Exhibit 2.2
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
Dated as of March 15, 2004
by and among
DARR Westwood Technology Corporation,
DARR Westwood Acquisition Corporation,
The Shareholders of Westwood Computer Corporation Named Herein,
Westwood Computer Corporation,
and
▇▇▇▇▇ ▇▇▇▇▇▇, as Shareholders' Agent
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER ..........................................................1
Section 1.1. The Merger. ..............................................1
Section 1.2. Effective Time of the Merger. ............................2
Section 1.3. Effects of the Merger. ...................................2
Section 1.4. Closing. .................................................2
ARTICLE II THE SURVIVING AND PARENT CORPORATIONS...............................2
Section 2.1. Articles of Incorporation. ...............................2
Section 2.2. Bylaws. ..................................................2
Section 2.3. Directors and Officers. ..................................2
ARTICLE III EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT
CORPORATIONS; SURRENDER OF CERTIFICATES ....................3
Section 3.1. Conversion of Shares in the Merger. ......................3
Section 3.2. Conversion of Subsidiary Shares. .........................3
Section 3.3. Surrender of Certificates. ...............................3
Section 3.4. Tax Withholding. .........................................4
Section 3.5. Closing of the Company's Transfer Books. .................5
Section 3.6. Options and Stock Grants. ................................5
Section 3.7. Dissenters' Rights. ......................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY ......................6
Section 4.1. Organization and Qualification. ..........................6
Section 4.2. Capitalization. ..........................................6
Section 4.3. Subsidiaries. ............................................7
Section 4.4. Authority; Non-Contravention; Approvals. .................7
Section 4.5. Financial Statements. ....................................9
Section 4.6. Absence of Undisclosed Liabilities. ......................9
Section 4.7. Absence of Certain Changes or Events. ...................10
Section 4.8. Litigation. .............................................10
Section 4.9. No Violation of Law. ....................................11
Section 4.10. Contracts. ..............................................11
Section 4.11. Taxes. ..................................................12
Section 4.12. Employee Benefit Plans; ERISA. ..........................14
Section 4.13. Labor Controversies. ....................................17
Section 4.14. Environmental Matters. ..................................18
Section 4.15. Title to Assets. ........................................19
Section 4.16. Intellectual Property; Software. ........................19
Section 4.17. Brokers and Finders. ....................................21
Section 4.18. New Jersey Shareholders Protection Act and
Rights Agreement. .......................................21
Section 4.19. Affiliate Transactions. .................................21
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Section 4.20. Products Liability. .....................................21
Section 4.21. Relationship with Customers and Suppliers. ..............22
Section 4.22. Indemnification Claims. .................................22
Section 4.23. Absence of Questionable Payments. .......................22
Section 4.24. Board Recommendation. ...................................22
Section 4.25. Insurance. ..............................................22
Section 4.26. Government Contracts. ...................................23
Section 4.27. Shareholders. ...........................................24
Section 4.28. Disclosures. ............................................24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY ............25
Section 5.1. Organization and Qualification. .........................25
Section 5.2. Authority; Non-Contravention; Approvals. ................25
Section 5.3. Financing. ..............................................26
Section 5.4. Brokers and Finders. ....................................26
Section 5.5. Subsidiary. .............................................26
ARTICLE VI COVENANTS OF THE PARTIES ..........................................27
Section 6.1. Mutual Covenants. .......................................27
Section 6.2. Covenants of the Company. ...............................28
ARTICLE VII ADDITIONAL AGREEMENTS OF THE PARTIES .............................31
Section 7.1. Access to Information. ..................................31
Section 7.2. Acquisition Transactions. ...............................32
Section 7.3. Expenses and Fees. ......................................35
Section 7.4. Employee Benefits. ......................................36
Section 7.5. Litigation. .............................................37
Section 7.6. Third Party Standstill Agreements. ......................37
Section 7.7. Insurance. ..............................................38
ARTICLE VIII CONDITIONS ......................................................38
Section 8.1. Conditions to Each Party's Obligation to Effect the
Merger. .................................................38
Section 8.2. Conditions to Obligations of Parent and Subsidiary
to Effect the Merger. ...................................39
Section 8.3. Conditions to Obligations of the Company. ...............42
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER .................................43
Section 9.1. Termination. ............................................43
Section 9.2. Effect of Termination. ..................................45
Section 9.3. Amendment. ..............................................46
Section 9.4. Extension; Waiver. ......................................46
ARTICLE X INDEMNIFICATION ....................................................46
Section 10.1. Survival of Representations, Etc. .......................46
Section 10.2. Indemnification by Shareholders. ........................47
Section 10.3. Limitation on Indemnification. ..........................48
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Section 10.4. Indemnification by Parent. ..............................49
Section 10.5. No Contribution. ........................................49
Section 10.6. Interest. ...............................................50
Section 10.7. Insurance and Tax Benefits...............................50
Section 10.8. Procedure for Indemnification - Third-Party Claims.......50
Section 10.9. Exercise of Remedies by Parent Indemnitees Other Than
Parent...................................................52
Section 10.10. Indemnification Remedy...................................52
ARTICLE XI GENERAL PROVISIONS ................................................52
Section 11.1. Shareholders' Agent. ....................................52
Section 11.2. Further Assurances. .....................................53
Section 11.3. Notices. ................................................53
Section 11.4. Governing Law. ..........................................54
Section 11.5. Parties to Agreement. ...................................54
Section 11.6. Interpretation. .........................................54
Section 11.7. Severability. ...........................................54
Section 11.8. Assignment. .............................................55
Section 11.9. Enforcement. ............................................55
Section 11.10. Submission to Jurisdiction; Waivers. ....................55
Section 11.11. Counterparts. ...........................................55
Section 11.12. Entire Agreement. .......................................55
ARTICLE XII DEFINITIONS ......................................................56
EXHIBITS
A. Directors and Officers of the Surviving Corporation
B. Allocation of Consideration
C. Form of 5% Promissory Note
D. Form of 8% Promissory Note
E. Form of Letter of Transmittal
F. Form of Voting Agreement
G. Form of Amendment to Purchase and Sale Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 15, 2004 (this
"Agreement"), is made and entered into by and among DARR Westwood Technology
Corporation, a Delaware corporation ("Parent"), DARR Westwood Acquisition
Corporation, a New Jersey corporation and a subsidiary of Parent ("Subsidiary"),
the shareholders of the Company listed on the signature pages hereto (each a
"Principal Shareholder" and collectively the "Principal Shareholders"), Westwood
Computer Corporation, a New Jersey corporation (the "Company") and ▇▇▇▇▇ ▇▇▇▇▇▇,
as Shareholders' Agent (as defined herein).
BACKGROUND
WHEREAS, Parent, Subsidiary and the Company intend to effect a merger of
Subsidiary with and into the Company (the "Merger") in accordance with this
Agreement and the Business Corporation Act of the State of New Jersey ("NJBCA").
Upon consummation of the Merger, Subsidiary will cease to exist, and the Company
will continue as a subsidiary of Parent.
WHEREAS, this Agreement has been approved by the respective boards of
directors of Parent, Subsidiary and the Company.
WHEREAS, the Company's authorized capital stock consists of Class A Series
I (Voting) stock, no par value, and Class A Series II (Non-Voting) stock, no par
value, (the "Company Common Stock").
WHEREAS, simultaneously with the execution and delivery of this Agreement
and in order to induce Parent and Subsidiary to enter into this Agreement, the
Principal Shareholders have executed and delivered to Parent and Subsidiary an
agreement (the "Voting Agreement") pursuant to which the Principal Shareholders
have agreed to take specified actions in furtherance of the transactions
contemplated by this Agreement, including voting their shares in favor of this
Agreement, the Merger and the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined below) Subsidiary shall be
merged with and into the Company in accordance with the NJBCA, and the separate
existence of Subsidiary shall thereupon cease. The Company shall continue its
existence under the laws of the State of New Jersey and, in its capacity as the
surviving corporation in the Merger, the Company is hereinafter sometimes
referred to as the "Surviving Corporation."
Section 1.2. Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective Time") as shall be stated in a
certificate of merger (or if no time shall be
stated, upon the filing of such certificate), in such form as required by and
executed in accordance with the NJBCA, to be filed with the Department of
Treasury of the State of New Jersey in accordance with Section 14A:10-4.1 of the
NJBCA (the "Merger Filing"). The Merger Filing shall be made as soon as
practicable after the satisfaction or waiver of the conditions set forth in
Article VIII. The parties shall, subject to the provisions hereof use all
commercially reasonable efforts to consummate, as soon as practicable, the
Merger in accordance with Section 1.4.
Section 1.3. Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the NJBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of Subsidiary and the Company shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Subsidiary and the Company
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Closing. The consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Drinker
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 a.m. on
the second business day after satisfaction or waiver of the latest to occur of
the conditions set forth in Article VIII except for those conditions which are
only capable of being performed at the Closing. The date on which the Closing
actually takes place is referred to in this Agreement as the "Closing Date."
ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
Section 2.1. Articles of Incorporation. The articles of incorporation of
the Company as in effect immediately before the Effective Time shall be the
articles of incorporation of the Surviving Corporation as of the Effective Time,
and thereafter may be amended in accordance with their terms and as provided in
the NJBCA.
Section 2.2. Bylaws. The bylaws of Subsidiary as in effect immediately
before the Effective Time shall be the bylaws of the Surviving Corporation as of
the Effective Time and thereafter may be amended in accordance with their terms
and as provided by the Articles of Incorporation of the Surviving Corporation
and the NJBCA.
Section 2.3. Directors and Officers. The director and officers of the
Surviving Corporation immediately after the Effective Time shall be the
individuals identified on Exhibit A.
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ARTICLE III EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT
CORPORATIONS; SURRENDER OF CERTIFICATES
Section 3.1. Conversion of Shares in the Merger. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder of any
capital stock of Parent, Subsidiary or the Company:
(a) the total Merger Consideration (as defined below)
shall be $6,500,000, and each share of Company Common Stock (other than shares
canceled pursuant to Section 3.1(b)) shall be converted into the right to
receive (i) (A) a cash amount per share per Shareholder as set forth next to
such Shareholder's name on Exhibit B, which, in the aggregate, equals $5,245,222
(the "Cash Consideration,") (ii) a promissory note in the original principal
amount set forth on Exhibit B next to such Shareholder's name made by the
Company in favor of such Shareholder in the form attached hereto as Exhibit C
and for which the aggregate principal amount owed to all Shareholders is
$313,695 (the "5% Note") and (iii) and a promissory note in the original
principal amount set forth on Exhibit B next to such Shareholder's name made by
the Company in favor of such Shareholder in the form attached hereto as Exhibit
D, and for which the aggregate principal amount owed to all Shareholders is
$941,083 (the "8% Note", together with the 5% Note, the "Notes" and the Notes
together with the Cash Consideration, the "Merger Consideration"), payable to
the holder thereof, in each case without interest, upon surrender of the
certificate formerly representing such share in the manner provided in Section
3.3, less any required withholding taxes; and
(b) each share of capital stock of the Company, if any,
owned by Parent or any subsidiary of Parent or held in treasury by the Company
immediately before the Effective Time shall be canceled and no consideration
shall be paid in exchange therefor and shall cease to exist from and after the
Effective Time.
Section 3.2. Conversion of Subsidiary Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the shareholders of
Subsidiary, each issued and outstanding share of voting common stock, par value
$.01 per share of the Subsidiary shall be converted into one voting common
share, par value $.01 per share of the Surviving Corporation and each issued and
outstanding share of non-voting common stock, par value $.01 per share of
Subsidiary shall be converted into one non-voting common share, par value $.01
per share, of the Surviving Corporation.
Section 3.3. Surrender of Certificates.
(a) Parent shall serve as paying agent in the Merger
("Paying Agent"). Within three business days after the Effective Time, the
Paying Agent shall mail to each holder of record of a certificate or
certificates that immediately before the Effective Time represented outstanding
shares of Company Common Stock (the "Company Certificates") (i) a letter of
transmittal in the form attached hereto as Exhibit E which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon actual delivery of the Company Certificates
to the Paying Agent, and (ii) instructions for use in effecting the surrender of
the Company Certificates in exchange for the Cash Consideration. Upon surrender
of Company Certificates for cancellation to the Paying Agent, together with a
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duly executed letter of transmittal and the proper execution and delivery to
Paying Agent of such reasonable documentation, the holder of such Company
Certificates shall thereupon be entitled to receive in exchange therefor the
Cash Consideration for each share of Company Common Stock formerly represented
thereby, in accordance with Section 3.1, and the Company Certificates so
surrendered shall be canceled. No interest shall be paid or accrued, upon the
surrender of the Company Certificates, for the benefit of holders of the
Certificates on any Cash Consideration. The holder of the Company Certificates
shall be entitled to receive payments made pursuant to the Notes at such times
and in such amounts as set forth therein..
(b) At any time following the date which is twelve
months after the Effective Time, the duties of the Paying Agent shall terminate.
Thereafter, each holder of a Company Certificate may surrender such Company
Certificate to the Surviving Corporation (subject to applicable abandoned
property, escheat and similar laws), solely as general creditors therefor, for
the payment of their claim for Merger Consolidation, without any interest
thereon, which such holders may be entitled. None of the Parent, Subsidiary, the
Company or the Surviving Corporation shall be liable to a holder of shares of
Company Common Stock for any amounts delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws. If any Company
Certificates shall not have been surrendered prior to twelve months after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration in respect of such Company Certificate would otherwise escheat to
or become the property of any Governmental Authority), any such cash shall, to
the extent permitted by applicable law, become the property of the Parent, free
and clear of all claims or interest of any person previously entitled thereto.
If, after the Effective Time, subject to the terms and conditions of this
Agreement, Company Certificates formerly representing shares of Company Common
Stock are presented to the Surviving Corporation, they shall be cancelled and
exchanged for Merger Consideration in accordance with this Article III.
(c) If any Company Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the holder
claiming such Company Certificate to be lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed Company
Certificate the Merger Consideration deliverable in respect thereof determined
in accordance with this Article III. When authorizing such issuance in exchange
therefor, the Board of Directors of the Surviving Corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Company Certificate to give the
Surviving Corporation such indemnity as it may reasonably direct as protection
against any claim that may be made against the Surviving Corporation with
respect to the Company Certificate alleged to have been lost, stolen or
destroyed.
Section 3.4. Tax Withholding. Parent (or any affiliate thereof) shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any former holder of shares of Company Common
Stock such amounts as Parent (or any affiliate thereof) is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or any other provision of
federal, state, local or foreign tax law. To the extent that amounts are so
withheld by Parent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the
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former holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by Parent.
Section 3.5. Closing of the Company's Transfer Books. From and after
the Effective Time, the stock transfer books of the Company shall be closed and
no transfer of shares of Company Common Stock which were outstanding immediately
before the Effective Time shall thereafter be made.
Section 3.6. Options and Stock Grants. Prior to the Closing, the
Company shall use all reasonable efforts to cause each outstanding stock option
(each an "Option") heretofore granted under any Company stock option plan (the
"Company Stock Plan"), each outstanding phantom stock option (the "Phantom
Stock") heretofore granted under any Company phantom stock plan or agreement
granting phantom stock options or rights (whether written or oral) (the "Phantom
Stock Plan") and each outstanding warrant to purchase Common Stock (each a
"Warrant") to be exercised or terminated effective immediately prior to the
Closing and conditioned upon the Closing. As provided herein, the Company Stock
Plan, the Phantom Stock Plan and any Benefit Plan (or other plan, program or
arrangement) providing for the issuance or grant of any other interest in
respect of the capital stock of the Company shall terminate upon the Effective
Time. The Company has taken all steps necessary to ensure that the Company is
not or will not be bound by any Options, Phantom Stock, Warrants, other options,
other warrants, rights or agreements which would entitle any Person to acquire
any capital stock of the Surviving Corporation or, except as otherwise provided
in this Agreement, to receive any payment in respect thereof.
Section 3.7. Dissenters' Rights. (a) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are owned by
shareholders of the Company who have properly perfected their rights as
dissenting shareholders within the meaning of Section 14A:11-2 of the NJBCA (the
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration unless and until such shareholders shall have failed to perfect
their right of payment under applicable law, but, instead, the holders thereof
shall be entitled to payment of the fair value of such Dissenting Shares
determined in accordance with Sections 14A:11-3 through 14A:11-11 of the NJBCA.
If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right of dissent, each share of Company Common Stock held
by such shareholder shall thereupon be deemed to have been converted into the
right to receive and become exchangeable for, at the Effective Time, Merger
Consideration in the manner provided for in Section 3.1.
(b) The Company shall give Parent and Shareholders'
Agent (i) prompt notice of any notices of dissent filed pursuant to Section
14A:11-2 of the NJBCA received by the Company, withdrawals of demands for
payment and any other instruments served in connection with the exercise by
shareholders of their dissenters' rights pursuant to the NJBCA and received by
the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to notices of dissent and demands for payment under the
NJBCA. The Company and Parent shall jointly direct all negotiations and
proceedings with respect to notices of dissent and demands for payment under the
NJBCA with counsel jointly selected by Parent and the Company and any such
expenses relating to such negotiations and proceedings
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shall be paid by the Company. Each of the Company and Parent shall direct such
negotiations and proceedings in a prompt manner and shall use commercially
reasonable efforts in conducting such negotiations and proceedings. The Company
shall not, except with the prior written consent of Parent, which consent shall
not be unreasonably withheld or delayed, (x) make any payment with respect to
any such notice of dissent or demand for payment or (y) offer to settle or
settle any such notice of dissent or demand for payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Subsidiary that, except
as set forth in the disclosure schedule dated as of the date hereof (the
"Company Disclosure Schedule"), it being agreed that disclosure of any item on
the Company Disclosure Schedule shall be deemed disclosure with respect to all
sections of this Article IV if the relevance of such item to all such other
sections is clearly apparent from the face of the Company Disclosure Schedule:
Section 4.1. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey and has the requisite corporate power and authority
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted and is contemplated to be conducted following the
Closing. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so qualified and in good standing has
not and could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. True, accurate and complete copies
of the Company's articles of incorporation and bylaws, in each case as in effect
on the date hereof, including all amendments thereto, have heretofore been
delivered to Parent.
Section 4.2. Capitalization.
(a) The authorized capital stock of the Company consists
of 2,000,000 shares of Class A Series I (voting) common stock, no par value
("Series I Common Stock"), and 18,000,000 shares of Class A Series II
(non-voting) common stock, no par value ("Series II Common Stock"). 1,870,424
shares of Series I Common Stock and 16,796,866 of Series II Common Stock are
outstanding, all of which are validly issued and are fully paid, non-assessable
and free of preemptive rights and (iii) 73,840 shares of Series I Common Stock
and 247,960 shares of Series II Common Stock are held in treasury of the
Company.
(b) No bonds, debentures, notes or other indebtedness of
the Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of the
Company may vote are issued or outstanding.
(c) As of the date hereof, there are no outstanding
subscriptions, options, stock phantom rights (or rights outstanding under any
Company phantom stock plan), grants, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
rights of conversion or exchange under any outstanding security,
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instrument or other agreement, obligating the Company to issue, deliver or sell,
redeem or repurchase, or cause to be issued, delivered or sold, additional
shares of the capital stock of the Company or obligating the Company to grant,
extend or enter into any such agreement or commitment. Except as otherwise
contemplated by this Agreement, there are no voting trusts, proxies or other
agreements or understandings to which the Company is a party or is bound with
respect to the voting of any shares of capital stock of the Company.
Section 4.3. Subsidiaries. The only subsidiaries of the Company are
those set forth in Section 4.3 of the Company Disclosure Schedule. Each direct
and indirect subsidiary of the Company is duly formed or organized, validly
existing and in good standing under the laws of its jurisdiction of formation or
incorporation and has the requisite corporate or limited liability company power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted, and each subsidiary of the Company
is qualified to transact business, and is in good standing, in each jurisdiction
in which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary except in all cases
where the failure to be so qualified and in good standing has not had and could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. All of the outstanding shares of capital stock of each
subsidiary of the Company are validly issued, fully paid, nonassessable and free
of preemptive rights and are owned directly or indirectly by the Company free
and clear of any liens, claims, encumbrances, adverse rights and security
interests whatsoever. There are no subscriptions, options, warrants, rights,
calls, contracts, voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale, voting or transfer
of any shares of capital stock of or interest in any subsidiary of the Company,
including any right of conversion or exchange under any outstanding security,
instrument or agreement. Except for the capital stock of its subsidiaries, the
Company does not own, directly or indirectly, any capital stock or other
ownership interest of any corporation, partnership, limited partnership, limited
liability company, joint venture or other entity. Except for the capital stock
of other subsidiaries of the Company, each subsidiary of the Company does not
own, directly or indirectly, any capital stock or other ownership interest of
any corporation, partnership, limited partnership, limited liability company,
joint venture or other entity. The Company has delivered to Parent complete and
correct copies of the Charter and Bylaws or other organizational documents of
the Company's subsidiaries. The Company's subsidiaries do not own, directly or
indirectly, any shares of Company Common Stock.
Section 4.4. Authority; Non-Contravention; Approvals.
(a) The Company has full corporate power and authority
to execute and deliver this Agreement and, subject to the Company Shareholders'
Approval (as defined herein) to consummate the transactions. This Agreement has
been approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize the execution
and delivery of this Agreement or, except for the Company Shareholders'
Approval, the consummation by the Company of the transactions. The only vote of
holders of any class or series of capital stock of the Company or any of its
subsidiaries necessary to adopt and approve this Agreement and the Merger is the
adoption and approval of this Agreement and the Merger by the holders of a
majority of the total number of outstanding shares of Series I Common Stock
entitled to vote at the Shareholders Meeting (the "Company
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Shareholders' Approval"). The affirmative vote of the holders of any capital
stock or other securities (or any separate class thereof) of the Company or any
of its subsidiaries is not necessary to consummate the Merger or any transaction
contemplated by this Agreement other than as set forth in the preceding
sentence. This Agreement has been duly executed and delivered by the Company,
and, assuming the due authorization, execution and delivery hereof by Parent and
Subsidiary, constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that such
enforcement may be subject to (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally and (b) general equitable principles.
(b) The execution, delivery and performance of this
Agreement by the Company and the consummation of the Merger and the other
transactions will not violate, conflict with or result in any violation of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or give rise to a right of termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of Encumbrances upon any of the
properties or assets of the Company or any of its subsidiaries under (i) the
articles of incorporation or bylaws of the Company or any of its subsidiaries,
(ii) any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any Governmental Authority or court
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets, or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, contract, lease or other instrument,
obligation or agreement of any kind to which the Company or any of its
subsidiaries is now a party or by which the Company or any of its subsidiaries
or any of their respective properties or assets are bound or affected; subject
in the case of the terms, conditions or provisions described in clause (ii)
above, to obtaining (before the Effective Time) the Company Required Statutory
Approvals (as defined below) and the Company Shareholders' Approval. Excluded
from the foregoing sentences of this paragraph (b), insofar as they apply to the
terms, conditions or provisions described in clause (iii) of the first sentence
of this paragraph (b) (and whether resulting from such execution and delivery or
consummation), are such violations, conflicts, breaches, defaults, terminations,
accelerations or creations of Encumbrances that have not had and could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) Except for (i) filings under any applicable state
securities or blue sky laws or state takeover laws, (ii) the making of the
Merger Filing with the Department of Treasury of the State of New Jersey in
connection with the Merger, and (iii) any required filings with or approvals
from applicable environmental authorities, including, without limitation, the
New Jersey Industrial Site Recovery Act, as amended, public service commissions
and public utility commissions (the filings and approvals referred to in clauses
(i) through (iii) are collectively referred to as the "Company Required
Statutory Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of, any Governmental Authority is
necessary for the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby, other than
such declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
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Section 4.5. Financial Statements.
(a) The Company has furnished to Parent (i) the audited
balance sheets of the Company as of August 31, 2003 (the "Company Balance
Sheet") and as of August 31, 2002, and the related audited statements of income
and cash flows of the Company for the twelve months ended August 31, 2003 and
August 31, 2002 and (ii) the unaudited balance sheet of the Company as of
November 30, 2003 and the related statements of income and cash flows of the
Company for the three (3) months ended November 30, 2003 (collectively, the
"Company Financial Statements"). The Company Financial Statements are accurate
and complete in all material respects, have been prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP"), and
fairly present the financial position, assets and liabilities of the Company as
of the respective dates thereof, and the results of operations and cash flows of
the Company for the periods covered thereby. Since the date of the Company
Balance Sheet, (i) there has been no change in the assets, liabilities or
financial condition of the Company from that reflected in the Company Balance
Sheet, except for changes in the ordinary course of business which in the
aggregate have not been materially adverse to the Company and (ii) to the
Knowledge of the Company, no event or condition that individually or in the
aggregate has had or could reasonably be expected to have a Company Material
Adverse Effect has occurred or is continuing. The Financial Statements have been
prepared from and are in accordance with the books and records of the Company.
(b) The Company Financial Statements reflect all
liabilities of the Company, whether absolute, accrued or contingent, as of the
respective dates thereof, of the type required to be reflected or disclosed in a
balance sheet (or the notes thereto) prepared in accordance with GAAP. The
Company does not have any liabilities or obligations of any nature that are not
reflected on the Company Financial Statements other than current liabilities
(within the meaning of GAAP) incurred since the respective dates thereof in the
ordinary course of business. To the Knowledge of the Company, there is no basis
for the assertion against the Company of any material liability (other than
current liabilities referred to above) not fully reflected or reserved against
in the Company Financial Statements.
Section 4.6. Absence of Undisclosed Liabilities. Neither the Company
nor any of its subsidiaries have incurred any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies which (i) are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto or
(ii) were incurred after August 31, 2003 in the ordinary course of business,
consistent with past practices or (b) liabilities, obligations or contingencies
which have not had and could not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect.
Section 4.7. Absence of Certain Changes or Events. Except as set forth
in Section 4.7 of the Company Disclosure Schedule, since August 31, 2003, the
Company, its subsidiaries and their shareholders have conducted their business
only in the ordinary course consistent with past practice and there has been no
Company Material Adverse Effect. Without limiting the foregoing, except as set
forth in Section 4.7 of the Company Disclosure Schedule or as reflected in the
Company Balance Sheet, since the date of the Company Balance Sheet, neither the
Company nor any of its subsidiaries have (a) purchased or redeemed any shares of
their
- 9 -
respective stock (including, without limitation, the Company Common Stock), or
granted or issued any option, warrant or other right to purchase or acquire any
such shares, (b) incurred any liabilities or obligations (whether absolute,
accrued, contingent or otherwise), except liabilities and obligations incurred
in the ordinary course of business which would not have a Company Material
Adverse Effect, (c) encumbered any of their properties or assets, tangible or
intangible, except for Encumbrances incurred in the ordinary course of business,
consistent with past practice, (d) suffered any change or, to the Company's
Knowledge, received any threat of any change in any of its relations with, or
any loss or, to the Company's Knowledge, threat of loss of, any of the
suppliers, clients, distributors, customers or employees that are material to
the business of the Company or its subsidiaries, including any loss or change
which may result from the transactions contemplated by this Agreement, (e)
disposed of or has failed to keep in effect any rights in, to or for the use of
any franchise, license, permit or certificate material to the business of the
Company or its subsidiaries, (f) changed any method of keeping of its books of
account or accounting practices, (g) disposed of or failed to keep in effect any
rights in, to or for the use of any of the Intellectual Property (as hereinafter
defined) material to the business of the Company or its subsidiaries, (h) sold,
transferred or otherwise disposed of any assets, properties or rights of any of
the business of the Company or its subsidiaries, except inventory sold in the
ordinary course of business consistent with past practice, (i) entered into any
transaction, agreement or event outside the ordinary course of the conduct of
the business of the Company or its subsidiaries, (j) made nor authorized any
single capital expenditure in excess of $25,000, or capital expenditures in
excess of $100,000 in the aggregate, (k) changed or modified in any manner its
existing credit, collection and payment policies, procedures and practices with
respect to accounts receivable and accounts payable, respectively, including
without limitation, acceleration of collections of receivables, failure to make
or delay in making collections of receivables (whether or not past due),
acceleration of payment of payables or failure to pay or delay in payment of
payables, (l) incurred any damage, destruction or loss, whether covered by
insurance or not, that would have a Company Material Adverse Effect, (m) made
any declaration, payment or setting aside for payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any securities
of the Company or its subsidiaries, other than as identified in writing to
counsel for Parent on or prior to the date hereof; or (n) waived or released any
material right or claim of the Company or its subsidiaries.
Section 4.8. Litigation. Except as specifically set forth in Section
4.8 of the Company Disclosure Schedule, there are no claims, suits, actions or
proceedings pending or, to the Knowledge of the Company, threatened against the
Company or any of its subsidiaries, or any of their respective directors or
officers (in their capacity as such), before any court or Governmental
Authority, or any arbitrator (collectively, "Claims") that (i) seek to restrain
the consummation of the Merger or the transactions or (ii) which if adversely
determined could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Except as set forth in Section 4.8
of the Company Disclosure Schedule, neither the Company nor any of its
subsidiary is a party to or bound by any judgment, decree, injunction,
settlements, arbitration, awards, rule or order of any court or Governmental
Authority or any arbitrator (collectively, "Judgments") with respect to or
affecting the properties, assets, personnel or business of the Company, which
prohibits or restricts the consummation of the transactions, or has had or could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or could affect the validity of this Agreement or its
enforceability against any shareholder or the Company, or compliance by any
shareholder or the Company. Except set forth in Section
- 10 -
4.8 of the Company Disclosure Schedule as of the date hereof, there are no
material Claims or Judgments with respect to or affecting the properties,
assets, personnel or business of the Company or any of its subsidiaries. The
Company Financial Statements reflect an adequate reserve for all claims, suits,
actions, proceedings, judgments, decrees, injunctions, rules or order pending or
threatened against the Company or any of its subsidiaries through the date of
such financial statements.
Section 4.9. No Violation of Law. Except as disclosed in Section 4.9 of
the Company Disclosure Schedule, the Company and its subsidiaries are and, since
August 31, 2003 have been in compliance in all material respects with all
applicable provisions of any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any Governmental Authority. The Company and its
subsidiaries have all material permits, licenses, approvals, and other
governmental authorizations, consents and approvals necessary to conduct its
businesses as presently conducted (collectively, the "Company Permits"). The
Company and its subsidiaries are in compliance with the terms of the Company
Permits in all material respects.
Section 4.10. Contracts. Section 4.10 of the Company Disclosure Schedule
lists, under the relevant heading, oral or written contracts, agreements,
arrangements, guarantees, licenses, leases and commitments (each a "Contract"),
that, to the Knowledge of the Company, exist as of the date hereof to which the
Company or any subsidiary is a party or by which it is bound and which fall
within any of the following categories (collectively, the "Material Contracts"):
(a) Contracts not entered into in the ordinary course of the Company's or any of
its subsidiaries' businesses and other than those that individually or in the
aggregate are not material to the business of the Company and any of its
subsidiaries, taken as a whole, (b) joint venture and partnership agreements,
(c) Contracts containing covenants purporting to limit the freedom of the
Company or any of its subsidiaries to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (d) Contracts
which after the consummation of any of the transactions could have the effect of
limiting the freedom of Parent or to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (e) Contracts
which contain minimum purchase conditions in excess of $50,000 with respect to
inventory purchases for resale, and $50,000 in the case of everything else, or
requirements or other terms that restrict or limit the purchasing or
distribution relationships of the Company or its subsidiaries or their
affiliates (including after consummation of any of the transactions), Parent or
any of its affiliates, or any customer, licensee or lessee thereof, (f)
Contracts relating to any outstanding commitment for capital expenditures in
excess of $50,000, (g) indentures, mortgages, promissory notes, loan agreements
or guarantees of borrowed money, letters of credit or other agreements or
instruments of the Company or its subsidiaries or commitments for the borrowing
or the lending by the Company or its subsidiaries of amounts in excess of
$50,000 in the aggregate or providing for the creation of any Encumbrance upon
any of the assets of the Company or its subsidiaries with an aggregate value in
excess of $50,000, (h) Contracts providing for "earn-outs" or other contingent
payments by the Company or its subsidiaries involving more than $50,000 per
contract over the terms of all such Contracts, (i) Contracts associated with off
balance sheet financing, including but not limited to arrangements for the sale
of receivables, (j) Material Licenses (as defined in Section 4.16), (k) stock
purchase agreements, asset purchase agreements or other acquisition or
divestiture agreements entered into since February 1, 1998 where the
consideration in any individual transaction exceeds $50,000, (l)
- 11 -
material Contracts with respect to which a change in the ownership (whether
directly or indirectly) of shares of Company Common Stock or the composition of
the Board of Directors of the Company may result in a violation of or default
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of benefits under such Contract, except any such Contract
that is not material to the business of the Company, (m) contracts with
consultants, employees, officers or directors of the Company or any of its
subsidiaries or (n) contracts with Governmental Entities (as defined below)
involving an obligation by the Company or any of its subsidiaries to make a
payment in excess of $50,000 (excluding customary rebates or credit to
Governmental Entities pursuant to such contracts). All Material Contracts to
which the Company or any of its subsidiaries is a party or by which they are
bound are valid and binding obligations of the Company and, to the Knowledge of
the Company, the valid and binding obligation of each other party thereto and
are in full force and effect. Neither the Company, it subsidiaries, nor, to the
knowledge of the Company, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition which with
the passage of time or giving of notice (or both) would constitute a default
under or permit the termination of, any Material Contract. Notwithstanding the
above, Material Contracts shall not include contracts or agreements with
customers, vendors and suppliers entered into in the ordinary course of business
(i) which are terminable on less than 60 days prior written notice by either
party or (ii) which do not contain minimum purchase or other commitments or
obligations provisions on the part of the Company.
Section 4.11. Taxes. Except as disclosed in Section 4.11 of the Company
Disclosure Schedule:
(a) All federal, state, local and foreign returns,
estimates, information statements and reports, including any schedule or
attachment thereto or any amendment thereof ("Tax Returns"), relating to any and
all Taxes concerning or attributable to the Company and its subsidiaries or
their respective operations required to be filed by or on behalf of the Company
or its subsidiaries have been timely filed (after giving effect to any valid
extensions of time in which to make such filings). All such Tax Returns are
true, correct and complete in all material respects. All Taxes, whether or not
shown as due on such Tax Returns, have been timely paid. Adequate reserves or
accruals for Taxes have been (or will be) provided on the Company's books and
the Company Financial Statements, in accordance with GAAP, with respect to any
period (or portion thereof) up to the Closing Date for which Tax Returns have
not been filed or for which Taxes are not yet due and owing. The Company has
made available to Parent all material Tax Returns, examination reports and
statements of deficiencies filed or received for all taxable periods since
February 1, 2000.
(b) Neither the Company nor any of its subsidiaries have
waived any statute of limitations in respect of the assessment and collection of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(c) Neither the Company nor any of its subsidiaries is
currently the beneficiary of any extension of time within which to file any Tax
Return. The Company and its subsidiaries are not a party to any Tax allocation
or Tax sharing agreement.
- 12 -
(d) The Company and its subsidiaries have duly and
timely withheld from employee salaries, wages and other compensation and has
paid over to the appropriate Governmental Authority all material Taxes required
to be so withheld and paid over.
(e) There is no Tax deficiency outstanding, assessed or
proposed in writing against the Company or any of its subsidiaries. No audit or
other examination of any Tax Return of the Company or any of its subsidiaries is
currently in progress. No Governmental Authority with respect to which the
Company or any of its subsidiaries does not file Tax Returns has claimed that
the Company or any of its subsidiaries are, or may be, subject to taxation by
that jurisdiction.
(f) Neither the Company, any of its subsidiaries nor any
other person on behalf of the Company or its subsidiaries, has (i) filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
its subsidiaries, (ii) agreed to or is required to make any adjustments pursuant
to Section 481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method (and the Company and each
of its subsidiaries has no application pending with any Governmental Authority
with respect to an accounting method change), (iii) executed or entered into
closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law or
(iv) granted a power of attorney with respect to any Tax matter that would have
continuing effect after the Closing.
(g) Neither the Company nor its subsidiaries is subject
to any private letter ruling of the Internal Revenue Service or comparable
rulings of other Governmental Authorities.
(h) Neither the Company nor any subsidiary is a party to
any agreement, contract, arrangement or plan (including this Agreement and the
consummation of the Merger) that has resulted or could result, separately or in
the aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code (or any similar provision of state, local or
foreign law) or that would bind the Company or its subsidiaries to compensate
any individual for excise Taxes paid under Section 4999 of the Code.
(i) The Company and it subsidiaries have never been a
member of an affiliated group of corporations (as that term is defined in
Section 1504(a)(1) of the Code, or any similar provision of state, local, or
foreign law), and the Company and its subsidiaries have no liability for the
Taxes of any person under Treasury Regulation 'SS' 1.1502-6 (or any similar
provision of state, local, or foreign law), or as a transferee or successor, by
contract, or otherwise.
(j) The Company and its subsidiaries have not been the
"distributing corporation" or the "controlled corporation" within the meaning of
Section 355(a) of the Code.
(k) There are no Encumbrances for Taxes on the assets of
the Company or its subsidiaries, except for Liens for Taxes not yet due and
payable.
- 13 -
(l) Neither the Company not any Shareholder is a foreign
person within the meaning of Sections 897 and 1445 of the Code.
(m) The Company and each of its subsidiaries is not a
U.S. real property holding corporation as defined in Section 897 of the Code and
has not been such a corporation during the five-year period ending on the date
of the Closing Date.
(n) The Company and its subsidiaries have disclosed on
its federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code. The Company and its subsidiaries have not invested in
any entity or entered into any arrangement that is a "tax shelter" within the
meaning of Section 6662(d)(2)(C) of the Code or that has been described in any
list or announcement published pursuant to Section 6662(d)(2)(D) of the Code.
(o) The disallowance of a deduction under Section 162(m)
of the Code of employee remuneration will not apply to any amount paid or
payable by the Company under any commitment, program, arrangement or
understanding.
Section 4.12. Employee Benefit Plans; ERISA.
(a) For purposes of this Agreement, (i) "Company Plan"
means (x) each employee pension benefit plan (as such term is defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) ("Pension Plan"); (y) each employee welfare benefit plan (as such
term is defined in Section 3(1) of ERISA) ("Welfare Plan") maintained
contributed to or required to be contributed to by the Company and any of its
ERISA Affiliates, and (z) each stock option, stock purchase, stock appreciation
right and stock based plan and each deferred compensation, severance,
change-in-control, incentive and bonus plan, program, contract or agreement,
whether funded or unfunded, written or unwritten, subject to ERISA or exempt,
maintained by the Company or any ERISA Affiliate (as such term is defined below)
for the benefit of current or former employees or current or former directors of
the Company; and (ii) "ERISA Affiliate" means any trade or business whether or
not incorporated, under common control with the Company within the meaning of
Section 414(b), (c), (m), or (o) of the Code or Section 4001(b) of ERISA.
(b) With respect to each Company Plan, the Company has
made available to Parent a true, correct and complete copy of: (i) all current
plan documents, trust agreements, insurance contracts and other funding
vehicles, and amendments thereto; (ii) all Form 5500 series forms for the most
recently ended plan year (and any financial statements and other schedules
attached thereto) filed with respect to any Company Plan for which such filing
is required; (iii) all current summary plan descriptions and subsequent
summaries of material modifications with respect to each Company Plan for which
such descriptions and modifications are required under ERISA; (iv) the most
recent IRS determination letter for each Pension Plan which is intended to be
qualified under Section 401(a) of the Code (and any current or pending
application with respect to any Pension Plan); and (v) the most recent actuarial
report for all Pension Plans requiring actuarial valuation.
- 14 -
(c) The Company and, with respect to the Company Plans
each ERISA Affiliate, and each of the Company Plans, are in compliance in all
material respects with the applicable provisions of ERISA, and those provisions
of the Code applicable to the Company Plans.
(d) All contributions to and payments from any Company
Plan which may have been required in accordance with its terms and, when
applicable, Section 302 of ERISA or Section 412 of the Code, have been timely
made. All contributions with respect to the period ending on the Closing Date
will have been paid by that date, even though not due until a later date. No
Pension Plan which is subject to the minimum funding requirements of Part 3 of
Subtitle B of Title I of ERISA or to Section 412 of the Code has incurred any
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code and no funding deficiency has been waived within the
meaning of Section 303 of ERISA or Section 412 of the Code. The funding method
used in connection with each Company Plan is acceptable under current IRS
guidelines and the actuarial assumptions used in connection with funding each
such Company Plan are reasonable. No asset of the Company, and no asset of any
ERISA Affiliate which is to be acquired by Parent pursuant to this Agreement, is
subject to any lien under Code Section 401(a)(29), ERISA Section 302(f) or Code
Section 412(n), ERISA Section 4068 or arising out of any action filed under
ERISA Section 4301(b).
(e) Except as indicated on Schedule 4.12(e), all
material reports, returns and similar documents with respect to the Company
Plans required to be filed with any government agency or distributed to any
Company Plan participant have been duly and timely filed or distributed.
(f) The Company and each ERISA Affiliate have complied
with the notice and continuation coverage requirements of Section 4980B of the
Code and the regulations thereunder with respect to each Company Plan that is,
or was during any taxable year of the Company or any ERISA Affiliate for which
the statute of limitations on the assessment of federal income taxes remains
open, by consent or otherwise, a group health plan within the meaning of Section
5000(b)(1) of the Code.
(g) No conditions exist that would reasonably be
expected to subject the Company, or any ERISA Affiliate to any material
liability under Title IV of ERISA. Set forth in Section 4.13(g) of the Company
Disclosure Schedule are the unfunded liabilities and projected costs, as of the
date of this Agreement, of each of the Company Plans. Unfunded liabilities
include, but are not limited to, (1) the excess of the liabilities, determined
using both the accumulated benefit obligation and projected benefit obligation
methodology of Statement of Financial Accounting Standards No. 87, of any
Company Plan subject to Title IV of ERISA over the fair market value of such
Company Plan's assets (2) the amount of any unfunded deferred compensation,
including, without limitation the present value, based on the methods and
assumptions described in (1) of an Company Plan described in Section 201(2) of
ERISA and (3) the actuarially determined present value of any obligation to
provide retiree medical or life insurance benefits. For the purposes of this
Section 4.13(g) unfunded liabilities and projected costs have been determined by
the Company and its actuaries using actuarial methods and assumptions that are,
individually and in the aggregate, reasonable taking into account circumstances
known to them as of the date of this Agreement, specifically including
- 15 -
assumptions as to mortality and expected retirement ages, and, except as
adjusted to satisfy the requirements that such assumptions be reasonable,
consistent with prior practice. Projected costs include all legally required
contributions to any such plans, plus the reasonably estimated ongoing costs of
providing the annual benefits payable under any such Company Plans on the
assumption those plans remain in effect in accordance with their terms.
(h) Neither the Company nor any of its ERISA Affiliates,
currently maintains or has, within the previous six years, maintained, been
obligated to contribute to or incurred any liability that remains unsatisfied as
of the date of this Agreement with respect to any multiemployer plan, as defined
in Section 3(37) of ERISA.
(i) Except as set forth on the Company Disclosure
Schedule, neither the Company nor any of its ERISA Affiliates is bound by any
collective bargaining agreement or legally binding agreement to maintain or
contribute to any Company Plan.
(j) Each Company Plan (i) has been administered in
material compliance with its terms (except that in any case in which any Company
Plan is currently required to comply with a provision of ERISA or of the Code,
but is not yet required to be amended to reflect such provision, it has been
administered in accordance with such provision); (ii) which is intended to be a
qualified plan within the meaning of Section 401(a) of the Code has a favorable
determination from the IRS as to its qualified status or is within the remedial
amendment period for making any required changes and no determination letter
with respect to any Company Plan has been revoked nor has the Company or any
ERISA Affiliate received notice of threatened revocation, nor has any Company
Plan been amended, or failed to be amended, since the date of its most recent
determination letter in any respect that would adversely affect its
qualification or materially increase its cost nor has any Company Plan been
amended in a manner that would require security to be provided in accordance
with Section 401(a)(29) of the Code; (iii) may, without liability, be amended,
terminated or otherwise discontinued, except as specifically prohibited by
federal law; and (iv) which constitutes a "Group Health Plan" under the
Administrative Simplification provisions of the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") and the regulations issued thereunder, such
Group Health Plans are in compliance in all material respects with applicable
provisions of HIPAA and the HIPAA regulations.
(k) There are no pending investigations by any
governmental agency involving the Company Plans, no termination proceedings
involving the Company Plans, and no threatened or pending claims (except for
claims for benefits payable in the normal operation of the Company Plans), suits
or proceedings against any Company Plan or asserting any rights or claims to
benefits under any Company Plan which could give rise to any material liability,
nor, to the best of the Company's or any ERISA Affiliate's knowledge are there
any facts which could give rise to any material liability in the event of any
such investigation, claim, suit or proceeding.
(l) Neither the Benefit Plans, the Company, any ERISA
Affiliate, nor any employee of the foregoing, nor, to the best of the Company's
knowledge, any trusts created thereunder, nor any trustee, administrator or
other fiduciary thereof, has engaged in a "prohibited transaction" (as such term
is defined in Section 4975 of the Code or Section 406 of ERISA)
- 16 -
which could subject any thereof to the tax or penalty on prohibited transactions
imposed by such Section 4975 or the sanctions imposed under Title I of ERISA.
(m) Except as set forth in Section 4.12(m) of the
Company Disclosure Schedule which shall include a detailed description of the
payments and other obligations of the Company under such Company Plan, no
Company Plan provides benefits, payments or other remuneration to any employee,
director, former employee or former director, including, without limitation,
death or medical benefits, upon a change of control, or beyond termination of
service or retirement other than (A) coverage mandated by law or (B) death or
retirement benefits under a Company Plan qualified under Section 401(a) of the
Code. Except as set forth in Section 4.12(m) of the Company Disclosure Schedule,
neither the Company nor any ERISA Affiliate has made a written or oral
representation to any current or former employee promising or guaranteeing any
employer paid continuation of medical, dental, life or disability coverage for
any period of time beyond retirement or termination of employment.
(n) The Company maintains, and has complied with in all
material respects, its policies or practices, on the proper classification for
all employees, leased employees, consultants and independent contractors, for
all purposes (including, without limitation, for all Tax purposes and for
purposes of determining eligibility to participate in any Company Plan).
(o) Neither the Company nor any ERISA Affiliate has
incurred or is reasonably likely to incur any liability with respect to any plan
or arrangement that would be included within the definition of "Company Plan"
hereunder but for the fact that such plan or arrangement was terminated before
the date of this Agreement.
(p) There are no material pension, welfare, stock
option, stock purchase, stock appreciation right, other stock based, deferred
compensation, severance, change-in-control, incentive or bonus plan, program,
contract or agreement which would be described in Section 4.12(a) above, but for
the fact that such plans are maintained outside the jurisdiction of the United
States.
Section 4.13. Labor Controversies. There are no controversies pending
or, to the knowledge of the Company, threatened between the Company or its
subsidiaries and any of their respective employees, except for such
controversies which have not had and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Neither the
Company nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company or any of its subsidiaries, nor does the Company know of any activities
or proceedings of any labor union to organize any such employees. The Company
and each of its subsidiaries have no knowledge of any current strikes,
slowdowns, work stoppages, lockouts or threats thereof, by or with respect to
any employees of the Company or its subsidiaries.
Section 4.14. Environmental Matters.
(a) The Company and each of its subsidiaries is in
compliance in all material respects with all applicable federal, state, local
and foreign laws, statutes, orders, rules,
- 17 -
regulations, ordinances, decrees, orders or judgments relating to protection of
human health and the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) and worker
health and safety (collectively, "Environmental Laws"), which compliance
includes, but is not limited to, the possession by the Company and its
subsidiaries of all material Permits required under applicable Environmental
Laws, and compliance in all material respects with the terms and conditions
thereof. Neither the Company nor its subsidiaries have received written notice
of or, to the Knowledge of the Company, is the subject of, any action, cause of
action, claim, investigation, penalty, demand or notice by any Person alleging
liability under or non-compliance with any Environmental Law (an "Environmental
Claim") that is unresolved or for which payment or other performance is still
pending. Neither the Company nor any of its subsidiaries have received any
unresolved written request for information, notice of claim, demand or
notification that it is or may be potentially responsible for any investigation,
examination or response action in connection with any Release or threatened
Release of Hazardous Substances.
(b) No hazardous, toxic or polluting substance, material
or waste, including, without limitation, petroleum or fractions thereof,
polychlorinated biphenyls, asbestos or asbestos-containing materials, and
radioactive materials ("Hazardous Substances") have been released, spilled,
leaked, discharged, disposed of, pumped, poured, emitted, emptied, injected,
leached, dumped or allowed to escape ("Released") by or on behalf of the
Company. Except as disclosed in Section 4.14(b) of the Company Disclosure
Schedule, to the actual Knowledge of the Company, no person at any property now
or formerly owned, operated or leased by the Company or any of its predecessors
has Released any Hazardous Substances. No asbestos, asbestos-containing
materials or polychlorinated biphenyls are present at any building on the
property operated or leased by the Company or its subsidiaries in violation of
Environmental Laws or which requires abatement, removal, retrofilling or other
investigation, remediation or other response action. No Hazardous Substances
managed, used, generated, treated, manufactured, processed, handled, stored,
recycled, transported, disposed or Released by the Company or its subsidiaries
or any of their predecessors has come to be located at any site listed on the
National Priorities List promulgated pursuant to the Comprehensive Environmental
Response and Liability Act, CERCLIS or any similar list maintained by any
Governmental Authority or which requires investigation, remediation or other
response actions under applicable Environmental Laws. Neither the Company nor
any of its subsidiaries have retained or assumed by contract any material
liability or responsibility for any environmental matters including liability
under or violations of Environmental Laws. Except as set forth in Section 4.14
of the Company Disclosure Schedule and heretofore provided to Parent and
Subsidiary, there have been no environmental inspections, studies, audits,
tests, reviews or other analyses in relation to any property or business now or
previously owned, operated or leased by Company and its subsidiaries.
Section 4.15. Title to Assets. The Company and each of its subsidiaries
has good and marketable title in fee simple to all its real property and good
and valid title to all its material leasehold interests and other material
assets and properties (real, personal or intangible) reflected in the most
recent balance sheet included in the Company Financial Statements, except for
properties and assets that have been disposed of in the ordinary course of
business since the date of such balance sheet, free and clear of all
Encumbrances, except (a) liens for current taxes, payments of which are not yet
delinquent, and (b) such imperfections in title and easements and
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encumbrances, if any, as do not materially detract from the value, or interfere
with the present use of the property subject thereto or affected thereby, or
otherwise materially impair the Company's business operations. Section 4.15 of
the Company Disclosure Schedule sets forth the addresses of the real property
owned by the Company and its subsidiaries. All leases under which the Company
leases any real or personal property are in good standing, valid and effective
in accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or both
would become a default. The material machinery and equipment owned or leased by
the Company and its subsidiaries is (i) suitable for the uses to which it is
currently employed and (ii) in good operating condition (except for ordinary
wear and tear).
Section 4.16. Intellectual Property; Software.
(a) The Company and each of its subsidiaries owns, or is
validly licensed or otherwise has the right to use (in each case, free and clear
of all material Encumbrances) all patents, patent applications, trademarks (both
registered and unregistered), trade names, service marks (both registered and
unregistered), copyrights (both registered and unregistered) and other
proprietary intellectual property rights, computer programs and other technology
that are material to the Company's and its subsidiaries' businesses. Section
4.16(a) of the Company Disclosure Schedule sets forth, as of the date hereof, a
complete and accurate list of all patents and pending patent applications,
trademarks, service marks, trade names, material copyrights (including without
limitation, computer software programs), and registrations and applications for
registration of copyrights, trademarks, service marks, trade names, trade dress
and domain names (collectively "Intellectual Property") owned or held for use by
the Company or any of its subsidiaries in the conduct of their business.
(b) Section 4.16(b) of the Company Disclosure Schedule
sets forth a list of all material licenses, sublicenses, consents and other
agreements (whether written or otherwise) other than commercial off the shelf
("COTS") licenses for software ("Material License") (A) pertaining to any
patents, trademarks, service marks, trade names, trade dress, copyrights, trade
secrets, computer software (other than commercially available, off-the-shelf
software applications obtained or licensed for less than $5,000), web site
design, or other intellectual property used by the Company or its subsidiaries
in the conduct of their businesses, and (B) by which the Company licenses or
otherwise authorizes a third party to use the Company's or its subsidiaries'
Intellectual Property. The Company is in compliance in all material respects
with all applicable provisions of such agreements, and such agreements are now,
and immediately following the Closing shall be, in full force and effect. Except
as set forth in Section 4.16(b) of the Company Disclosure Schedule, the
transactions contemplated under this Agreement do not and will not trigger any
provision under any such license agreement to (x) permit the termination of such
agreement by the licensor; (y) permit the renegotiation of any terms, including
without limitation the amount of any commission, royalty or other fee(s) payable
under such agreement; or (z) restrict, in any material way, the Company's or
Surviving Corporation's use of such intellectual property in the business
subsequent to the Effective Time. To the Knowledge of the Company, the computer
software and information technology systems owned, leased or licensed for use in
the business do not contain any viruses, worms, or other disabling or malicious
code, and any such software or systems, to the extent applicable, will
consistently and accurately interpret, calculate, manipulate, store, and
exchange data/time date.
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(c) In each of the following cases, except for those
matters that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect: (i) to the
Knowledge of the Company, the business operations of the Company and its
subsidiaries do not infringe, dilute, misappropriate or otherwise violate the
patents, trademarks, service marks, trade names, trade dress, copyrights
(including computer software), trade secrets or other intellectual property
rights of any Person; (ii) to the Knowledge of the Company, no Person is
challenging or infringing on or otherwise violating any right of the Company or
any of its subsidiaries with respect to any Company Intellectual Property; (iii)
the Company and its subsidiaries have not received any written notice or
otherwise has Knowledge of any claim, demand, suit, order or proceeding that the
operations of the Company or its subsidiaries infringe, misappropriate or
otherwise violate the intellectual property rights of any Person; (iv) to its
Knowledge, all Company Intellectual Property is in full force and effect, is
held of record in the name of the Company or its subsidiaries free and clear of
all Encumbrances, and is not the subject of any cancellation or reexamination
proceeding or any proceeding challenging their extent or validity; and (v) none
of the material trade secrets, know-how or other confidential or proprietary
information of the Company or its subsidiaries has been disclosed to any Person
unless such disclosure was necessary and made pursuant to an appropriate
confidentiality agreement.
(d) The information technology systems owned, licensed,
leased, operated on behalf of, or otherwise held for use in the business by the
Company and its subsidiaries, including all computer hardware, software,
firmware and telecommunications systems used in the business of Company and its
subsidiaries perform reliably and in material conformance with the appropriate
specifications or documentation for such systems. Except for scheduled or
routine maintenance, the information technology systems of Company and its
subsidiaries are fully available for use in the business and, as applicable, by
the customers and clients of the Company, 24 hours a day, 7 days a week. The
Company and its subsidiaries have taken commercially reasonable steps to provide
for the archival, back-up, recovery and restoration of the critical business
data of the business.
(e) Except as set forth in Section 4.16(e) of the
Company Disclosure Schedule, the Company and its subsidiaries own or possess the
right to use, including without limitation the right to modify and create
derivative works of, the design, content, and all intellectual property rights
associated with and contained in all of the Company's and its subsidiaries'
operating web sites. The Company and its subsidiaries own all right, title and
interest in the design and content of the web site free and clear of all claims,
including without limitation claims or rights of joint owners and employees,
agents, consultants or other parties involved in the development, creation,
maintenance or enhancement of the web site.
Section 4.17. Brokers and Finders. Except for its obligation to pay fees
and expenses pursuant to its agreement with ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc., neither the
Company nor its subsidiaries have entered into any contract, arrangement or
understanding with any Person which may result in the obligation of the Company
or any of its subsidiaries or Parent or any of its subsidiaries to pay any
finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby. Except for the fees and
expenses payable to ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc., no Person is entitled to receive
any investment banking, brokerage or finder's fee, or commission in connection
with this Agreement, the Merger or the other
- 20 -
transactions based upon arrangements made by or on behalf of the Company or any
of its subsidiaries.
Section 4.18. New Jersey Shareholders Protection Act and Rights
Agreement. Prior to the date hereof, the Board of Directors of the Company has
taken all action necessary to exempt under or make not subject to (x) the
provisions of the New Jersey Shareholders Protection Act (the "NJSPA") and (y)
any other New Jersey takeover law or New Jersey law that purports to limit or
restrict business combinations: (i) the execution of this Agreement, (ii) the
Merger and (iii) the transactions contemplated hereby.
Section 4.19. Affiliate Transactions. Except as disclosed in Section
4.19 of the Company Disclosure Schedule, since December 31, 2001, no director,
officer, employee or greater than five percent (5%) shareholder of the Company
or member of the family of any such Person or any entity in which any such
Person or any member of the family of any such Person, has a substantial
interest or is an officer, director, trustee, partner or holder of more than 5%
of the outstanding capital stock thereof, is a party to any transaction with the
Company or any of its subsidiaries, including any Contract providing for the
employment of, furnishing of services by, rental of real or personal property
from or otherwise requiring payments to any such Person or firm, other than
employment-at-will arrangements in the ordinary course of business.
Section 4.20. Products Liability. To the Knowledge of the Company, there
are no (a) liabilities, known or unknown, fixed or contingent, with respect to
any products of the Company or any of its subsidiaries that are based on a
theory of strict product liability, negligence or other tort theories (as
distinct from product warranty claims described in clause (b) below), or (b)
liabilities of the Company or its subsidiaries, known or unknown, fixed or
contingent, which have been asserted, for the breach of any express or implied
product warranty or any other similar claim with respect to any product
manufactured or sold by the Company or it subsidiaries (other than any claim
based on standard warranty obligations made by the Company or it subsidiaries in
the ordinary course of the conduct of their respective businesses to purchasers
of their products), which individually or in the aggregate could reasonably be
expected to have a Company Material Adverse Effect. Section 4.20 of the Company
Disclosure Schedule contains copies of the Company's standard warranties and
return policies. The Company, its subsidiaries and each of their respective
predecessors has not and does not produce, market, distribute, sell or otherwise
use in the operation of its business any product or component that contains
asbestos.
Section 4.21. Relationship with Customers and Suppliers. Section 4.21 of
the Company Disclosure Schedule lists the names and addresses of the 10
suppliers of the Company and its subsidiaries which accounted for the largest
dollar volume of purchases by the Company and its subsidiaries for the twelve
months ended August 31, 2003 (the "Major Suppliers"). Section 4.21 of the
Company Disclosure Schedule lists the names and addresses of the 10 customers of
the Company and its subsidiaries which accounted for the largest dollar volume
of purchases from the Company and its subsidiaries for the twelve months ended
August 31, 2003 (the "Major Customers"). The Company knows of no written or oral
communication, fact, event or action which exists or has occurred within 12
months prior to the date hereof, which would lead the Company reasonably to
believe that any Major Customer or any Major Supplier will terminate or
materially and adversely modify its business relationship with Company and its
subsidiaries.
- 21 -
Section 4.22. Indemnification Claims. Other than as set forth in Section
4.22 of the Company Disclosure Schedule, the Company is not aware of any
indemnification, breach of contract or similar claims by or against the Company
or any of its subsidiaries which are pending or threatened (or which could be
reasonably expected to be made in the future), in each case in excess of
$100,000 in amount, with respect to any acquisition or disposition by the
Company or any of its subsidiaries of any assets or businesses.
Section 4.23. Absence of Questionable Payments. To the Company's
Knowledge, neither the Company, nor its subsidiaries, nor any director, officer,
agent, employee or other person acting on behalf of the Company or its
subsidiaries, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of (i) Section 104 of
the Foreign Corrupt Practices Act of 1977 (15 U.S.C. 'SS'79dd-2), as amended, or
(ii) any other applicable foreign, federal or state law. To the Company's
Knowledge, neither the Company, nor its subsidiaries, nor any current director,
officer, agent, employee or other person acting on behalf of the Company or its
subsidiaries, has accepted or received any unlawful contributions, payments,
gifts, or expenditures.
Section 4.24. Board Recommendation. The Board of Directors of the
Company, at a meeting duly called and held on the date of execution of this
Agreement, has unanimously approved this Agreement and (i) determined that this
Agreement and the transactions, including the Merger, are fair to and in the
best interests of the shareholders of the Company and declared the Merger to be
advisable; (ii) approved this Agreement; and (iii) recommended that the
shareholders of the Company approve and adopt this Agreement and approve the
Merger and directed that such matter be submitted to the Company's shareholders
at the Company's Shareholders' Meeting.
Section 4.25. Insurance. Except as set forth in Section 4.25 of the
Company Disclosure Schedule, the Company and its subsidiaries have been fully
covered at all times by insurance in scope and amount customary and reasonable
for the businesses in which they are engaged and the liabilities they have
incurred. Section 4.25 of the Company Disclosure Schedule contains a complete
and correct list of all policies of insurance of the Company and its
subsidiaries for the past 5 years, including the policy numbers, coverage
amounts and deductibles for each policy. The Company has made available true,
correct and complete copies of such policies to Parent. All such policies are in
full force and effect. All premiums due on such policies have been paid in full.
There is no default with respect to any provision contained in any such policy
which could have an adverse affect upon the ability of the insured to collect
insurance proceeds under such policy, nor has there been any failure by the
insured to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by the policy. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim under,
any such policy has been received by the Company or any of their affiliates.
Since its inception, all products liability and general liability policies
maintained by or for the benefit of the Company and its subsidiaries have been
"occurrence" policies and not "claims made" policies.
- 22 -
Section 4.26. Government Contracts.
(a) (i) To the knowledge of the Company none of its
employees or its subsidiaries' employees is or during the last three years has
been (except as to routine security investigations) under administrative, civil,
or criminal investigation, indictment, or information by any regulatory
authority of the United States Federal Government or any state government or any
of their respective agencies, the contracting or auditing function of any
governmental entity with which it is contracting, the United States Department
of Justice, the Inspector General of the United States Governmental Entity or
the respective state equivalent, or any prime contractor with a governmental
entity (a "Governmental Entity"), (ii) to the Knowledge of the Company, there is
no pending audit or investigation by any Governmental Entity of the Company or
its subsidiaries with respect to any alleged irregularity, misstatement, or
omission arising under or relating to a Government Contract (as defined below),
and (iii) during the last three years, neither the Company nor its subsidiaries
has made a voluntary disclosure with respect to any alleged irregularity,
misstatement, or omission arising under or relating to a Government Contract. To
the Knowledge of the Company, neither the Company nor its subsidiaries has made
any intentional misstatement or omission in connection with any voluntary
disclosure that has led to any of the consequences set forth in clause (i) or
(ii) of the immediately preceding sentence or any other material damage, penalty
assessment, recoupment of payment, or disallowance of cost. For purposes of this
Agreement, "Government Contract" means any contract that (i) is between the
Company or a subsidiary and a Governmental Entity or (ii) is entered into by the
Company or a subsidiary as a subcontractor (at any tier) in connection with a
contract between another entity and a Governmental Entity.
(b) To the Knowledge of the Company, there are (i) no
outstanding claims against the Company or any subsidiary by a Governmental
Entity or by any prime contractor, subcontractor, or vendor arising under any
Government Contract and (ii) no disputes between the Company or a subsidiary and
a Governmental Entity under the Contract Disputes Act or any other federal or
state statute or between the Company or a subsidiary and any prime contractor,
subcontractor, or vendor arising under or relating to any such Government
Contract, except any such claim or dispute that would not reasonably be expected
to result in a Company Material Adverse Effect.
(c) Neither the Company nor any subsidiary has been
suspended or debarred from doing business with a Governmental Entity and is not
the subject of a finding of non-responsibility or ineligibility for U.S.
Government contracting.
(d) No misstatement contained in schedules of
Government-furnished equipment provided to a Governmental Entity by the Company
or a subsidiary under any Government Contract would reasonably be expected to
result in a Company Material Adverse Effect.
(e) The Company and each of its subsidiaries has not,
with respect to any Government Contract, or within the past three years with
respect to any former contract with a Governmental Entity, received a cure
notice advising the Company or any subsidiary that it was in default or would,
if it failed to take remedial action, be in default under such contract.
- 23 -
(f) All amounts previously charged by the Company or any
subsidiary to any Government Contract have been reasonable, allowable, and
allocable (as such terms are defined in the Federal Acquisition Regulations) and
in accordance with Government Cost Accounting Standards to each such contract or
proposal.
(g) To the Knowledge of the Company, no basis exists for
any of the following with respect to any of its contracts or subcontracts with
any Governmental Entity: (i) a Termination for Default (as provided in 48 C.F.R.
Ch.1 'SS'52.249-8, 52.249-9 or similar sections), (ii) a Termination for
Convenience (as provided in 48 C.F.R. Ch.1 'SS'52.241-1, 52.249-2 or similar
sections), or (iii) a Stop Work Order (as provided in 48 C.F.R. Ch.1
'SS'52.212-13 or similar sections); and the Company and its subsidiaries have no
reason to believe that funding may not be provided under any contract or
subcontract with any Governmental Entity in the upcoming federal fiscal year.
(h) Except as set forth in Section 4.26(h) of the
Company Disclosure Scheduled, the Company and its subsidiaries have no
agreements, contracts, or commitments which require it to obtain or maintain a
security clearance with any Governmental Entity.
(i) Except as described in Section 4.26(i) of the
Company Disclosure Schedule, no item of Intellectual Property (as defined in
Section 4.16) has been conceived, developed, created or reduced to practice
under or pursuant to any Government Contract.
Section 4.27. Shareholders. There are no more than 35 purchasers (as
such term is defined by Regulation D of the Securities Act, as defined below) of
the Company that will purchase the Notes.
Section 4.28. Disclosures. No representation or warranty made by the
Company in this Agreement, nor any statement or record contained in the Company
Disclosure Schedule of this Agreement or certificate furnished by the Company to
the Parent or Subsidiary pursuant to this Agreement contains any untrue
statement of a material fact or omits any material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY
Parent and Subsidiary each represent and warrant to the Company that:
Section 5.1. Organization and Qualification. Each of Parent and
Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted. Each of Parent and
Subsidiary is qualified to transact business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. True, accurate and complete copies of each of Parent's
and Subsidiary's articles (or certificate) of incorporation or formation and
bylaws, in each case as in
- 24 -
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to the Company.
Section 5.2. Authority; Non-Contravention; Approvals.
(a) Parent and Subsidiary each have full corporate power
and authority to enter into this Agreement and to consummate, the Merger and the
other transactions. This Agreement has been approved by the shareholders of
Subsidiary and the Boards of Directors of Parent and Subsidiary, and no other
corporate proceedings on the part of Parent or Subsidiary are necessary to
authorize the execution and delivery of this Agreement or the consummation by
Parent and Subsidiary of the transactions. This Agreement has been duly executed
and delivered by each of Parent and Subsidiary, and, assuming the due
authorization, execution and delivery hereof by the Company, constitutes a valid
and legally binding agreement of each of Parent and Subsidiary enforceable
against each of them in accordance with its terms, except that such enforcement
may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and (b) general equitable principles.
(b) The execution, delivery and performance of this
Agreement by each of Parent and Subsidiary does not and the consummation of the
Merger and the other transactions will not violate, conflict with or result in
violation of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to a right of
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation of any
Encumbrance upon any of the properties or assets of Parent or any of its
subsidiaries under (i) the respective articles (or certificates) of
incorporation or bylaws of Parent or any of its subsidiaries, (ii) any law,
regulation, judgment, injunction, order or decree binding on or applicable to
Parent or any of its subsidiaries, except that no representation or warranty is
made with respect to any antitrust statute, regulation, rule or other such
restriction), or (iii) any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which Parent or any of its subsidiaries
is now a party or by which Parent or any of its subsidiaries or any of their
respective properties or assets may be bound or affected; subject in the case of
the terms, conditions or provisions described in clause (ii) above, to obtaining
(before the Effective Time) the Parent Required Statutory Approvals (as defined
in Section 5.2(c)). Excluded from the foregoing sentences of this paragraph (b),
insofar as they apply to the terms, conditions or provisions described in clause
(iii) of the first sentence of this paragraph (b) (and whether resulting from
such execution and delivery or consummation), are such violations, conflicts,
breaches, defaults, terminations, accelerations or creations of Encumbrances
that have not had and could not reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect.
(c) Except for (i) filings under any applicable state
securities or blue sky laws or state takeover laws, (ii) the filing of
appropriate documents with the relevant authorities of other states or
jurisdictions in which the Parent or any of its subsidiaries is qualified to do
business, (iii) the making of the Merger Filing with the Department of Treasury
of the State of New Jersey in connection with the Merger, (iv) any required
filings with or approvals from applicable environmental authorities, public
service commissions and public
- 25 -
utility commissions, and (v) the filing of reports with the U.S. Department of
Commerce regarding foreign direct investment in the United States, if applicable
(the filings and approvals referred to in clauses (i) through (v) are
collectively referred to as the "Parent Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any Governmental Authority is necessary for the
execution and delivery of this Agreement by Parent or Subsidiary or the
consummation by Parent or Subsidiary of the transactions contemplated hereby.
Section 5.3. Financing. Parent has and will have at the Effective Time,
and will make available to Subsidiary (or cause to be made available),
$2,250,000 in funds, which funds will be utilized to consummate the Merger on
the terms contemplated by this Agreement.
Section 5.4. Brokers and Finders. Parent and its subsidiaries have not
entered into any contract, arrangement or understanding with any Person which
may result in the obligation of the Company, to pay prior to the Effective Time
any finder's fees, brokerage or agent commissions or other like payments in
connection with the transactions contemplated hereby. Except as set forth in
Section 4.17, to the Knowledge of Parent, no Person is entitled to receive from
the Company any investment banking, brokerage or finder's fee or commission
prior to the Effective Time in connection with this Agreement, the Merger or the
other transactions based upon arrangements made by or on behalf of Parent or any
of its subsidiaries.
Section 5.5. Subsidiary. Subsidiary was formed solely for the purposes
of engaging in the transactions contemplated hereby, and has engaged in no other
business activities and has conducted its operations only as contemplated
hereby. There are no debts, obligations or liabilities of Subsidiary immediately
prior to the Effective Time other than those relating to the financing provided
by Parent as contemplated in Section 5.3, which financing has been approved by
the Company.
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ARTICLE VI
COVENANTS OF THE PARTIES
Section 6.1. Mutual Covenants.
(a) General. Subject to the terms and conditions hereof
(including Section 7.2(b)), each of the parties shall (and shall cause its
respective subsidiaries to) use commercially reasonable efforts to take all
actions and to do all things necessary, proper or advisable to consummate the
Merger and the other transactions, including, without limitation, using
reasonable efforts to prepare, execute and deliver such instruments and take or
cause to be taken such actions as are necessary, proper or advisable under
applicable laws and regulations to consummate and make effective as soon as
reasonably practicable the transactions. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary action. Such commercially reasonable
efforts shall apply to, without limitation, the obtaining of all necessary
consents, approvals or waivers from third parties and Governmental Authorities
necessary to the consummation of the transactions.
(b) Other Governmental Matters. Subject to the terms and
conditions hereof, each of the parties hereto shall (and shall cause its
subsidiaries to) use commercially reasonable efforts to take any additional
action that may be necessary, proper or advisable to (i) obtain from any
Governmental Authority any consent, license, permit, waiver, approval,
authorization required or appropriate to be obtained by either Parent or the
Company in connection with the authorization, execution and delivery of this
Agreement and the consummation of the Merger and the other transactions
contemplated hereby, (ii) make all necessary filings, and thereafter make any
required submissions with respect to the Merger and the other transactions
required under any applicable federal or state securities or other laws, and
(iii) effect all other necessary registrations, filings and submissions. Each of
the parties shall (and shall cause each of their respective subsidiaries to)
cooperate and use commercially reasonable efforts to contest vigorously and
resist any action, including legislative, administrative or judicial action, and
to have vacated, lifted, reversed or overturned any decree, judgment, injunction
or other order whether temporary, preliminary or permanent that is in effect and
restricts, prevents, prohibits or otherwise bars the consummation of the Merger
or any other transaction.
(c) Shareholder Approval.
(i) (A) As soon as practicable but in no event
later than March 26, 2004, the Company shall duly call and give notice of a
meeting of its shareholders (the "Shareholders Meeting") for the purpose of
obtaining the Company Shareholders' Approval and (B) as soon as practicable
following the execution of this Agreement convene and hold the Shareholders
Meeting for the purpose of obtaining the Company Shareholders' Approval.
(ii) To the extent permitted by law, Parent
agrees to cause all shares of Company Common Stock owned by Parent or any of its
subsidiaries to be voted in favor of the Merger.
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(d) Notification of Certain Matters. From and after the
date hereof and until the Effective Time, upon receiving knowledge thereof, each
party hereto shall promptly notify the other parties hereto of (i) the
occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of
which has resulted in, or could reasonably be expected to result in, any
condition to the Merger set forth in Article VIII, not being satisfied, (ii) the
Company's failure to comply with any covenant or agreement to be complied with
by it pursuant to this Agreement which has resulted in, or could reasonably be
expected to result in, any condition to the Merger set forth in Article VIII,
not being satisfied and (iii) any representation or warranty made by such party
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified as to materiality becoming untrue or inaccurate in any material
respect; provided, however, that the delivery of any notice pursuant to this
Section 6.1(d) shall not cure any breach of any representation or warranty
contained in this Agreement or limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
(e) Public Statements. All press releases or other
public statements with respect to the Merger or the other transactions
contemplated hereby issued or made available to customers and suppliers of the
Company shall require the prior mutual agreement and approval of both Parent and
the Company, unless otherwise required by applicable law.
(f) The Company and its Board of Directors shall (i) use
best efforts to ensure that no state takeover statute or similar statute, rule
or regulation (including Sections 14A:10A-1 to 14A:10A-6 of the NJBCA) is or
becomes applicable to, the Merger, this Agreement, or any of the other
transactions contemplated by the foregoing and (ii) if any state takeover
statute or similar statute, rule or regulation becomes applicable to, the
Merger, this Agreement or any other transactions, use best efforts to ensure
that the Merger and the other transactions, including the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger and the other transactions.
(g) The Company shall use commercially reasonable
efforts not to, and shall use commercially reasonable efforts not to permit any
of its subsidiaries to, take any action or nonaction that will, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of the Company set forth in this Agreement that is qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect or (iii) except
as otherwise permitted by Section 7.2, or any condition to the Merger set forth
in Article VIII, not being satisfied.
Section 6.2. Covenants of the Company.
(a) Conduct of Business. Except as otherwise
contemplated by this Agreement or disclosed in the Company Disclosure Schedule,
after the date hereof and before the Closing Date or earlier termination of this
Agreement, unless Parent shall otherwise consent in writing, the Company shall
(and shall cause its subsidiaries to):
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(i) to conduct its business in the ordinary course
of business in all material respects, in substantially the same manner as
conducted before the date of this Agreement;
(ii) use commercially reasonable efforts to
preserve intact its business organizations and goodwill, keep available the
services of its respective present officers and key employees, and preserve the
goodwill and business relationships with material customers and others having
material business relationships with it; and
(iii) not
(A) amend or propose to amend its
articles (or certificate) of incorporation or bylaws or equivalent
organizational documents;
(B) authorize for issuance, issue,
sell, offer, deliver pledge or otherwise encumber or agree, propose to offer or
commit to issue, sell, deliver, pledge or otherwise encumber (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any additional shares of its capital stock of
any class or other securities (except commercial loans) or equity equivalents
(including, without limitation, stock options and any stock appreciation rights)
or securities convertible into or exchangeable for (or accelerate any right to
convert or exchange securities for any capital stock of the Company other than
as provided in Section 3.6 hereof), except that upon written notice to Parent
the Company may issue shares upon exercise of options or the vesting of stock
grants outstanding on the date hereof, in accordance with their respective terms
as in effect on the date hereof;
(C) split, combine or reclassify its
outstanding capital stock or declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise, except for the
payment of dividends or distributions to the Company;
(D) adopt, authorize or propose a plan
of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its subsidiaries (other than the Merger);
(E) redeem, purchase, acquire or offer
or propose to redeem, purchase or acquire any shares of its capital stock or any
options, warrants or rights to acquire any of its capital stock or any security
convertible into or exchangeable for its capital stock;
(F) make or agree to make, by merging
or consolidating with, by purchasing an equity interest in or a portion of the
assets of, or in any other manner, any material acquisition of any assets or
businesses other than (1) the purchase of inventories and supplies from
suppliers and vendors in the ordinary course of business, and (2) expenditures
for fixed or capital assets not in excess of $100,000 in the aggregate;
(G) sell, lease, exchange pledge,
encumber or otherwise dispose of any material assets or businesses other than
(1) sales of obsolete and excess assets and sales of inventories in the ordinary
course of business, (2) sales of businesses or assets
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disclosed in the Company Disclosure Schedule, and (3) Encumbrances entered into
in the ordinary course of business;
(H) make or revoke any material Tax
election except in a manner consistent with past practice, change any method of
accounting for Tax purposes, or settle or compromise any material Tax liability
with any Governmental Authority or agree to an extension of a statute of
limitations;
(I) adopt or effect any change in
accounting policies or practices, except to the extent required by generally
accepted accounting principles, or by applicable law;
(J) purchase any derivative
securities, except for purchases to hedge interest and rate exposure in the
ordinary course of business;
(K) settle or compromise any material
claims or litigation or modify or amend or terminate any Contracts or waive,
release or assign any material right or claims;
(L) (i) incur any indebtedness for
borrowed money, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its subsidiaries, guarantee
any such indebtedness or debt securities of another person, enter into any "keep
well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, or (ii) make any loans, advances or capital contributions to,
or investments in, any other person, other than to or in the Company;
(M) enter into any Contract with
commitments by the Company or any of its subsidiaries for expenditures of $5,000
or more individually and $25,000 in the aggregate except those incurred in the
ordinary course of business consistent with past practices;
(N) pay, discharge, settle or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities reflected or
reserved against in the Company Financial Statements or incurred since the date
of such financial statements in the ordinary course of business consistent with
past practice;
(O) grant any bonus, award, loan, pay
raise, unusual or extraordinary sick pay or vacation payment or unusual salary
or other payments, disbursements or other distributions in any manner or form to
any of the Company's or its affiliates, shareholders, directors, officers or
employees (or related parties thereto); provided, however, that (i) the Company
shall be entitled to make bonus payments for the quarter ended November 30, 2003
to management level employees of the Company and (ii) the Company shall be
entitled to grant pay raises to management level employees, in each of (i) and
(ii) upon providing Parent with written notice of the amounts of such bonus
payments and/or pay raise and
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the name of the employee at least five (5) days prior to making such bonus
payment and/or granting such pay raise;
(P) make a contribution in cash or
assets to any rabbi trust or any analogous funding mechanism maintained or
created to provide security under a nonqualified Company Plan, except to the
extent required under such Company Plan as it exists on the date of this
Agreement; or
(Q) enter into any letter of intent or
binding contract, agreement, commitment or arrangement with respect of any of
the foregoing.
(b) The Company shall cause to be prepared and timely
filed all Tax Returns required to be filed by the Company on or prior to the
Closing Date (the "Company Pre-Closing Returns"). The Company Pre-Closing
Returns shall be prepared, where relevant, in a manner consistent with the
Company's past practices except as otherwise required by applicable law. The
Company shall allow Parent the opportunity to review and comment on the Company
Pre-Closing Returns to be filed after the date hereof for a reasonable period
prior to the intended filing date. The Company shall cause to be timely paid and
shall be responsible for all Taxes due with respect to Company Pre-Closing
Returns.
(c) Parent shall cause all other Tax Returns of the
Company to be prepared and filed. With respect to any such Tax Return that
includes a period prior to the Closing Date (the "Straddle Period Returns"),
Parent shall deliver such return (and a calculation of the portion of the Taxes
shown on such return that are apportioned, as determined in Section 10.2(b), to
the portion of the Tax period ending on the Closing Date) to the Shareholders'
Agent, for review and comment, at least 60 days prior to the applicable filing
deadline for such return. The Shareholders' Agent shall promptly notify Parent
of any disputed items with respect to the Straddle Period Returns and the
parties shall diligently attempt to resolve such disputes. If such disputes
cannot be resolved within 30 days prior to the applicable filing deadline, such
disputes shall be submitted to an independent accounting firm mutually
acceptable to the Company and Parent for final resolution.
ARTICLE VII
ADDITIONAL AGREEMENTS OF THE PARTIES.
Section 7.1. Access to Information.
(a) Subject to applicable law and to the terms and
conditions of the Confidentiality Agreement dated April 24, 2003 between
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc. and Parent (the "Confidentiality Agreement"), the
Company and its subsidiaries shall afford to Parent and Subsidiary and Parent's
employees, directors, officers, accountants, counsel, financial advisors and
other representatives (the "Parent Representatives") full access during normal
business hours and at other times with reasonable notice throughout the period
before the Effective Time (including for the purpose of conducting any
environmental investigations or audits that Parent or Subsidiary reasonably
determine are necessary) to all of the Company's properties, books, contracts,
commitments and records and, during such period, shall furnish promptly to
Parent or
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the Parent Representatives (i) a copy of each report, schedule and other
document filed by the Company pursuant to the requirements of federal or state
securities laws, (ii) such other information concerning the Company's business,
properties and personnel as Parent shall reasonably request, and (iii) permit
Parent to make such inspections as it may require (and the Company shall
cooperate with in any inspections, including, without limitation, environmental
diligence). Parent and its subsidiaries shall hold and shall use commercially
reasonable efforts to cause the Parent Representatives to hold in strict
confidence all nonpublic documents and information furnished to Parent,
Subsidiary and any Parent Representative in connection with the transactions
contemplated by this Agreement in accordance and subject to the Confidentiality
Agreement.
(b) The parties acknowledge that certain of the
information which has been and will be made available pursuant to this Agreement
may be proprietary and include confidential information ("Confidential
Information"). The Company and Parent shall each hold all such Confidential
Information about the other in confidence and shall not disclose it to any
Person (other than to their respective Representatives, so long as those
Representatives agree to keep any such Confidential Information in confidence)
without the approval of the Person supplying such information; provided,
however, that the foregoing restriction shall not apply to any information which
is or becomes publicly known or which is lawfully obtained from a third party,
or to any disclosure required by law or in connection with the enforcement of
the Company's or Parent's rights under this Agreement. If the transactions
contemplated hereby are not consummated, Parent and Subsidiary shall return all
documents containing proprietary or Confidential Information received from them
and destroy any internal analyses based in whole or in part on such information.
This section supplements the terms and conditions of the Confidentiality
Agreement and shall not be construed to supersede such Agreement except to the
extent expressly inconsistent herewith.
(c) If this Agreement is terminated, Parent shall
promptly return to the Company (or, at the Company's request, destroy) all
nonpublic written material provided pursuant to this Section 7.1 and shall not
retain any copies, extracts or other reproductions in whole or in part of such
written material. In such event all documents, memoranda, notes and other
writings (including all electronic versions thereof) prepared by Parent based on
the information in such material shall be destroyed (and Parent shall cause the
Parent Representatives to similarly destroy the documents, memoranda and notes),
and, if requested by the Company, such destruction (and reasonable best efforts)
shall be certified to the Company in writing by an authorized officer
supervising such destruction.
Section 7.2. Acquisition Transactions.
(a) From and after the date hereof and before the
Effective Time or earlier termination of this Agreement, the Company shall not,
and shall not permit any of its subsidiaries to, and the Company shall cause its
subsidiaries, officers, directors and employees, and any attorney, accountant,
investment banker, financial advisor or other agent retained by it or any of its
subsidiaries not to, initiate, solicit, encourage (including by providing
non-public or confidential information) or take any other action to facilitate,
any inquiries or the making of any submissions of any Acquisition Proposal (as
defined herein) or enter into or maintain or continue discussions or negotiate
with any person or group in furtherance of such inquiries or to obtain or
- 32 -
induce any person or group to make or submit an Acquisition Proposal or agree to
or endorse any Acquisition Proposal or assist or participate in, facilitate or
encourage, any effort or attempt by any other person or group to do or seek any
of the foregoing or authorize or permit any of its officers, directors or
employees or any of its subsidiaries or any of its affiliates or any attorney,
accountant, investment banker, financial advisor or other representative or
agent retained by it or any of its subsidiaries to take such action.
"Acquisition Proposal" means an inquiry, offer or proposal regarding any of the
following (other than the transactions contemplated by this Agreement) involving
the Company or any subsidiary: (i) any merger, consolidation, share exchange,
recapitalization, liquidation, dissolution, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of 20% or more of the assets of the Company and its
subsidiaries, taken as a whole, or of any Material Business (as defined herein)
or of any subsidiary or subsidiaries responsible for a Material Business in a
single transaction or series of related transactions; (iii) any tender offer
(including a self tender offer) or exchange offer that, if consummated, would
result in any person or group beneficially owning more than 20% of the
outstanding shares of any class of equity securities of the Company or its
subsidiaries (or in the case of a person or group which beneficially owns more
than 20% of the outstanding shares of any class of equity securities of the
Company as of the date hereof, would result in such person or group increasing
the percentage or number of shares of such class beneficially owned by such
person or group) or the filing of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") in connection therewith; (iv) any
acquisition of 20% or more of the outstanding shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith or any other acquisition or disposition the consummation of
which would prevent or materially diminish the benefits to Parent of the Merger;
or (v) any public announcement by the Company or any third party of a proposal,
plan or intention to do any of the foregoing or of any agreement to engage in
any of the foregoing. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this Section 7.2 by any officer,
director, employee or affiliate of the Company or any attorney, accountant,
investment banker or other advisor, agent or representative of the Company or
any of its subsidiaries, whether or not such person is purporting to act on
behalf of the Company or any of its subsidiaries or otherwise, shall be deemed
to be a breach of this Section 7.2 by the Company.
(b) Notwithstanding the provisions of paragraph (a)
above or of this Agreement (other than the third sentence of this Section
7.2(b)), the Company may, prior to the adoption of this Agreement by the
requisite vote of the shareholders of the Company, in response to a unsolicited,
bona fide, written Acquisition Proposal from a financially capable Person (a
"Potential Acquiror") which did not result from a breach of this Section 7.2,
which the Company's Board of Directors determines would reasonably be expected
to lead to, a Superior Proposal (as defined herein), furnish confidential or
non-public information to such Potential Acquiror and negotiate with such
Potential Acquiror, if, and only to the extent that (i) the Board of Directors
of the Company, after consultation with and based upon the written opinion of
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel), determines reasonably and in good faith that the
failure to do so would constitute a breach of the fiduciary duty of the Board of
Directors of the Company under applicable law and (ii) prior to taking such
action the Company (x) delivers to Parent and Subsidiary the notice required
pursuant to Section 7.2(c) stating that it is taking such action and (y)
receives from such person or group an executed confidentiality agreement that is
not, in any material respect, less
- 33 -
restrictive as to such person or entity than the Confidentiality Agreement and
which, in any event, contains customary confidentiality and standstill
restrictions and shall not contain any exclusivity provisions which would
prohibit the Company from complying with its obligations under this Section 7.2
or otherwise under this Agreement. Additionally, nothing contained in this
Section 7.2 shall prohibit the Company or the Board of Directors of the Company
from taking and disclosing to its shareholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Securities Exchange Act of 1934, as
amended or from making any disclosure to the Company's shareholders if the Board
of Directors of the Company, after consultation with and based upon the written
opinion of independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines reasonably and in good faith that the failure
to take such action would constitute a breach of the fiduciary duty of the Board
of Directors under applicable law; provided that neither the Board of Directors
of the Company nor any committee thereof withdraws or modifies, or proposes to
withdraw or modify, the approval or recommendation of the Board of Directors of
the Company of the Merger or approves or recommends, or publicly proposes to
approve or recommend, an Acquisition Proposal unless and until the Company and
the Board of Directors of the Company have complied with all the provisions of
this Section 7.2. Notwithstanding anything herein to the contrary, the first
sentence and second sentence of this Section 7.2(b) and the proviso of Section
7.2(d) shall not apply with respect to any Acquisition Proposal from a Person
(or such Person's affiliates) that prior to the date hereof entered into a
confidentiality agreement, non-disclosure agreement or similar arrangement with
the Company or any of its subsidiaries or any of their respective agents in
connection with such party's consideration of an Acquisition Proposal.
(c) The Company shall promptly notify (and, in any
event, within one business day) Parent orally and in writing after receipt of
any Acquisition Proposal, indication of interest or request for non-public
information relating to the Company or its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company by any Person that informs the Board of Directors of the Company that it
is considering making, or has made, an Acquisition Proposal and the status of
any discussions with respect to an Acquisition Proposal. Such notice shall
include the material terms of such request, Acquisition Proposal or inquiry and
the identity of the person making any such request, Acquisition Proposal or
inquiry and the Company's response thereto. The Company will keep Parent fully
informed of the status and details (including amendments or proposed amendments)
of any such request, Acquisition Proposal or inquiry. Immediately following the
execution of this Agreement, the Company will cease and cause to be terminated
any existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(d) Except as expressly permitted by this Section 7.2,
neither the Board of Directors of the Company nor any committee thereof shall
(i) withdraw, modify in a manner adverse to Parent or Subsidiary, or propose to
withdraw, modify in a manner adverse to Parent or Subsidiary or fail to make its
approval or recommendation of the Merger, this Agreement and the other
transactions, (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal, (iii) take any action not previously taken to render the
provisions of any anti-takeover statute, rule or regulation (including Sections
14A:10A-1 to 14A:10A-6 of the NJBCA) inapplicable to any person (other than
Parent, Subsidiary or their affiliates) or group or to any Acquisition Proposal,
or (iv) cause the Company to accept such
- 34 -
Acquisition Proposal and/or enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, an
"Acquisition Agreement") related to any Acquisition Proposal; provided, however,
that prior to the adoption of this Agreement by the requisite vote of the
shareholders of the Company, the Board of Directors of the Company may terminate
this Agreement pursuant to Section 9.1(e) if, and only to the extent that (A)
such Acquisition Proposal is a Superior Proposal, (B) the Board of Directors of
the Company, after consultation with and based upon the written opinion of
independent legal counsel (who may be the Company's regularly engaged
independent counsel), determines reasonably and in good faith that the failure
to do so would constitute a breach of the fiduciary duty of the Board of
Directors of the Company under applicable law, (C) the Company shall, prior to
or simultaneously with the taking of such action, have paid or pay to Parent or
Subsidiary or their designee the Termination Fee referred to in Section 9.2, (D)
the Company is not in material breach of this Agreement, including without
limitation this Section 7.2, (E) the Company shall have complied with its
obligations under Section 9.1(e) and (F) concurrently with such termination, the
Company enters into a definitive acquisition agreement with respect to such
Superior Proposal.
(e) "Superior Proposal" means any proposal made by one
or more third parties (the "Bidders") to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger, consolidation,
share exchange, business combination, recapitalization, liquidation, dissolution
or other similar transaction, all the shares of Company Common Stock then
outstanding or all or substantially all of the assets of the Company and its
subsidiaries for consideration consisting of all cash and such Bidders have such
consideration immediately available and such proposal is not otherwise subject
to a financing or funding condition, which the Board of Directors of the Company
determines reasonably and in good faith (based on the written opinion of a
financial advisor of nationally recognized reputation) to be superior to the
holders of Company Common Stock from a financial point of view (taking into
account any changes to the terms of this Agreement that have been proposed by
Parent in response to such proposal) and to be more favorable to holders of
Company Common Stock (taking into account all financial and strategic
considerations, including relevant legal, financial, regulatory and other
aspects of such proposal and the third party making such proposal and the
conditions and prospects for completion of such proposal) than the Merger and
the other transactions taken as a whole. "Material Business" means any business
(or the assets needed to carry out such business) that contributed or
represented 20% or more of the net sales, the net income or the assets
(including equity securities) of the Company and its subsidiaries taken as a
whole.
Section 7.3. Expenses and Fees. If the Agreement is terminated all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, except as provided in Section 9.2. If the Agreement and the
transactions contemplated hereby are consummated, all costs and expenses
incurred shall be paid by the party incurring such expenses, except that the
Company shall pay (a) the reasonable fees and expenses of all of Parent's third
party advisors (including accountants and legal advisors retained by Parent in
connection with the transactions contemplated by this Agreement) up to $200,000
and (b) the reasonable fees of the Company's accountants and legal advisors.
Notwithstanding anything herein to the contrary, the shareholders of the Company
immediately prior to the Effective time shall pay any and all fees and expenses
of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, Inc.
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Section 7.4. Employee Benefits.
(a) During the period commencing at the Effective Time
and ending on the first anniversary thereof (the "Anniversary Period"), the
Surviving Corporation shall provide to employees who were employees of the
Company or its subsidiaries immediately prior to the Effective Time
(collectively, "Company Employees") severance benefits that are substantially
similar to the severance benefits provided to those Company Employees under the
Company's existing severance plans (the "Severance Plans") as they exist on the
date of this Agreement. During the Anniversary Period, the Surviving Corporation
shall provide to Company Employees (for so long as they are employed by the
Surviving Corporation) salary and other benefits that are, in the aggregate,
substantially similar to those provided by the Company and its subsidiaries to
such Company Employees immediately prior to the Effective Time (including,
without limitation, benefits pursuant to qualified and nonqualified retirement
plans, savings plans, medical, dental, disability and life insurance plans and
programs, deferred compensation arrangements, bonus plans, and retiree benefit
plans, policies and arrangements), but excluding for purposes of this comparison
the Company's long-term incentive programs or other Company Plans providing for
compensation based on the equity of the Company and any such benefits provided
prior to the Effective Time that consist of any equity-related compensation.
(b) Except to the extent prohibited by law, with respect
to any employee benefit plans in which any Company Employees first become
eligible to participate on or after the Effective Time, and in which such
Company Employees did not participate before the Effective Time, the Surviving
Corporation shall: (i) to the extent applicable, use commercially reasonable
efforts to cause the waiver of all pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Company Employees under any such plans in which such employees
may be eligible to participate after the Effective Time, except to the extent
such pre-existing conditions, exclusions or waiting periods would apply under
the Company Plan, agreement, policy or arrangement that provides the same type
of benefits as it existed immediately before the Effective Time; (ii) provide
each Company Employee with credit for any co-payments and deductibles paid
before the Effective Time (to the same extent such credit was given under the
appropriate Company Plan, agreement, policy or arrangement that provides the
same type of benefits as it existed immediately before the Effective Time) in
satisfying any applicable deductible or out-of-pocket requirements under any
such plan in which such employees may be eligible to participate after the
Effective Time; (iii) recognize all service of such Company Employees to the
extent such Company Employee's service was recognized by a Company Plan (or
vacation, personal or sick day policy of the Company) as in effect on the date
of this Agreement for all purposes (including, without limitation, purposes of
eligibility to participate, vesting credit, entitlement to benefits, and,
benefit accrual) in any plan or policy in which such employees may be eligible
to participate or receive benefits after the Effective Time, which provides the
same type of benefits provided under the Company Plan as it existed immediately
before the Effective Time and (iv) with respect to flexible spending accounts,
provide each Company Employee with a credit for any salary reduction
contributions made thereto and a debit for any expenses incurred thereunder with
respect to the plan year in which the Effective Time occurs.
- 36 -
(c) Notwithstanding anything in this Section 7.4 to the
contrary, (i) the Surviving Corporation shall not be required to take any
actions under this Section 7.4 that would result in duplication of the benefits
(including, without limitation, the accrual of benefits under a pension plan)
with respect to any Company Employee, (ii) any plan, program or arrangement
adopted or maintained by the Surviving Corporation, that is not a plan, program
or arrangement that provides the same type of benefits provided under a Company
Plan as of the date immediately prior to the Effective Time shall not be subject
to the provisions of Section 7.4(b), and (iii) nothing in this Section 7.4 shall
(A) subject to Sections 7.4(a) and 7.4(b), prohibit any changes to or
terminations of the Company Plans (including, but not limited to, the Severance
Plans), (B) confer upon any Company Employee any right with respect to continued
employment by the Surviving Corporation or any of its ERISA Affiliates, or (C)
create any third party beneficiary rights in any Company Employee, any
beneficiary or any dependent thereof with respect to the compensation, terms and
conditions of employment or benefits that may be provided to any Company
Employee (or former Company Employee) by the Surviving Corporation or its ERISA
Affiliates or under any benefit plan which the Surviving Corporation or its
ERISA Affiliates may maintain or cause to be maintained with respect to such
Company Employee.
Section 7.5. Litigation. The Company shall give Parent and
Shareholder's Agent the opportunity to participate in the defense or settlement
of any shareholder litigation against the Company and its directors or officers
relating to the Merger or the other transactions contemplated by this Agreement,
and shall give Parent the opportunity to participate in the defense of such
litigation (at the Company's cost); provided, however, that no settlement shall
be agreed to before the consummation of the Merger without Parent's consent,
which consent shall not be unreasonably withheld or delayed; and provided
further that no settlement requiring a payment or an admission of any wrongdoing
by a director or officer shall be agreed to without such director's or officer's
consent. Notwithstanding anything is this section to the contrary, Parent shall
have the opportunity to direct the defense or settlement of shareholder
litigation against the Company and its directors and officers relating to the
Merger or the other transactions contemplated by this Agreement if each of the
Litigation Conditions (as defined herein) have not been satisfied.
Section 7.6. Third Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any material provision of any confidentiality
or standstill or similar agreement to which the Company and any of its
subsidiaries is a party (other than any involving Parent or Subsidiary). Subject
to the foregoing, during such period, the Company agrees to enforce and agrees
to permit (and, to the fullest extent permitted under applicable law, hereby
assigns its rights thereunder to Parent and Subsidiary) Parent and Subsidiary to
enforce on its behalf and as third party beneficiaries thereof, to the fullest
extent permitted under applicable law, the provisions of any such agreements,
including obtaining injunctions to prevent any breaches of such agreements and
to enforce specifically the terms and provisions thereof in any court or other
tribunal having jurisdiction. Notwithstanding the foregoing, nothing in this
Section 7.6 is intended to prevent the Company from exercising its rights under
Section 7.2 in accordance with the provisions of such Section. In addition, the
Company hereby waives any rights the Company may have under any standstill or
similar agreements to object to the transfer to Subsidiary of all shares of
Company Common Stock held by Shareholders covered by such standstill or similar
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agreements and hereby covenants not to consent to the transfer of any shares of
Company Common Stock held by such Shareholders to any other person unless (i)
the Company has obtained the specific, prior written consent of Parent with
respect to any such transfer or (ii) this Agreement has been terminated pursuant
to Article IX.
Section 7.7. Insurance. The Company shall maintain in full force and
effect the policies of insurance listed in Section 4.25 of the Company
Disclosure Schedule, subject only to variations required by the ordinary
operations of its business, or else will obtain, prior to the lapse of any such
policy, substantially similar coverage with insurers of recognized standing and
approved in writing by Parent. The Company shall promptly advise Parent in
writing of any change of insurer or type of coverage in respect of the policies
listed in Section 4.25 of the Company Disclosure Schedule.
ARTICLE VIII
CONDITIONS
Section 8.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, before the Effective
Time, of the following conditions:
(a) this Agreement shall have been adopted by the
requisite affirmative vote of the shareholders of the Company in accordance with
applicable law;
(b) no statute, rule, regulation, executive order,
decree or injunction shall have been enacted, entered, promulgated, or enforced
by any court or Governmental Authority which is in effect and has the effect of
prohibiting the consummation of the Merger; and
(c) (i) in the case of the Company's obligations, (x)
all other Company Required Statutory Approvals necessary for the consummation of
the Merger and the transactions shall have been obtained and be in effect at the
Effective Time, and (y) all other consents or approvals of Governmental
Authorities necessary for the consummation of the Merger and the transactions
shall have been obtained and be in effect at the Effective Time, except where
the failure to obtain any such consent or approval could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, and (ii) in the case of Parent's and Subsidiary's obligations, (x) all
other Parent Required Statutory Approvals necessary for the consummation of the
Merger and the transactions contemplated hereby shall have been obtained and be
in effect at the Effective Time, and (y) all other consents or approvals of
Governmental Authorities necessary for the consummation of the Merger and the
transactions shall have been obtained and be in effect at the Effective Time,
except where the failure to obtain any such consent or approval could not
reasonably be expected (i) to have a Company Material Adverse Effect or a Parent
Material Adverse Effect, (ii) to prohibit or materially limit the ownership or
operation by the Company, Parent or any of their respective subsidiaries or
affiliates of any of the businesses or assets of the Company or Parent or any of
their respective subsidiaries or affiliates, (iii) to impose material
limitations on the ability of Parent or Subsidiary to acquire or hold, or
exercise full rights of ownership of, any shares of Company Common
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Stock (iv) to prohibit Parent or any of its subsidiaries or affiliates from
effectively controlling the businesses of the Company in any material respect,
or (v) to require divestiture by Subsidiary or any of its affiliates of any
shares of Company Common Stock.
Section 8.2. Conditions to Obligations of Parent and Subsidiary to
Effect the Merger. The obligations of Parent and Subsidiary to effect the Merger
and otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction (or waiver by Parent), at or prior to the Closing,
of each of the following conditions:
(a) Shareholder Approval. This Agreement and the
transactions contemplated hereby shall have been adopted by the requisite vote
of the Shareholders of the Company in accordance with applicable law; provided,
that no more than ten percent (10%) of holders of Company Common Stock shall
exercise dissenter's rights within the meaning of Section 14A:11-2 of the NJBCA.
(b) GE Financing. The Company shall have received
financing of at least $1,500,000 from GE Commercial Distribution Finance
Corporation, on terms and conditions satisfactory to Parent and the Company.
(c) Performance of Agreements; Representations and
Warranties. (i) The Company shall have performed in all material respects all of
the obligations under this Agreement to be performed by it at or before the
Closing, (ii) all representations and warranties of the Company contained in
this Agreement that are qualified by materiality will be true and correct in all
respects on the date of this Agreement and on the Effective Date subject to such
qualification, with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except to the extent
that such representations are made expressly as of an earlier date, which
representations will be true and correct as of such earlier date, and (iii) all
representations and warranties of the Company contained in this Agreement that
are not qualified by materiality will be true and correct in all material
respects on the date of this Agreement and on the Effective Date, with the same
force and effect as though such representations and warranties had been made on
and as of the Effective Date, except to the extent that such representations are
made expressly as of an earlier date, which representations will be true and
correct as of such earlier date. Parent and Subsidiary shall have been furnished
with a certificate of the Company's President or Vice President, dated the
Effective, certifying to the foregoing.
(d) AntiTrust Filings. No Governmental Authority having
jurisdiction over the transactions contemplated hereby shall have taken any
action to enjoin or prevent the consummation of such transactions.
(e) Required Governmental Consents; Notice. All
statutory and regulatory consents and approvals which are required under the
laws or regulations of the United States and other Authorities shall have been
obtained.
(f) Third Party Consents. All third-party consents
required in connection with the transactions contemplated hereby shall have been
obtained for the Contracts
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set forth in Section 8.2(f) of the Company Disclosure Schedule, excluding
consents under those Contracts that are terminable at will by such third party
(the "Specified Contracts").
(g) Divestiture of Real Estate. The Company shall have
divested its building located in Springfield, New Jersey and made a payment to
all of its shareholders of the proceeds of such sale prior to the Effective
Date.
(h) Lease Agreement. Parent and the Company shall have
entered into an amended five-year lease agreement for the Springfield premises,
such lease to be on terms and conditions satisfactory to Parent and the Company
as agreed to prior to the date hereof.
(i) No Material Adverse Effect. No Material Adverse
Effect shall have occurred, nor shall any event or circumstance which could
reasonably be expected to have a Material Adverse Effect have occurred.
(j) Credit Facilities. The bank and credit facilities
the Company currently has in place with GE Commercial Distribution Finance
Corporation and Textron Financial Corporation shall either (i) remain in place
with such terms, conditions and agreements as are satisfactory to Parent or (ii)
be replaced with such bank and credit facilities upon terms and conditions
satisfactory to Parent and the Company.
(k) ▇▇▇▇▇▇ Investment. At the Effective Time, Four Kings
Management LLC shall provide the Company with a $750,000 note, in the form
agreed to by the parties thereto prior to the date hereof.
(l) Net Tangible Assets. Net tangible assets of the
Company at the Effective Date shall be at least $5,385,000 and the composition
of the Company's assets and liabilities shall be consistent with the Company's
balance sheet as of and at February 28, 2003.
(m) Employment Agreements. The Company shall enter into
(a) employment agreements with ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, in the
forms agreed to by the parties thereto prior to the date hereof (the "Employment
Agreements") and (b) a severance agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, in the form
agreed to by the parties thereto prior to the date hereof, such agreement and
the Employment Agreements each to contain a non-competition agreement with the
Company.
(n) Management Agreement. The Company shall have entered
into a Management Agreement with ▇▇▇▇ Global Holdings, Inc., in the form agreed
to by the parties thereto prior to the date hereof.
(o) Westwood Solutions LLC. The Company shall own 100%
of the outstanding membership interest in Westwood Solutions LLC.
(p) Company Closing Certificate. Parent shall have been
furnished with a certificate executed by the Company and the Shareholders' Agent
(the "Company Closing Certificate"), dated the Closing Date, certifying that the
conditions set forth in Sections 8.1 and 8.2 have been fulfilled (or waived) at
or prior to the Closing Date.
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(q) FIRPTA Certificate. At or prior to Closing, the
Company shall deliver to Parent, a certificate, pursuant to Treasury Regulation
'SS''SS' 1.897-2(h) and 1.1445-2(c), certifying that the Company Common Stock is
not a U.S. real property interest.
(r) Letter of Transmittal. The Parent shall have
received from each Shareholder the letter of transmittal in the form of Exhibit
E attached hereto.
(s) Voting Agreement. The Principal Shareholders shall
have executed and delivered the Voting Agreement, in the form of Exhibit F, to
Parent and Subsidiary.
(t) Securities Purchase Agreement. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
shall have entered into the Securities Purchase Agreement by and among Parent,
DARR Westwood LLC and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, on terms agreed to by the parties
thereto prior to the date hereof.
(u) Purchase and Sale Agreement Amendment. The Company
shall have entered into an Amendment to the Purchase and Sale Agreement, such
amendment in the form attached hereto as Exhibit G, with Westwood Property
Holdings LLC, under which amendment Westwood Property Holdings LLC agrees to
fully indemnify the Company for any and all environmental liabilities at the
property located on Diamond Road in Springfield Township, Union County, New
Jersey.
(v) Financing Statements. The UCC-1 financing statements
filed by (i) MLC Federal Inc. with the State of New Jersey Department of
Treasury Commercial Recording and (ii) First Union National Bank with the New
Jersey Union County Clerk and Fairfax County Circuit Court, Virginia shall be
terminated.
(w) Opinion of Counsel. Parent shall have received from
both Drinker ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP and counsel to the Company, an opinion dated the
Effective Date, in form and substance satisfactory to Parent.
Section 8.3. Conditions to Obligations of the Company. The obligations
of the Company to effect the Merger and otherwise consummate the transactions
contemplated by this Agreement are subject to the satisfaction (or waiver by the
Company), at or prior to the Closing, of each of the following conditions:
(a) GE Financing. The Company shall have received
financing of at least $1,500,000 from GE Commercial Distribution Finance
Corporation, on terms and conditions satisfactory to Parent and the Company.
(b) Performance of Agreements; Representations and
Warranties. (i) Parent and Subsidiary shall have performed in all material
respects all of the obligations under this Agreement to be performed by it at or
before the Closing, (ii) all representations and warranties of Parent and
Subsidiary contained in this Agreement that are qualified by materiality will be
true and correct in all respects on the date of this Agreement and on the
Effective Date subject to such qualification, with the same force and effect as
though such representations and warranties had been made on and as of the
Closing Date, except to the extent that such representations are made expressly
as of an earlier date, which representations will be true and correct as of such
earlier date, and (iii) all representations and warranties of Parent and
- 41 -
Subsidiary contained in this Agreement that are not qualified by materiality
will be true and correct in all material respects on the date of this Agreement
and on the Effective Date, with the same force and effect as though such
representations and warranties had been made on and as of the Effective Date,
except to the extent that such representations are made expressly as of an
earlier date, which representations will be true and correct as of such earlier
date. The Company shall have been furnished with a certificate of Parent's
President or Vice President, dated the Effective, certifying to the foregoing.
(c) AntiTrust Filings. No Governmental Authority
having jurisdiction over the transactions contemplated hereby shall have taken
any action to enjoin or prevent the consummation of such transactions.
(d) Required Governmental Consents; Notice. All
statutory and regulatory consents and approvals which are required under the
laws or regulations of the United States and other Authorities shall have been
obtained.
(e) Third Party Consents. All third-party consents
required in connection with the transactions contemplated hereby shall have been
obtained for the Specified Contracts.
(f) Divestiture of Real Estate. The Company shall have
divested its building located in Springfield, New Jersey and made a payment to
all of its shareholders of the proceeds of such sale prior to the Effective
Date.
(g) No Material Adverse Effect. No Material Adverse
Effect shall have occurred, nor shall any event or circumstance which could
reasonably be expected to have a Material Adverse Effect have occurred.
(h) Credit Facilities. The bank and credit facilities
the Company currently has in place with GE Commercial Distribution Finance
Corporation and Textron Financial Corporation shall either (i) remain in place
with such terms, conditions and agreements as are satisfactory to Parent or (ii)
be replaced with such bank and credit facilities upon terms and conditions
satisfactory to Parent and the Company.
(i) DARR Westwood LLC Investment. At the Effective Time,
DARR Westwood LLC shall provide the Company with a $750,000 note, in the form
agreed to by the parties thereto prior to the date hereof.
(j) Employment Agreements. The Company shall enter into
(a) the Employment Agreements and (b) a severance agreement with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
in the form agreed to by the parties thereto prior to the date hereof, such
agreement and the Employment Agreements each to contain a non-competition
agreement with the Company.
(k) Management Agreement. The Company shall have entered
into a Management Agreement with ▇▇▇▇ Global Holdings, Inc., in the form agreed
to by the parties thereto prior to the date hereof.
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(l) Parent's Closing Certificate. The Company shall have
been furnished with a certificate executed by Parent (the "Parent Closing
Certificate"), dated the Closing Date, certifying that the conditions set forth
in Sections 8.1 and 8.3 have been fulfilled (or waived) at or prior to the
Closing Date.
(m) Preferred Stock. The Parent shall have furnished the
Company, and the Company shall have approved, the terms of the Certificate of
Designation for the 8% Cumulative Compounding Preferred Stock of the Parent.
(n) Securities Purchase Agreement. DARR Westwood LLC
shall have entered into the Securities Purchase Agreement by and among the
Parent, DARR Westwood LLC and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, on terms agreed to by the
parties thereto prior to the date hereof.
(o) Purchase and Sale Agreement Amendment. The Company
shall have entered into an Amendment to the Purchase and Sale Agreement, such
amendment in the form attached hereto as Exhibit G, with Westwood Property
Holdings LLC, under which amendment Westwood Property Holdings LLC agrees to
fully indemnify the Company for any and all environmental liabilities at the
property located on Diamond Road in Springfield Township, Union County, New
Jersey.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
before the Effective Time, whether before or after approval of this Agreement
and the Merger by the shareholders of the Company:
(a) by mutual written consent of duly authorized by the
Boards of Directors of Parent, Subsidiary and the Company;
(b) by the Company at any time if (i) Parent or
Subsidiary are in breach in any material respect of any of its covenants or
agreements in this Agreement, (ii) the representations and warranties of Parent
or Subsidiary contained in this Agreement that are qualified by materiality are
not true and correct in all respects on the date of this Agreement and at
anytime thereafter subject to such qualification, with the same force and effect
as though such representations and warranties had been made on and as such date,
except to the extent that such representations are made expressly as of an
earlier date, which representations should be true and correct as of such
earlier date, (iii) the representations and warranties of Parent or Subsidiary
contained in this Agreement that are not qualified by materiality are not true
and correct in all material respects on the date of this Agreement and at
anytime thereafter, with the same force and effect as though such
representations and warranties had been made on and as of such date, except to
the extent that such representations are made expressly as of an earlier date,
which representations should be true and correct as of such earlier date
(collectively, a "Parent Breach"), which Parent Breach shall not have been
cured, if such Parent Breach is capable of cure, within ten (10) days after
notice thereof by the Company;
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(c) by Parent or Subsidiary at any time if (i) the
Company is in breach in any material respect of any of its covenants or
agreements in this Agreement (other than those contained in Sections 6.2(iv)(B)
and 6.2(iv)(E)), (ii) the Company is in breach in any respect of the agreements
and covenants set forth in Sections 6.2(iv)(B) and 6.1(iv)(E), (iii) the
representations and warranties of the Company contained in this Agreement that
are qualified by materiality are not true and correct in all respects on the
date of this Agreement and at anytime thereafter subject to such qualification,
with the same force and effect as though such representations and warranties had
been made on and as such date, except to the extent that such representations
are made expressly as of an earlier date, which representations should be true
and correct as of such earlier date or (iv) the representations and warranties
of the Company contained in this Agreement that are not qualified by materiality
are not true and correct in all material respects on the date of this Agreement
and at anytime thereafter, with the same force and effect as though such
representations and warranties had been made on and as of such date, except to
the extent that such representations are made expressly as of an earlier date,
which representations should be true and correct as of such earlier date
(collectively, a "Company Breach"), which Company Breach shall not have been
cured, if such Company Breach is capable of cure, within ten (10) days after
notice thereof by Parent;
(d) by Parent or the Company, if there shall exist any
statute, rule, regulation or order of any court or Governmental Authority which
permanently (without right of appeal or reconsideration) restrains or prohibits
the transactions contemplated hereby;
(e) by the Company prior to the Closing, concurrently
with the execution of a definitive acquisition agreement under the circumstances
permitted by Section 7.2, provided, that such termination under this Section
9.1(e) shall not be effective unless (x) the Company and its Board of Directors
shall have complied in all material respects with all their obligations under
Section 7.2 and the Company shall have paid the Termination Fee pursuant to
Section 9.2(b) and (y) the Company shall have provided Parent with at least
three (3) Business Days' prior written notice prior to terminating this
Agreement, which notice shall be accompanied by (1) a copy of the proposed
definitive acquisition agreement with respect to the Superior Proposal that the
Company proposes to accept and (2) the Company's written certification that it
has made the determinations with respect to such Superior Proposal set forth in
clauses (A) and (B) of the proviso in Section 7.2(d) and (3) the representation
that the Company will, in the absence of any other Superior Proposal, execute
such a definitive acquisition agreement unless Parent modifies this Agreement
such that the Company's Board of Directors determines that this Agreement is at
least as favorable to the holders of the Company's common stock from a financial
point of view as such Superior Proposal;
(f) by Parent if (i) the Company shall have notified
Parent that its Board of Directors has resolved to recommend another transaction
to the shareholders of the Company, (ii) the Board of Directors of the Company
or any committee thereof shall have withdrawn, or modified, amended or changed
in a manner adverse to Parent its approval or recommendation of the transactions
contemplated hereby or this Agreement, or shall have approved or recommended to
the Company's shareholders an Acquisition Proposal or shall have adopted any
resolutions to effect any of the foregoing or (iii) the Board of Directors of
the Company shall have failed to publicly reaffirm their approval or
recommendation of the
- 44 -
transactions contemplated hereby or this Agreement within two (2) Business Days
following Parent's written request to do so;
(g) by either party hereto, if the Closing does not
occur on or prior to May 31, 2004 (provided that the terminating party shall not
have prevented the Closing to occur as a result of a breach by it of this
Agreement).
Section 9.2. Effect of Termination.
(a) In the event of termination of this Agreement by
either Parent or the Company pursuant to the provisions of Section 9.1, this
Agreement shall forthwith become void and there shall be no liability or further
obligation on the part of the Company, Parent, Subsidiary or their respective
officers or directors (except for obligations in this Section 9.2, in the second
sentence of Section 7.1(a) and in Sections 7.1(b), 7.3, 11.5, and 11.11, all of
which shall survive the termination). Nothing in this Section 9.2 shall relieve
any party from liability for any willful and intentional breach of any covenant
or agreement of such party contained in this Agreement.
(b) If (i) Parent terminates this Agreement pursuant to
Section 9.1(f); (ii) Parent terminates this Agreement pursuant to Sections
9.1(c) and within 12 months after such termination the Company enters into or
publicly announces an intention to enter into a definitive agreement with
respect to an Acquisition Proposal, or consummates or publicly announces an
intention to enter into a definitive agreement with respect to an Acquisition
Proposal, or consummates or publicly announces an intention to consummate an
Acquisition Proposal; or (iii) this Agreement is terminated by the Company
pursuant to Section 9.2(e), then the Company shall pay to Buyer a termination
fee in cash equal to $150,000 (the "Termination Fee"), which shall be paid in
the case of a termination pursuant to subclause (ii) of this Section 9.2(b),
within two (2) Business Days following the date of the occurrence described in
such subclause, or in the case of a termination pursuant to subclause (i) or
(iii) of this Section 9.2(b), prior to or simultaneously with such termination.
Any payment required to be made pursuant to this subsection (b) shall be made to
Parent by wire transfer of immediately available funds to an account designated
by Parent. The payment of the Termination Fee shall not be deemed to constitute
liquidated damages. The provisions of this Section 9.2 shall not derogate from
any other rights or remedies which Parent or Subsidiary may possess under this
Agreement (including as provided in Article X or Section 11.11) or under
applicable law, and the payment of the Termination Fee shall not be deemed to
constitute liquidated damages.
Section 9.3. Amendment. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered: (a) prior to the Closing Date, on behalf of Parent,
Subsidiary, the Company and the Shareholders' Agent (acting exclusively for and
on behalf of all of the Shareholders); and (b) after the Closing Date, on behalf
of Parent and the Shareholders' Agent (acting exclusively for and on behalf of
all of the Shareholders).
Section 9.4. Extension; Waiver. At any time before the Effective Time,
any party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party
- 45 -
contained herein or in any document, certificate or writing delivered pursuant
hereto, or (c) waive compliance by the party with any of the agreements or
conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE X
INDEMNIFICATION
Section 10.1. Survival of Representations, Etc.
(a) The representations and warranties made by the
Company and the Shareholders in this Agreement and in each of the other
agreements, certificates and instruments delivered to Parent pursuant to or in
connection with the transactions contemplated by this Agreement shall survive
the Closing and shall expire, together with the Parent Indemnitees' (as defined
below) right to seek indemnification for breaches thereto pursuant to this
Article X, on the second anniversary of the Closing Date, except that (i)
representations and warranties contained in Section 4.14 (relating to
Environmental Matters) shall not expire until the fifth anniversary of the
Closing Date, (ii) the representations and warranties contained in Sections 4.12
(relating to Employee Benefit Plans) and 4.11 (relating to Taxes) shall not
expire until ninety (90) days after the relevant statute of limitations expires
and the representations and warranties contained in 4.1 (relating to
Organization and Qualification), 4.2 (relating to Capitalization), 4.4 (relating
to Authority; Non-Contravention; Approvals), and 4.17 (relating to Brokers and
Finders) shall survive indefinitely (as applicable, the "Shareholder Expiration
Date"); provided, however, that if, at any time prior to the applicable
Shareholder Expiration Date, any Parent Indemnitee (acting in good faith)
delivers to the Shareholders' Agent a written notice alleging the existence of
an inaccuracy in or a breach of any of the representations and warranties made
by the Company and any Shareholder (and setting forth in reasonable detail the
basis for such Parent Indemnitee's belief that such an inaccuracy or breach may
exist) and asserting a claim for recovery under Section 10.2 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive the applicable Shareholder Expiration Date until such time as such claim
is fully and finally resolved. The representations and warranties made by Parent
and Subsidiary survive the Closing and shall expire, together with the
Shareholder Indemnitees' right to seek indemnification for breaches thereto
pursuant to this Article X, on the second anniversary of the Closing Date,
except that the representations and warranties contained in Section 5.1
(relating to Organization) and 5.2 (relating to Authority) shall survive
indefinitely (as applicable, the "Parent Expiration Date"); provided, however,
that if, at any time prior to the applicable Parent Expiration Date, any
Shareholder Indemnitee (acting in good faith) delivers to Parent a written
notice alleging the existence of any inaccuracy in or breach of any of the
representations and warranties made by Parent and Subsidiary (and setting forth
in reasonable detail the basis for such Shareholder Indemnitee's belief that
such an inaccuracy or breach may exist) and asserting a claim for recovery under
Section 10.4 based on such alleged inaccuracy or breach, then the claim asserted
in such notice shall survive the applicable Parent Expiration Date until such
time as such claim is fully and finally resolved.
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(b) For purposes of this Agreement, each statement or
other item of information set forth in the Company Disclosure Schedule shall be
deemed to be a part of the representation and warranty made by the Company in
this Agreement.
(c) No limitation or condition of liability provided in
this Article X shall apply to any misrepresentation or breach of warranty
contained herein if such misrepresentation or breach of warranty was made
willfully or with intent to deceive, or breach of the covenants and agreements
under this Agreement or in any statement or certificate furnished or to be
furnished pursuant hereto or in connection with the transactions contemplated
hereby. For purposes of determining the existence of any misrepresentation,
breach of warranty, or nonfulfillment of any covenant or agreement, or
calculating the amount of any Damages incurred in connection with any such
misrepresentation, breach of warranty, or nonfulfillment of any covenant or
agreement, any and all references to material or Company Material Adverse Effect
(or other correlative terms) shall be disregarded.
Section 10.2. Indemnification by Shareholders.
(a) Subject to the limitations set forth in this Article
X, from and after the Closing Date, the Shareholders of the Company (the
"Shareholder Indemnitors"), jointly and severally, shall hold harmless and
indemnify the Parent Indemnitees from and against, and shall compensate and
reimburse each of the Parent Indemnitees for, any Damages which are directly or
indirectly suffered or incurred by any of the Parent Indemnitees or to which any
of the Parent Indemnitees may otherwise become subject (regardless of whether or
not such Damages relate to any third-party claim) and which arise from or as a
result of or are directly or indirectly connected with: (i) any
misrepresentation in, inaccuracy in or breach of any representation or warranty
of the Company set forth in this Agreement or in any agreement, certificate or
instrument furnished or to be furnished to Parent pursuant hereto or in
connection with the transactions contemplated hereby; (ii) any breach of any
covenant or obligation of the Company (including the covenants set forth in
Articles VI and VII); (iii) any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before or otherwise involving, any
court or other Governmental Authority or any arbitrator or arbitration panel
("Legal Proceeding") relating to any inaccuracy or breach of the type referred
to in clause (i) or (ii) above; (iv) any Legal Proceeding set forth in Section
4.8 of the Company Disclosure Schedule; (v) any Legal Proceeding initiated by a
shareholder or shareholders of the Company challenging the fairness of the
Merger; (vi) any Legal Proceeding commenced by any Parent Indemnitee for the
purpose of enforcing any of its rights under this Article X, (vii) any and all
amounts payable to any shareholder of the Company who exercises his or her right
to dissent from the Merger and the transactions contemplated hereby and seeks to
receive the fair value of such shareholder's shares of Company Common Stock in
accordance with the NJBCA or (viii) any claims or assertions made by any
employees or shareholders of the Company for stock or other rights pursuant to
any phantom stock arrangement that the Company may have, whether oral or
written. Any amount of Damages required to be indemnified pursuant to this
Section 10.2 shall be deemed, to the extent permitted by law, an adjustment in
the Merger Consideration.
- 47 -
(b) From and after the Effective Time, the Shareholder
Indemnitors, jointly and severally, shall hold harmless and indemnify each of
the Parent Indemnitees from and against, and shall compensate and reimburse each
of the Parent Indemnitees for: (i) any Taxes of the Company (and related
Damages) attributable to any taxable period (or portion thereof) ending on or
before the Closing Date, to the extent such Taxes exceed the accrual for such
Taxes on the Company Balance Sheet; (ii) any increase in Tax liability (and
related Damages) resulting from the Company being liable for any Taxes (a) of
any consolidated group of which the Company was a member on or before the
Closing Date pursuant to Section 1.1502-6 of the Treasury Regulations or any
analogous state, local or foreign provisions and (b) of any Person as transferee
or successor, by contract or otherwise for any taxable period (or portion
thereof) ending on or before the Closing Date. In the event a taxable period
includes a period prior to the Closing Date, Taxes shall, in the case of real
and personal property Taxes, be apportioned ratably to such taxable period on a
daily basis and, in the case of other Taxes, be apportioned to such taxable
period based on a closing of the books on the Closing Date.
(c) Each of the Company and the Shareholders
acknowledges and agrees that, if the Surviving Corporation suffers, incurs or
otherwise becomes subject to any Damages as a result of or in connection with
any inaccuracy in or breach of any representation, warranty, covenant or
obligation, then (without limiting any of the rights of the Surviving
Corporation as a Parent Indemnitee) Parent shall also be deemed, by virtue of
its ownership of the stock of the Surviving Corporation, to have incurred
Damages as a result of and in connection with such inaccuracy or breach.
Section 10.3. Limitation on Indemnification.
(a) The Shareholder Indemnitors shall have no liability
(for indemnification or otherwise) with respect to claims under Section 10.2
until the total of all Damages with respect to such matters exceeds $150,000 and
then only for the amount by which such Damages exceed $75,000. The limitation on
liability in the preceding sentence does not apply to Damages resulting from any
breach of the representations and warranties contained in 4.1 (relating to
Organization and Qualification), 4.2 (relating to Capitalization), and 4.4
(relating to Authority; Non-Contravention; Approvals).
(b) The total liability of each Shareholder Indemnitor
with respect to all claims under Section 10.2 shall not exceed the pro rata
share of the Merger Consideration allocable to each Shareholder on Exhibit B.
(c) The liability of the Shareholder Indemnitors under
this Section 10.3 must first be satisfied by set-off against the Notes against
the latest installments of principal payments due and allocated 25% to the 5%
Note and 75% to the 8% Note. The right of set off granted herein is granted
without any requirement of presentment, demand, protest or other notice of any
kind to the Company and the Shareholders and shall be in addition to and not in
substitution of any other rights Parent shall entitled to under this Agreement
or otherwise. Nothing in this Article X shall limit the ability of the Parent
Indemnities to seek recovery for Damages based on fraud or intentional
misrepresentation.
- 48 -
Section 10.4. Indemnification by Parent. Subject to the limitations set
forth in this Article X, from and after the Effective Time, Parent shall hold
harmless and indemnify each of the Shareholder Indemnitees from and against, and
shall compensate and reimburse each of the Shareholder Indemnitees for, any
Damages which are directly or indirectly suffered or incurred by any of the
Shareholder Indemnitees or to which any of the Shareholder Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are directly
or indirectly connected with: (a) any misrepresentation in, inaccuracy in or
breach of any representation or warranty set forth in this Agreement or any
agreement or instrument furnished or to be furnished to the Company or the
Shareholders pursuant hereto or in connection with the transactions contemplated
hereby; (b) any breach of any covenant or obligation of Parent (including the
covenants set forth in Article VI); or (c) any Legal Proceeding relating to any
inaccuracy or breach of the type referred to in clause (a) or (b) above
(including any Legal Proceeding commenced by any Shareholder Indemnitee for the
purpose of enforcing any of its rights under this Article X). Any amount of
Damages required to be indemnified pursuant to this Section 10.4 shall be
deemed, to the extent permitted by law, an adjustment in the Merger
Consideration. Any claims for indemnification pursuant to this Section 10.4
shall be made by the Shareholders' Agent on behalf of any Shareholder
Indemnitee; provided, however, that the Shareholders' Agent shall not make any
such claim without obtaining the prior written consent of at least 50% of the
Shareholder Indemnitees.
Section 10.5. No Contribution. Each Shareholder Indemnitor waives, and
acknowledges and agrees that he shall not have and shall not exercise or assert
(or attempt to exercise or assert), any right of contribution, right of
indemnity or other right or remedy against Subsidiary or the Company in
connection with any indemnification obligation or any other liability to which
he may become subject under or in connection with this Agreement or any
agreement or instrument furnished or to be furnished to Parent or in connection
with the transactions contemplated hereby.
Section 10.6. Interest. Any Indemnitor who is required to hold
harmless, indemnify, compensate or reimburse any Indemnitee pursuant to this
Article X with respect to any Damages shall also be liable to such Indemnitee
for interest on the amount of such Damages (for the period commencing as of the
date on which such Indemnitor first received notice of a claim for recovery by
such Indemnitee and ending on the date on which the liability of such Indemnitor
to such Indemnitee is fully satisfied by such Indemnitor) at a floating rate
equal to the rate of interest publicly announced by Citibank, N.A. in its
principal office in New York, New York from time to time as its prime, base or
reference rate.
Section 10.7. Insurance and Tax Benefits. The amount due as
indemnification with respect to any claim under this Article X shall take into
account and shall be reduced by the amount of any tax benefits received by the
Indemnitee with respect to the claim for Damages and any insurance or
indemnification proceeds actually paid by any third party in respect of the
subject matter of such claim (after deducting all attorneys' fees, expenses and
other costs of recovery); provided, that the amounts of any increase in
insurance premium or retroactive premiums or premium adjustments resulting from
the making of a claim or claims against insurers shall, for this purpose, be
deemed to be deducted from the amount so paid by such insurers; provided,
further, that the Company agrees, at the request of the Shareholders' Agent, to
file a claim against any such insurer (but not indemnitor) and use its
reasonable efforts to
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pursue any such filed claim, so long as the costs of such activities are paid by
the Shareholders and the filing of such claim and such activities will not
adversely affect the business of the Company or its relations with its
constituencies or disrupt its operations.
Section 10.8. Procedure for Indemnification - Third-Party Claims.
(a) Promptly after receipt by a party entitled to
indemnity under Section 10.2 or 10.4 (an "Indemnified Person") of notice of the
assertion of a claim (the "Claim Notice") by a third party against it, such
Indemnified Person shall, if a claim is to be made against a party obligated to
indemnify under such Section (an "Indemnifying Person"), give the Claim Notice
to the Indemnifying Person of the assertion of such claim; provided, however,
that the failure to provide such Claim Notice shall not relieve the Indemnifying
Person of any obligations that it may have to any Indemnified Person under this
Article X, except (i) to the extent such failure shall have adversely prejudiced
the Indemnifying Party and (ii) to the extent expenses are incurred during the
period in which notice was not provided.
(b) If any third-party claim referred to in Article X is
against an Indemnified Person and it gives notice to the Indemnifying Person of
the assertion of such third-party claim, the Indemnifying Person shall have
fifteen (15) days from the personal delivery of mailing of the Claim Notice (the
"Notice Period"), or if the laws of jurisdiction of the Company require a
shorter term than the Notice Period, the Notice Period shall be reduced to two
(2) days from the personal delivery or mailing of the Claim Notice, to notify
the Indemnified Party whether or not it desires to assume the defense of such
claim with counsel satisfactory to the Indemnified Person if (i) the claim
involves (and continues to involve) solely monetary damages and the Indemnifying
Party's assumption of the defense or settlement of such claim will not have an
adverse effect on the Indemnified Party's business, (ii) the Indemnifying Party
expressly agrees in writing to the Indemnified Party that, as between the two,
the Indemnifying Party is solely obligated to satisfy and discharge the claim,
and (iii) the Indemnifying Party makes reasonably adequate provision to satisfy
the Indemnified Party of the Indemnifying Party's ability to satisfy and
discharge the claim (the foregoing collectively, the "Litigation Conditions");
provided, however, that if (i) the Indemnifying Person is also a party against
whom the third-party claim is made and the Indemnified Person determines in good
faith that joint representation would be inappropriate, or (ii) the Indemnifying
Person fails to provide reasonable assurance to the Indemnified Person of its
financial capacity to defend such third-party claim and provide indemnification
with respect to such third-party claim; and provided further, however, that the
Indemnifying Party shall forfeit the right to control the defense or settlement
of any such claim if, at any time after assuming the defense or settlement
thereof, the Indemnifying Party no longer satisfies the Litigation Conditions.
All costs and expenses incurred by the Indemnifying Party in defending such
claim or demand shall be a liability of, and shall be paid by, the Indemnifying
Party. After notice from the Indemnifying Person to the Indemnified Person of
its election to assume the defense of such third-party claim, the Indemnifying
Person shall not, as long as it diligently conducts such defense, be liable to
the Indemnified Person under this Article X for any fees of other counsel or any
other expenses with respect to the defense of such third-party claim, in each
case subsequently incurred by the Indemnified Person in connection with the
defense of such claim, other than reasonable costs of investigation, which shall
be Damages recoverable under this Section. If the Indemnifying Person assumes
the defense of a third-party claim, (i) such assumption will conclusively
establish for purposes of this Agreement that the
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claims made in that claim are within the scope of and subject to
indemnification; (ii) no compromise, settlement, or offer to settle or
compromise any such claim may be effected by the Indemnifying Person without the
Indemnified Person's prior written consent, which shall not be unreasonably
withheld, if such settlement or compromise would result in the imposition of a
consent order, injunction or decree that would restrict the future activity or
conduct of the Indemnified Party or any subsidiary or affiliate thereof unless
the sole relief provided is monetary damages that are paid in full by the
Indemnifying Person (after the set-off and satisfaction of the Notes as provided
in Section 10.3; and (iii) the Indemnified Person shall have no liability with
respect to any compromise or settlement of such third-party claims effected
without its consent (which may not be unreasonably withheld). If a Claim Notice
is given to an Indemnifying Person of the assertion of any third-party claim and
the Indemnifying Person does not, within the Notice Period, give notice to the
Indemnified Person of its election to assume the defense of such claim, the
Indemnifying Person will be bound by any determination made in such claim or any
compromise or settlement effected by the Indemnified Person.
(c) With respect to any third-party claim subject to
indemnification under this Section: (i) both the Indemnified Person and the
Indemnifying Person, as the case may be, shall keep the other party fully
informed of the status of such third-party claim and any related proceedings at
all stages thereof where such party is not represented by its own counsel, and
(ii) the parties agree (each at its own expense) to render to each other such
assistance as they may reasonably require of each other and to cooperate in good
faith with each other in order to ensure the proper and adequate defense of any
third-party claim.
(d) With respect to any third-party claim subject to
indemnification under this Section, the parties agree to cooperate in such a
manner as to preserve in full (to the extent possible) the confidentiality of
all Confidential Information and the attorney client and work-product
privileges. In connection therewith, each party agrees that: (i) it will use its
best efforts, in respect of any third-party claim in which it has assumed or
participated in the defense, to avoid production of Confidential Information
(consistent with applicable law and rules of procedure), and (ii) all
communications between any party hereto and counsel responsible for or
participating in the defense of any third-party claim shall, to the extent
possible, be made so as to preserve any applicable attorney-client or
work-product privilege.
Section 10.9. Exercise of Remedies by Parent Indemnitees Other Than
Parent. No Parent Indemnitee (other than Parent or any successor thereto or
assign thereof) shall be permitted to assert any indemnification claim or
exercise any other remedy under this Agreement unless Parent (or any successor
thereto or assign thereof) shall have consented to the assertion of such
indemnification claim or the exercise of such other remedy.
Section 10.10. Indemnification Remedy. The indemnification rights of
Indemnified Persons under this Article X are independent of and in addition to
such rights and remedies as such Indemnified Persons may have at law or in
equity or otherwise for any breach of representation, warranty, agreement or
covenant hereunder on the part of any shareholder hereto, including the right to
seek recission or restitution, none of which rights or remedies shall be
affected or diminished hereby. No right to indemnification under this Article X
shall be limited by reason of any investigation or audit conducted before or
after the Closing of any Indemnified Persons hereto or the knowledge of such
party of any breach of any representation, warranty,
- 51 -
agreement or covenant by the shareholders of the Company at any time, or the
decision by Indemnified Persons to complete the Closing.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1. Shareholders' Agent. By virtue of their approval and
adoption of this Agreement, the Shareholders of the Company shall be deemed to
have irrevocably constituted and appointed, effective as of the Closing, ▇▇▇▇▇
▇▇▇▇▇▇ (the "Shareholders' Agent") as their true and lawful agent and
attorney-in-fact to take any and all actions on their behalf in connection with
the transactions contemplated by this Agreement, including, without limitation,
entering into any other agreement relating thereto or to this Agreement and
exercising on behalf of the Shareholders of the Company all or any powers,
authority, rights and discretion conferred on them under this Agreement, the
Escrow Agreement or any such other agreement, including without limitation,
waiving any terms and conditions of any such agreement, giving and receiving
notices and communications entering into agreements regarding satisfaction of
claims by Parent Indemnitees, objecting to such deliveries, agreeing to,
negotiating, entering into settlements and compromises of, and demanding
arbitration and complying with orders of courts and awards of arbitrators with
respect to such claims, and taking all actions necessary or appropriate in the
judgment of the Shareholders' Agent for the accomplishment of the foregoing.
This power of attorney is coupled with an interest and is irrevocable. By virtue
of its approval and adoption of this Section 11.1, the Shareholders' Agent
hereby accepts its appointment as Shareholders' Agent hereunder on the terms set
forth herein. No bond shall be required of the Shareholders' Agent, and the
Shareholders' Agent shall receive no compensation for its services. Notices or
communications to or from the Shareholders' Agent shall constitute notice to or
from each of the Company's Shareholders for purposes of this Agreement. Parent
shall be entitled to deal exclusively with the Shareholders' Agent on all
matters relating to this Agreement, and shall be entitled to rely conclusively
(without further evidence of any kind whatsoever) on any document executed or
purported to be executed on behalf of any Shareholder by the Shareholders'
Agent, and on any other action taken or purported to be taken on behalf of any
Shareholder by the Shareholders' Agent, as fully binding upon such Shareholder.
Section 11.2. Further Assurances. Each party hereto shall execute and
cause to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
Section 11.3. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given, and
shall be effective upon receipt, if delivered personally, telecopied (which is
confirmed), sent by registered or certified mail (return receipt requested), or
sent by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to Parent or Subsidiary, to:
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▇▇▇▇ Technology LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
and
Dechert LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company, or Shareholders' Agent, to:
Westwood Computer Corporation
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Drinker ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Section 11.4. Governing Law. This agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of New Jersey applicable to contracts executed and to be performed wholly
within such state.
Section 11.5. Parties to Agreement. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement. The rights of any third party beneficiary hereunder are not subject
to any defense, offset or counterclaim.
Section 11.6. Interpretation. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit to, 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."
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The words "hereof," "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein or unless the
context clearly otherwise indicates. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
Section 11.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
Section 11.8. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
Section 11.9. Enforcement. The parties agree that irreparable damage
would occur and that the parties would not have any adequate remedy at law 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 or in equity.
Section 11.10. Submission to Jurisdiction; Waivers. Each of Parent,
Subsidiary and the Company irrevocably agrees that any legal action or
proceeding with respect to this Agreement or for recognition and enforcement of
any judgment in respect hereof brought by any other party hereto or its
successors or assigns may be brought and determined in the federal or state
courts located in Camden County, New Jersey, and each of Parent, Subsidiary and
the Company hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each of
Parent, Subsidiary and the Company hereby irrevocably waives, and agrees not to
assert,
- 54 -
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) 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 before
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), or (c) to the fullest extent permitted by applicable law, that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper or (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
Section 11.11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 11.12. Entire Agreement. This Agreement (including the documents
and instruments referred to herein and the Confidentiality Agreement)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both oral and written, among the parties with respect to the
subject matter of this Agreement. In the event of a conflict between the
provisions of this Agreement and the Confidentiality Agreement, the provisions
of this Agreement shall prevail.
ARTICLE XII
DEFINITIONS
Section 12.1. For purposes of this Agreement:
(a) "Company Material Adverse Effect" means any change,
event, circumstance or effect, individually or when aggregated with other such
changes, events, circumstances or effects, (i) is or may reasonably be expected
to be materially adverse to the business, assets, liabilities, prospects,
earnings, operations, products, properties, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, or (ii) materially
impairs the ability of the Company to perform on a timely basis its obligations
under this Agreement or the consummation of the transactions contemplated
hereby. For the purposes of this Agreement, the determination of whether a
breach of a representation and warranty or covenant of this Agreement shall be
deemed to give rise to a Company Material Adverse Effect shall be determined on
a cumulative basis by adding the effect of the breach of any such representation
and warranty or covenant (determined without regard to any materiality or
Company Material Adverse Effect qualifiers) to the effect of all other breaches
of representations and warranties and covenants of this Agreement (determined
without regard to any materiality or Company Material Adverse Effect qualifiers)
for each of the applicable period or periods to which each such representation,
warranties or covenants relate, in all cases before applying the materiality
standard set forth in the preceding sentence, and then determining whether, for
any of the applicable periods, such aggregate sum exceeds the materiality
standard set forth in the preceding sentence.
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(b) "Damages" mean loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation, remediation or other response actions) or
expense of any nature.
(c) "Encumbrance" means liens, security interests,
pledges, equities, proxies, claims, charges, adverse claims, mortgages, rights
of first refusal, preemptive rights, restrictions, encumbrances, easements,
covenants, licenses, options or title defects of any kind whatsoever.
(d) "Governmental Authority" means a governmental or
regulatory body, agency or authority.
(e) "Knowledge of the Company" means the actual
knowledge of those individuals listed in Section 12.1(e) of the Company
Disclosure Schedule, after due inquiry.
(f) "Knowledge of the Parent" means the actual knowledge
of those individuals listed in Section 12.1(f) of the Company Disclosure
Schedule, after due inquiry.
(g) "Parent Indemnitees" means each of (i) Parent; (ii)
Parent's current and future affiliates (including Subsidiary and, following the
Merger and the Surviving Corporation); (iii) the respective representatives of
the Persons referred to in clauses (i) and (ii) above; and (iv) the respective
successors and assigns of the Persons referred to in clauses (i), (ii) and (iii)
above; provided, however, that the Shareholders of the Company shall not be
deemed to be Parent Indemnitees.
(h) "Parent Material Adverse Effect" means any change,
event, violation, inaccuracy, circumstance or effect, individually or when
aggregated with other such changes, events, violations, inaccuracies,
circumstances or effects, that materially impairs the ability of Parent to
perform on a timely basis its obligations under this Agreement or the
consummation of the transactions contemplated hereby.
(i) "Person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity, and the term "subsidiary" (written
without capitalization) means, when used with reference to any non-natural
Person, any corporation, partnership, limited liability company, joint venture
or other entity of which such Person owns or controls, directly or indirectly,
50% or more of the stock or other voting interests, the holders of which are
entitled to vote for the election of a majority of the board of directors or any
similar governing body of such corporation, partnership, limited liability
company, joint venture or other entity.
(j) "Shareholder Indemnitees" means the following
Persons: (i) the Shareholders; (ii) the Shareholder' Agent; (iii) the current
and future Affiliates of the Shareholders and the Shareholders' Agent; (iv) the
respective representatives of the Persons referred to in clauses (i), (ii) and
(iii) above; and (v) the respective successors and assigns of the Persons
referred to in clauses (i), (ii), (iii) and (iv) above.
- 56 -
(k) "Shareholders" mean each shareholder of the Company
that does not perfect its appraisal rights and is otherwise entitled to receive
the Merger Consideration.
(l) "Taxes" means all taxes, including, without
limitation, income, gross receipts, excise, property, sales, withholding, social
security, occupation, use, service, license, payroll, franchise, transfer and
recording taxes, fees and charges, windfall profits, severance, customs, import,
export, employment or similar taxes, charges, fees, levies or other assessments
imposed by the United States, or any state, local or foreign government or
subdivision or agency thereof, whether computed on a separate, consolidated,
unitary, combined, or any other basis, and such term shall include any interest,
fines, penalties or additional amounts of any interest in respect of any
additions, fines or penalties attributable or imposed or with respect to any
such taxes, charges, fees, levies or other assessments.
- 57 -
IN WITNESS WHEREOF, Parent, Subsidiary, the Principal Shareholders, the
Company and the Shareholders' Agent have caused this Agreement to be signed by
their respective officers as of the date first written above.
WESTWOOD COMPUTER CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Name:
--------------------------
Title:
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DARR WESTWOOD ACQUISITION CORPORATION
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Name:
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Title:
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DARR WESTWOOD TECHNOLOGY CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name:
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Title:
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/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇, AS SHAREHOLDERS AGENT
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5% Note........................................................................3
8% Note........................................................................3
Acquisition Agreement.........................................................35
Acquisition Proposal..........................................................33
Agreement......................................................................1
Anniversary Period............................................................36
Bidders.......................................................................36
Cash Consideration.............................................................3
Claim Notice..................................................................51
Claims........................................................................11
Closing........................................................................2
Closing Date...................................................................2
Code...........................................................................5
Company........................................................................1
Company Balance Sheet..........................................................9
Company Breach................................................................45
Company Certificates...........................................................4
Company Closing Certificate...................................................41
Company Common Stock...........................................................1
Company Disclosure Schedule....................................................6
Company Employees.............................................................37
Company Financial Statements...................................................9
Company Material Adverse Effect...............................................56
Company Permits...............................................................11
Company Plan..................................................................15
Company Pre-Closing Returns...................................................32
Company Required Statutory Approvals...........................................9
Company Shareholders' Approval.................................................8
Company Stock Plan.............................................................5
Confidential Information......................................................33
Confidentiality Agreement.....................................................32
Contract......................................................................11
COTS..........................................................................20
Damages.......................................................................57
Dissenting Shares..............................................................5
Effective Time.................................................................2
Employment Agreements.........................................................41
Encumbrance...................................................................57
Environmental Claim...........................................................18
Environmental Laws............................................................18
ERISA.........................................................................15
ERISA Affiliate...............................................................15
GAAP...........................................................................9
Government Contract...........................................................24
Governmental Authority........................................................57
Governmental Entity...........................................................24
Hazardous Substances..........................................................19
HIPAA.........................................................................17
Indemnified Person............................................................51
Indemnifying Person...........................................................51
Intellectual Property.........................................................20
Judgments.....................................................................11
Knowledge of the Company......................................................57
Knowledge of the Parent.......................................................57
Legal Proceeding..............................................................48
Litigation Conditions.........................................................51
Major Customers...............................................................22
Major Suppliers...............................................................22
Material Business.............................................................36
Material Contracts............................................................11
Material License..............................................................20
Merger.........................................................................1
Merger Consideration...........................................................3
Merger Filing..................................................................2
NJBCA..........................................................................1
NJSPA.........................................................................22
Notes..........................................................................3
Notice Period.................................................................51
Option.........................................................................5
Parent.........................................................................1
Parent Breach.................................................................44
Parent Closing Certificate....................................................44
Parent Expiration Date........................................................47
Parent Indemnitees............................................................57
Parent Material Adverse Effect................................................57
Parent Representatives........................................................32
Parent Required Statutory Approvals...........................................27
Paying Agent...................................................................3
Pension Plan..................................................................15
Person........................................................................57
Phantom Stock..................................................................5
Phantom Stock Plan.............................................................5
Potential Acquiror............................................................34
Principal Shareholder..........................................................1
Released......................................................................19
Securities Act................................................................34
Series I Common Stock..........................................................7
Series II Common Stock.........................................................7
Severance Plans...............................................................37
Shareholder Expiration Date...................................................47
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Shareholder Indemnitees.......................................................58
Shareholder Indemnitors.......................................................48
Shareholders..................................................................58
Shareholders Meeting..........................................................28
Shareholders' Agent...........................................................53
Specified Contracts...........................................................41
Straddle Period Returns.......................................................32
Subsidiary.....................................................................1
Superior Proposal.............................................................36
Surviving Corporation..........................................................2
Tax Returns...................................................................13
Taxes.........................................................................58
Termination Fee...............................................................46
Voting Agreement...............................................................1
Warrant........................................................................5
Welfare Plan..................................................................15
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EXHIBIT A
Directors and Officers of the Surviving Corporation
Directors
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Officers
Chairman - ▇▇▇▇▇▇ ▇▇▇▇▇
Vice Chairman - ▇▇▇▇▇ ▇▇▇▇▇▇▇
President - ▇▇▇▇▇ ▇▇▇▇▇▇
Treasurer, CEO-▇▇▇▇▇▇ ▇▇▇▇▇▇
Assistant Treasurer-▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President Operations- ▇▇▇▇ ▇▇▇▇▇▇▇
Vice President Sales - ▇▇▇▇ ▇▇▇▇▇▇▇▇
Secretary, Chief Financial Officer - ▇▇▇ ▇▇▇▇
Assistant Secretary- ▇▇▇▇ ▇▇▇▇▇▇▇
Assistant Secretary-▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
EXHIBIT B
Allocation of Consideration
EXHIBIT C
Form of 5% Promissory Note
EXHIBIT D
Form of 8% Promissory Note
EXHIBIT E
Form of Letter of Transmittal
EXHIBIT F
Form of Voting Agreement
EXHIBIT G
Form of Amendment to Purchase and Sale Agreement