EXHIBIT 3
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AGREEMENT AND PLAN OF MERGER
among:
ELECTROGRAPH HOLDINGS, INC.,
a Delaware corporation;
CICE ACQUISITION CORP.,
a New York corporation; and
MANCHESTER TECHNOLOGIES, INC.,
a New York corporation
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Dated as of April 17, 2005
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION.................................................................2
1.1 MERGER OF MERGER SUB INTO THE COMPANY..........................................................2
1.2 EFFECT OF THE MERGER...........................................................................2
1.3 CLOSING; EFFECTIVE TIME........................................................................2
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS................................2
1.5 CONVERSION OF SHARES...........................................................................3
1.6 ESCROW ACCOUNT.................................................................................3
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS........................................................4
1.8 PAYMENT OF PRICE PER SHARE; EXCHANGE OF COMPANY STOCK CERTIFICATES.............................4
1.9 COMPANY OPTIONS................................................................................6
1.10 FURTHER ACTION.................................................................................7
1.11 ADJUSTMENT TO COMPANY COMMON STOCK.............................................................7
1.12 DISSENTER'S RIGHTS.............................................................................7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................................8
2.1 DUE ORGANIZATION; SUBSIDIARIES.................................................................8
2.2 AUTHORITY; BINDING NATURE OF AGREEMENT.........................................................8
2.3 CAPITALIZATION, ETC............................................................................9
2.4 SEC FILINGS; FINANCIAL STATEMENTS.............................................................10
2.5 SEC DISCLOSURE CONTROLS AND PROCEDURES........................................................11
2.6 ABSENCE OF CHANGES............................................................................12
2.7 PROPRIETARY ASSETS............................................................................12
2.8 MATERIAL CONTRACTS............................................................................13
2.9 LIABILITIES...................................................................................15
2.10 GOVERNMENTAL AUTHORIZATIONS...................................................................16
2.11 TAX MATTERS...................................................................................16
2.12 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.....................................................17
2.13 ENVIRONMENTAL MATTERS.........................................................................20
2.14 LEGAL PROCEEDINGS; ORDERS.....................................................................20
2.15 VOTE REQUIRED.................................................................................20
2.16 NON-CONTRAVENTION.............................................................................21
TABLE OF CONTENTS
(continued)
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2.17 GOVERNMENTAL FILINGS..........................................................................22
2.18 FAIRNESS OPINION..............................................................................22
2.19 BROKER........................................................................................22
2.20 RELATED PARTY TRANSACTIONS....................................................................22
2.21 PERSONAL PROPERTY.............................................................................23
2.22 REAL PROPERTY.................................................................................23
2.23 COMPLIANCE WITH LAWS..........................................................................24
2.24 INSURANCE.....................................................................................24
2.25 TAKEOVER STATUTES.............................................................................24
2.26 MATERIAL SUPPLIERS AND MATERIAL CUSTOMERS.....................................................25
2.27 TRANSACTION FEES..............................................................................25
2.28 FULL DISCLOSURE...............................................................................25
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...................................25
3.1 DUE ORGANIZATION; SUBSIDIARIES................................................................25
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT........................................................25
3.3 NON-CONTRAVENTION.............................................................................26
3.4 GOVERNMENTAL FILINGS..........................................................................26
3.5 FULL DISCLOSURE...............................................................................26
3.6 MERGER SUB FORMATION..........................................................................26
3.7 FINANCING.....................................................................................27
3.8 INVESTIGATION; ACKNOWLEDGMENT.................................................................27
SECTION 4. CERTAIN COVENANTS OF THE COMPANY..........................................................28
4.1 OPERATION OF THE COMPANY'S BUSINESS...........................................................28
4.2 NO SOLICITATION...............................................................................31
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES.......................................................32
5.1 PROXY STATEMENT...............................................................................32
5.2 COMPANY SHAREHOLDERS' MEETING.................................................................33
5.3 REGULATORY APPROVALS..........................................................................33
5.4 INDEMNIFICATION OF OFFICERS AND DIRECTORS.....................................................34
5.5 ADDITIONAL AGREEMENTS.........................................................................35
TABLE OF CONTENTS
(continued)
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5.6 DISCLOSURE....................................................................................36
5.7 CONFIDENTIALITY...............................................................................36
5.8 ACCESS AND INVESTIGATION......................................................................36
5.9 STOCK EXCHANGE DE-LISTING.....................................................................37
5.10 EMPLOYEES AND EMPLOYEE BENEFITS...............................................................37
5.11 TAKEOVER STATUTES.............................................................................37
5.12 DEFENSE OF LITIGATION.........................................................................38
5.13 ACTIONS WITH RESPECT TO FINANCING.............................................................38
5.14 PAYMENT IN FULL OF ACQUIRED COMPANY INDEBTEDNESS..............................................38
5.15 RELEASE OF OBLIGATIONS UNDER DESIGNATED REAL PROPERTY LEASES..................................38
5.16 RELEASE OF OBLIGATIONS UNDER ▇▇▇▇ LEASE.......................................................39
5.17 CUSTOMERS AND SUPPLIERS.......................................................................39
5.18 TANK CLOSURE..................................................................................40
5.19 TRANSACTION EXPENSES..........................................................................40
5.20 TERMINATING OPERATIONS........................................................................40
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB..............................40
6.1 ACCURACY OF REPRESENTATIONS...................................................................40
6.2 PERFORMANCE OF COVENANTS......................................................................41
6.3 SHAREHOLDER APPROVAL..........................................................................41
6.4 ANTITRUST.....................................................................................41
6.5 CONSENTS......................................................................................41
6.6 COMPANY MATERIAL ADVERSE EFFECT...............................................................41
6.7 AGREEMENTS AND DOCUMENTS......................................................................41
6.8 NO RESTRAINTS.................................................................................41
6.9 NO GOVERNMENTAL LITIGATION....................................................................41
6.10 RELEASES FROM CERTAIN OPTION HOLDERS..........................................................42
6.11 DISSENTING SHARES.............................................................................42
6.12 FUNDING.......................................................................................42
6.13 TERMINATION OF THE LOAN AGREEMENT AND INVENTORY FINANCING ARRANGEMENTS........................42
TABLE OF CONTENTS
(continued)
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6.14 DIRECTOR AND OFFICER RESIGNATIONS.............................................................42
6.15 ▇▇▇▇▇▇ EMPLOYMENT AGREEMENT AND NON-COMPETE AND NON-DISCLOSURE AGREEMENTS.....................42
6.16 ACTIONS WITH RESPECT TO CERTAIN EMPLOYEES.....................................................42
6.17 TERMINATION OF RELATED PARTY TRANSACTIONS.....................................................42
6.18 RELEASE OF OBLIGATIONS UNDER THE DESIGNATED REAL PROPERTY LEASES..............................42
6.19 DELIVERY OF ESCROW AGREEMENT..................................................................42
6.20 TRANSACTION EXPENSES..........................................................................43
6.21 TERMINATING OPERATIONS........................................................................43
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY.........................................43
7.1 ACCURACY OF REPRESENTATIONS...................................................................43
7.2 PERFORMANCE OF COVENANTS......................................................................43
7.3 SHAREHOLDER APPROVAL..........................................................................43
7.4 ANTITRUST.....................................................................................43
7.5 CONSENTS......................................................................................43
7.6 DOCUMENTS.....................................................................................44
7.7 NO RESTRAINTS.................................................................................44
SECTION 8. TERMINATION...............................................................................44
8.1 TERMINATION...................................................................................44
8.2 EFFECT OF TERMINATION.........................................................................45
8.3 TERMINATION FEES..............................................................................46
SECTION 9. MISCELLANEOUS PROVISIONS..................................................................47
9.1 AMENDMENT.....................................................................................47
9.2 WAIVER........................................................................................47
9.3 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES................................................47
9.4 ENTIRE AGREEMENT..............................................................................47
9.5 APPLICABLE LAW; JURISDICTION..................................................................48
9.6 ATTORNEYS' FEES...............................................................................48
9.7 ASSIGNABILITY.................................................................................48
9.8 NOTICES.......................................................................................49
TABLE OF CONTENTS
(continued)
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9.9 COUNTERPARTS..................................................................................50
9.10 NO THIRD-PARTY BENEFICIARIES..................................................................50
9.11 SEVERABILITY..................................................................................50
9.12 CONSTRUCTION..................................................................................50
9.13 REMEDIES......................................................................................50
9.14 SPECIFIC PERFORMANCE..........................................................................50
9.15 WAIVER OF JURY TRIAL..........................................................................51
Exhibit A Certain Definitions
Exhibit B Voting Agreement
Exhibit C ▇▇▇▇▇▇ Employment Agreement
Exhibit D Non-Compete and Non-Disclosure Agreements
Exhibit E Escrow Agreement
Exhibit F Certificate of Incorporation of Surviving Corporation
Exhibit G Bylaws of Surviving Corporation
Exhibit H Option Cancellation and Release
Exhibit I Release
Exhibit J Surrender Agreement
Exhibit K Assignment and Assumption Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and entered
into as of April 17, 2005, by and among ELECTROGRAPH HOLDINGS, INC., a Delaware
corporation ("PARENT"); CICE ACQUISITION CORP., a New York corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"); and MANCHESTER TECHNOLOGIES,
INC., a New York corporation (the "COMPANY"). Certain capitalized terms used in
this Agreement are defined in EXHIBIT A.
RECITALS
WHEREAS, Parent, Merger Sub and the Company intend to effect a merger
of Merger Sub with and into the Company in accordance with this Agreement and
the New York Business Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a
wholly-owned subsidiary of Parent.
WHEREAS, the respective boards of directors of Parent, Merger Sub and
the Company have adopted this Agreement and the board of directors of the
Company has determined that the Merger, this Agreement, the Voting Agreement,
each of the Ancillary Agreements to which the Company is a party, and the
transactions contemplated by this Agreement and such Ancillary Agreements, are
advisable and fair to and in the best interests of the Company and its
shareholders.
WHEREAS, the board of directors of the Company has resolved to
recommend to its shareholders adoption of this Agreement and the transactions
contemplated hereby.
WHEREAS, concurrently with the execution of this Agreement, and as a
condition to the willingness of Parent and Merger Sub to enter into this
Agreement, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, who is the record or beneficial owner of
approximately 56% of the outstanding shares of Company Common Stock, is entering
into a voting agreement with Parent in the form attached hereto as EXHIBIT B
under which, among other things, he has agreed to (i) vote his shares of Company
Common Stock in favor of adoption of this Agreement and (ii) take other actions
in furtherance of the transactions contemplated by this Agreement (the "VOTING
AGREEMENT").
WHEREAS, concurrently with the execution of this Agreement, and as a
condition to the willingness of Parent and Merger Sub to enter into this
Agreement, ▇▇▇ ▇▇▇▇▇▇ is entering into (i) an employment agreement with
Electrograph Systems, Inc., a subsidiary of the Company ("ELECTROGRAPH"), in the
form attached hereto as EXHIBIT C (the "▇▇▇▇▇▇ EMPLOYMENT AGREEMENT") and (ii)
an executive participation agreement with Electrograph Investment Holdings,
Inc., the effectiveness of both of which are conditioned upon consummation of
the Merger.
WHEREAS, concurrently with the execution of this Agreement, and as a
condition to the willingness of Parent and Merger Sub to enter into this
Agreement, each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇ is entering into a
non-compete and non-disclosure agreement with Parent and Merger Sub in the form
attached hereto as EXHIBIT D (the "NON-COMPETE AND NON-DISCLOSURE
AGREEMENTS"), the effectiveness of both of which are conditioned upon
consummation of the Merger.
WHEREAS, subject to the terms set forth in Section 1.6(d) below,
simultaneously with, and as a condition of the parties hereto to effect, the
Merger, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, the Company, Parent and the Escrow Agent will enter
into an Escrow Agreement, in the form attached hereto as EXHIBIT E (the "ESCROW
AGREEMENT").
NOW THEREFORE, in consideration of the foregoing and the respective
covenants, agreements and representations and warranties set forth herein, the
parties to this Agreement, intending to be legally bound, agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and
subject to the conditions set forth in this Agreement and the applicable
provisions of the New York Business Corporation Law (the "NYBCL"), at the
Effective Time, (a) Merger Sub shall be merged with and into the Company, (b)
the separate existence of Merger Sub shall cease and the Company will continue
as the surviving corporation in the Merger (the "SURVIVING CORPORATION"), and
(c) the Surviving Corporation shall become a wholly-owned Subsidiary of Parent.
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set
forth in this Agreement and in the applicable provisions of the NYBCL.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, no later than five (5) business days following
the satisfaction or waiver of the conditions set forth in Sections 6 and 7
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of such conditions) (the date
on which the Closing occurs, the "CLOSING DATE"). Subject to the provisions of
this Agreement, a certificate of merger satisfying the requirements of Section
904 of the NYBCL (the "CERTIFICATE OF MERGER") shall be duly executed by the
Company and concurrently with or immediately following the Closing delivered to
the Department of State of the State of New York. The Merger shall become
effective upon the date and time of the filing of the Certificate of Merger with
the Secretary of State of the State of New York or such other date and time as
Parent and the Company may mutually agree and include in the Certificate of
Merger (the "EFFECTIVE TIME").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS; DIRECTORS AND
OFFICERS. From and after the Effective Time:
(a) the Certificate of Incorporation of the Company shall
be amended and restated in its entirety in the form attached hereto as EXHIBIT
F, and such Certificate of Incorporation, as so amended and restated, shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by the NYBCL and such Certificate of Incorporation;
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(b) the Bylaws of the Company shall be amended and restated
in their entirety in the form attached hereto as EXHIBIT G, and such Bylaws, as
so amended and restated, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided in such Bylaws;
(c) the directors of the Surviving Corporation shall be the
respective individuals who are directors of Merger Sub immediately prior to the
Effective Time; and
(d) the officers of the Surviving Corporation shall be the
respective individuals who are officers of the Merger Sub immediately prior to
the Effective Time.
1.5 CONVERSION OF SHARES.
(a) At the Effective Time, by virtue of the Merger and
without any further action on the part of Parent, Merger Sub, the Company or the
holders of any capital stock of Merger Sub or the Company:
(i) each share of Company Common Stock then held in the treasury of the Company
or held by any of its Subsidiaries or by Parent or any of its wholly-owned
Subsidiaries immediately prior to the Effective Time shall be cancelled
automatically and shall cease to exist, and no consideration shall be delivered
in exchange therefor;
(ii) except as provided in clause "(i)" above and except for Dissenting Shares,
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive in cash an
amount equal to $6.40, without any interest thereon (the "PRICE PER SHARE"). All
shares of Company Common Stock that have been so converted shall be cancelled
automatically and shall cease to exist, and the holders of certificates which
immediately prior to the Effective Time represented those shares (a "COMPANY
STOCK CERTIFICATE") shall cease to have any rights with respect to those shares,
other than the right to receive the aggregate Price Per Share relating thereto
upon surrender of their Company Stock Certificates in accordance with Section
1.8; and
(iii) each share of the common stock, $0.01 par value per share, of Merger Sub
then outstanding shall be converted into and become one validly issued, fully
paid and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
1.6 ESCROW ACCOUNT.
(a) As used herein, (i) the "COMPANY ESCROW AMOUNT" shall
mean an amount equal to $1,500,000, as may be increased (but not decreased) and
as shall be finally determined in accordance with this Section 1.6, and (ii) the
"STOCKHOLDER ESCROW AMOUNT" shall mean an amount equal to $1,500,000, as may be
decreased (but not increased) and as shall be finally determined in accordance
with this Section 1.6.
(b) No later than two (2) business days prior to the
Closing Date, the Company shall prepare and deliver to Parent a statement (the
"EXPENSE STATEMENT"), certified in writing by the Chief Financial Officer of the
Company, setting forth in reasonable detail the final amount of all Transaction
Expenses (the "EXPENSE AMOUNT"). If the Expense Amount is less than
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$6,000,000, the Stockholder Escrow Amount shall be decreased by an amount equal
to the positive amount of such difference less $150,000, and the Company Escrow
Amount shall be increased by an amount equal to the positive amount of such
difference less $150,000.
(c) At the Closing, (i) the Company shall deliver to an
escrow agent (which escrow agent shall be a bank or trust company with a branch
located in the City of New York) appointed prior to the Closing by Parent,
subject to approval by the Company, which approval shall not be unreasonably
withheld or delayed (the "ESCROW AGENT"), cash by wire transfer of immediately
available funds, in an amount equal to the Company Escrow Amount, and (ii)
Parent shall deduct from the aggregate Price Per Share otherwise payable to
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ an amount equal to the Stockholder Escrow Amount, and shall
deliver to the Escrow Agent cash by wire transfer of immediately available
funds, in an amount equal to the Stockholder Escrow Amount, such amounts in each
case to be held in an escrow account (the "ESCROW ACCOUNT") in accordance with
the terms of the Escrow Agreement as security for the obligations set forth
therein.
(d) Notwithstanding anything in this Section 1.6 or in this
Agreement to the contrary, in the event the that each of the Acquired Companies
is replaced by one or more Persons other than the Acquired Companies or any of
their Affiliates or is otherwise released on or prior to the Closing Date from
all obligations any of the Acquired Companies may have in respect of the ▇▇▇▇
Lease in compliance with the last sentence of Section 4.1(a) and Section 5.16,
then (i) the Escrow Agreement shall not be executed by any of the parties
contemplated to be a party thereto and the execution and delivery of the Escrow
Agreement shall no longer be a condition to Parent and Merger Sub's obligation
to consummate the transactions contemplated by this Agreement as specified in
Section 6.19, (ii) the provisions set forth in clauses (a), (b) and (c) of this
Section 1. 6 shall be disregarded in their entirety and shall be of no further
force and effect, and (iii) all references to "Company Escrow Amount",
"Stockholder Escrow Amount", "Expense Statement", "Expense Amount", "Escrow
Agent" and "Escrow Account" shall be disregarded in their entirety for any and
all purposes under this Agreement.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective
Time, the stock transfer books of the Company shall be closed with respect to
all shares of Company Common Stock. No further transfer of any such shares of
Company Common Stock shall be made on such stock transfer books after the
Effective Time. If, after the Effective Time, a valid certificate previously
representing any shares of Company Stock is presented to the Exchange Agent or
to the Surviving Corporation or Parent, such Company Stock Certificate shall be
canceled and shall be exchanged as provided in Section 1.8.
1.8 PAYMENT OF PRICE PER SHARE; EXCHANGE OF COMPANY STOCK
CERTIFICATES. (a) Immediately prior to the Effective Time, Parent shall deposit
or cause to be deposited with a party mutually agreeable to Parent and Company
(such selected party, the "EXCHANGE AGENT") in a separate fund (the "PAYMENT
FUND"), established for the benefit of the holders of Company Common Stock,
immediately available funds in amounts necessary for the payment of the
aggregate Price Per Share relating thereto payable under Section 1.5(a)(ii) upon
surrender of Company Stock Certificates in accordance with this Section 1.8,
less, if applicable, the Stockholder Escrow Amount otherwise payable to ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇. Promptly after the Effective Time, Parent shall cause the Exchange
Agent to mail to the record holders of Company
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Stock Certificates (i) a letter of transmittal in customary form and containing
such provisions as Parent may reasonably specify (including a provision
confirming that delivery of Company Stock Certificates shall be effected, and
risk of loss and title to Company Stock Certificates shall pass, only upon
delivery of such Company Stock Certificates to the Exchange Agent), and (ii)
instructions for use in effecting the surrender of Company Stock Certificates in
exchange for the aggregate Price Per Share relating thereto. Upon surrender of a
Company Stock Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by the Exchange Agent or Parent, (A) the holder of such
Company Stock Certificate shall be entitled to receive in exchange therefor an
amount in cash equal to the aggregate Price Per Share relating thereto, less any
required withholding of Taxes; PROVIDED, HOWEVER, that ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, upon
the surrender of all Company Stock Certificates held by him, shall be entitled
to the aggregate Price Per Share relating thereto, less, if applicable, the
Stockholder Escrow Amount and any required withholding of Taxes, and (B) the
Company Stock Certificate so surrendered shall be canceled immediately. Until
surrendered as contemplated by this Section 1.8, each Company Stock Certificate
shall be deemed, from and after the Effective Time, to represent only the right
to receive the aggregate Price Per Share relating thereto as contemplated by
Section 1.5(a)(ii). The aggregate Price Per Share relating to any Company Stock
Certificate paid upon the surrender of such Company Stock Certificate shall be
deemed to have been paid in full satisfaction of all rights pertaining to such
Company Stock Certificate and the shares of Company Common Stock formerly
represented by it. If any Company Stock Certificate shall have been lost, stolen
or destroyed, Parent may, in its discretion and as a condition precedent to the
payment of the aggregate Price Per Share relating thereto, require the owner of
such lost, stolen or destroyed Company Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in such sum as Parent may
reasonably direct) as indemnity against any claim that may be made against the
Exchange Agent, Parent or the Surviving Corporation with respect to such Company
Stock Certificate. In the event that the aggregate Price Per Share relating to
any Company Stock Certificate is to be paid to a Person other than the Person in
whose name the surrendered Company Stock Certificate is registered in the
transfer records of the Company, then such Person shall be entitled to receive
an amount equal to the aggregate Price Per Share relating to such Company Stock
Certificate upon (i) presenting such Company Stock Certificate representing
shares of Company Common Stock to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and (ii) paying any
applicable transfer or withholding Taxes or establishing to the reasonable
satisfaction of Parent and the Exchange Agent that any such Taxes have already
been paid or are not applicable.
(b) Each of the Exchange Agent, Parent and the Surviving
Corporation shall be entitled to deduct and withhold from any consideration
payable or otherwise deliverable pursuant to this Agreement to any holder or
former holder of Company Common Stock such amounts as may be required to be
deducted or withheld therefrom under the Code or any state, local or foreign Tax
Legal Requirements or under any other applicable Legal Requirement. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the Person to whom
such amounts would otherwise have been paid.
(c) None of Parent, the Surviving Corporation or the
Exchange Agent shall be liable to any holder or former holder of Company Common
Stock or to any other Person with
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respect to any portion of the consideration to be paid to the shareholders of
the Company that is properly paid to any public official pursuant to any
applicable abandoned property law, escheat law or similar Legal Requirement.
(d) The Exchange Agent shall invest the Payment Fund as
directed by Parent in an Eligible Investment. Any interest and other income
resulting from such investment shall become a part of the Payment Fund, and any
amounts in excess of the amounts payable under Section 1.5(a)(ii) shall be paid
promptly to Parent unless otherwise agreed to by Parent and Company.
(e) Any portion of the Payment Fund that remains unclaimed
by the holders of Company Stock Certificates 360 days after the Effective Time
shall be delivered by the Exchange Agent to Parent upon demand. Thereafter, any
holder of Company Stock Certificates who has not complied with this Section 1.8
shall look only to Parent for payment of the aggregate Price Per Share relating
thereto.
1.9 COMPANY OPTIONS. Except as may be otherwise agreed in writing
among Parent, the Company and any holder of any Company Option (as hereinafter
defined), upon the consummation of the Merger, each option to acquire Company
Common Stock (each, a "COMPANY OPTION," and collectively, the "COMPANY Options")
outstanding immediately prior to the Effective Time under any stock option plan,
agreement or arrangement of the Company, including but not limited to Company
Options issued under the Manchester Equipment Co., Inc. Amended and Restated
1996 Incentive and Non-Incentive Stock Option Plan, the Manchester Equipment Co.
Incentive and Non-Incentive Stock Option Plan, As Amended through July 27, 2001
(collectively, the "1996 OPTION PLANS") and the Company's 2005 Incentive
Compensation Plan (collectively, the "OPTION PLANS"), whether or not then
exercisable or vested, shall be terminated and cancelled immediately prior to
the Effective Time for the consideration (if any) provided in this Section 1.9.
Each holder of a Company Option that has an option exercise price per share less
than the Price Per Share and that is vested immediately prior to the Effective
Time without any action on the part of the Company or the Company board of
directors or any committee thereof (each such Company Option described in the
foregoing clauses, a "VESTED COMPANY OPTION"), shall have the right to receive
from the Company a cash payment (less applicable federal, state and local
withholding taxes) in an amount equal to the product obtained by multiplying (a)
the excess of the Price Per Share over the exercise price per share of such
Vested Company Option, by (b) the number of shares of Company Common Stock for
which such Vested Company Option was exercisable immediately prior to its
cancellation (such amounts payable hereunder with respect to all Vested Company
Options being referred to as the "OPTION PAYMENTS"). Prior to the execution and
delivery of this Agreement, the Company's board of directors shall have
reviewed, considered and approved the Option Payments and determined that such
Option Payments are permitted adjustments in connection with a merger, within
the meaning of Section 10 of each of the Company's 1996 Option Plans. Each
Company Option that is not a Vested Company Option and each Company Option that
is a Vested Company Option that has an exercise price per share equal to or
greater than the Price Per Share will automatically be cancelled without any
consideration as of the Effective Time and the Company shall have obtained on or
prior to the Closing Date a consent and release from holders of such options in
the form attached hereto as EXHIBIT H. As of the Effective Time, each of the
Option Plans shall be terminated and all Company Options cancelled (without any
liability on the part of the Surviving
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Corporation other than as expressly set forth in this Section 1.9). The Company
and the Company board of directors and any committee thereof shall take all
actions (including giving requisite notices to holders of Company Options
advising them of such cancellations and any rights pursuant to this Section 1.9
and obtaining any requisite consents from holders of Company Options) (y) as are
necessary to fully advise holders of Company Options of their rights under the
Option Plans in connection with the Merger and the Company Options and (z) as
are necessary to effectuate the provisions of this Section 1.9 under the terms
of the Option Plans. From and after the Effective Time, other than as expressly
set forth in this Section 1.9, no holder of a Company Option shall have any
rights in respect thereof other than to receive payment (if any) for his or her
Company Options as set forth in this Section 1.9. The Company shall pay the
Option Payments immediately prior to the Effective Time.
1.10 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession of and to all rights and property of Merger Sub and
the Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
1.11 ADJUSTMENT TO COMPANY COMMON STOCK. In the event of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange with respect to the Company Common Stock occurring before the Effective
Time, the Price Per Share shall be appropriately adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange.
1.12 DISSENTER'S RIGHTS. Notwithstanding anything to the contrary
contained herein, if required by the NYBCL (but only to the extent required
thereby), no shares of Company Common Stock that are issued and outstanding as
of immediately prior to the Effective Time and that are held by a shareholder
who has properly exercised his or her appraisal rights (such shares of Company
Common Stock being referred to herein as "DISSENTING SHARES" and such
shareholder being referred to herein as a "DISSENTING Shareholder") under the
NYBCL shall be entitled to receive any payments pursuant to Section 1.8 hereof,
unless and until such Dissenting Shareholder fails to perfect or shall have
otherwise irrevocably lost or withdrawn such Dissenting Shareholder's right to
dissent from the Plan of Merger under the NYBCL, in which case such Dissenting
Shareholder shall be entitled to receive payments pursuant to Section 1.8 hereof
in exchange for such Dissenting Shareholder's Dissenting Shares. With respect to
Dissenting Shares, the rights of a Dissenting Shareholder who complies with the
provisions of Section 623 of the NYBCL shall be limited exclusively to appraisal
rights provided under Section 623 of the NYBCL in exchange for such Dissenting
Shareholder's Dissenting Shares; provided, however, that payments, if any,
determined to be due to a Dissenting Shareholder shall be made without reduction
or dilution of the Price Per Share payable to non-Dissenting Shareholders. The
Company shall give Parent (i) prompt notice of any demands for appraisal of any
shares of Company Common Stock, the withdrawals of such demands, and any other
instrument served on the Company under the provisions of Section 623 of the
NYBCL and (ii) the right to participate in all negotiations and proceedings with
respect to demands for appraisal under the NYBCL. The Company shall not offer to
make or make any payment with respect to any demands for appraisal without the
prior written consent of Parent.
7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as of the
date hereof and as of the Closing Date (subject to such exceptions or
qualifications as are disclosed in writing in the disclosure letter supplied by
the Company to Parent dated as of the date hereof (the "COMPANY DISCLOSURE
LETTER"), which Company Disclosure Letter is arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this
Agreement and the disclosures in any paragraph of the Company Disclosure Letter
shall also constitute disclosure under, and shall also qualify, the other
paragraphs in this Agreement to the extent that the relevance of such
disclosures are reasonably apparent on their face) as follows:
2.1 DUE ORGANIZATION; SUBSIDIARIES. Each of the Acquired Companies
is a corporation or limited liability company duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate or limited liability company power
and authority: (a) to conduct its business in the manner in which its business
is currently being conducted; (b) to own, lease and use its assets in the manner
in which its assets are currently owned, leased and used; and (c) to perform its
obligations under all Material Contracts by which it is bound. Each of the
Acquired Companies is qualified to do business as a foreign corporation, and is
in good standing, under the laws of all jurisdictions where the nature of its
business requires such qualification, except where the failure to be so
qualified does not have, and is not reasonably likely to have, a Company
Material Adverse Effect. The Company has delivered to Parent accurate and
complete copies of (i) the certificate of incorporation, bylaws and other
charter or organizational documents of each of the Acquired Companies, including
all amendments thereto and (ii) the existing minutes and other records of the
meetings and other proceedings (including any actions taken by written consent
or otherwise without a meeting) of the shareholders or members of each of the
Acquired Companies, the board of directors of each of the Acquired Companies and
all committees of the board of directors of each of the Acquired Companies (the
items described in clauses (i) and (ii) of this sentence are collectively
referred to herein as the "ACQUIRED COMPANIES CONSTITUENT DOCUMENTS"). The
Company has no Subsidiaries, except for the entities identified in Section 2.1
of the Company Disclosure Letter. (The Company and each of its Subsidiaries on
the date hereof are collectively referred to herein as the "ACQUIRED
COMPANIES"). Except as set forth in Section 2.1 of the Company Disclosure
Letter, none of the Acquired Companies has any equity interest or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any Entity, other than (y) the Company's
interest in its Subsidiaries identified in Section 2.1 of the Company Disclosure
Letter, or (z) any interest in publicly traded companies held for investment
only and in each case comprising less than one percent of the outstanding
capital stock of such company. None of the Acquired Companies have, at any time,
been a general partner of, or with the exception of a guaranty of the debt or
obligation of another Acquired Company, otherwise been liable for any of the
debts or other obligations of, any general partnership, limited partnership or
other Person.
2.2 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
requisite corporate power and authority to enter into and, subject to the
Required Company Shareholder Vote, to perform its obligations under this
Agreement and each of the Ancillary Agreements to which it is a party. The board
of directors of the Company (at a meeting duly called and held) has: (a)
determined that the Merger, this Agreement, the Voting Agreement, each of the
Ancillary
8
Agreements to which it is a party and the transactions contemplated by this
Agreement and such Ancillary Agreements are advisable and fair to and in the
best interests of the Company and its shareholders, (b) determined that the
Price Per Share to be paid to the shareholders of the Company in the Merger is
fair to those shareholders, (c) authorized and approved the execution, delivery
and performance by the Company of this Agreement and each of the Ancillary
Agreements to which it is a party and approved the Merger, this Agreement, the
Voting Agreement, each of the Ancillary Agreements to which it is a party and
the transactions contemplated by this Agreement, the Voting Agreement and such
Ancillary Agreements and (d) recommended the adoption of this Agreement by the
holders of Company Common Stock and directed that this Agreement be submitted
for consideration by the Company's shareholders at the Company Shareholders'
Meeting (the "COMPANY BOARD RECOMMENDATION"). The execution, delivery and
performance by the Company of this Agreement and each of the Ancillary
Agreements to which it is a party and the consummation by the Company of the
transactions contemplated by this Agreement and such Ancillary Agreements have
been duly and validly authorized by all necessary corporate action on the part
of the Company, subject to the Required Company Shareholder Vote. This Agreement
and each of the Ancillary Agreements to which the Company is a party has been
duly executed by the Company and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists
of: (i) twenty-five million (25,000,000) shares of Company Common Stock, par
value $.01 per share, and (ii) five million (5,000,000) shares of preferred
stock, par value $.01 per share. As of the date hereof, (i) 8,440,948 shares of
Company Common Stock were issued and outstanding, (ii) no shares of the
Company's preferred stock were issued or outstanding, (iii) no shares of capital
stock of the Company were held in the Company's treasury, (iv) 2,600,000 shares
of Company Common Stock were reserved for issuance under the Amended and
Restated 1996 Incentive and Non-Incentive Stock Option Plan (the "1996 STOCK
OPTION PLAN") and (v) 1,000,000 shares of Company Common Stock were reserved for
issuance under the Company's 2005 Incentive Compensation Plan. Except as set
forth in this Section 2.3(a) as of the date hereof, no shares of capital stock
of the Company were authorized, issued, reserved for issuance or outstanding.
All of the outstanding shares of Company Common Stock have been duly authorized
and validly issued, and are fully paid and nonassessable. There are no shares of
Company Common Stock held by any of the Company's Subsidiaries. None of the
outstanding shares of Company Common Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right (whether pursuant to the certificate of incorporation or bylaws of the
Company or any Acquired Company Contract or any statute to which any of the
Acquired Companies is subject). None of the Acquired Companies is under any
obligation, or is bound by any Contract pursuant to which it may become
obligated, to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or capital stock of any Subsidiary of the Company or to provide any
funds to or make any investment in (A) any Subsidiary of the Company that is not
wholly-owned by the Company or (B) any other Person.
9
(b) As of the date hereof, Company Options to acquire an
aggregate of 731,900 shares of Company Common Stock pursuant to stock options
have been granted and are outstanding under the Company's 1996 Stock Option Plan
and no Company Options, no shares of Company Common Stock or any other awards
have been granted under the Company's 2005 Incentive Compensation Plan. Section
2.3(b) of the Company Disclosure Letter sets forth the following information
with respect to each Company Option outstanding as of the date of this
Agreement: (i) the name of the optionee; (ii) the number of shares of Company
Common Stock subject to such Company Option; (iii) the exercise price of such
Company Option; (v) the date on which such Company Option was granted; (v) the
extent to which such Company Option is vested and exercisable as of the date of
this Agreement; (vi) the date on which such Company Option expires; and (vii)
whether such Company Option is an incentive stock option or a non-qualified
stock option. The Company has delivered to Parent accurate and complete copies
of all plans and agreements pursuant to which the Company has granted Company
Options; provided, however, that, to the extent any agreements grant Company
Options pursuant to a plan, the Company has delivered accurate and complete
copies of the forms of all stock option agreements evidencing such options.
(c) Except for Company Options disclosed in Section 2.3(b)
of the Company Disclosure Letter, there is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) granted by
an Acquired Company to acquire any shares of the capital stock or other
securities of any of the Acquired Companies; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of any of the Acquired
Companies; (iii) rights agreement, shareholder rights plan (or similar plan
commonly referred to as a "poison pill") or Contract under which any of the
Acquired Companies is or may become obligated to issue, deliver or sell or
repurchase, redeem or otherwise acquire any shares of its capital stock or any
other securities ((i) through (iii) collectively, "STOCK RIGHTS").
(d) All of the outstanding shares of capital stock of each
of the Company's Subsidiaries have been duly authorized and are validly issued,
are fully paid and nonassessable and are owned beneficially and of record by the
Company, free and clear of any encumbrances and except for the subsidiaries
disclosed on Section 2.3(d) of the Company Disclosure Letter, are not subject to
any preemptive rights.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Except as disclosed on Section 2.4(a) of the Company
Disclosure Letter, the Company has timely filed with the SEC all registration
statements, proxy statements, periodic reports, schedules, forms and all other
documents required to be filed by the Company with the SEC since August 1, 2002.
All such registration statements, proxy statements, periodic reports, schedules,
forms and all other documents required to be filed (including those that the
Company is required to or may file on or prior to the Effective Time) are
referred to herein as the "COMPANY SEC DOCUMENTS." As of the time it was filed
with the SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Company SEC
Documents complied as to form in all material respects with the applicable
requirements of the Securities Act or the Exchange Act (as the case may be); and
(ii) none of the Company SEC Documents contained any untrue statement of a
material fact or
10
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. Other than the Company, none of the
Acquired Companies is required to file any registration statements, proxy
statements, periodic reports, schedules, forms or other documents with the SEC
or similar regulatory body. No Subsidiary of the Company is subject to the
periodic reporting requirements of the Exchange Act or is otherwise required to
file any forms, reports, schedules, statements or other documents with the SEC,
any foreign Governmental Body that performs a similar function to that of the
SEC or any securities exchange or quotation service.
(b) The consolidated financial statements (including any
related notes) contained or incorporated by reference in the Company SEC
Documents (the "COMPANY FINANCIAL STATEMENTS"): (i) complied in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC applicable thereto; (ii) were prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC, and except that the unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end adjustments which
will not, individually or in the aggregate, be material in amount); and (iii)
fairly presented the consolidated financial position of the Company and its
consolidated Subsidiaries, in all material respects, as of the respective dates
thereof and the consolidated results of operations and cash flows of the Company
and its consolidated Subsidiaries for the periods then ended, subject in the
case of the unaudited consolidated financial statements, to normal year-end
adjustments and any other adjustments described therein. For purposes of this
Agreement, "COMPANY BALANCE SHEET" means that consolidated balance sheet of the
Company and its consolidated subsidiaries as of January 31, 2005 set forth in
the Company's Quarterly Report on Form 10-Q filed with the SEC on March 14, 2005
and the "COMPANY BALANCE SHEET DATE" means January 31, 2005.
(c) The Company Financial Statements were prepared from the
books and records of the Company and its Subsidiaries and are in accordance with
all material and applicable Legal Requirements.
2.5 SEC DISCLOSURE CONTROLS AND PROCEDURES.
(a) The Company has established and maintained proper
disclosure controls and procedures to ensure that material information required
to be included in the Company SEC Documents is known to the officers of the
Company responsible for preparing, and certifying as to the accuracy of, the
Company SEC Documents (the "COMPANY RESPONSIBLE OFFICERS"). The Company has
evaluated the effectiveness of such disclosure controls and procedures as of
January 31, 2005 and presented any conclusions about the effectiveness of such
disclosure controls and procedures based on such evaluation in its most recent
Company SEC Document.
(b) The Company Responsible Officers have disclosed to the
Company's independent auditors and to the audit committee of the Company's board
of directors (i) all significant deficiencies in the design or operation of such
disclosure controls and procedures which could adversely affect the Company's
ability to record, process, summarize and report financial data (including
identifying for the Company's independent auditors any material
11
weaknesses in such disclosure controls and procedures), and (ii) any fraud,
whether or not material, that involves management or other employees of the
Company or any of its Subsidiaries who have a significant role in such
disclosure controls and procedures.
(c) The books and records of the Acquired Companies that
have an operating business as of the date hereof have been and are being
maintained in accordance with GAAP and all other applicable legal and accounting
requirements in all material respects.
2.6 ABSENCE OF CHANGES. Since the Company Balance Sheet Date,
except as set forth in Section 2.6 of the Company Disclosure Letter or as
otherwise permitted by the terms of this Agreement from and after the date
hereof:
(a) each of the Acquired Companies has operated its
respective business in the ordinary course of business;
(b) there has been no Company Material Adverse Effect and
no fact, event, circumstance or condition exists or has occurred that has had,
or could reasonably be expected to have, a Company Material Adverse Effect;
(c) none of the Material Customers or Material Suppliers
has decreased materially or threatened to decrease or limit materially or, to
the knowledge of the Company, intends to modify materially its relationship with
the Acquired Companies or intends to decrease or limit materially, its services
or supplies to the Acquired Companies or its usage or purchase of the services
or products of the Acquired Companies, except that for purposes of this Section
2.6, the entities listed on Section 2.6 of the Company Disclosure Letter shall
not be considered a Material Supplier; and
(d) none of the Acquired Companies has taken any action
which, if taken after the date of this Agreement, would be prohibited by Section
4.1.
2.7 PROPRIETARY ASSETS.
(a) Section 2.7(a) of the Company Disclosure Letter sets
forth all U.S. and foreign patents, patent applications, registered trademarks,
trademark applications, registered copyrights, copyright applications and domain
names owned by any of the Acquired Companies that are material to and used in
the business, operations or products of the Acquired Companies. Section 2.7(a)
of the Company Disclosure Letter sets forth any one-time, ongoing royalty or
other payment obligations in excess of $25,000 with respect to Proprietary
Assets licensed to or by any of the Acquired Companies by or to any Person and
identifies the Contract under which each such Proprietary Asset is being
licensed to such Acquired Company. The Acquired Companies have good and valid
title to all of the Acquired Company Proprietary Assets identified or required
to be identified in Section 2.7(a) of the Company Disclosure Letter, free and
clear of all Encumbrances, except for (i) any lien for current taxes not yet due
and payable, and (ii) minor liens that have arisen in the ordinary course of
business and that do not (individually or in the aggregate) materially detract
from the value of the Acquired Company Proprietary Asset subject thereto or
materially impair the operations of the Acquired Companies. The Acquired
Companies own or have a valid right to use, subject to any relevant license
agreement(s) disclosed in Section 2.7(a) of the Company Disclosure Letter, all
Proprietary Assets that are used in the business, operations
12
or products of the Acquired Companies, except to the extent that a failure by
the Company to so own or have the valid right to use any such Proprietary Asset
would not, individually or in the aggregate, be material to the Acquired
Companies. None of the Acquired Companies has developed jointly with any other
Person any Acquired Company Proprietary Asset that is material to the business
of the Acquired Companies and with respect to which such other Person has any
rights, and no employee, officer or director of any Acquired Company owns or has
rights in or to any Proprietary Assets that are used in the business, operations
or products of the Acquired Companies, except to the extent that a failure by
the Company to so own or have the valid right to use any such Proprietary Asset
would not, individually or in the aggregate, be material to the Acquired
Companies.
(b) (i) All trademarks, service marks and copyrights
listed in Section 2.7(a) of the Company Disclosure Letter are valid, enforceable
and subsisting; (ii) to the knowledge of the Company, none of the Acquired
Company Proprietary Assets that is used in the business, operations or products
of the Acquired Companies and no Proprietary Asset that is currently being
developed by any of the Acquired Companies (either by itself or with any other
Person) infringes, misappropriates or conflicts with any Proprietary Asset owned
or used by any other Person; (iii) to the knowledge of the Company, none of the
business, operations, products, systems, software, computer, source code,
models, algorithm, formula, inventions, designs or technology that has been
designed, created, developed, assembled, manufactured or sold by any of the
Acquired Companies is infringing, misappropriating or making any unlawful or
unauthorized use of any Proprietary Asset owned or used by any other Person, or
has at any time infringed, misappropriated or made any unlawful or unauthorized
use of any Proprietary Asset owned or used by any other Person; (iv) none of the
Acquired Companies has received any written notice or other communication (in
writing) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful or unauthorized use of, any material Proprietary
Asset owned or used by any other Person; and (v) to the knowledge of the
Company, no other Person is infringing, misappropriating or making any unlawful
or unauthorized use of, and no Proprietary Asset owned or used by any other
Person infringes or conflicts with, any material Acquired Company Proprietary
Asset. Except as set forth in Section 2.7(b) of the Company Disclosure Letter,
none of the Acquired Companies has (i) licensed any material Acquired Company
Proprietary Asset to any Person, or (ii) entered into any covenant not to
compete or Contract limiting its ability to exploit fully any material Acquired
Company Proprietary Asset or to transact business in any market or geographical
area or with any Person.
2.8 MATERIAL CONTRACTS.
(a) For purposes of this Agreement, each of the following
Acquired Company Contracts, and only the following Acquired Company Contracts,
shall be deemed to constitute a "MATERIAL CONTRACT":
(i) any Acquired Company Contract that is required
by the rules and regulations of the SEC to be described in the Company SEC
Documents or to be filed as an exhibit thereto;
(ii) any Acquired Company Contract relating to the
employment of any employee, and any Acquired Company Contract pursuant to which
any of the Acquired
13
Companies is or may become obligated to make any severance, termination, bonus
or relocation payment or any other payment (other than payments in respect of
salary) in excess of $25,000, to any current or former employee, officer or
director or any Acquired Company Contract which provides for the acceleration of
vesting of any options or acceleration of other rights to acquire shares of
Company Common Stock;
(iii) any Acquired Company Contract relating to the
acquisition, transfer, development, sharing or license of any Acquired Company
Proprietary Asset;
(iv) any Acquired Company Contract which provides
for indemnification of any officer, director, employee or agent of any of the
Acquired Companies or any other Person;
(v) any Acquired Company Contract imposing any
restriction on the right or ability of any Acquired Company to (A) compete with
any other Person, (B) solicit the employment of, or employ, any Person, (C)
acquire any material product or other material asset or any services from any
other Person, sell any material product or other material asset to or perform
any services for any other Person or transact business or deal in any other
manner with any other Person, (D) develop or distribute any material technology,
(E) make, have made, use or sell any current products or products under
development, or (F) acquire any capital stock or other security of any Person;
(vi) any Acquired Company Contract that
contemplates or involves payment or delivery of cash or other consideration or
the performance of services in an amount or having a value in excess of $50,000
in the aggregate;
(vii) any other Acquired Company Contract, if a
breach by the Company or any other party thereto of such Contract would
reasonably be expected to have a Company Material Adverse Effect;
(viii) any Acquired Company Contract requiring that
any of the Acquired Companies give any notice or provide any information to any
Person prior to considering or accepting any Acquisition Proposal or similar
proposal, or prior to entering into any discussions, agreement, arrangement or
understanding relating to any Acquisition Transaction or similar transaction;
(ix) any Acquired Company Contract under which any
Acquired Company uses or occupies or has the right to use or occupy any real
property (collectively, the "REAL PROPERTY LEASES", and the land, buildings and
other improvements covered by the Real Property Leases being herein called the
"LEASED REAL PROPERTY"), it being agreed that any Acquired Company Contract
(collectively, the "ASSIGNED Leases") that would otherwise have constituted a
Real Property Lease but for the assignment of such Acquired Company Contract to
a third party prior to the date of this Agreement and is identified as an
Assigned Lease in Section 2.8(a)(ix) of the Company Disclosure Letter shall not
constitute an Acquired Company Contract;
(x) any Acquired Company Contract relating to any
Indebtedness, guarantying the performance of any Person or guarantying any
Indebtedness;
14
(xi) any Acquired Company Contract containing any
covenant limiting in any respect the right of any Acquired Company (A) to engage
in any line of business or to engage in business in any geographic area, (B) to
develop, market or distribute any products or services, or (C) to compete with
any Person or granting any exclusive distribution rights;
(xii) any Acquired Company Contract that contains
any so-called "most favored nation" provision or similar provisions requiring
the Company or any of its Subsidiaries to offer to a Person, any terms or
conditions that are at least as favorable as those offered to one or more other
Persons; and
(xiii) any Acquired Company Contract that restricts
the ability of any Acquired Company to assert any material claims or initiate
any material Legal Proceedings against any other Person.
Section 2.8(a) of the Company Disclosure Letter identifies each
Acquired Company Contract that, as of the date hereof, constitutes a Material
Contract. The Company has delivered to Parent an accurate and complete copy of
each Material Contract, including all material amendments thereto, other than
Material Contracts and amendments thereto filed as an exhibit to the Company SEC
Documents.
(b) Each Material Contract is valid, binding and in full
force and effect and is enforceable in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
(c) None of the Acquired Companies has violated or
breached, in any material respect, without curing such violation or breach prior
to the date hereof, or is in any material default (with or without notice or
lapse of time or both) under, any Material Contract. To the knowledge of the
Company, none of the other parties to any Material Contract has violated or
breached, in any material respect, without curing such violation or breach prior
to the date hereof, or is in any material default (with or without notice or
lapse of time or both) under, any Material Contract.
2.9 LIABILITIES. None of the Acquired Companies has any accrued,
contingent or other inchoate liabilities of any nature, either matured or
unmatured (whether due or to become due or of a type required to be recorded or
reflected on a balance sheet, including the footnotes thereto, under GAAP),
except for: (i) liabilities or obligations disclosed and provided for in the
Company Balance Sheet or in the notes thereto; (ii) liabilities that have been
incurred by the Acquired Companies since the Company Balance Sheet Date in the
ordinary course of business which have not resulted in and are not reasonably
expected to result in any material increase in the Company's liabilities from
those disclosed or provided for in the Company Balance Sheet or in the related
notes; (iii) liabilities arising from or relating to this Agreement and the
transactions contemplated hereby and (iv) the Assigned Leases. Except as set
forth in Section 2.9 of the Company Disclosure Letter, there are no off-balance
sheet structures or transactions with respect to the Acquired Companies. Except
as disclosed in Section 2.9 of the Company Disclosure Letter or as disclosed on
the Company Balance Sheet, the Acquired Companies have no outstanding
Indebtedness.
15
2.10 GOVERNMENTAL AUTHORIZATIONS. Each of the Acquired Companies
holds all material Governmental Authorizations necessary to enable such Acquired
Company to conduct its business in the manner in which such business is
currently being conducted. All such Governmental Authorizations are valid and in
full force and effect. Each Acquired Company is, and at all times since August
1, 2002 has been, in material compliance with the terms and requirements of such
Governmental Authorizations. Since August 1, 2002, except as set forth in
Section 2.10 of the Company Disclosure Letter, none of the Acquired Companies
has received any written notice from any Governmental Body regarding (i) any
actual or possible violation of or failure to comply with any material term or
requirement of any such Governmental Authorization, or (ii) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any such Governmental Authorization.
2.11 TAX MATTERS.
(a) All material Tax Returns required to be filed by or
with respect to any of the Acquired Companies with any Governmental Body (the
"ACQUIRED COMPANY RETURNS") (i) have been or will be filed on or before the
applicable due date (including any extensions of such due date), and (ii) have
been, or will be when filed, prepared in all material respects in substantial
compliance with applicable Legal Requirements. All material Taxes shown on the
Acquired Company Returns to be due on or before the Closing Date have been or
will be paid on or before the Closing Date. The Company Financial Statements
accrue all actual and contingent liabilities for Taxes with respect to all
periods through the dates thereof in accordance with generally accepted
accounting principles.
(b) No audit or other proceeding by any Governmental Body
is pending or threatened with respect to any Taxes due from or with respect to
the Acquired Companies except as set forth on Section 2.11(b) of the Company
Disclosure Letter. No Governmental Body has given written notice of its
intention to assert any deficiency or claim for additional Taxes against the
Acquired Companies. No claim has been made against the Acquired Companies by any
Governmental Body in a jurisdiction where the Acquired Companies do not file Tax
Returns that the Acquired Companies are or may be subject to taxation by that
jurisdiction. All deficiencies for Taxes asserted or assessed against the
Acquired Companies have been fully and timely paid, settled or properly
reflected in the most recent financial statements contained in the Company SEC
Documents.
(c) The Acquired Companies are not, nor have they ever
been, a United States real property holding corporation within the meaning of
Section 897(c)(1)(A)(ii) of the Code.
(d) The Acquired Companies have made available to Parent
correct and complete copies of all material Tax Returns, examination reports and
statements of deficiencies for taxable periods, or transactions consummated, for
which the applicable statutory periods of limitations have not expired.
(e) No Acquired Company is a party to any Contract relating
to the sharing, allocation or indemnification of Taxes (collectively, "TAX
SHARING AGREEMENTS") or has any liability for Taxes of any Person (other than
members of the affiliated group, within the meaning of Section 1504(a) of the
Code, filing consolidated federal income tax returns of which the
16
Company is the common parent) under Treasury Regulation ss. 1.1502-6, Treasury
Regulation ss. 1.1502-78 or any similar state, local or foreign Legal
Requirements, as a transferee or successor, or otherwise.
(f) The Acquired Companies have each withheld (or will
withhold) from their respective employees, independent contractors, creditors,
stockholders and third parties, and timely paid to the appropriate taxing
authority, proper and accurate amounts in all material respects for all periods
ending on or before the Closing Date in compliance with all Tax withholding and
remitting provisions of applicable Legal Requirements. The Acquired Companies
have each complied in all material respects with all Tax information reporting
provisions under applicable Legal Requirements.
(g) No Acquired Company has constituted a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of shares qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution that could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the transactions contemplated by this
Agreement.
(h) Any adjustment of Taxes of the Acquired Companies made
by the IRS in writing, which adjustment is required to be reported to the
appropriate state, local, or foreign Taxing authorities, has been so reported.
(i) No Acquired Company has executed or entered into a
closing agreement under Section 7121 of the Code or any similar provision of
state, local or foreign Legal Requirements, and no Acquired Company is subject
to any private letter ruling of the IRS or comparable ruling of any other taxing
authority.
(j) No Acquired Company has entered into any transaction
that constitutes (i) a "reportable transaction" within the meaning of Treasury
Regulation ss. 1.6011-4(b), (ii) a "confidential tax shelter" within the meaning
of Treasury Regulation ss. 301.6111-2(a)(2) or (iii) a "potentially abusive tax
shelter" within the meaning of Treasury Regulation ss. 301.6112-1(b).
2.12 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Section 2.12(a) of the Company Disclosure Letter lists
each "employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), including all
stock purchase, stock option, severance, employment, change-in-control, fringe
benefit, collective bargaining, bonus, incentive, deferred compensation,
profit-sharing, employee loan and all other employee benefit plans, agreements,
programs or other arrangements, whether or not subject to ERISA (including any
funding mechanism therefor now in effect or required in the future as a result
of the transaction contemplated by this Agreement or otherwise), whether formal
or informal, oral or written, under which (i) any current or former employee,
director or consultant of any Acquired Company has any present or future right
to benefits and which are contributed to, sponsored or maintained by any
Acquired Company, or (ii) any Acquired Company has any present or future
liability. All
17
such plans, agreements, programs, policies and arrangements shall be
collectively referred to as the "ACQUIRED COMPANY EMPLOYEE PLANS."
(b) With respect to each Acquired Company Employee Plan,
the Company has made available to Parent a current, accurate and complete copy
(or, to the extent no such copy exists, an accurate description) thereof and, to
the extent applicable (i) any related trust agreement or other funding
instrument, (ii) the most recent IRS determination letter, if applicable, (iii)
all summary plan descriptions and (iv) for the three most recent years (A) the
Form 5500 and attached schedules, (B) audited financial statements and (C)
actuarial valuation reports.
(c) Each Acquired Company Employee Plan has been
established, maintained and administered in accordance with its terms, and in
substantial compliance with the applicable provisions of ERISA, the Code and
other applicable Legal Requirements; (ii) each Acquired Company Employee Plan
which is intended to be qualified within the meaning of Code Section 401(a) is
so qualified, has received a favorable determination letter as to its
qualification, and nothing has occurred that could reasonably be expected to
cause the loss of such qualification; (iii) no "reportable event" (as such term
is defined in ERISA Section 4043) "prohibited transaction" (as such term is
defined in ERISA Section 406 and Code Section 4975) or "accumulated funding
deficiency" (as such term is defined in ERISA Section 302 and Code Section 412
(whether or not waived)) has occurred with respect to any Acquired Company
Employee Plan, (iv) no Acquired Company has incurred any current or projected
liability in respect of post-employment or post-retirement health, medical or
life insurance benefits for current, former or retired employees of any Acquired
Company, except as required to avoid any excise tax under Section 4980B of the
Code or otherwise except as may be required pursuant to any other applicable
Legal Requirements, (v) no event has occurred and no condition exists that would
subject any Acquired Company, either directly or by reason of their affiliation
with any member of their "Controlled Group" (defined as any organization which
is a member of a controlled group of organizations within the meaning of
Sections 414(b), (c), (m) or (o) of the Code), to any tax, fine, lien, penalty
or other liability imposed by ERISA, the Code or other applicable laws, rules
and regulations, (vi) no Acquired Company Employee Plan is a split-dollar life
insurance program or otherwise provides for loans to executive officers (within
the meaning of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002), and (vii) for each Acquired
Company Employee Plan with respect to which a Form 5500 has been filed, no
material change has occurred with respect to the matters covered by the most
recent Form 5500 since the date thereof.
(d) None of the Acquired Company Employee Plans is subject
to Title IV of ERISA and no Acquired Company, nor any member of the Controlled
Group of any Acquired Company, has incurred any liability under Title IV of
ERISA which remains unsatisfied. Neither any Acquired Company, nor any
organization to which any Acquired Company is a successor or parent corporation
within the meaning of Section 4069(b) of ERISA, has engaged in any transaction
described in Sections 4069 or 4212(c) of ERISA. Within the five years preceding
the date of this Agreement, neither any Acquired Company, nor any member of the
Controlled Group of any Acquired Company, has incurred any liability under Title
IV of ERISA.
(e) No Acquired Company Employee Plan is a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) and neither any Acquired
Company, nor any members of
18
their Controlled Group has at any time sponsored or contributed to, or has or
had any liability or obligation in respect of, any multiemployer plan.
(f) With respect to each Acquired Company Employee Plan,
(i) no actions, suits or claims (other than routine claims for benefits in the
ordinary course) are pending or, to the knowledge of the Company, are
threatened, (ii) no facts or circumstances exist that could give rise to any
such actions, suits or claims, and (iii) no administrative investigation, audit
or other proceeding by the Department of Labor, the Pension Benefit Guaranty
Corporation, the Internal Revenue Service or other Governmental Bodies are
pending, in progress, or to the knowledge of the Company, threatened.
(g) Except as set forth in Section 2.12(g) of the Company
Disclosure Letter, none of the Acquired Companies has proposed or agreed to any
increase in benefits under any Acquired Company Employee Plan (or the creation
of new benefits) or change in employee coverage beyond current levels which
would materially increase the expense of maintaining the Acquired Company
Employee Plan above the level of expense incurred in respect thereof for the
most recent fiscal year ended prior to the date hereof. Except as set forth in
Section 2.12(g) of the Company Disclosure Letter, none of the consummation of
the transactions contemplated by this Agreement, the execution of this Agreement
or shareholder approval of this Agreement (whether alone or in connection with
any subsequent event(s)) will (i) entitle any employee of any Acquired Company
to severance pay or any increase in severance pay upon any termination of
employment after the date of this Agreement, (ii) accelerate the time of payment
or vesting or result in any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
result in any other material obligation pursuant to, any of the Acquired Company
Employee Plans, (iii) limit or restrict the right of the Company to merge, amend
or terminate any of the Acquired Company Employee Plans, (iv) cause the Company
to record additional compensation expense on its income statement with respect
to any Company Option, or (v) result in payments under any of the Acquired
Company Employee Plans which would not be deductible under Section 280G of the
Code.
(h) No Acquired Company Employee Plan covers employees of
any Acquired Company outside of the United States.
(i) There is no Contract, plan or arrangement covering any
Person that, individually or in the aggregate, will give rise to the payment of
any amount that would not be deductible by Parent, the Company or any of their
respective subsidiaries by reason of Section 162(m) of the Code.
(j) (i) There are no controversies pending or
threatened, between any of the Acquired Companies and any of their respective
employees which controversies have had, or would reasonably be expected,
individually or in the aggregate, to have a Company Material Adverse Effect, and
a description of each pending or threatened controversy is set forth in Section
2.12(j) of the Company Disclosure Letter; (ii) each of the Acquired Companies is
in material compliance with all applicable Legal Requirements respecting
employment and employment practices, terms and conditions of employment and
wages and hours, employment discrimination, disability rights or benefits, equal
opportunity, plant closure issues, affirmative action, workers' compensation,
severance payments, labor relations, employee leave issues,
19
occupational safety and health requirements and unemployment insurance and
related matters; (iii) none of the Acquired Companies is a party to or otherwise
bound by any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization and, within the last
three years, there has not been any, and there is no pending or, to the
knowledge of the Company, threatened, (A) labor strike, or (B) material
arbitration, grievance, unfair labor practice charge or complaint, dispute,
strike, picket, walkout, work stoppage, slow-down, other job action, lockout or
organizational effort involving any Acquired Company; (iv) the Company is not
obligated to make any payments or provide any benefits to any Person under the
Worker Adjustment and Retraining Notification Act of 1988, as amended, or any
similar plant closing or mass layoff law, such as California Labor Code Section
1400 et seq.; and (v) except as set forth in Section 2.12(j) of the Company
Disclosure Letter, all persons to whom any Acquired Company has made payments
for the performance of services during the four-year period ending on the
Closing have been properly classified as employees or non-employees for purposes
of federal income and employment tax withholding and coverage under and
participation in all of the Acquired Company Employee Plans.
2.13 ENVIRONMENTAL MATTERS. Except as set forth on Section 2.13 of
the Company Disclosure Letter, each of the Acquired Companies is and, to the
extent that the relevant statutes of limitation have not run, has been in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by each of the Acquired Companies of
all material Governmental Authorizations required under applicable Environmental
Laws, and material compliance with the terms and conditions thereof. None of the
Acquired Companies has received any written notice or other written
communication, whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that any of the Acquired Companies is not in compliance
in all material respects with any Environmental Law, and, to the knowledge of
the Company, there are no circumstances that may prevent or interfere with
material compliance by any of the Acquired Companies with any Environmental Law
in the future. To the knowledge of the Company and except as set forth on
Section 2.13 of the Company Disclosure Letter, (i) no property that is leased to
the Acquired Companies, and no surface water, groundwater or soil at or under
such property contains Materials of Environmental Concern that would be
reasonably likely to result in material liability or material costs to the
Acquired Companies, and (ii) none of the Acquired Companies has any material
liability for any clean-up or remediation under any Environmental Law or the
exposure of any individual to Materials of Environmental Concern. To the
knowledge of the Company, and except in material compliance with Environmental
Laws, all property that is leased to any of the Acquired Companies is free of
any friable asbestos or friable asbestos-containing material.
2.14 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Section 2.14
of the Company Disclosure Letter, there is no Legal Proceeding pending or, to
the knowledge of the Company, threatened against (a) any of the Acquired
Companies or (b) any director, officer or employee of any of the Acquired
Companies or other Person for whom any of the Acquired Companies may be liable.
There is no order, writ, injunction, judgment or decree to which any of the
Acquired Companies, or any of the material assets owned or used by any of the
Acquired Companies, is subject.
2.15 VOTE REQUIRED. The affirmative vote of the holders of
two-thirds of the shares of Company Common Stock outstanding on the record date
for the Company Shareholders' Meeting
20
(the "REQUIRED COMPANY SHAREHOLDER VOTE") is the only vote of the holders of any
class or series of the Company's capital stock necessary to adopt this Agreement
and otherwise approve the Merger and the other transactions contemplated by this
Agreement. There are no voting trusts, proxies or similar agreements,
arrangements or commitments to which the Company or any of its Subsidiaries is a
party or of which the Company has knowledge with respect to the voting of any
shares of capital stock of the Company or any of its Subsidiaries (other than
the Voting Agreement). There are no bonds, debentures, notes or other
instruments of Indebtedness of any of the Acquired Companies that have the right
to vote, or that are convertible or exchangeable into or exercisable for
securities having the right to vote, on any matters on which stockholders of the
Company may vote.
2.16 NON-CONTRAVENTION. The execution, delivery and performance by
the Company of this Agreement and the Ancillary Agreements to which it is a
party and the consummation by the Company of the Merger and the other
transactions contemplated by this Agreement and such Ancillary Agreements do not
and will not, directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation or
breach of any of the provisions of the certificate of incorporation or bylaws of
any of the Acquired Companies or any resolution adopted by the shareholders, the
board of directors or any committee of the board of directors of any of the
Acquired Companies;
(b) contravene, conflict with or result in a material
violation of any Legal Requirement or any order, writ, injunction, judgment or
decree to which any of the Acquired Companies, or any of the material assets
owned or used by any of the Acquired Companies, is subject;
(c) contravene, conflict with or result in a material
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
material Governmental Authorization that is held by any of the Acquired
Companies or that otherwise relates to the business of any of the Acquired
Companies or to any of the assets owned or used by any of the Acquired
Companies;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, in any material respect, any provision
of any Material Contract, or give any Person the right to (i) declare a default
or exercise any remedy under any Material Contract, (ii) a rebate, chargeback,
penalty or change in delivery schedule under any Material Contract, (iii)
accelerate the maturity or performance of any Material Contract, or (iv) cancel,
terminate, amend or modify any material term of any Material Contract, other
than as set forth in Section 2.16(d) of the Company Disclosure Letter;
(e) require any consent, approval or other authorization
of, or filing with or notification to, any Person under any Material Contract,
other than as set forth in Section 2.16(e) of the Company Disclosure Letter; or
21
(f) cause the creation or imposition of any Encumbrances on
any assets owned or used by any of the Acquired Companies, other than as set
forth in Section 2.16(f) of the Company Disclosure Letter.
2.17 GOVERNMENTAL FILINGS. The execution, delivery and performance
by the Company of this Agreement and the Ancillary Agreements to which it is a
party and the consummation by the Company of the transactions contemplated by
this Agreement and such Ancillary Agreements do not and will not require any
consent, approval or other authorization of, or filing with or notification to,
any Governmental Body, other than:
(a) the delivery of the Certificate of Merger with the
Department of State of the State of New York;
(b) the filing with the SEC of (i) the Proxy Statement
relating to the Company Shareholders' Meeting and (ii) any other filings and
reports that may be required in connection with this Agreement and the
transactions contemplated by this Agreement under the Exchange Act;
(c) compliance with the rules and regulations of the Nasdaq
National Market;
(d) the pre-merger notification required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"); and
(e) compliance with the so-called "fair price,"
"moratorium," "control share acquisition" or other similar state anti-takeover
laws ("TAKEOVER STATUTES") set forth in Section 2.17(e) of the Company
Disclosure Letter.
2.18 FAIRNESS OPINION. The Company's board of directors has
received the written opinion of BB&T Capital Markets, financial advisor to the
Company, to the effect that, as of the date of this Agreement, the Price Per
Share is fair, from a financial point of view, to the holders of Company Common
Stock. The Company has made available to Parent a complete and correct copy of
such opinion. The Company has obtained the authorization of BB&T Capital Markets
to include a copy of such opinion in the Proxy Statement.
2.19 BROKER. Except for the amount of $2.5 million payable by the
Company to ▇▇▇▇▇▇ ▇▇▇▇ Securities, no broker, finder, investment banker or any
other Person is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger or any of the other transactions contemplated by
this Agreement except as disclosed in Section 2.19 of the Company Disclosure
Letter. The Company has furnished to Parent accurate and complete copies of all
agreements under which any such fees, commissions or other amounts have been
paid or may become payable and all indemnification and other agreements related
to the engagement of ▇▇▇▇▇▇ ▇▇▇▇ Securities and any other Person listed in
Section 2.19 of the Company Disclosure Letter.
2.20 RELATED PARTY TRANSACTIONS. Except as disclosed in the Company
SEC Documents filed at least two business days prior to the date of this
Agreement or as set forth in Section 2.20 of the Company Disclosure Letter:
(a) no Related Party is indebted to any of the Acquired
Companies;
22
(b) no Related Party has any direct or indirect financial
interest in, any Material Contract, transaction or business dealing involving
the Acquired Companies;
(c) no Related Party is competing, directly or indirectly,
with the Acquired Companies;
(d) no Related Party has any claim or right against the
Acquired Companies (other than rights under Company Options and rights to
receive compensation for services performed as an employee of the Company); and
(e) no Related Party owns any assets used by any of the
Acquired Companies in its business. (For purposes of this Section 2.20, each of
the following shall be deemed to be a "RELATED PARTY":
(i) each individual who is an "executive officer"
(as such term is defined in Rule 3b-7 promulgated under the Exchange Act) or
director of any of the Acquired Companies;
(ii) each member of the "immediate family" (as such
term is defined in Item 404 of Regulation S-K promulgated by the SEC) of each of
the individuals referred to in clause "(i)" above; and
(iii) any trust or other Entity (other than the
Acquired Companies) in which any one of the individuals referred to in clauses
"(i)" and "(ii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, any voting, proprietary, equity
or other financial interest.)
2.21 PERSONAL PROPERTY. Electrograph has good and marketable title
to, or a valid and enforceable leasehold interest in, all material personal
assets owned or used by it. Neither the Company's nor any of its Subsidiaries'
ownership of or leasehold interest in any such personal assets is subject to any
Encumbrances. Electrograph has ownership of or rights in all of the assets
necessary for the continued conduct and operation of the businesses of
Electrograph after the Closing in substantially the same manner as conducted and
operated prior to the Closing, except that the space occupied by Electrograph at
▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ is leased to the Company.
2.22 REAL PROPERTY.
(a) OWNED PROPERTIES. None of the Acquired Companies owns,
nor have any of the Acquired Companies agreed to purchase, any real property,
nor do any of the Acquired Companies own or hold any option, right of first
refusal or other contractual right to purchase any real property.
(b) LEASED PROPERTIES. All rent and other sums and charges
payable by any Acquired Company as tenant under any Real Property Lease are
current. No notice of default or termination under any Real Property Lease is
outstanding, and no termination event or condition or uncured default exists on
the part of any Acquired Company or, to the knowledge of the Company, the
landlord under any Real Property Lease. To the knowledge of the Company, no
23
event has occurred and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute such a default or termination event
or condition. Other than the Space Leases, the applicable Acquired Company's
interest as tenant under each Real Property Lease is free and clear of all
Encumbrances against such interest other than Permitted Encumbrances.
(c) ENTIRE PREMISES. All of the land, buildings, structures
and other improvements used by Electrograph in the conduct of its business are
included in the Leased Real Property.
(d) SPACE LEASES. Set forth on Section 2.22(d) of the
Company Disclosure Letter is a true, correct and complete schedule of all
leases, subleases, licenses and other agreements (collectively, the "SPACE
LEASES") granting to any person other than any of the Acquired Companies any
right to the possession, use, occupancy or enjoyment of the Leased Real Property
or any portion thereof. The Company has heretofore delivered to Parent true,
correct and complete copies of all Space Leases (including all material
modifications, amendments and supplements). Each Space Lease is valid, binding
and in full force and effect. All rent and other sums and charges payable by the
tenant or occupant thereunder (the "SPACE TENANT") are current. No notice of
default or termination under any Space Lease is outstanding and no termination
event or condition or uncured default on the part of the Applicable Acquired
Company or, to the knowledge of the Company, the Space Tenant exists under any
Space Lease. To the knowledge of the Company, no event has occurred and no
condition exists which, with the giving of notice or the lapse of time or both,
would constitute such a default or termination event or condition.
(e) CONDEMNATION. None of the Acquired Companies has
received written notice of any pending, threatened or contemplated condemnation
proceeding affecting the Leased Real Property or any part thereof or of any sale
or other disposition of the Leased Real Property or any part thereof in lieu of
condemnation.
(f) CASUALTY. No portion of the Leased Real Property has
suffered any material damage by fire or other casualty which has not heretofore
been repaired and restored.
2.23 COMPLIANCE WITH LAWS. None of the Acquired Companies is in
conflict with, or in default or violation of, in any material respects, any
Legal Requirements applicable to it or by which any of the assets owned or used
by any Acquired Company is bound.
2.24 INSURANCE. The Acquired Companies maintain, and have
maintained without interruption, policies or binders of insurance covering risks
and events and in amounts adequate for their respective businesses and
operations in which they operate. Except as set forth in Section 2.24 of the
Company Disclosure Letter, such policies will not terminate as a result of the
consummation of the transactions contemplated by this Agreement.
2.25 TAKEOVER STATUTES. The board of directors of the Company has
taken all necessary action to ensure that the restrictions on business
combinations contained in Section 912 of the NYBCL will not apply to this
Agreement, the Voting Agreement, the Merger or the other transactions
contemplated by this Agreement and the Voting Agreement including by approving
this Agreement, the Voting Agreement, the Merger and the other transactions
contemplated by this Agreement and the Voting Agreement. Except as set forth in
Section 2.25 of the Company
24
Disclosure Letter, no other Takeover Statutes apply or purport to apply to this
Agreement, the Voting Agreement, the Merger or any of the other transactions
contemplated by this Agreement or the Voting Agreement.
2.26 MATERIAL SUPPLIERS AND MATERIAL CUSTOMERS. Section 2.26 of the
Company Disclosure Letter sets forth a true and complete list, by sales for the
fiscal year ended July 31, 2004, of the ten largest suppliers of Electrograph
(each, a "MATERIAL SUPPLIER") and the 25 largest customers of Electrograph
(each, a "MATERIAL CUSTOMER").
2.27 TRANSACTION FEES. Section 2.27 of the Company Disclosure
Letter sets forth the Company's good faith estimate as of the date hereof of the
Transaction Expenses payable to the Persons specified in such Section or in
connection with the actions specified in such Section, as applicable (exclusive
of any amounts paid prior to March 1, 2005). Notwithstanding the foregoing, in
no event shall there be deemed to be a breach of or inaccuracy in the
representation and warranty set forth in this Section 2.27 if the actual
Transaction Expenses payable to such Persons or in connection with such actions
is different than the amounts set forth in Section 2.27 of the Company
Disclosure Letter.
2.28 FULL DISCLOSURE. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the Proxy Statement will, at the time the Proxy Statement is filed
with the SEC or at the time it is mailed to the shareholders of the Company,
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 the light of the circumstances under which they are made, not
misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as of the
date hereof and the Closing Date as follows:
3.1 DUE ORGANIZATION; SUBSIDIARIES. Parent is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York. Each of
Parent and Merger Sub has all requisite corporate power and authority: (i) to
conduct its business in the manner in which its business is currently being
conducted and (ii) to own and use its assets in the manner in which its assets
are currently owned and used.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. Each of Parent and
Merger Sub has the requisite corporate power and authority to enter into and to
perform its obligations under this Agreement and each of the Ancillary
Agreements to which it is a party and has authorized and approved the execution,
delivery and performance by such Person of this Agreement and such Ancillary
Agreements and approved the Merger, this Agreement, such Ancillary Agreements
and the transactions contemplated by this Agreement and such Ancillary
Agreements. This Agreement and each of the Ancillary Agreements to which it is a
party has been duly executed by each of Parent and Merger Sub and constitute the
legal, valid and binding obligations of each of
26
Parent and Merger Sub, enforceable against Parent and Merger Sub, as the case
may be, in accordance with their terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
3.3 NON-CONTRAVENTION. The execution, delivery and performance by
each of Parent and Merger Sub of this Agreement and the Ancillary Agreements to
which it is a party and the consummation by Parent and Merger Sub of the Merger
and the other transactions contemplated by this Agreement and such Ancillary
Agreements do not and will not, directly or indirectly (with or without notice
or lapse of time): (i) conflict with or result in a violation or breach of any
provision of the certificate of incorporation or bylaws of Parent or Merger Sub,
or (ii) contravene, conflict with or result in a material violation of any Legal
Requirement or any order, writ, injunction, judgment or decree to which Parent
or Merger Sub is subject.
3.4 GOVERNMENTAL FILINGS. The execution, delivery and performance
by Parent and Merger Sub of this Agreement and the Ancillary Agreements to which
they are party, and the consummation by Parent and Merger Sub of the
transactions contemplated by this Agreement and such Ancillary Agreements do not
and will not require any consent, approval or other authorization of, or filing
with or notification to, any Governmental Body, other than:
(a) the delivery of the Certificate of Merger with the
Department of State of the State of New York;
(b) the filing with the SEC of (i) the Proxy Statement and
(ii) any other filings or reports that may be required in connection with this
Agreement and the transactions contemplated by this Agreement under the Exchange
Act;
(c) compliance with the rules and regulations of the Nasdaq
National Market;
(d) the pre-merger notification required under the HSR Act;
and
(e) compliance with the Takeover Statutes set forth in
Section 2.17(e) of the Company Disclosure Letter.
3.5 FULL DISCLOSURE. None of the information supplied or to be
supplied by or on behalf of Parent for inclusion or incorporation by reference
in the Proxy Statement will, at the time the Proxy Statement is mailed to the
shareholders of the Company or at the time of the Company Shareholders' Meeting,
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 the light of the circumstances under which they are made, not
misleading.
3.6 MERGER SUB FORMATION. Merger Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Merger Agreement.
Since the date of its incorporation, Merger Sub has not carried on any business
or conducted any operations other than execution of this Merger Agreement, the
performance of its obligations hereunder and related ancillary matters.
26
3.7 FINANCING.
(a) Parent has delivered to the Company a true and complete
copy of a commitment letter of ▇▇▇▇▇▇-▇▇▇▇▇▇ Capital, Inc. (the "EQUITY
PROVIDER"), an Affiliate of Parent, to provide equity financing in connection
with the transactions contemplated by this Agreement (the "EQUITY COMMITMENT
LETTER"). The Equity Commitment Letter has been duly authorized and executed by
all parties thereto and is in full force and effect. The obligations of the
Equity Provider to fund the commitments under the Equity Commitment Letter are
not subject to any condition which is not set forth expressly in the Equity
Commitment Letter. Parent is not aware of any fact, circumstance or occurrence
that makes any of the assumptions or statements set forth in the Equity
Commitment Letter inaccurate in any material respect or that causes the Equity
Commitment Letter to be ineffective; PROVIDED, that no representation or
warranty is made by Parent respecting any fact, circumstance or occurrence that
constitutes a breach of the Company's representations, warranties or covenants
under this Agreement.
(b) Parent has delivered to the Company a true and complete
copy of a commitment letter of Antares Capital Corporation (the "DEBT PROVIDER")
to provide the amount of debt financing set forth therein in connection with the
transactions contemplated by this Agreement (the "DEBT COMMITMENT LETTER," and
together with the Equity Commitment Letter, the "COMMITMENT LETTERS"). The Debt
Commitment Letter has been duly authorized and executed by Parent and, to the
knowledge of Parent, by the Debt Provider, and is in full force and effect. The
obligations of the Debt Provider to fund the commitments under the Debt
Commitment Letter are not subject to any condition which is not set forth
expressly in the Debt Commitment Letter and neither Parent nor Merger Sub have
any reason to expect that the conditions included in the Debt Commitment Letter
will not be satisfied before the Effective Time; PROVIDED, that no
representation or warranty is made by Parent respecting any fact, circumstance
or occurrence that constitutes a breach of the Company's representations,
warranties or covenants under this Agreement.
(c) The Commitment Letters provide Parent with aggregate
financing in an amount sufficient to enable Parent to pay the aggregate Price
Per Share and pay all contemplated fees and expenses related to the transactions
contemplated by this Agreement and to the knowledge of Parent, to provide
adequate working capital for the Acquired Companies.
3.8 INVESTIGATION; ACKNOWLEDGMENT. Parent has conducted a review
and analysis of the business, operations, assets, liabilities, results of
operations, financial condition, software, technology and prospects of the
Company and acknowledges that Parent has been provided access to the personnel,
properties, premises and records of the Company which Parent has requested for
such purpose. Except for the representations and warranties contained in this
Agreement or in any of the Ancillary Agreements, Parent acknowledges that
neither the Company nor any other Person makes any other express or implied
representation or warranty with respect to the Company Common Stock, the Company
or with respect to any other information provided to Parent, whether on behalf
of the Company or such other Persons, including as to merchantability or fitness
for any particular use or purpose.
27
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 OPERATION OF THE COMPANY'S BUSINESS.
(a) During the period from the date of this Agreement
through the Effective Time (the "PRE-CLOSING PERIOD"), the Company shall: (i)
ensure that each of the Acquired Companies conducts its business and operations
(A) in the ordinary course of business, and (B) in material compliance with all
applicable Legal Requirements and the requirements of all Acquired Company
Contracts; (ii) use Commercially Reasonable Efforts to ensure that each of the
Acquired Companies preserves intact its current business organization, keeps
available the services of its current officers and employees (except when in the
good faith judgment of the Company such services are not in the best interests
of the Company) and maintains its relations and goodwill with all material
suppliers, customers, landlords, creditors, licensors, licensees, employees and
other Persons having business relationships with the respective Acquired
Companies, other than as set forth in Section 4.1(a)(ii) of the Company
Disclosure Letter; (iii) provide all notices, assurances and support required by
any Material Contract relating to any Proprietary Asset in order to ensure that
no condition under such Material Contract occurs which could result in, or could
increase the likelihood of any transfer by any Acquired Company of any
Proprietary Asset; (iv) make all filings and payments necessary or reasonable to
keep all registered or issued Proprietary Assets that are material to and used
in the business in full force and effect; (v) keep in full force and effect
(with the same scope and limits of coverage) all insurance policies in effect as
of the date of this Agreement covering all material assets of the Acquired
Companies and (vi) to the extent reasonably requested by Parent, cause its
officers to report regularly to Parent concerning the status of the Acquired
Companies' respective businesses. Notwithstanding anything contained in this
Section 4.1 or in this Agreement to the contrary, but subject to Section
4.1(b)(xvii) in the case of Non-Electrograph Liabilities that are current
liabilities and Section 4.1(b)(xviii) in the case of Non-Electrograph Assets
that are current assets, the Company shall be entitled to (1) satisfy,
extinguish or otherwise discharge any Non-Electrograph Liabilities, (2) sell,
assign, transfer or otherwise dispose of any Non-Electrograph Assets, (3) enter
into transactions to sell, transfer, convey, assign terminate or otherwise
dispose of the Designated Real Property Leases and the ▇▇▇▇ Lease, as long as
any such actions described in clauses (1), (2) or (3) above: (A) do not result
in additional Indebtedness to any of the Acquired Companies; (B) do not
detrimentally affect the ability to conduct or operate the business of
Electrograph; (C) do not result in further liabilities or obligations of any
kind or nature to Parent or any of its Subsidiaries from and after the Effective
Time; and (D) are not with a Related Party or other Affiliate of the Acquired
Companies.
(b) During the Pre-Closing Period, the Company shall not,
and shall not permit any of the other Acquired Companies to, take any of the
following actions, without the prior written consent of Parent:
(i) except as provided in Section 1.9 declare,
accrue, set aside or pay any dividend or make any other distribution in respect
of any shares of capital stock or repurchase, redeem or otherwise reacquire any
shares of capital stock or other securities, except repurchases of unvested
shares at cost in connection with the termination of the employment or
consulting relationship with any employee or consultant pursuant to stock option
or purchase agreements existing as of the date of this Agreement;
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(ii) sell, issue, deliver, grant or authorize the
sale, issuance, delivery or grant of (A) any capital stock or other security,
(except that the Company may issue Company Common Stock upon the valid exercise
of Company Options outstanding as of the date of this Agreement in accordance
with their terms), (B) any Stock Rights, Company Options or equity-based
compensation awards, including any awards under the Company's 1996 Stock Option
Plan or the Company's 2005 Incentive Compensation Plan, (C) any instrument
convertible into or exchangeable for any capital stock or other security or (D)
enter into any Contract with respect to the sale, voting, repurchase or
registration of any capital stock or other securities;
(iii) except as provided in Section 1.9 amend or
waive any of its rights under, or accelerate the vesting under, any provision of
any of the Company's stock option plans, any provision of any agreement
evidencing any outstanding stock option or otherwise modify any of the terms of
any outstanding option or any related Contract;
(iv) amend or permit the adoption of any amendment
to any of the Acquired Companies Constituent Documents, or effect or become a
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(v) acquire any equity interest or other interest
in any other Entity;
(vi) make capital expenditures that exceed $250,000
in the aggregate;
(vii) except as set forth in Section 4.1(b)(vii) of
the Company Disclosure Letter, enter into any Contract, or modify or amend any
existing Contract, providing for (A) severance or termination pay, (B)
indemnification of officers and directors, or (C) benefits which are contingent
upon the occurrence of a transaction involving the Company of the nature
contemplated by this Agreement or otherwise granting any severance or
termination pay to any present or former director, officer or employee of any
Acquired Company; PROVIDED HOWEVER, that the Company shall be obligated to take
the actions set forth in Section 4.1(b)(vii) of the Company Disclosure Letter
prior to the Effective Time and nothing in this Agreement shall be interpreted
to restrict the Company from taking any such actions;
(viii) except as otherwise permitted by the last
sentence of Section 4.1(a), purchase, lease, license or otherwise acquire any
right or other asset from any other Person or sell, transfer, convey, pledge,
encumber, grant a security interest in or otherwise dispose of, or lease or
license, any right or other asset to any other Person (except for (A) purchases
and sales of inventory by the Company in the ordinary course of business or (B)
purchases and sales of assets by the Company not having a value, or not
requiring payments to be made or received, in excess of $50,000 individually and
$250,000 in the aggregate), or waive, relinquish or otherwise impair any
material right or any duties or obligations of confidentiality;
(ix) abandon or fail to enforce any Proprietary
Assets that are material to and used in the business, operations or products of
the Acquired Companies;
29
(x) lend money or other property to any Person,
including, without limitation, any present or former director, officer or
employee of the Company or any Acquired Company, or incur or guarantee any
indebtedness;
(xi) except for payments and prepayments permitted
by the last sentence of Section 4.1(a) or as set forth in Section 4.1(b)(xi) of
the Company Disclosure Letter, incur, assume or prepay any Indebtedness, or
assume, guarantee, endorse or otherwise become liable or responsible for the
obligations of any other Person;
(xii) except as otherwise permitted by the last
sentence of Section 4.1(a), (A) enter into any Contract that would constitute a
Material Contract had it been entered into as of the date of this Agreement,
other than in the ordinary course of business or (B) terminate, cancel or
request any material change in any Material Contract or any Contract entered
into pursuant to clause (A) above;
(xiii) waive, release, assign, settle or compromise
any material Legal Proceedings;
(xiv) except in the ordinary course of business, (A)
establish, adopt, amend, terminate or make contributions to any Acquired Company
Employee Plan (except as otherwise required by applicable Legal Requirements or
as set forth in Section 4.1(b)(xiv) of the Company Disclosure Letter) or any
plan, agreement, program, policy, trust, fund or other arrangement that would be
an Acquired Company Employee Plan if it were in existence as of the date of this
Agreement; (B) pay any bonus or make any profit-sharing or similar payment to,
or increase the amount of the hourly wage rates, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of its present or
former directors, officers or employees, except as set forth in Section
4.1(b)(xiv) of the Company Disclosure Letter; or (C) become obligated to do any
of the foregoing;
(xv) change any of its methods of accounting or Tax
or accounting practices except as required by GAAP or applicable Tax Legal
Requirements;
(xvi) make or revoke any material Tax elections or
file any amended Tax Returns except as required by applicable Legal
Requirements;
(xvii) satisfy, extinguish or otherwise discharge any
Non-Electrograph Liabilities that are current liabilities of the Acquired
Companies for more than fair market value thereof;
(xviii) sell, assign, transfer or otherwise dispose of
any Non-Electrograph Assets that are current assets of the Acquired Companies
for less than the fair market value thereof;
(xix) incur or otherwise assume any liabilities or
other obligations in connection with the Terminating Operations;
(xx) take or agree to take any action which would
result in the failure to satisfy the conditions provided for in Section 6.1 or
Section 6.2; or
30
(xxi) authorize, agree or commit to take any of the
actions described in clauses "(i)" through "(xx)" of this Section 4.1(b).
(c) During the Pre-Closing Period, the Company shall, and
shall cause the other Acquired Companies to:
(i) prepare and timely file all Tax Returns
required to be filed by them on or before the Closing Date ("POST-SIGNING
RETURNS"), except as otherwise required by applicable laws;
(ii) consult with Parent with respect to all
material Post-Signing Returns and deliver drafts of such Post-Signing Returns to
Parent no later than ten business days prior to the date on which such
Post-Signing Returns are required to be filed after giving effect to any
applicable extensions;
(iii) fully and timely pay all Taxes due and payable
in respect of such Post-Signing Returns that are so filed except as required by
applicable Legal Requirements;
(iv) properly reserve (and reflect such reserve in
their books and records and financial statements) for all Taxes payable by them
for which no Post-Signing Return is due prior to the Effective Time;
(v) notify Parent of any Legal Proceeding or audit
pending or threatened in writing against the Acquired Companies in respect of
any Tax matter, including Tax liabilities and refund claims, and not settle or
compromise any such Legal Proceeding or audit without Parent's prior written
consent, which consent shall not be unreasonably withheld; and
(vi) terminate all Tax Sharing Agreements to which
the Acquired Companies are a party such that there are no further liabilities
thereunder.
(d) Notwithstanding anything to the contrary contained herein,
nothing contained in this Agreement shall (i) give Parent, directly or
indirectly, the right to control the Company's operations prior to the Closing
or (ii) prohibit the Company from purchasing inventory for the operation of the
business of any Acquired Company in an amount not to exceed $5,000,000 in any
single or series of related transactions with any single vendor.
4.2 NO SOLICITATION.
(a) The Company agrees that none of the Acquired Companies
shall, and it shall cause its or their respective Representatives not to,
directly or indirectly, (i) solicit, initiate, or encourage or induce the
making, submission or announcement of any inquiries or the making of any
proposal or offer related to an Acquisition Transaction, (ii) furnish any
information regarding any of the Acquired Companies to any Person that has made
or indicated an intention to make any inquiry, proposal or offer related to an
Acquisition Transaction, (iii) engage in discussions or negotiations with any
Person that has made or indicated an intention to make any inquiry, proposal or
offer related to any Acquisition Transaction, (iv) approve, endorse or recommend
any proposal or offer related to an Acquisition Transaction, (v) make or
authorize any statement, recommendation or solicitation in support of any
proposal or offer related to an
31
Acquisition Transaction, or (vi) enter into any letter of intent, agreement in
principle or similar document or any Contract having a primary purpose of
effectuating, or which would effect, any Acquisition Transaction; PROVIDED,
HOWEVER, that prior to the adoption of this Agreement by the Required Company
Shareholder Vote, this Section 4.2(a) shall not prohibit the Company or its
board of directors from furnishing nonpublic information regarding the Acquired
Companies to, or entering into discussions with, any Person that has made a
Superior Offer if (A) the board of directors of the Company concludes in good
faith, after consultation with its outside legal counsel, that such action is
reasonably necessary in order for the board of directors of the Company to act
in a manner consistent with its fiduciary obligations to the Company's
shareholders under applicable Legal Requirements, and (B) the Company receives
from such Person an executed confidentiality agreement, PROVIDED, that this
Section 4.2(a) shall not prohibit the Company's board of directors from
complying with Rules 14d-9 and 14e-2(a) under the Exchange Act.
(b) The Company shall within two business days advise
Parent of any inquiry or proposal or offer received by the Company or any of its
Representatives related to an Acquisition Transaction or any request for
nonpublic information relating to any of the Acquired Companies by any Person
that has made or indicated an intention to make any inquiry, proposal or offer
related to an Acquisition Transaction. The Company shall within two business
days provide Parent with the identity of such Person and a copy of such inquiry,
proposal, offer or request (or, where no such copy is available, a detailed
description of such inquiry, proposal, offer or request). The Company shall keep
Parent reasonably informed on a current basis of the status and material terms
of any such inquiry, proposal, offer or request, and any related material
communications to or by the Company or its Representatives.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 PROXY STATEMENT. As promptly as reasonably practicable after
the date of this Agreement, the Company shall prepare the Proxy Statement. The
Company shall provide Parent with a reasonable opportunity to review and comment
on such draft, and once such draft is in a form reasonably acceptable to each of
Parent and the Company, the Company shall file the Proxy Statement with the SEC,
which shall occur as soon as reasonably practicable after the date of this
Agreement, but in no event later than 30 business days after the date of this
Agreement. The Company shall use reasonable best efforts to cause the Proxy
Statement to comply as to form with the rules and regulations promulgated by the
SEC and to respond promptly to any comments or requests for additional
information of the SEC or its staff. The Company shall promptly (A) notify
Parent upon the receipt of any such comments or requests and (B) provide Parent
with copies of all correspondence between the Company and its Representatives,
on the one hand, and the SEC and its staff, on the other hand. Prior to
responding to any such comments or requests or the filing or mailing of the
Proxy Statement, the Company (x) shall provide Parent with a reasonable
opportunity to review and comment on any drafts of the Proxy Statement and
related correspondence and filings and (y) shall include in such drafts,
correspondence and filings all comments reasonably proposed by Parent. The
Company will use reasonable best efforts to cause the Proxy Statement to be
mailed to the Company's shareholders, as promptly as reasonably practicable
after clearance by the SEC. The Company and Parent shall promptly furnish to the
other party all information concerning such party and, with respect to the
Company, the Company's shareholders, that may be required or reasonably
requested in connection with any action contemplated by this Section 5.1. If any
event relating to any of the Acquired Companies
32
or Parent occurs, or if the Company or Parent becomes aware of any information,
that should be disclosed in an amendment or supplement to the Proxy Statement,
then the Company or Parent, as the case may be, shall as soon as practicable
inform the other party thereof and the Company shall as soon as practicable file
such amendment or supplement with the SEC and, if appropriate, mail such
amendment or supplement to the shareholders of the Company.
5.2 COMPANY SHAREHOLDERS' MEETING.
(a) The Company shall call, give notice of and hold a
meeting of the holders of Company Common Stock to vote on a proposal to adopt
this Agreement (the "COMPANY SHAREHOLDERS' MEETING"). The Company Shareholders'
Meeting shall be held as promptly as reasonably practicable after the mailing of
the Proxy Statement to the shareholders of the Company. The Company shall
exercise reasonable best efforts to solicit or cause to be solicited from its
shareholders proxies in favor of adoption of this Agreement and take all other
action reasonably necessary or advisable to obtain the Required Company
Shareholder Vote. Each of the Company and Parent shall use its reasonable best
efforts to ensure that all proxies solicited by or on behalf of the Company or
Parent in connection with the Company Shareholders' Meeting are solicited in
compliance with all applicable Legal Requirements. If the Company has not
procured the Required Company Shareholder Vote as of the date of the Company
Shareholders' Meeting, at the request of Parent, the Company shall from time to
time adjourn or postpone the Company Shareholders' Meeting for such period of
time as Parent shall reasonably request solely for the purpose of soliciting
additional proxies in favor of the adoption of this Agreement.
(b) Subject to Section 5.2(c), the Proxy Statement shall
include the Company Board Recommendation. Subject to Section 5.2(c), the Company
Board Recommendation shall not be withdrawn or modified in a manner adverse to
Parent, and subject to Section 5.2(c) no resolution by the board of directors of
the Company or any committee thereof to withdraw or modify the Company Board
Recommendation in a manner adverse to Parent shall be adopted or proposed.
(c) Notwithstanding anything to the contrary contained in
Section 5.2(b), at any time prior to the adoption of this Agreement by the
Required Company Shareholder Vote, the Company Board Recommendation may be
withdrawn or modified in a manner adverse to Parent (and the withdrawal of the
Company Board Recommendation may be noted in the Proxy Statement) if: (i) a
Superior Offer is made to the Company and is not withdrawn; and (ii) the
Company's board of directors determines in good faith, after consultation with
the Company's outside legal counsel, that, in light of such Superior Offer, the
withdrawal or modification of the Company Board Recommendation is reasonably
necessary in order for the board of directors of the Company to act in a manner
consistent with its fiduciary obligations to the Company's shareholders under
applicable Legal Requirements. Notwithstanding the foregoing, the Company Board
Recommendation will not be withdrawn or modified in a manner adverse to Parent
at any time within two business days after Parent receives written notice from
the Company confirming its intention to take such action.
5.3 REGULATORY APPROVALS.
33
(a) Upon the terms and subject to the conditions of this
Agreement and in accordance with applicable Legal Requirements, each of Parent
and the Company shall (i) use its reasonable best efforts to obtain any
consents, approvals or other authorizations, and make any filings and
notifications required in connection with the transactions contemplated by this
Agreement and (ii) thereafter make any other submissions either required or
deemed appropriate by either Parent or the Company, in connection with the
transactions contemplated by this Agreement under (A) the Securities Act and the
Exchange Act, (B) the HSR Act, (C) the NYBCL, (D) any other applicable Legal
Requirements and (E) the rules and regulations of the Nasdaq National Market.
Parent and the Company shall cooperate and consult with each other in connection
with the making of all such filings and notifications, including by providing
copies of all relevant documents to the non-filing party and its advisors prior
to filing, and notwithstanding anything to the contrary set forth herein, Parent
and the Company shall prepare and make the filing required under the HSR Act as
soon as reasonably practicable after the date of this Agreement, but in no event
later than 25 business days after the date of this Agreement. Neither Parent nor
the Company shall file any such document if the other party has reasonably
objected to the filing of such document. Neither Parent nor the Company shall
consent to any voluntary extension of any statutory deadline or waiting period
of the consummation of the transactions contemplated by this Agreement at the
behest of any Governmental Body without the consent of the other party, which
consent shall not be unreasonably withheld.
(b) Each of Parent and the Company shall promptly inform
the other party upon receipt of any communication from the Federal Trade
Commission, the Department of Justice or any other Governmental Body regarding
any of the transactions contemplated by this Agreement. If Parent or the Company
(or any of their respective Representatives) receives a request for additional
information from any such Governmental Body that is related to the transactions
contemplated by this Agreement, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response to such request.
(c) Notwithstanding the foregoing, nothing in this Section
5.3 shall require, or be construed to require, Parent to agree to (i) sell, hold
separate, divest, discontinue or limit, before or after the Effective Time, any
assets, businesses or interest in any assets or businesses of Parent, the
Company or any of their respective Affiliates or (ii) any conditions relating
to, or changes or restriction in, the operations of any such assets or
businesses which would result in a Parent Material Adverse Effect or a Company
Material Adverse Effect.
5.4 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) All rights to indemnification, including the
advancement of expenses, now existing in favor of those Persons who are or were
directors and officers of the Company (the "INDEMNIFIED PERSONS") for acts and
omissions occurring prior to the Effective Time, as provided in the Company's
Certificate of Incorporation or Bylaws (as in effect as of the date of this
Agreement) and as provided in the indemnification agreements between the Company
and said Indemnified Persons (as in effect as of the date of this Agreement and
as disclosed in Section 2.8(a)(iv) of the Company Disclosure Letter), shall
survive the Merger and shall be observed by the Surviving Corporation, and
Parent shall take all action necessary to cause the
34
Surviving Corporation to observe such rights, to the fullest extent permitted by
New York law for a period of not less than six years after the Effective Time.
(b) From the Effective Time until the sixth anniversary of
the Effective Time, the Surviving Corporation shall maintain in effect, for the
benefit of the Indemnified Persons with respect to acts or omissions occurring
prior to the Effective Time, the existing policy of directors' and officers'
liability insurance maintained by the Company as of the date of this Agreement
(the "EXISTING POLICY"); PROVIDED, HOWEVER, that Parent may substitute for the
Existing Policy a policy of no less favorable coverage, provided that the
carrier of such policy is a reputable insurance carrier that has a financial
strength rating from A.M. Best (or its successor) that is equal to or better
than the financial strength rating assigned by A.M. Best to the insurance
carrier of the Company's Existing Policy as of the date hereof. Prior to the
Effective Time, the annual premiums of the Existing Policy for such six year
period shall be prepaid in full, with the Company and Parent sharing equally the
amount of such prepayment.
(c) If the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, in each such case, to the extent necessary,
Parent shall assure the proper provision is made so that the successors and
assigns of the Surviving Corporation assume or are otherwise bound by the
obligations of the Surviving Corporation set forth in this Section 5.4.
5.5 ADDITIONAL AGREEMENTS.
(a) Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with applicable Legal Requirements, except
as otherwise provided in this Agreement, each of the Parties shall use its
Commercially Reasonable Efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things reasonably necessary or advisable to
ensure that the conditions set forth in Sections 6 and 7 are satisfied and to
consummate the transactions contemplated by this Agreement as promptly as
practicable. Parent and the Company shall not, and shall not permit any of their
respective Subsidiaries to, take any action that could reasonably be expected to
result in any of the conditions to the Merger set forth in Sections 6 or 7 not
being satisfied or satisfaction of those conditions being unreasonably delayed,
except, in the case of the Company, to the extent its board of directors
withdraws, modifies or amends the Company Board Recommendation in accordance
with Section 5.2(c).
(b) During the Pre-Closing Period, the Company shall
promptly notify Parent in writing of (i) any event, condition, fact or
circumstance that occurs, arises or exists after the date of this Agreement and
that would cause or constitute a material inaccuracy in any representation or
warranty made by the Company in this Agreement if such representation or
warranty had been made as of the time of the occurrence, existence or discovery
of such event, condition, fact or circumstance, or such event, condition, fact
or circumstance had occurred, arisen or existed on or prior to the date of this
Agreement; (ii) any material breach of any covenant or obligation of the
Company; (iii) any communication from any Person alleging that the consent of
such Person (or another Person) is or may be required in connection with the
transactions contemplated by this Agreement; (iv) any communication from any
Governmental
35
Body in connection with the transactions contemplated by this Agreement; and (v)
any material Legal Proceedings threatened in writing or commenced against or
otherwise affecting the Acquired Companies. No notification given to Parent
pursuant to this Section 5.5(b) shall limit or otherwise affect any of the
representations, warranties, covenants or obligations of the Company contained
in this Agreement.
(c) During the Pre-Closing Period, Parent shall promptly
notify the Company in writing of (i) any event, condition, fact or circumstance
that occurs, arises or exists after the date of this Agreement and that would
cause or constitute a material inaccuracy in any representation or warranty made
by Parent in this Agreement if such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement; and (ii)
any material breach of any covenant or obligation of Parent, (iii) any
communication from any Person alleging that the consent of such Person (or other
Person) is or may be required in connection with the transactions contemplated
by this Agreement; and (iv) any communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement. No notification
given to the Company pursuant to this Section 5.5(c) shall limit or otherwise
affect any of the representations, warranties, covenants or obligations of
Parent contained in this Agreement.
5.6 DISCLOSURE. Parent and the Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or any of the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, neither Parent nor
the Company shall, and neither Parent nor the Company shall permit any of their
respective Representatives to, make any disclosure regarding the Merger or any
of the other transactions contemplated by this Agreement unless (i) the other
party shall have approved such disclosure, or (ii) the disclosing party shall
have been advised in writing by its outside legal counsel that such disclosure
is required by applicable Legal Requirements, in which case the disclosing party
shall use its reasonable best efforts to consult with the other party before
issuing any such release or making any such public statement.
5.7 CONFIDENTIALITY. The Parties hereby acknowledge that the
provisions of the confidentiality agreement, as amended, dated June 25, 2004,
between the Company and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and Pegasus Technology Ventures, and the
confidentiality agreement, dated September 22, 2004, between the Company and
▇▇▇▇▇▇-▇▇▇▇▇▇ Capital, Inc. shall apply with respect to all information provided
hereunder to Parent or any of its Subsidiaries or Representatives in connection
with the transactions contemplated by this Agreement as if Parent were an
original party to such confidentiality agreements.
5.8 ACCESS AND INVESTIGATION. During the Pre-Closing Period, the
Company shall, and shall cause the respective Representatives of the Acquired
Companies to: (i) provide Parent and Parent's Representatives with reasonable
access to the Acquired Companies' Representatives, personnel, properties and
assets and to all existing books, records, Tax Returns, work papers and other
documents and information relating to the Acquired Companies (including the
status of product development efforts); and (ii) provide Parent and Parent's
Representatives with such copies of the existing books, records, Tax Returns,
work papers and other documents and information relating to the Acquired
Companies, and with such additional financial, operating and
36
other data and information regarding the Acquired Companies, as Parent may
reasonably request; provided that upon termination of this Agreement in
accordance with Article 8 hereof, Parent shall promptly return to the Company
any and all material and other documents provided or furnished to Parent and
Parent's Representatives in accordance with this Section 5.8. No investigation
conducted by Parent or Parent's Representations, however, will affect or be
deemed to modify any representation or warranty made in this Agreement.
5.9 STOCK EXCHANGE DE-LISTING. Parent and the Company shall use
their reasonable best efforts to cause the Company Common Stock to no longer be
quoted on the Nasdaq National Market System and to be de-registered under the
Exchange Act as soon as practicable following the Effective Time. Nothing in
this Section 5.9 shall be construed to prohibit Parent or any of its
Subsidiaries from having quoted on the Nasdaq National Market or registered
under the Exchange Act any securities issued by Parent or any of its
Subsidiaries from time to time after the Effective Time.
5.10 EMPLOYEES AND EMPLOYEE BENEFITS. Parent and the Company agree
that, except as provided in Section 4.1(b)(vii) of the Company Disclosure
Letter, all employees of the Acquired Companies immediately prior to the
Effective Time shall be employed by the Surviving Corporation and its
Subsidiaries immediately after the Effective Time; PROVIDED, that, neither
Parent nor the Surviving Corporation shall have any obligation under this
Agreement to continue the employment of any such employees following the
Effective Time. Prior to the Closing, the Company shall use its Commercially
Reasonable Efforts to obtain from each employee listed on Section 4.1(b)(vii) of
the Company Disclosure Letter a release signed by each such employee,
substantially in the form of EXHIBIT I attached hereto. Parent and the Surviving
Corporation agree that, for a period of 12 months after the Effective Time, the
Surviving Corporation shall provide all employees of the Surviving Corporation
and its Subsidiaries with compensation and employee benefits (other than
severance, equity-based compensation, deal-based payments or non-qualified
deferred compensation) that are substantially similar to the compensation and
employee benefits provided to the employees of the Acquired Companies
immediately prior to the Effective Time under the Acquired Company Employee
Plans; PROVIDED, HOWEVER, that the costs of providing such benefits shall not
exceed 110% of the costs of providing such benefits pursuant to the relevant
Acquired Company Employee Plans immediately prior to the Effective Time. To the
extent the same exist, the Surviving Corporation shall be responsible for the
continuation of health plan coverage, in accordance with the requirements of
COBRA and Sections 601 through 608 of ERISA, for any employee of the Acquired
Companies or qualified beneficiary under a Company health plan who is already
receiving COBRA benefits or who loses health coverage in connection with the
transactions contemplated in this Agreement. "COBRA" means the Consolidated
Omnibus Budget Reconciliation Act of 1985 and regulations promulgated
thereunder. Nothing herein express or implied shall confer upon any of the
employees of the Acquired Companies, the Surviving Corporation or any Subsidiary
of the Surviving Corporation, or any of their Affiliates, any rights or
remedies, including any right to any particular form of compensation or employee
benefit or to employment or continued employment for any specified period, of
any nature or kind whatsoever under or by reason of this Agreement.
5.11 TAKEOVER STATUTES. If any Takeover Statute is or becomes
applicable to this Agreement, the Voting Agreement, the Merger or the other
transactions contemplated by this Agreement or the Voting Agreement, each of
Parent and the Company and their respective boards
37
of directors shall (a) take all necessary action to ensure that such
transactions may be consummated as promptly as practicable upon the terms and
subject to the conditions set forth in this Agreement and (b) otherwise act to
eliminate or minimize the effects of such Takeover Statute.
5.12 DEFENSE OF LITIGATION. The Company shall not settle or offer
to settle any Legal Proceedings against the Acquired Companies or any of its
directors or officers by any stockholder of the Company arising out of or
relating to this Agreement or the transactions contemplated by this Agreement
without the prior written consent of Parent, which consent shall not be
unreasonably withheld. The Company shall not cooperate with any Person that may
seek to restrain, enjoin, prohibit or otherwise oppose the transactions
contemplated by this Agreement, and the Company shall cooperate with Parent and
Merger Sub in resisting any such effort to restrain, enjoin, prohibit or
otherwise oppose such transactions.
5.13 ACTIONS WITH RESPECT TO FINANCING. The Company shall
reasonably cooperate with Parent and its Affiliates in connection with the
fulfillment of the condition set forth in Section 6.12, including causing the
Acquired Companies, and their respective Representatives to (i) provide
information to Parent and its Representatives in connection with the preparation
of such offering memoranda and documentation as is required under the Commitment
Letters, (ii) meet with potential lenders and financing sources at reasonable
times upon reasonable advance notice, (iii) assist with the preparation of
customary collateral audits and inventory appraisals conducted with respect to
debt financings of the type provided in the Debt Commitment Letter and (iv)
assist in obtaining any necessary or desirable consents from the suppliers to
the Acquired Companies, and agreements to subordinate the security interests in
the assets of the Acquired Companies held by the suppliers to the Acquired
Companies to the security interests in the assets of the Acquired Companies to
be held by the Debt Provider from and after the Closing; PROVIDED, HOWEVER, the
failure of Parent and its Affiliates to obtain such consents shall not be deemed
to be a breach by the Company of this Section 5.13.
5.14 PAYMENT IN FULL OF ACQUIRED COMPANY INDEBTEDNESS. The Company
shall, prior to the Closing, pay or cause to be paid in full or otherwise
released or terminated in a manner reasonably satisfactory to Parent all
Contracts that provide for an extension of credit to any Acquired Company or
permit any Acquired Company to incur any Indebtedness for borrowed money, all
Indebtedness owed by any Acquired Company to any other Person, other than such
Indebtedness set forth in Section 5.14 of the Company Disclosure Letter,
including all obligations of the Acquired Companies in respect of such
Indebtedness and all Encumbrances on the capital stock or assets of the Acquired
Companies securing amounts in respect of such Indebtedness.
5.15 RELEASE OF OBLIGATIONS UNDER DESIGNATED REAL PROPERTY LEASES.
Prior to the Closing (and to the extent not heretofore achieved), the Company
shall cause each of the Acquired Companies to be replaced by one or more Persons
other than the Acquired Companies or any of their Affiliates or otherwise
released, from and after the Closing, from all obligations any of the Acquired
Companies may have in respect of the Designated Real Property Leases in
compliance with the last sentence of Section 4.1(a); it being agreed that
notwithstanding anything to the contrary contained in this Agreement, such
Acquired Companies shall have the right to execute any and all customary
documents and instruments that comply with the requirements of the last sentence
of Section 4.1(a) in order to satisfy its obligations under this Section 5.15
and in
38
no event shall same constitute a breach of any representation and warranty made
by the Company under this Agreement or otherwise constitute a default on the
part of the Company under this Agreement; PROVIDED, that the Company shall have
provided to Parent, at least five days prior to such execution, written notice
thereof and copies of the latest drafts of such documents and instruments and
shall consult with Parent with respect to such documents and instruments prior
to the execution thereof. The Company shall have the right to incur fees,
expenses and other payments up to the Allocated Release Amount set forth in
Section 5.15 of the Company Disclosure Letter for each Designated Real Property
Lease in order to have each of the Acquired Companies so replaced or released
from such Designated Real Property Lease pursuant to this Section 5.15.
Notwithstanding anything to the contrary contained in this Agreement, any
document or instrument that is not less favorable in substance to the Acquired
Companies in question than (x) the Surrender Agreement, attached hereto as
EXHIBIT J, or (y) the Assignment and Assumption Agreement, attached hereto as
EXHIBIT K, as the case may be (i.e., depending on whether the replacement or
release in question is a lease surrender or assignment), shall be deemed to be
in compliance with the last sentence of Section 4.1(a).
5.16 RELEASE OF OBLIGATIONS UNDER ▇▇▇▇ LEASE. Prior to the Closing,
the Company shall use its Commercially Reasonable Efforts to seek to have each
of the Acquired Companies replaced by one or more persons other than the
Acquired Companies or any of their Affiliates or otherwise released, from and
after the Closing, from all obligations any of the Acquired Companies may have
in respect of the ▇▇▇▇ Lease in compliance with the last sentence of Section
4.1(a) and in no event shall the failure to be so replaced or released
constitute a breach of any representation and warranty made by the Company under
this Agreement or otherwise constitute a default on the part of the Company
under this Agreement; it being agreed that notwithstanding anything to the
contrary contained in this Agreement, such Acquired Companies shall have the
right to execute any and all customary documents and instruments in connection
therewith that comply with the requirements of the last sentence of Section
4.1(a); PROVIDED, that the Company shall have provided to Parent, at least five
days prior to such execution, written notice thereof and copies of the latest
drafts of such documents and instruments and shall consult with Parent with
respect to such documents and instruments prior to the execution thereof. The
parties will cooperate with each other in exercising such reasonable efforts.
The Acquired Companies shall have the right to incur fees, expenses and other
payments up to the amount specified in Section 5.16 of the Company Disclosure
Letter (the "BREAKAGE FEE") in order to have each of the Acquired Companies so
replaced or released from the ▇▇▇▇ Lease pursuant to this Section 5.16; PROVIDED
HOWEVER, that no portion of such Breakage Fee shall be paid unless, concurrently
with such payment, each of the Acquired Companies shall be so replaced or
released. Notwithstanding anything to the contrary contained in this Agreement,
any document or instrument that is not less favorable in substance to the
Acquired Companies in question than (x) the Surrender Agreement, attached hereto
as EXHIBIT J, or (y) the Assignment and Assumption Agreement, attached hereto as
EXHIBIT K, as the case may be (i.e., depending on whether the replacement or
release in question is a lease surrender or assignment), shall be deemed to be
in compliance with the last sentence of Section 4.1(a).
5.17 CUSTOMERS AND SUPPLIERS. Parent and Merger Sub shall not, and
shall cause each of their respective Representatives and Affiliates not to,
contact any of the customers or suppliers of any of the Acquired Companies
without the express written consent of the Company, which consent may not be
unreasonably withheld or delayed.
39
5.18 TANK CLOSURE. The Company shall, prior to Closing, (i) abandon
in place or remove the underground storage tank at the Leased Real Property at
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, in accordance with all applicable
Legal Requirements (the "TANK CLOSURE"), and (ii) apply to the appropriate
Governmental Body and use Commercially Reasonable Efforts to obtain a "no
further action" letter or similar approval of the Tank Closure (the "CLOSURE
CERTIFICATION") from that Governmental Body.
5.19 TRANSACTION EXPENSES. Prior to the Closing, the Acquired
Companies shall not have incurred Transaction Expenses (other than any
Transaction Expenses paid prior to March 1, 2005) in an amount in excess of
$6,000,000. At or prior to Closing, the Company shall pay the amount of all
Transaction Expenses.
5.20 TERMINATING OPERATIONS. Prior to the Closing, the Company
shall, subject to the last sentence of Section 4.1(a) and Sections 4.1(b)(xvii),
4.1(b)(xviii) and 4.1(b)(xix) and except for the Assigned Leases or as otherwise
permitted by this Agreement: (a) satisfy, extinguish and otherwise discharge all
Non-Electrograph Liabilities (other than Non-Electrograph Liabilities that are,
individually and in the aggregate, not material); (b) sell, assign, transfer or
otherwise dispose of all Non-Electrograph Assets (other than Non-Electrograph
Assets that are, individually and in the aggregate, not material); and (c) wind
down, settle the affairs of and terminate the operations of the Acquired
Companies listed on Section 5.20 of the Company Disclosure Letter (the
"TERMINATING OPERATIONS"); and (d) use its Commercially Reasonable Efforts to
consult with Parent with respect to such matters prior to taking any material
action in connection therewith.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction or waiver, at or prior to the Closing, of each of the
following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Other than the representations
and warranties contained in Sections 2.1, 2.2, 2.3, 2.6(b), 2.15, 2.19, and
2.25, the representations and warranties of the Company contained in this
Agreement (as such representations and warranties would read if all limitations
or qualifications therein as to materiality or Company Material Adverse Effect
(or similar concept) were deleted therefrom) shall be true and correct as of the
date of this Agreement and shall be true and correct as of the Closing Date as
if made on and as of the Closing Date (except as to such representations and
warranties made as of a specific date, which shall have been true and correct as
of such date), other than breaches or inaccuracies in any such representations
or warranties that have not had, and would not reasonably be expected to have,
individually and in the aggregate, a Company Material Adverse Effect; and the
representations and warranties contained in Sections 2.1, 2.2, 2.3, 2.6(b),
2.15, 2.19 and 2.25 shall be true and correct as of the date of this Agreement
and as of the Closing Date as if made on and as of the Closing Date (except as
to such representations and warranties made as of a specific date, which shall
have been true and correct as of such date).
40
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that the
Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 SHAREHOLDER APPROVAL. This Agreement shall have been duly
adopted by the Required Company Shareholder Vote.
6.4 ANTITRUST. The waiting period to the consummation of the
Merger pursuant to the HSR Act, if applicable, shall have expired or been
terminated.
6.5 CONSENTS. All consents, approvals and other authorizations of
any Governmental Body required to consummate the Merger and the other
transactions contemplated by this Agreement (other than the delivery of the
Certificate of Merger with the Department of State of the State of New York)
shall have been obtained, free of any condition that would reasonably be
expected to have a Parent Material Adverse Effect or a Company Material Adverse
Effect.
6.6 COMPANY MATERIAL ADVERSE EFFECT. Since the date of this
Agreement, (a) no event, fact or set of circumstances shall have occurred or
exist that has had, or would reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect and (b) none of the suppliers
of Electrograph listed in Section 6.6 of the Company Disclosure Letter and no
customer or group of customers of Electrograph accounting for at least 10% of
the gross profit of the Acquired Companies for the seven months ended February
28, 2005 shall have terminated or materially decreased or threatened in writing
to terminate or materially decrease its relationship with the Acquired
Companies.
6.7 AGREEMENTS AND DOCUMENTS. Parent shall have received a
certificate executed by the Chief Executive Officer and Chief Financial Officer
of the Company, in such capacity, confirming that the conditions set forth in
Sections 6.1, 6.2, 6.3, 6.4, 6.6, 6.8 and 6.9 have been duly satisfied.
6.8 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.9 NO GOVERNMENTAL LITIGATION. There shall not be pending or
threatened any Legal Proceeding: (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement; (ii) relating to the Merger and seeking to
obtain from Parent or the Company or any of its Subsidiaries any damages that
may be material to Parent or the Company or any of its Subsidiaries; (iii)
seeking to prohibit or limit in any material respect Parent's ability to vote,
receive dividends with respect to or otherwise exercise ownership rights with
respect to the stock of the Surviving Corporation; (iv) which would materially
and adversely affect the right of Parent, the Surviving Corporation or any
Subsidiary of Parent to own the assets or operate the business of the Acquired
Companies; or (v) seeking to compel Parent or the Company, or any Subsidiary of
Parent or the Company, to
41
dispose of or hold separate any material assets, as a result of the Merger or
any of the other transactions contemplated by this Agreement.
6.10 RELEASES FROM CERTAIN OPTION HOLDERS. The Company shall have
obtained an executed consent and release in the form attached hereto as Exhibit
H from each holder of (i) a Company Option that is not a Vested Company Option
and (ii) a Company Option that is a Vested Company Option that has an exercise
price per share equal to or greater than the Price Per Share.
6.11 DISSENTING SHARES. Appraisal rights shall not have been
perfected pursuant to Section 623 of the NYBCL by shareholders of the Company
with respect to more than 10% of the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time.
6.12 FUNDING. Parent shall have received the amount of funds set
forth in the Debt Commitment Letter as a result of funding thereunder or as a
result of funding from one or more alternative sources of financing.
6.13 TERMINATION OF THE LOAN AGREEMENT AND INVENTORY FINANCING
ARRANGEMENTS. The Loan Agreement and Inventory Financing Arrangements shall have
been terminated, and each of the Acquired Companies shall have been released as
a borrower or guarantor, as applicable, under the Loan Agreement and all
Encumbrances on the capital stock or assets of the Acquired Companies securing
amounts owed in respect of the Loan Agreement and Inventory Financing
Arrangements shall have been released or terminated.
6.14 DIRECTOR AND OFFICER RESIGNATIONS. Parent shall have received
written resignation letters from each of the directors and officers of the
Company and each other Acquired Company requested by Parent effective as of the
Effective Time.
6.15 ▇▇▇▇▇▇ EMPLOYMENT AGREEMENT AND NON-COMPETE AND NON-DISCLOSURE
AGREEMENTS. The ▇▇▇▇▇▇ Employment Agreement and each of the Non-Compete and
Non-Disclosure Agreements shall have become effective in accordance with their
respective terms.
6.16 ACTIONS WITH RESPECT TO CERTAIN EMPLOYEES. The Company shall
have taken all of the actions set forth in Section 4.1(b)(vii) of the Company
Disclosure Letter.
6.17 TERMINATION OF RELATED PARTY TRANSACTIONS. The Company shall
have caused the termination, payment or settlement in full of all transactions
required to be disclosed pursuant to Section 2.20, and Parent shall have
received reasonably satisfactory evidence thereof.
6.18 RELEASE OF OBLIGATIONS UNDER THE DESIGNATED REAL PROPERTY
LEASES. Each of the Acquired Companies shall have, in accordance with Section
5.15, been replaced by one or more Persons other than the Acquired Companies or
any of their Affiliates or otherwise released from all obligations any of the
Acquired Companies may have (as lessee, guarantor, or otherwise) in respect of
the Designated Real Property Leases.
6.19 DELIVERY OF ESCROW AGREEMENT. Subject to Section 1.6(d), the
Escrow Agreement shall have been duly executed and delivered by each of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, the Company and the Escrow Agent.
42
6.20 TRANSACTION EXPENSES. The Acquired Companies shall not have
incurred Transaction Expenses (other than any Transaction Expenses paid on or
prior to March 1, 2005) in an amount in excess of $6,000,000, the Transaction
Expenses shall have been paid in full in accordance with the provisions of
Section 5.19, and Parent shall have received evidence (such as a ▇▇▇▇ or
statement) indicating the full amount of each Transaction Expense payable.
6.21 TERMINATING OPERATIONS. The Company shall have, in accordance
with Section 5.20: (a) satisfied, extinguished and otherwise discharged all
Non-Electrograph Liabilities (other than Non-Electrograph Liabilities that are,
individually and in the aggregate, not material); (b) sold, assigned,
transferred or otherwise disposed of all Non-Electrograph Assets (other than
Non-Electrograph Assets that are, individually and in the aggregate, not
material); and (c) wound down, settled the affairs of and terminated the
operations of the Terminating Operations.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY
The obligation of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Other than the representations
and warranties contained in Sections 3.1 and 3.2, the representations and
warranties of Parent contained in this Agreement as such representations and
warranties would read if all limitations or qualifications therein as to
materiality (or similar concept) were deleted therefrom shall be true and
correct as of the date of this Agreement and shall be true and correct as of the
Closing Date as if made on and as of the Closing Date (except as to such
representations and warranties made as of a specific date, which shall have been
true and correct as of such date), other than breaches of or inaccuracies in any
such representations or warranties that have not had, and would not reasonably
be expected to have, individually and in the aggregate, a Parent Material
Adverse Effect; and the representations and warranties contained in Sections 3.1
and 3.2 shall be true and correct as of the date of this Agreement and as of the
Closing Date as if made on and as of the Closing Date (except as to such
representations and warranties made as of a specific date, which shall have been
true and correct as of such date).
7.2 PERFORMANCE OF COVENANTS. Each covenant and obligation that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 SHAREHOLDER APPROVAL. This Agreement shall have been duly
adopted by the Required Company Shareholder Vote.
7.4 ANTITRUST. The waiting period to the consummation of the
Merger pursuant to the HSR Act, if applicable, shall have expired or been
terminated.
7.5 CONSENTS. All consents, approvals and other authorizations of
any Governmental Body required to consummate the Merger and the other
transactions contemplated by this Agreement (other than the delivery of the
Certificate of Merger with the Department of State of the State of New York)
shall have been obtained, free of any condition that would reasonably be
expected to have a Company Material Adverse Effect.
43
7.6 DOCUMENTS. The Company shall have received a certificate
executed on behalf of Parent by an executive officer of Parent, confirming that
the conditions set forth in Sections 7.1 and 7.2 have been duly satisfied.
7.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
the Company shall have been issued by any court of competent jurisdiction and
remain in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by the Company
illegal.
SECTION 8. TERMINATION
8.1 TERMINATION. This Agreement may be terminated prior to the
Effective Time (whether before or after the adoption of this Agreement by the
shareholders of the Company at the Company Shareholders' Meeting):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company, if the Merger shall
not have been consummated prior to the date that is seven months and 15 days
after the date hereof (the "TERMINATION DATE"); PROVIDED, HOWEVER, that a party
shall not be permitted to terminate this Agreement pursuant to this Section
8.1(b) if the failure to consummate the Merger by the Termination Date is
primarily attributable to a failure on the part of such party to perform any
covenant or obligation in this Agreement required to be performed by such party
at or prior to the Effective Time;
(c) by either Parent or the Company, if a court of
competent jurisdiction or other Governmental Body shall have issued a final and
nonappealable order, decree or ruling, or shall have taken any other action,
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
(d) by either Parent or the Company, if (i) the Company
Shareholders' Meeting (including any adjournments and postponements thereof)
shall have been held and completed and the Company's shareholders shall have
taken a final vote on a proposal to adopt this Agreement, and (ii) this
Agreement shall not have been adopted at the Company Shareholders' Meeting (and
shall not have been adopted at any adjournment or postponement thereof) by the
Required Company Shareholder Vote;
(e) by Parent, if the board of directors of the Company
shall have withdrawn or modified in a manner adverse to Parent the Company Board
Recommendation;
(f) by Parent, if (i) the board of directors of the Company
approves, endorses or recommends a Superior Offer, (ii) the Company enters into
a written agreement (whether binding or non-binding) relating to a Superior
Offer, (iii) a tender offer or exchange offer for any outstanding shares of
capital stock of the Company is commenced and the board of directors of the
Company fails to recommend against acceptance of such tender offer or exchange
offer by its shareholders (including, for these purposes, by taking no position
with respect to the acceptance of such tender offer or exchange offer by its
shareholders, which shall constitute a failure to
44
recommend against acceptance of such tender offer or exchange offer) within ten
business days after commencement, or (iv) the Company or its board of directors
publicly announces its intention to do any of the foregoing;
(g) by Parent, if the board of directors of the Company
exempts any Person other than Parent or any of its Affiliates from the
provisions of Section 912 of the NYBCL;
(h) by Parent, if the Company breaches any of its
representations, warranties, covenants or agreements contained in this
Agreement, which breach (i) would give rise to the failure of a condition set
forth in Sections 6.1, 6.2 or 6.6 of the Agreement and (ii) has not been cured
by the Company within 20 business days after the Company's receipt of written
notice of such breach from Parent;
(i) by the Company, if the board of directors of the
Company approves, and authorizes the Company to enter into, a definitive
agreement providing for the implementation of a Superior Offer, but only so long
as:
(i) the Required Company Shareholder Vote has not
yet been obtained;
(ii) the Company is not then and has not been in
breach of any of its obligations under Section 4.2;
(iii) the board of directors of the Company has
determined in good faith, after consultation with its financial and legal
advisors, that such action is reasonably necessary in order for the board of
directors to act in a manner consistent with its fiduciary duty under applicable
Legal Requirements;
(iv) the Company has notified Parent in writing
that it intends to enter into such definitive agreement;
(v) Parent does not, within two business days
following Parent's receipt of such notice, make an offer which the board of
directors of the Company determines in good faith, after consultation with its
financial and legal advisors, to be as favorable to the Company's stockholders
as the Superior Offer giving rise to such notice; and
(vi) such termination occurs within two business
days following the two business day period referred to in Section 8.1(i)(v); or
(j) by the Company, if Parent breaches any of its
representations, warranties, covenants or agreements contained in this
Agreement, which breach (i) would give rise to the failure of a condition set
forth in Section 7.1 or 7.2 and (ii) has not been cured by Parent within 20
business days after Parent's receipt of written notice of such breach from the
Company.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 8.1, this Agreement shall be of no further
force or effect; PROVIDED, HOWEVER, that (i) this Section 8.2, Section 8.3 and
Section 9 shall survive the termination of this Agreement and shall remain in
full force and effect, and (ii) the termination of this Agreement shall not
45
relieve any party from any liability for any willful breach of any
representation, warranty, covenant or obligation contained in this Agreement.
8.3 TERMINATION FEES.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; PROVIDED, HOWEVER, that the
filing fee required under the HSR Act in connection with the transactions
contemplated by this Agreement shall be paid 50% by Parent and 50% by the
Company.
(b) The Company shall pay, or cause to be paid, to Parent
by wire transfer of immediately available funds a termination fee and
reimbursement of expenses in an amount equal to $2,500,000 (the "TERMINATION
FEE"):
(i) if this Agreement is terminated by the Company
pursuant to Section 8.1(i), in which case payment shall be made before or
concurrently with such termination;
(ii) if this Agreement is terminated by Parent
pursuant to Section 8.1(e), 8.1(f) or 8.1(g) or pursuant to Section 8.1(h) as a
result of a willful breach by the Company, in which case payment shall be made
within two business days of such termination; or
(iii) if (A) a proposal or offer related to an
Acquisition Transaction shall have been made or proposed to the Company or its
shareholders or otherwise publicly announced (whether or not conditional), (B)
this Agreement is terminated by either Parent or the Company pursuant to Section
8.1(b) or 8.1(d) and (C) within 12 months following the date of such
termination, any Acquired Company enters into a written agreement (whether
binding or non-binding) providing for the implementation of a proposal or offer
related to an Acquisition Transaction or shall consummate any proposal or offer
related to an Acquisition Transaction (whether or not such proposal or offer was
the same proposal or offer referred to in the foregoing clause (A)), in which
case payment shall be made within two business days of the date on which such
Acquired Company enters into such agreement in principle, arrangement,
understanding or Contract or consummates such proposal or offer, as applicable.
(c) The payment of the Termination Fee shall be
compensation and liquidated damages for the loss suffered by Parent as a result
of the termination of the Agreement under the circumstances contemplated under
Section 8.3(b) and to avoid the difficulty of determining damages under the
circumstances. The Company shall have no further liability to Parent after the
payment of the Termination Fee.
(d) The Parties acknowledge and agree that the agreements
contained in this Section 8.3 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the Parties
would not enter into this Agreement. If the Company fails to pay when due any
amount payable under this Section 8.3 then the Company shall pay to Parent, as
applicable, its costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on such overdue amount
(for the period commencing as of the date such overdue amount was originally
required to be paid and ending on the date such overdue amount is actually
46
paid to Parent in full) at a rate per annum
equal to the "PRIME RATE" (as announced by Bank of America or any successor
thereto) in effect on the date such overdue amount was originally required to be
paid plus 2%.
SECTION 9. MISCELLANEOUS PROVISIONS
9.1 AMENDMENT. This Agreement may be amended with the approval of
the respective boards of directors of the Company and Parent at any time
(whether before or after adoption of this Agreement by the shareholders of the
Company); PROVIDED, HOWEVER, that after any such adoption of this Agreement by
the Company's shareholders, no amendment shall be made which by law requires
further approval of the shareholders of the Company without the further approval
of such shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
9.2 WAIVER.
(a) No failure on the part of any party to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
(b) No party shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or remedy under
this Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
(c) Any of the Parties to this Agreement may waive any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, but only by an instrument in writing executed by the party
waiving compliance. Any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.
9.3 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
under this Agreement will survive the Effective Time, and none of the Acquired
Companies, their respective Affiliates and any of the officers, directors,
employees or stockholders of any of the foregoing, will have any liability
whatsoever with respect to any such representation or warranty after such time.
This Section 9.3 will not limit any covenant or agreement of the Parties which
by its term contemplates performance after the Closing.
9.4 ENTIRE AGREEMENT. This Agreement, the Company Disclosure
Letter, the Ancillary Agreements and the other agreements referred to herein
constitute the entire agreement among the parties hereto and supersede all other
prior agreements and understandings, both written and oral, among or between any
of the parties with respect to the subject matter hereof and thereof.
47
9.5 APPLICABLE LAW; JURISDICTION. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS THEREOF. EACH OF THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION OF THE SUPREME
COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND TO THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT THEREOF IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR FOR THE RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT ARISING OUT OF
OR RELATING TO THIS AGREEMENT, AND HEREBY WAIVES ANY OBJECTION AS TO VENUE AND
FORUM NON CONVENIENS WITH RESPECT TO ANY SUCH ACTIONS BROUGHT IN ANY OF SUCH
COURTS. PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE SERVED BY CERTIFIED MAIL
ON ANY PARTY HERETO ANYWHERE IN THE WORLD WHERE SUCH PARTY IS FOUND AND MAY ALSO
BE SERVED UPON ANY PARTY IN THE MANNER PROVIDED FOR THE SERVICE OF PROCESS UNDER
THE LAWS OF THE STATE OF NEW YORK OR THE LAWS OF THE PLACE OR JURISDICTION WHERE
SUCH PARTY IS FOUND.
9.6 ATTORNEYS' FEES. In any action at law or suit in equity to
enforce this Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a
reasonable sum for its attorneys' fees and all other reasonable costs and
expenses incurred in such action or suit.
9.7 ASSIGNABILITY. This Agreement shall be binding upon, and shall
be enforceable by and inure solely to the benefit of, the parties hereto and
their respective successors and assigns; PROVIDED, HOWEVER, that neither this
Agreement nor any of the Company's rights hereunder may be assigned by the
Company, Parent or Merger Sub without the prior written consent of Parent and
Merger Sub with respect to the Company, and the consent of the Company with
respect to Parent or Merger Sub, and any attempted assignment of this Agreement
or any of such rights by the Company, Parent or Merger Sub, as the case may be,
without the consent of Parent and Merger Sub with respect to the Company, and
the consent of the Company with respect to Parent or Merger Sub, shall be void
and of no effect. Notwithstanding the foregoing, (a) Parent may designate, by
written notice to the Company, a Subsidiary that is wholly-owned by Parent to be
merged with and into the Company in lieu of Merger Sub, in which event all
references in this Agreement to Merger Sub shall be deemed references to such
Subsidiary, and in that case, all representations and warranties made in this
Agreement with respect to Merger Sub as of the date of this Agreement shall be
deemed representations and warranties made with respect to such Subsidiary as of
the date of such designation, and (b) from and after the Closing, Parent, the
Company and/or any of their respective Subsidiaries (including Electrograph) may
assign their respective rights under this Agreement to one or more lenders
(including the Debt Provider, and its successors and assigns) in connection with
a secured debt financing arrangement without the prior written consent of any of
Parent, the Company or Merger Sub. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person (other than the parties
hereto) any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
48
9.8 NOTICES. Any notice or other communication required or
permitted to be delivered to any party under this Agreement shall be in writing
and shall be deemed properly given on the day of delivery if delivered by hand
or facsimile (with confirmation of delivery), or on the second business day
after being sent by registered overnight mail, return receipt requested, by
overnight courier or overnight express delivery service or by facsimile (in each
case, with confirmation of delivery) to the address or facsimile telephone
number set forth beneath the name of such party below (or to such other address
or facsimile telephone number as such party shall have specified in a written
notice given to the other parties hereto):
IF TO PARENT OR MERGER SUB:
Electrograph Holdings, Inc.
c/o ▇▇▇▇▇▇-▇▇▇▇▇▇ Capital, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ and
(▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO (WHICH COPY SHALL NOT CONSTITUTE NOTICE):
Paul, Weiss, Rifkind ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE COMPANY:
Manchester Technologies, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITH COPIES TO (WHICH COPIES SHALL NOT CONSTITUTE NOTICE):
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
AND
Kressel, Rothlein, ▇▇▇▇▇ & ▇▇▇▇, LLC
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
49
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
9.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
9.10 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section
5.4, this Agreement is not intended to confer any rights or remedies upon any
Person other than the parties to this Agreement.
9.11 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions of this Agreement.
If any provision of this Agreement, or the application of that provision to any
Person or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted for that provision in order to carry
out, so far as may be valid and enforceable, the intent and purpose of the
invalid or unenforceable provision and (b) the remainder of this Agreement and
the application of that provision to other Persons or circumstances shall not be
affected by such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of that provision, or the
application of that provision, in any other jurisdiction.
9.12 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include masculine and feminine genders.
(b) The parties have been represented by counsel during the
negotiation and execution of this Agreement and waive the application of any
Laws or rule of construction providing that ambiguities in any agreement or
other document shall be construed against the party drafting such agreement or
other document.
(c) As used in this Agreement, the words "INCLUDE" and
"INCLUDING," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "WITHOUT
LIMITATION."
(d) Except as otherwise indicated, all references in this
Agreement to "SECTIONS" and "EXHIBITS" are intended to refer to Sections of and
Exhibits to this Agreement.
9.13 REMEDIES. Any and all remedies expressly conferred upon a
party to this Agreement shall be cumulative with, and not exclusive of, any
other remedy contained in this Agreement, at law or in equity. The exercise by a
party to this Agreement of any one remedy shall not preclude the exercise by it
of any other remedy.
9.14 SPECIFIC PERFORMANCE. The parties to this Agreement agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that
50
the parties to this Agreement shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
9.15 WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND MERGER
SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THE ACTIONS OF PARENT, THE COMPANY OR MERGER SUB IN THE NEGOTIATIONS,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ELECTROGRAPH HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
CICE ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
MANCHESTER TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
[Signature Page to Agreement and Plan of Merger]
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
"1996 OPTIONS PLANS" shall have the meaning assigned to it in Section
1.9.
"1996 STOCK OPTION PLAN" shall have the meaning assigned to it in
Section 2.3(a).
"ACQUIRED COMPANY CONTRACT" shall mean any Contract: (i) to which any
of the Acquired Companies is a party; (ii) by which any of the Acquired
Companies or any asset of any of the Acquired Companies is bound or under which
any of the Acquired Companies has any obligation; or (iii) under which any of
the Acquired Companies has any right or interest.
"ACQUIRED COMPANY EMPLOYEE PLANS" shall have the meaning assigned to it
in Section 2.12(a).
"ACQUIRED COMPANY PROPRIETARY ASSET" shall mean any Proprietary Asset
owned by or licensed to any of the Acquired Companies or otherwise used by any
of the Acquired Companies.
"ACQUIRED COMPANY RETURNS" shall have the meaning assigned to it in
Section 2.11.
"ACQUIRED COMPANIES" shall have the meaning assigned to it in Section
2.1.
"ACQUIRED COMPANIES CONSTITUENT DOCUMENTS" shall have the meaning
assigned to it in Section 2.1.
"ACQUISITION PROPOSAL" shall mean any bona fide, unsolicited, written
proposal (which is not withdrawn) contemplating or otherwise relating to any
Acquisition Transaction.
"ACQUISITION TRANSACTION" shall mean any transaction or series of
transactions involving:
(a) any merger, consolidation, share exchange, business
combination, issuance of securities, direct or indirect acquisition of
securities, recapitalization, tender offer, exchange offer or other similar
transaction in which (i) any of the Acquired Companies is a constituent
corporation, (ii) a Person or "group" (as defined in the Exchange Act and the
rules promulgated thereunder) of Persons directly or indirectly acquires, in a
single or series of related transactions, beneficial or record ownership of
securities representing more than 10% of the outstanding securities of any class
of voting securities of any of the Acquired Companies, or (iii) any of the
Acquired Companies issues securities representing more than 10% of the
outstanding securities of any class of voting securities of any of the Acquired
Companies;
(b) any sale or disposition of any business or businesses or of
assets that constitute or account for 10% or more of the consolidated net
revenues, net income or assets of any of the Acquired Companies, other than in
the ordinary course of business ; or
1
(c) any liquidation or dissolution of any of the Acquired
Companies.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control
with, such first Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" shall mean the Agreement and Plan of Merger to which this
Exhibit A is attached, as it may be amended from time to time.
"ANCILLARY AGREEMENTS" shall mean the Voting Agreement, the ▇▇▇▇▇▇
Employment Agreement and, if entered into on or prior to Closing, the Escrow
Agreement.
"ASSIGNED LEASES" shall have the meaning assigned to it in Section
2.8(a)(ix).
"BREAKAGE FEE" shall have the meaning assigned to it in Section 5.16.
"BUSINESS DAY" means any day, other than Saturday, Sunday or a U.S.
federal holiday, and shall consist of the time period from 12:01 a.m. through
12:00 midnight Eastern time.
"CERTIFICATE OF MERGER" shall have the meaning assigned to it in
Section 1.3.
"CLOSING" shall have the meaning assigned to it in Section 1.3.
"CLOSURE CERTIFICATION" shall have the meaning assigned to it in
Section 5.18.
"CLOSING DATE" shall have the meaning assigned to it in Section 1.3.
"COBRA" shall have the meaning ascribed to it in Section 5.10.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
(including any successor code), and the rules and regulations promulgated
thereunder.
"COMMITMENT LETTERS" shall have the meaning assigned to it in Section
3.7(b).
"COMMERCIALLY REASONABLE EFFORTS" shall mean the Person's efforts in
accordance with reasonable commercial practices and without the payment of any
money to any third party except the incurrence of reasonable costs and expenses
that are not, individually or in the aggregate, material in the context of the
commercial objective to be achieved under this Agreement by the Person that has
the applicable obligation to use such efforts to achieve such objective.
"COMPANY" shall have the meaning assigned to it in the Introduction.
"COMPANY BALANCE SHEET" shall have the meaning assigned to it in
Section 2.4(b).
"COMPANY BALANCE SHEET DATE" shall have the meaning assigned to it in
Section 2.4(b).
2
"COMPANY BOARD RECOMMENDATION" shall have the meaning assigned to it in
Section 2.2.
"COMPANY COMMON STOCK" shall mean the Common Stock, $.01 par value per
share, of the Company.
"COMPANY DISCLOSURE LETTER" shall mean the Disclosure Letter that has
been prepared by the Company signed by a duly authorized officer of the Company
and delivered by the Company to Parent prior to or on the date of execution of
this Agreement.
"COMPANY ESCROW AMOUNT" shall have the meaning set forth in Section
1.6(a).
"COMPANY FINANCIAL STATEMENTS" shall have the meaning assigned to it in
Section 2.4(b).
"COMPANY MATERIAL ADVERSE EFFECT" One or more related events, facts,
violations, breaches, inaccuracies, circumstances or other matters will be
deemed to be a "COMPANY MATERIAL ADVERSE EFFECT" if such events, facts,
violations, breaches, inaccuracies, circumstances or other matters had or would
reasonably be expected to have or give rise to, individually or in the
aggregate, a material adverse effect on (i) the business, condition (financial
or otherwise), results of operations, assets, liabilities, operations or
financial performance of the Acquired Companies , taken as a whole or (ii) the
ability of the Company to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby, PROVIDED, HOWEVER, that none of
the following shall be deemed to constitute a Company Material Adverse Effect:
(a) any change in and of itself in the market price or trading volume of the
Company's stock after the date hereof; (b) changes in general economic
conditions in the United States or abroad (including, without limitation, any
effect that acts of terrorism or outbreak of war have on such general economic
conditions); or (c) legal, governmental or regulatory factors (including,
without limitation, any effect that acts of terrorism or outbreak of war have on
such legal, governmental or regulatory factors) generally affecting companies in
the Company's industry.
"COMPANY OPTIONS" shall have the meaning assigned to it in Section 1.9.
"COMPANY RESPONSIBLE OFFICERS" shall have the meaning assigned to it in
Section 2.5(a).
"COMPANY SEC DOCUMENTS" shall have the meaning assigned to it in
Section 2.4(a).
"COMPANY SHAREHOLDERS' MEETING" shall have the meaning assigned to it
in Section 5.2(a).
"COMPANY STOCK CERTIFICATE" shall have the meaning assigned to it in
Section 1.5(a)(ii).
"CONSENT" shall mean any approval, consent, ratification, permission,
waiver or authorization (including any Governmental Authorization).
"CONTRACT" shall mean any agreement, contract, subcontract, lease,
sublease, instrument, note, bond, mortgage, indenture, commitment, option,
warranty, purchase order, license,
3
sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
"DEBT COMMITMENT LETTER" shall have the meaning assigned to it in
Section 3.7(b).
"DEBT PROVIDER" shall have the meaning assigned to it in Section
3.7(b).
"DESIGNATED REAL PROPERTY LEASES" shall mean all lease obligations of
any of the Acquired Companies in respect of the properties located at (i) ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇, (▇▇) ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇; (iii)
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ and (iv) ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇.
"DISSENTING SHAREHOLDER" shall have the meaning assigned to it in
Section 1.12.
"DISSENTING SHARES" shall have the meaning assigned to it in Section
1.12.
"EFFECTIVE TIME" shall have the meaning assigned to it in Section 1.3.
"ELIGIBLE INVESTMENT" shall mean (i) obligations issued or guaranteed
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof); (ii) obligations (including certificates of deposit and
banker's acceptances) of any domestic commercial bank having capital and surplus
in excess of $500,000,000; (iii) repurchase obligations for underlying
securities of the type described in clause (i); and (iv) investment in an
Insured Money Market Fund of an institution described in clause (ii).
"ELECTROGRAPH" shall have the meaning assigned to it in the Recitals.
"ENCUMBRANCE" shall mean any lien, pledge, hypothecation, lease,
charge, mortgage, deed of trust, security interest, encumbrance, claim,
infringement, interference, option, right of first offer or refusal, easement,
restrictive covenant, encroachment, preemptive right or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
"ENTITY" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), syndicate, firm or other enterprise,
association, organization, entity or group (which term shall include a "group"
as such term is defined in Section 13(d)(3) of the Exchange Act).
"ENVIRONMENTAL LAW" means any Legal Requirement relating to pollution
or protection of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any Legal Requirement
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling of or
exposure of any individual to Materials of Environmental Concern;
4
"EQUITY COMMITMENT LETTER" shall have the meaning assigned to it in
Section 3.7(a).
"EQUITY PROVIDER" shall have the meaning assigned to it in Section
3.7(a).
"ERISA" shall has the meaning assigned to the it in Section 2.12(a).
"ESCROW ACCOUNT" shall have the meaning assigned to it in Section
1.6(c).
"ESCROW AGENT" shall have the meaning assigned to it in Section 1.6(c).
"ESCROW AGREEMENT" shall have the meaning assigned to it in Recitals.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCHANGE AGENT" shall have the meaning assigned to it in Section
1.8(a).
"EXISTING POLICY" shall have the meaning assigned to it in Section
5.4(b).
"EXPENSE AMOUNT" shall have the meaning assigned to it in Section
1.6(b).
"EXPENSE STATEMENT" shall have the meaning assigned to it in Section
1.6(b).
"GAAP" shall have the meaning assigned to it in Section 2.4(b).
"GOVERNMENTAL AUTHORIZATION" shall mean any: (i) permit, license,
certificate, franchise, permission, variance, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority, consent or approval of any Governmental
Body or pursuant to any Legal Requirement; or (ii) right under any Contract with
any Governmental Body.
"GOVERNMENTAL BODY" shall mean any: (i) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any
nature; (ii) federal, state, local, municipal, foreign or other government; or
(iii) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court, arbitral body or
other tribunal).
"HSR ACT" shall have the meaning assigned to it in Section 2.17(d).
"INDEBTEDNESS" means, as to any Person, (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations of such Person to pay
the deferred purchase price of property or services, except trade accounts
payable and accrued commercial or trade liabilities arising in the ordinary
course of business, (c) all interest rate and currency swaps, caps, collars and
similar agreements or hedging devices under which payments are obligated to be
made by such Person, whether periodically or upon the happening of a
contingency, (d) all indebtedness created or arising under
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any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person under leases
(other than any liabilities or obligations under the Assigned Leases) which have
been or should be, in accordance with GAAP, recorded as capital leases, and (f)
all indebtedness secured by any Encumbrance (other than Encumbrances in favor of
lessors under leases other than leases included in clause (e)) on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that Person.
"INDEMNIFIED PERSONS" shall have the meaning assigned to it in Section
5.4(a).
"INVENTORY FINANCING ARRANGEMENTS" shall mean the inventory financing
arrangements (i) the Company and GE Commercial Distribution Finance Corp.
(pursuant to the Agreement for Wholesale Financing, dated March 19, 2004,
between GE Commercial Distribution Finance Corp. and the Company, as amended,
and the agreements and other instruments related thereto) and (ii) between the
Company and Deutsche Financial Services Corp. (pursuant to the Agreement for
Wholesale Financing, dated August 25, 1997, between Deutsche Financial Services
Corp. and the Company, as amended, and the agreements and other instruments
related thereto) and any other similar inventory financing arrangements.
"KNOWLEDGE OF THE COMPANY" means the knowledge of any officer of the
Acquired Companies, after due inquiry.
"LEASED REAL PROPERTY" shall have the meaning assigned to it in Section
2.8(a)(ix).
"LEGAL PROCEEDING" shall mean any action, claim, demand, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, charge,
complaint, indictment, inquiry, audit, examination or investigation commenced,
brought, conducted or heard by or before, or otherwise involving, any court or
other Governmental Body or any arbitrator or arbitration panel.
"LEGAL REQUIREMENT" shall mean any principle of common law or case law
or federal, state, local, municipal, foreign or other law, statute,
constitution, executive order, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented, applied or otherwise put into effect by or under the authority of
any Governmental Body (or under the authority of the NASD).
"LOAN AGREEMENT" shall mean the Loan Agreement, dated as of March 21,
2005, between Manchester Technologies, Inc., Manchester International Ltd.,
Electrograph Systems, Inc., Texport Technology Group, Inc., , Marketplace
▇▇.▇▇▇, Inc., e.Track Solutions, Inc., Manchester Equipment Co., Inc., Champion
Vision, Inc., and Telstarr Professional Services, Inc., and Citibank, N.A..
"MATERIAL CONTRACT" shall have the meaning assigned to it in Section
2.8(a).
"MATERIAL CUSTOMER" shall have the meaning assigned to it in Section
2.26.
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"MATERIAL SUPPLIER" shall have the meaning assigned to it in Section
2.26.
"MATERIALS OF ENVIRONMENTAL CONCERN" shall mean all chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products and any other substance that is currently regulated by any
Environmental Law.
"MERGER" shall have the meaning assigned to it in the Recitals.
"MERGER SUB" shall have the meaning assigned to it in the Introduction.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NON-COMPETE AND NON-DISCLOSURE AGREEMENTS" shall have the meaning
assigned to it in the Recitals.
"NON-ELECTROGRAPH ASSETS" shall mean any assets of the Acquired
Companies that are not used in connection with the conduct or operation of the
business of Electrograph. For purposes of this definition and this Agreement,
the following shall not be deemed "Non-Electrograph Assets": (i) the premises
leased by the Company at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ (and the documents
related thereto), (ii) the Assigned Leases, (iii) except for purposes of the
last sentence of Section 4.1(a), the ▇▇▇▇ Lease and (iv) any assets that are
used in connection with the conduct or operation of the business of Champion
Vision, Inc.
"NON-ELECTROGRAPH LIABILITIES" shall mean any liabilities or other
obligations of the Acquired Companies that were not incurred or otherwise
assumed in connection with the conduct or operation of the business of
Electrograph. For purposes of this definition and this Agreement, the following
shall not be deemed "Non-Electrograph Liabilities": (i) the premises leased by
the Company at ▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇▇, ▇▇ (and the documents related
thereto), (ii) the Assigned Leases, (iii) except for purposes of the last
sentence of Section 4.1(a), the ▇▇▇▇ Lease, (iv) any guarantees provided by any
Acquired Company of obligations or other liabilities of Electrograph and (v) any
liabilities or other obligations incurred or otherwise assumed in connection
with the conduct or operation of the business of Champion Vision, Inc.
"NYBCL" shall have the meaning assigned to it in the Section 1.1.
"OPTION PAYMENTS" shall have the meaning assigned to it in Section 1.9.
"OPTION PLANS" shall have the meaning assigned to it in Section 1.9.
"▇▇▇▇ LEASE" shall mean the capital lease obligations of any of the
Acquired Companies in respect of the property located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇.
"PARENT" shall have the meaning assigned to it in the Introduction.
"PARENT MATERIAL ADVERSE EFFECT" One or more related events, facts,
violations, breaches, inaccuracies, circumstances or other matters will be
deemed to be a "PARENT MATERIAL ADVERSE EFFECT" if such events, facts,
violations, breaches, inaccuracies, circumstances or other matters had or could
reasonably be expected to have or give rise to a material adverse effect on the
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ability of Parent to pay the aggregate Price Per Share for all shares of Company
Common Stock outstanding immediately prior to the Effective Time and to
consummate the transactions contemplated hereby.
"PARTIES" shall mean the parties to this Agreement.
"PAYMENT FUND" shall have the meaning assigned to it in Section 1.8(a).
"PERMITTED ENCUMBRANCES" shall mean (a) mechanics, materialmen's,
carrier's repairer's and other Encumbrances arising or incurred in the ordinary
course of business or that are not yet due and payable or are being contested in
good faith; (b) Encumbrances for Taxes not yet due and payable or which are
being contested in good faith and for which adequate reserves have been
established in accordance with GAAP; and (c) encumbrances and restrictions on
real property (including easements, covenants, rights of way and similar
restrictions of record) that do not materially interfere with the use, occupancy
or operation of such real property.
"PERSON" shall mean any individual, Entity or Governmental Body.
"POST-SIGNING RETURNS" shall have the meaning assigned to it in Section
4.1(c)(i).
"PRE-CLOSING PERIOD" shall have the meaning assigned to it in Section
4.1(a).
"PRICE PER SHARE" shall have the meaning assigned to it in Section
1.5(a)(ii).
"PROPRIETARY ASSET" shall mean any: (i) patent, patent application,
trademark (whether registered or unregistered), trademark application, trade
name, fictitious business name, service ▇▇▇▇ (whether registered or
unregistered), registered service ▇▇▇▇ application, copyright (whether
registered or unregistered), copyright application, registered maskwork,
maskwork application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, source code, algorithm, invention, design,
blueprint, engineering drawing, domain names, proprietary product, technology,
proprietary right or other intellectual property right or intangible asset; or
(ii) right to use or exploit any of the foregoing.
"PROXY STATEMENT" shall mean the proxy statement to be sent to the
Company's shareholders in connection with the Company Shareholders' Meeting.
"REAL PROPERTY LEASES" shall have the meaning assigned to it in Section
2.8(a)(ix).
"RELATED PARTY" shall have the meaning assigned to it in Section
2.20(e).
"REPRESENTATIVES" shall mean officers, directors, employees,
Affiliates, agents, attorneys, accountants, advisors and other authorized
representatives.
"REQUIRED COMPANY SHAREHOLDER VOTE" shall have the meaning assigned to
it in Section 2.15.
"SEC" shall mean the United States Securities and Exchange Commission.
8
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SPACE LEASES" shall have the meaning set forth in Section 2.22(d).
"SPACE TENANT" shall have the meaning set forth in Section 2.22(d).
"STOCKHOLDER ESCROW AMOUNT" shall have the meaning set forth in Section
1.6(a).
"STOCK RIGHTS" shall have the meaning assigned to it in Section 2.3(c).
"SUBSIDIARY" means, when used with respect to Parent or the Company,
any other Person that Parent or the Company, as applicable, directly or
indirectly owns or has the power to vote or control 50% or more of any class or
series of capital stock of such Person.
"SUPERIOR OFFER" shall mean an Acquisition Proposal made by any Person
or Persons other than Parent on terms that the board of directors of the Company
determines, in its good faith judgment, after consultation with its legal and
financial advisors and after taking into account any conditions to, and risks
of, consummation and financing contingencies, if any, and giving consideration
to the enumerated items in Section 717(b) of the NYBCL, to be more favorable to
the Company's shareholders than the terms of the Merger.
"SURVIVING CORPORATION" shall have the meaning assigned to it in
Section 1.1.
"TAKEOVER STATUTES" shall have the meaning assigned to it in Section
2.17(e).
"TANK CLOSURE" shall have the meaning assigned to it in Section 5.18.
"TAX" shall mean (i) any federal, state, provincial, local, foreign and
other tax, levy, fee, impost, duty, and similar governmental charge (including
any interest, fine, assessment, penalty or addition to tax imposed in connection
therewith or with respect thereto) including (x) taxes imposed on, or measured
by, income, franchise, profits or gross receipts, and (y) ad valorem, value
added, capital gains, sales, goods and services, use, real or personal property,
capital stock, license, branch, payroll, estimated withholding, employment,
social security (or similar), unemployment, compensation, utility, severance,
production, excise, stamp, occupation, premium, windfall profits, transfer and
gains taxes, and customs duties, and (ii) any transferee liability in respect of
any items described in the foregoing clause (i).
"TAX RETURN" shall mean any return (including any information return),
report, statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax including any
attachment thereto or amendment thereof.
"TAX SHARING AGREEMENTS" shall have the meaning assigned to it in
Section 2.11(e).
9
"▇▇▇▇▇▇ EMPLOYMENT AGREEMENT" shall have the meaning assigned to it in
the Recitals.
"TERMINATING OPERATIONS" shall have the meaning assigned to it in
Section 5.20.
"TERMINATION DATE" shall have the meaning assigned to it in Section
8.1.
"TERMINATION FEE" shall have the meaning assigned to it in Section
8.3(b).
"TRANSACTION EXPENSES" shall mean only the following fees and expenses
incurred, paid or payable by the Acquired Companies in connection with this
Agreement and the Ancillary Agreements and the transactions contemplated by this
Agreement and the Ancillary Agreements: (i) fees and expenses paid or payable by
any of the Acquired Companies in respect of brokers, finders, attorneys,
accountants, consultants and advisors (including for matters related to any
Legal Proceedings based on or resulting from the transactions contemplated by
this Agreement or the Ancillary Agreements), (ii) all premiums paid or payable
pursuant to Section 5.4(b), (iii) all amounts paid or payable to current or
former directors, officers and employees (other than any Option Payments),
including all amounts paid or payable in connection with the actions set forth
in Section 4.1(b)(vii) of the Company Disclosure Letter required to be taken by
the Company prior to the Effective Time, (iv) any printing, mailing and SEC
filing fees and expenses payable by any of the Acquired Companies, (v) one-half
of the required filing fee to be paid by Parent and Company under the HSR Act,
(vi) relocation fees and expenses, (vii) fees and expenses related to the
Company Shareholders' Meeting, and (viii) fees and expenses incurred by the
Acquired Companies in connection with the Company's obligations under Section
5.20. Any fee or expense incurred, paid or payable by the Acquired Companies in
excess of $25,000 on any invoice or other similar statement that could
reasonably be construed as a "TRANSACTION EXPENSE" shall be presumed to be a
"TRANSACTION EXPENSE," unless Parent and the Company mutually agree otherwise.
Notwithstanding anything to the contrary, "TRANSACTION EXPENSES" shall not
include fees and expenses incurred, paid or payable in connection with the
release of the Acquired Companies from all obligations in respect of the
Designated Real Property Leases pursuant to Section 5.15 and the ▇▇▇▇ Lease
pursuant to Section 5.16, the continuation and maintenance of ongoing litigation
unrelated to any of the transactions contemplated by this Agreement or any of
the Ancillary Agreements.
"VESTED COMPANY OPTION" shall have the meaning assigned to it in
Section 1.9.
"VOTING AGREEMENT" shall have the meaning assigned to it in the
Recitals.
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