EXHIBIT 10.19
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
between
GRETAG IMAGING GROUP, INC.
GRETAG ACQUISITION CORP.
and
RASTER GRAPHICS, INC.
Dated as of October 6, 1998
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TABLE OF CONTENTS
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Page
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ARTICLE 1 The Merger............................................................ 2
1.1. The Merger.................................................... 2
1.2. The Closing................................................... 2
1.3. Effective Time................................................ 2
ARTICLE 2 Certificate of Incorporation and Bylawsof the Surviving
Corporation........................................................... 3
2.1. Certificate of Incorporation.................................. 3
2.2. Bylaws........................................................ 3
ARTICLE 3 Directors and Officers of the Surviving Corporation................... 3
3.1. Directors..................................................... 3
3.2. Officers...................................................... 3
ARTICLE 4 Effect of the Merger on Securitiesof Merger Sub and the
Company............................................................... 3
4.1. Merger Sub Stock.............................................. 3
4.2. Company Securities............................................ 4
4.3. Exchange of Certificates Representing Common Stock............ 5
4.4. Adjustment of Merger Consideration............................ 6
4.5. Dissenting Company Stockholders............................... 6
ARTICLE 5 Representations and Warranties of the Company......................... 7
5.1. Existence; Good Standing; Corporate Authority................. 7
5.2. Authorization, Validity and Effect of Agreements.............. 8
5.3. Compliance with Laws.......................................... 8
5.4. Capitalization................................................ 8
5.5. Subsidiaries.................................................. 9
5.6. No Violation................................................. 10
5.7. Company Reports; Proxy Statement............................. 11
5.8. Litigation................................................... 12
5.9. Absence of Certain Changes................................... 13
5.10. Taxes........................................................ 13
5.11. Employee Benefit Plans....................................... 15
5.12. Labor and Employment Matters................................. 16
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5.13. Brokers and Finders.......................................... 17
5.14. Fairness Opinion............................................. 17
5.15. Licenses and Permits......................................... 17
5.16. Environmental Matters........................................ 17
5.17. Material Contracts........................................... 18
5.18. Intellectual Property; Technology............................ 20
5.19. Required Vote of Company Stockholders........................ 23
5.20. State Statutes............................................... 23
5.21. Disclosures.................................................. 23
ARTICLE 6 Representations and Warranties of Purchaser and Merger Sub........... 24
6.1. Existence; Good Standing; Corporate Authority................ 24
6.2. Authorization, Validity and Effect of Agreements............. 24
6.3. Proxy Statement.............................................. 24
6.4. No Violation................................................. 24
6.5. Financing.................................................... 25
6.6. Brokers and Finders.......................................... 25
ARTICLE 7 Covenants............................................................ 25
7.1. No Solicitation.............................................. 25
7.2. Interim Operations........................................... 27
7.3. Filings; Other Action........................................ 32
7.4. Access to Information........................................ 33
7.5. Publicity.................................................... 34
7.6. Further Action............................................... 34
7.7. Insurance; Indemnity......................................... 35
7.8. Restructuring of Merger...................................... 35
7.9. Employees and Employee Benefit Plans......................... 36
7.10. Stockholder Approval; Preparation of Proxy Statement......... 36
7.11. Additional Agreements of the Company......................... 38
7.12. Transfer Taxes............................................... 39
ARTICLE 8 Conditions........................................................... 39
8.1. Conditions to Each Party's Obligation to Effect the Merger... 39
8.2. Additional Conditions to Obligations of Purchaser and
Merger Sub to Effect the Merger.............................. 40
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8.3. Additional Conditions to Obligations of the Company.......... 41
ARTICLE 9 Termination; Amendment; Waiver....................................... 41
9.1. Termination.................................................. 41
9.2. Effect of Termination........................................ 44
9.3. Amendment.................................................... 44
9.4. Extension; Waiver............................................ 44
ARTICLE 10 General Provisions................................................... 45
10.1. Nonsurvival of Representations and Warranties................ 45
10.2. Notices...................................................... 45
10.3. Assignment; Binding Effect................................... 45
10.4. Entire Agreement............................................. 46
10.5. Fees and Expenses............................................ 46
10.6. Governing Law................................................ 47
10.7. Headings..................................................... 48
10.8. Interpretation............................................... 48
10.9. Investigations............................................... 48
10.10. Severability................................................. 48
10.11. Enforcement of Agreement..................................... 48
10.12. Counterparts................................................. 49
DEFINITIONS ....................................................................... v
DISCLOSURE SCHEDULE
EXHIBIT I Memorandum of Understanding
iii
DEFINITIONS
Defined Term Section Reference
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"Acquisition Agreement" Section 7.1(b)
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"Acquisition Proposal" Section 7.1
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"affiliate" Section 10.8
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"Agreement" First Paragraph
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"associate" Section 10.8
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"Board" or "Board of Directors" Section 7.15
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"Cap" Section 7.7(a)
---
"Certificate" Section 4.2(b)
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"Closing" Section 1.2
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"Closing Date" Section 1.2
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"Commercial Software" Section 5.18(h)
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"Common Stock" Section 4.2(a)
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"Company" First Paragraph
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"Company Benefit Plans" Section 5.11
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"Company Intellectual Property" Section 5.18(b)
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"Company Owned Intellectual Property" Section 5.18
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"Company Reports" Section 5.7(a)
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"Company Software" Section 5.18(h)
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"Company Stockholder Approval" Section 5.19
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"Computer Systems" Section 5.18(i)
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"Consents" Section 7.3
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"Contract" or "Contracts" Section 5.6
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"Current Policies" Section 7.7(a)
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"Delaware Courts" Section 10.6
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"Derivative" or "Derivatives" Section 5.17
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"DGCL" Section 4.5
----
"Disclosure Letter" Section 5
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"Dissenting Common Stock" Section 4.5
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"Effective Time" Section 1.3
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"Employee Agreements" Section 5.11
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"Encumbrances" Section 5.5
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iv
"Environmental Laws" Section 5.16(a)
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"excess parachute payment" Section 5.11
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"Exchange Act" Section 5.6
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"Exchange Fund" Section 4.3(a)
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"Fairness Opinion" Section 5.14
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"Foreign Antitrust Laws" Section 5.6
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"Governmental Entity" Section 5.3
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"group" Section 8.2(g)
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"Hazardous Substances" Section 5.16(b)
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"HSR Act" Section 5.6
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"Information Statement" Section 5.7(b)
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"Inkjet Business" Option Agreement
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"Inkjet Option" Option Agreement
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"Intellectual Property" Section 5.18(j)
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"Laws" Section 5.3
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"Litigation" Section 5.8
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"Loan Agreement" Recitals
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"Losses" Section 7.7(b)
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"Material Adverse Effect" Section 5.1
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"Material Contracts" Section 5.17
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"Material Delaying Effect" Section 5.6
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"Maximum Expense Amount" Section 10.5(b)
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"Merger" Section 1.1
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"Merger Consideration" Section 4.2(a)
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"Merger Sub" First Paragraph
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"MOU" Section 5.8
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"Option" or "Options" Section 4.2(d)
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"Option Agreement" Recitals
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"Other Antitrust Consents" Section 7.3
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"Other Antitrust Filings" Section 7.3
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"Paying Agent" Section 4.3(a)
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"Pending Reports" Section 7.10(c)
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"Permits" Section 5.15
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"Preferred Stock" Section 5.4
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"Proxy Statement" Section 7.10(b)
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"Purchaser" First Paragraph
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"Purchaser Expenses" 11.5(b)
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"Regulatory Filings" Section 5.6
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"Requisite Regulatory Approvals" Section 8.1(f)
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"Rights" Section 5.4
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"Rights Agreement" Section 5.4
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"Settlement" Section 5.8
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"SEC" Section 5.7
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"Securities Act" Section 5.7(a)
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"Seiko Epson Agreement" Section 7.11(d)
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"Software" Section 5.18(k)
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"Stock Option Plans" Section 4.2(d)
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"Stock Purchase Plan" Section 5.4
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"Stockholders Agreement" Recitals
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"Stockholders Meeting" Section 7.10
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"Subsidiary" Section 10.8
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"Superior Proposal" Section 7.1
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"Surviving Corporation" Section 1.1
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"Tax" or "Taxes" Section 5.10(l)
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"Tax Return" Section 5.10(l)
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"Termination Amount" Section 10.5(b)
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"Unaudited 1998 Financial Statements" Section 5.7
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"Vested Options" Section 4.2(d)
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vi
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 6, 1998 (this
"Agreement"), among Gretag Imaging Group, Inc., a Delaware corporation
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("Purchaser"), Gretag Acquisition Corp., a Delaware corporation and a wholly
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owned subsidiary of Purchaser ("Merger Sub"), and Raster Graphics, Inc., a
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Delaware corporation (the "Company").
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RECITALS
WHEREAS, the Boards of Directors of Purchaser, Merger Sub and the Company
each have determined that it is advisable and in the best interests of their
respective companies and stockholders for Purchaser to acquire the Company upon
the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Purchaser's and Merger Sub's willingness to enter into this
Agreement, the Purchaser and the Company are entering into an Asset and
Subsidiary Stock Option Agreement (the "Option Agreement"), pursuant to which
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Purchaser shall have the right, upon the occurrence of certain conditions, to
purchase certain assets of the Company and/or the shares of Onyx Graphics
Corporation ("O-Sub"), a wholly owned Subsidiary of the Company;
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WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement to the Purchaser's and Merger Sub's willingness to
enter into this Agreement, certain stockholders of the Company, Purchaser and
Merger Sub are entering into a Stockholders Agreement (the "Stockholders
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Agreement"), pursuant to which such stockholders have agreed, among other
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things, to vote their shares in favor of the Merger;
WHEREAS, the Board of Directors of the Company has approved the
transactions contemplated by the Option Agreement and the Stockholders
Agreement;
WHEREAS, concurrently with the execution of this Agreement, the Company
and Purchaser have entered into a Loan and Pledge Agreement, dated as of the
date hereof (the "Loan Agreement") pursuant to which Purchaser has agreed to
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advance certain amounts to the Company; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection herewith.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
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at the Effective Time, Merger Sub shall be merged with and into the Company in
accordance with this Agreement, and the separate corporate existence of Merger
Sub shall thereupon cease (the "Merger"). The Company shall be the surviving
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corporation in the Merger (sometimes hereinafter referred to as the "Surviving
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Corporation"). The Merger shall have the effects specified in the DGCL.
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1.2 The Closing. Subject to the terms and conditions of this Agreement,
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the closing of the Merger (the "Closing") shall take place at the offices of
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Debevoise & Plimpton, 875 Third Avenue, New York, New York, at 10:00 a.m., local
time, as soon as practicable following the satisfaction (or waiver if
permissible) of the conditions set forth in Article 8 or at such other time,
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date or place as Purchaser and the Company may agree. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
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1.3 Effective Time. If all the conditions to the Merger set forth in
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Article 8 shall have been fulfilled or waived in accordance herewith and this
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Agreement shall not have been terminated as provided in Article 9, the parties
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hereto shall cause a Certificate of Merger meeting the requirements of Sections
103 and 251 of the DGCL to be properly executed and filed in accordance with
such Sections on the Closing Date. The Merger shall become effective at the
time of filing of the Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with the DGCL or at such later time which the
parties hereto shall have agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time").
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2
ARTICLE 2
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of
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Merger Sub in effect immediately prior to the Effective Time shall be adopted as
the Certificate of Incorporation of the Surviving Corporation, until duly
amended in accordance with applicable law, except that the name of the Surviving
Corporation shall be "Raster Graphics, Inc."
2.2 Bylaws. The Bylaws of the Company in effect immediately prior to
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the Effective Time shall be adopted as the Bylaws of the Surviving Corporation,
until duly amended in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
3.1 Directors. The directors of Merger Sub immediately prior to the
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Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
3.2 Officers. The officers of the Company immediately prior to the
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Effective Time, together with such additions thereto as Merger Sub shall
designate, shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES
OF MERGER SUB AND THE COMPANY
4.1 Merger Sub Stock. At the Effective Time, each share of common
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stock, $0.01 par value per share, of Merger Sub outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and
3
nonassessable share of common stock, $0.001 par value per share, of the
Surviving Corporation.
4.2 Company Securities.
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(a) At the Effective Time, each share of Common Stock, par value $0.001
per share (the "Common Stock") of the Company, together with the associated
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Rights, issued and outstanding immediately prior to the Effective Time (other
than shares of Common Stock owned by Purchaser or Merger Sub or held by the
Company or owned or held by any of their respective Subsidiaries, all of which
shall be canceled as provided in Section 4.2(c), and other than shares of
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Dissenting Common Stock) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the right to receive cash
in the amount of $1.2968 per share, without interest (the "Merger
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Consideration"). Except where the context otherwise requires, all references
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herein to shares of Common Stock shall include the associated Rights.
(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Common Stock shall cease
to be outstanding and shall be automatically canceled and retired and shall
cease to exist, and each holder of shares of Common Stock (other than Merger
Sub, Purchaser, the Company and each of their respective Subsidiaries) shall
thereafter cease to have any rights with respect to such shares of Common Stock,
except the right to receive, without interest, the Merger Consideration in
accordance with Section 4.3 upon the surrender of a certificate or certificates
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(a "Certificate") representing such shares of Common Stock or, with respect to
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shares of Dissenting Common Stock, payment of the appraised value of shares of
Dissenting Common Stock in accordance with Section 4.5.
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(c) Each share of Common Stock issued and owned or held by Purchaser,
Merger Sub, the Company or any of their respective Subsidiaries at the Effective
Time shall, by virtue of the Merger, cease to be outstanding and shall be
automatically canceled and retired without payment of any consideration
therefor.
(d) All options (individually, an "Option" and collectively, the
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"Options") outstanding immediately prior to the Effective Time under any Company
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stock option plan or stock purchase plan (the "Stock Option Plans"), whether or
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not then exercisable, shall be canceled and each holder of an Option will be
entitled to receive, for each share of Common Stock subject to an Option, an
amount in cash equal to the excess, if any, of the Merger Consideration over the
per share exercise price of such Option, without interest. The amounts payable
pursuant to this Section 4.2(d) shall be subject to all applicable withholding
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of taxes. The Company shall use its reasonable best efforts to
4
obtain all necessary consents of the holders of Options to the cancellation of
the Options in accordance with this Section 4.2(d).
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4.3 Exchange of Certificates Representing Common Stock.
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(a) Prior to the Effective Time, Purchaser shall appoint a commercial
bank or trust company having net capital of not less than $100,000,000 and which
is reasonably satisfactory to the Company, to act as paying agent hereunder for
payment of the Merger Consideration upon surrender of Certificates (the "Paying
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Agent"). Purchaser shall, or shall cause the Surviving Corporation to, provide
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the Paying Agent with cash in amounts necessary to pay for all the shares of
Common Stock pursuant to Section 4.2(a) and to make all payments in connection
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with the Options pursuant to Section 4.2(d), as and when such amounts are needed
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by the Paying Agent. Such amounts shall hereinafter be referred to as the
"Exchange Fund."
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(b) Promptly after the Effective Time, Purchaser shall cause the Paying
Agent to mail to each holder of record of shares of Common Stock immediately
prior to the Effective Time (i) a letter of transmittal which shall specify that
-
delivery shall be effected, and risk of loss and title to such Certificates
shall pass, only upon delivery of the Certificates to the Paying Agent and which
letter shall be in customary form and have such other provisions as Purchaser
may reasonably specify and (ii) instructions for effecting the surrender of such
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Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate to the Paying Agent together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the amount of
cash into which shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 4.2, and the shares
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represented by the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or will accrue on the cash payable upon surrender of any
Certificate. In the event of a transfer of ownership of Common Stock which is
not registered in the transfer records of the Company, payment may be made with
respect to such Common Stock to such a transferee if the Certificate
representing such shares of Common Stock is presented to the Paying Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) At and after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are
5
presented to the Surviving Corporation, they shall be canceled and exchanged as
provided in this Article 4.
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(d) Any portion of the Exchange Fund (including the proceeds of any
interest and other income received by the Paying Agent in respect of all such
funds) that remains unclaimed by the former stockholders of the Company six
months after the Effective Time shall be delivered to the Surviving Corporation.
Any former stockholders of the Company who have not theretofore complied with
this Article 4 shall thereafter look only to the Surviving Corporation for
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payment of any Merger Consideration that may be payable upon surrender of any
Certificates such stockholder holds, as determined pursuant to this Agreement,
without any interest thereon.
(e) None of Purchaser, the Company, the Surviving Corporation, the
Paying Agent or any other person shall be liable to any former holder of shares
of Common Stock for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
(f) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed and, if required by the Surviving Corporation,
the posting by such person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration payable in
respect thereof pursuant to this Agreement.
4.4 Adjustment of Merger Consideration. If, subsequent to the date of
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this Agreement but prior to the Effective Time, the outstanding shares of Common
Stock shall have been changed into a different number of shares or a different
class as a result of a stock split, reverse stock split, stock dividend,
subdivision, reclassification, split, combination, exchange, recapitalization or
other similar transaction, the Merger Consideration shall be appropriately
adjusted.
4.5 Dissenting Company Stockholders. Notwithstanding any provision of
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this Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, shares of Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by holders of such
shares of Common Stock who have properly exercised appraisal rights with respect
thereto (the "Dissenting Common Stock") in accordance with Section 262 of the
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Delaware General Corporation Law ("DGCL") will not be exchangeable for the right
----
to receive the Merger Consideration, and holders of such shares of Dissenting
Common Stock will be entitled to receive
6
payment of the appraised value of such shares of Dissenting Common Stock in
accordance with the provisions of such Section 262 unless and until such holders
fail to perfect or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Dissenting
Common Stock will thereupon be treated as if they had been converted into and
have become exchangeable for, at the Effective Time, the right to receive the
Merger Consideration, without any interest thereon. Notwithstanding anything to
the contrary contained in this Section 4.5, if (i) the Merger is rescinded or
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abandoned or (ii) the stockholders of the Company revoke the authority to effect
--
the Merger, then the right of any stockholder to be paid the fair value of such
stockholder's Dissenting Common Stock pursuant to Section 262 of the DGCL shall
cease. The Company will give Purchaser prompt notice of any demands and
withdrawals of such demands received by the Company for appraisals of shares of
Dissenting Common Stock. The Company shall not, except with the prior written
consent of Purchaser, make any payment with respect to any demands for appraisal
or offer to settle or settle any such demands.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser and Merger Sub as
of the date hereof and as of the Effective Time as follows, except as
specifically disclosed in the writing from the Company to Purchaser and Merger
Sub that is dated the date of this Agreement and that is identified by the
Company to Purchaser as the disclosure letter to this Agreement (the "Disclosure
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Letter"):
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5.1 Existence; Good Standing; Corporate Authority. Each of the Company
---------------------------------------------
and its Subsidiaries is (i) a corporation duly incorporated, validly existing
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and in good standing under the laws of its jurisdiction of incorporation and
(ii) is duly licensed or qualified to do business as a foreign corporation and
--
is in good standing under the laws of any other state of the United States or
any other jurisdiction in which the character of the properties owned or leased
by it or in which the transaction of its business makes such licensure,
qualification or good standing necessary, except where the failure to be so in
good standing or to be so licensed or qualified, individually or in the
aggregate, would not have a material adverse effect on the business, operations,
results of operations, assets, financial condition or prospects of the Company
and its Subsidiaries taken as a whole (a "Material Adverse Effect"). Each of
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the Company and its Subsidiaries has the requisite corporate power and authority
to own, operate and lease its properties and carry
7
on its business as now conducted. The Company has heretofore delivered to
Purchaser true and correct copies of the Certificate of Incorporation and Bylaws
of the Company as currently in effect.
5.2 Authorization, Validity and Effect of Agreements. The Company has
------------------------------------------------
the requisite corporate power and authority to execute and deliver this
Agreement and the Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Option Agreement by the Company, the execution and delivery of the
Stockholders Agreement by the stockholders who are parties thereto and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors, and no other
corporate proceedings on the part of the Company or its stockholders are
necessary to authorize this Agreement, the Stockholders Agreement or the Option
Agreement or to consummate the transactions contemplated hereby or thereby
(other than the approval of this Agreement and the Merger by the holders of a
majority of the shares of Common Stock, if required by applicable law). The
Board of Directors has duly adopted resolutions determining that the Merger is
advisable and the terms of the Merger are fair to, and in the best interests of,
the Company and the Company's stockholders and recommending that the Company's
stockholders approve the Merger and this Agreement. Each of this Agreement and
the Option Agreement has been duly and validly executed and delivered by the
Company, and (assuming this Agreement and the Option Agreement each constitutes
a valid and binding obligation of Purchaser and Merger Sub) constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
5.3 Compliance with Laws. Except as set forth in the Disclosure Letter,
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neither the Company nor any of its Subsidiaries is in violation of any foreign,
federal, state or local law, statute, ordinance, rule, regulation, order,
judgment, ruling or decree ("Laws") of any foreign, federal, state or local
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judicial, legislative, executive, administrative or regulatory body or authority
or any court, arbitration, board or tribunal (each such entity, a "Governmental
------------
Entity") applicable to the Company or any of its Subsidiaries or any of their
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respective properties or assets, except for violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
5.4 Capitalization. The authorized capital stock of the Company
--------------
consists of 50,000,000 shares of Common Stock and 2,000,000 shares of preferred
stock, $0.001 par value (the "Preferred Stock"). As of October 5, 1998, (a)
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9,599,525 shares of Common Stock were issued and outstanding, (b) 30,000 shares
-
of Preferred Stock were subject to Preferred Stock Purchase Rights ("Rights")
------
issued pursuant to the Preferred Shares Rights Agreement, dated as of February
4, 1998, between the Company and U.S. Stock
8
Transfer Corporation, as rights agent (the "Rights Agreement"), (c) Options to
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purchase an aggregate of 1,628,408 shares of Common Stock were outstanding,
1,628,408 shares of Common Stock were reserved for issuance upon the exercise of
outstanding Options and 430,300 shares were reserved for future grants under the
Stock Option Plans, and there were no stock appreciation rights or limited stock
appreciation rights outstanding other than those attached to such Options, (d)
-
no shares of Common Stock were held by the Company in its treasury, and (e) no
-
shares of Common Stock of the Company were held by the Company's Subsidiaries.
Except for the Rights, the Warrants and the Options, the Company has no
outstanding bonds, debentures, notes or other obligations or securities
entitling the holders thereof to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. The Disclosure Letter sets forth for each Option and
Warrant, (i) its exercise price, (ii) its expiration date, (iii) the first date
- -- ---
upon which it becomes exercisable, and (iv) the number of shares of Common Stock
--
(or the securities) for which it is exercisable. Since December 31, 1997, the
Company (i) has not issued any shares of Common Stock, (ii) has granted Options
- --
to purchase an aggregate of 487,900 shares of Common Stock under the Stock
Option Plans, and (iii) has not split, combined or reclassified any of its
---
shares of capital stock. All issued and outstanding shares of Common Stock are
duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. Except for the Rights, the Options and pursuant to the Loan
Agreement and except as set forth in this Section 5.4 or in the Disclosure
-----------
Letter, there are no other shares of capital stock of the Company, no securities
of the Company convertible or exchangeable for shares of capital stock or voting
securities of the Company, and no existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock of, or equity interests in, the
Company or any of its Subsidiaries. There are no outstanding obligations of the
Company or any Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company and, other than outstanding Options,
there are no awards outstanding under the Stock Option Plans or any other
outstanding stock-related awards. After the Effective Time, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of
capital stock of the Company or the Surviving Corporation pursuant to any
Options or any Company Benefit Plan. Except as set forth in the Disclosure
Letter, there are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of capital stock of the Company or any of its Subsidiaries.
5.5 Subsidiaries. Except as set forth in the Disclosure Letter, (i) the
------------ -
Company owns, directly or indirectly through a Subsidiary, all of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power
9
to elect directors or others performing similar functions with respect to such
Subsidiary) of each of the Company's Subsidiaries, and (ii) each of the
--
outstanding shares of capital stock of each of the Company's Subsidiaries (other
than O-Sub) is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by the Company free and clear of all
liens, pledges, security interests, claims or other encumbrances
("Encumbrances"). Each of the outstanding shares of capital stock of O-Sub is
------------
duly authorized, validly issued, fully paid and nonassessable and is owned
directly by the Company, free and clear of all Encumbrances. The Disclosure
Letter sets forth for each Subsidiary of the Company: (i) its name and
-
jurisdiction of incorporation or organization; (ii) its authorized capital stock
--
or share or equity capital; (iii) the number of issued and outstanding shares of
---
capital stock or share or equity capital; and (iv) the holder or holders of such
--
shares. Except for interests in the Company's Subsidiaries or as set forth in
the Disclosure Letter, neither the Company nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or other entity.
5.6 No Violation. Except as set forth in the Disclosure Letter, neither
------------
the execution and delivery by the Company of this Agreement or the Option
Agreement nor the consummation by the Company of the transactions contemplated
hereby or thereby will: (i) violate, conflict with or result in a breach of any
-
provisions of the Certificate of Incorporation or Bylaws (or comparable
constituent documents) of the Company or any of its Subsidiaries; (ii) violate,
--
conflict with, result in a breach of any provision of, constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, result in the termination or in a right of termination of,
accelerate the performance required by or benefit obtainable under, result in
the triggering of any payment or other obligations pursuant to, result in the
creation of any Encumbrance upon any of the properties of the Company or its
Subsidiaries (including, without limitations, the assets subject to the Option
Agreement and the shares of O-Sub) under, or result in there being declared
void, voidable, subject to withdrawal, or without further binding effect, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust or any license, franchise, Permit, lease, contract, plan, agreement or
other instrument, commitment or obligation to which the Company or any of its
Subsidiaries is a party, by which the Company or any of its Subsidiaries or any
of their respective properties is bound, or under which the Company or any of
its Subsidiaries or any of their respective properties is entitled to a benefit
(each of the foregoing, to the extent the same have any continuing force or
effect, a "Contract" and collectively, "Contracts"), except for any of the
-------- ---------
foregoing matters which, individually or in the aggregate, would not have a
Material Adverse Effect, prevent or materially delay the consummation of the
transactions contemplated hereby (a "Material Delaying Effect") or prevent or
------------------------
materially delay the consummation of the transactions
10
contemplated by the Option Agreement; (iii) other than the filings provided for
---
in Section 1.3, the filings required under the Hart-Scott-Rodino Antitrust
-----------
Improvements Act of 1976 (the "HSR Act"), the Securities Exchange Act of 1934,
-------
as amended, and the rules and regulations promulgated thereunder (the "Exchange
--------
Act"), or filings in connection with the maintenance of qualification to do
- ---
business in other jurisdictions (the filings disclosed in the Disclosure Letter
in response to this clause (iii), the other filings referred to in this clause
(iii) and the Other Antitrust Filings and Consents required or permitted to be
made or obtained, collectively, the "Regulatory Filings"), require any consent,
------------------
approval or authorization of, or declaration, filing or registration with, any
Governmental Entity, including any such consent, approval, authorization,
declaration, filing or registration under any Laws of any foreign jurisdiction
relating to antitrust matters or competition ("Foreign Antitrust Laws") or any
----------------------
other Law of any foreign jurisdiction, except for those consents, approvals,
authorizations, declarations, filings or registrations the failure of which to
obtain or make, individually or in the aggregate, would not have a Material
Adverse Effect or a Material Delaying Effect; or (iv) violate any Laws
--
applicable to the Company, any of its Subsidiaries or any of their respective
assets, except for violations which, individually or in the aggregate, would not
have a Material Adverse Effect.
5.7 Company Reports; Proxy Statement. (a) The Company has made
--------------------------------
available to Purchaser each registration statement, report, proxy statement or
information statement (as defined under the Exchange Act) prepared by it for
filing with the Securities and Exchange Commission (the "SEC") since December
---
31, 1995, each in the form (including exhibits and any amendments thereto) filed
with the SEC (collectively, as amended or restated, the "Company Reports"). As
---------------
of their respective dates (or the respective dates of the latest amendment
thereto or restatement thereof), the Company Reports and, when filed, the
Pending Reports, (i) complied, or will comply, as to form in all material
-
respects with the applicable requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act") and the
--------------
Exchange Act and (ii) did not, or will not, contain any untrue statement of a
--
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of the consolidated balance
sheets of the Company included in or incorporated by reference into the Company
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of the Company and its consolidated Subsidiaries
as of its date, and each of the consolidated statements of earnings and cash
flows of the Company included in or incorporated by reference into the Company
Reports (including any related notes and schedules) fairly presents the results
of operations, earnings or cash flows, as the case may be, of the Company and
its Subsidiaries for the periods set forth therein, in each case in accordance
with generally
11
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein. The unaudited financial statements of the
Company for the periods ended March 31, 1998 and June 30, 1998 (the "Unaudited
---------
1998 Financial Statements"), previously provided to Merger Sub have been
- -------------------------
prepared using the same accounting principles and policies and in a manner
consistent with the financial statements of the Company and its Subsidiaries for
the period ended December 31, 1996 and fairly present the consolidated financial
position of the Company and its consolidated Subsidiaries as of March 31, 1998
and June 30, 1998, respectively, and the consolidated results of their
operations, changes in stockholders' equity and statements of cash flow for the
periods ended March 31, 1998 and June 30, 1998, respectively. Except as set
forth in the Disclosure Letter, neither the Company nor any of its Subsidiaries
has any liabilities or obligations, contingent or otherwise, except (i)
-
liabilities and obligations in the respective amounts reflected or reserved
against in the Company's consolidated balance sheet as of December 31, 1997,
included in the Company Reports or (ii) liabilities and obligations incurred in
--
the ordinary course of business since that date which individually or in the
aggregate would not have a Material Adverse Effect.
(b) The Proxy Statement will comply as to form in all material respects
with the Exchange Act and, at the respective times filed with the SEC or first
published, sent or distributed to the stockholders of the Company, will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, that the Company makes no representation or warranty as to
--------
any information included in the Proxy Statement that was provided by Purchaser
or Merger Sub. If at any time prior to the Closing Date the Company shall
obtain knowledge of any facts with respect to itself, any of its officers and
directors or any of its Subsidiaries that would require the supplement or
amendment to any of the foregoing documents in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or to comply with applicable Laws, such amendment or supplement
shall be promptly filed with the SEC and, as required by Law, disseminated to
the stockholders of the Company, and in the event Purchaser shall advise the
Company as to its obtaining knowledge of any facts that would make it necessary
to supplement or amend the Proxy Statement, the Company shall promptly amend or
supplement such document as required and distribute the same to its
stockholders.
5.8 Litigation. Except as set forth in the Disclosure Letter, there are
----------
no claims, actions, suits, proceedings, arbitrations, investigations or audits
(collectively, "Litigation") by a third party (including a Governmental Entity)
----------
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries,
12
other than those which, individually or in the aggregate, would not have a
Material Adverse Effect. Except as set forth in the Disclosure Letter, no
Governmental Entity has indicated an intention to conduct any audit,
investigation or other review with respect to the Company or any of its
Subsidiaries. No Person has notified the Company that it or any other Person
intends to terminate, renegotiate or otherwise modify or object to the
settlement (the "Settlement"), reached on August 18, 1998, the terms of which
----------
are identical in all material respects to the Memorandum of Understanding
("MOU") attached hereto as Exhibit I (with the changes specifically set forth in
---
the Disclosure Schedule), with respect to the In re Raster Graphics Securities
--------------------------------
Litigation, No. C-980807-FMS pending in the United States District Court for the
- ----------------------------
Northern District of California and Ginter, et al. v. Raster Graphics, Inc. et
------------------------------------------
al., Civil No. CV 772401 pending in Santa Clara Superior Court (collectively,
- ------------------------
the "Settlement Litigation"), and to the knowledge of the Company, there is no
---------------------
reason that the Settlement will not be timely approved by the appropriate courts
of competent jurisdiction in substantially the form described in the MOU. The
aggregate amount of damages and costs (including legal fees) that the Company
will incur as a result of the final disposition of the Litigation described in
the second and fourth paragraphs of Schedule 5.8 of the Disclosure Letter shall
not exceed $400,000.
5.9 Absence of Certain Changes. Except as set forth in the Disclosure
--------------------------
Letter, since December 31, 1996, the Company and its Subsidiaries have conducted
their business only in the ordinary course of such business consistent with past
practices, and there has not been (i) any Material Adverse Effect suffered by
-
the Company or any of its Subsidiaries; (ii) any declaration, setting aside or
--
payment of any dividend or other distribution with respect to the capital stock
of the Company or its Subsidiaries (other than wholly-owned Subsidiaries) or any
repurchase, redemption or any other acquisition by the Company or its
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or its Subsidiaries; (iii) any
---
change in accounting principles, practices or methods; (iv) any entry into or
--
amendment of any employment agreement with, or any increase in the rate or terms
(including, without limitation, any acceleration of the right to receive
payment) of compensation payable or to become payable by the Company or any of
its Subsidiaries to, their respective directors, officers or employees, except
increases in the ordinary course of business in accordance with the past
practice of the Company; (v) any entry into or amendment of any increase in the
-
rate or terms (including, without limitation, any acceleration of the right to
receive payment) of any bonus, insurance, pension or other employee benefit plan
or arrangement covering any such directors, officers or employees, except
increases in the ordinary course of business in accordance with the past
practice of the Company; (vi) any revaluation by the Company or any of its
--
Subsidiaries of any of their respective assets, including, without limitation,
write-downs
13
of inventory or write-offs of accounts receivable; (vii) any transaction
---
or commitment made by the Company or any of its Subsidiaries to buy or
sell any assets that are or would be material to the Company's business; or
(viii) any other transaction or event that, had it occurred after the date of
- -----
this Agreement, would constitute a breach of the covenant contained in Section
-------
7.2(b).
- ------
5.10. Taxes. Except as set forth in the Disclosure Letter:
-----
(a) Each of the Company and its Subsidiaries has timely filed (subject
to extensions) all U.S. federal income Tax Returns and all other material Tax
Returns required to be filed by it, and has duly paid or caused to be paid on
its behalf all Taxes shown to be due on such returns or otherwise due and
payable. Such Tax Returns of the Company and the Subsidiaries are true and
complete in all material respects, except where failure to be so true or
complete would not have a Material Adverse Effect. The most recent consolidated
financial statements contained in the Company Reports reflect an adequate
reserve in accordance with generally accepted accounting principles for all
Taxes payable by the Company and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements.
(b) No material deficiencies for any Taxes have been proposed, asserted
or assessed against the Company or any of the Subsidiaries that have not been
fully paid or adequately provided for in the appropriate financial statements of
the Company and its Subsidiaries, no waivers of the time to assess any Taxes are
outstanding, and no power of attorney granted by the Company or any Subsidiary
with respect to any Taxes is currently in force. No material issues relating to
Taxes have been raised in writing by any governmental authority during any
presently pending audit or examination.
(c) There are no material Encumbrances for Taxes on any of the assets
of the Company or the Subsidiaries or the shares of O-Sub (other than for
current taxes not yet due and payable).
(d) The Company and the Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes.
(e) None of the Company or the Subsidiaries has filed a consent under
Section 341(f) of the Code.
14
(f) None of the Company or the Subsidiaries is a party to any agreement
that could obligate it to make any payments that would not be deductible by
reason of Section 280G of the Code.
(g) Neither the Company nor, since the date of its acquisition by the
Company, any Subsidiary is a party to any tax allocation, tax sharing agreement,
any closing agreement or similar agreement relating to Taxes.
(h) No U.S. federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any U.S. federal income or material state, local or foreign Taxes or
Tax Returns of the Company or any of the Subsidiaries and neither the Company
nor any of the Subsidiaries has received a written notice of any pending audit
or proceeding.
(i) Neither the Company nor, since the date of its acquisition by the
Company, any Subsidiary has agreed to or is required to make any material
adjustment under Section 481(a) of the Code.
(j) The Company has not been (and will not be) a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the 5-year period ending at the Effective Time.
(k) The statute of limitations with respect to the U.S. federal income
tax liability of the Company has expired with respect to the year 1993 and all
earlier years.
(l) For the purpose of this Agreement, (A) the terms "Tax" or "Taxes"
- --- -----
shall mean all taxes, fees, duties, tariffs, levies, imposts, or other charges
of any kind (together with any interest, penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto),
including, without limitation, taxes or other charges on or with respect to
income, franchise, gross receipts, property, sales, use, profits, capital stock,
payroll, employment, social security, workers compensation, unemployment
compensation or net worth, taxes or charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added or gains taxes; license
registration and documentation fees; and customs duties, tariffs and similar
charges of any kind whatsoever, and (B) the term "Tax Return" shall mean any
- ----------
report, return, document, declaration or any other information or filing
required to be supplied to any taxing authority with respect to Taxes.
5.11 Employee Benefit Plans. All employee benefit plans and other
----------------------
benefit arrangements covering employees of the Company or any of its
Subsidiaries or to which
15
the Company or any of its Subsidiaries are required to contribute (the "Company
-------
Benefit Plans") and all employee agreements providing compensation, severance,
- -------------
retention, change in control or other benefits to any employee or former
employee of the Company or any of its Subsidiaries, other than agreements which
have been satisfied in full (the "Employee Agreements") are set forth in the
-------------------
Disclosure Letter. True and complete copies of (1) the Company Benefit Plans and
-
any related agreement, (2) the most recent annual report and actuarial valuation
-
(if applicable), and (3) the Employee Agreements have been made available to
-
Purchaser. Any Company Benefit Plan intended to be qualified under Section
401(a) of the Code has received a determination letter and, to the knowledge of
the Company, continues to satisfy the requirements for such qualification. No
Company Benefit Plan nor the Company nor any Subsidiary has incurred any
material liability or penalty under Section 4975 of the Code or Section 502(i)
of ERISA or engaged in any transaction that is reasonably likely to result in
any such material liability or penalty. Each Company Benefit Plan that the
Company does not maintain and administer has been maintained and administered in
compliance in all material respects with its terms and with ERISA and the Code
to the extent applicable thereto, and to the knowledge of the Company, each
other Company Benefit Plan has been maintained and administered in compliance in
all material respects with its terms and with ERISA and the Code to the extent
applicable thereto. There is no pending or, to the knowledge of the Company,
threatened Litigation against or otherwise involving any of the Company Benefit
Plans and no Litigation has been brought against or with respect to any such
Company Benefit Plan, except for any of the foregoing which, individually or in
the aggregate, would not have a Material Adverse Effect. Except as set forth in
the Disclosure Letter, neither the Company nor any of its Subsidiaries has any
current or expected liability with respect to any Company Benefit Plan that is
not fully reflected in the materials delivered to Purchaser as described above
nor is any asset of the Company nor any of its Subsidiaries subject to any lien
under Code section 401(a)(29), ERISA section 302(f) or Code section 412(n),
ERISA section 4068 or arising out of any action filed under ERISA section
4301(b). Neither the Company nor any of its Subsidiaries that is, or has been
treated as a "single employer" together with the Company under section 414(b),
414(c) or 414(m) of the Code, has incurred any liability which can subject any
of the parties to this Agreement to material liability under section 4062, 4063
or 4064 of ERISA. Neither the Company nor any of its Subsidiaries is required to
contribute to any multi-employer plan within the meaning of section 4001(a)(3)
of ERISA. Neither the Company nor any of its Subsidiaries has incurred any
withdrawal liability within the meaning of section 4201 of ERISA. Except as
described in the Company Reports, neither the Company nor any of its
Subsidiaries maintains or contributes to any plan or arrangement which provides
or has any liability to provide life insurance or medical or other employee
welfare benefits to any employee or former employee upon his or her retirement
or termination of employment, and neither the Company nor any of its
16
Subsidiaries has ever represented, promised or contracted (whether in oral
or written form) to any employee or former employee that such benefits would be
provided. Except as set forth in the Disclosure Letter, (i) the execution of,
-
and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, policy, arrangement or agreement or
any trust or loan that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee and (ii) no payment or benefit which will or may be made by the
--
Company, any of its Subsidiaries, or Purchaser or Merger Sub with respect to any
employee will constitute an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code.
5.12 Labor and Employment Matters. Except as set forth in the Disclosure
----------------------------
Letter, (a) neither the Company nor any of its Subsidiaries is a party to, or
-
bound by, any collective bargaining agreement or other Contracts or
understanding with a labor union or labor organization; and (b) except as would
-
not, individually or in the aggregate, have a Material Adverse Effect, there is
no (i) unfair labor practice, labor dispute (other than routine individual
-
grievances) or labor arbitration proceeding pending or, to the knowledge of the
Company, threatened against the Company or its Subsidiaries, (ii) activity or
--
proceeding by a labor union or representative thereof to organize any employees
of the Company or any of its Subsidiaries, or (iii) lockouts, strikes,
---
slowdowns, work stoppages or threats thereof by or with respect to such
employees. The Company and its Subsidiaries each is in compliance with all Laws
regarding employment, employment practices, terms and conditions of employment
and wages, except for such noncompliance which, individually or in the
aggregate, would not have a Material Adverse Effect.
5.13 Brokers and Finders. Except for Hambrecht and Quist pursuant to an
-------------------
engagement letter, a true and complete copy of which has previously been
delivered to Purchaser, no broker, dealer or financial advisor is entitled to
receive from the Company or any of its Subsidiaries any broker's, finder's or
investment banking fee in connection with this Agreement or the transactions
contemplated hereby.
5.14 Fairness Opinion. The Company has received the opinion (the
----------------
"Fairness Opinion") of Hambrecht and Quist to the effect that, as of the date of
- -----------------
this Agreement, the terms of the Merger and the Merger Consideration are fair
from a financial point of view to the holders of Common Stock. The Company has
been authorized by Hambrecht and Quist to permit the inclusion of the Fairness
Opinion and references thereto, subject to
17
prior review and consent by Hambrecht and Quist (such consent not to be
unreasonably withheld or delayed), in the Proxy Statement.
5.15 Licenses and Permits. Except as set forth in the Disclosure Letter,
--------------------
the Company and its Subsidiaries have, and/or have caused to be maintained, all
necessary licenses, permits, certificates of need, approvals and authorizations
(collectively, "Permits") from all Governmental Entities required to lawfully
-------
conduct their respective businesses as presently conducted, except for those
Permits the lack of which, individually or in the aggregate, would not have a
Material Adverse Effect, and (a) no Permit is subject to revocation or
-
forfeiture by virtue of any existing circumstances, (b) there is no Litigation
-
pending or, to the knowledge of the Company, threatened to modify or revoke any
Permit, and (c) no Permit is subject to any outstanding order, decree, judgment,
-
stipulation, or investigation that would be likely to affect such Permit, except
for instances of any of the foregoing items (a) through (c) which, individually
or in the aggregate, would not have a Material Adverse Effect.
5.16 Environmental Matters. (a) Except as set forth in the Disclosure
---------------------
Letter, the Company and each of its Subsidiaries' operation and use of its
assets, including its owned and leased real property, are in compliance in all
respects with all applicable Laws relating to the protection of human health or
the environment ("Environmental Laws"), except to the extent that any such
------------------
noncompliance would not have a Material Adverse Effect on the Company. The
Company and each of its Subsidiaries have obtained all environmental, health and
safety permits necessary for the operation of its respective business as
presently conducted, and all such permits are in full force and effect and the
Company and each of its Subsidiaries are in compliance in all respects with the
terms and conditions of each such permit, except, in each case, to the extent
that any such noncompliance would not have a Material Adverse Effect on the
Company. Except as set forth in the Disclosure Letter, neither the Company nor
any of its Subsidiaries has received any notice of, nor is there, any
administrative or judicial investigation, proceeding or action with respect to
any material violation, alleged or proven, of Environmental Laws by the Company
or any of its subsidiaries or otherwise involving its owned or leased real
property.
(b) Except as set forth in the Disclosure Letter, none of the Company or
any of its Subsidiaries has taken or failed to take any action that has resulted
in or will result in any liability or obligation relating to (x) the
-
environmental conditions on, under, or about the assets of the Company or any of
its Subsidiaries or any of their respective owned or leased real property, or
any properties owned, leased, operated or used by the Company or any of its
Subsidiaries or any predecessor of the Company or any of its Subsidiaries at the
present time or in the past, including, without limitation, the air, soil
18
and groundwater conditions at such properties or (y) the past or present use,
-
management, handling, transport, treatment, generation, storage, disposal or
release of any Hazardous Substances, except in the case of clauses (x) and (y)
above, to the extent such liability or obligation would not have a Material
Adverse Effect.
"Hazardous Substances" means asbestos-containing material and any and all
--------------------
hazardous or toxic substances, materials or wastes as defined or listed under
the Resource Conservation and Recovery Act, the Toxic Substances Control Act,
the Comprehensive Environmental Response, Compensation and Liability Act or any
comparable state statute or any regulation promulgated under any of such federal
or state statutes.
5.17 Material Contracts. The Disclosure Letter sets forth a list as of
------------------
the date hereof of all (i) Contracts for borrowed money or guarantees thereof,
-
other than Contracts entered into in the ordinary course of business consistent
with the past practice of the Company involving less than $25,000 individually
or $250,000 in the aggregate or Contracts between the Company and any of its
wholly owned Subsidiaries or between any of the Company's wholly owned
Subsidiaries, (ii) Contracts involving any rate swap transaction, basis swap,
--
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of these transactions), or any combination of these transactions
(each a "Derivative" and collectively, "Derivatives"), other than Derivatives
---------- -----------
entered into in the ordinary course of business consistent with the past
practice of the Company and with the Company's policies regarding Derivatives as
previously disclosed to Purchaser, (iii) Contracts containing covenants by the
---
Company or any Subsidiary restricting its ability or the ability of any of the
affiliates of the Company or any of its Subsidiaries to engage in any line of
business, (iv) Contracts to purchase materials, supplies or other assets, other
--
than purchase orders entered into in the ordinary course of business consistent
with the past practice of the Company and other Contracts involving obligations
of less than $25,000 individually and $250,000 in the aggregate, (v) Contracts
-
to purchase or acquire advertising or other product promotion or brand support
other than spot orders purchased in the ordinary course of business or involving
commitments by the Company of less than $25,000, (vi) Contracts with
--
distributors, brokers or sales agents for the distribution of the products of
the Company, other than Contracts involving or likely to involve payments of
less than $200,000 per year, (vii) Contracts entered into by the Company since
---
January 1, 1993 and in which the Company's surviving liability (including
indemnities) could reasonably be expected to exceed $100,000 and involving the
sale or other disposition by the Company of one or more business units,
divisions or entities (including former
19
Subsidiaries), (viii) Contracts involving the investment, including by way of
----
capital contribution, loan or advance, by the Company or any of its Subsidiaries
of more than $25,000 in any other person, firm or entity (other than wholly-
owned Subsidiaries), other than investments no longer owned by the Company or
its Subsidiaries, (ix) promotion Contracts in the United States with the
--
Company's ten largest customers having a term of longer than three (3) months,
and (x) other Contracts under which the obligation of the Company and its
-
Subsidiaries is $100,000 or more or are otherwise material to the business of
the Company and its Subsidiaries, taken as a whole (all Contracts described in
each of the categories (i) through (x) above, "Material Contracts"). All
------------------
Contracts to which the Company or any of its Subsidiaries is a party or by which
any of their respective assets are bound are valid and binding, in full force
and effect and enforceable against the parties thereto in accordance with their
respective terms, except where the failure to be so valid and binding, in full
force and effect or enforceable would not individually or in the aggregate have
a Material Adverse Effect. There is not under any such Contract, any existing
default, or event, which after notice or lapse of time, or both, would
constitute a default, by the Company or any of its Subsidiaries, or to the
knowledge of the Company, any other party, other than any such defaults or
events which, individually or in the aggregate, would not have a Material
Adverse Effect.
5.18 Intellectual Property; Technology.
---------------------------------
(a) The Disclosure Letter sets forth a complete and correct list of all
Intellectual Property that is owned by the Company or any Subsidiary (the
"Company-Owned Intellectual Property"), provided that Company-Owned Intellectual
- ------------------------------------
Property shall include, but the Disclosure Letter need not set forth,
inventions, processes, formulae, trade secrets, know-how or confidential
information that are not reduced to tangible form or that are not susceptible to
legal protection by filing or registration with any Governmental Entity.
(b) Except as set forth in the Disclosure Letter, all the Intellectual
Property used by the Company or any Subsidiary or held by it for future use in
connection with, necessary for the conduct of or otherwise material to the
operation of the business of the Company (the "Company Intellectual Property"),
-----------------------------
is owned by the Company or such Subsidiary. Except as set forth in the
Disclosure Letter, the Company or a Subsidiary has the exclusive right to use
the Company Intellectual Property for the life thereof for the purpose or
purposes for which it is being used or intended to be used, free from (i) any
-
Encumbrances and (ii) any requirement of royalty payments, obligations, license
--
fees, charges or other payments, or material conditions or restrictions
whatsoever. Immediately after the Effective Time, the Surviving Corporation
shall own or have
20
licensed to it all the Company Intellectual Property, in each case free from
Encumbrances and on the same terms and conditions as in effect prior to the
Effective Date.
(c) There is no Company Intellectual Property that the Company does not
either own or have the right to use.
(d) The Disclosure Letter sets forth all written or oral agreements and
arrangements (i) pursuant to which the Company or a Subsidiary has licensed
-
Intellectual Property to, or the use of Intellectual Property is otherwise
permitted (through non-assertion, settlement or similar agreements or otherwise)
with respect to, any other Person, and (ii) pursuant to which the Company or a
--
Subsidiary has had Intellectual Property licensed to it, or has otherwise been
permitted to use Intellectual Property (through non-assertion, settlement or
similar agreements or otherwise). All of the agreements and arrangements set
forth in the Disclosure Letter: (i) are in full force and effect and
-
enforceable in accordance with their terms, and no default exists or is threat
ened thereunder by the Company or a Subsidiary or any other Person, (ii) license
--
or permit that which they purport to license or permit, (iii) are free and clear
---
of all Encumbrances, and (iv) do not contain any change in control or other
--
terms or conditions that will become applicable or inapplicable as a result of
the consummation of the trans actions contemplated by this Agreement or the
Option Agreement.
(e) The conduct of the business of the Company and the Subsidiaries does
not infringe any Intellectual Property or other rights of any Person. None of
the Company Intellectual Property is being infringed, misappropriated or
otherwise used or available for use by any Person without written authority from
the Company, except as set forth in the Disclosure Letter.
(f) No claim or demand of any Person has been made or, to the knowledge
of the Company, threatened, nor is there any litigation that is pending or, to
the knowledge of the Company, threatened, that (i) challenges the rights of the
-
Company in respect of any Company Intellectual Property, (ii) asserts that the
--
Company is infringing or otherwise in conflict with, or is (except as set forth
in the Disclosure Letter) required to pay any royalty, license fee, charge or
other amount with regard to, any Company Intellectual Property, or (iii) claims
---
that any default exists under any agreement or arrangement set forth or required
to be disclosed in the Disclosure Letter. None of the Company Intellectual
Property is subject to any material outstanding order, ruling, decree, judgment
or stipulation by or with any court, tribunal, arbitrator or other Governmental
Entity.
21
(g) The Company-Owned Intellectual Property has been duly registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office, the United States Copyright Office or other filing offices,
domestic or foreign, to the extent necessary or desirable to ensure full
protection under any applicable Laws. The Disclosure Letter sets forth a
complete list of such Company-Owned Intellectual Property that is registered
with, filed in or issued by, as the case may be, the United States Patent and
Trademark Office, the United States Copyright Office or other filing offices,
domestic or foreign, and such registrations, filings, issuances and other
actions remain in full force and effect. Except as set forth in the Disclosure
Letter, the Company and its Subsidiaries have taken all necessary actions to
ensure full protection of the Company Intellectual Property under any applicable
Law.
(h) The Company or a Subsidiary has valid licenses to all copies of all
Software that it utilizes in connection with the conduct of its business and
that it does not own ("Commercial Software"), and the use by the Company or such
-------------------
Subsidiary of such Commercial Software, including without limitation all
modifications and enhancements thereto (whether created by the Company or by a
third party) is in full compliance with the terms and provisions of such
licenses. The Company or such Subsidiary owns all right, title and interest in
and to all Software marketed or licensed by it to its customers or held for use
or in development for marketing and licensing to its customers (collectively,
the "Company Software"), including but not limited to all Intellectual Property
----------------
rights therein and thereto, except for Commercial Software identified in the
Disclosure Letter as Software incorporated into the Company Software. Set forth
in the Disclosure Letter is a full and complete list of (i) the Company Software
-
and (ii) all Commercial Software utilized by the Company or a Subsidiary in
--
connection with the conduct of its business. None of the Commercial Software or
Company Software, and no use thereof by the Company or permitted use by its
licensees, infringes upon or violates any patent, copyright, trade secret or
other Intellectual Property right of any person or entity, and no claim or
demand with respect to any such infringement or violation has been made or, to
the best knowledge of the Company, threatened. There are no defects in the
Company Software that would prevent such Software from performing in all
material respects the tasks and functions that it was intended to perform except
those which can be cured without a Material Adverse Effect.
(i) The Company has conducted an inventory of all (i) Company Software
-
and (ii) Software owned or licensed by it as well as the hardware and embedded
--
microcontrollers in non-computer equipment used by the Company in connection
with, necessary for or otherwise material to the operation of its business
(collectively, the "Computer Systems") in order to determine which parts of the
----------------
Computer Systems are not Year 2000 Compatible and to estimate the cost of
rendering such Computer Systems
22
Year 2000 Compatible prior to January 1, 2000. Based on the above-referenced
inventory, the Company represents and warrants that the Computer Systems are
either Year 2000 Compatible or will be Year 2000 Compatible prior to July 1,
1999; the estimated cost of rendering the Computer Systems Year 2000 Compatible
is $50,000, of which $50,000 has been or will be incurred by the Company. "Year
----
2000 Compatible" means that the Computer Systems to the extent required for
- ---------------
their particular use (x) correctly perform date data century recognition, and
-
calculations that accommodate same century and multi-century formulas and date
values; (y) operate or are expected to operate on a basis comparable to their
-
current operation during and after calendar year 2000 A.D., including but not
limited to leap years; and (z) shall not end abnormally or provide invalid or
-
incorrect results as a result of date data which represents or references
different centuries or more than one century.
(j) "Intellectual Property" means the United States and foreign
---------------------
trademarks, service marks, trade names, trade dress, copyrights, and similar
rights, including registrations and applications to register or renew the
registration of any of the foregoing, the United States and foreign letters
patent and patent applications, inventions, processes, designs, formulae, trade
secrets, know-how, confidential information, Software, data and documentation,
and all similar intellectual property rights, tangible embodiments of any of the
foregoing (in any form or medium including electronic media), and licenses of
any of the foregoing.
(k) "Software" means all computer programs, including all source code and
--------
object code versions thereof, in any and all forms and media, whether recorded
on paper, magnetic media or other electronic or non-electronic media (including
data and all related documentation, user manuals, training materials, flow
charts, diagrams, descriptive tests and programs, computer print-outs,
underlying tapes, computer databases and similar items) and computer
applications and operating programs.
5.19 Required Vote of Company Stockholders. Unless the Merger may be
-------------------------------------
consummated in accordance with Section 253 of the DGCL, the only vote of the
stockholders of the Company required to adopt this Agreement and approve the
Merger is the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock (the "Company Stockholder Approval"). No greater or
----------------------------
other vote of the stockholders of the Company is required by Law or the
Certificate of Incorporation or Bylaws of the Company to adopt this Agreement
and the Option Agreement and to approve the Merger and the transactions
contemplated by the Option Agreement.
5.20 State Statutes. The Board of Directors has approved the Merger,
--------------
this Agreement, the Option Agreement, the Loan Agreement and the Stockholders
23
Agreement, and such approval is sufficient to render inapplicable to the Merger,
this Agreement, the Option Agreement, the Loan Agreement, the Stockholders
Agreement and the transactions contemplated by this Agreement, the Option
Agreement, the Loan Agreement and the Stockholders Agreement, the provisions of
Section 203 of the DGCL to the extent, if any, such Section is applicable to the
Merger, this Agreement, the Option Agreement, the Loan Agreement, the
Stockholders Agreement and the transactions contemplated by this Agreement, the
Option Agreement, the Loan Agreement and the Stockholders Agreement. To the
knowledge of the Company, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement, the
Option Agreement, the Loan Agreement the Stockholders Agreement or the
transactions contemplated by this Agreement, the Option Agreement, the Loan
Agreement or the Stockholders Agreement. The provisions of Section 2115 of the
California General Corporation Law do not and shall not apply to the Company,
the Merger or the transactions contemplated by this Agreement, the Option
Agreement, the Loan Agreement or the Stockholders Agreement.
5.21 Disclosures. This Agreement and the Disclosure Letter furnished by
-----------
the Company or any of its Subsidiaries pursuant hereto, taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
contained herein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub hereby jointly and severally represent and
warrant to the Company as of the date hereof and as of the Effective Time as
follows:
6.1. Existence; Good Standing; Corporate Authority. Each of Purchaser
---------------------------------------------
and Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation.
6.2. Authorization, Validity and Effect of Agreements. Each of Purchaser
------------------------------------------------
and Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the Option Agreement and the consummation by Purchaser and
Merger Sub of the transactions contemplated hereby and thereby have been duly
and validly authorized by
24
the respective Boards of Directors of Purchaser and Merger Sub, as applicable,
and by Purchaser as the sole stockholder of Merger Sub, and no other corporate
proceedings on the part of Purchaser or Merger Sub are necessary to authorize
this Agreement or the Option Agreement or to consummate the transactions
contemplated hereby or thereby. Each of this Agreement and the Option Agreement
has been duly and validly executed and delivered by Purchaser and Merger Sub,
and (assuming this Agreement and the Option Agreement each constitutes a valid
and binding obligation of the Company) constitutes the valid and binding
obligation of each of Purchaser and Merger Sub, enforceable against Purchaser
and Merger Sub in accordance with their respective terms.
6.3 Proxy Statement. None of the information supplied by Purchaser or
---------------
Merger Sub for inclusion in the Proxy Statement, at the respective times filed
with the SEC and distributed to stockholders of the Company, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
6.4 No Violation. Neither the execution and delivery of this Agreement
------------
or the Option Agreement by Purchaser and Merger Sub nor the consummation by them
of the transactions contemplated hereby or thereby will (i) violate, conflict
-
with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws of Merger Sub or Purchaser, in each as amended; (ii)
--
other than the Regulatory Filings and pursuant to the Foreign Antitrust Laws,
require any consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Entity, the lack of which, individually or
in the aggregate, would have a material adverse effect on the ability of
Purchaser or Merger Sub to consummate the transactions contemplated hereby; and
(iii) violate any Laws applicable to Purchaser or Merger Sub or any of their
---
respective assets, except for violations which, individually or in the
aggregate, would not have a material adverse effect on the ability of Purchaser
or Merger Sub to consummate the transactions contemplated hereby.
6.5 Financing. At the Effective Time, Purchaser will cause Merger Sub
---------
to have funds available to it sufficient to consummate the Merger on the terms
contemplated hereby.
6.6 Brokers and Finders. No actions by Purchaser or Merger Sub or by
-------------------
anyone acting on behalf of either of them has given rise to any valid claim
against the Company for any broker's, finder's or investment banking fee in
connection with this Agreement or the transactions contemplated hereby.
25
ARTICLE 7
COVENANTS
7.1 No Solicitation. (a) The Company and its Subsidiaries shall, and
---------------
shall direct and use reasonable efforts to cause their respective officers,
directors or employees, or any investment banker, financial advisor, attorney,
accountant or other representative to, immediately cease any discussions or
negotiations with any parties other than the Purchaser and Merger Sub that may
be ongoing with respect to an Acquisition Proposal. The Company and its
Subsidiaries shall not, and shall not authorize or permit any of their
respective officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it to,
directly or indirectly, (i) solicit, initiate or encourage (including by way of
-
furnishing non-public information), or take any other action to facilitate, any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal or (ii) participate in any
--
discussions or negotiations regarding an Acquisition Proposal; provided,
--------
however, that if, at any time prior to the adoption of this Agreement by the
- -------
holders of Common Stock, the Board of Directors of the Company determines in
good faith, based on the advice of outside counsel, that failure to do so would
constitute a breach of its fiduciary duties to the Company's stockholders under
applicable law, the Company, in response to an Acquisition Proposal that (I) was
-
unsolicited or that did not otherwise result from a breach of this Section
-------
7.1(a), and subject to compliance with Section 7.1(c), and (II) constitutes a
- ------ -------------- --
Superior Proposal, may (x) furnish non-public information with respect to the
-
Company and its Subsidiaries to the person who made such Acquisition Proposal
pursuant to a customary and reasonable confidentiality agreement and (y)
-
participate in negotiations regarding such Acquisition Proposal. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in the preceding sentence by any director or officer of the Company or
any of its Subsidiaries or any investment banker, financial advisor, attorney,
accountant or other representative of the Company or any of its Subsidiaries,
acting on behalf of the Company or any of its Subsidiaries, shall be deemed to
be a breach of this Section 7.1(a) by the Company. For purposes of this
--------------
Agreement, "Acquisition Proposal" means any proposal or offer from any person
--------------------
relating to any direct or indirect acquisition or purchase of 10% or more of the
assets of the Company or any of its Subsidiaries or any shares of any class of
outstanding equity securities of the Company or any of its Subsidiaries, any
tender offer or exchange offer that if consummated would result in any person
beneficially owning 10% or more of any class of equity securities of the Company
or any of its Subsidiaries or any merger, consolidation, business combination,
sale of substantially all the assets, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any of its Subsidiaries, other
than the transactions
26
contemplated by this Agreement. For purposes of this Agreement, a "Superior
--------
Proposal" means any bona fide proposal made by a third party to acquire,
- --------
directly or indirectly, for consideration consisting of cash and/or securities,
100% of the voting power of the Common Stock of or all or substantially all the
assets of the Company and its Subsidiaries and otherwise on terms which the
Board of Directors determines in good faith (based on the written opinion of a
financial advisor of nationally recognized standing (which opinion shall be
provided to the Purchaser)) to be more favorable to the Company's stockholders
than the Merger and for which financing, to the extent required by the terms of
such proposal, is then committed or which, in the good faith judgment of the
Board of Directors, is reasonably capable of being obtained by such third party.
(b) Neither the Board of Directors nor any committee thereof shall (i)
-
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
Purchaser, the approval or recommendation by such Board of Directors or such
committee of this Agreement or the Merger unless there is a Superior Proposal
outstanding, (ii) approve or recommend, or propose to approve or recommend, an
--
Acquisition Proposal unless such Acquisition Proposal is a Superior Proposal or
(iii) cause the Company to enter into any letter of intent, agreement in
---
principle, acquisition agreement or other agreement (an "Acquisition Agreement")
---------------------
with respect to an Acquisition Proposal unless such Acquisition Proposal is a
Superior Proposal, and unless, in each case, the Board of Directors shall have
(x) determined in good faith, based on the advice of outside counsel, that
- --
failure to do so would constitute a breach of its fiduciary duties to the
Company's stockholders under applicable law, and (y) terminated this Agreement
-
pursuant to Section 9.1(c)(ii).
------------------
(c) The Company shall promptly (but in any event within one day) advise
the Purchaser orally and in writing of any Acquisition Proposal or any inquiry
regarding the making of an Acquisition Proposal including any request for
information, the material terms and conditions of such request, Acquisition
Proposal or inquiry and the identity of the person making such request,
Acquisition Proposal or inquiry. The Company will, to the extent reasonably
practicable, keep the Purchaser fully informed of the status and details
(including amendments or proposed amendments) of any such request, Acquisition
Proposal or inquiry.
(d) Nothing contained in this Section 7.1 shall prohibit the Company from
-----------
at any time taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to the Company's stockholders if, in the good faith judgment of the Board of
Directors, based upon the advice of outside counsel, failure so to disclose
would constitute a breach of its fiduciary duties to the Company's stockholders
under applicable law; provided, however,
-------- -------
27
neither the Company nor its Board of Directors nor any committee thereof shall,
except as permitted by Section 7.1(b), withdraw or modify, or propose to
--------------
withdraw or modify, its position with respect to the Merger or this Agreement or
approve or recommend, or propose to approve or recommend, an Acquisition
Proposal; provided, further, that the taking of a position by the Company
-----------------
pursuant to Rule 14e-2(a)(2) or (3) of the Exchange Act in respect of an
Acquisition Proposal shall not be deemed a withdrawal, a modification or a
proposal to do either, of its position with respect to the Merger for purposes
hereof.
7.2. Interim Operations.
------------------
(a) From the date of this Agreement to the Effective Time, except as set
forth in the Disclosure Letter or as otherwise required pursuant to this
Agreement, unless Purchaser has consented in writing thereto, the Company shall,
and shall cause each of its Subsidiaries to:
(i) conduct its operations according to its usual, regular and
ordinary course of business consistent with past practice;
(ii) use its reasonable best efforts to preserve intact their
business organizations and goodwill, to maintain in effect all existing
qualifications, licenses, Permits, approvals and other authorizations
referred to in Sections 5.1 and 5.15, to keep available the services of their
------------ ----
officers and employees and to maintain, to the extent reasonably possible
given the Company's current cash position and loan from Purchaser,
satisfactory relationships with customers, suppliers, distributors, brokers,
sales agents and all other persons having business relationships with them,
including through the payment of additional compensation reasonably
acceptable to Purchaser to such distributors, brokers and sales agents
reasonably calculated to maintain at least the current level of
merchandising, distribution and shelving;
(iii) promptly notify Purchaser upon becoming aware of any
material breach of any representation, warranty or covenant contained in this
Agreement or the occurrence of any event that would cause any representation,
warranty or covenant contained in this Agreement no longer to be true and
correct in all material respects;
(iv) promptly deliver to Purchaser true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement (including the Pending Reports) and any internal monthly
reports prepared for or delivered to the Board of Directors after the date
hereof; and
28
(v) deliver, within 20 business days after the end of each
accounting month, monthly consolidated financial statements, in the same
format as heretofore furnished to Purchaser, for the Company and its
Subsidiaries for and as of the end of each such month.
(b) From the date of this Agreement to the Effective Time, except as set
forth in the Disclosure Letter, unless Purchaser has consented in writing
thereto, the Company shall not, and shall not permit any of its Subsidiaries to:
(i) amend its Certificate of Incorporation or Bylaws or
comparable governing instruments;
(ii) except with respect to the Option Agreement, the Loan
Agreement or the issuance in the aggregate of 20,000 shares of Common Stock
in the ordinary course of business consistent with the past practice of the
Company, issue, sell, pledge or otherwise dispose of any shares of its
capital stock or other ownership interest in the Company (other than
issuances of Common Stock in respect of any exercise of Options outstanding
on the date hereof and disclosed in the Disclosure Letter) or any of the
Subsidiaries, or any securities convertible into or exchangeable for any such
shares or ownership interest, or any rights, warrants or options to acquire
or with respect to any such shares of capital stock, ownership interest, or
convertible or exchangeable securities; or accelerate any right to convert or
exchange or acquire any securities of the Company or any of its Subsidiaries
for any such shares or ownership interest;
(iii) effect any stock split, reverse stock split, stock dividend,
subdivision, reclassification or similar transaction, or otherwise change its
capitalization as it exists on the date hereof;
(iv) except with respect to the Option Agreement and the Loan
Agreement, grant, confer, award or amend any option, warrant, convertible
security or other right to acquire any shares of its capital stock or take
any action to cause to be exercisable any otherwise unexercisable option
under any stock option plan or restricted stock plan;
(v) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of Common Stock or other
capital stock or ownership interests (other than such payments by a wholly-
owned Subsidiary to the Company or another wholly-owned Subsidiary);
29
(vi) directly or indirectly redeem, purchase or otherwise acquire
any shares of its capital stock or the capital stock of any of its
Subsidiaries;
(vii) sell, lease, assign, transfer or otherwise dispose of (by
merger or otherwise) any of its property, business or assets (including,
without limitation, receivables, leasehold interests or Intellectual Property
and including any sale leaseback transaction) except (i) for the sale of
-
inventory in the ordinary course of business, (ii) for sales of other assets
--
(other than assets subject to the Option Agreement) for fair value in the
ordinary course of business provided that the proceeds of such other asset
sales do not exceed $250,000 in any single transaction or $700,000 in the
aggregate prior to the Effective Time, (iii) with respect to the Option
---
Agreement and (iv) the dissolution of the Company's French subsidiary;
--
(viii) settle or compromise any pending or threatened Litigation
without Purchaser's consent (which consent will not be unreasonably withheld
or delayed), other than (a) the Settlement on terms substantially similar to
-
those described in the MOU, and (b) settlements of Litigations which involve
-
solely the payment of money (without admission of liability) not to exceed
$50,000 in any one case or $100,000 in the aggregate;
(ix) make any advance, loan, extension of credit or capital
contribution to, or purchase or acquire (by merger or otherwise) any stock,
bonds, notes, debentures or other securities of, or any assets constituting a
business unit of, or make any other investment in, any person, firm or
entity, except (a) extensions of trade credit and endorsements of negotiable
-
instruments and other negotiable documents in the ordinary course of
business, (b) investments in cash and cash equivalents, (c) payroll and
- -
travel advances in the ordinary course of business and (d) investments in
-
wholly owned Subsidiaries;
(x) make any capital expenditures in the aggregate for the
Company and its Subsidiaries in excess of the amounts specified in the
Company's budget for capital expenditures, a true and complete copy of which
has previously been delivered to Purchaser, or otherwise acquire assets
having a value, in the aggregate, in excess of $50,000 not in the ordinary
course of business;
(xi) incur, assume or create any indebtedness for borrowed money
or the deferred purchase price for property or services or pursuant to any
capital lease or other financing, except (a) indebtedness incurred in the
-
ordinary course of business consistent with past practice for working capital
purposes pursuant to the Company's existing credit facilities as disclosed in
the Disclosure Letter, and
30
(b) with respect to the Loan and Pledge Agreement, provided the terms of such
- --------
indebtedness have been approved by Purchaser in its reasonable discretion,
and (c) for the incurrence, assumption or creation of indebtedness in the
-
ordinary course of business consistent with the past practice of the Company
not exceeding $100,000 in any one instance or $250,000 in the aggregate at
any one time outstanding; or amend in a manner materially adverse to the
Company, any of the Company's existing credit facilities;
(xii) assume, guarantee or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except wholly-owned Subsidiaries of the Company and except for
obligations in the ordinary course of business consistent with the past
practice of the Company not exceeding $100,000 individually and $250,000 in
the aggregate;
(xiii) make any material Tax election (unless required by law or
unless consistent with prior practice) or settle or compromise any material
income tax liability except, in each case, if Purchaser is given reasonable
prior notice thereof;
(xiv) waive or amend any term or condition of any confidentiality
or "standstill" agreement to which the Company is a party and which relates
to a business combination with the Company or the purchase of shares or
assets of the Company;
(xv) grant or amend any stock-related or performance awards
except for such awards in the ordinary cause of business consistent with past
practice of the Company not to exceed $5,000 in the aggregate;
(xvi) except with respect to agreements which are terminable at
will by the Company without any material penalty to the Company, enter into
or amend any legally binding employment, severance, retention, change in
control, consulting or salary continuation agreements with any officers,
directors, employees or former employees or grant any increases in
compensation or benefits to employees other than increases to officers and
employees in the ordinary course of business consistent with the past
practice of the Company;
(xvii) adopt, amend or terminate any employee benefit plan policy,
understanding or arrangement (except as expressly contemplated by this
Agreement);
31
(xviii) except for purchase orders for the sale of the Company's
products in the ordinary course of business consistent with past practice,
enter into (a) any agreements with distributors or sales agents other than
-
agreements terminable without penalty on less than 30 days' notice, (b) any
-
agreements to distribute products for others or which restrict the ability of
the Company or its Subsidiaries or affiliates to compete or (c) any other
-
agreements, other than agreements relating to product promotions or the Seiko
Epson Agreement, that would constitute Material Contracts; or amend any of
the foregoing agreements as exist on the date hereof;
(xix) amend, change or waive (or exempt any person or entity from
the effect of) the Rights Agreement, except in connection with the
transactions contemplated by this Agreement or the Option Agreement;
(xx) make any material changes in the type or amount of their
insurance coverages;
(xxi) except as may be required by law or generally acceptable
accounting principles and with prior written notice to the Purchaser, change
any accounting principles or practices used by the Company or its
Subsidiaries;
(xxii) effect any material change in the Company's advertising,
product promotion or brand support policies or programs or commit to any
significant new product promotion or advertising campaign except, in each
case, for matters in the ordinary course of business consistent with the past
practice of the Company;
(xxiii) effect any material change in the Company's billing
practices or sales terms, or cause a material acceleration or delay in the
manufacture, shipment or sale of inventory, the collection of accounts or
notes receivable or, to the extent reasonably possible given the Company's
current cash position and loan from Purchaser, the payment of accounts or
notes payable except, in each case, for matters in the ordinary course of
business consistent with the past practice of the Company;
(xxiv) enter into any Contracts for Derivatives, except for spot,
option and forward Contracts entered into in the ordinary course of business
consistent with the past practice of the Company and with the Company's
policies regarding Derivatives as previously disclosed to Purchaser;
(xxv) waive, relinquish, release or terminate any right or claim,
including any such right or claim under any Material Contract or permit any
rights of material value to use any Intellectual Property to lapse or be
forfeited, in each case,
32
except in the ordinary course of business consistent with the past practice
of the Company;
(xxvi) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for any substantial part
of the property of the Company or any Subsidiary, or make a general
assignment for the benefit of creditors, or permit or suffer to exist the
commencement of any bankruptcy, reorganization, debt arrangement or other
case or proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of the Company
or any Subsidiary; or
(xxvii) agree in writing or otherwise to take any of the foregoing
actions.
7.3 Filings; Other Action. Subject to the terms and conditions herein
---------------------
provided, the Company, Purchaser, and Merger Sub shall: (a) promptly make their
-
respective filings and thereafter make any other required submissions under the
HSR Act with respect to the Merger; (b) cooperate and consult with one another
-
in (i) determining which Regulatory Filings are required or, in the case of
-
Other Antitrust Filings, permitted to be made prior to the Effective Time with,
and which consents, approvals, Permits, authorizations or waivers (collectively,
"Consents") are required or, in the case of Other Antitrust Consents, permitted
--------
to be obtained prior to the Effective Time from Governmental Entities or other
third parties in connection with the execution and delivery of this Agreement,
the assignment of any Contract and the consummation of the transactions
contemplated hereby, including, without limitation, (x) all such Regulatory
-
Filings and Consents as relate to Foreign Antitrust Laws (the "Other Antitrust
---------------
Filings" and the "Other Antitrust Consents," respectively; collectively, the
- ------- ------------------------
"Other Antitrust Filings and Consents"), (y) all Consents required to transfer
- ------------------------------------- -
to the Company any Permits or registrations held on behalf of the Company or any
of its Subsidiaries by or in the name of distributors, brokers or sales agents
and (z) all Consents set forth in Section 5.6 of the Disclosure Letter; (ii)
- --
preparing all Regulatory Filings and all other filings, submissions and
presentations required or prudent to obtain all Consents, including by providing
to the other party drafts of such material reasonably in advance of the
anticipated filing or submission dates; and (iii) timely making all such
---
Regulatory Filings and timely seeking all such Consents (it being understood
that the parties will make or seek to obtain all Other Antitrust Filings and
Consents, whether mandatory or voluntary); and (c) use their reasonable best
-
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. It is understood
that it is principally the Company's obligation to use its reasonable best
efforts to obtain the Consents described above as soon as practicable following
the date hereof. Each of
33
Purchaser and the Company shall use its reasonable best efforts to contest any
proceeding seeking a preliminary injunction or other legal impediment to, and to
resolve any objections as may be asserted by any Governmental Entity with
respect to, the Merger under the HSR Act or Foreign Antitrust Laws; provided
--------
that the foregoing shall not require Purchaser to take any action that could
directly or indirectly (x) impose limitations on the ability of Purchaser
-
or Merger Sub (or any of their affiliates or Subsidiaries) effectively
to acquire, operate or hold, or require Purchaser, Merger Sub or the
Company or any of their respective affiliates or Subsidiaries to dispose of or
hold separate, any portion of their respective assets or business that (I) is
-
either material to the business of Purchaser and its Subsidiaries or material to
the business of the Company and its Subsidiaries, or (II) is reasonably likely
--
to have a Material Adverse Effect, (y) restrict any future business activity by
-
Purchaser, Merger Sub, the Company or any of their affiliates or Subsidiaries
that (I) is either material to the business of Purchaser and its Subsidiaries or
-
material to the business of the Company and its Subsidiaries, or (II) is
--
reasonably likely to have a Material Adverse Effect, including, without
limitation, requiring the prior consent of any Governmental Entity to future
transactions by Purchaser, Merger Sub, the Company or any of their affiliates or
Subsidiaries, or (z) otherwise adversely affect Purchaser, Merger Sub, the
-
Company or any of their respective affiliates or Subsidiaries in a manner that
(I) is either material to the business of Purchaser and its Subsidiaries or
- --
material to the business of the Company and its Subsidiaries, or (II) is
--
reasonably likely to have a Material Adverse Effect. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of Purchaser and
the Surviving Corporation shall take all such necessary action.
7.4 Access to Information. From the date of this Agreement to the
---------------------
Closing, upon reasonable notice, the Company shall, and shall cause its
Subsidiaries to, subject to the compliance with applicable laws and
confidentiality obligations to third parties, (i) give Purchaser and its
-
authorized representatives reasonable access during normal business hours to all
books, records, personnel, research and other consultants, offices and other
facilities and properties of the Company and its Subsidiaries and their
accountants and accountants' work papers, (ii) permit Purchaser to make such
--
copies and inspections thereof as Purchaser may reasonably request and (iii)
---
furnish Purchaser with such financial and operating data and other information
with respect to the business and properties of the Company and its Subsidiaries
as Purchaser may from time to time reasonably request; provided that no
investigation or information furnished pursuant to this Section 7.4 shall affect
-----------
any representations or warranties made by the Company herein or the conditions
to the obligations of Purchaser to consummate the transactions contemplated
hereby.
34
7.5 Publicity. The Company and Purchaser shall, subject to their
---------
respective legal obligations, obtain the prior consent of the other party (which
consent will not be unreasonably withheld or delayed) before issuing any press
release or otherwise making public statements with respect to the transactions
contemplated hereby or by the Option Agreement and in making any filings with
any national securities exchange with respect thereto.
7.6 Further Action. (a) Each party hereto shall, subject to the
--------------
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
(b) The Company shall not, and the Company shall cause its Subsidiaries
not to, take any action that could reasonably be expected to result in (i) any
-
of the representations and warranties of the Company set forth in this Agreement
that are qualified by materiality becoming untrue, (ii) any of such
--
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions set forth in Article 8 not being
--- ---------
satisfied (subject to the Company's right to take actions specifically permitted
by Section 7.1). The Company shall use, and the Company shall cause its
-----------
Subsidiaries to use, their reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using their reasonable efforts to satisfy the conditions contained in Section
-------
7.10(c) and Article 8.
- ------- ---------
(c) The Company shall confer with Purchaser on a regular and frequent
basis as reasonably requested by Purchaser, report on operational matters and
promptly advise Purchaser orally and, if requested by Purchaser, in writing of
any material adverse change with respect to the Company. The Company shall
promptly notify Purchaser in writing of the occurrence of any event that will or
may result in the failure to satisfy any of the conditions specified in Section
-------
7.10(c) or Section 8. The Company will promptly provide to Purchaser (and its
- ------- ---------
counsel) copies of all filings made by the Company with any Governmental Entity
in connection with this Agreement and the transactions contemplated hereby. The
Company will promptly apprise Purchaser of any developments with respect to the
Settlement, and will provide to Purchaser (and its counsel) copies of all drafts
of documents and all correspondence relating to the Settlement.
35
7.7 Insurance; Indemnity.
--------------------
(a) For a period of four years after the Effective Time, Purchaser shall
cause to be maintained officers' and directors' liability insurance covering the
parties who are currently covered, in their capacities as officers and
directors, by the Company's existing officers' and directors' liability
insurance policies (the "Current Policies") on terms substantially no less
----------------
advantageous to such parties than such Current Policies; provided, however, that
-------- -------
Purchaser shall not be required, in order to maintain or procure such coverage,
to pay annual premiums in excess of $225,000 (the "Cap"); and provided, further,
--- -------- -------
that if equivalent coverage cannot be obtained, or can be obtained only by
paying an amount in excess of the Cap, Purchaser shall only be required to
obtain such coverage for such four-year period as can be obtained by paying
annual premiums equal to the Cap.
(b) For a period of four years after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless, to the fullest extent permitted
under applicable law, each person who is, or has been at any time prior to the
date hereof or who becomes prior to the Effective Time, an officer or director
of the Company or any of its Subsidiaries against all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement (collectively, "Losses") in connection
------
with any Litigation arising out of or pertaining to acts or omissions, or
alleged acts or omissions, by them in their capacities as such, which acts or
omissions occurred prior to the Effective Time. Without limiting the foregoing,
the Company and after the Effective Time the Surviving Corporation shall
periodically advance expenses as incurred with respect to the foregoing to the
fullest extent permitted under applicable law provided that the person to whom
the expenses are advanced provides an undertaking to repay such advance if it is
ultimately determined that such person is not entitled to indemnification.
7.8 Restructuring of Merger. Upon the mutual agreement of Purchaser and
-----------------------
the Company, the Merger shall be restructured in the form of a forward
subsidiary merger of the Company into Merger Sub, with Merger Sub being the
surviving corporation, or as a merger of the Company into Purchaser, with
Purchaser being the surviving corporation. In such event, this Agreement shall
be deemed appropriately modified to reflect such form of merger.
7.9 Employees and Employee Benefit Plans.
------------------------------------
(a) From and after the Effective Time, Purchaser shall cause the Surviving
Corporation and any of its Subsidiaries to honor in accordance with their terms
and the
36
past practice of the Company all existing employment and severance agreements
between the Company or any of its Subsidiaries, except as otherwise provided
herein, and any officer, director, or employee of the Company or any of its
Subsidiaries so long as such agreements shall have been identified to Purchaser
in the Disclosure Letter and to the extent such terms are in effect on the date
hereof or as otherwise provided
(b) The Company will use its reasonable best efforts consistent with
past practice and applicable law to enforce any existing non-compete and
confidentiality provisions contained in agreements with employees and former
employees.
(c) From and for two years after the Effective Time, Purchaser will, or
will cause Merger Sub, as applicable, to continue to provide each employee of
the Company and its Subsidiaries with employee benefits and other terms and
conditions of employment that are, in the aggregate, comparable to the benefits
and terms and conditions provided to each such employee by the Company or any of
its Subsidiaries, as applicable, on the Closing Date.
(d) The Company will use its reasonable best efforts to apply for and
receive from the Internal Revenue Service a favorable determination letter for
the Raster Graphics, Inc. Employees 401(k) Savings Plan & Trust.
7.10 Stockholder Approval; Preparation of Proxy Statement. (a) Subject
----------------------------------------------------
to the provisions of this Agreement, as promptly as practicable following the
satisfaction or waiver by Purchaser of the conditions set forth in Section
-------
7.10(c), the Company will (i) duly call, give notice of, convene and hold a
- ------- -
meeting of its stockholders (the "Stockholder Meeting") for the purpose of
-------------------
obtaining the voting upon the Merger, and (ii) through its Board of Directors,
--
declare the advisability of the Merger and recommend to its stockholders that
the Company Stockholder Approval be given.
(b) Subject to the provisions of this Agreement, as promptly as
practicable following the satisfaction or waiver by Purchaser of the conditions
set forth in Section 7.10(c), the Company will, at Purchaser's request, prepare
---------------
and file a preliminary Proxy Statement (such proxy statement, and any amendments
or supplements thereto, the "Proxy Statement") with the SEC and will use its
---------------
reasonable best efforts to respond to any comments of the SEC or its staff and
to cause the Proxy Statement to be cleared by the SEC as soon as practicable
after responding to all such comments to the satisfaction of the staff. The
Company will notify Purchaser promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will supply
Purchaser with copies of all correspondence between the Company or any of
37
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement or the Merger. The Company agrees to
notify the Purchaser a reasonable time prior to the filing or distribution of
the Proxy Statement of such filing or distribution. The Company shall give the
Purchaser and its counsel (who shall provide any comments thereon as soon as
practicable) the opportunity to review the Proxy Statement prior to its being
filed with the SEC and shall give the Purchaser and its counsel (who shall
provide any comments thereon as soon as practicable) the opportunity to review
all amendments and supplements to the Proxy Statement and all responses to
requests for additional information and replies to comments prior to their being
filed with, or sent to, the SEC. Each of the Company and the Purchaser agrees to
use its reasonable best efforts, after consultation with the other party, to
respond promptly to all such comments of and requests by the SEC. As promptly as
practicable after the Proxy Statement has been cleared by the SEC, the Company
shall mail the Proxy Statement to the stockholders of the Company. If at any
time prior to the Stockholders Meeting there shall occur any event that should
be set forth in an amendment or supplement to the Proxy Statement, the Company
will promptly prepare and mail to its stockholders such an amendment or
supplement. The Company will not mail any Proxy Statement, or any amendment or
supplement thereto, to which Purchaser reasonably objects; provided, that
--------
Purchaser shall identify its objections and fully cooperate with the Company to
create a mutually satisfactory Proxy Statement.
(c) Notwithstanding anything to the contrary in this Agreement, without
the prior written consent of Purchaser, the Company shall neither (i) call a
-
Stockholder Meeting for the purpose of voting on the Merger, nor (ii) file a
--
Proxy Statement with the SEC or otherwise publish a Proxy Statement, unless and
until each of the following conditions has been satisfied: (w) the Settlement
-
shall have been approved by all relevant parties and the appropriate court of
competent jurisdiction in substantially the form described in the MOU; (x) the
-
Company shall have filed with the SEC the Company's Annual Report on Form 10-K
for the Company's 1997 fiscal year, the Company's Quarterly Reports on Form 10-Q
for the quarterly periods ending March 31, 1998 and June 30, 1998, respectively
and, if deemed necessary by the Company's auditors, restatements of the
Company's Quarterly Reports for the quarterly periods ending March 31, 1997,
June 30, 1997, and September 30, 1997, which reports (the "Pending Reports")
---------------
shall comply in form and substance with the Exchange Act; (y) the Company shall
-
be in compliance with all reporting requirements applicable to the Company under
the Securities Act and the Exchange Act except such requirements, the failure of
with which to comply, would not, individually or in the aggregate, have a
Material Adverse Effect and (z) Purchaser shall not have determined in its
-
reasonable discretion that Section 2115 of the California General Corporation
Law applies to the Company, the Merger or any of the transactions contemplated
by the Merger Agreement and the Option Agreement.
38
(d) The Company shall use its reasonable best efforts to obtain the
Company Shareholder Approval.
(e) Purchaser agrees to cause all shares of Common Stock owned by
Purchaser or any Subsidiary of Purchaser to be voted in favor of the approval of
the Merger.
7.11 Additional Agreements of the Company. (a) The Company shall use
------------------------------------
its reasonable best efforts to file the Pending Reports as promptly as
practicable after the date hereof, but in no event later than (i) October 15,
-
1998 for the Pending Reports for the periods ending in 1997 and (ii) November
--
30, 1998 for the periods ending in 1998. The Company shall provide drafts of
such filings to Purchaser at Purchaser's request and shall consider any comments
suggested by Purchaser; provided, that the Company will not be in breach of the
--------
first sentence of this Section 7.11(a) due to Purchaser's delay in providing
---------------
such comments to the Company.
(b) The Company shall use its reasonable best efforts to insure that the
Settlement shall be approved by all parties and the appropriate court of
competent jurisdiction in substantially the form described in the MOU.
(c) Except with respect to the Option Agreement and the Loan Agreement,
the Company shall (i) maintain the shares of O-Sub free and clear of all
-
Encumbrances for so long as either this Agreement or the Option Agreement
remains in effect; and (ii) promptly (but no later than October 15, 1998)
--
either remove any and all Encumbrances from the other assets subject to the
Option Agreement or provide to Purchaser evidence reasonably satisfactory to
Purchaser that such Encumbrances will be removed prior to the exercise of the
Inkjet Option.
(d) The Company shall use its reasonable best efforts to finalize,
execute and deliver an agreement with Seiko Epson Corporation (the "Seiko Epson
-----------
Agreement") covering the same matters described in the Letter of Intent, dated
- ---------
April 22, 1997, between the Company and Seiko Epson Corporation, as soon as
practicable, but in no event later than November 15, 1998.
(e) The Company shall use its reasonable best efforts (including paying
all delinquent franchise taxes) to (i) restore the Company and its Subsidiaries
-
to good standing in the jurisdiction in which the Company or such Subsidiary, as
applicable, is incorporated or organized, and (ii) restore the Company's and its
--
Subsidiaries' licenses or qualifications to do business as foreign corporations
and restore them to good standing in each jurisdiction in which the character of
the properties owned or leased by it or in
39
which the transaction of its business makes such licensure, qualification or
good standing necessary. The Company shall use its reasonable best efforts to
maintain the good standing, licensure and qualifications of the Company and its
Subsidiaries in all relevant jurisdictions.
7.12 Transfer Taxes. Any liability for New York State Real Property
--------------
Transfer Tax and similar real property transfer taxes and real property gains
taxes imposed by any other state with respect to the transactions contemplated
by this Agreement, together with applicable interest, penalties and additions
thereto, if any, shall be paid or caused to be paid by the Purchaser.
ARTICLE 8
CONDITIONS
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger shall be subject to the
satisfaction or, where permissible, waiver, prior to the Effective Time, of the
following conditions:
(a) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(b) None of the parties hereto shall be subject to any order, judgment,
injunction, decree or ruling, or other action of a court or other Governmental
Entity of competent jurisdiction restraining, enjoining or otherwise prohibiting
the Merger or the transactions contemplated by this Agreement; provided that
--------
each of the parties shall have used its reasonable best efforts to appeal as
promptly as practicable any such order, judgment, injunction, decree, ruling or
other action.
(c) The Company Stockholder Approval shall have been obtained in
accordance with the DGCL and the Company's Certificate of Incorporation and By-
laws.
(d) Other than the filing provided for by Section 1.3, all Regulatory
-----------
Filings and Consents (including the Other Antitrust Filings and Consents) which
are necessary for the consummation of the Merger shall have been made or
obtained, or any waiting period (whether requisite or voluntary) under any
Foreign Antitrust Laws shall have expired, in each case, to the extent that the
failure to make or obtain such Regulatory Filings or Consents or of the waiting
period to have expired, in the aggregate, is reasonably likely, individually or
in the aggregate, to have a Material Delaying Effect (all
40
such Consents, Regulatory Filings and the lapse of all such waiting periods
being referred to as the "Requisite Regulatory Approvals"), and all such
------------------------------
Requisite Regulatory Approvals shall be in full force and effect. There shall
not be any statute, law, rule or regulation that makes consummation of the
Merger illegal or prohibited.
8.2 Additional Conditions to Obligations of Purchaser and Merger Sub to
-------------------------------------------------------------------
Effect the Merger. The obligations of Purchaser and Merger Sub to effect the
- -----------------
Merger shall be subject to the satisfaction or, where permissible, waiver, prior
to the Effective Time, of the following conditions:
(a) The Settlement shall have been approved by all relevant parties and
the appropriate court of competent jurisdiction in substantially the form
described in the MOU.
(b) (i) The representations or warranties made by the Company in this
-
Agreement shall be true and correct in all respects as of the date hereof, and
shall be true and correct in all respects as of the Closing Date as if made as
of the Closing Date (other than representations and warranties made as of a
specified date), except where the failure to be so true and correct (without
giving effect to any materiality qualifications or thresholds contained in such
representations and warranties), individually and in the aggregate, would not
have a Material Adverse Effect or materially adversely affect the business of
Purchaser in relation to its decision to consummate the transactions
contemplated hereby, and (ii) the Company shall not have breached or failed to
--
comply in any material respect with any of its obligations under this Agreement,
the Loan Agreement or the Option Agreement.
(c) There shall not have been issued, delivered, sold or granted any
shares of Common Stock pursuant to the Rights Agreement.
(d) Since the date hereof, there shall not have occurred any event,
change, effect or development that, individually or in the aggregate, would have
a Material Adverse Effect.
(e) The Seiko Epson Agreement, in form and substance reasonably
satisfactory to Purchaser, shall have been executed and delivered by all parties
thereto.
(f) Each of the Company and its Subsidiaries is validly existing and in
good standing under the laws of its jurisdiction of incorporation and is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of any other state of the United States or any other
jurisdiction in which the character of
41
the properties owned or leased by it or in which the transaction of its business
makes such licensure, qualification or good standing necessary.
8.3 Additional Conditions to Obligations of the Company. The
---------------------------------------------------
obligations of the Company to effect the Merger are subject to the satisfaction
or, where permissible, waiver, prior to the Effective Time, of the following
conditions:
(a) (i) The representations or warranties made by Purchaser in this
Agreement shall be true and correct in all respects as of the date hereof, and
shall be true and correct in all respects as of the Closing Date as if made as
of the Closing Date (other than representations and warranties made as of a
specified date), except where the failure to be so true and correct (without
giving effect to any materiality qualifications or thresholds contained in such
representations and warranties), individually and in the aggregate, would not
have a Material Adverse Effect, and (ii) Purchaser shall not have breached or
failed to comply in any material respect with any of its obligations under this
Agreement, the Loan Agreement or the Option Agreement.
(b) Purchaser or Merger Sub shall have deposited the aggregate Merger
Consideration with the Paying Agent.
ARTICLE 9
TERMINATION; AMENDMENT; WAIVER
9.1 Termination. This Agreement may be terminated and the Merger
-----------
contemplated hereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company, if any:
(a) by mutual written consent of the Company and Purchaser;
(b) by Purchaser or the Company if:
(i) the Effective Time shall not have occurred on or before
February 28, 1999 (provided that the right to terminate this Agreement
--------
pursuant to this clause (i) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of or
resulted in the failure of the Effective Time to occur on or before such
date);
42
(ii) there shall be any statute, law, rule or regulation that
makes consummation of the Merger illegal or prohibited or if any court or
other Governmental Entity of competent jurisdiction shall have issued an
order, judgment, decree or ruling, or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, judgment,
injunction, decree, ruling or other action shall have become final and non-
appealable; provided that the party terminating this Agreement has complied
--------
with the provisions of the penultimate sentence of Section 7.3; or
(iii) the Company Stockholder Approval shall not have been
obtained at a Stockholder Meeting duly convened therefor or at any
adjournment or postponement thereof;
(c) by the Company if:
(i) (x) any of the respective representations or warranties made by
-
Purchaser or Merger Sub in this Agreement shall not have been true and
correct in all respects when made, or shall thereafter have ceased to be true
and correct in all respects as if made as of such later date (other than
representations and warranties made as of a specified date), except where the
failure to be so true and correct (without giving effect to any materiality
qualifications or thresholds contained in such representations and
warranties), individually or in the aggregate, would not have a Material
Adverse Effect, or (y) Purchaser or Merger Sub shall have breached or failed
-
to comply in any material respect with any of its obligations under this
Agreement, which untruth or inaccuracy or breach, in the case of clauses (x)
or (y), is not curable or, if curable, is not cured within 10 business days
after written notice thereof has been given by the Company to Purchaser;
(ii) the Company takes any of the actions described in Section
-------
7.1(b), provided, that the Company has notified Purchaser in writing of its
------ --------
intent to take any such action five days prior to the termination of this
Agreement, and the Acquisition Proposal at stake continues to be a Superior
Proposal notwithstanding any modification by Purchaser of the terms of the
Merger; provided further that the Company has complied with the provisions of
-------- -------
Sections 7.1(b) and (c); and provided further that such termination under
--------------- ---
this Section 9.1(c)(ii) shall not be effective until (x) the Company has paid
------------------ -
to Purchaser or deposited with a mutually acceptable escrow agent an amount
equal to the sum of the Maximum Expense Amount and the Termination Amount;
and (y), the Company has deposited with a mutually acceptable escrow agent
-
the items set forth in Schedule D to the Option Agreement.
43
(d) by Purchaser if:
(i) (A) the Company fails to file (x) the Pending Reports for the
- -
periods ending in 1997 by October 15, 1998 or (y) the Pending Reports for the
-
periods ending in 1998 by by November 30, 1998, (B) if the Company, upon
-
Purchaser's request (based upon Purchaser's reasonable belief that events are
likely to occur that would enable Purchaser to exercise the Inkjet Option),
has not placed in escrow the items set forth in Schedule D to the Option
Agreement, or (C) if the Seiko Epson Agreement, in form and substance
-
reasonably satisfactory to Purchaser, has not been executed and delivered by
all parties thereto by November 15, 1998.
(ii) (A) the Company has failed by October 15, 1998 to have removed
-
all Encumbrances from the assets subject to the Option Agreement (other than
the O-Sub Shares) or provided to Purchaser evidence reasonably satisfactory
to Purchaser that such Encumbrances will be removed prior to the exercise of
the Inkjet Option or (B) any Encumbrance (other than Encumbrances existing as
-
of the date hereof and Encumbrances created pursuant to the Loan Agreement or
the Option Agreement) has been placed on all or any portion of the O-Sub
Shares or the other assets subject to the Option Agreement, and all such
Encumbrance has not been removed within 10 calendar days after Purchaser has
delivered written notice to the Company requesting that such Encumbrance be
removed.
(iii) (x) Any of the representations or warranties made by the
Company in this Agreement shall not have been true and correct in all
respects when made, or shall thereafter have ceased to be true and correct in
all respects as if made as of such later date (other than representations and
warranties made as of a specified date), except where the failure to be so
true and correct (without giving effect to any materiality qualifications or
thresholds contained in such representations and warranties), individually
and in the aggregate, would not have a Material Adverse Effect or materially
adversely affect the business of Purchaser in relation to its decision to
consummate the transactions contemplated hereby, or (y) the Company shall
-
have breached or failed to comply in any material respect with any of its
obligations under this Agreement, the Loan Agreement or the Option Agreement,
which untruth or inaccuracy or breach, in the case of clauses (x) or (y), is
not curable, or is not cured within 10 business days after written notice
thereof has been given by Purchaser to the Company;
(iv) Any corporation, entity, "group" or "person" (as defined in
the Exchange Act), other than Purchaser or Merger Sub, shall have acquired
beneficial ownership of more than 25% of the outstanding shares of Common
Stock;
44
(v) Since the date hereof, there shall have occurred any event,
change, effect or development that, individually or in the aggregate, would
have a Material Adverse Effect;
(vi) if the Settlement has been rejected by a court of competent
jurisdiction or otherwise terminated, and a substitute settlement that is
reasonably acceptable to Purchaser has not been entered into and approved by
such court within 30 days of such rejection or termination; or
(vii) if the Company takes any of the actions described in Section
-------
7.1(b) or if the Board of Directors shall have resolved to take any such
------
action.
9.2 Effect of Termination. If this Agreement is terminated and the
---------------------
Merger is abandoned pursuant to Section 9.1 hereof, this Agreement, except for
-----------
the provisions of Section 7.11(c), Section 9.2 and Article 10, shall terminate,
--------------- ----------- ----------
without any liability on the part of any party or its directors, officers or
stockholders. Nothing herein shall relieve any party to this Agreement of
liability for breach of this Agreement or prejudice the ability of the non-
breaching party to seek damages from any other party for any breach of this
Agreement, including without limitation, attorneys' fees and the right to pursue
any remedy at law or in equity.
9.3 Amendment. To the extent permitted by applicable law, this
---------
Agreement may be amended by action taken by or on behalf of the Board of
Directors of the Company and Purchaser at any time before or after adoption of
this Agreement by the stockholders of the Company but, after any such
stockholder approval, no amendment shall be made which decreases the Merger
Consideration or which adversely affects the rights of the Company's
stockholders hereunder without the approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all of the parties.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
-----------------
parties hereto, by action taken by or on behalf of the Board of Directors and
Purchaser, may (i) extend the time for the performance of any of the obligations
-
or other acts of the other parties hereto, (ii) waive any inaccuracies in the
--
representations and warranties contained herein by any other applicable party or
in any document, certificate or writing delivered pursuant hereto by any other
applicable party or (iii) waive compliance with any of the agreements or
---
conditions contained herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
45
ARTICLE 10
GENERAL PROVISIONS
10.1 Nonsurvival of Representations and Warranties. None of the
---------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
10.2 Notices. Any notice required to be given hereunder shall be
-------
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier service (with proof of
service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to Purchaser or Merger Sub: If to the Company:
Gretag Imaging Group, Inc. Raster Graphics, Inc.
c/o Gretag Imaging, Inc. 3025 Orchard Parkway
2070 Westover Road San Jose, CA 95134
Chicopee, MA 01022
Telephone: (413) 593-6900 Telephone: (408) 232-4000
Facsimile: (413) 788-0940 Facsimile: (408) 232-4100
Attention: William Recker Attention: Rakesh Kumar
With a copy to:
Gretag Imaging Holding AG
Althardstrasse 70
CH-8105 Regensdorf Switzerland
Telephone: (011-411) 842-2092
Facsimile: (011-411) 842-2411
Attention: Dr. Eduard Brunner
With a copy to: With a copy to:
46
Debevoise & Plimpton Venture Law Group
875 Third Avenue 2800 Sand Hill Road
New York, New York 10022 Menlo Park, CA 94025
Telephone: (212) 909-6000 Telephone: (650) 854-4488
Facsimile: (212) 909-6836 Facsimile: (650) 854-1121
Attention: Christopher Smeall, Esq. Attention: Edmund S. Ruffin, Jr., Esq.
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3 Assignment; Binding Effect. Neither this Agreement nor any of the
--------------------------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that either Purchaser
-------- -------
or Merger Sub (or both) may assign its rights hereunder to an affiliate but
nothing shall relieve the assignor from its obligations hereunder. Subject to
the preceding sentence, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except for
the provisions of Sections 4.2(a) and 4.2(d), nothing in this Agreement,
--------------- ------
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
10.4 Entire Agreement. This Agreement, the Disclosure Letter, the Option
----------------
Agreement, the Loan Agreement and any other documents delivered by the parties
in connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof or therewith and supersede all prior
agreements and understandings among the parties with respect thereto.
10.5 Fees and Expenses.
-----------------
(a) Except as provided in Section 10.5(b), whether or not the Merger is
---------------
consummated, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
(b) If this Agreement is terminated by the Company pursuant to Section
-------
9.1(b)(iii) or 9.1(c)(ii) or by Purchaser pursuant to 9.1(d)(i)(A)(x) (but only
- -------------------------
if all the relevant Pending Reports continue not to be filed on November 30,
1998), 9.1(d)(iii),
47
9.1(d)(vi) or 9.1(d)(vii), the Company shall pay Purchaser as promptly as
practicable in same-day funds an aggregate amount equal to the Purchaser
Expenses. "Purchaser Expenses" shall mean the documented reasonable
------------------
out-of-pocket expenses of Purchaser, Merger Sub and their respective affiliates
incurred in connection with or arising out of the Merger, this Agreement, the
Option Agreement (including the exercise thereof), the Loan Agreement (other
than those expenses explicitly covered therein) and the transactions
contemplated hereby and thereby (including, without limitation, amounts paid or
payable to investment bankers (if any), information agents, lending banks, fees
and expenses of counsel, accountants and consultants and printing and mailing
expenses, regardless of when such expenses are incurred); provided, that in no
--------
event shall Purchaser Expenses exceed $1,000,000 (the "Maximum Expense Amount");
----------------------
and provided further, that if (a) for any reason the Purchaser is unable to
----------------
consummate the purchase of the Inkjet Business (as defined in the Option
Agreement) in accordance with the Option Agreement at the Combined Closing Date
(as defined in the Option Agreement) following any termination of this Agreement
pursuant to Section 9.1(b)(iii), 9.1(c)(ii), 9.1(d)(iii) or 9.1(d)(vii) or (b)
at any time following the consummation of the purchase of such Inkjet Business
Purchaser is required to rescind or unwind such purchase or pay damages to the
Company or any other Person (whether pursuant to a judgment or award or by
reason of any settlement of any judicial or arbitral proceeding) as a result of
or in connection with such purchase, then the Company shall promptly pay to
Purchaser the sum of $500,000 (the "Termination Amount") in immediately
------------------
available funds in addition to the Purchaser Expenses.
(ii) If this Agreement is terminated by the Company pursuant to Section
-------
9.1(c)(i), Purchaser shall pay the Company as promptly as practicable in same-
- ---------
day funds an aggregate amount equal to the Company Expenses. "Company Expenses"
----------------
shall mean the documented reasonable out-of-pocket expenses of the Company and
its affiliates incurred in connection with or arising out of the Merger, this
Agreement, the Option Agreement and the transactions contemplated hereby and
thereby (including, without limitation, amounts paid or payable to investment
bankers, information agents, lending banks, fees and expenses of counsel,
accountants and consultants and printing and mailing expenses, regardless of
when such expenses are incurred); provided that in no event shall Company
--------
Expenses exceed $1,000,000; and provided further that Company Expenses shall not
-------- -------
include any fees and expenses that would have been incurred by the Company or
its affiliates regardless of whether Purchaser and the Company had negotiated
and executed this Agreement or the Option Agreement (including, without
limitation, fees and expenses paid or payable to accountants with respect to the
preparation, restatement and filing of the Pending Reports, and amounts paid or
payable to investment bankers, counsel and consultants for advice given with
respect to the general solicitation of potential acquirors of the Company).
48
(c) Each of the Company and Purchaser acknowledges that the agreements
contained in Section 10.5(b) are an integral part of the transactions
---------------
contemplated by this Agreement, and that, without these agreements, Purchaser,
on the one hand, and the Company on the other would not enter into this
Agreement; accordingly, if the Company or Purchaser fails to promptly pay any
amounts owing pursuant to this Section 10.5(b) when due, the Company or
---------------
Purchaser shall in addition thereto pay to Purchaser or the Company, as the case
may be, all costs and expenses (including, pursuant to Section 10.5(b), fees and
---------------
disbursements of counsel) incurred in collecting such amounts, together with
interest on such amounts (or any unpaid portion thereof) from the date such
payment was required to be made until the date such payment is received by
Purchaser or the Company, as the case may be, at the prime rate of Citibank,
N.A. as in effect from time to time during such period.
10.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Each of the Company, Purchaser and Merger Sub hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and of the United States of America
located in the State of Delaware (the "Delaware Courts") for any litigation
---------------
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the Delaware Courts and agrees not to plead or claim in any Delaware Court
that such litigation brought therein has been brought in an inconvenient forum.
10.7 Headings. Headings of the Articles and Sections of this Agreement
--------
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
10.8 Interpretation. In this Agreement, unless the context otherwise
--------------
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa. Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." As used in this Agreement, the words "Subsidiary," "affiliate" and
---------- ---------
"associate" shall have the meanings ascribed thereto in Rule 12b-2 under the
---------
Exchange Act. For purposes of this Agreement, one party shall be considered
"wholly owned" by another party if all of the shares of its outstanding capital
stock, other than directors' qualifying shares, are beneficially owned by such
other party. As used in this Agreement, the words "to the knowledge of the
Company" shall mean the
49
knowledge of the directors and senior officers of the Company, after reasonable
investigation.
10.9 Investigations. No action taken pursuant to this Agreement,
--------------
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement.
10.10 Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.11 Enforcement of Agreement.
------------------------
(a) The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or was otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any Delaware Court, this being in addition to any other
remedy to which they are entitled at law or in equity.
(b) The prevailing party in any judicial action shall be entitled to
receive from the other party reimbursement for the prevailing party's reasonable
attorneys' fees and disbursements, and court costs.
10.12 Counterparts. This Agreement may be executed by the parties hereto
------------
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
50
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
RASTER GRAPHICS, INC.
By: /s/ Rak Kumar
----------------------
Name: Rak Kumar
Title: President & CEO
GRETAG IMAGING GROUP, INC.
By: /s/ Dr. Eduard Brunner
----------------------
Name: Dr. Eduard Brunner
Title: Treasurer
GRETAG ACQUISITION CORP.
By: /s/ Dr. Eduard Brunner
----------------------
Name: Dr. Eduard Brunner
Title: Treasurer
51