EXHIBIT 2.1
MERGER AGREEMENT
dated as of April 23, 2003
by and among
NEW ENGLAND BUSINESS SERVICE, INC.,
CENTURION SUB, INC.,
and
SAFEGUARD BUSINESS SYSTEMS, INC.
Table of Contents
ARTICLE I THE MERGER.................................... 1
Section 1.1 The Merger.............................. 1
Section 1.2 Effective Time.......................... 1
Section 1.3 Effects of the Merger................... 1
Section 1.4 Certificate of Incorporation of the
Surviving Corporation................... 2
Section 1.5 By-Laws of the Surviving Corporation.... 2
Section 1.6 Directors and Officers of the
Surviving Corporation................... 2
Section 1.7 Closing................................. 2
ARTICLE II MERGER CONSIDERATION AND CONVERSION AND
EXCHANGE OF SECURITIES.................. 3
Section 2.1 Merger Consideration.................... 3
Section 2.2 Conversion of Capital Stock and Options. 6
Section 2.3 Escrow and Payment Procedures........... 7
Section 2.4 Actions With Respect to Company Options. 9
Section 2.5 Actions With Respect to Company Warrants 10
Section 2.6 Appraisal Rights........................ 10
Section 2.7 Withholding Rights...................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY............................. 11
Section 3.1 Organization, Qualification and
Corporate Power; Subsidiaries........... 11
Section 3.2 Authority; No Conflict; Required
Filings and Consents.................... 13
Section 3.3 Debt and Capitalization................. 14
Section 3.4 Financial Statements.................... 16
Section 3.5 Trade Receivables....................... 16
Section 3.6 Inventory............................... 16
Section 3.7 Properties; Encumbrances................ 16
Section 3.8 No Undisclosed Liabilities.............. 17
Section 3.9 Absence of Certain Changes or Events.... 17
Section 3.10 Plant and Equipment..................... 17
Section 3.11 Taxes................................... 18
Section 3.12 Intellectual Property................... 20
Section 3.13 Environmental Matters................... 22
Section 3.14 Labor Matters........................... 23
Section 3.15 Employee Benefit Plans.................. 24
Section 3.16 Compliance with Laws.................... 26
Section 3.17 Litigation.............................. 27
Section 3.18 Certain Business Practices.............. 27
Section 3.19 Suppliers............................... 27
Section 3.20 Distributors............................ 27
Section 3.21 Other Contracts......................... 28
Section 3.22 Insurance............................... 29
Section 3.23 Books and Records....................... 30
Section 3.24 Bank Accounts........................... 31
Section 3.25 Insider Interests and Related Party
Transactions............................ 31
Section 3.26 Proxy Statement......................... 31
Section 3.27 Opinion of Financial Advisor............ 31
Section 3.28 Brokers and Finders..................... 31
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER.. 32
Section 4.1 Organization and Qualification of
Corporate Power......................... 32
Section 4.2 Authority; No Conflict; Required Filings
and Consents............................ 32
Section 4.3 Amendment to Revolving Credit Agreement. 33
ARTICLE V CONDUCT OF BUSINESS........................... 33
Section 5.1 Covenants of the Company................ 33
Section 5.2 Cooperation............................. 36
ARTICLE VI ADDITIONAL AGREEMENTS........................ 36
Section 6.1 No Solicitation......................... 36
Section 6.2 Approval of Stockholders................ 38
Section 6.3 Access to Information................... 39
Section 6.4 Company Disclosure Letter............... 39
Section 6.5 Legal Conditions to Merger; Further
Assurances.............................. 39
Section 6.6 Termination of Stockholders Agreement... 40
Section 6.7 FIRPTA Statement........................ 40
Section 6.8 Public Disclosure....................... 40
Section 6.9 Tax Matters............................. 41
Section 6.10 Indemnification and Insurance........... 43
ARTICLE VII CONDITIONS TO MERGER........................ 44
Section 7.1 Conditions to Each Party's Obligation
to Effect the Merger.................... 44
Section 7.2 Additional Conditions to Obligations
of the Buyer and Sub.................... 44
Section 7.3 Additional Conditions to Obligations
of the Company.......................... 46
ARTICLE VIII SURVIVAL AND INDEMNIFICATION............... 46
Section 8.1 Survival................................ 46
Section 8.2 Indemnification by the Stockholders
and Option holders...................... 47
Section 8.3 Indemnification by the Buyer............ 49
Section 8.4 Procedures Relating to Indemnification.. 49
Section 8.5 Characterization of Indemnification
Payments................................ 50
Section 8.6 Exclusive Remedy........................ 51
ARTICLE IX REPRESENTATIVE............................... 51
Section 9.1 Authority................................ 51
Section 9.2 Successors............................... 51
Section 9.3 Actions; Indemnification................. 51
Section 9.4 Representative Expenses.................. 52
Section 9.5 Access................................... 52
ARTICLE X TERMINATION; FEES AND EXPENSES................. 53
Section 10.1 Termination................................ 53
Section 10.2 Effect of Termination...................... 54
Section 10.3 Fees and Expenses.......................... 54
ARTICLE XI MISCELLANEOUS................................. 55
Section 11.1 Amendment.................................. 55
Section 11.2 Extension; Waiver.......................... 55
Section 11.3 Transfer Taxes............................. 55
Section 11.4 Notices.................................... 55
Section 11.5 Interpretation............................. 57
Section 11.6 Counterparts............................... 57
Section 11.7 Entire Agreement; No Third Party
Beneficiaries............................. 57
Section 11.8 Governing Law.............................. 57
Section 11.9 Enforcement................................ 57
Section 11.10 Arbitration............................... 58
Section 11.11 Severability.............................. 58
Section 11.12 Assignment................................ 58
Exhibit A Form of Payment and Escrow Agreement.......A-1
Table of Defined Terms
Terms Cross Reference In
Agreement
AAA Section 11.10(a)
Acquisition Proposal Section 6.1(a)
Adjusted Working Capital Section 2.1(d)
Agreement Preamble
Buyer Preamble
Buyer Material Adverse Effect Section 4.1
Certificate(s) Section 2.3(c)
Certificate of Merger Section 1.2
Claim Section 8.4(a)
Closing Section 1.7
Closing Balance Sheet Section 2.1(b)
Closing Date Section 1.7
Closing Statements Section 2.1(b)
Code Section 2.3(a)
Company Preamble
Company Balance Sheet Section 3.4
Company Board Recommendation Section 6.2(a)
Company By-laws Section 3.1(a)
Company Certificate of Incorporation Section 3.1(a)
Company Common Stock Section 2.1(e)
Company Disclosure Letter Article III
Company Financial Statements Section 3.4
Company Intellectual Property Section 3.12(a)
Company Options Section 2.1(e)
Company Property Section 3.13(b)
Company Representatives Section 6.1(a)
Company Stockholders Agreement Section 6.6
Company Stockholders Meeting Section 6.2(a)
Company Third Party Consents Section 3.2(d)
Company Warrants Section 2.1(e)
Company's Knowledge Section 3.11(d)
Confidentiality Agreement Section 6.1(a)(A)
Debt Instruments Section 3.3(a)
Deductible Section 8.2(b)
DGCL Section 1.1
Dissenting Shares Section 2.6
Distributor Section 3.20
Distributor Agreement Section 3.20
Effective Time Section 1.2
Environmental Claims Section 3.13(b)
Environmental Law Section 3.13(b)
Equity Escrow Fund Section 2.3(a)
Equity Payment Fund Section 2.3(a)
ERISA Section 3.15(a)
ERISA Affiliate Section 3.15(a)
Final Aggregate Merger Consideration Section 2.1(e)
Final and Binding Section 2.1(c)
Final Closing Balance Sheet Section 2.1(c)
Final Closing Statements Section 2.1(c)
Fully Diluted Common Stock Number Section 2.1(e)
GAAP Section 2.1(b)
Governmental Entity Section 3.2(d)
Hazardous Materials Section 3.13(b)
HSR Act Section 3.2(d)
Indebtedness Section 2.1(a)
Indebtedness Payment Fund Section 2.3(a)
Indemnified Party Section 8.4(a)
Indemnifying Party Section 8.4(a)
Initial Aggregate Merger Consideration Section 2.1(a)
Loss(es) Section 8.2(a)
Material Adverse Effect Section 3.1(a)
Merger Preamble
Merger Consideration Adjustment
Arbitrator Section 2.1(c)
Merger Proposal Section 3.2(b)
Merger Vote Section 3.2(b)
Option Exercise Proceeds Section 2.1(e)
Optionholder(s) Section 2.1(e)
Optionholder Agreement Section 2.4
Ownership Percentage Interest Section 8.2(b)
Payment and Escrow Agent Section 2.3(a)
Payment and Escrow Agreement Section 2.3(a)
Per Option Merger Consideration Section 2.2(d)
Per Share Merger Consideration Section 2.1(e)
Per Share Partial Payment Section 2.3(c)
Permits Section 3.16(b)
Plan of Reorganization Section 2.1(e)
Plans Section 3.15(a)
Pre-Closing Period Section 8.2(a)
Proxy Statement Section 3.26
Release Section 3.13(b)
Representative Section 9.1
Representative Expenses Section 9.4
Representative Fund Section 2.3(a)
San Jacinto Section 2.1(e)
San Jacinto Subordinated Notes Section 3.11(o)
Section 338 Election Section 8.2(a)
Stockholder(s) Section 2.3(c)
Stockholder Agreement Section 2.3(c)
Sub Preamble
Sub By-laws Section 1.5
Sub Certificate of Incorporation Section 1.4
Sub Common Stock Section 2.2(a)
Subsidiary Section 3.1(b)
Superior Proposal Section 6.1(c)
Suppliers Section 3.19
Surviving Corporation Section 1.1
Tax Claim Section 6.9(c)
Tax Return Section 3.11(p)
Taxes Section 3.11(p)
Third Party Claim Section 8.4(b)
Trademarks Section 3.12(a)
WARN Section 3.14
Warrant Agent Section 2.5
Warrant Agreement Section 2.1(e)
Warrant Notice Section 2.1(e)
MERGER AGREEMENT
MERGER AGREEMENT, dated as of April 23, 2003 (this
"Agreement"), by and among New England Business Service,
Inc., a Delaware corporation (the "Buyer"), Centurion Sub,
Inc., a Delaware corporation and an indirect, wholly-owned
subsidiary of the Buyer ("Sub") and Safeguard Business
Systems, Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Buyer, Sub
and the Company deem it advisable and in the best interests
of each corporation and its respective stockholders that the
Buyer and the Company engage in a business combination in
order to advance the long-term business interests of the
Buyer and the Company, respectively;
WHEREAS, in furtherance of the foregoing, the
Boards of Directors of the Buyer, Sub and the Company have
approved a business combination by means of a transaction in
which the Company will become an indirect, wholly-owned
subsidiary of the Buyer as the result of the merger of Sub
with and into the Company (the "Merger") pursuant to the
terms, and subject to the conditions, set forth in this
Agreement; and
WHEREAS, the Board of Directors of the Company has
unanimously recommended that the Company's stockholders
adopt this Agreement and approve the Merger;
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants
and agreements set forth below, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions
of this Agreement, at the Effective Time (as defined in Section
1.2), Sub shall merge with and into the Company in
accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), and the separate corporate existence
of Sub shall thereupon cease and the Company shall continue
as the Surviving Corporation. The Company, in its capacity
as the corporation surviving the Merger, is sometimes
hereinafter referred to as the "Surviving Corporation."
Section 1.2 Effective Time. In order to effectuate the
Merger, on the Closing Date (as defined in Section 1.7), the Company
shall cause a certificate of merger (the "Certificate of Merger")
to be filed with the Secretary of State of the State of
Delaware in such form as required by, and executed in
accordance with, the DGCL. The Merger shall be effective as
of the time of filing of the Certificate of Merger (the
"Effective Time").
Section 1.3 Effects of the Merger. The Merger shall
have the effects provided for in Section 259 of the DGCL.
Section 1.4 Certificate of Incorporation of the Surviving
Corporation. At and after the Effective Time, the
Certificate of Incorporation of Sub, as in effect
immediately prior to the Effective Time (the "Sub
Certificate of Incorporation"), shall be the Certificate of
Incorporation of the Surviving Corporation, until amended in
accordance with the DGCL, except that from and after the
Effective Time the name of the Surviving Corporation shall
be "Safeguard Business Systems, Inc."
Section 1.5 By-Laws of the Surviving Corporation. At
and after the Effective Time, the By-laws of
Sub (the "Sub By-laws"), as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving
Corporation, until amended in accordance with the DGCL,
except that from and after the Effective Time the name of
the Surviving Corporation as set forth in such by-laws shall
be "Safeguard Business Systems, Inc."
Section 1.6 Directors and Officers of the Surviving
Corporation. The directors and officers of the Surviving
Corporation shall be determined by the Buyer, each to hold
office in accordance with the Certificate of Incorporation
and By-laws of the Surviving Corporation.
Section 1.7 Closing. Subject to Sections 7.1, 7.2, 7.3
and 10.1, the closing of the Merger (the "Closing") shall take place at
9:00 a.m. E.S.T., on June 2, 2003 at the offices of Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or on such other date, or such other
time or place, as is agreed to in writing by the Buyer and
the Company. The date on which the Closing shall occur is
referred to herein as the "Closing Date."
ARTICLE II
MERGER CONSIDERATION AND
CONVERSION AND EXCHANGE OF SECURITIES
Section 2.1 Merger Consideration.
(a) The initial aggregate merger consideration shall be an
amount in cash equal to (i) $72,500,000 minus (ii) the
aggregate amount of all Indebtedness of the Company and its
Subsidiaries (as defined in Section 3.1(b)) outstanding
immediately prior to the Effective Time (the "Initial
Aggregate Merger Consideration") and shall be subject to
adjustment pursuant to this Section 2.1. For purposes of
this Agreement, "Indebtedness" shall mean (a) any
indebtedness of the Company or any of its Subsidiaries for
borrowed money or issued in substitution of or exchange of
indebtedness for borrowed money other than any indebtedness
between the Company and any of its Subsidiaries or between
or among the Company's Subsidiaries, (b) any indebtedness of
the Company or any of its Subsidiaries evidenced by any
note, bond, debenture or other debt security, (c) any
contingent reimbursement obligation in excess of an
aggregate of $322,000 with respect to any letters of credit,
(d) any indebtedness for borrowed money guaranteed in any
manner by the Company or any of its Subsidiaries (including
guarantees in the form of an agreement to repurchase or
reimburse) other than any guarantee between the Company and
any of its Subsidiaries or between or among the Company's
Subsidiaries, (e) any obligations in excess of an aggregate
of $900,000 under capitalized leases with respect to which
the Company or any of its Subsidiaries is liable,
contingently or otherwise, as obligor, guarantor or
otherwise, or with respect to which obligations the Company
or any of its Subsidiaries assures a creditor against loss
and (f) all interest, premiums, penalties, charges, fees,
expenses and other amounts due in connection with the
payment and satisfaction in full of the obligations
described in the foregoing clauses (a) through (e) of this
definition; provided, however, that Indebtedness shall not
include amounts payable by the Company under the Premium
Finance Agreement between the Company and AFCO Premium
Credit LLC for prepaying insurance premiums and paying
insurance payments for $1,421,000.
(b) The Buyer shall, on or before the date that is 45
calendar days after the Closing Date, prepare and deliver to
the Representative (as defined in Section 9.1) an unaudited
consolidated balance sheet of the Company as of May 31, 2002
(the "Closing Balance Sheet") and the related unaudited
consolidated statements of operations and comprehensive
income, stockholders' equity and cash flows for the period
then ended (collectively, the "Closing Statements"). The
Closing Statements (i) shall present fairly, in all material
respects, the financial position, results of operations and
cash flows of the Company as of the date thereof or for the
period then ended, as applicable, and (ii) shall be prepared
in accordance with United States generally accepted
accounting principles ("GAAP") and in a manner consistent
with the Company Financial Statements (as defined in Section
3.4). For the avoidance of doubt, the Closing Balance Sheet
(A) shall reflect as accrued expenses any costs and expenses
incurred or payable by the Company or any Subsidiary of the
Company in connection with the negotiation, investigation
and documentation of this Agreement and the Merger and any
success, broker, finder or other fee or commission incurred
or payable by the Company or any Subsidiary of the Company
in connection with the execution of this Agreement or the
consummation of the Merger, in each case, which remains
unpaid as of the Closing and (B) shall not reflect (x) any
amounts payable under the severance protection agreements
set forth in Section 3.15(a)(ii) of the Company Disclosure
Letter (as defined in Article III) due to the resignation of
any of the officers parties thereto pursuant to Section
7.2(f) or (y) the payment of any Indebtedness in connection
with the Closing.
(c) The Representative shall, on or before the date that is
45 calendar days after receipt of the Closing Statements,
notify the Buyer of any and all objections it has regarding
the manner in which any item or items are treated on the
Closing Statements (including the Closing Balance Sheet).
If the Representative fails to notify the Buyer of any
objection regarding the manner in which any item or items
are treated on the Closing Statements (including the Closing
Balance Sheet) within such 45-day period, the Representative
shall be deemed to have accepted the Closing Statements
(including the Closing Balance Sheet) and the Closing
Statements (and the Closing Balance Sheet) shall be the
"Final Closing Statements" (and the "Final Closing Balance
Sheet"). If the Representative notifies the Buyer of any
objections regarding the manner in which any item or items
are treated on the Closing Statements (including the Closing
Balance Sheet) within such 45-day period, the Representative
and the Buyer shall attempt to resolve such objections
during the 30 calendar days following such 45-day period.
If the Representative and the Buyer are unable to agree on
the manner in which any item or items should be treated in
the Closing Statements (including the Closing Balance Sheet)
within such 30-day period, irrespective of whether the basis
of their disagreement arises out of the application of
accounting principles or the terms of this Agreement to the
Closing Statements (including the Closing Balance Sheet) or
otherwise, the Representative and the Buyer shall each
prepare separate written reports of such item or items and
refer such reports to ▇▇▇▇▇ ▇▇▇▇, CPA, JD (the "Merger
Consideration Adjustment Arbitrator") within 30 calendar
days after the expiration of such 30-day period. If for
whatever reason Mr. Love is unable or unwilling to serve as
the Merger Consideration Adjustment Arbitrator, such reports
shall be referred to an alternative Merger Consideration
Adjustment Arbitrator mutually acceptable to the
Representative and the Buyer. The Merger Consideration
Adjustment Arbitrator shall determine within 30 calendar
days after receipt of such reports the manner in which such
item or items shall be treated in the Closing Statements
(including the Closing Balance Sheet); provided, however,
that the dollar amount of each item so determined shall be
within the range of dollar amounts proposed by the
Representative and the Buyer. The determinations by the
Merger Consideration Adjustment Arbitrator regarding the
manner in which any item or items are treated on the Closing
Statements (including the Closing Balance Sheet) shall be in
writing and shall be Final and Binding on the parties. For
purposes of this Section 2.1(c), "Final and Binding" shall
mean that the aforesaid determinations shall have the same
preclusive effect for all purposes as if such determinations
had been embodied in a final judgment, no longer subject to
appeal, entered by a court of competent jurisdiction, and
either party may petition a court having jurisdiction over
the parties and subject matter to reduce such decision to
judgment. The fees, costs and expenses of retaining the
Merger Consideration Adjustment Arbitrator shall be
allocated by the Merger Consideration Adjustment Arbitrator
between the Representative and the Buyer in accordance with
the Merger Consideration Adjustment Arbitrator's judgment as
to the relative merits of the respective positions of the
parties regarding the manner in which any item or items are
treated on the Closing Statements (including the Closing
Balance Sheet) with respect to which they were unable to
agree as reflected in their respective reports to the Merger
Consideration Adjustment Arbitrator. Following the
resolution of all objections of the Representative regarding
the manner in which any item or items are treated on the
Closing Statements (including the Closing Balance Sheet), by
mutual agreement or the Merger Consideration Adjustment
Arbitrator, the Buyer shall prepare the final Closing
Statements (including the final Closing Balance Sheet)
reflecting such resolution and shall deliver copies thereof
to the Representative and such final Closing Statements
(including the final Closing Balance Sheet) shall be the
"Final Closing Statements" (and the "Final Closing Balance
Sheet").
(d) If the Adjusted Working Capital derived from the Final
Closing Balance Sheet is greater or less than $4,326,000,
the Initial Aggregate Merger Consideration shall be
increased or decreased, respectively, by the amount of such
difference. For purposes of this Section 2.1(d), "Adjusted
Working Capital" shall mean the difference between (i) the
sum of the amounts of (A) "marketable securities", (B)
"trade receivables (net)", (C) "other receivables", (D)
"inventories (net)" and (E) "other current assets" reflected
on the Final Closing Balance Sheet and (ii) the sum of the
amounts of (A) "accounts payable" and (B) "accrued expenses"
reflected on the Final Closing Balance Sheet. Based on the
Company Balance Sheet (as defined in Section 3.4), the
Adjusted Working Capital was $4,773,000 as of December 31,
2002.
(e) If the Initial Aggregate Merger Consideration is not
increased or decreased pursuant to Section 2.1(d), the
Initial Aggregate Merger Consideration shall be the "Final
Aggregate Merger Consideration." If the Initial Aggregate
Merger Consideration is increased or decreased pursuant to
Section 2.1(d), the Initial Aggregate Merger Consideration
as so increased or decreased pursuant to Section 2.1(d),
shall be the "Final Aggregate Merger Consideration." The
"Per Share Merger Consideration" shall be an amount in cash
up to the amount equal to the quotient obtained by dividing
(i) the result obtained by adding (A) the Final Aggregate
Merger Consideration and (B) the aggregate amount that would
be payable to the Company by the holders (each an
"Optionholder" and collectively the "Optionholders") of all
options ("Company Options") to purchase shares of common
stock, par value $.01 per share, of the Company ("Company
Common Stock") outstanding immediately prior to the
Effective Time if such Optionholders exercised all such
Company Options, whether or not then exercisable,
immediately prior to the Effective Time (the aggregate
amount obtained pursuant to this clause (B) being referred
to as the "Option Exercise Proceeds") by (ii) the result
obtained by adding (A) the total number of shares of Company
Common Stock that are issued and outstanding immediately
prior to the Effective Time (including shares of Company
Common Stock issued and outstanding as a result of the
exercise of warrants to purchase Company Common Stock
("Company Warrants") issued pursuant to the Warrant
Agreement dated January 2, 2001 executed by the Company (the
"Warrant Agreement") in accordance with the notice to be
given to the holders of Company Warrants in accordance with
the Warrant Agreement (the "Warrant Notice") pursuant to
Section 2.5), (B) the total number of shares of Company
Common Stock that remain issuable by the Company immediately
prior to the Effective Time under the First Amended Plan of
Reorganization of San Jacinto Holdings Inc. ("San Jacinto")
dated as of October 16, 2000 and as in effect immediately
prior to the Effective Time (the "Plan of Reorganization")
and (C) the total number of shares of Company Common Stock
that would be issuable by the Company to the Optionholders
if such Optionholders exercised all Company Options
outstanding immediately prior to the Effective Time, whether
or not then exercisable, immediately prior to the Effective
Time (the result obtained pursuant to this clause (ii) being
referred to as the "Fully Diluted Common Stock Number").
Section 2.2 Conversion of Capital Stock and Options.
As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of
any shares of Company Common Stock or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding
share of Common Stock, par value $.01 per share ("Sub Common
Stock"), of Sub shall be converted into and become one fully
paid and nonassessable share of Common Stock, par value $.01
per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. All shares
of Company Common Stock that are owned by the Company as treasury stock
shall be cancelled and retired and shall cease to exist and
no consideration shall be delivered in exchange therefor.
(c) Company Common Stock. Subject to Sections
2.1, 2.3, 2.6 and 2.7, each issued and outstanding share of Company
Common Stock (including shares of Company Common Stock
issued and outstanding as a result of the exercise of
Company Warrants in accordance with the Warrant Notice
pursuant to Section 2.5 and other than shares of Company
Common Stock cancelled in accordance with Section 2.2(b) and
any Dissenting Shares (as defined in Section 2.6)) shall be
converted into the right to receive the Per Share Merger
Consideration. All such shares of Company Common Stock,
when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect
thereto, except the right to receive the Per Share Merger
Consideration pursuant to this Section 2.2(c).
(d) Company Options. Subject to Sections
2.1, 2.3, 2.6 and 2.7, each outstanding Company Option, whether
or not then exercisable, shall be converted into the right to receive
with respect to each share of Company Common Stock subject
thereto an amount in cash (the "Per Option Merger
Consideration") equal to up to the excess of (A) the Per
Share Merger Consideration over (B) the per share exercise
price of such Company Option. All such Company Options,
when so converted, shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist, and
each Optionholder shall cease to have any rights with
respect to any such Company Option, except the right to
receive the Per Option Merger Consideration pursuant to this
Section 2.2(d).
Section 2.3 Escrow and Payment Procedures.
(a) Payment and Escrow Agreement. At the Closing, the
Buyer, the Representative and SunTrust Bank, a Georgia
banking corporation (the "Payment and Escrow Agent") shall
enter into a Payment and Escrow Agreement substantially in
the form of Exhibit A hereto (the "Payment and Escrow
Agreement"). As of the Effective Time, the Buyer shall
deposit with the Payment and Escrow Agent: (i) an amount in
cash equal to the amount of the Indebtedness of the Company
and its Subsidiaries to be paid off in connection with the
Closing (the "Indebtedness Payment Fund"); and (ii) the
Initial Aggregate Merger Consideration (less the aggregate
amount of the Initial Aggregate Merger Consideration the
Buyer or the Surviving Corporation then knows it is required
to deduct and withhold under the Internal Revenue Code of
1986, as amended (the "Code"), or any other provision of
state, local or foreign tax law, with respect to the
payments to be made pursuant to Sections 2.3(c) or (d)), (A)
$7,900,000 of which, together with any additional
amount deposited therein pursuant to Section 4.1 of the
Payment and Escrow Agreement, shall be the "Equity Escrow
Fund," (B) $500,000 of which shall be the "Representative
Fund" and (C) the balance of which shall be the "Equity
Payment Fund." The Payment and Escrow Agent shall hold and
pay or distribute the Indebtedness Payment Fund, the Equity
Escrow Fund, the Representative Fund and the Equity Payment
Fund, and any interest or other income earned thereon, in
accordance with this Agreement and the Payment and Escrow
Agreement.
(b) Payment Procedures for Indebtedness.
As soon as reasonably practicable after the Effective Time,
the Payment and Escrow Agent shall pay the Indebtedness Payment
Fund to the holders of the Indebtedness of the Company and its
Subsidiaries to be paid of in connection with the Closing
pursuant to the Payment and Escrow Agreement.
(c) Payment Procedures for Company Common Stock.
As soon as reasonably practicable after the Effective Time, the
Payment and Escrow Agent shall mail to each holder (each a
"Stockholder" and collectively the "Stockholders") of record
of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of Company
Common Stock (each a "Certificate" and collectively the
"Certificates") whose shares were converted pursuant to
Section 2.2(c) into the right to receive the Per Share
Merger Consideration (i) a stockholder agreement
substantially in the form of Exhibit B attached hereto (a
"Stockholder Agreement"), (ii) a letter of transmittal
substantially in form of Exhibit 4 to the Payment and Escrow
Agreement and (iii) instructions for use in effecting the
delivery of the Stockholder Agreement and the surrender of
the Certificates in exchange for the Per Share Merger
Consideration. As soon as reasonably practicable prior to
the Effective Time, the Buyer shall make available to the
Representative as many copies of such Stockholder Agreement,
letter of transmittal and instructions as the Representative
shall request in writing. Upon delivery after the Effective
Time of a duly executed Stockholder Agreement to the Payment
and Escrow Agent and surrender of a Certificate for
cancellation to the Payment and Escrow Agent, together with
such letter of transmittal, duly executed, and subject to
the prior payout of the Indebtedness Payment Fund pursuant
to Section 2.3(b), the Stockholder surrendering such
Certificate shall be entitled to receive in exchange for
each share of Company Common Stock formerly represented by
such Certificate (A) promptly upon surrender of such
Certificate, a partial payment of the Per Share Merger
Consideration in an amount equal to the quotient obtained by
dividing (i) the result obtained by adding the amount of the
Initial Aggregate Merger Consideration and the amount of the
Option Exercise Proceeds and subtracting therefrom the sum
of (x) the amount of the Equity Escrow Fund and (y) the
amount of the Representative Fund by (ii) the Fully Diluted
Common Stock Number (the "Per Share Partial Payment") and
(B) at the times stated in and subject to the terms and
conditions of the Payment and Escrow Agreement, up to the
amount of the balance of the Per Share Merger Consideration
payable to such Stockholder pursuant to this Agreement and
the Payment and Escrow Agreement, and the Certificate so
surrendered shall immediately be cancelled. Until
surrendered as contemplated by this Section 2.3(c), each
Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such
surrender the Per Share Merger Consideration as provided
herein.
If any payment of Per Share Merger Consideration
is to be made to a person other than the person in whose
name the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such payment that the
Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other
than the registered holder of the Certificate so
surrendered.
In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Buyer, the
posting by such person of a bond in such amount as the Buyer
or the Surviving Corporation may reasonably direct as
indemnity against any claim that may be made against either
of them with respect to such Certificate, the Payment and
Escrow Agent will deliver, as provided in this Section
2.3(c), in respect of such lost, stolen or destroyed
Certificate that portion of the Per Share Merger
Consideration which such person has a right to receive
pursuant to Section 2.2(c).
Any and all of (i) voting in favor of the Merger
Proposal (as defined in Section 3.2(b)), (ii) delivering a
Stockholder Agreement to the Payment and Escrow Agent, (iii)
surrendering a Certificate for cancellation to the Payment
and Escrow Agent or (iv) the receipt of any Per Share Merger
Consideration by any Stockholder shall constitute such
Stockholder's express (A) agreement to be bound by, and to
comply with, this Agreement, including Articles II, VIII and
IX hereof, and the Payment and Escrow Agreement, in each
case as a Stockholder hereunder and thereunder and (B)
appointment of the Representative to act as its
representative pursuant to this Agreement and the Payment
and Escrow Agreement.
(d) Payment Procedures for Company Options. As soon as
reasonably practicable after the Effective Time, the Payment
and Escrow Agent shall mail to each Optionholder who holds a
Company Option which immediately prior to the Effective Time
represented an option to acquire outstanding shares of
Company Common Stock and which was converted pursuant to
Section 2.2(d) into the right to receive the Per Option
Merger Consideration (i) a letter of transmittal
substantially in the form of Exhibit 7 to the Payment and
Escrow Agreement and (ii) instructions for use in effecting
the surrender of the Company Option in exchange for the Per
Option Merger Consideration. As soon as reasonably
practicable prior to the Effective Time, the Buyer shall
make available to the Representative as many copies of such
letter of transmittal and instructions as the Representative
shall request in writing. Upon surrender of the Company
Option for cancellation to the Payment and Escrow Agent,
together with such letter of transmittal, duly executed, and
subject to the prior payout of the Indebtedness Payment Fund
pursuant to Section 2.3(b), the Optionholder surrendering
such Company Option shall be entitled to receive in exchange
for each share of Company Common Stock for which such
Company Option was exercisable immediately prior to the
Effective Time (A) promptly upon surrender of such Company
Option, a partial payment of the Per Option Merger
Consideration in an amount equal to the result obtained by
subtracting the per share exercise price of such Company
Option from the Per Share Partial Payment and (B) at the
times stated in and subject to the terms and conditions of
the Payment and Escrow Agreement, up to the amount of the
balance of the Per Option Merger Consideration payable to
such Optionholder pursuant to this Agreement and the Payment
and Escrow Agreement, and the Company Option so surrendered
shall immediately be cancelled. Until surrendered as
contemplated by this Section 2.3(d), each Company Option
shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the
Per Option Merger Consideration as provided herein.
Any and all of (i) delivering an Optionholder
Agreement to the Payment and Escrow Agent, (ii) surrendering
a Company Option for cancellation to the Payment and Escrow
Agent or (iii) the receipt of any Per Option Merger
Consideration by an Optionholder shall constitute such
Optionholder's express (A) agreement to be bound by, and to
comply with, this Agreement, including Articles II, VIII and
IX hereof, and the Payment and Escrow Agreement, in each
case as an Optionholder hereunder and thereunder and (B)
appointment of the Representative to act as its
representative pursuant to this Agreement and the Payment
and Escrow Agreement.
(e) Closing of Stock Transfer Books. From
and after the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further
registration of transfers on the stock transfer books of the
Company or the Surviving Corporation of the shares of
Company Common Stock which were outstanding immediately
prior to such time. If, after such time, Certificates are
presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Section
2.3.
(f) No Liability. Neither the Buyer nor the Company shall
be liable to any Stockholder or Optionholder in respect of
any monies properly delivered to a public official pursuant
to any applicable abandoned property, escheat or similar
law.
Section 2.4 Actions With Respect to Company Options.
Prior to the Effective Time, the Company shall
take all necessary and appropriate actions to effect the
conversion and cancellation of the Company Options pursuant
to Sections 2.2(d) and 2.3(d), including, without
limitation, (a) obtaining the approval of the Company's
Board of Directors for the conversion and cancellation of
the Company Options pursuant to Sections 2.2(d) and 2.3(d)
in compliance with the applicable provisions of the plans
governing and the agreements evidencing the Company Options,
(b) providing Optionholders with any requisite advance
notice of the conversion and cancellation of the Company
Options pursuant to Sections 2.2(d) and 2.3(d) and (c)
obtaining from each Optionholder a duly executed
optionholder agreement substantially in the form of Exhibit
C hereto (an "Optionholder Agreement").
Section 2.5 Actions With Respect to Company Warrants.
In accordance with the Warrant Agreement, not
later than the fifth business day following the execution
and delivery of this Agreement, the Company shall give a
Special Adjustment Notice (as defined in the Warrant
Agreement) to each Holder (as defined in the Warrant
Agreement) (i) setting forth in reasonable detail the terms
of the Merger, (ii) stating the date agreed or proposed for
consummation of the Merger (which shall not be earlier than
the twenty-fifth business day following the date of such
Special Adjustment Notice), (iii) specifying the details of
the adjustment to the Exercise Price (as defined in the
Warrant Agreement) resulting from the Merger and (iv)
containing a statement to the effect that all outstanding
Company Warrants not exercised prior to 5:00 P.M., Dallas,
Texas time, on the twentieth business day following the date
of such Special Adjustment Notice shall, as provided in the
Warrant Agreement, terminate and become void. The Special
Adjustment Notice shall be subject to prior review of and
approval by the Buyer and its counsel, such approval not to
be unreasonably withheld or delayed. Cash and Company
Warrants delivered upon exercise thereof, and the
certificates evidencing the shares of Company Common Stock
issued upon such exercise, during the period from the date
of such Special Adjustment Notice through and including the
date on which all unexercised Company Warrants shall expire
as aforesaid shall be placed in escrow with an escrow agent
designated by the Company (the "Warrant Agent") (such cash
to be invested by the Warrant Agent for the account, benefit
and risk of each exercising Holder in debt securities issued
by the United States of America or any agency or
instrumentality thereof and entitled to its full faith and
credit, if and to the extent so directed by such Holder).
So long as the certificates evidencing such shares of
Company Common Stock issued upon such exercise and the funds
delivered in payment therefor shall remain in escrow, the
persons in whose names such certificates are to be
registered in the stock transfer records of the Company
shall have no rights as Stockholders arising by virtue of
the issuance of such certificates.
Section 2.6 Appraisal Rights.
Notwithstanding any other provision of this
Agreement to the contrary, shares of Company Common Stock
that are outstanding immediately prior to the Effective Time
and which are held by holders who shall have not voted in
favor of the Merger and who shall have demanded properly in
writing appraisal for such shares in accordance with Section
262 of the DGCL and who shall not have withdrawn such demand
or otherwise have forfeited appraisal rights (collectively,
the "Dissenting Shares") shall not be converted into or
represent the right to receive the Per Share Merger
Consideration. Such holders shall be entitled to receive
payment of the appraised value of such shares of Company
Common Stock held by them in accordance with the provisions
of such Section 262, except that all Dissenting Shares held
by holders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under such
Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective
Time, for the right to receive, without interest, the Per
Share Merger Consideration upon surrender, in the manner
provided in Section 2.3 and the Payment and Escrow
Agreement, of the Certificate or Certificates which
immediately prior to the Effective Time represented such
shares of Company Common Stock.
Section 2.7 Withholding Rights.
Each of the Buyer and the Surviving Corporation
shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement
to any Stockholder or Optionholder such amounts as it is
required to deduct and withhold with respect to the making
of such payment under the Code, or any other provision of
state, local or foreign tax law. To the extent that amounts
are so withheld by the Buyer or the Surviving Corporation,
as the case may be, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to
the Stockholder or Optionholder, as applicable, in respect
of which such deduction and withholding was made by the
Buyer or the Surviving Corporation, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer
and Sub that the statements contained in this Article III
are true and correct as of the date hereof (unless the
particular statement is, by its language, as of another
date, in which case, it is true and correct as of that other
date), except as set forth in the disclosure letter
delivered by the Company to the Buyer on or before the date
of this Agreement (the "Company Disclosure Letter"). The
Company Disclosure Letter shall be arranged in sections
corresponding to the numbered and lettered sections
contained in this Article III and the disclosure in any
section shall qualify only the corresponding section in this
Article III.
Section 3.1 Organization, Qualification and Corporate
Power; Subsidiaries.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified or
licensed to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be
so qualified or licensed would, in the aggregate, reasonably
be expected to have a material adverse effect on the
prospects, business, assets, properties, liabilities,
results of operations or condition (financial or otherwise)
of the Company and its Subsidiaries (as defined in Section
3.1(b)) taken as a whole (a "Material Adverse Effect").
Section 3.1(a) of the Company Disclosure Letter sets forth
each jurisdiction in which the Company is so qualified or
licensed to do business as a foreign corporation and the
name and address of each member of the Board of Directors of
the Company. The Company has heretofore delivered to the
Buyer complete and correct copies of the Company's
Certificate of Incorporation and By-laws ("Company
Certificate of Incorporation" and "Company By-laws"), each
as amended and in full force and effect as of the date of
this Agreement.
(b) Section 3.1(b) of the Company Disclosure
Letter (i) sets forth the name, jurisdiction of organization and
authorized capital of each Subsidiary of the Company,
indicating whether such Subsidiary is directly or indirectly
owned by the Company (and if such Subsidiary is owned
indirectly, the record owners of the shares or other
ownership interests of such Subsidiary), (ii) identifies
each jurisdiction in which each such Subsidiary is qualified
or licensed to do business as a foreign corporation and
(iii) sets forth the name and address of each member of the
Board of Directors of each such Subsidiary. Each Subsidiary
of the Company is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as now being
conducted and is duly qualified or licensed to do business
and is in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified or
licensed would, in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company has heretofore
delivered to the Buyer complete and correct copies of the
certificate of incorporation and by-laws (or equivalent
organizational documents) of each Subsidiary of the Company,
each as amended and in full force and effect as of the date
of this Agreement. As used in this Agreement, the word
"Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which
held by such party or any Subsidiary of such party do not
have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others
performing similar functions with respect to such
corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of
its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(c) Except for the Subsidiaries identified in
Section 3.1(b) of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries directly or indirectly owns
any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or
similar interest in, any corporation, partnership, joint
venture or other association, organization or entity.
Section 3.2 Authority; No Conflict; Required Filings and
Consents.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and
performance of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby
have been duly authorized by all necessary corporate action
on the part of the Company, subject only to the Stockholder
approval specified in Section 3.2(b). This Agreement has
been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its
terms.
(b) The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is
the only action by the holders of capital stock of the Company
necessary to adopt this Agreement and approve the Merger
(the "Merger Vote"). The Board of Directors of the Company
(at a meeting duly called and held) has unanimously (i)
approved this Agreement, the Merger and the transactions
contemplated hereby (the "Merger Proposal"), (ii) determined
that the Merger Proposal is fair to and in the best
interests of the Stockholders and declared the advisability
of this Agreement, (iii) recommended that the Stockholders
vote in favor of the Merger Proposal and (iv) fixed the date
of this Agreement as the record date for the determination
of the Stockholders entitled to vote on the Merger Proposal.
(c) The execution and delivery of this Agreement
by the Company does not, and the consummation by the Company of the
transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of any
provision of the Company Certificate of Incorporation or the
Company Bylaws or the comparable organizational documents of
any Subsidiary of the Company, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse
of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation
or loss of any benefit) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to
which the Company or any of its Subsidiaries is a party or
by which any of them or any of their properties or assets
may be bound except for violations, breaches, defaults,
terminations, cancellations, accelerations or losses which
would not, in the aggregate, reasonably be expected to have
a Material Adverse Effect or (iii) conflict with or violate
any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any
of its or their properties or assets.
(d) No consent, approval, order or authorization
of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental
authority or instrumentality ("Governmental Entity") or
other person is required to be obtained by, or given to or
with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby,
except for (i) the Merger Vote, (ii) the filing of the pre-
merger notification report under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and the expiration or early termination of the related
waiting period, (iii) the filing of the Certificate of
Merger with, and the acceptance of such filing by, the
Secretary of State of the State of Delaware and (iv) the
third party consents identified in Section 3.2(d) of the
Company Disclosure Letter (the consents identified in clause
(iv) hereof being referred to collectively as the "Company
Third Party Consents").
Section 3.3 Debt and Capitalization.
(a) Section 3.3(a) of the Company Disclosure Letter (which
shall be updated and delivered to the Buyer as of
immediately prior to the Effective Time) sets forth the
amounts of all Indebtedness (which, solely for purposes of
this Section 3.3(a), shall include all contingent
reimbursement obligations with respect to letters of credit
and all obligations under capitalized leases, in each case,
without regard to the dollar limitations set forth in
Sections 2.1(c) and (e)) of the Company and its Subsidiaries
outstanding as of the date hereof (and as updated as of
immediately prior to the Effective Time), the names of the
parties to which such amounts are owed and the agreements
pursuant to which such amounts were borrowed or otherwise
are owed (collectively, "Debt Instruments"). The Company
is, and since August 1, 2002 has been, in compliance with
the terms and provisions of the Debt Instruments, except for
such noncompliance as would be cured by payment of the
Indebtedness of the Company and its Subsidiaries to be paid
off in connection with the Closing. Neither the Company nor
any of its Subsidiaries has any indebtedness or equipment
lease or other similar obligation to Bankers Direct Leasing,
a division of EAB Leasing Corp. other than the obligations
not exceeding $813,000 in the aggregate under and pursuant
to the equipment lease dated February 12, 1999 between the
Company and Bankers Direct Leasing.
(b) The authorized capital stock of the Company
consists of 8,000,000 shares of Company Common Stock. As of the
date hereof, (i) 5,294,376 shares of Company Common Stock are
issued and outstanding, (ii) 838,236 shares of Company
Common Stock are reserved for issuance under the Company's
stock option plans, of which 541,000 shares of Company
Common Stock underlie outstanding Company Options, (iii)
625,179 shares of Company Common Stock are reserved for
issuance upon the exercise of Company Warrants (iv) 2,242
shares of Company Common Stock are reserved for issuance
under the Plan of Reorganization to the former equityholders
and bondholders of San Jacinto who have not yet tendered
their San Jacinto holdings in exchange for Company Common
Stock pursuant to the Plan of Reorganization, (v) 28,416
shares of Company Common Stock are reserved for issuance
under the Plan of Reorganization to the former equityholders
of San Jacinto upon the exercise of Company Warrants
issuable to such former equityholders who have not yet
tendered their San Jacinto holdings in exchange for Company
Warrants pursuant to the Plan or Reorganization and (vi) no
shares of Company Common Stock are held by the Company in
its treasury. Except as set forth in this Section 3.3(b),
there are no equity securities of any class of the Company
or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or
outstanding. All issued and outstanding shares of capital
stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and are not subject
to, nor were issued in violation of, any preemptive rights.
None of the issued and outstanding shares of capital stock
of the Company, the Company Options or the Company Warrants
has been issued in violation of any applicable federal or
state law.
(c) Section 3.3(c) of the Company Disclosure
Letter (which shall be updated and delivered to the Buyer as of
immediately prior to the Effective Time) sets forth (i) the
number of shares of Company Common Stock issued and
outstanding as of the date hereof (and as updated as of
immediately prior to the Effective Time), (ii) a list of (A)
(1) all the holders of shares of Company Common Stock
outstanding as of the date hereof, as such names appear on
the stock transfer books of the Company, and the number of
outstanding shares of Company Common Stock held by each such
holder as of the date hereof (and as updated as of
immediately prior to the Effective Time) and (2) all former
equityholders and bondholders of San Jacinto who have not
yet tendered their San Jacinto holdings in exchange for
Company Common Stock pursuant to the Plan of Reorganization,
as such names appear in the records of the Company, and the
number of shares of Company Common Stock issuable to each
such former equityholder or bondholder under the Plan of
Reorganization as of the date hereof (and as updated as of
immediately prior to the Effective Time), (B) all holders of
Company Options outstanding under each of the Company's
stock option plans as of the date hereof (and as updated as
of immediately prior to the Effective Time), the number of
shares of Company Common Stock subject to each Company
Option and the exercise price, vesting terms and expiration
date thereof and (C) (1) all holders of outstanding Company
Warrants to purchase shares of Company Common Stock
outstanding as of the date hereof (and as updated as of
immediately prior to the Effective Time), the number of
shares of Company Common Stock subject to each Company
Warrant and the exercise price, vesting terms and expiration
date thereof and (2) all former equityholders of San Jacinto
who have not yet tendered their San Jacinto holdings in
exchange for Company Warrants pursuant to the Plan of
Reorganization, as such names appear in the records of the
Company, the number of shares of Company Common Stock
subject to the Company Warrants issuable to each such former
equityholder under the Plan of Reorganization as of the date
hereof (and as updated as of immediately prior to the
Effective Time) and the exercise price, vesting terms and
expiration date thereof. All Company Warrants not exercised
prior to 5:00 p.m. Dallas, Texas time, on the twentieth
business day following the date of the Special Adjustment
Notice given by the Company pursuant to Section 2.5 shall
terminate and become void. Except as set forth in Section
3.3(c) of the Company Disclosure Letter (as updated as of
immediately prior to the Effective Time), there are no
options, warrants, calls, rights, commitments or agreements
of any character to which the Company or any of its
Subsidiaries is a party, or by which the Company or any of
its Subsidiaries is bound, obligating the Company or any of
its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital
stock of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to grant,
extend or accelerate the vesting of or enter into any such
option, warrant, call, right, commitment or agreement.
Except for the letter referred to in Section 10.1(i), there
are no voting trusts, proxies or other agreements or
understandings with respect to the shares of capital stock
of the Company. There are no obligations, contingent or
otherwise, of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries or
to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such
Subsidiary or any other entity.
(d) All issued and outstanding shares of capital
stock of each of the Subsidiaries of the Company have been duly
authorized and validly issued, are fully paid and
nonassessable and are not subject to, nor were issued in
violation of, any preemptive rights and all of the
outstanding shares of capital stock of each of the
Subsidiaries of the Company are owned directly or indirectly
by the Company, free and clear of any security interests,
liens, claims, pledges, options, rights of first refusal,
restrictions, charges and other encumbrances or restrictions
of any nature whatsoever. None of the issued and
outstanding shares of capital stock of each of the
Subsidiaries of the Company has been issued in violation of
any applicable federal or state law. Except for shares of
capital stock of its Subsidiaries, the Company does not,
directly or indirectly, own any equity or similar interest
in, or any interest convertible into or exchangeable or
exercisable for any equity or similar interest in, any
corporation, partnership, joint venture or other business
association or entity.
Section 3.4 Financial Statements.
The Company has heretofore delivered to the
Buyer consolidated balance sheets of the Company as at
December 31, 2002 (the "Company Balance Sheet") and December
31, 2001 and consolidated statements of operations and
comprehensive income, stockholders' equity and cash flows
for each of the periods then ended (collectively, the
"Company Financial Statements"). The Company Financial
Statements have been audited by Deloitte & Touche LLP,
independent certified public accountants, and Deloitte &
Touche LLP's audit reports thereon, including the
unqualified opinion of Deloitte & Touche LLP on the Company
Financial Statements, are included therein. Each of the
Company Financial Statements (including, in each case, any
related notes), complied, as of their respective dates, in
all material respects with all applicable accounting
requirements with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis
throughout the periods involved and fairly presented, in all
material respects, the consolidated financial position of
the Company and its Subsidiaries as at the respective dates
and the consolidated results of its operations and cash
flows for the periods indicated.
Section 3.5 Trade Receivables.
All trade receivables of the Company, whether
reflected in the Company Balance Sheet or otherwise,
represent sales actually made in the ordinary course of
business, and are current and collectible net of any
reserves shown on the Company Balance Sheet (which reserves
were calculated consistent with past practices).
Section 3.6 Inventory
The inventory of the Company and its
consolidated Subsidiaries consists of raw materials, work in
process and finished goods reasonably expected to be used in
the ordinary course of their respective businesses, subject
only to any reserve for inventory write-down as reflected in
the Company Balance Sheet (which reserves were calculated
consistent with past practices).
Section 3.7 Properties; Encumbrances.
Each of the Company and its Subsidiaries has
good, valid and legal title to, or, in the case of leased
properties and assets, a valid leasehold interest in, all
the properties and assets which it purports to own or lease
(real, personal and mixed, tangible and intangible),
including, without limitation, all the properties and assets
reflected in the Company Balance Sheet (except for personal
property sold since December 31, 2002 in the ordinary course
of business and consistent with past practices). All
properties and assets reflected in the Company Balance Sheet
are free and clear of all title defects or objections,
liens, claims, charges, security interests or other
encumbrances of any nature whatsoever, except for liens for
current taxes not yet due. Section 3.7 of the Company
Disclosure Letter sets forth (i) the current address of the
Company's principal executive offices and the address of any
other property that has served as the Company's principal
executive offices during the past five years, (ii) the
address of each property located in the United States in
which the Company or its Subsidiaries currently maintains
assets or has maintained assets during the past five years
and (iii) the name and address of all third parties in
possession of chattel paper, inventory (of more than a de
minimus amount) or equipment belonging to the Company or any
of its Subsidiaries.
Section 3.8 No Undisclosed Liabilities.
The Company and its Subsidiaries do not have
any liabilities or obligations (whether accrued, contingent,
due or to become due or whether or not required to be
reflected in financial statements in accordance with GAAP)
other than (i) liabilities reflected in the Company Balance
Sheet or (ii) normal or recurring liabilities incurred since
December 31, 2002 in the ordinary course of business
consistent with past practices (none of which results from,
arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort,
infringement or violation of law).
Section 3.9 Absence of Certain Changes or Events.
(a) Since December 31, 2002: (i) there has not
occurred any event, change, effect, fact, circumstance or other
occurrence which has had, or which would reasonably be
expected to have, a Material Adverse Effect; (ii) the
businesses of the Company and each of its Subsidiaries have
been conducted only in the ordinary course consistent with
past practices; and (iii) neither the Company nor any of its
Subsidiaries has engaged in any material transaction or
entered into any material agreement outside the ordinary
course of business.
(b) Since December 31, 2002 and through the
date hereof: (i) neither the Company nor any of its Subsidiaries
has increased the compensation or benefits of any of its
respective officers or granted any general salary or
benefits increase to any of its respective employees; and
(ii) neither the Company nor any of its Subsidiaries has
taken any action that would have required the consent of the
Buyer under Section 5.1 if such action were taken after the
date hereof.
Section 3.10 Plant and Equipment.
To the Company's Knowledge, the plant and
structures of the Company are structurally sound with no
material defects and are in good operating condition and
repair and are adequate for the uses to which they are being
put; and none of such plants, structures or equipment are in
need of maintenance and repairs except for ordinary, routine
maintenance and repairs which are not material in nature or
cost.
Section 3.11 Taxes.
(a) Each of the Company and its Subsidiaries has duly
filed or will have duly filed (or there has been or will be duly
filed on its behalf), all Tax Returns (as hereinafter
defined), including any consolidated, combined or similar
Tax Return of which the Company or any of its Subsidiaries
is required to be included, required to be filed on or
before the Closing Date, and all such Tax Returns are true,
correct and complete in all respects. Each of the Company
and its Subsidiaries has duly paid or will have duly paid
(or there has been or will be duly paid on its behalf), all
Taxes (as hereinafter defined) due and payable as of the
Closing Date. The Company and its Subsidiaries have
established adequate reserves in accordance with GAAP for
the payment of all Taxes not yet due and payable (including
deferred income taxes).
(b) There are no encumbrances for Taxes (other
than for Taxes not yet due and payable) on any of the assets of the
Company or any of its Subsidiaries.
(c) The Company and its Subsidiaries have
complied in all respects with all federal, state and local, and foreign Tax
information reporting and withholding requirements,
including, without limitation, requirements with respect to
wages and other compensation.
(d) None of the Company or any of its
Subsidiaries has received any assessment for unpaid Taxes
which has neithersince been paid nor is currently being contested
in good faith, and none of the Company or its Subsidiaries has
received any notice of any pending or threatened assessment
of Taxes, or any audits, examinations, investigations, or
other proceedings in respect of Taxes or Tax Returns of the
Company or any of its Subsidiaries, in each case, for which
adequate reserves have not been provided in accordance with
GAAP. To the Company's Knowledge, no state of facts exists
or has existed that would constitute grounds for the
assessment of any Taxes with respect to any taxable year or
period for which the statute of limitations has not yet
expired. Section 3.11(d) of the Company Disclosure Letter
lists all federal, state, local, and foreign income Tax
Returns filed with respect to the Company and its
Subsidiaries for taxable periods ended on or after December
31, 1996, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that are currently
the subject of audit. For purposes of this Agreement, the
term "Company's Knowledge" means the actual knowledge of
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ acquired (i) in the performance of their duties
in the ordinary course of business or (ii) in the course of
consulting with appropriate personnel of the Company and its
Subsidiaries (or, in the case of matters related to Taxes,
with the persons who prepared the applicable Tax Returns) in
connection with the transactions contemplated by this
Agreement with respect to the subject matter of the
pertinent representations and warranties or covenants and
agreements of the Company herein (which consulting has
occurred).
(e) None of the Company or its Subsidiaries has
waived any statute of limitations with respect to Taxes or agreed to
any extension of time within which to file any Tax Return
for any taxable period, which such Tax Return has not since
been filed, or agreed to extend the period for the
assessment or collection of any Taxes, which such agreement
remains effective.
(f) None of the Company of any of its Subsidiaries
is liable for the Taxes of any other person as a transferee,
successor or otherwise, or by reason of having joined in a
consolidated, combined or similar Tax Return.
(g) No claim has been made by any taxing authority
in a jurisdiction where the Company and its Subsidiaries do not
file Tax Returns that any of the Company or its Subsidiaries
is or may be subject to taxation by that jurisdiction, or
that the Company or any of its Subsidiaries is required to
file a Tax Return in such jurisdiction.
(h) None of the Company or any of its Subsidiaries
will be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as
a result of any change in method of accounting for a taxable
period ending on or prior to the Closing Date under Section
481 of the Code, or any similar provision of state, local or
other law, nor has any taxing authority proposed any such
adjustment to taxable income or change in accounting method.
(i) None of the Company or any of its Subsidiaries
is a party to any agreement, plan, contract or arrangement that
could result, separately or in the aggregate, (i) in a
payment of any "excess parachute payments" within the
meaning of Section 280G of the Code, or (ii) in a payment of
any amount that would not be deductible under Section 162(m)
of the Code.
(j) For all taxable periods ending after
December 31, 1994, none of the Company or any of its Subsidiaries
has been a member of any affiliated group of corporations (as
defined in Section 1504 of the Code), other than the affiliated
group of corporations of which the Company is the common
parent, and is not a party to, bound by, or otherwise
obligated under any Tax sharing agreement, Tax
indemnification agreement or similar contract or arrangement
or has potential liability or obligation to any third party
as a result of, or pursuant to, any such agreement, contract
or arrangement.
(k) No power of attorney has been granted and
remains in effect by or on behalf of the Company or any of its
Subsidiaries with respect to any matter relating to Taxes.
(l) No indebtedness of the Company or any of its
Subsidiaries consists of "corporate acquisition
indebtedness" within the meaning of Section 279 of the Code.
(m) No election under 341(f) of the Code has
been made or shall be made prior to the Closing Date to treat
the Company or any Subsidiary as a consenting corporation, as
defined in Section 341 of the Code.
(n) There are no outstanding balances of
deferred gain or loss accounts related to any deferred intercompany
transactions to which the Company or any of its Subsidiaries
was a party.
(o) In the merger of San Jacinto with and into
the Company pursuant to the Agreement of Merger dated as of January 2,
2001, in connection with the Plan of Reorganization, holders
of 12% Senior Subordinated Notes due 2002 issued by San
Jacinto ("San Jacinto Subordinated Notes") and San Jacinto's
"pre-change shareholders" (within the meaning of Treasury
regulation section 1.382-9) received, in exchange for (i)
San Jacinto Subordinated Notes that such holders had held
continuously since prior to November 12, 1998 or (ii) San
Jacinto stock, an amount of Company Common Stock
representing (x) at least 50% of the total voting power of
the stock of the Company and (y) at least 50% of the total
value of the Company, in each case, determined immediately
after consummation of the Plan of Reorganization and
treating options or warrants to purchase Company Common
Stock outstanding at such time as exercised for purposes of
making such determination. Neither San Jacinto nor the
Company made an election pursuant to Section 382(l)(5)(H) of
the Code to not have the provisions of Section 382(l)(5) of
the Code apply. The Company has not experienced an
"ownership change" (within the meaning of Section 382 of the
Code) in the 2-year period following the consummation of the
Plan of Reorganization.
(p) For purposes of this Agreement, (i) "Taxes"
shall mean all taxes, assessments, charges, duties, fees, levies or
other governmental charges including, without limitation,
all federal, state, local, foreign and other income,
franchise, profits, capital gains, capital stock, transfer,
sales, use, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding,
employment, goods and services, gross receipts, gains, ad
valorem, social security, unemployment, disability, premium,
recapture, credit, abandoned or unclaimed property, and
other taxes, assessments, charges, duties, fees, levies or
other governmental charges of any kind whatsoever (whether
payable directly or by withholding and whether or not
requiring the filing of a Tax Return), all estimated taxes,
deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as
a result either of being a member of a combined,
consolidated, unitary or affiliated group and (ii) "Tax
Return" means any return, declaration, report, claim for
refund or information return or statement filed or required
to be filed with any taxing authority relating to Taxes,
including any schedule or attachment thereto, and including
any amendment thereof.
Section 3.12 Intellectual Property.
(a) The Company owns, without restriction, or is licensed
to use, the rights to all (i) trademarks, trade names,
service marks, and other business identifiers (collectively,
"Trademarks"), (ii) copyrights together with any
registrations and applications therefor, (iii) patents and
patent applications, (iv) internet domain names, (v)
internet-based list server programs, (vi) schematics, (vii)
trademarks, copyrights or patents associated with any
inventories, (viii) technology, (ix) know-how, processes,
methodologies and trade secrets, (x) computer software
programs or applications including, without limitation, all
object and source codes, (xi) databases and collections of
data, (xii) customer lists and files and (xiii) tangible or
intangible proprietary information or material, that in any
material respect are used in the business of the Company or
any of its Subsidiaries as currently conducted (the "Company
Intellectual Property"), free and clear of any security
interests, liens, claims, pledges, options, rights of first
refusal, restrictions, charges and other encumbrances or
restrictions of any nature whatsoever. Section 3.12(a) of
the Company Disclosure Letter sets forth: (i) all patents,
Trademarks, registered copyrights, and any applications for
any of the foregoing included in the Company Intellectual
Property; (ii) all licenses and other agreements to which
the Company or any of its Subsidiaries is a party and
pursuant to which the Company or any of its Subsidiaries is
authorized to use any Company Intellectual Property
(excluding license agreements for generally commercially
available software with an acquisition price of less than
$2,500) and includes the identities of the parties thereto,
a description of the nature and subject matter thereof, the
applicable royalty and the term thereof; and (iii) all
licenses, agreements and arrangements, oral or written,
pursuant to which the Company or any of its Subsidiaries
authorizes a third party to use, or otherwise grants a third
party any rights with respect to, any Company Intellectual
Property and includes the identities of the parties thereto,
a description of the nature and subject matter thereof, the
applicable payments thereunder and the term thereof.
(b) No claims (i) to the effect that the
manufacture, sale or use of any product, process or service
as now used or offered or proposed for use or sale by the
Company or any of its Subsidiaries infringes on any copyright,
trade secret, patent or other intellectual property right of
any Person, (ii) against the use by the Company or any of its
Subsidiaries of any Company Intellectual Property or (iii)
challenging the ownership, validity, enforceability or
effectiveness of any of the Company Intellectual Property
have been filed or, to the Company's Knowledge, threatened,
and, to the Company's Knowledge, there are no valid grounds
for any such claims. All granted and issued patents and all
registered Trademarks set forth in Section 3.12(a) of the
Company Disclosure Letter and all registered copyrights held
by the Company or any of its Subsidiaries are valid,
enforceable and subsisting. To the Company's Knowledge,
there is not any material unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property
by any third person, including, without limitation, any
Distributor (as defined in Section 3.20), former
Distributor, employee or former employee. Neither the
Company nor any of its Subsidiaries is, or as a result of
the execution and delivery of this Agreement or the
performance of the Company's obligations hereunder will be,
in violation of, or will lose or impair any rights pursuant
to, any license or agreement set forth in Section 3.12(a) of
the Company Disclosure Letter, and there exists no event or
condition which will result in a violation or breach of, or
constitute a default by the Company or a Subsidiary of the
Company, or, to the Company's Knowledge, the other party
thereto, under any such license or agreement.
(c) No owned Company Intellectual Property
is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting in any material manner the licensing
or use thereof by the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has entered
into any agreement to indemnify any other person against any
charge of infringement based upon, without limitation, such
person's manufacture, sale, use or importation of any
product, service or process incorporating any Company
Intellectual Property. Neither the Company nor any of its
Subsidiaries has entered into any agreement granting any
third party the right to bring infringement actions with
respect to, or otherwise to enforce rights with respect to,
any Company Intellectual Property. The Company and its
Subsidiaries have the exclusive right to file, prosecute and
maintain all applications and registrations with respect to
the Company Intellectual Property that is owned by the
Company or any of its Subsidiaries.
Section 3.13 Environmental Matters.
(a) (i) There is no Release or threatened Release of any
Hazardous Materials existing on, beneath or from the
surface, subsurface or ground water associated with Company
Property, currently occurring, nor has any Release occurred
at any time in the past, which would require investigation,
reporting, response, remediation or other corrective action
under any Environmental Law; (ii) the Company Property, and
all uses and conditions of the Company Property and all
operations of the Company, have been and are in compliance,
in all material aspects, with all Environmental Laws; (iii)
the Company has not received any notice of violation of
Environmental Laws or other similar communication; (iv) to
the Company's Knowledge, there are no facts or circumstances
relating to the Company Property or the business of the
Company that would give rise to any material violation or
liability under any Environmental Law; (v) the Company
Property and the operations of the Company comply, in all
material respects, with all terms and conditions of any
permits issued under Environmental Laws; and (vi) no
Environmental Claims against the Company or any of its
Subsidiaries or any Company Property are pending or, to the
Company's Knowledge, threatened.
(b) For purposes of this Agreement, the
following terms shall have the following meanings: (i)
"Company Property" means any real property and improvements
at any time owned, leased or operated by the Company or any of its
Subsidiaries; (ii) "Hazardous Materials" means (A) any
petroleum or petroleum products, radioactive materials,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls, and radon gas; (B) any chemicals,
materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes,"
"extremely hazardous substances," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of
similar import, under any applicable Environmental Law; and
(C) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any
governmental authority; (iii) "Environmental Law" means any
federal, state, foreign or local statute, law, rule,
regulation, ordinance, guideline, policy, code or rule of
common law in effect and in each case as amended as of the
date hereof and the Closing Date, and any judicial or
administrative interpretation thereof applicable to the
Company or its operations or property as of the date hereof
and the Closing Date, including any judicial or
administrative order, consent decree or judgment, relating
to the environment, health, safety or Hazardous Materials,
including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. 9601 et seq.; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq.; the
Federal Water Pollution Control Act, as amended, 33 U.S.C.
1251 et seq.; the Toxic Substances Control Act, 15 U.S.C.
2601 et seq.; the Clean Air Act, 42 U.S.C. 7401 et seq.;
Occupational Safety and Health Act, 29 U.S.C. 651 et seq.;
Oil Pollution Act of 1990, 33 U.S.C. 2701 et seq.; the
Safe Drinking Water Act, 42 U.S.C. 300f et seq., and
their state and local counterparts and equivalents; (iv)
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or
violation, investigations or proceedings under any
Environmental Law or any permit issued under any such
Environmental Law (for purposes of this subclause (iv),
"Claims"), including, without limitation, (A) any and all
Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental
Law and (B) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury
to health, safety or the environment; and (v) "Release"
means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying or seeping
into or upon any land or water or air, or otherwise entering
into the environment.
Section 3.14 Labor Matters.
(i) Each of the Company and its Subsidiaries is
in material compliance with all federal, state, local and
foreign laws respecting employment and employment practices,
terms and conditions of employment, wages and hours, and
occupational health and safety, and has not and is not
engaged in any unfair labor practice; (ii) no material
unfair labor practice charge or complaint against the
Company or any of its Subsidiaries is pending before the
National Labor Relations Board or an equivalent tribunal
under applicable foreign law; (iii) there is no labor
strike, slowdown, stoppage or material dispute pending or,
to the Company's Knowledge, threatened against or involving
the Company or any of its Subsidiaries; (iv) no union or
works council represents, claims to represent, or has
represented any employees of the Company or any of its
Subsidiaries and no representation question exists
respecting the employees of the Company or any of its
Subsidiaries; (v) no collective bargaining agreement is
currently being negotiated by the Company or any of its
Subsidiaries and neither the Company nor any of its
Subsidiaries is or has been a party to a collective
bargaining agreement; (vi) neither the Company nor any of
its Subsidiaries has experienced any material labor
difficulty during the last three years; and (vii) there has
been no "mass layoff" or "plant closing" by the Company as
defined in the Federal Workers Adjustment Retraining and
Notification Act ("WARN") or state law equivalent, or any
other mass layoff or plant closing that would trigger notice
pursuant to WARN or state law equivalent, during the last
three years.
Section 3.15 Employee Benefit Plans.
(a) Section 3.15(a) of the Company Disclosure Letter
contains a true and complete list of: (i) each deferred
compensation and each bonus or other incentive compensation,
stock purchase, stock option and other equity compensation
plan, program, agreement or arrangement; (ii) each severance
or termination pay, medical, surgical, hospitalization, life
insurance and other "welfare" plan, fund or program (within
the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")); (iii)
each profit-sharing, stock bonus or other "pension" plan,
fund or program (within the meaning of Section 3(2) of
ERISA); (iv) each employment, termination, retention, change
in control or other severance agreement or arrangement; and
(v) each other employee benefit plan, fund, program, policy,
agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed
to by the Company or by any trade or business (an "ERISA
Affiliate"), whether or not incorporated, that together with
the Company would be deemed a "single employer" within the
meaning of Section 4001(b) of ERISA, or to which the Company
or an ERISA Affiliate is party, whether written or oral, for
the benefit of any employee or former employee of the
Company or any of its Subsidiaries (collectively, the
"Plans"). No Plan is subject to Section 302 or Title IV of
ERISA or Section 412 of the Code and neither the Company nor
any ERISA Affiliate has sponsored, maintained, contributed
to or been required to contribute to any such plan within
the six years prior to the date hereof. Neither the Company
nor any ERISA Affiliate has any commitment or formal plan,
whether legally binding or not, to create any additional
employee benefit plan or materially modify any existing
Plan.
(b) With respect to each Plan, the Company has heretofore
delivered or made available to the Buyer true and complete
copies of each of the following documents: (i) a copy of the
Plan and any amendments thereto (or if the Plan is not a
written Plan, a description thereof); (ii) a copy of the two
most recent annual reports and actuarial reports, if
required under ERISA, and the most recent report, if any,
prepared with respect thereto in accordance with Statement
of Financial Accounting Standards Nos. 87 and 106; (iii) a
copy of the most recent Summary Plan Description required
under ERISA with respect thereto; (iv) if the Plan is funded
through a trust or any third party funding vehicle, a copy
of the trust or other funding agreement and the latest
financial statements, or other accounting, if any, thereof;
and (v) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan
intended to qualify under Section 401 of the Code.
(c) All contributions required to be made with
respect to any Plan on or prior to the Closing have been timely
made or, if not yet required to be made, are properly reflected
on the Company's balance sheets.
(d) Neither the Company nor any of its Subsidiaries,
any Plan or any trust created thereunder, nor, to the Company's
Knowledge, any trustee or administrator thereof, has engaged
in a transaction in connection with which the Company or any
of its subsidiaries, any Plan or any such trust could be
subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a tax imposed pursuant to
Section 4975 or 4976 of the Code.
(e) Each Plan has been operated and administered
in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the
Code. There are no pending, or, to the Company's Knowledge,
threatened or anticipated, claims by or on behalf of any
Plan, by any employee or beneficiary covered under any such
Plan or otherwise involving any such Plan (other than
routine claims for benefits).
(f) Each Plan intended to be "qualified" within
the meaning of Section 401(a) of the Code complies in all material
respects with the applicable requirements of the Code and
the trusts maintained under each such Plan comply in all
material respects with the requirements of Section 501(a) of
the Code.
(g) No Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured)
for employees or former employees of the Company or any of its
subsidiaries for periods extending beyond their retirement
or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any
"pension plan" or (iii) benefits the full cost of which is
borne by the current or former employee (or his
beneficiary). No condition exists that would prevent the
Company or any of its Subsidiaries from amending or
terminating any Plan providing health or medical benefits in
respect of any active or former employee of the Company or
any of its Subsidiaries.
(h) The consummation of the transactions
contemplated by this Agreement will not, either alone or
in combination with another event, (i) entitle any current
or former director, officer or employee of the Company or
any Subsidiary or any other person to any bonus payment,
retention benefit, severance pay, unemployment compensation,
success fee payable by the Company or any Subsidiary or any other
payment or any benefit under any similar agreement or (ii)
accelerate the time of payment or vesting, or increase the
amount of compensation due any such current or former
employee, officer or other person. No amounts payable under
the Plans will fail to be deductible for federal income tax
purposes by virtue of Section 280G of the Code. No employee
of the Company who is a party to a severance protection or
similar agreement with the Company has been terminated
without Cause or in contemplation of the transactions
contemplated hereby and no event has occurred which would
constitute Good Reason with respect to such employee or
which would otherwise entitle any such employee to benefits
or payments pursuant to such agreement. For purposes of
this Section 3.15(h), "Cause" and "Good Reason" shall have
the meanings given to such terms in the form of the
Company's severance protection agreement in effect as of the
Effective Time.
(i) Section 3.15(i) of the Company Disclosure
Letter sets forth the following information with respect to each life
insurance policy that relates to the supplemental retirement
and death benefits payable by the Company to the former
employees of the Company identified on Section 3.15(a) of
the Company Disclosure Letter under the heading "Deferred
Compensation":
(i) the name and date of birth of the insured;
(ii) the name of the insurer;
(iii) the name of the beneficiary;
(iv) the policy number and type of policy;
(v) the face amount of the policy; and
(vi) if applicable, the cash value of the policy as of the
most recent practicable date.
With respect to each insurance policy required to be
disclosed in Section 3.15(i) of the Company Disclosure
Letter: (A) the policy is legal, valid, binding and
enforceable by and in favor of the Company, and in full
force and effect; (B) neither the Company nor, to the
Company's Knowledge, any other party to the policy is in
breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has
occurred which, with notice or lapse of time, would
constitute such a breach or default, or permit termination,
modification or acceleration, under the policy; (C) no party
to the policy has repudiated any provision thereof; and (D)
the execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions
contemplated hereby does not violate or breach, or
constitute a default under, the policy. Since December 31,
2002, the Company has not borrowed against or otherwise
taken any action to diminish the cash value of any such
policy.
Section 3.16 Compliance with Laws.
(a) The Company and each of its Subsidiaries has
complied with, is not in violation of, and has not received any
notices of violation with respect to, any federal, state,
local or foreign statute, law or regulation, including,
without limitation, any franchise or similar law or
regulation, with respect to the conduct of its business, or
the ownership or operation of its business, except for
failures to comply or violations which would not, in the
aggregate, reasonably be expected to have a Material Adverse
Effect or impair the ability of the Company to consummate
the transactions contemplated by this Agreement. Neither
the Company nor any Subsidiary of the Company is or has been
determined to be a "franchisor" or otherwise subject to any
franchise or similar law or regulation in any jurisdiction,
and the Company and each of its Subsidiaries has complied
with, is not in violation of, and has not received any
notices of violation with respect to, any franchise or
similar law or regulation to which it has been determined to
be subject.
(b) The Company and its Subsidiaries hold or
maintain, to the extent legally required, all federal, state,
local and foreign, permits, approvals, registrations, licenses,
authorizations, certificates, rights, exemptions and orders
from Governmental Entities (the "Permits") that are material
to and required for the operation of the business of the
Company and its Subsidiaries as now conducted, and there has
not occurred any default under any such Permit.
(c) No issuance of equity securities by the
Company has been or was required to be registered under the
Securities Act of 1933, as amended. None of the Company's
equity securities have been or are required to be registered
under the Securities Exchange Act of 1934, as amended, due to the
number of record holders of Company Common Stock, Company
Options or Company Warrants or otherwise.
Section 3.17 Litigation.
There is no action, suit, claim or proceeding,
at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or, to the
Company's Knowledge, any investigation by) any Governmental
Entity, pending, or, to the Company's Knowledge, threatened,
against or affecting the Company or any of its Subsidiaries,
or any of their respective properties or rights. There are
no such suits, actions, claims, proceedings or
investigations pending or, to the Company's Knowledge,
threatened, seeking to prevent or challenging the
transactions contemplated by this Agreement. Neither the
Company nor any of its Subsidiaries is subject to any
judgment, injunction, order or decree entered in any lawsuit
or proceeding.
Section 3.18 Certain Business Practices.
Neither the Company nor any Subsidiary of the
Company nor, to the Company's Knowledge, any director,
officer, employee or agent of the Company or a Subsidiary of
the Company has (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful
payments related to a political activity, (b) made any
unlawful payment to any foreign or domestic government
official or employee or to any foreign or domestic political
party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (c) made any
other unlawful payment.
Section 3.19 Suppliers.
Section 3.19 of the Company Disclosure Letter
sets forth the ten largest suppliers of the Company (the
"Suppliers") in terms of costs recognized for the purchase
of products or services during the fiscal year ended
December 31, 2002. To the Company's Knowledge, none of the
Suppliers has any plan or intention, and the Company has not
received any written or oral threat from any of the
Suppliers, to terminate, cancel or otherwise adversely
modify its relationship with the Company or to decrease
materially or limit its products or services to the Company.
Section 3.20 Distributors.
Section 3.20 of the Company Disclosure Letter
identifies each agreement between the Company (or any of its
Subsidiaries) and each distributor (a "Distributor") engaged
in the marketing or sale of the Company's products, and each
supplement, addendum, or amendment thereto or modification
thereof (collectively, a "Distributor Agreement"), and sets
forth (i) the parties to the Distributor Agreement, (ii) the
term of such Distributor Agreement, (iii) the territory
assigned to the Distributor under such Distributor Agreement
(indicating whether such Distributor has an exclusive right
to market the Company's products in such territory), (iv)
the annual sales generated under each Distributor Agreement
for the years ended December 31, 2002 and 2001, (v) the
commissions paid to the Distributor for the years ended
December 31, 2002 and 2001 and (vi) the amount of post-
termination payments made to former Distributors for the
years ended December 31, 2002 and 2001. Each Distributor
has entered into a Distributor Agreement with the Company
and there are no oral agreements or arrangements between any
Distributor and the Company. Each Distributor Agreement is
in full force and effect and constitutes a legal, valid and
binding agreement, enforceable in accordance with its terms,
of the Company, and, to the Company's Knowledge, of the
Distributor party thereto. The Company is in compliance
with its obligations under each Distributor Agreement, and,
to the Company's Knowledge, each Distributor is in
compliance with its obligations under its Distributor
Agreement. To the Company's Knowledge, none of the
Distributors or customers has any plan or intention, and the
Company has not received any written or oral threat from any
of the Distributors or customers, to terminate, cancel or
otherwise adversely modify its relationship with the Company
or to decrease materially or limit its usage, purchase or
distribution of the Company's products. The execution and
delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated
hereby does not violate or breach, or constitute a default
under, any Distributor Agreement.
Section 3.21 Other Contracts.
Section 3.21 of the Company Disclosure Letter
lists the following contracts to which the Company or any
Subsidiary of the Company is a party or by or to which any
of their respective assets, properties or securities are
bound or subject:
(a) any contract, which cannot be terminated
by the Company or a Subsidiary of the Company on 90 days'
notice or less and without penalty or premium, pursuant to
which the Company or any Subsidiary of the Company in the
fiscal year ended December 31, 2002 purchased, or in the
fiscal year ending December 31, 2003 is expected to purchase,
goods or services costing in excess of $25,000;
(b) any contract, which cannot be terminated by
the Company or any Subsidiary of the Company on 90 days' notice
or less and without penalty or premium, pursuant to which the
Company or such Subsidiary is obligated to purchase all or
substantially all of its requirements of a particular
product or service from another party or to make periodic
minimum purchases of a particular product or service from
another party;
(c) any contract (excluding Plans) between
the Company or any Subsidiary of the Company, on the one hand,
and any past or present Stockholder, director, officer or employee
of the Company or any Subsidiary of the Company, on the other hand;
(d) any contract providing for consulting services
pursuant to which the Company or any Subsidiary of the Company will
make payments in any year to any person exceeding $10,000;
(e) any contract pursuant to which the Company
or any Subsidiary of the Company, since January 2, 2001, sold, or
after the date hereof is obligated to sell, to another
person securities, assets or properties for consideration
(including the assumption of liabilities) in excess of
$10,000, other than in the ordinary course of business;
(f) any contract pursuant to which the Company
or any Subsidiary of the Company, since January 2, 2001, acquired,
or after the date hereof is obligated to acquire, from
another person securities, assets or properties for
consideration (including the assumption of liabilities) in
excess of $10,000, other than in the ordinary course of
business;
(g) any contract which contains covenants of the
Company or any Subsidiary of the Company not to compete in any
line of business, in any geographic area or with any person or
covenants of any person not to compete with the Company or
any Subsidiary of the Company or in any line of business of
the Company or any Subsidiary of the Company;
(h) any contract under which the Company or any
Subsidiary of the Company has made advances or loans to any other
person;
(i) any contract under which the Company or any
Subsidiary of the Company has surety, guarantee or indemnification
obligations;
(j) any contract which, upon the occurrence of a
default or event of default thereunder, would, by its terms,
create or give rise to any lien, claim, charge, security interest or
other encumbrance on the Company or any Subsidiary of the
Company or any of their respective properties or assets; and
(k) any contract with a change in control provision or
otherwise requiring any consent, approval, waiver or other
action by any person in connection with the transactions
contemplated by this Agreement.
The Company has heretofore delivered or made
available to the Buyer complete and correct copies of all
contracts listed on Section 3.21 of the Company Disclosure
Letter as in effect on the date hereof. The Company or the
Subsidiary of the Company party thereto has performed in all
material respects all obligations required to be performed
by it under, and has complied in all material respects with
all requirements and terms and conditions of, each contract
listed on Section 3.21 of the Company Disclosure Letter to
which it is a party. Within the last two years, neither the
Company nor any Subsidiary of the Company has received any
written notice or claim or assertion of default, breach or
termination, or any written cure or show cause notice, with
respect to any contract listed on Section 3.21 of the
Company Disclosure Letter to which it is a party.
Section 3.22 Insurance.
Section 3.22 of the Company Disclosure Letter
sets forth the following information with respect to each
insurance policy (including policies providing property,
automobile, casualty, liability, umbrella, and workers'
compensation coverage and bond and surety arrangements) in
force and effect at any time since January 1, 1998 and to
which the Company is or was a party, a named insured or
otherwise the beneficiary of coverage:
(a) the name, address and telephone number
of the agent;
(b) the name of the insurer, the name of the
policyholder and the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the general type of coverage (including an
indication of whether the coverage was on a claims made, occurrence, or
other basis) and amount (including any deductibles and
ceilings) of coverage; and
(e) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each insurance policy required to
be disclosed in Section 3.22 of the Company Disclosure
Letter: (i) the policy is legal, valid, binding and
enforceable by and in favor of the Company, and in full
force and effect; (ii) neither the Company nor, to the
Company's Knowledge, any other party to the policy is in
breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; (iii) no
party to the policy has repudiated any provision thereof;
and (iv) the execution and delivery of this Agreement by the
Company and the consummation by the Company of the
transactions contemplated hereby does not violate or breach,
or constitute a default under, the policy. Section 3.22 of
the Company Disclosure Letter describes any self-insurance
or co-insurance arrangements affecting the Company.
Section 3.23 Books and Records.
Subject to normal year-end adjustments, if any,
the books of account and other similar records of the
Company and each of its Subsidiaries are true and complete
in all material respects and have been maintained in
accordance with sound business practice. The Company and
each of its Subsidiaries has made and kept books, records
and accounts which, in reasonable detail, accurately and
fairly reflect its transactions. The Company and each of
its Subsidiaries maintains a system of accounting controls
sufficient to provide reasonable assurances that, in all
material respects: (a) transactions are executed in
accordance with management's general or specific
authorization; (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in
conformity with GAAP and (ii) to maintain accountability for
assets; (c) access to assets is permitted only in accordance
with management's general or specific authorization; and (d)
the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. The stock
ledgers of the Company and each of its Subsidiaries, true
and complete copies of which have been made available to the
Buyer, are complete and correct as of the date of delivery.
The minute books of the Company and each of its
Subsidiaries, true and complete copies of which have been
made available to the Buyer, contain true and complete
records of all meetings held of, and corporate action taken
by, the Stockholders, Board of Directors or any committee of
the Company or such Subsidiary, as the case may be, and of
all written consents executed in lieu of the holding of any
such meeting as of the date of delivery. No meeting of any
such Stockholders, Board of Directors or committee has been
held for which minutes have been prepared and are not
contained in such minute books.
Section 3.24 Bank Accounts.
Section 3.24 of the Company Disclosure Letter
identifies all bank and brokerage accounts of the Company
and lists the names of all persons authorized to make
withdrawals therefrom or have access thereto.
Section 3.25 Insider Interests and Related Party
Transactions.
No director or officer or, to the Company's
Knowledge, Stockholder or employee of the Company has,
directly or indirectly, (i) an interest (other than any
ownership of less than 3% of the voting securities of any
publicly traded company) in any entity that purchases from
or sells to the Company or any of Subsidiary of the Company
any products or services, (ii) an interest in any property,
real or personal, tangible or intangible, including without
limitation, Company Intellectual Property, used in or
pertaining to the business of the Company and its
Subsidiaries, (iii) an interest in any contract, arrangement
or understanding to which the Company or any of its
Subsidiaries is a party, (iv) borrowed any monies from or
incurred indebtedness or other similar obligations to the
Company or any of Subsidiary of the Company other than in
the form of travel advances in the ordinary course of
business consistent with past practice or (v) since January
2, 2001, engaged in any non-arm's length transaction with
the Company or any of its Subsidiaries.
Section 3.26 Proxy Statement.
None of the information supplied by the Company
and included in the Proxy Statement (the "Proxy Statement")
to be sent to the Stockholders in connection with the
solicitation of the Merger Vote will, on the date the Proxy
Statement is first mailed or otherwise provided to the
Stockholders, or at the Effective Time, contain any untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which
they are made, not misleading, or necessary to correct any
statement in any earlier communication with respect to the
solicitation of the Merger Vote which has become false or
misleading.
Section 3.27 Opinion of Financial Advisor.
The financial advisor of the Company, Gordian
Group, LLC, has delivered to the Company an opinion dated
the date of this Agreement to the effect that, as of the
date of this Agreement, the consideration to be received in
the Merger is fair, from a financial point of view, to the
holders of equity interests in the Company. The Company has
heretofore provided a true and correct copy of such opinion
to the Buyer.
Section 3.28 Brokers and Finders.
No broker, finder or investment banker (other
than ▇▇▇▇▇ ▇▇▇▇▇ & Associates LLC, who will be paid a fee by
the Company and Morgens Waterfall Vintiadis & Co. Inc.) is
entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the
Company or any of its Subsidiaries.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company
that the statements contained in this Article IV are true
and correct as of the date hereof (unless the particular
statement is, by its language, as of another date, in which
case, it is true and correct as of that other date).
Section 4.1 Organization and Qualification of Corporate
Power.
Each of the Buyer and Sub is a corporation duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now
being conducted, and is duly qualified or licensed to do
business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified or
licensed would have or result in a material adverse effect
on the prospects, business, assets, properties, liabilities,
results of operations or condition (financial or otherwise)
of the Buyer and its Subsidiaries taken as a whole (a "Buyer
Material Adverse Effect").
Section 4.2 Authority; No Conflict; Required Filings and
Consents.
(a) Each of the Buyer and Sub has all requisite
corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery
and performance of this Agreement by the Buyer and Sub and
the consummation by the Buyer and Sub of the transactions
contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Buyer and Sub.
This Agreement has been duly executed and delivered by the
Buyer and Sub and constitutes a valid and binding obligation
of the Buyer and Sub, enforceable against the Buyer and Sub
in accordance with their respective terms.
(b) The execution and delivery of this Agreement
by the Buyer and Sub does not, and the consummation by them of the
transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of any
provision of the Certificate of Incorporation of the Buyer,
the Sub Certificate of Incorporation, the Bylaws, as
amended, of the Buyer or the Sub By-laws, (ii) result in any
violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to
a right of termination, cancellation or acceleration of any
obligation or loss of any benefit) under any of the terms,
conditions or provisions of any note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or
obligation to which the Buyer is a party or by which the
Buyer or any of its properties or assets may be bound,
except for violations, breaches, defaults, terminations,
cancellations, accelerations or losses which would not, in
the aggregate, reasonably be expected to have a Buyer
Material Adverse Effect or (iii) conflict with or violate
any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation
applicable to the Buyer or any of its properties or assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental
Entity or other person is required by or with respect to the
Buyer or Sub in connection with the execution and delivery
of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-
merger notification report under the HSR Act and the
expiration or early termination of the related waiting
period and (ii) the filing of the Certificate of Merger
with, and the acceptance of such filing by, the Secretary of
State of the State of Delaware.
Section 4.3 Amendment to Revolving Credit Agreement.
The Buyer has heretofore delivered to the
Company a complete and correct copy of a Fourth Amendment to
the Second Amended and Restated Revolving Credit Agreement
dated as of April 18, 2003 by and among the Buyer, Fleet
National Bank and certain other financial institutions
which, as of the date hereof, (a) among other things,
subject to the terms and conditions thereof, authorizes the
consummation by the Buyer of the transactions contemplated
by this Agreement and provides sufficient availability of
funds to enable the Buyer to deliver the Indebtedness
Payment Fund and the Initial Aggregate Merger Consideration
and (b) is in full force and effect.
ARTICLE V
CONDUCT OF BUSINESS
Section 5.1 Covenants of the Company
During the period from the date hereof and
continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees as to
itself and its Subsidiaries (except to the extent that the
Buyer shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed), to carry on
its business in the usual, regular and ordinary course in
substantially the same manner as previously conducted, to
pay its debts and Taxes when due subject to good faith
disputes over such debts or Taxes, to pay or perform other
obligations when due, and, to the extent consistent with
such business, use all reasonable efforts consistent with
past practices and policies to preserve intact its present
business organization, keep available the services of its
present officers and key employees and preserve its
relationships with customers, suppliers, distributors,
licensors, licensees and others having business dealings
with it, to the end that its goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Except as
expressly contemplated by this Agreement, subject to Section
6.1, the Company shall not (and shall not permit any of its
Subsidiaries to), without the prior written consent of the
Buyer, which consent shall not be unreasonably withheld or
delayed:
(a) Declare, set aside or pay any dividends on
or make any other distributions (whether in cash, stock or property)
in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or
redeem or otherwise acquire, directly or indirectly, any
shares of its capital stock;
(b) Issue, deliver or sell or authorize or propose
the issuance, delivery or sale of any shares of its capital
stock or securities convertible into shares of its capital
stock, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character
obligating it to issue, any such shares or convertible
securities, other than the issuance of shares of Company
Common Stock issuable upon the exercise of Company Options
or Company Warrants outstanding on the date hereof or amend
the terms of any outstanding shares of its capital stock, or
subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating
it to issue, any such shares or convertible securities;
(c) (i) Incur, assume or prepay any indebtedness
or any other liabilities other than in the ordinary course of
business consistent with past practices; (ii) incur or
otherwise become liable for any indebtedness or equipment
lease or other similar obligation to Bankers Direct Leasing,
a division of EAB Leasing Corp. other than the obligations
not exceeding $813,000 in the aggregate in existence on the
date hereof under and pursuant to the equipment lease dated
February 12, 1999 between the Company and Bankers Direct
Leasing; (iii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person other
than a Subsidiary of the Company in the ordinary course of
business and consistent with past practices; (iv) make any
loans, advances (other than travel advances consistent with
the Company's policy) or capital contributions to, or
investments in, any other person, other than to Subsidiaries
of the Company consistent with past practices; (v) authorize
or make capital expenditures in excess of the amounts
currently budgeted therefor; or (vi) permit any insurance
policy naming the Company or any Subsidiary of the Company
as a beneficiary or a loss payee to be cancelled or
terminated other than in the ordinary course of business
consistent with past practices, or borrow against or
otherwise take any action to diminish the cash value of any
such insurance policy;
(d) Sell, lease, license, waive, release, transfer,
encumber or otherwise dispose of any of its properties or
assets, except in the ordinary course of business consistent
with past practices;
(e) Revalue any of its assets, including writing down
the value of inventory or writing off accounts receivable, other
than downward revaluations in the ordinary course of
business consistent with past practices;
(f) Permit the amount of its consolidated inventories
to be reduced by more than $200,000 from the amount thereof on the
Company Balance Sheet or permit any reduction in
consolidated inventories which would jeopardize shipments to
any customer;
(g) Delay or postpone the payment of accounts payable
or other liabilities, other than in the ordinary course of
business consistent with past practices;
(h) (i) Increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any director, officer or
employee, except for (x) normal increases in salaried
compensation in the ordinary course of business consistent
with past practices and (y) bonuses payable, in the ordinary
course of business consistent with past practices; (ii)
grant any severance or termination pay to, or enter into any
employment or severance agreement, with any director,
officer or employee; (iii) enter into any collective
bargaining agreement; or (iv) establish, adopt, enter into
or amend any bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or
other plan, trust, fund, policy or arrangement for the
benefit of any directors, officers or employees;
(i) Transfer or license to any person or entity or
otherwise extend, amend or modify any rights to the Company
Intellectual Property, other than in the ordinary course of
business consistent with past practices;
(j) Modify, amend or terminate any material contract to
which the Company is a party or waive any of its material
rights or claims except in the ordinary course of business
consistent with past practices;
(k) Modify, amend or terminate any Distributor
Agreement, enter into a new Distributor Agreement or enter into any
other relationship or arrangement with a new Distributor,
except in the ordinary course of business consistent with
past practices;
(l) Enter into any contract of the type specified in
Section 3.21;
(m) Agree to the settlement of any material claim or
litigation;
(n) Take any action with respect to, or make any material
change in its accounting policies or procedures in effect at
December 31, 2002, except as may be required by changes in
GAAP upon the advice of its independent accountants;
(o) Amend or propose to amend the Company Certificate
of Incorporation or the Company By-laws (or comparable organizational
documents of its Subsidiaries);
(p) Merge or consolidate with another corporation,
partnership or other business organization, or acquire or
purchase an equity interest in or a substantial portion of
the assets of another corporation, partnership or other
business organization or otherwise acquire any assets
outside the ordinary course of business consistent with past
practices or otherwise enter into any material contract,
commitment or transaction outside the ordinary course of
business consistent with past practices;
(q) (i) Make a request for a Tax ruling from or
enter into a closing agreement with, any taxing authority; (ii) settle
or compromise any claim, action, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
Taxes; or (iii) except as required under applicable law,
make any elections with respect to Taxes, change any method
of accounting for Tax purposes, or otherwise change its tax
policies or procedures in effect at December 31, 2002; or
(r) Enter into any contract, agreement, commitment or
arrangement with respect to any of the actions described in
Sections 5.1(a) through (q) above, or any action which would
be reasonably likely to make any of the Company's
representations or warranties contained in this Agreement
untrue or incorrect in any material respect as of the date
of this Agreement or the Closing Date.
Section 5.2 Cooperation.
Subject to compliance with applicable law, from
the date hereof until the Effective Time, (a) the Company
shall confer with the Buyer on a regular and frequent basis
to report operational matters of materiality and the general
status of ongoing operations and (b) each of the Company and
the Buyer shall promptly provide the other party or its
counsel with copies of all filings made by such party with
any Governmental Entity in connection with this Agreement,
the Merger and the transactions contemplated hereby and
thereby.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 No Solicitation
(a) During the period from the date of this
Agreement until the earlier of the termination of this Agreement
in accordance with its terms or the Effective Time, neither the
Company, nor any of its Subsidiaries or affiliates shall,
directly or indirectly, through any officer, director,
employee, representative or agent thereof (and each shall
use reasonable efforts to cause such officers, directors,
employees, representatives and agents (collectively,
"Company Representatives") not to, directly or indirectly),
(i) solicit, initiate, facilitate or encourage any inquiries
or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial
assets, sale of shares of capital stock or similar
transactions involving the Company or any of its
Subsidiaries, other than the transactions contemplated by
this Agreement (any of the foregoing inquiries or proposals
being referred to in this Agreement as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any
person or entity relating to, any Acquisition Proposal or
(iii) agree to, approve or recommend any Acquisition
Proposal; provided, however, that nothing contained in this
Agreement shall prevent the Company or its Board of
Directors from:
(A) entering into negotiations or discussions
with or providing non-public information to, any person in response
to an unsolicited, bona fide and written Acquisition
Proposal if (1) neither the Company nor any of its
Subsidiaries, affiliates or Company Representatives shall
have violated any of the restrictions in this Section 6.1,
(2) the Company's Board of Directors determines in good
faith, after having taken into account the advice of its
outside legal counsel, that such action is required in order
for such Board of Directors to comply with its fiduciary
obligations to the Stockholders under applicable law, (3) at
least three business days prior to entering into
negotiations or discussions with, or providing non-public
information to, such person, the Company gives the Buyer
written notice of the identity of such person and of the
Company's intention to enter into negotiations or
discussions with, or provide non-public information to, such
person, and the Company receives from such person an
executed confidentiality agreement containing terms no less
restrictive than the terms of the Confidentiality Agreement,
dated June 19, 2002, between the Buyer and the Company (the
"Confidentiality Agreement") and (4) at least three business
days prior to providing any non-public information to such
person, the Company furnishes such information to the Buyer
(to the extent such information has not been previously
delivered or made available by the Company to the Buyer); or
(B) agreeing to, approving or recommending an unsolicited,
bona fide and written Acquisition Proposal if (1) neither
the Company nor any of its affiliates or Company
Representatives shall have violated any of the restrictions
set forth in this Section 6.1, (2) the Company provides the
Buyer with written notice at least three business days prior
to any meeting of the Company's Board of Directors at which
such Board of Directors will consider whether such
Acquisition Proposal constitutes a Superior Proposal (as
defined below), (3) the Company's Board of Directors makes
the determination necessary for such Acquisition Proposal to
constitute a Superior Proposal, (4) the Company's Board of
Directors determines in good faith, after having taken into
account the advice of its outside legal counsel, that such
action is required in order for such Board of Directors to
comply with its fiduciary obligations to the Stockholders
under applicable law, (5) the Company does not agree to,
approve or recommend such Acquisition Proposal at any time
before the day that is the fifth business day after the
Buyer receives written notice from the Company stating that
the Company's Board of Directors has determined that such
Acquisition Proposal constitutes a Superior Proposal and (6)
simultaneously with the earlier of the agreement with
respect to, or approval or recommendation of, any such
Superior Proposal, the Company makes the payment required to
be made pursuant to Section 10.3(b).
(b) The Company shall notify the Buyer immediately
(and no later than 72 hours) after receipt by the Company or any of
its Subsidiaries, affiliates or Company Representatives of
any Acquisition Proposal or any request for non-public
information in connection with an Acquisition Proposal or
for access to the properties, books or records of the
Company or any of its Subsidiaries by any person or entity
that informs the Company or any of its Subsidiaries,
affiliates or Company Representatives that it is considering
making, or has made, an Acquisition Proposal. Such notice
to the Buyer shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or
contact. The Company shall keep the Buyer informed of all
material developments and the status of any Acquisition
Proposal, any negotiations or discussions with respect to
any Acquisition Proposal or any request for non-public
information in connection with any Acquisition Proposal or
for access to the properties, books or records of the
Company or any of its Subsidiaries by any person or entity
that is considering making, or has made, an Acquisition
Proposal. The Company shall provide the Buyer with copies
of all documents received from or delivered or sent to any
person or entity that is considering making or has made, an
Acquisition Proposal.
(c) For purposes of this Agreement, "Superior
Proposal" means an unsolicited, bona fide and written Acquisition
Proposal that the Board of Directors of the Company
determines in good faith, after consultation with its
financial advisor and taking into account all legal,
financial, regulatory and other aspects of the proposal and
the person making the proposal, would, if consummated,
result in a transaction more favorable to the Stockholders
from a financial point of view than the transactions
contemplated by this Agreement.
(d) The Company and its Subsidiaries, affiliates
and Company Representatives shall immediately cease any
discussions or negotiations with any other parties that may
be ongoing as of the date hereof with respect to any
Acquisition Proposal and shall request the return or
destruction of all non-public information provided in
connection therewith.
Section 6.2 Approval of Stockholders.
(a) The Company shall, subject to and in accordance
with the Company Certificate of Incorporation, Company By-laws
and the DGCL, as promptly as practicable following the date
of this Agreement, take all action to call, give notice of,
convene and hold a meeting of the Stockholders for the
purpose of obtaining the Merger Vote (the "Company
Stockholders Meeting") and shall use its reasonable best
efforts to obtain, and promptly notify the Buyer upon
obtaining, the Merger Vote. The Board of Directors of the
Company shall submit this Agreement and the Merger to the
Stockholders at the Company Stockholders Meeting, whether or
not the Board of Directors of the Company at any time
changes, withdraws, modifies or qualifies its recommendation
in favor of the Merger Proposal (the "Company Board
Recommendation"), unless prior thereto as a result of such
change, withdrawal, modification or qualification the
Company terminates this Agreement pursuant to Section
10.1(f) and simultaneously therewith makes the payment
contemplated thereby.
(b) As promptly as practicable following the date
of this Agreement, the Company shall prepare and mail or otherwise
provide to the Stockholders the Proxy Statement, which shall
include the Company Board Recommendation; provided that, the
Board of Directors of the Company may change, withdraw,
modify or qualify the Company Board Recommendation in a
manner adverse to the Buyer if the Board of Directors of the
Company determines in good faith, after having taken into
account the advice of its outside legal counsel, that such
action is required to comply with its fiduciary obligations
to the Stockholders under applicable law. The Proxy
Statement, the form of any proxy or ballot and all other
materials to be provided to the Stockholders in connection
with obtaining the Merger Vote shall be subject to prior
review of and approval by the Buyer and its counsel, such
approval not to be unreasonably withheld or delayed.
Section 6.3 Access to Information.
Upon reasonable notice, during normal business
hours during the period prior to the Effective Time, the
Company shall (and shall cause its Subsidiaries to) afford
to the officers, directors, employees, accountants, counsel
and other representatives of the Buyer (a) reasonable access
to all its properties, plants, personnel, books, contracts,
commitments and records (other than privileged documents)
and (b) all other information concerning its business,
properties and personnel as the Buyer may reasonably request
during such period. During such period, the Buyer will hold
any such information which is non-public in confidence in
accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation
pursuant to this Section 6.3 shall affect or be deemed to
modify any representation or warranty contained in this
Agreement or the conditions to the obligations or the
parties to consummate the Merger. Notwithstanding the
foregoing, the parties to this Agreement (and each employee,
representative, or other agent of the parties) may disclose
to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the Merger, beginning on
the earlier of (i) the date of the public announcement of
discussions relating to the Merger, (ii) the date of public
announcement of the Merger, or (iii) the date of the
execution of this Agreement, provided, however, none of the
parties (nor any employee, representative or other agent
thereof) may disclose any information that is not necessary
to understanding the tax treatment and tax structure of the
Merger (including the identity of the parties and any
information that could lead another to determine the
identity of the parties), or any information to the extent
that such disclosure could result in a violation of any
federal or state securities law.
Section 6.4 Company Disclosure Letter
(a) From time to time prior to the Closing, the Company
shall give prompt notice to the Buyer and thereafter
promptly supplement or amend the Company Disclosure Letter
with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would
have been required to be set forth or described in the
Company Disclosure Letter. No supplement or amendment of
the Company Disclosure Letter made pursuant to this Section
6.4 shall be deemed to cure any breach of any representation
or warranty made in this Agreement unless the Buyer
specifically agrees thereto in writing.
(b) From time to time prior to the Closing, the
Buyer shall give prompt notice to the Company of any matter of which
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇ acquires
actual knowledge that if existing or occurring at the date
of this Agreement would have been required to be set forth
or described in the Company Disclosure Letter.
Section 6.5 Legal Conditions to Merger; Further
Assurances.
Each of the Buyer and, subject to Section 6.1,
the Company will take all commercially reasonable actions
necessary to comply promptly with all legal requirements
which may be imposed with respect to the Merger (which
actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection
with approvals of or filings with any other Governmental
Entity) and will promptly cooperate with and furnish
information to each other in connection with any such
requirements imposed upon any of them or any of their
Subsidiaries in connection with the Merger. Each of the
Buyer and the Company will, and will cause its Subsidiaries
to, take all commercially reasonable actions necessary to
obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other person
required to be obtained or made by the Buyer, the Company or
any of their Subsidiaries in connection with the Merger or
the taking of any action contemplated thereby or by this
Agreement. The Company shall obtain and deliver to the
Buyer a duly executed agreement of the United Safeguard
Distributors Association in form and substance satisfactory
to the Buyer in its sole and reasonable discretion pursuant
to which the United Safeguard Distributors Association
waives all of its rights to receive grants of options to
acquire securities of the Company under Section 4.1(g)(2) of
the Plan of Reorganization and any and all additional claims
or rights it may have with respect to grants of options or
equity awards (other than awards under the USDA Restricted
Stock Award Agreement dated January 2, 2001) from the
Company or any successor thereto, including, but not limited
to, any such rights (other than awards under the USDA
Restricted Stock Award Agreement dated January 2, 2001)
arising under the Plan of Reorganization, any stock option
or equity plan, agreement or arrangement of the Company or
otherwise. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving
Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of either of
Sub or the Company, the proper officers and directors of
each party to this Agreement shall take all such necessary
action.
Section 6.6 Termination of Stockholders Agreement.
The Company shall take all action, and shall
obtain the consent, approval or agreement of any person,
required to terminate in its entirety, effective at the
Effective Time, the Stockholders Agreement, dated as of
January 2, 2001, by and among the Company and the
securityholders of the Company party thereto (the "Company
Stockholders Agreement"), so that as of the Effective Time,
the Company Stockholders Agreement shall be void and of no
further force or effect and no person shall have any rights
or obligations whatsoever thereunder.
Section 6.7 FIRPTA Statement.
On or prior to the Closing Date, (i) the
Representative shall cause the Company to deliver to the
Representative a statement, as contemplated by and meeting
the requirements of Sections 1.1445-2(c)(3) and 1.897-2(h)
of the Treasury regulations, certifying that the shares of
Company Common Stock are not U.S. real property interests
within the meaning of the Code and applicable Treasury
regulations and (ii) the Representative shall deliver such
statement to the Buyer.
Section 6.8 Public Disclosure.
The Buyer 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
this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation,
except as may be required by law or, in the case of the
Buyer, the rules and regulations of the New York Stock
Exchange.
Section 6.9 Tax Matters.
(a) The parties shall, unless prohibited by
applicable law, cause the taxable period of the Company and each
of its Subsidiaries to end as of the Closing Date. The Buyer will
not permit the Company to take any actions on the Closing
Date that are out of the ordinary course of business, except
as contemplated by this Agreement. For purposes of this
Agreement, in the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion
of such Tax related to the portion of such Tax period ending
on the Closing Date shall (i) in the case of any Taxes other
than Taxes based upon or related to income, sales, gross
receipts, premiums, wages, capital expenditures or expenses,
be deemed to be the amount of such Tax for the entire Tax
period multiplied by a fraction the numerator of which is
the number of days in the Tax period ending on the Closing
Date and the denominator of which is the number of days in
the entire Tax period, and (ii) in the case of any Tax based
upon or related to income, sales, gross receipts, premiums,
wages, capital expenditures or expenses, be deemed to be
equal to the amount which would be payable if the relevant
Tax period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations will
be made in a manner consistent with the prior practices of
the Company and its Subsidiaries.
(b) The Buyer shall prepare or cause to be
prepared and file or cause to be filed all Tax Returns for the
Company and its Subsidiaries that are filed after the Closing Date.
All such Tax Returns (other than the federal and state
income Tax Returns for the taxable period beginning January
1, 2003 and ending on the Closing Date to the extent such
Tax Returns relate to the amount of the goodwill of the
Company and its Subsidiaries (prior to the effect of the
Section 338 Election, as defined in Section 8.2(a))) that
relate to a Pre-Closing Period (as defined in Section
8.2(a)) will be prepared in a manner consistent with the
prior practices of the Company and its Subsidiaries unless
prohibited by applicable law. Any such Tax Return will be
provided to the Representative 30 days prior to the due date
for filing such Tax Return (or, if required to be filed
within 30 days of the Closing, as soon as reasonably
practicable following the Closing). The Representative will
have the right to review and comment on such Tax Return.
(c) Except as otherwise provided in this
Section 6.9(c), if any notice of deficiency, proposed adjustment,
adjustment, assessment, audit, examination or other administrative
or court proceeding, suit, dispute or other claim (a "Tax
Claim") is delivered, sent, commenced or initiated against
the Buyer or any of its affiliates by any taxing authority,
the Buyer shall be solely responsible for controlling the
defense of such Tax Claim. If any Tax Claim in respect of
which indemnity may be sought by the Buyer or its affiliates
pursuant to Section 8.2 is asserted in writing against the
Buyer or any of its affiliates, the Buyer shall promptly
notify the Representative of such Tax Claim within 15 days
of the Buyer's receipt of written notice of such Tax Claim
and shall give the Representative such information with
respect thereto as the Representative may reasonably
request. The Representative may elect to discharge, at any
time, the indemnification obligation of the Stockholders
and Optionholders under Section 8.2 with respect to any such
Tax Claim by paying to the Buyer in accordance with the
procedures set forth in the Payment and Escrow Agreement the
amount of the Taxes asserted by the relevant taxing
authority as due and payable with respect to such Tax Claim,
calculated on the date of such payment. The Representative,
at its own expense, may participate in and, upon timely
written notice to the Buyer, assume the defense of any such
Tax Claim to the extent the issues involved in such Tax
Claim may result in the Stockholders and Optionholders
having an indemnification obligation under Section 8.2;
provided, however, that, notwithstanding anything to the
contrary set forth herein, (i) the Representative shall keep
the Buyer fully informed of any proceedings, events and
developments related to or in connection with such Tax
Claim; (ii) the Buyer shall be entitled to receive copies of
all correspondence and documents related to such Tax Claim;
(iii) the Representative shall consult with the Buyer and
shall not enter into any settlement with respect to any such
Tax Claim without the Buyer's prior written consent, which
shall not be unreasonably withheld; and (iv) at its own cost
and expense, the Buyer shall have the right to participate
in (but not control) the defense of such Tax Claim. The
costs and expenses (including the cost of counsel) incurred
in contesting any such Tax Claim shall be borne by the party
that would be liable for any Tax liability resulting from
such Tax Claim under this Agreement (and, if such parties
are the Stockholders and Optionholders, the Buyer shall be
entitled to receive payment from the Stockholders and
Optionholders for such costs and expenses in accordance with
the procedures set forth in the Payment and Escrow
Agreement). The Buyer and its affiliates agree to cooperate
with the Representative in pursuing any such Tax Claim. The
Buyer shall be entitled to receive payment from the
Stockholders and Optionholders for any reasonable out-of-
pocket expenses incurred in connection with such
cooperation, including the cost of counsel, in accordance
with the procedures set forth in the Payment and Escrow
Agreement. Whether or not the Representative chooses to
defend or prosecute any Tax Claim, all of the parties hereto
shall cooperate in the defense or prosecution thereof.
Notwithstanding any other provision of this Agreement, the
Representative shall not have the right to control, defend,
settle, compromise or contest any Tax Claim to the extent
that the Buyer and its affiliates waives their right to
indemnification from the Stockholders and Optionholders with
respect to such Tax Claim.
(d) The Buyer, the Company and its Subsidiaries
and the Stockholders shall cooperate fully, as and to the extent
reasonably requested by any other party to this Agreement,
in connection with the filing of Tax Returns pursuant to
this Section 6.9. Such cooperation shall include the
retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to
any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to
provide additional information and explanation of any
material provided hereunder. The Company and its
Subsidiaries and the Stockholders shall (A) retain all
books and records with respect to Tax matters pertinent to
the Company and its Subsidiaries relating to any taxable
period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent
notified by the Buyer or the Representative, any extensions
thereof) of the respective taxable periods, and to abide by
all record retention agreements entered into with any taxing
authority, and (B) give the other party reasonable written
notice prior to transferring, destroying or discarding any
such books and records and, if the other party so requests,
the Company and its Subsidiaries or the Stockholders, as the
case may be, shall allow the other party to take possession
of such books and records. The Buyer and the Stockholders
shall, upon request, use their reasonable best efforts to
obtain any certificate or other document from any
Governmental Entity or any other person as may be necessary
to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(e) All Tax sharing agreements or similar agreements
with respect to or involving the Company or any of its
Subsidiaries shall be terminated as of the Closing Date and,
after the Closing Date, the Company and its Subsidiaries
shall not be bound thereby or have any liability thereunder.
Section 6.10 Indemnification and Insurance.
(a) The provisions with respect to indemnification and
exculpation from liability set forth in the Sub Certificate
of Incorporation and the Sub By-Laws shall not be amended,
repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who on or prior
to the Effective Time were directors or officers of the
Company, unless such modification is required by law.
(b) The Buyer shall, or shall cause the Surviving
Corporation to, buy a "tail" that covers, until the sixth
anniversary of the Effective Time, those persons who are as
of the Effective Time covered by the Company's current
directors' and officers' liability insurance policy (a copy
of which has been heretofore delivered to the Buyer) with
respect to those matters covered by the Company's current
directors' and officers' liability policy and relating to
facts or events that occurred prior to the Effective Time;
provided, however, that in no event shall the Buyer or the
Surviving Corporation be required to expend for such tail in
excess of 300% of the portion of the last annual premium
paid by the Company for the Company's current directors' and
officers' liability coverage; and, provided, further, that
if the cost of such tail exceeds 300% of the portion of the
last annual premium paid by the Company for the Company's
current directors' and officers' liability coverage, then
the Buyer or the Surviving Corporation shall only be
obligated to obtain such coverage as can be obtained for an
amount equal to 300% of the portion of the last annual
premium paid by the Company for the Company's current
directors' and officers' liability coverage.
(c) The provisions of this Section 6.10 are intended
to be for the benefit of, and shall be enforceable by, each
indemnified or insured party referred to above in this
Section 6.10.
ARTICLE VII
CONDITIONS TO MERGER
Section 7.1 Conditions to Each Party's Obligation to
Effect the Merger.
The respective obligations of each party to
this Agreement to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. The Merger Proposal shall
have been approved and adopted by the requisite Merger Vote.
(b) HSR Act. The waiting period applicable to
the consummation of the Merger under the HSR Act shall have
expired or been terminated and no action shall have been
instituted by the Department of Justice or the Federal Trade
Commission challenging or seeking to enjoin the consummation
of the transactions contemplated hereby, which action shall
have not been withdrawn or terminated.
(c) Approvals. Other than the filing of the
Certificate of Merger, all consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, or
expirations of waiting periods imposed by, any Governmental
Entity shall have been filed, occurred or been obtained.
(d) No Injunctions or Illegality. No order,
ruling, judgment or injunction by any court of competent
jurisdiction or other Governmental Entity restraining,
enjoining or otherwise prohibiting the consummation of the
Merger or limiting or restricting the Buyer's conduct or
operation of the Buyer's and its Subsidiaries' (including
the Surviving Corporation) business after the Merger shall
have been issued and then be in effect (provided, that the
Buyer and the Company shall use their reasonable best
efforts to have any such order, ruling, judgment or
injunction vacated or lifted); and there shall there not be
any statute, rule or regulation enacted, enforced or deemed
applicable to the Merger which prohibits, restrains,
restricts or enjoins the consummation of the Merger or has
the effect of making the Merger illegal.
(e) Payment and Escrow Agreement. The Buyer, the
Representative and the Payment and Escrow Agent shall have
executed and delivered the Payment and Escrow Agreement.
Section 7.2 Additional Conditions to Obligations
of the Buyer and Sub.
The obligations of the Buyer and Sub to effect
the Merger shall be subject to the satisfaction or waiver by
the Buyer prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company set forth in
this Agreement, if not qualified by materiality, shall be
true and correct in all material respects or, if qualified
by materiality, shall be true and correct in all respects,
in each case, as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date
(except for representations and warranties which speak
solely as of another date, which shall be, if not qualified
by materiality, true and correct in all material respects
or, if qualified by materiality, shall be true and correct
in all respects, in each case, as of such date); and the
Buyer shall have received a certificate of the Company
executed by the chief executive officer and the chief
financial officer of the Company to such effect.
(b) Performance of Obligations of the Company.
The Company shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date; and the Buyer
shall have received a certificate of the Company executed by
the chief executive officer and the chief financial officer
of the Company to such effect.
(c) No Pending or Threatened Actions. No
action or proceeding by any Governmental Entity or other person
seeking to restrain, enjoin or otherwise prohibit the
consummation of the Merger or limit or restrict the Buyer's
conduct or operation of the Buyer's and its Subsidiaries'
(including the Surviving Corporation) business after the
Merger shall then be threatened, instituted or pending
before any court of competent jurisdiction or other
Governmental Entity.
(d) Funding. The Buyer shall have obtained
adequate funding under the Second Amended and Restated Revolving
Credit Agreement, dated as of July 13, 2001 and as amended
through the date hereof, by and among the Buyer, Fleet
National Bank and certain other financial institutions, to
enable the Buyer to deliver the Indebtedness Payment Fund
and the Initial Aggregate Merger Consideration in accordance
with this Agreement.
(e) Company Options and Company Warrants.
The Company shall have obtained and delivered to the Buyer a duly
executed Optionholder Agreement from each Optionholder; all
of the Company Warrants either shall have been exercised or
shall have been terminated and become void in accordance
with the Warrant Agreement; and the Buyer shall have
received a certificate of the Company executed by the chief
executive officer and the chief financial officer of the
Company to such effect.
(f) Resignations. All officers and directors of the
Company and any of its Subsidiaries who the Buyer has
requested resign, shall have resigned.
(g) Consents. The Company shall have obtained the
Company Third Party Consents and delivered evidence thereof
reasonably satisfactory to the Buyer.
(h) Dissenters. Holders of no more than 1% of the
outstanding shares of Company Common Stock shall have
exercised appraisal rights in accordance with Section 262 of
the DGCL.
(i) Debt and Capitalization. The Buyer shall have
received versions, updated as of immediately prior to the Effective
Time, of Sections 3.3(a) and 3.3(c) of the Company
Disclosure Letter containing all information necessary to
permit preparation of Exhibits 1, 2 and 6 to the Payment and
Escrow Agreement and otherwise in form and substance
satisfactory to the Buyer.
(j) Safeguard Business Systems Limited.
Immediately prior to the Effective Time, the Company shall have
delivered certificates representing all of the outstanding shares of
capital stock of Safeguard Business Systems Limited, free
and clear of any security interests, liens, claims, pledges,
options, rights of first refusal, restrictions, charges and
other encumbrances or restrictions of any nature whatsoever
and accompanied by stock powers duly endorsed in blank or
duly executed instruments of transfer, to NEBS Business
Products Limited in exchange for a note substantially in the
form of Exhibit D hereto.
Section 7.3 Additional Conditions to Obligations of the
Company.
The obligation of the Company to effect the
Merger shall be subject to the satisfaction or waiver by the
Company prior to the Effective Time of the following
additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Buyer set forth in
this Agreement, if not qualified by materiality, shall be
true and correct in all material respects or, if qualified
by materiality, shall be true and correct in all respects,
in each case, as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date
(except for representations and warranties which speak
solely as of another date, which shall be, if not qualified
by materiality, true and correct in all material respects
or, if qualified by materiality, shall be true and correct
in all respects, in each case, as of such date); and the
Company shall have received a certificate of the Buyer
executed by an executive officer of the Buyer to such
effect.
(b) Performance of Obligations of the Buyer.
The Buyer shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date; and the Company
shall have received a certificate signed on behalf of the
Buyer by an executive officer of the Buyer to such effect.
(c) No Pending or Threatened Actions. No
action or proceeding by any Governmental Entity or other person
seeking to restrain, enjoin or otherwise prohibit the
consummation of the Merger shall then be threatened,
instituted or pending before any court of competent
jurisdiction or other Governmental Entity.
ARTICLE VIII
SURVIVAL AND INDEMNIFICATION
Section 8.1 Survival.
(a) The respective representations, warranties,
covenants and agreements of the Company and the Buyer contained in
this Agreement shall survive the Closing for a period of
eighteen months and shall terminate and be of no further
force or effect as of the date that is eighteen months after
the Effective Time; provided however, that the
representations and warranties of the Company in Sections
3.5, 3.6, 3.7, 3.9, 3.10, 3.14, 3.15, 3.16, 3.18, 3.19,
3.21, 3.22, 3.23, 3.24, 3.26 and 3.27 shall survive the
Closing for a period of six months and shall terminate and
be of no further force or effect as of the date that is six
months after the Effective Time.
(b) No entity or person shall be entitled to any
indemnification under Section 8.2 or 8.3, respectively, with
respect to any breach of a representation or warranty or
covenant or agreement after the termination thereof pursuant
to Section 8.1(a), except for claims previously asserted
pursuant to Section 8.4 and the representation, warranty,
covenant or agreement that is the subject of such properly
asserted claim, and the indemnification obligation of the
Stockholders and Optionholders or the Buyer with respect
thereto, shall survive until such time that such claim is
resolved in accordance herewith.
Section 8.2 Indemnification by the Stockholders and
Optionholders.
(a) The Stockholders and Optionholders shall indemnify the
Buyer and its affiliates and their respective officers,
directors, employees and agents against and hold them
harmless: (i) from any loss, liability, damage, demand,
claim, cost, suit, action or cause of action, judgment,
award, assessment, interest, penalty or expense (including,
without limitation, reasonable expenses of investigation and
reasonable attorneys' and consultants' fees) (any of the
foregoing being hereinafter referred to individually as a
"Loss" and collectively as "Losses") suffered or incurred by
any such indemnified person for or on account of or arising
from or in connection with (A) any breach of any
representation or warranty of the Company in this Agreement,
(B) any breach of any covenant or agreement of the Company
in this Agreement, (C) any claim, suit, action or cause of
action brought by or on behalf of any holder of a Company
Warrant or any potential holder of a Company Warrant that
remains issuable by the Company under the Plan of
Reorganization, whether relating to the Warrant Notice or
otherwise or (D) any claim, suit, action or cause of action
brought by or on behalf of a Stockholder with respect to the
disclosures contained in the Proxy Statement; and (ii) (A)
from any and all Taxes imposed upon the Company or any of
its Subsidiaries with respect or pursuant to (x) any taxable
period ending on or prior to the Closing Date, or with
respect to any taxable period beginning prior to and ending
after the Closing Date, the portion of such taxable period
ending on and including the Closing Date (a "Pre-Closing
Period"), (y) Treasury regulation Section 1.1502-6 (or any
comparable provision under state, local or foreign law or
regulation imposing several liability upon members of a
consolidated, combined, affiliated or unitary group) for any
Pre-Closing Period or (z) any and all Taxes of any person
(other than the Company and its Subsidiaries) imposed on the
Company or any of its Subsidiaries as a transferee or
successor, by contract or pursuant to any law, rule or
regulation, which Taxes relate to a Pre-Closing Period,
excluding in the case of clauses (x), (y) and (z) above, (1)
the amount of any Tax that has been specifically taken into
account in determining the Adjusted Working Capital on the
Final Closing Balance Sheet for purposes of calculating the
Final Aggregate Merger Consideration pursuant to Section
2.1(e) and (2) the amount of any Tax to the extent the
Stockholders and Optionholders are required to indemnify the
Buyer and its affiliates for such Tax pursuant to Section
8.2(a)(ii)(B) hereof and (B) if any Tax Return required to
be filed in connection with any election by the Buyer under
Section 338(g) of the Code (or any similar provision of
state, local or other law) (the "Section 338 Election") with
respect to the Buyer's acquisition of the Company pursuant
to the Merger reflects an adjusted tax basis of the goodwill
of the Company as of the Closing Date (and prior to the
effect of the Section 338 Election) of less than $59,884,000
(based on the reasonable determination of the Buyer, after
consultation with Deloitte & Touche LLP, independent
certified public accountants for the Buyer, and after
consideration of all information concerning the Company that
the Buyer deems relevant to such determination), from the
excess of (x) the amount of Taxes (including any alternative
minimum tax or similar tax under state, local or other law)
shown as due on any such Tax Return over (y) the amount of
Taxes that would have been shown as due on such Tax Return
if such adjusted tax basis had been equal to $59,884,000.
(b) The Stockholders and Optionholders shall
have no obligation under Section 8.2(a)(i) until the aggregate
amount of Losses suffered or incurred by the indemnified
persons thereunder exceeds $250,000 (the "Deductible"), and
thereafter, subject to the next sentence in this Section
8.2(b), the obligation of the Stockholders and Optionholders
under Section 8.2(a)(i) shall be for all Losses in excess of
the Deductible suffered or incurred by the indemnified
persons thereunder; provided that, the Deductible shall not
apply to Section 8.2(a)(i)(A) with respect to any breach of
any of the representations and warranties in the first
sentence of Section 3.3(a) or in Section 3.3(b) and the
Stockholders and Optionholders shall indemnify the
indemnified persons under Section 8.2(a) for the entire
amount of any Loss suffered or incurred by such indemnified
persons for or on account of or arising from or in
connection with any breach of any of the representations and
warranties in the first sentence of Section 3.3(a) or in
Section 3.3(b). The obligation of the Stockholders and
Optionholders under Sections 8.2(a)(i) and (ii)(A) shall be
limited to the lesser of (i) $6,000,000 of the Equity Escrow
Fund or (ii) the portion of the Equity Escrow Fund from time
to time remaining with the Payment and Escrow Agent under
the Payment and Escrow Agreement, and the Stockholders and
Optionholders shall have no further obligation under
Sections 8.2(a)(i) and (ii)(A) after the earlier of (x)
$6,000,000 of the Equity Escrow Fund has been distributed to
the Buyer with respect to the obligation of the Stockholders
and Optionholders under Sections 8.2(a)(i) and (ii)(A) in
accordance with the Payment and Escrow Agreement or (y) the
entire Equity Escrow Fund has been otherwise paid or
distributed in accordance with the Payment and Escrow
Agreement. The obligation of the Stockholders and
Optionholders under Section 8.2(a)(ii)(B) shall be limited
to the lesser of (i) $2,900,000 of the Equity Escrow Fund or
(ii) the portion of the Equity Escrow Fund from time to time
remaining with the Payment and Escrow Agent under the
Payment and Escrow Agreement, and the Stockholders and
Optionholders shall have no further obligation under Section
8.2(a)(ii)(B) after the earlier of (x) $2,900,000 of the
Equity Escrow Fund has been distributed to the Buyer with
respect to the obligation of the Stockholders and
Optionholders under Section 8.2(a)(ii)(B) in accordance with
the Payment and Escrow Agreement or (y) the entire Equity
Escrow Fund has been otherwise paid or distributed in
accordance with the Payment and Escrow Agreement. The
obligations of the Stockholders and Optionholders under
Section 8.2(a) shall be several, and not joint, in
proportion to their respective ownership percentage
interests equal to a quotient, expressed as a percentage,
obtained by dividing (i) in the case of a Stockholder, the
number of shares of Company Common Stock held by such
Stockholder immediately prior to the Effective Time or, in
the case of an Optionholder, the number of shares of Company
Common Stock subject to Company Options outstanding
immediately prior to the Effective Time held by such
Optionholder immediately prior to the Effective Time by (ii)
the Fully Diluted Common Stock Number (each an "Ownership
Percentage Interest"). The foregoing limitations in this
Section 8.2(b) shall not apply to any knowing and
intentional or fraudulent breaches of the representations,
warranties, covenants or agreements of the Company in this
Agreement.
Section 8.3 Indemnification by the Buyer.
(a) The Buyer shall indemnify the Stockholders and
Optionholders (and, in the case of a Stockholder or
Optionholder that is not an individual, such Stockholder's
or Optionholder's affiliates and their respective officers,
directors, employees and agents) and hold them harmless
from, any Losses suffered or incurred by any Stockholder or
Optionholder for or on account of or arising from or in
connection with (i) any breach of any representation or
warranty of the Buyer in this Agreement or (ii) any breach
of any covenant or agreement of the Buyer in this Agreement.
(b) The Buyer shall have no obligation under
Section 8.3(a)until the aggregate amount of Losses suffered or
incurred by the indemnified persons thereunder exceeds $250,000,
and thereafter, subject to the next sentence in this Section
8.3(b), the obligation of the Buyer under Section 8.3(a)
shall be for all Losses in excess of $250,000 suffered or
incurred by the indemnified persons thereunder. The
obligation of the Buyer under Section 8.3(a) shall be
limited to an amount equal to the portion of the Equity
Escrow Fund from time to time remaining with the Payment and
Escrow Agent under the Payment and Escrow Agreement and the
Buyer shall have no further obligation under Section 8.3(a)
after the entire Equity Escrow Fund has been paid or
distributed in accordance with the Payment and Escrow
Agreement. The foregoing limitations in this Section 8.3(b)
shall not apply to any knowing and intentional or fraudulent
breaches of the representations, warranties, covenants or
agreements of the Buyer in this Agreement.
Section 8.4 Procedures Relating to Indemnification.
(a) An indemnified person under Sections 8.2 or 8.3 (the
"Indemnified Party") shall give prompt written notice to an
indemnifying party (the "Indemnifying Party") of any Loss in
respect of which such Indemnifying Party has a duty to
indemnify such Indemnified Party under Sections 8.2 or 8.3
(a "Claim"), specifying in reasonable detail the nature of
the Loss for which indemnification is sought, the section or
sections of this Agreement to which the Claim relates and
the amount of the Loss involved (or, if not then
determinable, a reasonable good faith estimate of the amount
of the Loss involved), except that any delay or failure so
to notify the Indemnifying Party shall only relieve the
Indemnifying Party of its obligations hereunder to the
extent, if at all, that it is prejudiced by reason of such
delay or failure. Any such notice to be given to an
Indemnifying Party under Section 8.2 or by an Indemnified
Party under Section 8.3 shall be given to or by the
Representative.
(b) Except with respect to Tax Claims (which
shall be governed exclusively by Section 6.9(c)), if a Claim
results from any claim, suit, action or cause of action brought
or asserted by a third party (a "Third Party Claim"), the
Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory
to the Indemnified Party and the payment of all expenses.
The Indemnified Party shall have the right to employ
separate counsel in such Third Party Claim and participate
in such defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Party.
If the Indemnifying Party fails to assume the defense of any
Third Party Claim within 10 days after notice thereof, the
Indemnified Party shall have the right to undertake the
defense, compromise or settlement of such Third Party Claim
for the account of the Indemnifying Party, subject to the
right of the Indemnifying Party to assume the defense of
such Third Party Claim with counsel reasonably satisfactory
to the Indemnified Party at any time prior to the
compromise, settlement or final determination thereof.
Anything in this Section 8.4 to the contrary
notwithstanding, the Indemnifying Party shall not, without
the Indemnified Party's prior written consent, settle or
compromise any Third Party Claim or consent to the entry of
any judgment with respect to any Third Party Claim which
would have an adverse effect on the Indemnified Party.
Except with respect to any Third Party Claim relating to
Taxes, the Indemnifying Party may, without the Indemnified
Party's prior written consent, compromise or settle any such
Third Party Claim or consent to entry of any judgment with
respect to any Third Party Claim which requires solely money
damages paid by the Indemnifying Party, and which includes
as an unconditional term thereof the release by the claimant
or the plaintiff of the Indemnified Party from all liability
in respect of such Third Party Claim.
(c) With respect to any Claim other than a
Third Party Claim, the Indemnifying Party shall have ten days
from receipt of notice from the Indemnified Party of such Claim
within which to respond thereto. If the Indemnifying Party
does not respond within such ten-day period, the
Indemnifying Party shall be deemed to have accepted
responsibility to make payment and shall have no further
right to contest the validity of such Claim. If the
Indemnifying Party notifies the Indemnified Party within
such ten-day period that it rejects such Claim in whole or
in part, the Indemnified Party shall be free to pursue such
remedies as may be available to the Indemnified Party under
applicable law.
(d) If any Indemnified Party receives insurance
proceeds as a result of any Losses with respect to which it has
also received an indemnification payment or payments from an
Indemnifying Party hereunder, the Indemnified Party shall
pay the amount of such insurance proceeds (but not in excess
of the indemnification payment or payments actually received
from the Indemnifying Party with respect to such Losses
hereunder) to the Indemnifying Party as such insurance
proceeds are actually received by the Indemnified Party.
Section 8.5 Characterization of Indemnification Payments
All amounts paid by the Stockholders to the
Buyer or its affiliates or by the Buyer to the Stockholders
or their respective affiliates pursuant to this Article VIII
shall be treated as adjustments to the Final Aggregate
Merger Consideration for all Tax purposes.
Section 8.6 Exclusive Remedy.
From and after the Effective Time, the
indemnification rights provided in this Agreement shall be
the sole and exclusive remedy available to the parties
hereto with respect to any breach of the representations,
warranties, covenants or agreements of the parties in this
Agreement; provided however, that the limitation in this
Section 8.6 shall not apply to any knowing and intentional
or fraudulent breaches of any representations, warranties,
covenants or agreements of the parties in this Agreement.
ARTICLE IX
REPRESENTATIVE
Section 9.1 Authority.
From and after the Effective Time, ▇▇. ▇▇▇▇▇
▇▇▇▇▇▇ (the "Representative") shall serve as the sole and
exclusive representative of the Stockholders and
Optionholders, and their respective successors, under this
Agreement and the Payment and Escrow Agreement and as
attorney-in-fact and agent for and on behalf of each
Stockholder and Optionholder. From and after the Effective
Time, the Representative shall represent, and shall take all
action for and on behalf of, the Stockholders and
Optionholders, and their respective successors, with respect
to all matters arising under this Agreement or the Payment
and Escrow Agreement, including, without limitation, with
respect to (i) the determination of the merger consideration
pursuant to Article II, (ii) the indemnification obligations
of the Stockholders and Optionholders under Article VIII,
including the defense or settlement of any claims and the
making of payments with respect thereto, (iii) giving or
receiving all notices required to be given by or to any
Stockholder or Optionholder under this Agreement or the
Payment and Escrow Agreement, (iv) all action necessary in
connection with any amendment, extension, waiver or
assignment of this Agreement, (v) the execution of the
Payment and Escrow Agreement for and on behalf of the
Stockholders and Optionholders, and their respective
successors, and (vi) any and all additional action as is
contemplated to be taken by or on behalf of the Stockholders
and Optionholders by the Representative pursuant to this
Agreement and the Payment and Escrow Agreement.
Section 9.2 Successors.
If ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇ resigns from her position as
the Representative, dies or otherwise becomes unable to
serve as the Representative, Stockholders and Optionholders
having an aggregate Ownership Percentage Interest greater
than 50% shall select another representative to fill such
vacancy and such successor Representative shall be deemed to
be the Representative for all purposes of this Agreement and
the Payment and Escrow Agreement.
Section 9.3 Actions; Indemnification.
All decisions and actions by the Representative,
including without limitation any agreement between the
Representative and the Buyer or the Payment and Escrow Agent
relating to indemnification obligations of the Stockholders
and Optionholders under Article VIII, including the defense
or settlement of any claims and the making of payments with
respect hereto, shall be binding upon all of the
Stockholders and Optionholders, and their respective
successors, and no Stockholders or Optionholders, or any of
their respective successors, shall have the right to object,
dissent, protest or otherwise contest the same. The
Representative shall incur no liability to the Stockholders
or Optionholders, or any of their respective successors,
with respect to any action taken or suffered by the
Representative in reliance upon any notice, direction,
instruction, consent, statement or other documents believed
by the Representative to be genuinely and duly authorized,
nor for any other action or inaction with respect to the
indemnification obligations of the Stockholders and
Optionholders under Article VIII, including the defense or
settlement of any claims and the making of payments with
respect thereto, except to the extent resulting from the
Representative's own willful misconduct or gross negligence.
The Representative may, in all questions arising under this
Agreement or the Payment and Escrow Agreement, rely on the
advice of counsel, and shall not be liable to the
Stockholders or Optionholders, or any of their respective
successors, for anything done, omitted or suffered in good
faith by the Representative. The Stockholders and
Optionholders shall indemnify the Representative and hold
the Representative harmless against any loss, liability or
expense incurred without gross negligence or bad faith on
the part of the Representative and arising out of or in
connection with the acceptance or administration of the
Representative's duties under this Agreement or the Payment
and Escrow Agreement out of the Representative Fund pursuant
to the Payment and Escrow Agreement, and the Representative
shall not be entitled to any indemnification hereunder from
the Stockholders, the Optionholders, the Buyer or the
Surviving Corporation after the Representative Fund has been
exhausted. The Buyer and the Payment and Escrow Agent shall
be able to rely conclusively on the instructions and
decisions of the Representative with respect to the
indemnification obligations of the Stockholders and
Optionholders under Article VIII, including the defense or
settlement of any claims or the making of payments with
respect thereto, or as to any other actions required or
permitted to be taken by the Representative under this
Agreement or the Payment and Escrow Agreement, and no party
hereunder shall have any cause of action against the Buyer
or the Payment and Escrow Agent to the extent the Buyer or
the Payment and Escrow Agent has relied upon the
instructions or decisions of the Representative.
Section 9.4 Representative Expenses.
The Representative may incur out-of-pocket
costs and expenses on behalf of the Stockholders and
Optionholders in its capacity as the Representative,
including, without limitation, with respect to the
determination of the merger consideration pursuant to
Article II and the indemnification obligations of the
Stockholders and Optionholders under Article VIII
("Representative Expenses"). The Stockholders and
Optionholders shall pay the Representative for
Representative Expenses out of the Representative Fund
pursuant to the Payment and Escrow Agreement, and the
Representative shall not be entitled to any payment
hereunder for Representative Expenses from the Stockholders,
the Optionholders, the Buyer or the Surviving Corporation
after the Representative Fund has been exhausted.
Section 9.5 Access.
Upon reasonable notice and subject to a
confidentiality undertaking in form and substance
satisfactory to the Buyer, during normal business hours
during the period after the Effective Time, the Surviving
Corporation shall (and shall cause its Subsidiaries to)
afford to the Representative reasonable access to such
personnel and records (other than privileged documents) as
the Representative may reasonably request in connection with
the discharge of his duties hereunder.
ARTICLE X
TERMINATION; FEES AND EXPENSES
Section 10.1 Termination.
This Agreement may be terminated at any time
prior to the Effective Time (with respect to Sections
10.1(b) through 10.1(i), by written notice by the
terminating party to the other party) whether before or
after approval of the Merger Proposal by the Stockholders:
(a) by mutual written consent of the Buyer and
the Company;
(b) by either the Buyer or the Company if the
Merger shall not have been consummated by June 2, 2003, provided
that the right to terminate this Agreement under this Section
10.1(b) shall not be available (i) to any party whose
failure to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Merger
to occur on or before such date or (ii) to the Company due
to the failure, for any reason, to deliver the Proxy
Statement and hold the Company Stockholders Meeting, to
obtain the Optionholder Agreements, to cause the termination
of all unexercised Company Warrants or to cause the
termination of the Company Stockholders Agreement;
(c) by either the Buyer or the Company if a
court of competent jurisdiction or other Governmental Entity
shall have issued a nonappealable final order, ruling or
injunction or taken any other action, in each case having
the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, provided that the party
seeking to terminate pursuant to this Section 10.1(c) shall
have used its reasonable best efforts to have any such
order, ruling, injunction or other action vacated or lifted;
(d) by either the Buyer or the Company, if the
requisite vote of the Stockholders in favor of the Merger Proposal
shall not have been obtained;
(e) by the Buyer, if (i) the Board of Directors
of the Company shall have changed, withdrawn, modified or qualified
the Company Board Recommendation in a manner adverse to the
Buyer or shall have resolved to do any of the foregoing,
(ii) the Board of Directors of the Company shall have agreed
to, approved or recommended a Superior Proposal or (iii) the
Company or any of its Subsidiaries, affiliates or Company
Representatives takes any action prohibited by Section 6.1;
(f) by the Company, if (i) the Board of Directors
of the Company shall have changed, withdrawn, modified or qualified
the Company Board Recommendation in a manner adverse to the
Buyer or shall have resolved to do any of the foregoing or
(ii) the Board of Directors of the Company shall have agreed
to, approved or recommended a Superior Proposal, provided
that simultaneously with such termination the Company makes
the payment required to be made pursuant to Section 10.3(b);
(g) by either the Buyer or the Company, if there
has been a breach of any representation, warranty, covenant or
agreement on the part of the other party set forth in this
Agreement, which breach shall not have been cured, in the
case of a representation or warranty, prior to the Closing
(and which breach would result in the condition to Closing
in Sections 7.2(a) or 7.3(a), as the case may be, not being
satisfied as of the Closing) or, in the case of a covenant
or agreement, within 10 business days following receipt by
the breaching party of written notice of such breach from
the other party;
(h) by either the Buyer or the Company, if the
Buyer shall have been unable to obtain funding under the Second
Amended and Restated Revolving Credit Agreement, dated as of July
13, 2001 and as amended through the date hereof, by and
among the Buyer, Fleet National Bank and certain other
financial institutions, to enable the Buyer to deliver the
Indebtedness Payment Fund and the Initial Aggregate Merger
Consideration in accordance with this Agreement; or
(i) by the Buyer, if Morgens Waterfall Vintiadis & Co. Inc.
breaches any of its obligations in the letter from it to the
Buyer dated as of the date hereof.
Section 10.2 Effect of Termination.
In the event of termination of this Agreement
as provided in Section 10.1, this Agreement shall
immediately become void and there shall be no liability or
obligation on the part of the Buyer, the Company, Sub or
their respective officers, directors, stockholders or
affiliates, except (a) this Section 10.2 and Section 10.3
shall remain in full force and effect and survive any
termination of this Agreement and (b) such termination shall
not relieve a party from liability for breach of this
Agreement prior to such termination.
Section 10.3 Fees and Expenses.
(a) Except as set forth in this Section 10.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including attorneys' and
accountants' fees) shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
(b) The Company shall pay the Buyer a
termination fee in cash equal to the total amount of the Buyer's
fees and expenses incurred in connection with the negotiation,
investigation and documentation of this Agreement and the
Merger (including attorneys' and accountants' fees) plus
$500,000 upon the termination of this Agreement (i) by the
Buyer or the Company pursuant to Section 10.1(d), (ii) by
the Buyer pursuant to Sections 10.1(e), (g) or (i) or (iii)
by the Company pursuant to Section 10.1(f). The fee, if
applicable, payable pursuant to this Section 10.3(b) shall
be paid, in the case of termination by the Buyer, within
five business days of such termination or, in the case of
termination by the Company, simultaneously with such
termination; provided, that in no event shall the Company be
required to pay the fee to the Buyer pursuant to this
Section 10.3(b) if, immediately prior to the termination of
this Agreement, the Buyer was in material breach of its
obligations under this Agreement.
(c) The Buyer shall pay the Company a termination fee in
cash equal to the total amount of the Company's fees and
expenses incurred in connection with the negotiation,
investigation and documentation of this Agreement and the
Merger (including attorneys' and accountants' fees) plus
$500,000 upon the termination of this Agreement by the Buyer
or the Company pursuant to Section 10.1(h). The fee, if
applicable, payable pursuant to this Section 10.3(c) shall
be paid, in the case of termination by the Company, within
five business days of such termination or, in the case of
termination by the Buyer, simultaneously with such
termination; provided, that in no event shall the Buyer be
required to pay the fee to the Company pursuant to this
Section 10.3(c) if, immediately prior to the termination of
this Agreement, the Company was in material breach of its
obligations under this Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendment.
This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of
the Merger Proposal by the Stockholders, but, after any such
approval, no amendment shall be made which by law requires
further approval by such holders without such further
approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the
parties hereto.
Section 11.2 Extension; Waiver.
At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally
allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on
the part of a party hereto to any such extension or waiver
shall be valid only if set forth in a written instrument
signed on behalf of such party.
Section 11.3 Transfer Taxes.
All sales, use, transfer, recording, ad
valorem, privilege, documentary, gross receipts,
registration, conveyance, excise, license, gains, stamp,
duties, value added or similar Taxes and fees arising out
of, in connection with or attributable to the transactions
effected pursuant to this Agreement shall be borne and paid
by the Stockholders in proportion to their respective
Ownership Percentage Interests.
Section 11.4 Notices.
All notices and other communications hereunder
shall be in writing and shall be delivered personally or by
next-day courier or sent by facsimile with confirmation of
receipt to the parties at the addresses specified below (or
at such other address for a party as shall be specified by
like notice). Any such notice or other communication shall
be effective upon receipt, if personally delivered or sent
by facsimile, or one day after delivery to a courier for
next-day delivery.
(a) if to the Buyer or Sub, to:
New England Business Service, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel and
Secretary
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute
notice) to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Safeguard Business Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute
notice) to:
▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Representative, to:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute
notice) to:
▇▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 11.5 Interpretation.
When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words
"without limitation."
Section 11.6 Counterparts.
This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and
all of which together shall be deemed to be one and the same
instrument.
Section 11.7 Entire Agreement; No Third Party
Beneficiaries.
This Agreement (including the Confidentiality
Agreement and the other documents and instruments referred
to herein) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section
6.10(c) and Article VIII, is not intended to confer upon any
person other than the parties hereto any rights or remedies
hereunder.
Section 11.8 Governing Law.
This Agreement shall be governed by and
construed in accordance with the laws of the State of
Delaware, without regard to the conflict of laws rules
thereof.
Section 11.9 Enforcement.
The parties agree that irreparable damage would
occur in the event that any of the provisions of this
Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and
provisions of this Agreement, this being in addition to any
other remedy to which they are entitled at law (subject to
Section 11.10) or in equity. Each of the parties hereto (a)
irrevocably submits to exclusive jurisdiction of any federal
or state court located in the State of Delaware in the event
any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement prior to the
Effective Time or, after the Effective Time, to enforce any
arbitral award rendered pursuant to Section 11.10 and (b)
irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any
action or proceeding with respect to this Agreement, the
transactions contemplated hereby, any provision hereof or
the breach, performance, enforcement, validity or invalidity
hereof, (i) any claim that it is not personally subject to
the jurisdiction of the above-named courts for any reason
other than the failure to serve process, (ii) that it or its
property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts
(whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise) and (iii) to the fullest
extent permitted by applicable law, that (A) the suit,
action or proceeding in any such court is brought in an
inconvenient forum, (B) the venue of such suit, action or
proceeding is improper and (C) this Agreement, or the
subject matter hereof, may not be enforced in or by such
courts.
Section 11.10 Arbitration.
(a) After the Effective Time, except as set forth in
Section 2.1(c) and except with respect to an action seeking
specific performance or another equitable remedy, any
dispute relating to or arising out of this Agreement or the
Payment and Escrow Agreement, or to a breach of this
Agreement or the Payment and Escrow Agreement, arising among
the parties or their successors, shall be settled by
arbitration in accordance with the commercial arbitration
rules of the American Arbitration Association ("AAA"). The
arbitration proceeding, including the rendering of an award,
shall take place in Wilmington, Delaware and be administered
by the AAA. The parties agree to act in good faith to
mutually select an arbitrator. If within forty-five (45)
days after submission of any dispute to arbitration, the
parties cannot mutually agree on one arbitrator, the parties
shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator, who shall be the
sole arbitrator to hear the dispute and who shall not be
affiliated with, or otherwise have any personal,
professional or business relationship with, either the
Buyer, the Company, any Stockholder, any Optionholder or
the Representative. The decision of the arbitrator shall be
final and binding on the parties hereto or their successors
and any judgment rendered by such arbitrator may be enforced
by any court of competent jurisdiction located in the State
of Delaware. Each party shall bear its own expenses in
connection with such arbitration.
(b) From and after the Effective Time, the Buyer
and the Surviving Corporation shall be considered collectively as
one and the same party and the Stockholders and
Optionholders (acting through the Representative) shall be
considered collectively as one and the same party.
Section 11.11 Severability.
In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the
validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected
or impaired thereby and such invalidity, illegality or
unenforceability shall only apply as to such party in the
specific jurisdiction where such judgment shall be made.
Section 11.12 Assignment
This Agreement shall be binding upon and inure
to the benefit of the parties named herein and their
respective successors and permitted assigns. No party may
assign either this Agreement or any of its rights, interests
or obligations hereunder (whether by operations of law or
otherwise) without the prior written consent of the other
parties.
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IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written above.
NEW ENGLAND BUSINESS SERVICE,
INC.
By/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: EVP, Chief
Financial Officer and
Treasurer
CENTURION SUB, INC.
By/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Treasurer
SAFEGUARD BUSINESS SYSTEMS,
INC.
By/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive
Officer
The undersigned agrees, as the Representative, to
be bound by Article IX and, insofar as applicable to Article
IX, by Articles II, VIII and XI.
By/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, solely in her
capacity
as the Representative