, except
to the extent any such representation and warranty expressly speaks only as of
an earlier date (in which case as of such earlier date). Parent and Acquirer
shall have received a certificate from the Chief Executive Officer of the
Company (on behalf of the Company only) to the foregoing effect.
Section 6.2 Compliance by the Company. The Company shall have performed and
complied in all material respects with all of its covenants, agreements and
obligations under this Agreement required to be performed or complied with by it
on or before the Closing Date. Parent and Acquirer shall have received a
certificate from the Chief Executive Officer of the Company (on behalf of the
Company only) to the foregoing effect.
Section 6.3 Delivery of Certificate of Merger. The Company shall have duly
executed and delivered the Certificate of Merger.
Section 6.4 No Pending Judgments or Litigation. There shall not have been
issued and be in effect any order, decree or judgment of or in any court or
tribune of competent jurisdiction prohibiting consummation of the Merger or any
of the transactions contemplated hereby. No action, suit or proceeding shall be
pending or threatened against the Company wherein any unfavorable injunction,
judgment, order, decree ruling or charge would prohibit the consummation of the
Merger or any of the transactions contemplated hereby or would restrain or
prohibit the Parent's ownership or operation of all or any material portion of
the business or assets of the Company or any of its Subsidiaries or would compel
the Parent to dispose or hold separate all or any material portion of the
business or assets of the Company or any of its Subsidiaries. There shall not
have been any action taken, or any statute, rule or regulation enacted, enforced
or promulgated by any Governmental Entity that could reasonably be expected to
result in any of the foregoing consequences.
Section 6.5 Resignations of Directors and Officers. Except as set forth on
Schedule 6.5 all of the directors and officers of the Company shall have
resigned their positions with the Company and each of its Subsidiaries, on or
prior to the Closing Date and prior thereto shall have executed such appropriate
documents with respect to the transfer or establishment of bank accounts,
signing authority, and other similar matters, as the Acquirer shall have
reasonably requested.
Section 6.6 Resolutions Adopted by the Company. The Company shall have
delivered a copy of the resolutions adopted by the board of directors and
stockholders of the Company authorizing this Agreement and the transactions
contemplated hereby, certified by the Secretary of the Company.
41
Section 6.7 Certificates of Good Standing. The Company shall have delivered
a certificate of the Secretary of State of the State of Delaware, dated as of a
recent date prior to the Closing, with respect to the legal existence and good
standing of the Company under the laws of the State of Delaware, and shall have
delivered a certificate of the secretary of state (or comparable authority) of
the jurisdiction of incorporation, dated as of a recent date prior to the
Closing, with respect to the legal existence and good standing of each of the
Subsidiaries under the laws of such jurisdiction.
Section 6.8 Consents and Approvals. The Company shall have received all
consents and approvals of all Governmental Entities and all third parties
identified on Schedule 6.8, and to the extent required, the Company shall have
provided Parent and Acquirer with any certificate or similar document which may
be required by any Tax Authority in order to relieve Parent or the Acquirer, as
the case may be, of any obligation to withhold any portion of the purchase
price.
Section 6.9 Legal Opinion. The Parent and the Acquirer shall have received
from Brown Rudnick Berlack Israels LLP, counsel for the Company, a legal opinion
covering customary matters, which shall be addressed to the Parent and the
Acquirer, dated as of the Closing Date and in substantially the form attached
hereto as Exhibit B.
Section 6.10 HSR Act. All filings required to be made under the HSR Act
shall have been made, and any applicable waiting period thereunder shall have
expired.
Section 6.11 Escrow Agreement. There shall have been executed and delivered
to Acquirer an Escrow Agreement in substantially the form attached hereto as
Exhibit C (its "Escrow Agreement") pursuant to which the Escrow Amount shall be
deposited in escrow to secure payment of indemnification payable to Acquirer or
Parent hereunder.
Section 6.12 FIRPTA. Parent shall have received certifications providing
exemption from withholding under Section 1445 of the Code with respect to the
transactions contemplated by this Agreement.
Section 6.13 Dissenting Shares. The holders of not more than 10% of the
outstanding Shares shall have exercised dissenters' rights in accordance with
Delaware law.
Section 6.14 Voting Agreement. Each of The Nicholas G. Tagaris 2003
Irrevocable Trust, The Nicholas G. Tagaris 2003 Qualified Annuity Trust,
Nicholas G. Tagaris and Lief and Carol Jacobsen 2004 Charitable Remainder
Unitrust shall have executed and delivered to Parent and Acquirer a Voting
Agreement.
Section 6.15 Non-Competition Agreement. The individuals listed in Schedule
6.15 shall have executed and delivered to Parent and Acquirer a Non-competition
and Non-solicitation Agreement substantially in the applicable form attached
hereto as Exhibit D-1 or Exhibit D-2.
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Section 6.16 Affiliate Transactions. All obligations, agreements,
contracts, powers of attorney and other arrangements between any Stockholder (or
any Affiliate of such Stockholder or any member of such Stockholder's immediate
family) and the Company shall have been terminated, including, without
limitation, the termination of employment of the individuals named on Schedule
6.16 (the "Affiliate Employees") and the repayment of any loans, advances or
other amounts owed to the Company or any of its Subsidiaries, and each such
Affiliate Employee shall have executed and delivered to the Company a general
release in form and substance satisfactory to the Acquirer.
Section 6.17 Material Adverse Effect. Since March 28, 2004, there shall not
have been any event, occurrence, development or state of circumstances or facts
which, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect.
Section 6.18 Exchange and Paying Agent Agreement. The Company shall have
executed and delivered to the Parent and the Acquirer the Exchange and Paying
Agent Agreement.
Section 6.19 Title Insurance Policy. The Acquirer shall have received a
firm commitment for an owner's policy of title insurance from a
nationally-recognized title insurance company indicating that title to the Owned
Real Property is vested in the Company and that the Owned Real Property is free
and clear of all Encumbrances, other than as set forth in Section
2.10(e)(i)-(vi), and said title company is willing to issue a final owner's
policy on the Closing Date with such commitment.
Section 6.20 Termination of Citizens Line. The Company shall have provided
evidence satisfactory to the Parent and the Acquirer that the Citizens Line has
been terminated and that no Indebtedness remains outstanding, and no amounts are
owed, thereunder.
Section 6.21 Parachute Payments. The Company shall have taken all action
necessary to ensure that no agreement, contract, arrangement or plan (including,
without limitation, the Company Options) of the Company or any Subsidiary or,
for this purpose, any options granted or consideration paid (or otherwise
treated as granted or paid in connection with the Merger) by Parent or the
Acquirer to employees of or service providers to the Company or any Subsidiary
pursuant to the transactions contemplated by this Agreement, will result, in
Parent's reasonable determination, separately or in the aggregate, in the
payment of a "parachute payment' within the meaning of Section 280G of the Code.
The approval of the Stockholders entitled to vote thereon pursuant to Section
280G(b)(5)(A) and (B) and the Treasury Regulations thereunder in a form that
satisfies in all respects the shareholder approval requirements of Section
280G(b)(5)(A) and (B) and the Treasury Regulations thereunder (the
"Requirements") shall be deemed to satisfy the requirement of Parent's
reasonable determination. The Company shall submit the vote and related
disclosure under Section 280G(b)(5)(A) and (B) to Parent for its approval prior
to dissemination to Stockholders entitled to vote. Parent shall not unreasonably
withhold its approval. Parent's approval or failure to notify the Company of
specific objections and the reasons therefore within five (5) business days of
the Company' submission shall be final and conclusive as to satisfaction in all
material respects of the Requirements. In the event that Parent and the Company
43
are unable to agree on the vote and related disclosure, Parent and the Company
shall submit the vote and the related disclosure to the Unaffiliated Firm, whose
determination shall be final and conclusive. The expenses of the Unaffiliated
Firm related to such determination shall be borne fifty percent (50%) by the
Parent, and shall be borne fifty percent (50%) by the Company as a Transaction
Expense.
ARTICLE 7
CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Notwithstanding the provisions of Article 1, the Company shall be obligated
to perform the acts contemplated for performance by it under Article 1 only if
each of the following conditions is satisfied at or prior to the Closing Date,
unless any such condition is waived in writing by the Company:
Section 7.1 Accuracy of Representations and Warranties by the Parent and
the Acquirer. Each representation and warranty of the Parent and the Acquirer
contained in this Agreement (a) that is qualified as to materiality shall be
true and correct in all respects as of the Effective Date and as of the Closing
Date as though each such representation and warranty had been made on and as of
the Effective Date and as of the Closing Date, except to the extent any such
representation and warranty expressly speaks only as of an earlier date (in
which case as of such earlier date), and (b) that is not so qualified shall be
true and correct in all material respects as of the Effective Date and as of the
Closing Date as though each such representation and warranty had been made on
and as of the Effective Date and as of the Closing Date, except to the extent
any such representation and warranty expressly speaks only as of an earlier date
(in which case as of such earlier date). The Company shall have received a
certificate from an executive officer of each of the Parent and Acquirer to the
foregoing effect.
Section 7.2 Compliance by the Parent and the Acquirer. The Parent and the
Acquirer shall have performed and complied in all material respects with all of
their covenants, agreements and obligations under this Agreement to be performed
or complied with by them on or before the Closing Date. The Company shall have
received a certificate from an executive officer of each of the Parent and
Acquirer to the foregoing effect.
Section 7.3 Consents and Approvals. The Parent and the Acquirer shall have
received all consents and approvals of all Governmental Entities and all third
parties identified on Schedule 7.3.
Section 7.4 Delivery of Certificate of Merger. The Acquirer shall have duly
executed and delivered the Certificate of Merger.
Section 7.5 No Pending Judgments or Litigation. There shall not have been
issued and be in effect any order, decree or judgment of or in any court or
tribune of competent jurisdiction prohibiting consummation of the Merger or any
of the transactions contemplated hereby. No action, suit or proceeding shall be
44
pending or threatened against the Company wherein any unfavorable injunction,
judgment, order, decree ruling or charge would prohibit the consummation of the
Merger or any of the transactions contemplated hereby.
Section 7.6 Delivery of Aggregate Merger Consideration. At the Closing, the
Parent shall have delivered or shall simultaneously deliver the Escrow Amount to
the Escrow Agent and the Aggregate Merger Consideration to the Paying Agent. If
the Company does not have sufficient cash on the Closing Date to pay the
Aggregate Option Consideration to Company Optionholders, simultaneously with the
Closing to the extent necessary, the Parent shall advance cash to the Company to
permit payment of the Aggregate Option Consideration to Company Optionholders.
Section 7.7 Resolutions Adopted by the Parent and the Acquirer. Each of the
Parent and the Acquirer shall have delivered a copy of the resolutions adopted
by the boards of directors and stockholders (as appropriate) of the Parent and
the Acquirer authorizing this Agreement and the transactions contemplated
hereby, certified by the Secretary of the Parent and the Acquirer, as the case
may be.
Section 7.8 Certificate of Good Standing. Each of the Parent and the
Acquirer shall have delivered a certificate of the Secretary of State of the
jurisdiction of incorporation of such entity, dated as of a recent date prior to
the Closing, with respect to the legal existence and good standing of such
entity under the laws of such jurisdiction.
Section 7.9 HSR Act. All filings required to be made under the HSR Act
shall have been made, and any applicable waiting period thereunder shall have
expired.
Section 7.10 Exchange and Paying Agent Agreement. The Parent and the
Acquirer shall have executed and delivered to the Company the Exchange and
Paying Agent Agreement.
ARTICLE 8
INDEMNIFICATION
Section 8.1 Indemnity by Company Stockholders and Company Optionholders.
(a) Subject to the limitations in Section 8.4 below, each Company
Stockholder and Company Optionholder agrees, jointly and severally, to
indemnify, defend and hold harmless the Parent, the Acquirer and the
Surviving Corporation (and their respective directors, officers, employees
and Affiliates) (each, an "Indemnified Party") from and against any and all
claims, liabilities, losses, damages, costs and expenses, including without
limitation the reasonable expenses of investigation and the reasonable fees
and disbursements of counsel and accounting and technical experts and
consultants (collectively, the "Losses"), which any of such parties shall
incur or suffer and which relate to or arise, directly or indirectly, out
of any breach by the Company of any representation, warranty, covenant or
agreement made by the Company in this Agreement or any other certificate or
instrument delivered pursuant hereto.
45
(b) Subject to the limitations in Section 8.4 below, each Company
Stockholder and Company Optionholder agrees, severally but not jointly, to
indemnify, defend and hold harmless each Indemnified Party from and against
all Losses, which any of such Indemnified Parties shall suffer and which
relate to or arise, directly or indirectly, out of any breach by such
Company Stockholder or Company Optionholder, as the case may be, of any
representation, warranty, covenant or agreement made by such Company
Stockholder or Company Optionholder, as the case may be, in this Agreement
or any other certificate or instrument delivered pursuant hereto. For
purposes of clarification and subject to the limitations in Section 8.4
below, no Company Stockholder or Company Optionholder shall be responsible
under this Section 8.1(b) for any breach by any other Company Stockholder
or Company Optionholder of any representation, warranty or covenant, it
being understood that each such Company Stockholder and Company
Optionholder shall be responsible only for their own individual
representation, warranties and covenants.
Section 8.2 Claims.
(a) Any Indemnified Party seeking indemnification hereunder shall
promptly notify the Stockholder Representative (on behalf of the Company
Stockholders and Company Optionholders, the "Indemnifying Party"), of any
action, suit, proceeding, demand or breach (a "Claim") with respect to
which the Indemnified Party claims indemnification hereunder, provided that
failure of the Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Article 8 except to the
extent, if at all, that such Indemnifying Party shall have been actually
and materially prejudiced thereby.
(b) If such Claim relates to any action, suit, proceeding or demand
instituted against the Indemnified Party by a third party other than any
action, suit, proceeding or demand with respect to Taxes (a "Third Party
Claim"), then the Stockholder Representative, acting for the Indemnifying
Party, shall be entitled to participate in the defense of such Third Party
Claim after receipt of notice of such claim from the Indemnified Party.
Within twenty-one (21) days after receipt of notice of a particular matter
from the Indemnified Party, the Stockholder Representative, acting for the
Indemnifying Party, may assume the defense of such Third Party Claim by
providing the Indemnified Party with written notice of its election to
assume such defense. Notwithstanding the right of the Indemnified Party to
retain its own counsel as described below, the Indemnifying Party shall
have the authority to negotiate, compromise and settle such Third Party
Claim if and only if the following conditions are satisfied:
(i) the Indemnifying Party shall have confirmed in writing that
it is obligated hereunder to indemnify the Indemnified Party with
respect to such Third Party Claim; and
46
(ii) the Indemnifying Party shall not, without the consent of the
Indemnified Party, consent to the entry of any judgment or settle any
such Third Party Claim unless the Indemnified Party is unconditionally
released from all liability in respect of such Third Party Claim
without admission of liability and the Indemnified Party is satisfied
in its reasonable discretion, that there will be no continuing
restrictions on the business of the Indemnified Party with respect to
such Third Party Claim.
The Indemnified Party shall retain the right to employ its own counsel and
to participate in the defense of any Third Party Claim, the defense of
which has been assumed by the Indemnifying Party pursuant hereto, but the
Indemnified Party shall bear and shall be solely responsible for its own
costs and expenses in connection with such participation, unless (1) the
Indemnified Party has been advised by counsel that representation of the
Indemnified Party and the Indemnifying Party by the same counsel presents a
conflict of interest under applicable standards of professional conduct,
(2) the Indemnified Party has been advised by counsel that there may be
legal defenses available to it which are different from or in addition to
the defenses available to the Indemnifying Party, the Indemnifying Party is
not and has no plans to employ such different or additional defenses, and
in the reasonable judgment of such counsel it is advisable for the
Indemnified Party to employ separate counsel, (3) the Indemnifying Party
has failed to prosecute such defense in good faith or (4) the Escrow Amount
is likely to be insufficient to satisfy such Third Party Claim if such
Third Party Claim is determined in favor of the plaintiff. Except in the
case of clauses (3) or (4) above, the Indemnifying Party shall retain sole
authority to negotiate, compromise and settle such Third Party Claim
subject to the conditions set forth above. In no event will the Indemnified
Party consent to the entry of any judgment or enter into any settlement
with respect to any Third Party Claim for which it seeks indemnification
hereunder without the prior written consent of the Indemnifying Party,
which consent will not be unreasonably withheld or delayed if the consent,
judgment or settlement unconditionally releases the Indemnifying Party from
all liability in respect of such Third Party Claim without admission of
liability.
Section 8.3 Method and Manner of Paying Claims. Claimants shall only
be entitled to satisfy claims for indemnification pursuant to this Article
8 from the Escrow Amount, subject to the limitations set forth in Section
8.4.
Section 8.4 Limitations on Indemnification.
(a) No Indemnifying Party shall be required to indemnify an
Indemnified Party hereunder for any Claim except to the extent that
the aggregate amount of Losses for which all Indemnified Parties are
otherwise entitled to indemnification pursuant to this Article 8
exceeds $1,100,000, whereupon the Indemnified Party shall be entitled
to be paid for all losses in excess of $500,000 and not merely the
losses in excess of $1,100,000, subject to the limitations on the
maximum amount of recovery set forth in Section 8.4(b); provided that
the limitation in this Section 8.4(a) shall not apply to any breach of
Sections 2.7, 2.12 or 2.21 with respect to each of which the
Indemnifying Party shall be liable for Losses whether or not the
amount of such Losses exceeds $1,100,000 and whether or not the amount
of such Losses exceeds $500,000.
47
(b) With respect to any Company Stockholder or Company
Optionholder that is an Indemnifying Party, the aggregate Losses
payable by such Company Stockholder or Company Optionholder with
respect to a particular Claim for indemnification pursuant to Section
8.1(a), shall not exceed such Company Stockholder's or Company
Optionholder's Pro Rata Portion of such Claim and shall also be
limited as set forth in Section 8.4(d). With respect to any Losses
payable with respect to a particular Claim for indemnification
pursuant to Section 8.1(a), the Indemnified Party shall have recourse
to the entire portion of the Escrow Amount remaining at any time
without the applicability of any limitation in respect of any
particular Company Stockholder or Company Optionholder. For purposes
of the first sentence of this Section 8.4(b), with respect to a
Company Stockholder or Company Optionholder, "Pro Rata Portion" shall
mean, the product obtained by multiplying (A) the quotient obtained by
dividing the portion of the Escrow Amount attributable to such Company
Stockholder or Company Optionholder by the aggregate portions of the
Escrow Amount attributable to all Company Stockholders and Company
Optionholders, by (B) the total amount of such Claim (if and/or when
such Claim is liquidated or quantified). In addition, the Losses for
which an Indemnified Party shall be entitled to indemnification shall
be (i) net of any tax benefit (after taking into account any
offsetting tax burden) realized by such Indemnified Party by reason of
the facts and circumstances giving rise to such reimbursement, and
(ii) net of any insurance proceeds received by such Indemnified Party
in connection with the circumstances giving rise to such claim for
indemnification (for purposes of this sentence, an Indemnified Party
shall be deemed to have realized a "tax benefit" only to the extent,
and in the amount, that the actual tax liability of the Indemnified
Party in the taxable year in which the Loss has occurred is reduced by
the payment of any amount actually attributable to such Loss). The
Parent shall, and shall use reasonable efforts to cause each other
Indemnified Party, to use commercially reasonable efforts to collect
any and all applicable insurance proceeds from any available insurer
before attempting to seek indemnification hereunder; provided that
nothing herein (i) shall require any Indemnified Party to institute
any action against any insurer, (ii) shall limit any Indemnified
Party's ability to settle or compromise any insurance claim or (iii)
prohibit the assignment of any rights herein to any insurer in
connection with any claim for indemnity hereunder.
(c) The representations and warranties contained in this
Agreement or in any certificate or other writing delivered in
connection with this Agreement shall survive the Closing until the
close of business on the second anniversary of the Closing Date;
provided that the representations and warranties contained in Sections
2.7, 2.12 and 2.21 shall survive the Closing until the close of
business on the fourth anniversary of the Closing Date.
Notwithstanding the preceding sentence, any representation or warranty
in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the
preceding sentence if notice of the breach thereof giving rise to such
right of indemnity shall have been given to the Stockholder
Representatives prior to such time. The covenants and other agreements
contained in this Agreement (including those set forth in this Article
8) shall not expire.
48
(d) The parties hereto acknowledge and agree that the sole and
exclusive remedy of the Parent, the Surviving Corporation or any
Indemnified Party in respect of any and all claims relating to, in
connection with, or arising out of this Agreement and the transactions
contemplated hereby, including any Claims under this Article 8, shall
be satisfied solely from the Escrow Amount in accordance with the
provisions set forth in this Article 8. No Company Stockholder, no
Company Optionholder and no person who is or was a director, officer,
employee or agent of the Company prior to the Effective Time shall
have any personal liability to any Indemnified Party after the Closing
Date in connection with the Merger or this Agreement absent fraud or
intentional misrepresentation.
ARTICLE 9
TERMINATION OF AGREEMENT
Section 9.1 Termination. At any time prior to the Closing, this Agreement
may be terminated (i) by mutual consent of the Acquirer and the Company, (ii) by
the Acquirer if the conditions stated in Article 6 have not been satisfied at or
prior to the Closing, or (iii) by the Company if the conditions stated in
Article 7 have not been satisfied at or prior to the Closing; provided, however,
that a termination under either clauses (ii) or (iii) above shall not be
effective unless the terminating party has given the other party written notice
of its intent to terminate the Agreement, stating the reasons therefore, and the
non-terminating parties shall fail to cure such condition within fifteen (15)
days after the receipt of such notice.
Section 9.2 Effect Of Termination. If this Agreement shall be terminated as
above provided, all obligations of the parties hereunder shall terminate but any
breaching party shall remain liable to the non-breaching party for its damages
and out-of-pocket expenses; provided, however, that if this Agreement is
terminated prior to the Closing, only the Company, and not any of the Company
Stockholders, shall have any liability to the Parent or the Acquirer for any
breach of any representations, warranties or covenants under this Agreement.
Section 9.3 Right To Proceed. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Article 6 hereof have not
been satisfied, the Acquirer shall have the right to waive the satisfaction of
any such condition and to proceed with the transactions contemplated hereby, and
if any of the conditions specified in Article 7 hereof have not been satisfied,
the Company and the Company Stockholders, acting through the Stockholder
Representatives, shall have the right to waive the satisfaction of any such
condition and to proceed with the transactions contemplated hereby.
49
ARTICLE 10
DEFINITIONS
Section 10.1 Glossary of Defined Terms. The definitions of the following
terms may be found in the Section references set forth opposite each such term:
Defined Terms Section
------------- -------
AAA....................................................... Section 5.9
AAA Rules................................................. Section 5.9
Accountants............................................... Section 1.3(d)(i)
Acquirer.................................................. Preamble
Affiliate Employees....................................... Section 6.16
Aggregate Merger Consideration............................ Section 1.3(c)
Aggregate Option Consideration............................ Section 1.13(a)
Agreement................................................. Preamble
Audited Financial Statements.............................. Section 2.8
Balance Sheet............................................. Section 2.8
Claim..................................................... Section 8.2(a)
Closing................................................... Section 1.1
Closing Date.............................................. Section 1.1
Closing Date Financial Statement.......................... Section 1.3(d)(i)
Code...................................................... Section 2.16(a)
Company................................................... Preamble
Company Common Stock...................................... Recitals
Company Employees......................................... Section 5.8
Company Group............................................. Section 2.16(a)
Company Options........................................... Recitals
Company Plans............................................. Section 2.16(b)
Company Preferred Stock................................... Recitals
Company Qualified Plans................................... Section 2.16(c)
CPR....................................................... Section 5.9
Determination Date........................................ Section 1.3(d)(ii)
Dissenting Shares......................................... Section 1.7
DGCL...................................................... Section 1.2(c)
D&O Claim................................................. Section 5.7(a)
D&O Indemnified Parties................................... Section 5.7(a)
D&O Proceeding............................................ Section 5.7(b)
Effective Date............................................ Section 1.1
Effective Time............................................ Section 1.1
Eligible Company Options.................................. Section 1.9
Employees................................................. Section 2.16(b)
Enterprise Value.......................................... Section 1.2(j)
Environmental Laws........................................ Section 2.21
Environmental Liabilities................................. Section 2.21
ERISA..................................................... Section 2.16(b)(1)
50
Escrow Agreement.......................................... Section 6.11
Estimated Closing Net Worth............................... Section 1.3(f)
Final Net Worth........................................... Section 1.3(d)(ii)
Final Statement........................................... Section 1.3(d)(i)
Financial Statements...................................... Section 2.8
Hazardous Substance....................................... Section 2.21
Indemnified Party......................................... Section 8.1(a)
Indemnifying Party........................................ Section 8.2(a)
IRS....................................................... Section 2.16(b)
Leased Real Property...................................... Section 2.10(c)
Leases.................................................... Section 2.10(c)
Letter of Transmittal..................................... Section 1.6(a)
Losses.................................................... Section 8.1(a)
Material Contracts........................................ Section 2.15
Merger.................................................... Recitals
Net Worth................................................. Section 1.3(d)(i)
Net Worth Deficiency...................................... Section
1.3(e)(iii)
Option Consideration...................................... Section 1.13(a)
Owned Real Property....................................... Section 2.10(d)
Parent.................................................... Preamble
PBGC...................................................... Section 2.16(b)
Pro Rata Portion.......................................... Section 8.4(b)
Required Documentation.................................... Section 1.6(a)
Stockholder Notice........................................ Section 5.6
Stockholder Representatives............................... Section 1.11(a)
Subsidiary Employee Plan.................................. Section 2.16(n)
Surviving Corporation..................................... Section 1.2(b)
Third Party Claim......................................... Section 8.2(b)
Total Assets.............................................. Section 1.3(d)(i)
Total Liabilities......................................... Section 1.3(d)(i)
Transaction Expenses...................................... Section 1.3(a)
Unaffiliated Firm......................................... Section
1.3(d)(iii)
Unaudited Financial Statements............................ Section 2.8
Voting Agreement.......................................... Recitals
Section 10.2 Defined Terms. As used herein the following terms not
otherwise defined have the following respective meanings:
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person. As used
in this definition the term "control" (including the terms "controlled by" and
"under common control with") means, with respect to the relationship between or
among two or more Persons, the possession, directly or indirectly, of the power
51
to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Aggregate Equity Value" means the amount of Enterprise Value less the
amount of Transaction Expenses less Indebtedness of the Company outstanding on
the Closing Date immediately prior to the Effective Time (other than any
Indebtedness incurred by the Company to pay the Aggregate Option Consideration)
less the Escrow Amount.
"Certificate of Merger" means a customary form of certificate to effect a
merger of the Acquirer and the Company in substantially the form of Exhibit E
attached hereto.
"Certificates" means the original stock certificates which, immediately
prior to the Effective Time, represented shares of Company Stock, or the right
to receive shares of Company Stock, other than Dissenting Shares.
"Citizens Line" means the Loan Agreement for $10,000,000.00 by and among
Datel, Inc., Datel Systems, Inc. and Citizens Bank of Massachusetts, dated as of
June 28, 2000, as amended on June 28, 2002 whereby the loan amount was reduced
to $5,000,000.00, and further amended on October 28, 2002 whereby the parties
agreed that the loan would be payable on demand.
"Company Optionholder" means the holder of any outstanding Eligible Company
Options at the Effective Time.
"Company Stock Option Plan" means the Datel Holding Corporation 1997
Combination Stock Option Plan.
"Company Stock" means, collectively, Company Common Stock and Company
Preferred Stock.
"Company Stockholder" means any holder of record of shares of Company Stock
outstanding immediately prior to the Effective Time; provided, however, that the
term "Company Stockholder" shall not include any holder of Dissenting Shares.
"Encumbrance" means any title defect or objection, lien, pledge, mortgage,
deed of trust, security interest, claim (whether or not made, known or
contingent), judgment, lease, license, charge, pledge, option, escrow, right of
first refusal or offer, preemptive right, conditional sale or other title
retention agreement, easement, encroachment or other real estate declaration,
covenant, condition, restriction or servitude, transfer restriction under any
stockholder or similar agreement, encumbrance or any other restriction or
limitation whatsoever, in each case other than Permitted Encumbrances.
"Escrow Agent" means the escrow agent under the Escrow Agreement.
"Escrow Amount" means $10,000,000.
52
"Exchange and Paying Agent Agreement" means the Exchange and Paying Agent
Agreement substantially in the form attached hereto as Exhibit F.
"GAAP" means United States generally accepted accounting principles, which
are consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect as of the date of
this Agreement.
"Governmental Entity" means any government or any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, federal, state, local, transnational or foreign.
"Indebtedness" means, as applied to any Person, at any particular time,
without duplication, (a) indebtedness of such Person for borrowed money or
issued in substitution for or exchange of indebtedness for borrowed money, (b)
indebtedness of such Person evidenced by any note, bond, debenture or other debt
security, (c) indebtedness of such Person for the deferred purchase price of
property or services with respect to which such Person is liable, contingently
or otherwise, as obligor or otherwise (other than trade payables and other
current liabilities incurred in the ordinary course of business which are not
more 30 days past due), (d) contingent reimbursement obligations of such Person
with respect to letters of credit, (e) indebtedness guaranteed in any manner by
such Person (including guarantees in form of an agreement to repurchase or
reimburse), (f) obligations under capitalized leases with respect to which such
Person is liable as obligor or guarantor, (g) any indebtedness secured by an
Encumbrance on such Person's assets, (h) liabilities under any interest rate
swap agreement, currency or other hedge agreement, derivative instrument, or
other similar agreement designed to protect the Company against fluctuations in
interest rates, (i) liabilities owed in respect of the termination or
cancellation of any Material Contract, including under any employment or
non-competition agreements, (j) liabilities for bank overdrafts excluding any
book overdrafts relating to outstanding checks included in accounts payable to
the extent treated as bank overdrafts or otherwise included in any of the
Company's financial statements and (k) any unsatisfied obligation for
"withdrawal liability," as such term is defined under ERISA, to a Multiemployer
Plan (as such term is defined under ERISA).
"Knowledge of Company" means, with respect to any particular matter, the
actual knowledge of the executive officers and directors of the Company after
reasonable inquiry.
"Master Lease" means the Master Lease Agreement, including schedules, by
and between Datel, Inc. and Heller Financial Leasing, Inc., dated as of March
28, 2000, including those certain assignments of rights and interests by Heller
Financial Leasing, Inc., effective as of February 12, 2001 and April 30, 2001.
"Material Adverse Effect" means, with respect to any Person, any material,
substantial or significant, and adverse, detrimental or negative, development or
change in the business, operations, assets, liabilities, financial condition or
results of operations of such Person and its Subsidiaries taken as a whole, it
being understood that general industry, economic, regulatory or political
trends, developments or changes that do not disproportionately affect the
53
Company compared with other Persons also so involved in such industry or, the
economy, generally, shall not be deemed to constitute or result in a Material
Adverse Effect for purposes of this Agreement.
"Mortgage" means the $6,850,000.00 mortgage loan secured by 11 Cabot
Boulevard, Mansfield, MA, by Sun Life Assurance Company of Canada (U.S.) issued
to Datel, Inc., dated as of August 27, 1997, including the related Supplemental
Agreement by and between Datel, Inc. and Sun Life Assurance Company of Canada
(U.S.), dated as of August 27, 1997.
"Paying Agent" means Bank of New York, as the Paying Agent under the
Exchange and Paying Agent Agreement.
"Permitted Encumbrances" means (a) Encumbrances that arise out of taxes not
in default and payable without penalty or interest or the validity of which is
being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established in accordance with GAAP, (b)
workmen's, repairmen's or other similar Encumbrances arising or incurred by the
operation of law and in the ordinary course of business in respect of
obligations which are not overdue, (c) minor title defects, recorded easements
or Encumbrances affecting real property, which defects, easements or
Encumbrances do not, individually or in the aggregate, impair the continued use,
occupancy, value or marketability of title of the real property to which they
relate, assuming that the property is used on substantially the same basis as
such property is currently being used by the Company or (d) Encumbrances listed
in Schedule 2.10(a) and (e) (other than those noted as being discharged prior to
Closing).
"Person" means any corporation, association, partnership, limited liability
company, organization, business, individual, government or political subdivision
thereof or governmental agency.
"Proprietary Rights" means all patents, patent disclosures, patent
applications, trademarks, service marks, trademark and service mark
registrations and applications therefor, and all good will associated therewith,
copyrights, copyright registrations and applications, mask works, trade names,
corporate names, trade dress, technology, inventions, computer software, data
and documentation (including electronic media), specifications, product
drawings, training materials (including films, brochures and printed materials),
catalogs and other advertising and promotional materials, trade secrets,
know-how, confidential information, financial business and marketing plans,
customer and supplier lists, and all other intellectual property and proprietary
information or rights necessary for the operation of the business of the Company
as is presently conducted.
"Pro Rata Amount" means, with respect to the Aggregate Merger
Consideration, the pro rata portion of such amount payable pursuant to the
Company's certificate of incorporation per share of Company Common Stock and per
share of Company Preferred Stock, all as reasonably determined by the
Stockholder Representatives; and, with respect to the Escrow Amount, the pro
54
rata portion of such amounts similarly determined but also taking into account
the portion thereof payable to Company Optionholders.
"Shares" means shares of Company Stock.
"Stockholder" means any holder of record of Shares immediately prior to the
Effective Time.
"Subsidiary(ies)" means, with respect to any Person, any corporation a
majority (by number of votes) of the outstanding shares of any class or classes
of which shall at the time be owned by such Person or by a Subsidiary of such
Person, if the holders of the shares of such class or classes (a) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or persons performing similar functions) of the
issuer thereof, even though the right so to vote has been suspended by the
happening of such a contingency, or (b) are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the issuer thereof, whether or not the right so
to vote exists by reason of the happening of a contingency.
"Tax" and "Taxes" means (a) any tax, governmental fee, duties, assessments,
imposts, levies or other like assessment or charge of any kind whatsoever
(including, but not limited to, withholding on amounts paid to any Person, taxes
levied on, or measured by, or referred to as income, gross receipts, profits or
capital taxes, premium, sales, goods and services, use, value-added, excise,
stamp, business, property, payroll, employment, health, Medicare or other social
services taxes, and all surtaxes, alternative or add on minimum taxes, transfer
taxes, customs duties and all other taxes, governmental fees and other like
assessments and charges of any kind whatsoever (including, but not limited to,
tax liabilities incurred or borne as a transferee or successor, or by contract,
or otherwise)), whether computed on a separate, consolidated, unitary or
combined basis or in any other manner, together with all interest, penalties,
additions to tax and additional amounts with respect thereto, and (b) any
liability for the payment of any amount described in the foregoing clause (a) as
a result of the Company or any Subsidiary being a member of an affiliated,
consolidated or combined group with any corporation or other entity at any time
on or prior to the Closing Date.
"Tax Returns" means all returns, declarations, reports, claims for refund,
information statements and other documents relating to Taxes, including all
schedules and attachments thereto, and including all amendments thereof.
"Tax Authority" means any governmental authority responsible for the
imposition of any Tax.
All references to "$" or "dollars" are to United States currency.
55
ARTICLE 11
MISCELLANEOUS PROVISIONS
Section 11.1 Amendments. This Agreement may be amended only pursuant to an
agreement in writing between the Parent, on the one hand, and the Stockholder
Representatives, on the other hand, provided that such written agreement states
that it is an amendment of this Agreement.
Section 11.2 Expenses. All expenses incurred by any party hereto shall be
borne by the party incurring the same. Except as provided otherwise herein, in
the event of any dispute among the parties hereto, the prevailing party shall be
entitled to recover all reasonable legal fees and expenses incurred in
connection with such dispute from the non-prevailing party.
Section 11.3 Notices. Any notice expressly provided for under this
Agreement shall be in writing, and shall be deemed to have been duly given if
(a) delivered personally (effective upon delivery), (b) mailed by registered or
certified mail, return receipt requested, postage prepaid (effective five days
after dispatch), (c) sent via a reputable, established courier service that
guarantees next business day delivery (effective the next business day after
delivery to such courier) or (d) sent via telecopier followed within 24 hours by
confirmation by one of the foregoing methods (effective upon the transmission of
the telecopy in complete, readable form) addressed as set forth below. Any party
and any representative designated below may, by notice to the others, change its
address for receiving such notices.
Address for notices to Parent and Acquirer and, after the Closing, for
notices to the Surviving Corporation:
C&D Technologies, Inc.
1400 Union Meeting Road
P.O. Box 3053
Blue Bell, PA 19422
Attention: Vice President, Finance and Chief Financial Officer
Facsimile: (215) 619-7841
56
with copies to:
C&D Technologies, Inc.
1400 Union Meeting Road
P.O. Box 3053
Blue Bell, PA 19422
Attention: Vice President, General Counsel
Facsimile: (215) 619-7816
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, MA 02110
Attention: F. George Davitt, Esq.
Facsimile: (617) 248-7100
Address for notices to Company Stockholders, Company Optionholders and/or
the Stockholder Representatives:
Nicholas G. Tagaris Leif Jacobsen
3120 South Ocean Blvd. 6 Coach Road
Palm Beach, FL 33480 Walpole, MA 02081
Robert C. Caspar
6 Donnelly Drive
Dover, MA 02030
with copies to:
Brown Rudnick Berlack Israels LLP
One Financial Center
Boston, MA 02111
Attention: Steven R. London, Esquire
Facsimile: (617) 856-8201
Section 11.4 Assignment and Benefits of Agreement. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors. Before the Closing, this Agreement may not be assigned by any of the
foregoing without the written consent of the others. After the Closing, this
Agreement or any provision hereof may be assigned by Parent or the Surviving
Corporation without the consent of any other party. Except for Section 1.13 (for
the benefit of Company Optionholders) and Section 5.7 (for the benefit of
directors and officers), nothing in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
successors and assigns, any rights under or by reason of this Agreement.
57
Section 11.5 Entire Agreement. This Agreement, including all Exhibits,
Schedules and Recitals hereto, contains the entire understanding of the parties,
supersedes all prior agreements and understandings relating to the subject
matter hereof and thereof.
Section 11.6 Disclosure in Schedules. For purposes of this Agreement, with
respect to any matter that is clearly disclosed on any Schedule hereto in such a
way as to make its relevance to the information called for by another Section
of, or Schedule to, this Agreement readily apparent, such matter shall be deemed
to have been disclosed in response to such other Section and/or Schedule,
notwithstanding the omission of any appropriate cross-reference thereto;
provided, however, that the Company hereby covenants to make a good faith
diligent effort to make all appropriate cross-references within and to any and
all Sections and Schedules.
Section 11.7 Severability. In the event that any covenant, condition, or
other provision herein contained is held to be invalid, void, or illegal by any
court of competent jurisdiction, the same shall be deemed to be severable from
the remainder of this Agreement and shall in no way affect, impair, or
invalidate any other covenant, condition, or other provision contained herein.
Section 11.8 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the internal laws (not including the
choice-of-law rules) of the State of Delaware.
Section 11.9 Jurisdiction and Venue. Subject to Section 5.9 of this
Agreement, the parties hereto agree that any suit, action or proceeding arising
out of or relating to this Agreement shall be instituted only in a Massachusetts
state or federal court sitting in the Boston, Massachusetts, United States of
America. Each party hereto waives any objection it may have now or hereafter to
the laying of the venue of any such suit, action or proceeding, and irrevocably
submits to the jurisdiction of any such court in any such suit, action or
proceeding.
Section 11.10 Section Headings; Singular and Plural, Etc. All enumerated
subdivisions of this Agreement are herein referred to as "Section" or
"Subsection." The headings of Sections or Subsections are for reference only and
shall not limit or control the meaning thereof. Whenever a singular number is
used herein where required by context, the same shall include the plural, and
the neutral gender shall include the masculine and feminine genders. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
are deemed to be followed by the words "without limitation."
Section 11.11 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. Each of the parties
hereto represents to the other party hereto that it has discussed this Agreement
with its counsel. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
58
Section 11.12 Counterparts. This Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.13 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to seek specific performance on the terms
hereof, in addition to any other remedy at law or equity.
Section 11.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAVIES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
59
IN WITNESS WHEREOF, the parties hereto have duly executed this Merger
Agreement as an instrument under seal as of the date and year first above
written.
DATEL HOLDING CORPORATION
By /s/ Nicholas Tagaris
--------------------------------------------
Chief Executive Officer
PARENT
By /s/ Stephen E. Markert, Jr.
--------------------------------------------
Name:Stephen E. Markert, Jr.
Title: VP-CFO
CLETADD ACQUISITION CORPORATION
By /S/ Brian D. Crowe
-------------------------------------------
Name:Brain D. Crowe
Title:Vice President