UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of
report (Date of earliest event reported): March 4, 2005
BEL
FUSE INC.
(Exact
Name of Registrant as Specified in its Charter)
|
New
Jersey |
0-11676 |
22-1463699 |
(State
or Other Jurisdiction |
(Commission
File Number) |
(IRS
Employer |
of
Incorporation) |
Identification
No.) |
|
206
Van Vorst Street, Jersey City, New Jersey |
07302 |
(Address
of principal executive offices) |
(Zip
Code) |
Registrant's
telephone number, including area code (201) 432-0463
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry
into a Material Definitive Agreement.
On March
4, 2005, the Registrant and its newly formed subsidiary, Bel Westboro Inc.
(“Merger Sub”), entered into an agreement and plan of merger with Galaxy Power
Inc., a Massachusetts corporation (“Galaxy”), a copy of which is attached hereto
as Exhibit 2.1. Subject to the approval of Galaxy's shareholders and the
satisfaction of other conditions, the merger agreement provides for the merger
of the Merger Sub with and into Galaxy. Under the terms of the merger agreement,
Galaxy will become a wholly-owned subsidiary of the Registrant and the
shareholders of Galaxy Power Inc. will receive aggregate merger proceeds of
$18,000,000 (subject to certain closing adjustments) in cash, of which
$1,750,000 will be retained in escrow to address potential post-closing
indemnification issues. Galaxy’s vested options and warrants will be cashed out
at the effective time of the merger and all unvested options and warrants will
be cancelled as of the effective time of the merger. The Registrant will account
for the merger under the purchase method of accounting.
Shareholders
of Galaxy owning in excess of two-thirds of the outstanding common stock of
Galaxy have entered into a voting agreement pursuant to which they have agreed
to vote their shares of Galaxy common stock in favor of the merger.
The
Registrant has issued a press release describing the execution and delivery of
the agreement and plan of merger.
Item
9.01. Financial Statements and Exhibits.
(c) Exhibits
Exhibit
2.1- Agreement and Plan of Merger dated as of March 4, 2005 by and among Bel
Fuse Inc., Bel Westboro Inc. and Galaxy Power Inc.
Exhibit
99.1- Press release dated March 4, 2005
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| BEL FUSE INC. | ||
| |
|
|
| By: | /s/ Colin Dunn | |
|
Name: Colin Dunn | ||
| Title: Vice President of Finance | ||
Dated:
March 7, 2005
EXHIBIT
INDEX
Exhibit
2.1- Agreement and Plan of Merger dated as of March 4, 2005 by and among Bel
Fuse Inc., Bel Westboro Inc. and Galaxy Power Inc.
Exhibit
99.1- Press release dated March 4, 2005
Execution
Version
AGREEMENT
AND PLAN OF MERGER
DATED
AS OF MARCH 4, 2005
by
and among
BEL
FUSE INC.
BEL
WESTBORO INC.,
and
GALAXY
POWER INC.
Execution
Version
AGREEMENT
AND PLAN OF MERGER
This
AGREEMENT
AND PLAN OF MERGER, dated
as of March 4, 2005 (this “Agreement”), is
entered into by and among (i) BEL
FUSE INC., a New
Jersey corporation (the “Parent”), (ii)
BEL
WESTBORO INC., a
Massachusetts corporation and a wholly-owned subsidiary of the Parent (the
“Acquirer”), and
(iii) GALAXY
POWER INC., a
Massachusetts corporation (the “Company”).
RECITALS
WHEREAS, the
Company manufactures and sells high current, high density dc to dc converters
and supplying products to the telecommunications, computer and networking
industries (the “Business”);
WHEREAS, the
Company has authorized capital stock consisting of 2,000,000 shares of common
stock, par value $.01 per share (“Company
Common Stock”), of
which 914,463 shares are issued and outstanding as of the date
hereof;
WHEREAS, the
Company has outstanding options to purchase an aggregate of 153,500 shares of
Company Common Stock (“Company
Options”),
129,750 of which are exercisable as of the date hereof and/or will be
exercisable immediately preceding or as a result of the closing of the
transactions contemplated hereby (“Eligible
Company Options”) and
has outstanding warrants for the purchase of an aggregate of 278,447 shares of
Company Common Stock (“Company
Warrants”), all
of which are exercisable as of the date hereof;
WHEREAS, the
stockholders of the Company identified on Exhibit
A annexed
hereto (the “Principal
Stockholders”) own,
not less than two-thirds of the issued and outstanding shares of Company Common
Stock and have entered into that certain Voting Agreement, dated on even date
herewith, by and among the Parent, the Acquirer and the Principal Stockholders,
pursuant to which the Principal Stockholders have committed to voting in favor
of the transactions contemplated by this Agreement at any meeting of the
Company’s stockholders for the purpose of approving the transactions
contemplated by this Agreement (the “Voting
Agreement”);
and
WHEREAS, the
Boards of Directors of each of the Parent, the Acquirer, and the Company believe
that the merger of the Acquirer with and into the Company, pursuant to which the
shares of Company Common Stock would be exchanged for cash consideration and the
Eligible Company Options and Company Warrants would be exchanged for cash
consideration net of their applicable exercise price (the “Merger”), would
be advantageous and beneficial to their respective corporations and
stockholders.
NOW,
THEREFORE, in
consideration of the mutual covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE
1
THE
MERGER
Section
1.1. Closing
and Effective Date of Merger. Subject
to and upon the terms and conditions set forth in this Agreement, the closing of
the transactions contemplated under this Agreement (the “Closing”) will
be held at the offices of Bowditch & Dewey, LLP, 311 Main Street, Worcester,
Massachusetts 01608 at 10:00 AM Eastern Time, on the fifth Business Day
following the satisfaction or waiver of all conditions set forth in Articles
5 and
6 hereof,
or such other date, place or time as may be agreed upon among the parties hereto
(the “Closing
Date”). Upon
consummation of the Closing, the Company and the Acquirer shall cause to be
definitively executed and delivered to each other articles of merger (the
“Articles
of Merger”)
consistent with the terms hereof and prepared in accordance with the
Massachusetts Business Corporation Act (“MBCA”) and
cause the Articles of Merger to be duly filed with the Secretary of the
Commonwealth for the Commonwealth of Massachusetts in order to cause the Merger
to become effective under, and in accordance with, the laws of the Commonwealth
of Massachusetts and this Agreement. The Merger shall become effective on the
date and at the time of the filing of the Articles of Merger with the Secretary
of the Commonwealth for the Commonwealth of Massachusetts, or at such later time
as shall be agreed upon by the Company and the Acquirer and as shall be set
forth in the Articles of Merger (the “Effective
Time”). The
date on which the Effective Time occurs shall be referred to herein as the
“Effective
Date.” For
all purposes, all of the document deliveries and other actions to occur at the
Closing will be conclusively presumed to have occurred at the same time,
immediately before the Effective Time.
Section
1.2. Terms
and Conditions of Merger. At the
Effective Time, pursuant to this Agreement and the Articles of Merger,
automatically and without further action:
(a) The
Acquirer shall be merged with and into the Company and the separate existence of
the Acquirer shall cease.
(b) The
Company shall continue as the surviving corporation in the Merger (the
“Surviving
Corporation”).
(c) The
effect of the Merger will be as provided in the applicable provisions of the
MBCA.
(d) All of
the estates, properties, rights, privileges, powers and franchises of the
Company and the Acquirer and all of their property, real, personal and mixed,
and all debts due on whatever account to either of the Company or the Acquirer
shall vest in the Surviving Corporation, without further act or deed, except as
contemplated by this Agreement.
(e) The
Surviving Corporation shall be responsible for all of the liabilities and
obligations of each of the Company and the Acquirer and the liabilities of the
Company and the Acquirer shall not be affected nor shall the rights of creditors
thereof or of any Persons dealing with the Company or the Acquirer be
impaired.
(f) The
Articles of Organization of the Company shall be amended in the Merger to read
in its entirety as set forth on Annex
A to the
Articles of Merger and as so amended shall be the Articles of Organization of
the Surviving Corporation until thereafter amended as provided therein and by
law.
(g) The
By-laws of the Acquirer, as in effect immediately prior to the Effective Time,
shall be the By-laws of the Surviving Corporation until thereafter amended as
provided therein and by law.
(h) From and
after the Effective Time, the Board of Directors of the Surviving Corporation
will consist of the individuals set forth on Exhibit
B. Each
such director will hold office, subject to the applicable provisions of the
Articles of Organization and the By-Laws of the Surviving Corporation, until the
next annual meeting of stockholders of the Surviving Corporation and until
his/her successor shall be duly elected or appointed and shall duly qualify. If,
at or after the Effective Time, a vacancy shall exist in such Board of Directors
by reason of death or inability to act, or for any other reason, such vacancy
may be filled in the manner provided in the By-Laws of the Surviving
Corporation.
(i) From and
after the Effective Time, the individuals set forth on Exhibit
C shall be
the officers of the Surviving Corporation and shall act as such and hold the
offices set forth opposite their names until their respective successors are
duly elected or appointed and qualified. If, at or after the Effective Time, a
vacancy shall exist in any of the offices of the Surviving Corporation by reason
of death or inability to act, or for any other reason, such vacancy may be
filled in the manner provided in the By-Laws of the Surviving
Corporation.
(j) Each
issued and outstanding share of the capital stock of the Acquirer shall be
converted into and represent the right to receive ten (10) shares of common
stock, par value $0.01 per share, of the Surviving Corporation, whereupon the
Parent shall own all of the issued and outstanding capital stock of the
Surviving Corporation.
(k) Subject
to Section
1.3(b), each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive an amount in cash
equal to the quotient of dividing the Gross Merger Proceeds by the number of
Fully Diluted Shares (the “Per
Share Closing Amount”). The
Per Share Closing Amount less the Per Share/Option/Warrant Escrow Amount
(calculated in the manner provided for in Section
1.3(b)) shall
be referred to herein as the “Adjusted
Per Share Closing Amount.”
(l) Each
holder of an Eligible Company Option and each holder of a Company Warrant shall
be entitled to receive, subject to Section
1.3(b), with
respect to each share of Company Common Stock subject to a Company Option or a
Company Warrant, an amount in cash equal to the excess, if any, of the Per Share
Closing Amount over the applicable exercise price of such Eligible Company
Option or Company Warrant (the “Per
Option/Warrant Share Closing Amount”). The
Per Option/Warrant Share Closing Amount for each applicable Company Option and
Company Warrant less the Per Share/Option/Warrant Escrow Amount (calculated in
the manner provided for in Section
1.3(b)) shall
be referred to herein as the “Adjusted
Option/Warrant Per Share Closing Amount.”
-3-
(m) Each
share of Company Common Stock held as treasury stock by the Company shall be
canceled and retired, and shall cease to exist, and no payment shall be made
with respect thereto.
Section
1.3. Payment
for Stock; Procedures.
(a) As of the
Effective Time, either the Parent or the Acquirer (as shall be determined by the
Parent and the Acquirer, the “Paying
Party”) shall
deposit with the Exchange Agent for the benefit of the holders of shares of
Company Common Stock (who are not Dissenting Stockholders), Eligible Company
Options and Company Warrants, cash in an amount equal to the Adjusted Closing
Cash Merger Proceeds less the
Escrow Amount and less the
amount, if any, the Paying Party is entitled to retain pursuant to Section
1.3(e).
The
amount required to be deposited pursuant to this Section
1.3(a) is
referred to herein as the “Exchange
Fund.”
(b) At the
Closing, the Paying Party shall deliver to the Escrow Agent, on behalf of the
Company Stockholders, Company Optionholders and Company Warrant Holders, the
Escrow Amount, which Escrow Amount shall be held in an account pursuant to the
terms of the Escrow Agreement. The Company Stockholders, Company Optionholders
and Company Warrant Holders shall be deemed to have contributed to the Escrow
Amount an amount equal to the Per Share Escrow Amount multiplied by, (i) with
respect to the Company Stockholders, the number of shares of Company Common
Stock owned by the Company Stockholder immediately prior to the Effective Time
and (ii) with respect to the Company Optionholders and Company Warrant Holders,
the number of shares of Company Common Stock issuable upon the full exercise of
all Eligible Company Options held by the Company Optionholder immediately prior
to the Effective Time and all Company Warrants held by Company Warrant Holders
immediately prior to the Effective Time (in each instance, a “Per
Share/Option/Warrant Escrow Amount”).
(c) The
Parent, the Acquirer and the Company have previously agreed upon forms of (i) a
notice and letter of transmittal (which shall specify that delivery of the
Certificate or Certificates held by a Company Stockholder, Option Documents held
by Company Optionholders or Warrant Documents held by a Company Warrant Holder
shall be effected, and risk of loss and title to such Certificate, Certificates,
Option Documents or Warrant Documents shall pass, only upon proper delivery of
such Certificate, Certificates, Option Documents or Warrant Documents to the
Paying Party, each as the case may be) and (ii) instructions for use in
effecting the surrender of such Certificate, Certificates, Option Documents or
Warrant Documents, in each case, that the Paying Party will require in order for
the Company Stockholders, Company Optionholders or Company Warrant Holders to
obtain payment in respect of shares of Company Common Stock, Eligible Company
Options or Company Warrants, as the case may be. Such instructions shall
provide, among other things, that each Certificate surrendered shall be duly
endorsed or otherwise accompanied by a stock power or other instrument of
transfer, in form satisfactory to the Paying Party. As soon as practicable after
the Effective Time, the Surviving Corporation shall send to each Person who was,
at the Effective Time, a Company Stockholder, a Company Optionholder or a
Company Warrant Holder a copy of the foregoing materials (in the forms to be
mutually agreed upon by the Parent and the Company). Upon surrender to the
Exchange Agent after the Effective Time of Certificates for cancellation,
together with such letter of transmittal duly executed and such other documents
as the Exchange Agent may reasonably require, each such Company Stockholder
shall be entitled to receive in exchange therefor the Adjusted Per Share Closing
Amount multiplied by the number of shares of Company Common Stock represented by
such Certificates and the Certificates so surrendered shall then be canceled.
Subject to Section
1.4, until
surrendered as contemplated by this Section
1.3(c), each
Certificate from and after the Effective Time shall be deemed to represent only
the right to receive, upon such surrender, the amount of cash described herein.
Upon surrender to the Exchange Agent after the Effective Time of Option
Documents or Warrant Documents for cancellation, together with such letter of
transmittal duly executed and such other documents as the Exchange Agent may
reasonably require, such Company Optionholder or Company Warrant Holder shall be
entitled to receive in exchange therefor the applicable Adjusted Option/Warrant
Per Share Closing Amount multiplied by the number of shares of Company Common
Stock issuable upon the full exercise of such Eligible Company Option or Company
Warrant and the Option Documents or Warrant Documents so surrendered shall then
be canceled. Subject to Section
1.4, until
surrendered as contemplated by this Section
1.3(c), each
Option Document or Warrant Document from and after the Effective Time shall be
deemed to represent only the right to receive, upon such surrender, the amount
of cash described herein. To the extent that any amounts are properly withheld
by the Paying Party or the Exchange Agent for the payment of withholding Taxes
from a Company Stockholder’s Adjusted Per Share Closing Amount or a Company
Optionholder’s or a Company Warrant Holder’s Adjusted Option/Warrant Per Share
Closing Amount, then such withheld amounts will be treated for all purposes of
this Agreement as having been paid to the Company Stockholder, the Company
Optionholder or the Company Warrant Holder from whom such deduction and
withholding were made by the Paying Party, and the Surviving Corporation shall
be obligated as an employer of such Company Stockholder, Company Optionholder or
Company Warrant Holder to report and/or pay such withheld amounts to the
appropriate Government Entities.
-4-
(d) In the
case of Company Stockholders, in the event any Certificate shall have been lost,
stolen or destroyed, upon receipt of an affidavit as to such loss, theft or
destruction and to the ownership of such Certificate by the Company Stockholder
claiming such Certificate to be lost, stolen or destroyed, the receipt by the
Paying Party of appropriate and customary indemnification and the receipt by the
Paying Party of any other required documents (in each case, as reasonably
satisfactory to the Paying Party), the Paying Party will pay and distribute to
such Company Stockholder the Adjusted Per Share Closing Amount multiplied by the
number of shares of Company Common Stock represented by such lost, stolen or
destroyed Certificate.
(e) If any
stockholders of the Company exercise, perfect and/or reserve their appraisal or
dissenters rights pursuant to, and in accordance with, the MBCA and if such
stockholders or any of them do not withdraw such stockholder’s or stockholders’
demand for appraisal prior to the expiration of the period of time during which
such stockholders or stockholder are permitted to effect such withdrawal under
the MBCA (each, a “Dissenting
Stockholder”), then
immediately
after the expiration of such period of time, the Paying Party shall (i) retain
the amounts which otherwise would have been contributed to the Exchange Fund and
paid to each such Dissenting Stockholder pursuant to Section
1.2(k); and
(ii) in accordance with Section 13.24 of the MBCA, pay to each such Dissenting
Stockholder the amount which is required to be paid to such Dissenting
Stockholder pursuant to Section 13.24 of the MBCA.
-5-
Section
1.4. Dissenting
Shares.
Notwithstanding any provision of this Agreement to the contrary, with respect to
any shares of Company Common Stock held by Dissenting Stockholders (the
“Dissenting
Shares”) in
accordance with the MBCA, such Dissenting Shares shall not be converted into or
represent the right to receive the consideration payable pursuant to this
Agreement upon consummation of the Merger, but, instead, the Dissenting
Stockholders shall be entitled to payment of the appraised value of such
Dissenting Shares in accordance with the provisions of the MBCA, unless and to
the extent that any Dissenting Stockholders shall have irrevocably forfeited
his/her right to appraisal under the MBCA or irrevocably withdrawn its demand
for appraisal. If any Dissenting Stockholders has so irrevocably forfeited or
withdrawn its right to appraisal of Dissenting Shares, then, as of the
occurrence of such event, such Dissenting Stockholders shares of Company Common
Stock shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the consideration payable in respect of such
shares pursuant to this Agreement, which payments shall be made pursuant to the
terms of this Agreement.
Section
1.5. No
Further Transfers. After
the Effective Time, there shall be no further registration of transfer on the
stock transfer books of the Company of any shares of Company Stock. If, after
the Effective Time, any Certificate is presented (for transfer or otherwise) to
the Surviving Corporation, such Certificate shall be canceled and, subject to
Section
1.2(k) and the
procedures provided for in Section
1.3 hereof,
payment shall be made of the consideration provided for in this Agreement in
respect of the number of shares of Company Common Stock represented by such
Certificate.
Section
1.6. Termination
of Rights. After
the Effective Time, (a) holders of Company Common Stock will cease to be, and
will have no rights as, stockholders of the Company, and such holders’ rights
will consist only of (i) in the case of shares of Company Common Stock other
than Dissenting Shares, the right to receive the consideration provided for in
this Agreement in respect of such shares, without interest, and (ii) in the case
of Dissenting Shares, the rights afforded to the holders thereof under the
applicable provisions of the MBCA, (b) holders of Eligible Company Options shall
be entitled to receive only the consideration provided for in this Agreement in
respect of such Eligible Company Options, and (c) holders of Company Warrants
shall be entitled to receive only the consideration provided for in this
Agreement in respect of such Company Warrants. Until surrendered for
cancellation in accordance with the provisions of this Article
1, each
stock certificate representing shares of Company Common Stock shall, from and
after the Effective Time, represent (i) in the case of shares other than
Dissenting Shares, the right to receive the consideration provided for in this
Agreement in respect of such shares and (ii) in the case of Dissenting Shares,
the rights afforded to the holders thereof under the applicable provisions of
the MBCA.
Section
1.7. Working
Capital Adjustment.
(a) Delivery
of Accounts Receivable Report. At
least three (3) Business Days prior to the Closing, the Company shall deliver to
the Parent a report estimating all of the Accounts Receivable as of the Closing
Date (the “Estimated
Accounts Receivable Report”). The
Estimated Accounts Receivable Report shall (i) identify the dollar amount of
each Account Receivable and (ii) include an aging schedule for the Company’s
Accounts Receivable reflecting, as of the Closing Date, the aggregate amount of
the Accounts Receivable outstanding: (i) 30 days or less; (ii) more than 30 days
but less than or equal to 60 days; (iii) more than 60 days but less than or
equal to 90 days; and (iv) more than 90 days. The aggregate dollar amount of the
Accounts Receivable evidenced on the Estimated Accounts Receivable Report (the
“Estimated
Accounts Receivable Amount”) shall
be determined in a manner consistent with GAAP and take into consideration the
Company’s then current reserve for bad debts.
-6-
(b) Taking
of Inventory; Joint Inventory Report. No more
than five (5) days immediately preceding the Closing Date, the parties shall
take the following actions (the “Inventory
Audit”):
(i) the
Company shall deliver to the Parent a certificate which identifies all raw
materials to which the Company owns good and marketable title and are (1) in
transit to the Company, (2) located at the Facility or (3) located at an
Off-Site Warehouse (collectively, the “Raw
Materials”);
(ii) the
Company shall deliver to the Parent a certificate which identifies (1) all
finished goods located at the Facility or (2) located at an Off-Site Warehouse
(collectively, the “FG”);
and
(iii) the
Company shall deliver to the Parent a certificate which identifies all of the
Company’s work-in-process inventory located at the Facility (the “WIP”).
Upon
receipt of the certificates referenced in items (i), (ii) and (iii) above (the
“Inventory
Certificates”), the
Parent shall have the right prior to the Closing to audit the accuracy of the
Inventory Certificates and should the Parent identify any inaccuracies in the
Inventory Certificates, the Parent shall have the right to require
representatives of the Company and the Parent to conduct a physical audit as of
the Closing of all or any portion of the Raw Materials, FG or WIP. In the event
that any physical audit reveals an inaccuracy in any of the Inventory
Certificates, the Company shall so amend the applicable Inventory
Certificate(s). Once the Parent is satisfied with the content of the Inventory
Certificates, as amended, if applicable, the Company and the Parent shall
jointly prepare a report (the “Inventory
Report”) which
(i) details, for each type of Raw Material, WIP and FG, the number, amount
and/or weight, as applicable, of items of such type identified on the Inventory
Certificates, (ii) sets forth the agreed upon per-item values set forth in
Exhibit
D for each
type of Raw Material, WIP and FG (the “Agreed
Upon Inventory Values”), (iii)
multiplies the Agreed Upon Inventory Values for each type of Raw Materials, WIP
and FG by the number, amount and/or weight, as applicable, as identified in the
Inventory Certificates (each an “Inventory
Category Value”) and
(iv) determines the aggregate value of the Raw Materials, WIP and FG by adding
the Inventory Category Values (the “Closing
RM/WIP/FG Amount”).
-7-
(c) Closing
Report. On the
Closing Date, the Company shall deliver to the Parent a report (“Estimated
Closing Report”) which
identifies (i) the Estimated Accounts Receivable Amount, (ii) the Closing
RM/WIP/FG Amount, and (iii) the Company’s estimate of (A) its cash and cash
equivalents as of the Closing Date (the “Cash
Amount”), (B)
its prepaid assets as of the Closing Date (the “Prepaid
Assets Amount”) and
(C) its current liabilities as of the Closing Date (the “Liabilities
Amount”), in
each case determined in accordance with GAAP and in a manner consistent with the
preparation of the Financial Statements. The sum of the estimated Accounts
Receivable Amount plus the
Closing RM/WIP/FG Amount plus the Cash
Amount plus the
Prepaid Assets Amount and minus the
Liabilities Amount, as set forth in the Estimated Closing Report, shall be
referred to herein as the “Estimated
Working Capital Amount.” The
Estimated Working Capital Amount shall be calculated in the same manner as the
Benchmark Working Capital Amount, which is calculated as shown on Schedule
1.7(c) attached
hereto. Notwithstanding the foregoing, the Liabilities Amount shall include any
and all amounts (i) due and owing to any former employees of the Company
pursuant to chapter 149, section 183 of the Massachusetts General Laws to the
extent arising from the termination of such employee’s employment with the
Company prior to the Closing; (ii) due and owing to Howard Kaepplein to the
extent arising from the termination of his employment (whether resulting from
obligations under that certain Employment Severance Agreement dated as of March
31, 2004 by and between Howard Kaepplein and the Company or otherwise); and
(iii) required to be expended in order to obtain all those software
licenses necessary to operate the Business in the manner in which it is
currently being operated and in compliance with applicable Law.
(d) Adjustment
at Closing. In the
event that the Estimated Working Capital Amount is less than $2,363,000 (the
“Benchmark
Working Capital Amount”), the
Cash Merger Proceeds shall be reduced on a dollar-for-dollar basis, by an amount
equal to the difference (the “Negative
Amount”)
between the Benchmark Working Capital Amount and the Estimated Working Capital
Amount. In the event that the Estimated Working Capital Amount is greater than
the Benchmark Working Capital Amount, the Cash Merger Proceeds shall be
increased on a dollar-for-dollar basis, by an amount equal to the difference
(the “Positive
Amount”)
between the Estimated Working Capital Amount and the Benchmark Working Capital
Amount. The amount equal to the Cash Merger Proceeds plus the
Positive Amount or minus the
Negative Amount, whichever is applicable, shall be referred to as the
“Adjusted
Closing Cash Merger Proceeds.”
(e) Post-Closing
Adjustment.
Concurrently with the delivery of the Estimated Closing Report, the Company
shall deliver such documentation and work papers as the Company used to prepare
the calculations set forth in the Estimated Closing Report. In the event the
Parent disputes the actual sum of the Accounts Receivable Amount plus the
Closing RM/WIP/FG Amount plus the Cash
Amount plus the
Prepaid Assets Amount and minus the
Liabilities Amount as of the Effective Date (the “Actual
Working Capital Amount”) as
shown on the Estimated Closing Report, the Parent shall, within sixty (60) days
after the Closing, advise the Stockholder Representative in writing of any
objections the Parent may have with respect to the Estimated Closing Report (any
such objection shall (i) be set forth in reasonable detail, (ii) include
supporting calculations and documentation (if necessary) and (iii) propose an
adjustment to the Estimated Working Capital Amount) (a “WC
Objection”). In
the event the Parent fails to deliver to the Stockholder Representative a WC
Objection within such sixty (60) day period, the Parent shall be deemed to have
accepted and consented to the calculations and determinations made in the
Estimated Closing Report and the calculation of the Estimated Working Capital
Amount contained in the Estimated Closing Report shall be deemed to be final
(the “Final
Working Capital Amount”). In
the event the Parent delivers a WC Objection within sixty (60) days after the
Closing, the Stockholder Representative and the Parent shall utilize
commercially reasonable efforts to try to resolve the objections set forth in
the WC Objection (the “Disputed
Items”) within
sixty (60) days of the Stockholder Representative’s receipt of a WC Objection.
If the parties are unable to resolve the Parent’s objections within that period,
either party may refer the Disputed Items to the Boston office of Ernst &
Young or, if such firm is unwilling or unable to serve, the parties shall engage
the Boston office of another internationally known, mutually acceptable
accounting firm (the “Arbiter”) to
determine how the Disputed Items should be resolved. By execution of this
Agreement, each of the Parent and the Company hereby represents and warrants to
the other that Ernst & Young has not performed any services for such party
at any time during the five (5) year period immediately preceding the date
hereof. The Arbiter shall determine (i) the Actual Working Capital Amount based
solely upon
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the
provisions of this Agreement and the presentations by the parties and their
respective representatives, and not by independent review, and (ii) the
appropriate amount, if any, by which the Estimated Working Capital Amount should
be adjusted as a result of the manner in which the Company calculated the
Disputed Items in preparing the Estimated Closing Report. In resolving any
Disputed Item, the Arbiter (i) shall limit its review to matters specifically
set forth in the WC Objection, (ii) shall further limit its review to whether
the calculations are mathematically accurate and have been prepared in
accordance with the provisions of this Agreement and (iii) shall not assign a
value to any item greater than the greatest value for such item claimed by a
party hereto or less than the smallest value for such item claimed by a party
hereto. The determinations of the Arbiter shall be final, conclusive and binding
(also, the “Final
Working Capital Amount”). The
fees and expenses of the Arbiter shall be shared equally between the Company
Stockholders and Company Optionholders, on the one hand, the Parent on the other
hand, with the Company Stockholders’ and Company Optionholders’ portion of such
expenses being payable from the WC/Indemnity Escrow Amount pursuant to the terms
of the Escrow Agreement. On the fifteenth day following the date on which the
Final Working Capital Amount is determined, (i) in the event that the Final
Working Capital Amount is greater than the Estimated Working Capital Amount, the
Parent shall deliver to the Company Stockholders and the Company Optionholders
their Pro Rata Portion of the amount equal to the difference between (y) the
Final Actual Working Capital Amount and (z) the Estimated Working Capital Amount
and (ii) in the event that the Final Working Capital Amount is less than the
Estimated Working Capital Amount, the Parent shall be entitled to receive from
the WC/Indemnity Escrow Amount pursuant to the terms of the Escrow Agreement an
amount equal to the difference between (y) the Estimated Working Capital Amount
and (z) the Final Actual Working Capital Amount.
Section
1.8. Disposition
of the Exchange Fund.
Any
portion of the Exchange Fund which remains undistributed to the former holders
of Company Common Stock or Eligible Company Options or Company Warrants for
twelve (12) months after the Effective Time shall be delivered to the Surviving
Corporation, upon its request, to be held as a cash reserve for the cash payment
of Company Common Stock or Eligible Company Options or Company Warrants pursuant
to the Merger and any such former holders who have not theretofore surrendered
to the Exchange Agent their Certificates, Option Documents and/or Warrant
Documents in compliance herewith shall thereafter look only to the Surviving
Corporation for payment of the cash to be paid pursuant to the Merger. None of
the Surviving Corporation, the Exchange Agent, the Escrow Agent or the Company
shall be liable to any former holder of Company Common Stock or Eligible Company
Options or Company Warrants for any such cash held in the Exchange Fund or in
escrow hereunder which is delivered to a public official pursuant to an official
request under any applicable abandoned property, escheat or similar
law.
-9-
Section
1.9. Appointment
of Stockholder Representative.
(a) In order
to efficiently administer the transactions contemplated hereby, including the
indemnification provisions set forth in Article
7, each
Company Stockholder, Company Optionholder and Company Warrant Holder hereby
designates each of Howard Kaepplein, Bernhard Schroter and Robert Chmielinski
P.C. as their representatives (collectively, the “Stockholder
Representative”). By
virtue of (i) the adoption of this Agreement and the approval of the Merger by
the Company Stockholders at a meeting of the stockholders of the Company (or by
written consent in lieu of a meeting) pursuant to, and in accordance with, the
applicable provisions of the MBCA, each Company Stockholder (regardless of
whether or not such Company Stockholder votes in favor of the adoption of this
Agreement and the approval of the Merger by written consent) and (ii) each
Company Optionholder’s or Company Warrant Holder’s receipt of the Adjusted
Option/Warrant Per Share Closing Amount, each Company Optionholder and Company
Warrant Holder, shall be deemed to agree as follows:
(i) the
Parent, the Acquirer and the Surviving Corporation shall be able to rely
conclusively on the instructions and decisions of the Stockholder Representative
(acting by the majority) as to any actions required or permitted to be taken by
the Stockholder Representative hereunder, and no party hereunder shall have any
cause of action against the Parent, the Acquirer and/or the Surviving
Corporation to the extent the Parent, the Acquirer and/or the Surviving
Corporation has relied upon the instructions or decisions of the Stockholder
Representative;
(ii) all
actions, decisions and instructions of the Stockholder Representative shall be
based on a majority vote of the individuals serving in the capacity of a
Stockholder Representative and any and all such actions, decisions and
instructions approved by a majority of the individuals serving as a Stockholder
Representative shall be conclusive and binding upon all of the Company
Stockholders, Company Optionholders and Company Warrant Holders, and no Company
Stockholder, Company Optionholder or Company Warrant Holder shall have any cause
of action against the Stockholder Representative for any action taken, decision
made or instruction given by the Stockholder Representative under this Agreement
(or for any failure to take such action, make such decision or give such
instruction), except for fraud or willful misconduct by the Stockholder
Representative; and each Company Stockholder, Company Optionholder and Company
Warrant Holder, jointly and severally, shall indemnify each Stockholder
Representative for any and all claims, liabilities, losses, damages, costs and
expenses which such Stockholder Representative shall suffer and which relate to
or arise, directly or indirectly, out of any action taken by him/her in his/her
capacity as a Stockholder Representative in accordance with the terms of this
Agreement and which are asserted by any other Company Stockholder, Company
Optionholder or Company Warrant Holder against such Stockholder Representative
in accordance with the terms of this Agreement;
(iii) the
provisions of this Section
1.9 are
independent and severable, are irrevocable and coupled with an interest, and
shall be enforceable notwithstanding any rights or remedies that any Company
Stockholder, Company Optionholder or Company Warrant Holder may have in
connection with the transactions contemplated by this Agreement;
-10-
(iv) remedies
available at law for any breach of the provisions of this Section
1.9 are
inadequate; therefore, the Parent, the Acquirer and/or the Surviving Corporation
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving damages if the Parent, the Acquirer and/or the Surviving
Corporation brings an action to enforce the provisions of this Section
1.9;
and
(v) the
provisions of this Section
1.9 shall be
binding upon the executors, heirs, legal representatives, personal
representatives, successor trustees, and successors of each Company Stockholder,
Company Optionholder and Company Warrant Holder, and any references in this
Agreement to a Company Stockholder, Company Optionholder and Company Warrant
Holder shall mean and include the successors to such Company Stockholder’s,
Company Optionholder’s or Company Warrant Holder’s rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
(b) Each
Company Stockholder, Company Optionholder and Company Warrant Holder hereby
authorizes the Stockholder Representative to take any and all action as is
contemplated to be taken by or on behalf of such Company Stockholder, Company
Optionholder or Company Warrant Holder, and to assert the Company Stockholder’s,
Company Optionholder’s or Company Warrant Holder’s rights granted, pursuant to
the terms of this Agreement.
(c) In the
event that any of Howard Kaepplein, Bernhard Schroter and Robert Chmielinski
P.C. (or any of their substitutes as Stockholder Representative) dies, becomes
unable to perform his or her responsibilities hereunder or resigns from such
position, then David Steadman (or his substitute) shall fill such vacancy and
shall be deemed to be a Stockholder Representative for all purposes of this
Agreement and the documents delivered pursuant hereto. In the event that all of
the foregoing individuals are unable or unwilling to serve as a Stockholder
Representative, alternate Stockholder Representatives shall be elected by the
holders of a majority of the shares of Company Common Stock outstanding
immediately prior to the Effective Time, assuming the conversion, exchange
and/or exercise of all outstanding Eligible Company Options and Company Warrants
which are then currently convertible, exercisable or exchangeable for Common
Stock.
(d) Each
Stockholder Representative shall be compensated for his or her services rendered
in connection with the performance of his or her duties as a Stockholder
Representative, whether arising under this Agreement or otherwise, at hourly
rates commensurate with such Stockholder Representative’s customary hourly rates
for his or her other professional activities and shall be reimbursed for his or
her reasonable costs and expenses incurred in connection with the performance of
his or her duties as a Stockholder Representative, whether arising under this
Agreement or otherwise, including the reasonable fees of a certified public
accountant or other professional advisor retained by the Stockholder
Representative in connection with their duties under this Agreement.
Notwithstanding the foregoing, all rights of a Stockholder
Representative to
compensation and/or expense reimbursement, whether arising under this Agreement
or otherwise, shall be satisfied exclusively by payment out of, and only to the
extent of, the Stockholder Representative Escrow Amount, which shall be
maintained by Bowditch & Dewey, LLP, as escrow agent. In no event shall the
Surviving Corporation (i) be obligated to pay to any Stockholder Representative
any amounts pursuant to this Section 1.9(d) or (ii) have any recourse against
the Stockholder Representative Escrow Amount or
Bowditch & Dewey, LLP in its capacity as escrow agent.
-11-
Section
1.10. Effect
of Stockholder Approval of Merger. The
adoption of this Agreement and the approval of the Merger by the Company
Stockholders at a meeting of stockholders of the Company (or by written consent
in lieu of a meeting) pursuant to, and in accordance with, the applicable
provisions of the MBCA shall be deemed to constitute approval by each Company
Stockholder individually (regardless of whether or not such Company Stockholder
votes in favor of the adoption of this Agreement and the approval of the Merger
at such meeting or by written consent) to the same extent as if such Company
Stockholder were a party to this Agreement of, and the execution of the
transmittal letter and other required documentation by a Company Optionholder or
a Company Warrant Holder shall be deemed a consent to, (a) the appointment of
the Stockholder Representative, (b) the grant to the Stockholder Representatives
of all of the powers, rights and privileges contemplated under this Agreement,
including the right to indemnification set forth in
Section 1.9(a)(ii) hereof,
(c) the provisions of this Agreement concerning the replacement and substitution
of a person serving as a Stockholder Representative and (d) the terms and
conditions of this Agreement.
Section
1.11. Post-Closing
Accounts Receivable Adjustment.
Following the Closing, the Parent shall cause the Surviving Corporation to use
commercially reasonable efforts to collect the Accounts Receivable (each a
“Pre-Closing
Receivable”).
Within twenty (20) days of the close of each of the first six (6) calendar
months following the calendar month in which the Closing occurs, the Parent will
deliver a report to the Stockholder Representative indicating which Pre-Closing
Receivables were collected by the Surviving Corporation in the then most
recently completed month. During the one hundred eighty (180) day period
following the Closing, the Parent shall cause the Surviving Corporation to
authorize its employee in charge of collecting the Pre-Closing Receivables to
respond to any reasonable inquiries made by the Stockholder Representative
concerning the collection of the Pre-Closing Receivables. Any and all payments
received by the Surviving Corporation after the Closing (a “Post-Closing
Account Payment”) from
the customers of the Business (the “Accounts”) shall
be applied to the longest outstanding Pre-Closing Receivable; provided,
however, that if
a customer objects to the amount of an invoice or the quality of a product to
which such Pre-Closing Receivable relates, such customer payment shall be
applied to the customer’s next longest outstanding Accounts Receivable with
which the customer has not objected to the amount of an invoice or the quality
of a product to which such Accounts Receivable relates. If the Surviving
Corporation is unable to collect a Pre-Closing Receivable within one hundred
eighty (180) days from the invoice date of the Pre-Closing Receivable (the
“Receivable
Cut-Off Date”), the
Parent shall be entitled to receive from the WC/Indemnity Escrow Amount an
amount equal to the unpaid portion of any such Pre-Closing Receivable;
provided,
however, that
if prior
to the Receivable Cut-Off Date the Surviving Corporation enters into an
arrangement with a customer pursuant to which such customer is permitted to pay
all or a portion of a Pre-Closing Receivable after the Receivable Cut-Off Date,
such unpaid portion of such Pre-Closing Receivable due after the Receivable
Cut-Off Date shall not be payable out of the WC/Indemnity Escrow Amount until
(i) the customer breaches the terms of its payment arrangements with the
Surviving Company or (ii) five (5) Business Days prior to the date the
WC/Indemnity Escrow Amount is due to be released pursuant to the terms of the
Escrow Agreement.
-12-
Section
1.12. Payments
to Persons other than Registered Holders. If any
cash is to be paid to any Person other than the registered holder of the
Certificate surrendered in exchange therefor, it shall be a condition to such
exchange that such surrendered Certificate shall be properly endorsed and
otherwise in proper form for transfer and such Person either (i) shall pay to
the Exchange Agent any transfer or other Taxes required as a result of such cash
payment to such Person or (ii) shall establish to the satisfaction of the
Exchange Agent that such Tax has been paid or is not applicable. The Acquirer,
the Escrow Agent or the Exchange Agent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of shares of Company Common Stock such amounts as the Acquirer, the
Escrow Agent or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign Tax law. To the extent that amounts are so withheld by the
Acquirer, the Escrow Agent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Acquirer, the Escrow Agent or the Exchange Agent.
All amounts in respect of Taxes received or withheld by the Acquirer, the Escrow
Agent or the Exchange Agent shall be disposed of by the Acquirer, the Escrow
Agent or the Exchange Agent, as applicable, in accordance with the Code or such
state, local or foreign Tax law, as applicable.
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to the Parent and the Acquirer as
follows:
Section
2.1. Organization;
Authority. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite
corporate power and authority to own or lease and operate its properties and to
carry on its business as now conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the nature of its operations or properties requires such a qualification.
The Company has delivered to the Parent true, complete and correct copies of its
Articles of Organization and By-Laws, and all amendments thereto.
Section
2.2. Approval,
Binding Effect. The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and to perform all of its agreements and obligations under, and
to consummate the transactions contemplated by, this Agreement. This Agreement
and the transactions contemplated hereby have been duly authorized by the Board
of Directors of the Company and no other corporate approvals, other than the
approval of the Company Stockholders owning two-thirds of the issued and
outstanding shares of the Company Common Stock, on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company. This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency
and similar Laws affecting creditor's rights generally or equitable principles
relating to the availability of remedies.
-13-
Section
2.3. Non-Contravention. Except
as set forth on Schedule
2.3, the
execution and delivery of this Agreement, the performance and compliance by the
Company with the terms hereof and the consummation of all transactions,
including the Merger, contemplated hereby will not conflict with, result in a
breach or violation of, constitute a default (with or without due notice or
lapse of time or both) under, or give rise to any Encumbrance, right of
termination, cancellation, acceleration, vesting or modification of any right or
obligation or loss of any benefit under (a) any provision of the Articles of
Organization or By-Laws of the Company, (b) any Law or restriction applicable to
the Company or its properties or assets, (c) any judgment, order, writ,
injunction or decree of any court or judicial or quasi-judicial tribunal
applicable to the Company or its properties or assets or (d) any contract,
commitment, lease, agreement, mortgage, note, bond, indenture or other
instrument or obligation to which the Company is a party or by which it or its
assets are bound.
Section
2.4. No
Consents. Except
as set forth on Schedule
2.4, no
consent, notice, approval, waiver, license or other authorization or action by
or filing, registration or qualification with any Governmental Entity or any
other Person (including any party to any agreement with the Company) is required
in connection with the execution and delivery by the Company of this Agreement,
the consummation by the Company of the transactions contemplated hereby, or the
performance by the Company of its obligations hereunder.
Section
2.5. No
Subsidiaries. The
Company does not have, nor has it ever had, any Subsidiaries and does not own or
hold of record or beneficially, and is not obligated to acquire, any equity or
ownership interest in any other Person.
Section
2.6. Capitalization.
(a) The
authorized capital stock of the Company consists solely of 2,000,000 shares of
Company Common Stock, 914,463 shares of which are issued and outstanding on the
date hereof. All such outstanding shares of capital stock of the Company are
owned of record as of the date hereof by the stockholders set forth on
Schedule
2.6(a), and are
duly authorized, validly issued, fully paid, nonassessable and free and clear of
any preemptive rights or Encumbrances. Schedule
2.6(a) sets
forth a complete list of all Company Options and Company Warrants, and showing
for each such option: (i) the name of the optionee or warrant holder, (ii) the
number of shares issuable, (iii) the number of vested shares, (iv) the date of
expiration, (v) the exercise price, (vi) in the case of an option, whether or
not such option is intended to be an “incentive stock option” under Section 422
of the Code and (vii) whether the option or warrant shall become exercisable
upon the consummation of the transactions contemplated by this Agreement. The
Company has delivered to the Parent true and complete copies of each agreement
evidencing the grant of each Company Option and Company Warrant. The Company has
caused, or prior to the Effective Time shall cause, all Company Options other
than Eligible Company Options (the “Non-Eligible
Company Options”) to be
canceled, terminated and of no further force and effect. All of the Company
Warrants will be exercisable as of the Effective Time. The Company Options and
Company Warrants were validly issued by the Company. Except for the Voting
Agreement, there are no voting trusts or other agreements or understandings to
which the Company or any of its stockholders are a party with respect to the
voting of the Company Common Stock. The amendments made by the Company in 2005
to (i) the Company’s Incentive Stock Option Plan, adopted in 1999, as amended,
and the Company’s Incentive Stock Option Plan, adopted in 2002, as amended
(collectively, the “Plans”), and
(ii) the Stock Option Agreements and Warrants identified on Schedule
2.6(b), which
such amendments provide
for cashless exercise of Company Options and Company Warrants and partial
acceleration of the unvested Company Options, will have
received prior to the Effective Time the necessary corporate and non-corporate
approvals (i) on the part of the Board of Directors of the Company, the
Company’s shareholders and the holders of the Company Options and Company
Warrants and (ii) to satisfy the requirements contained in the Company’s
Articles of Organization, as amended, the Company’s Bylaws, and the
MBCA.
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(b) Except as
set forth on Schedule
2.6(b), (i) the
Company does not have any shares of capital stock or voting securities reserved
for issuance and (ii) does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the Company to issue, deliver or sell, or cause to be
issued, delivered or sold any shares of Company Common Stock or any other
ownership interest of the Company or any securities convertible into,
exchangeable for or representing the right to subscribe for, purchase or
otherwise receive any shares of Company Common Stock or any other ownership
interest of the Company or obligating the Company to grant, extend or enter into
any such subscriptions, options, warrants, calls, commitments or agreements.
There are no outstanding contractual obligations of the Company to repurchase,
redeem or otherwise acquire any shares of capital stock of the
Company.
Section
2.7. Financial
Statements.
(a) Attached
as Schedule
2.7 are true
and complete copies of (a) the audited balance sheet of the Company as of the
years ended December 31, 2003 and 2002, and the related audited income
statement, audited statement of cash flows and audited statement of changes in
stockholders’ equity of the Company for the three years ended December 31, 2003
(the “Audited
Financial Statements”), (b)
the unaudited balance sheet (the “Balance
Sheet”) of the
Company as of December 31, 2004 and the related unaudited income statement,
unaudited statement of cash flows and unaudited statement of retained earnings
for the twelve (12) months then ended (the “Unaudited
Financial Statements” and,
together with the Audited Financial Statements, the “Financial
Statements”). The
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, except for the absence
of footnotes thereto. The Financial Statements fairly present the financial
condition and the results of operations of the Company and its Subsidiaries as
of the dates and for the periods covered thereby.
(b) The
accounts receivable of the Company reflected in the Unaudited Financial
Statements arose from bona fide transactions in the ordinary course of business
and reflect credit terms consistent with the past practices of the Company. The
Company has not received notice of any counterclaims or setoffs against such
accounts receivable for which reserves have not been established in accordance
with GAAP.
-15-
(c) The raw
materials, work in process and finished goods inventory of the Company to the
extent reflected on the Unaudited Financial Statements net of reserves are
usable or saleable in the ordinary course of business of the Company and are
recorded on the books of the Company at the lower of cost or market value in
accordance with GAAP.
Section
2.8. Absence
of Certain Changes. Except
as set forth on Schedule
2.8, since
December 31, 2003, there has not been:
(a) any
adverse change in the condition (financial or otherwise), results of operations,
assets, liabilities or business of the Company other than changes arising in the
ordinary course of business;
(b) any
acquisition or disposition by the Company outside the ordinary course of
business of any asset or property used by the Company;
(c) any
damage, destruction or casualty loss to any material asset of the Company,
whether or not covered by insurance;
(d) any (i)
increase in the compensation, pension or other benefits payable or to become
payable to any of the present or former directors, officers, employees,
directors, agents or representatives of the Company or any bonus payments or
arrangements made to or with any of them, (ii) grant of any severance or
termination pay to any present or former director, officer or employee of the
Company, (iii) loan or advance of money or other property by the Company to any
present or former director, officer or employee of the Company, (iv)
establishment, adoption, entrance into, amendment or termination of any
collective bargaining agreement or (v) grants of any equity or equity-based
awards;
(e) any
voluntary forgiveness, cancellation, compromise, release or waiver of any right
or claim (or series of related rights and claims) of the Company in excess of
$25,000 individually or $25,000 in the aggregate or outside the ordinary course
of business, or any voluntary waiver of any right of value other than immaterial
compromises of accounts receivable in the ordinary course of business consistent
with past practice;
(f) the
imposition of any Encumbrance on any of the assets of the Company;
(g) any
lapse, termination, acceleration, modification, amendment, cancellation or
expiration, or to the Company’s Knowledge, threatened termination, acceleration,
modification, amendment or cancellation, of any Material Contract or other
material agreement, insurance policy, plan, lease, license or permit to which
the Company is a party or from which the Company receives benefits;
(h) any
amendments to the Articles of Organization or By-Laws (or other organizational
documents) of the Company;
(i) any
issuance, sale or disposal of any shares of capital stock or other ownership
interest of the Company, or any grant of, options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or exercise) any shares
of capital stock or other ownership interest of the Company;
-16-
(j) any
capital expenditure (or series of related capital expenditures) either in excess
of $25,000 or outside the ordinary course of business;
(k) any
change in any method of accounting, other than any such changes required by
GAAP;
(l) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash or in kind) on or with respect to, or redemption, purchase or
other acquisition of, any shares of capital stock of the Company;
(m) any loss
or, to the Company’s Knowledge, any threatened loss of a customer group or group
of customers which purchased individually or in the aggregate (on an annual
basis) more than $100,000 of goods and services from or through the Company;
(n) any act
or omission outside of the ordinary course of business other than in connection
with the transactions contemplated hereby; or
(o) any
commitment to do any of the foregoing.
Section
2.9. No
Undisclosed Liabilities. The
Company does not have any material liability or obligation (absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be reflected on a
balance sheet of the Company or reserved against or disclosed in the notes
thereto, except (a) for liabilities set forth in the Balance Sheet or the notes
thereto, (b) as set forth on Schedule
2.9 or (c)
for incidental trade account payables and expenses incurred in the ordinary
course of business since the Balance Sheet Date.
Section
2.10. Title
to Assets; Material Leases; Tangible Assets.
(a) Except as
set forth in Schedule
2.10(a), the
Company has good and marketable title to (or valid leasehold or contractual
interests in) all of the assets and properties used in connection with the
operation of the Business, free and clear of any Encumbrances, except (i)
mechanics’, carriers’, workmen’s, repairmen’s, warehousemen’s or other like
Encumbrances arising or incurred in the ordinary course of business, (ii) liens
for Taxes that are not yet due and payable or that may hereafter be paid without
penalty and (iii) other imperfections of title or Encumbrances, if any, that do
not, individually or in the aggregate, materially impair the continued use and
operation of the assets to which they relate in the conduct of the Business as
presently conducted. Schedule
2.10(a) also
contains a complete list of all machinery, motor vehicles, computer equipment,
other equipment, furniture, fixtures, and all other tangible personal property
(i) owned by the Company and used in connection with the Business on the date
hereof and (ii) leased by the Company and used in connection with the Business
on the date hereof pursuant to leases which involve monthly payments of more
than $500 per month on account of any such lease. Neither the Company nor, to
the Company’s Knowledge, any lessor of any such lease is in default under any
such lease and, to the Company’s Knowledge, no facts exists which, with notice
and/or the passage of time, would constitute such a default.
(b) All
material tangible assets and properties reflected on the Balance Sheet and all
of the assets leased by the Company identified on Schedule
2.10(a) are in
all material respects in good operating condition and repair, reasonable wear
and tear excepted, and no material properties or assets necessary for the
conduct of the Business in substantially the same manner as the Business has
heretofore been conducted are in need of replacement or material maintenance or
repair except for routine replacement, maintenance and repair.
-17-
(c) The
Company has never owned any real property. Schedule
2.10(c) sets
forth all material personal property leases to which the Company is a party or
by which it is bound and all real property leases to which the Company is a
party or by which it is bound (the “Leases”). The
Business is conducted solely from the Facility. Except as disclosed in
Schedule
2.10(c), each
Lease is the legal, valid and binding obligation of the Company, and to the
Knowledge of the Company, of each other party thereto, enforceable against each
such party thereto in accordance with its terms. Except as provided in
Schedule
2.10(c), the
consummation of the transactions contemplated by this Agreement will not result
in any default, penalty, termination, acceleration or modification to any Lease
and each Lease will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms immediately following and after giving
effect to the consummation of the transactions contemplated by this Agreement.
The Company, and to the Knowledge of the Company, each other party thereto, is
not in breach or default of, and no event has occurred which, with or without
notice or lapse of time, would constitute a breach or default or permit
termination, acceleration or modification under any Lease.
(d) The
rights, properties and assets owned by, leased or licensed to or otherwise
freely available in the public domain for use by the Company include all rights,
properties and other assets necessary to permit the Company to conduct its
business in all material respects in the same manner as it is conducted on, or
has been conducted immediately prior to, the date of this
Agreement.
Section
2.11. Indebtedness. Except
for Indebtedness reflected in the Balance Sheet and set forth on Schedule
2.11, the
Company does not have any Indebtedness outstanding at the date hereof. The
Company is not in default with respect to any outstanding Indebtedness or any
instrument relating thereto and except as set forth on Schedule
2.11, no such
Indebtedness or any instrument or agreement relating thereto purports to limit
the operation of the Business. Complete and correct copies of all instruments
and agreements (including all amendments, supplements, waivers and consents)
relating to any Indebtedness of the Company have been furnished to the
Parent.
Section
2.12. Taxes.
(a) The
Company has duly filed all Tax Returns required to be filed by it, all such
filed Tax Returns are complete and accurate in all material respects and the
Company has duly and timely paid all Taxes that are required to be paid by it,
except with respect to matters contested in good faith in appropriate
proceedings and identified on Schedule
2.12(a). The
Company has established as of the Balance Sheet Date, on its books and records,
reserves in accordance with GAAP consistently applied that are adequate in the
opinion of management of the Company for the payment of all Federal, state and
local Taxes not yet due and payable, but are incurred in respect of the Company
through such date. Except as set forth on Schedule
2.12(a), the
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party. The Company has not
waived any statute of limitations with respect to any material Taxes or, to the
extent related to such Taxes, agreed to any extension of time with respect to a
Tax assessment or deficiency, in each case to the extent such waiver or
agreement is currently in effect. Except as set forth in Schedule
2.12(a), no
Federal, state, local income, franchise or sales and use Tax Returns of the
Company have been examined by the United States Internal Revenue Service
(“IRS”) or the
appropriate state, local or foreign Tax authority. With respect to each
examination identified on Schedule
2.12(a), no
deficiencies were asserted as a result of such examinations which have not been
resolved and paid in full. There is no action, suit, investigation, audit, claim
or assessment pending or, to the Knowledge of the Company, proposed or
threatened, with respect to Taxes of the Company. To the Knowledge of the
Company, no claim has ever been made by a Tax authority in a jurisdiction where
the Company does not file Tax Returns that the Company is or may be subject to
Taxes assessed by such jurisdiction. The Company does not have any material
liability for any Taxes of any Person, other than the Company, under Treasury
Regulation Section 1.1502-6 or any comparable provision of state, local, or
foreign law, as a transferee or successor, by contract or otherwise. The Company
has made available to the Parent true and correct copies of the United States
Federal, state, local and foreign income Tax Returns filed by the Company for
Taxable years ended after December 31, 1999 and before the date hereof.
-18-
(b) Except as
set forth on Schedule
2.12(b), the
Company (i) has not requested any extension of time within which to file any Tax
Return which Tax Return has not since been filed, (ii) is not a party to any
agreement providing for the allocation or sharing of Taxes, (iii) is not
required to include in income any adjustment pursuant to Section 481(a) of the
Code, by reason of a voluntary change in accounting method initiated by the
Company (nor does the Company have any Knowledge that the IRS has proposed any
such adjustment or change of accounting method) or has any application pending
with the IRS or any other Tax authority requesting permission for any change in
accounting method, (iv) has not issued or assumed any obligation under Section
279 of the Code, any high yield discount obligation as described in Section
163(f)(1) of the Code or any registration-required obligation within the meaning
of Section 163(f)(2) of the Code that is not in registered form, (v) is not, or
has not been during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code, a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code, (vi) is not or has not been a member
of an affiliated group (within the meaning of Section 1504(a) of the Code)
filing consolidated United States Federal income Tax Returns (other than such a
group the common parent of which is or was the Company), (vii) has not been a
party to any distribution occurring during the last three years in which the
parties to such distribution treated the distribution as one to which Section
355 of the Code (or any similar provision of state, local or foreign law)
applied and (viii) has disclosed on its federal Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662.
(c) Except as
set forth on Schedule
2.12(c), no
officer, director, employee or agent (or former officer, director, employee or
agent) of the Company is entitled to now, or will or may be entitled to as a
consequence of this Agreement or the Merger or otherwise, to any payment or
benefit from the Company, the Surviving Corporation or from the Parent or any of
its Subsidiaries which if paid or provided would constitute an “excess parachute
payment”, as defined in Section 280G of the Code or regulations promulgated
thereunder.
-19-
Section
2.13. Litigation,
Etc. Except
as set forth on Schedule
2.13, no
proceeding, arbitration, action, judgment, decision, settlement, writ,
stipulation, decree, lawsuit, claim, complaint, injunction, order or
investigation before any Governmental Entity or other forum is pending or, to
the Knowledge of the Company, threatened against the Company. There is no
judgment, decree, injunction, or order of a Governmental Entity outstanding
against the Company. The Company has not received any written notice from any
Governmental Entity of any pending or threatened governmental investigation
relating to the Company. Except as set forth on Schedule
2.13, there
are no facts or circumstances known to the Company that could result in a claim
against the Company for damages or equitable relief which, if decided adversely,
could reasonably be expected to result in a Material Adverse Effect.
Schedule
2.13
identifies and provides a short description of any and all proceedings,
arbitrations, actions, judgments, decisions, settlements, writs, stipulations,
decrees, lawsuits, claims, complaints, injunctions, orders and investigation to
which the Company has been a party or which the Company has received, as
applicable, during the five (5) year period preceding the date
hereof.
Section
2.14. Employee
Matters.
(a) Schedule
2.14(a) lists
the names and titles of, and current annual compensation and most recent annual
bonus for, each current employee of the Company, together with a description of
any agreements concerning such employees and the individual’s employee status
(e.g., full-time, part-time, temporary, active, leave of absence, hourly,
salaried).
(b) There are
no personnel policies applicable to the employees of the Company, other than
employee manuals, true and complete copies of which have previously been
provided to the Parent.
(c) Schedule
2.14(c) lists
all Company Options and Company Warrants, showing for each such option or
warrant: (i) the name of the optionee or warrant holder, (ii) the number of
shares issuable, (iii) the number of vested shares, (iv) the date of expiration,
(v) the exercise price and (vi) in the case of an option, whether or not such
option is intended to be an “incentive stock option” under Section 422 of the
Code. The Company has delivered to the Parent true and complete copies of each
agreement evidencing the grant of each such option and warrant.
(d) Schedule
2.14(d) lists
all shares of Company Common Stock issued pursuant to any restricted stock
agreement (written or unwritten) including (i) the date such shares were sold or
awarded, (ii) the purchase price per share, if any, (iii) the number of shares
issued, (iv) the number of such shares which, as of the date hereof, have vested
and (v) the vesting schedule for such shares which, as of the date hereof, have
not vested. The Company has delivered to the Parent true and complete copies of
each such restricted stock agreement.
(e) Except as
set forth on Schedule
2.14(e), with
respect to current and former employees and service providers of the Company
(each an “Employee”):
(i) the
Company is and has been in compliance in all material respects with all Laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including any Laws respecting minimum wage and
overtime payments, employment discrimination, workers’ compensation, family and
medical leave, immigration, and occupational safety and health requirements, and
has not and is not engaged in any unfair labor practice;
-20-
(ii) there is
no basis for any claim by any Employee that such Employee was subject to a
wrongful discharge or any employment discrimination by the Company, or its
management, arising out of or relating to such Employee’s race, sex, age,
religion, national origin, ethnicity, handicap or any other protected
characteristic under applicable Laws;
(iii) there is
not now, nor within the past six (6) years has there been, any actions, suits,
claims, labor disputes or grievances pending, or, to the Knowledge of the
Company, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any liability to the
Company;
(iv) the
Employees of the Company are not and have never been represented by any labor
union, no collective bargaining agreement is binding and in force against the
Company or currently being negotiated by the Company, and to the Company’s
Knowledge, no union organization campaign is in progress with respect to any of
the Employees, and no question concerning representation exists respecting such
Employees;
(v) the
Company has not entered into any agreement, arrangement or understanding
restricting its ability to terminate the employment of any or all of its
Employees at any time, for any lawful or no reason, without penalty or
liability;
(vi) each
person classified by the Company as an independent contractor satisfies and has
satisfied the requirements of any Law to be so classified, and the Company has
fully and accurately reported such independent contractors’ compensation on IRS
Forms 1099 when required to do so;
(vii) the
Company has no liability for any payment with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice); and
(viii) there are
no pending, threatened or reasonably anticipated claims or actions against the
Company under any worker’s compensation policy or long-term disability
policy.
(f) No “mass
layoff,” “plant closing” or similar event as defined by the Worker Adjustment
and Retraining Notification Act with respect to the Company has
occurred.
Section
2.15. Contracts. Except
for contracts, commitments, leases, plans, agreements and licenses listed on
Schedule
2.15 (the
“Material
Contracts”), the
Company is not a party to or otherwise bound by (whether written or
oral):
-21-
(a) any
contract or purchase order for the future purchase of materials or supplies in
excess of $100,000;
(b) any
executory contracts for capital expenditures;
(c) any
contracts or commitments for the future sale of products in excess of $100,000
or with a remaining term in excess of ninety (90) days, other than purchase
orders relating to purchases to be made by customers of the Company in the
ordinary course of business;
(d) any
contract with a distributor, dealer, sales representative, supplier,
manufacturer or other Persons relating to the distribution, sale, supply or
manufacture of products;
(e) any
contract or agreement with any director, officer or stockholder of the Company
(or any of their respective Affiliates) or any other Person in which any of the
foregoing has a ten percent (10%) or more direct or indirect
interest;
(f) any
contract providing for stock awards or other equity-based compensation awards,
bonuses, pensions, deferred or incentive compensation, retirement or severance
payments, profit-sharing, insurance or other benefit plans or programs for any
present or former officer, consultant, director or employee of the
Company;
(g) any
employment, severance, change in control, consulting, commission, agency and
representative agreement or agreement to which the Company is a party with any
employee including, without limitation, all agreements and commitments relating
to wages, hours or other terms or conditions of employment (other than unwritten
employment arrangements terminable at will without payment of any contractual
severance or other amount);
(h) any
agreement concerning confidentiality, non-competition or non-solicitation of
employees;
(i) any
contract for the lease or sublease as lessee, lessor, sublessee or sublessor of
real or personal property of the Company, or any license of computer
software;
(j) any
contract or agreement that limits or purports to limit the ability of the
Company to compete in any line of business or with any Person or in any
geographic area or during any period of time or that limits or purports to limit
any other Person’s ability to compete with the Company;
(k) any
contract or agreement concerning a partnership, joint venture, joint development
or other cooperation agreement;
(l) any
contract or agreement for guaranty, indemnity or suretyship of Indebtedness of
any Person;
-22-
(m) any other
agreement (or group of related agreements) the performance of which involves
consideration in excess of $100,000 or is otherwise material to the Company and
its business; and
(n) any
amendments, supplements or modifications (whether written or oral) in respect of
any of the foregoing.
The
Company has delivered or made available to the Parent a correct and complete
copy of each Material Contract. Except as set forth on Schedule
2.15, each
Material Contract is legal, valid, binding, enforceable, and in full force and
effect and will continue to be legal, valid, binding, enforceable, and in full
force and effect immediately following the consummation of and after giving
effect to the transactions contemplated by this Agreement. Except as set forth
on Schedule
2.15, neither
the Company nor, to the Knowledge of the Company, any other party to any
Material Contract to which the Company is a party, is in breach or default in
complying with any provisions thereof and no event has occurred which with or
without notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration under any Material Contract. Except
as set forth on Schedule
2.15, the
Company has not received any written notice of the intention of any party to
terminate any Material Contract, whether as a termination for convenience or for
default of the Company thereunder.
Section
2.16. Pensions
and Benefits.
(a) Except as
disclosed on Schedule
2.16(a), (i)
neither the Company nor any of its ERISA Affiliates maintains or sponsors, or
makes or is required to make contributions to, or has any liability (contingent
or otherwise) with respect to, any Plans, (ii) none of the Plans is a
“multi-employer plan”, as defined in Section 3(37) of ERISA (a “Multi-employer
Plan”), (iii)
none of the Plans is a “single-employer plan” within the meaning of Section
4001(a)(15) of ERISA (a “Single
Employer Plan”), (iv)
none of the Plans provides post-retirement medical or health benefits, and (v)
none of the Plans is a “welfare benefit fund,” as defined in Section 419(e) of
the Code, or an organization described in Sections 501(c)(9) or 501(c)(20) of
the Code. The Company has delivered to the Parent true and complete copies of
(i) each Plan document (or written description of each unwritten Plan), and all
amendments thereto, (ii) the summary plan description of each Plan and
modifications thereto, (iii) each trust agreement or other funding medium with
respect to each Plan, (iv) the three (3) most recent annual reports for each of
the Plans (including all related schedules), (v) the most recent Internal
Revenue Service determination letter, opinion, notification or advisory letter
(as the case may be) for each Plan which is intended to constitute a qualified
plan under Section 401 of the Code, (vi) for each Plan that is a Single Employer
Plan, the three (3) most recent actuarial reports and financial statements and
(vii) for each Plan that is a Multi-employer Plan, the three (3) most recent
estimates of withdrawal liability.
(b) With
respect to each Plan that is subject to Title IV of ERISA, (i) no amount is due
or owing from the Company or any of its ERISA Affiliates to the PBGC or to any
Multi-employer Plan on account of any withdrawal therefrom, (ii) no such Plan
has been terminated other than in accordance with ERISA or at a time when the
Plan was not sufficiently funded and (iii) no Multi-employer Plan is in
reorganization (within the meaning of Section 4241 of ERISA) and the Company is
not aware of any event or condition which could result in any Multi-employer
Plan entering reorganization status. The transactions contemplated hereunder
shall not result in any such withdrawal or other liability under any Law with
respect to any Plan that is a Multi-employer Plan. At December 31, 2003, the
fair market value of plan assets of each Pension Plan exceeds the then projected
benefit obligations of each such Pension Plan based on the actuarial assumptions
used for purposes of the preparation of the Company’s financial statements for
the year ended December 31, 2003. All premiums (and interest charges and
penalties for late payment, if any) due to the PBGC with respect to each Pension
Plan have been paid.
-23-
(c) Neither
the Company nor any of its ERISA Affiliates is subject to any material
liability, Tax or penalty whatsoever to any person or agency whomsoever as a
result of engaging in a prohibited transaction under ERISA or the Code with
respect to any Plan, and no circumstances exists which could result in any
liability, Tax or penalty, including but not limited to, a penalty under Section
502 of ERISA, as a result of a breach of any duty under ERISA with respect to
any Plan. No event has occurred which could subject any Plan to Tax under
Section 511 of the Code. None of the Plans subject to Title IV of ERISA has,
within the past six (6) years, been completely or partially terminated nor has
there been any “reportable event”, as such term is defined in Section 4043(b) of
ERISA, with respect to any of the Plans within the past six (6) years, nor has
any notice of intent to terminate been filed or given with respect to any such
Plan. There has been no (i) withdrawal by the Company or any of its ERISA
Affiliates that is a substantial employer from a Single Employer Plan and which
has two or more contributing sponsors at least two of whom are not under common
control, as referred to in Section 4063(b) of ERISA or (ii) cessation by the
Company or any of its ERISA Affiliates of operations at a facility causing more
than twenty percent (20%) of Plan participants to be separated from employment,
as referred to in Section 4062(f) of ERISA. Neither the Company nor any of its
ERISA Affiliates, nor any other organization of which any of them are a
successor corporation as defined in Section 4069(b) of ERISA, have engaged in
any transaction described in Section 4069(a) of ERISA with respect to any
Plan.
(d) None of
the Plans nor any trust created thereunder has incurred any “accumulated funding
deficiency” as such term is defined in Section 412 of the Code, whether or not
waived, within the past six years, and no condition has occurred or exists which
by the passage of time could be expected to result in an accumulated funding
deficiency as of the last day of the current plan year of any such Plan. Each of
the Plans which is intended to be a qualified plan under Section 401(a) of the
Code has received a favorable determination letter, opinion, notification or
advisory letter from the Internal Revenue Service, and has been operated in
accordance with its terms and with the provisions of the Code. All of the Plans
have been administered and maintained in all material respects in compliance
with ERISA, the Code and all other applicable Law. All contributions required to
be made to each of the Plans under the terms of that Plan, ERISA, the Code or
any other Laws have been timely made. There are no liens against the property of
the Company or any of its ERISA Affiliates under Section 412(n) of the Code or
Sections 302(f) or 4068 of ERISA.
(e) There is
no contract, agreement or benefit arrangement covering any current or former
employee which, individually or in the aggregate, could reasonably be expected
to give rise to the payment of any amount which would constitute an “excess
parachute payment” (as defined in Section 280G of the Code). Except as disclosed
on Schedule
2.16(e), neither
the execution of this Agreement nor the consummation of any of the transactions
contemplated hereby will (i) result in any obligation or liability (with respect
to accrued benefits or otherwise) on the part of the Company or any of its
Affiliates to the PBGC, to any Plan, or to any present or former employee,
director, officer, stockholder, contractor or consultant of the Company or any
of its Affiliates, (ii) be a trigger event under any Plan that will result in
any payment (whether of severance pay or otherwise) becoming due to any such
present or former employee, officer, director, stockholder, contractor, or
consultant or (iii) accelerate the time of payment or vesting, or increase the
amount, of any compensation theretofore or thereafter due or granted to any
employee, officer, director, stockholder, contractor, or consultant of the
Company or any of its Affiliates.
-24-
(f) The
Company and each of its ERISA Affiliates have maintained the Plans in compliance
in all material respects with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“COBRA”), and
applicable COBRA regulations, (ii) the applicable requirements of the Health
Insurance Portability and Accountability Act of 1996 and the regulations
thereunder and (iii) Section 4980B, 4980C and 4980D of the Code.
(g) Except as
disclosed on Schedule
2.16(g), no Plan
(other than a Tax-qualified retirement plan) provides medical or death benefits
(whether or not insured) beyond an individual’s retirement or other termination
of service, except to the extent required by COBRA.
(h) Other
than routine claims for benefits under the Plans, there are no pending, or, to
Company’s Knowledge, threatened, actions, audits, investigations or proceedings
involving the Plans, or the fiduciaries, administrators, or trustees of any of
the Plans or the Company or any of its ERISA Affiliates as the employer or
sponsor under any Plan, with any of the Internal Revenue Service, the Department
of Labor, the PBGC, any participant in or beneficiary of any Plan or any other
person whomsoever. The Company knows of no reasonable basis for any such claim,
lawsuit, dispute, action or controversy.
(i) With
respect to any insurance policy relating to any Plan, neither the Company nor
any ERISA Affiliate is subject to any liability in the nature of a retroactive
rate adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring prior to the
Closing Date.
(j) Neither
the Company nor any ERISA Affiliate has announced the creation of, or made any
commitment to create, any additional employee benefit plan, agreement, policy or
arrangement or has any intention to modify any existing Plan.
Section
2.17. Compliance
with Laws, Etc. The
Company is, and at all times during the five (5) year period preceding the date
hereof has been, in compliance with all Laws applicable to the Company,
including, without limitation, those relating to discrimination in employment,
occupational safety and health, trade practices, competition and pricing,
zoning, building and sanitation, employment, retirement and labor relations,
product advertising and Environmental Laws. All reports and returns required by
Law to be filed by the Company with any Governmental Entity on or before the
date hereof have been timely filed, and all reports and returns required by Law
to be filed by the Company with any Governmental Entity after the date hereof,
but on or before the Effective Time, will have been timely filed prior to such
time. No whistleblower claims have ever been brought against the Company, and to
the Company’s Knowledge, no such claims are being threatened.
-25-
Section
2.18. Insurance.
Schedule
2.18 sets
forth a summary of all (i) insurance policies (including, without limitation,
policies providing theft, fire, liability (including products liability)
workers' compensation, life, property and casualty, directors' and officers',
and bond and surety arrangements) to which the Company (y) is currently a party,
a named insured or otherwise the beneficiary of coverage under and (z) was,
during the five (5) year period preceding the date hereof a party, a named
insured or otherwise the beneficiary of coverage under, and, in each instance,
specifies the insurer, the amount of coverage, type of insurance, expiration
date and any retroactive premium adjustments or other loss sharing agreements
and (ii) claims made against any insurance policy now or previously held by the
Company during the five (5) year period preceding the date hereof and the five
(5) year period preceding the Effective Time. All of the current policies listed
on Schedule
2.18 are in
full force and effect on the date hereof, and will continue to be in full force
and effect immediately following the consummation of the transactions
contemplated hereby. With respect to all of the policies listed on Schedule
2.18, all due
premiums have been timely paid in full and the Company is otherwise in
compliance with the terms and provisions thereof in all material respects. After
the consummation of the transactions contemplated hereby, the Surviving
Corporation shall have the right to make claims against any of the expired
policies listed on Schedule
2.18 which
are “occurrence based” policies. The Company has been covered since its
inception by insurance which, in the reasonable judgment of the Company, has
been adequate in scope and amount and customary and reasonable for the business
in which it has been engaged during the aforementioned period.
Section
2.19. Bank
Accounts, Signing Authority, Powers of Attorney. Except
as set forth on Schedule
2.19, the
Company has no account or safe deposit box in any bank and no Person has any
power, whether singly or jointly, to sign any checks on behalf of the Company,
to withdraw any money or other property from any bank, brokerage or other
account of the Company or to act under any power of attorney granted by the
Company at any time for any purpose. Schedule
2.19 also
sets forth the names of all Persons authorized to borrow money or sign notes on
behalf of the Company.
Section
2.20. Intellectual
Property Rights.
(a) Schedule
2.20(a) contains
a list of each employee, officer, director, advisor and consultant of the
Company who has executed a proprietary information, confidential information,
inventions and/or some other type of restrictive covenants agreement (each, a
“Covenants
Agreement”). The
Company has delivered to the Parent true and accurate copies of the Covenants
Agreements. The Company has no Knowledge of any facts or circumstances that any
of its employees, officers, directors, advisors or consultants are in violation
thereof.
-26-
(b) Schedule
2.20(b) contains
a complete and accurate list of all (i) patented or registered Intellectual
Property Rights owned or used by the Company or any of its Affiliates, (ii)
pending patent applications and applications for registrations of other
Intellectual Property Rights filed by the Company or any of its Affiliates,
(iii) unregistered trade names and corporate names owned or used by the Company
or any of its Affiliates, (iv) all licenses and other rights granted by the
Company or any of its Affiliates to any third party with respect to any
Intellectual Property Rights and (v) all licenses and other rights granted by
any third party to the Company or any of its Affiliates with respect to any
Intellectual Property Rights, in each case identifying the subject Intellectual
Property Rights. The Company owns all right, title and interest in and to all of
the Intellectual Property Rights listed under items (i), (ii) and (iii) above on
Schedule
2.20(b) free and
clear of all Encumbrances or claims of others. The Company owns all right, title
and interest to those Intellectual Property Rights listed under item (iv) above
on Schedule
2.20(b), subject
only to the terms of the licenses and other grants of rights disclosed therein.
The Company is the holder of valid and subsisting licenses to use the
Intellectual Property Rights identified under item (v) above on Schedule
2.20(b). The
Company owns all right, title and interest to, or has the right to use pursuant
to a valid license, all Intellectual Property Rights necessary for the operation
of the Business as presently conducted and as presently proposed to be conducted
after the Closing, free and clear of all Encumbrances or claims of others. The
Company has taken all necessary actions to maintain and protect the Intellectual
Property Rights that it owns. To the Company’s Knowledge, the owners of any
Intellectual Property Rights licensed to the Company have taken all necessary
actions to maintain and protect the Intellectual Property Rights that are
subject to such licenses. There have been no claims made against the Company or
any Affiliate asserting the invalidity, misuse or unenforceability of any of
such Intellectual Property Rights, and to the Company’s Knowledge, there are no
valid grounds for the same. Neither the Company nor any Affiliate has received
any notices of, and is not aware of any facts which indicate a likelihood of,
any infringement or misappropriation by, or conflict with, any third party with
respect to such Intellectual Property Rights (including, without limitation, any
demand or request that the Company or any Affiliate license any rights from a
third party). To the Knowledge of the Company, the Business has not infringed,
misappropriated or conflicted with and does not infringe, misappropriate or
conflict with any Intellectual Property Rights of others, nor would any future
conduct by the Business as presently contemplated infringe, misappropriate or
conflict with any Intellectual Property Rights of others. To the Company’s
Knowledge, the Intellectual Property Rights owned by or licensed to the Company
and/or Affiliates have not been infringed, misappropriated or conflicted by
others. The transactions contemplated by this Agreement shall have no adverse
effect on the Surviving Corporation’s right, title and interest in and to the
Intellectual Property Rights listed on Schedule
2.20(b). To the
Company’s Knowledge, none of the Employees are obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to promote
the interests of the Company or that would conflict with the future conduct by
the Business as presently contemplated. The Company does not believe it is or
will be necessary to utilize any inventions of any of the Employees (or people
it currently intends to hire) made prior to their employment by the
Company.
Section
2.21. Environmental
Matters.
(a) Except as
set forth on Schedule
2.21(a), the
Company is, and during the five (5) year period preceding the date hereof has
been, in compliance with all Environmental Laws governing its business,
operations, properties and assets and the real properties (including the
Facility) on which it has conducted the Business (the “Business
Real Properties”),
including, without limitation (i) all requirements relating to the Discharge and
Handling of Regulated Substances, (ii) all requirements relating to notice,
record keeping and reporting, (iii) all requirements relating to obtaining and
maintaining Environmental Licenses for the ownership of its properties and
assets and the operation of the Business as presently conducted, including
Licenses relating to the Handling and Discharge of Regulated Substances and (iv)
all applicable writs, orders, judgments, injunctions, governmental
communications, decrees, informational requests or demands issued pursuant to,
or arising under, any Environmental Laws.
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(b) The
Company has obtained all Environmental Licenses required by Law for the
ownership of its properties and assets and the operation of its Business as
presently conducted, including Environmental Licenses relating to the Handling
and Discharge of Regulated Substances. All of the Company’s Environmental
Licenses are described on Schedule
2.21(b) and are
in full force and effect. The Company’s Standard Industrial Code (“SIC”)
classification is 3629, and its North American Industry Classification System
(“NAICS”) number
is 335-999. Except as set forth on Schedule
2.21(b), the
Company has never at any time engaged in any activity which would have resulted
in the Company having a different SIC or NAICS classification.
(c) Except as
set forth on Schedule
2.21(c), there
are no (and the Company has no Knowledge of any basis for any) non-compliance
orders, warning letters, notices of violation (collectively, “Notices”),
claims, suits, actions, judgments, penalties, fines, or administrative or
judicial investigations or proceedings (collectively, “Proceedings”)
pending or, to the Knowledge of the Company, threatened against or involving the
Company, the Business, or the Business Real Properties, issued by any
Governmental Entity or third party with respect to any Environmental Laws or
Environmental Licenses issued to the Company thereunder in connection with,
related to or arising out of the ownership by the Company of its properties or
assets or the operation of its Business, which have not been resolved to the
satisfaction of the issuing Governmental Entity or third party in a manner that
would not impose any obligation, burden or continuing liability on the Company
in the event that the transactions contemplated by this Agreement are
consummated, including, without limitation (i) Notices or Proceedings related to
the Company being a potentially responsible party for a site undergoing
assessment, investigation, removal, response action, corrective action or other
remedial action by a Governmental Entity or private party under any applicable
Environmental Laws, (ii) Notices or Proceedings in connection with any site
undergoing assessment, investigation, removal, response action, corrective
action or other remedial action by a Governmental Entity or private party under
any applicable Environmental Laws, or in connection with any real property or
premises where the Company is alleged to have transported, transferred or
disposed of Regulated Substances, (iii) Notices or Proceedings relating to the
Company being responsible to undertake any assessment, investigation, removal,
response action, corrective action or other remedial action of any kind and (iv)
Notices or Proceedings related to the Company being liable under any
Environmental Laws for personal injury, property damage, natural resource
damage, or clean up obligations (“Environmental
Claims”).
(d) The
Company has no Knowledge of any past or present events, conditions,
circumstances, activities, practices, incidents or actions which could form the
basis of an Environmental Claim against the Company.
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(e) Except as
set forth on Schedule
2.21(e), the
Company has not Discharged, nor has it allowed or arranged for any third party
to Discharge, Regulated Substances to, at or upon (i) any location other than a
site lawfully permitted to receive such Regulated Substances, (ii) any real
property currently or previously owned or leased by the Company or (iii) any
site which, pursuant to any Environmental Laws, (y) has been placed on the
National Priorities List or its state equivalent or (z) any Governmental Entity
has notified the Company that such Governmental Entity has proposed or is
proposing to place on the National Priorities List or its state equivalent.
There has not occurred, nor is there presently occurring, a Discharge, or
threatened Discharge, of any Regulated Substance on, into or beneath the surface
of, or adjacent to, any real property currently or, to the Company’s Knowledge,
previously owned or leased by the Company in an amount requiring a notice or
report to be made to a Governmental Entity or in violation of any applicable
Environmental Laws.
(f) Except as
set forth on Schedule
2.21(f), (i)
neither the Company, its representatives or agents has conducted any
environmental audit, assessment, investigation, response, removal, corrective or
other remedial action or occupational health studies relating to or affecting
the Company or any real property currently or previously owned or leased by the
Company, nor to the Knowledge of the Company was any of the foregoing undertaken
by any Governmental Entity, or any third party, relating to or affecting the
Company or any real property currently or previously owned or leased by the
Company, (ii) there have not been any ground, water, soil, sediment, air or
asbestos investigation or monitoring undertaken by either the Company or its
representatives or agents or, to the Knowledge of the Company, undertaken by any
Governmental Entity or any third party, relating to or affecting the Company or
any real property currently or previously owned or leased by the Company
indicating the presence of Regulated Substances at levels requiring a notice or
report to be made to a Governmental Entity or in violation of any applicable
Environmental Laws, (iii) all material written communications between the
Company and any Governmental Entity relating to the Business or the Business
Real Properties arising under or related to Environmental Laws have been
provided to the Parent and (iv) there are no outstanding citations issued under
OSHA, or similar state or local Laws relating to or affecting the Company or any
real property currently or previously owned or leased by the
Company.
(g) All
documents filed by or on behalf of the Company with any Governmental Entity
pursuant to any Environmental Law in connection with the Merger were true,
correct and complete and did not omit to state any fact required to be stated
therein or necessary to make the statements therein not misleading.
(h) To the
Company’s Knowledge, there are no, and have never been, underground storage
tanks, landfills, surface impoundments, lagoons, in-ground vaults or tanks,
PCB-containing substances or waste storage, treatment or disposal areas on, in
or under the Business Real Properties.
(i) Except as
set forth on Schedule
2.21(i), the
Company does not use, nor has it ever used, any aboveground or underground tank
for the storage of Regulated Substances, and there are not now nor at any time
while any real property currently or previously owned or leased by the Company
has been occupied by the Company has there been any aboveground or underground
tanks upon or beneath any such real property that are required to be registered
under applicable Environmental Laws. To the Company’s Knowledge, there has never
been any aboveground or underground storage tanks upon or beneath any real
property currently owned or leased by the Company at any time prior to the
Company’s occupation thereof, that are required to be registered under
applicable Environmental Laws.
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(j) To the
Company’s Knowledge, no person has used Regulated Substances at, on, under, in,
from or affecting the Business Real Properties or the Company in any manner
which violates or has violated any Environmental Law, and there are no Regulated
Substances at, on, under, in or affecting the Business Real Properties or any
improvements thereon, which presence may result in any investigatory, removal,
remedial or other liability or obligation under any Environmental
Law.
(k) There has
been no release of Regulated Substances at any time during the Company’s or, to
the Company’s Knowledge, any other person’s occupancy of the Business Real
Properties, nor have Regulated Substances been used, treated, stored, handled,
managed or disposed of during the Company’s or, to the Company’s Knowledge, any
other Person’s occupancy of the Business Real Properties in a manner which
imposes or will impose any damage, cost, obligation, liability, claim, loss, or
expense on the Parent, the Acquirer or the Surviving Corporation.
(l) To the
Company’s Knowledge, no friable asbestos insulation or other asbestos-containing
material has been installed at the Business Real Properties.
(m) No lien
has attached to any property interest of the Company pursuant to any
Environmental Law.
(n) The
Company is not obligated to supply any reports or information to any
Governmental Entity with oversight authority with respect to environmental
matters except in the ordinary course of business, and other than in the
ordinary course of business no information request has been issued to or
received by the Company pursuant to any Environmental Law.
(o) To the
Company’s Knowledge, no facts, events or conditions exist that would reasonably
be expected to have a Material Adverse Effect on the Surviving Corporation’s
compliance with Environmental Laws after the Closing Date.
Section
2.22. Customers
and Suppliers.
Schedule
2.22 sets
forth a list of (a) the twenty-five (25) largest customers of the Company in
terms of gross sales during the year ended December 31, 2004 and (b) the
twenty-five (25) largest suppliers (from which the Company purchases goods) of
the Company in terms of purchases during the period commencing on January 1,
2004 through and including the date hereof. Except as set forth on Schedule
2.22, (a) no
customer has notified or otherwise indicated to the Company that it will stop,
or decrease the rate of, its purchases of materials, products or services from
the Company, and no customer has, during 2004, ceased or materially decreased
its purchases of any such materials, products or services from the Company and
(b) no supplier has notified or otherwise indicated to the Company that it will
stop, or decrease the rate of, or, other than publicly announced generally
applicable price increases, materially increase the cost of, its supply of
materials, products or services used by the Business, and no supplier has,
during the period commencing on January 1, 2004 through and including the date
hereof, ceased, materially decreased the rate of or materially raised the cost
of, any such materials, products or services. The Company has (i) not made any
representations, warranties, promises, undertakings or agreements to change or
modify the financial, business or operating terms with respect to any of its
customers or suppliers, (ii) not received notice of any violation of the terms
of any arrangement with any Account and (iii) no reason to believe its
relationship with any customer or supplier is in jeopardy or that such customer
or supplier will not maintain its existing relationships after the
Closing.
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Section
2.23. Minute
Books. The
minute books and stock transfer books of the Company have been made available to
the Parent for inspection and accurately record in all material respects
therein, all actions taken by the Board of Directors and stockholders of the
Company. No other minute books of the Company are kept or exist.
Section
2.24. Brokers. The
Company has not retained, utilized or been represented by any broker, finder,
agent or other intermediary in connection with the negotiation or consummation
of this Agreement or the transactions contemplated hereby.
Section
2.25. Related
Party Transactions. Except
as set forth in Schedule
2.25, no
current or former partner, director, officer, or shareholder of the Company or
any associate or Affiliate thereof, or any relative with a relationship of not
more remote than first cousin of any of the foregoing, is presently, or during
the past twelve (12) months has been, (i) a party to any transaction with the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services by, or rental of real or personal property from, or
otherwise requiring payments to, any such director, officer, employee or
shareholder or such associate or (ii) to the Company’s Knowledge, the direct or
indirect owner of an interest in any corporation, firm, association or business
organization which is a present or potential competitor, supplier or customer of
the Company, nor does any such Person receive income from any source other than
the Company which relates to the business or should properly accrue to the
Company.
Section
2.26. Voting
Requirements. The
affirmative vote or written consent of the holders of two thirds (2/3) of the
outstanding shares of Company Common Stock, are the only votes of the holders of
any class or series of the Company’s capital stock necessary, whether under Law
or otherwise, to approve and adopt this Agreement and the transactions
contemplated hereby.
Section
2.27. Restrictive
Agreements. The
Company is not a party to any executory agreement, contract, commitment or
arrangement (whether written or oral), and there is no such executory agreement,
contract, commitment or arrangement by which the Company or any of its
properties or assets is bound or affected, (i) to loan money or extend credit
(other than trade credit in the ordinary course of business) to or guarantee the
obligations of any other Person (other than guarantees by way of endorsement of
negotiable instruments in the ordinary course of business) or (ii) which
involves any joint venture, partnership or other arrangement involving sharing
of profits with any Person.
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Section
2.28. Absence
of Certain Commercial Practices. Neither
the Company, nor to the Knowledge of the Company, any director, officer, agent,
employee or other Person acting on behalf of the Company, has (i) given or
agreed to give any gift or similar benefit of more than nominal value to any
customer, supplier, or governmental employee or official or any other Person who
is or may be in a position to help or hinder the Company in connection with any
proposed transaction, which gift or similar benefit, if not given in the past,
might have materially and adversely affected the Business or prospects of the
Company, or which, if not continued in the future, might materially and
adversely affect the Business after the Closing Date, or (ii) 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 Section 30A of the Securities Exchange Act of
1934.
Section
2.29. Product
or Service Liability. There
is no material claim pending or, to the Company’s Knowledge, threatened against
or involving the Company or the Business relating to any services performed by
the Company and alleged to have been defective or improperly rendered, or any
products delivered by or sold by the Company which are alleged to be defective
or not in compliance with contractual requirements. Schedule
2.29 contains
a short description of any and all claims received by the Company since January
1, 2000 relating to any services performed by the Company and alleged to have
been defective or improperly rendered, or any products delivered by or sold by
the Company which are alleged to be defective or not in compliance with
contractual requirements.
Section
2.30. Representations
Complete.
No
representation or warranty made by the Company in this Agreement, any Schedule,
any Exhibit or any certificate delivered, or to be delivered, by or on behalf of
the Company pursuant hereto contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in any material
respect. To the Knowledge of the Company, there is no fact or circumstance that
the Company has not disclosed to the Parent and the Acquirer in writing that the
Company presently believes has had a Material Adverse Effect on the Company or
could reasonably be expected to have a Material Adverse Effect on the
Company.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF THE PARENT AND THE ACQUIRER
The
Parent and the Acquirer hereby, jointly and severally, represent and warrant to
the Company as follows:
Section
3.1. Organization
and Standing of the Parent and the Acquirer. The
Parent is an entity validly existing and in good standing under the laws of the
State of New Jersey and has all requisite corporate or other power and authority
to own or lease and operate its properties and to carry on its business as now
conducted. The Acquirer is a corporation duly incorporated, validly existing and
in good standing under the laws of the Commonwealth of
Massachusetts.
Section
3.2. Approval;
Binding Effect. Each of
the Parent and the Acquirer has all requisite corporate power and authority to
execute and deliver this Agreement and to perform all of its agreements and
obligations hereunder in accordance with its terms. This Agreement and the
transactions contemplated hereby have been duly authorized by the Boards of
Directors of the Parent and the Acquirer. This Agreement has been duly executed
and delivered by each of the Parent and the Acquirer. This Agreement constitutes
the legal, valid and binding obligation of the Parent and/or the Acquirer, as
applicable, enforceable against the Parent and/or the Acquirer, as applicable,
in accordance with its terms, except as such validity, binding effect or
enforceability may be limited by bankruptcy, insolvency and similar Laws
affecting creditor’s rights generally or equitable principles relating to the
availability of remedies.
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Section
3.3. Non-Contravention. The
execution and delivery of this Agreement, the performance and compliance by the
Parent and the Acquirer with the terms hereof and the consummation of all
transactions, including the Merger, contemplated hereby will not conflict with
or result in any breach or violation of or default (with due notice or lapse of
time or both) or creation of any Encumbrance under, or the acceleration, vesting
or modification of any right or obligation under (a) any provision of the
charter, by-laws or other organizational documents of the Parent or the
Acquirer, (b) any judgment, order, writ, injunction or decree of any court or
judicial or quasi-judicial tribunal applicable to the Parent or the Acquirer,
(c) any statute, rule, regulation, order, law, ordinance or restriction
applicable to the Parent or the Acquirer or (d) any contract, commitment, lease,
agreement, mortgage, note, indenture or other instrument or obligation to which
the Parent or the Acquirer is a party or by which it or its assets are bound, in
each case except to the extent any such breach, violation, creation of
Encumbrance, acceleration, vesting or modification does not, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Parent and/or the Acquirer.
Section
3.4. No
Consents. No
consent, notice, approval, waiver, license or other authorization or action by
or filing with any Governmental Entity or any other Person (including any party
to any agreement with either the Parent or the Acquirer) is required in
connection with the execution and delivery by the Parent and the Acquirer of
this Agreement, the consummation by the Parent and the Acquirer or the
transactions contemplated hereby, or the performance by the Parent and the
Acquirer of their obligations hereunder.
Section
3.5. Brokers. Neither
the Parent nor the Acquirer has retained, utilized or been represented by any
broker, finder, agent or other intermediary in connection with the negotiation
or consummation of this Agreement or the transactions contemplated
hereby.
Section
3.6. Financial
Resources. The
Parent has the financial resources to pay the entire Exchange Fund at the
Closing in cash without borrowing.
ARTICLE
4
CERTAIN
OTHER COVENANTS OF THE PARTIES
Section
4.1. Conduct
of Business. Except
as permitted in Schedule
4.1 or as
otherwise consented to by the Parent or the Acquirer, from the date of this
Agreement and until the Closing, the Company shall:
(a) conduct
the Business in the manner as heretofore conducted, and use commercially
reasonable efforts to preserve the business organization of the Company intact,
keep available the services of the Employees and maintain the existing relations
with franchisees, customers, suppliers, creditors, business partners, Employees
and others having business dealings with the Company, to the end that the
goodwill and ongoing business of the Company shall be unimpaired in any matter
respect at the Closing Date;
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(b) not, with
respect to the Business, institute any new methods of product development,
purchase, sale, lease, management, accounting or operation other than minor
changes consistent with prudent business practice or engage in any transaction
or activity outside the ordinary course of business;
(c) with
respect to the Business, (i) maintain the books, records and accounts of the
Company consistent with past practices, (ii) file, on a timely basis, with the
appropriate Governmental Entities all Tax Returns required to be filed and pay
all Taxes due prior to the Closing Date and (iii) maintain, preserve and protect
all of the Company’s assets in the condition in which they exist on the date
hereof, except for ordinary wear and tear;
(d) not
modify, amend, terminate, or renew any Material Contract, except in the ordinary
course of business, or waive, release or assign any material right or claim, in
each case to the extent that such waiver, release or assignment relates to the
Business;
(e) notify
the Parent prior to the Business entering into any new Material Contract, except
in the ordinary course of business;
(f) not enter
into any material commitment or transaction outside of the ordinary course of
business;
(g) not
permit any insurance policy or binder pertaining to the Business to be canceled
or terminated without notice to the Parent, except policies that are replaced
without diminution or gaps in coverage;
(h) not
settle any pending litigation or claim relating to the Business;
(i) not make
any material election with respect to Taxes, change any currently or previously
effective election relating to Taxes, adopt or change any accounting method
(except as required by Law or GAAP), whether or not relating to Taxes, enter
into any closing agreement relating to Taxes, settle or consent to any claim or
assessment relating to Taxes, waive the statute of limitations for any such
claim or assessment, or file any amended Tax Return or claim for refund of
Taxes;
(j) not take,
or agree to or commit to take, any action that would result in any of the
conditions to the Closing set forth in Article
5 not
being satisfied, or would make any representation or warranty of the Company
contained herein untrue in any respect at, or as of any time prior to, the
Closing Date, or that would materially impair the ability of the Company, the
Company Stockholders, the Company Optionholders, the Company Warrant Holders,
the Parent and/or the Acquirer to consummate the Closing in accordance with the
terms hereof or materially delay such consummation;
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(k) not
permit the Company to take any action (or omit to take any action) that would
have, individually or in the aggregate, a Material Adverse Effect;
(l) except as
required by Law, not enter into any negotiation with respect to, or adopt or
amend in any respect, any collective bargaining agreement relating to the
Business;
(m) except as
may be required under any existing agreement or by Law, not grant or agree to
grant any bonuses to any employee employed in the conduct of the Business, nor
shall the Company increase the rates of salaries or compensation of the
employees employed in the conduct of the Business or increase or provide any new
pension, retirement or other employment benefits to any of the Employees, other
than general increases made in accordance with the Company’s past
practices;
(n) cooperate
in good faith with Parent in communicating with the Employees regarding the
Merger;
(o) operate
the Business in compliance with all Laws in all material respects;
(p) use
commercially reasonable efforts to preserve and protect all material permits,
licenses, approvals, certificates, registrations and other authorizations
relating to the Business;
(q) ship,
transfer and/or deliver products to its customers only in a manner consistent
with the Business’ past practices;
(r) notify
the Parent prior to the Business (i) removing or disposing any fixed or
infrastructure assets, (ii) incurring any capital expenditures or (iii) hiring
or firing any employees; and
(s) not enter
into any agreement, contract, commitment or arrangement to do anything that it
is prohibited from doing pursuant to this Section
4.1 and
shall not authorize, recommend, propose or announce an intention to do anything
that it is prohibited from doing pursuant to this Section
4.1.
Section
4.2. Waivers,
Consents and Approvals.
Notwithstanding any other provision of this Agreement, the Company will use its
best efforts, with the full cooperation of the Parent and the Acquirer, to
obtain the consents or approvals of third parties required under any Material
Contracts and from any Governmental Entity which are listed on Schedule
5.8 hereof.
Nothing in this Agreement will constitute a transfer or an attempted transfer of
any Material Contracts or Governmental Entity consents, approvals, waivers, or
other authorizations which are listed on Schedule
5.8 hereof
which by its terms or under Law requires the consent or approval of a third
party (including, without limitation, a Governmental Entity) unless such consent
or approval shall have been obtained.
Section
4.3. Further
Assurances. Subject
to the terms and conditions herein provided, each of the parties hereto agrees
to use all reasonable efforts to, as promptly as practicable, take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under Law to consummate and make effective the transactions
contemplated by this Agreement. In case at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, the
Stockholder Representative and the proper officers and directors of the
Surviving Corporation shall take all such necessary action.
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Section
4.4. Announcements. Except
as otherwise required by Law, prior to the Closing, the Company and the Parent
shall cooperate with each other in the development of a joint communication plan
which will address the content and distribution of all news releases and other
announcements with respect to this Agreement and the transactions contemplated
hereby. Except to the extent otherwise required by Law (including the rules and
regulations of the Securities and Exchange Commission and NASDAQ or any other
self-regulatory organization applicable to the Parent) and except as prescribed
in a joint communication plan of the parties, in no event shall any party to
this Agreement make, issue or release or authorize any of its directors,
officers, employees or agents to make, issue or release any announcement,
statement or acknowledgment regarding the transactions contemplated under this
Agreement, or reveal the status of the transactions provided for herein,
regardless of whether such announcement, statement or acknowledgment is made or
directed to the public generally or to employees, suppliers, customers or other
third parties, without first obtaining the consent of the Parent and the
Company, or except as may be required by the Company to communicate with its
stockholders in connection with the transactions contemplated by this Agreement;
provided
however, that
the Parent shall be permitted to describe the transactions contemplated by this
Agreement in a press release and in current, quarterly and annual reports filed
under the Securities Exchange Act of 1934.
Section
4.5. Notice
of Merger and Appraisal Rights. As
promptly as practicable following the date of this Agreement, the Company shall
prepare and deliver to the stockholders of the Company a Notice of Merger and
Appraisal Rights (the “Stockholder
Notice”), which
Stockholder Notice shall comply in all respects with the requirements of the
MBCA. All such information contained in the Stockholder Notice shall be accurate
and complete in all material respects as of the date of its delivery to the
stockholders of the Company.
Section
4.6. Treatment
of Employees. At the
Effective Time, the Parent shall cause the Surviving Company to offer employment
to substantially all persons who are employees of the Company immediately prior
to the Closing (the “Company
Employees”), such
employment to be for substantially equivalent positions and on substantially
equivalent wage or compensation rates as such Company Employees have with the
Company. Except as specifically otherwise provided herein, nothing contained in
this Agreement shall confer upon any Employee any right with respect to
continuance of employment by the Surviving Corporation, nor shall anything
herein interfere with the right of the Surviving Corporation to terminate the
employment of any of the Employees at any time, with or without cause, or
restrict the Surviving Corporation in the exercise of its independent business
judgment in modifying any of the terms and conditions of the employment of the
Employees following the Closing.
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Section
4.7. Intentionally
Omitted.
Section
4.8. Tax
Matters.
(a) Pre-Closing
Conduct. Without
the prior written consent of the Parent, the Company shall not make or change
any election, change an annual tax or accounting period, adopt or change any Tax
or accounting method, file any amended Tax Return, enter into any closing
agreement, settle any Tax claim or assessment relating to the Company, surrender
any right to claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment relating to the
Company, or take any other similar action relating to the filing of any Tax
Return or the payment of any Tax, if such election, adoption, change, amendment,
agreement, settlement, surrender, consent, or other action could have an effect
on the Tax liability of the Company for any period ending after the Closing
Date.
(b) Straddle
Period. In the
case of any Tax period that includes (but does not end on) the Closing Date (a
“Straddle
Period”), the
determination of the Taxes for the Pre-Closing Tax Period of the Straddle Period
and the portion of the Straddle Period beginning after the Pre-Closing Tax
Period shall be determined by assuming that the Straddle Period consisted of two
taxable years or periods, one which ended at the close of the Closing Date and
the other which began at the beginning of the day following the Closing Date,
and items of income, gain, deduction, loss or credit, and state and local
apportionment factors of the Company for the Straddle Period shall be allocated
between such two taxable years or periods on a “closing of the books basis” by
assuming that the books of the Company were closed at the Closing Date,
provided, however, that (A) exemptions, allowances or deductions that are
calculated on an annual basis, such as the deduction for depreciation and (B)
periodic taxes such as real and personal property taxes shall be apportioned
ratably between such periods on a daily basis. Notwithstanding anything to the
contrary contained herein, all net operating losses attributable to Tax years
ending on or before the Closing Date shall be credited first against Taxes for
the Pre-Closing Tax Period.
(c) Responsibility
for Filing Tax Returns. The
Parent shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Company which are filed after the Closing Date and shall pay
or cause to be paid all Taxes shown as due on such Tax Returns. The Parent shall
permit the Stockholder Representative or its independent public accountants to
review and comment on each Tax Return for a Pre-Closing Tax Period no later than
thirty (30) Business Days prior to filing and shall make such revisions to such
Tax Returns as are consistent with past practice and custom, unless a contrary
position is indicated by law, and shall, in good faith, attempt to accommodate
any other reasonable requests of the Stockholder Representative and its
independent public accountants, to the extent not inconsistent with
Law.
(d) Refunds
and Tax Benefits. Any Tax
refund received by the Parent or the Company, and any amounts credited against
Tax to which the Parent or the Company become entitled, that relate to Taxes for
the Company for the Pre-Closing Tax Period shall be for the account of the
Company Stockholders, Company Optionholders and Company Warrant Holders (but
only to the extent such refunds or credits exceed the amount accrued therefor
(if any) on the Balance Sheet), and the Parent shall pay over to the Stockholder
Representative any such refund or the amount of such credit within forty-five
(45) days after receipt or entitlement thereto. The Stockholder Representative
shall be responsible for distributing to each Company Stockholder, Company
Optionholder and Company Warrant Holder (who become entitled to a portion of the
Exchange Fund receive the amounts due the Company Stockholders, Company
Optionholders and Company Warrant Holders pursuant to Section
1.3(c)) their
proportionate share of any amount paid to the Stockholder Representative
pursuant to this Section
4.8(d).
Notwithstanding anything to the contrary herein, neither the Parent nor the
Company shall be required to amend any Tax Return or file any refund claim for
Taxes, nor shall it be required to carry back any tax attributes to a
Pre-Closing Tax Period.
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(e) Cooperation
on Tax Matters.
(i) The
parties hereto shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Tax Returns pursuant to
Section
4.8(b)
(including signing any such Tax Returns) above and any audit, litigation, or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party’s request) the provision of records and
information which are reasonably relevant to any such audit, litigation, or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any material provided
hereunder.
(ii) The
Parent and the Stockholder Representative, on behalf of the Company
Stockholders, the Company Optionholders and the Company Warrant Holders, further
agree, upon request, to use their respective best efforts to obtain any
certificate or other document from any Governmental Entity or any other Person
as may be necessary to mitigate, reduce, or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) The
Parent and the Stockholder Representative, on behalf of the Company
Stockholders, further agree, upon request, to provide the other party with all
information that any party may be required to report pursuant to Code Sections
6043 or 6043A and all Treasury Regulations promulgated thereunder.
(f) Tax
Sharing Agreements. All Tax
sharing agreements or similar agreements with respect to or involving the
Company shall be terminated as of the Closing Date and, after the Closing Date,
the Company shall not be bound thereby or have any liability
thereunder.
(g) Certain
Taxes and Fees. All
transfer, documentary, sales, use, stamp, registration, and other such Taxes,
and all conveyance fees, recording charges, and other fees and charges
(including any penalties and interest) incurred in connection with consummation
of the transactions contemplated by this Agreement shall be paid by the Company
Stockholders when due, and the Company Stockholders will, at their own expense,
file all necessary Tax Returns and other documentation with respect to all such
Taxes, fees, and charges, and, if required by Law, the Parent will, and will
cause its Affiliates to, join in the execution of any such Tax Returns and other
documentation.
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(h) Survival
of Obligations.
Notwithstanding any other provision in this Agreement to the contrary, the
obligations of the parties set forth in this Section
4.8 shall be
unconditional and absolute and shall remain in effect without limitation as to
time or amount.
(i) Treatment
of Payments. All
payments made by the Parent pursuant to Section
4.8 or to
any indemnified party pursuant to Article
7 shall
constitute an adjustment of the Adjusted Cash Merger Consideration for Tax
purposes and shall be treated as such by the Parent, the Company and the Company
Stockholders on their respective Tax Returns to the extent permitted by
Law.
Section
4.9. Access
and Information. Prior
to the Closing, the
Parent shall be entitled to make or cause to be made such reasonable
investigation of the Business and the Facility as the Parent deems necessary or
advisable, and the Company shall cooperate with any such investigation. In
furtherance of the foregoing, but not in limitation thereof, the Company shall
permit the Parent and its agents and representatives to have reasonable and
continued access to all applicable premises and books and records of the Company
during regular business hours and shall furnish such financial and operating
data (including, but not limited to, projections, forecasts, business plans,
strategic plans and other data relating to the Business as the Parent shall
reasonably request from time to time); provided,
however, the
Company shall be under no obligation to deliver to the Parent any information in
violation of any non-disclosure or confidentiality agreement (but shall be
required to disclose to the Parent the type of information not being so
provided). Prior to the Effective Time, neither the Parent nor the Acquirer
shall use any information obtained pursuant to this Section
4.9 for any
purpose unrelated to the consummation of the transactions contemplated by this
Agreement and, if such transactions are not consummated, they will hold all
information and documents obtained pursuant to this Section
4.9 in
confidence unless and until such time as such information or documents otherwise
become publicly available or unless it is advised by counsel that any such
information or document is required by Law to be disclosed (and the Parent and
the Acquirer shall give reasonable advance notice of any intended disclosure of
such information or documents to the Stockholder Representative in order to
permit the Stockholder Representative to seek judicial protection from and
against a contemplated disclosure). In the event that this Agreement is
terminated, the Parent will deliver to the Company all documents so obtained by
it and any copies thereof in the possession of the Parent or its agents and
representatives or, at the option of the Parent, the Parent shall cause all of
such documents and all of such copies to be destroyed and shall certify the
destruction thereof to the Company. No investigation by the Parent or the
Acquirer heretofore or hereafter made shall modify or otherwise affect any
representations and warranties of the Company pursuant to this Agreement, which
shall survive any such investigation.
Section
4.10. Third
Party Proposals.
Neither
the Company nor any Affiliate of the Company shall solicit or encourage
inquiries or proposals with respect to or furnish any information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or of a substantial
equity interest in, the Company or any business combination with the Company
other than as contemplated by this Agreement (each, a “Transaction
Proposal”). The
Company shall notify (and provide a reasonably detailed description to) the
Parent immediately if any Transaction Proposal is received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, the Company. The Company shall, and shall cause its
Affiliates to, immediately cease and cause to be terminated any existing
activities, including discussions or negotiations with any parties, conducted
prior to the date hereof with respect to any Transaction Proposal. If any Person
(other than the Parent or its agents and representatives) during the one (1)
year period prior to the date of this Agreement has been provided with any
confidential information or data relating to any Transaction Proposal, the
Company shall use reasonable efforts to cause such information or data to be
immediately returned to it. The Company shall cause its officers, directors,
agents, advisors and Affiliates to comply with the provisions of this
Section
4.10.
Notwithstanding the foregoing, if the Company receives any unsolicited inquiry
for the purchase of all or any part of the Company, the Company may respond to
such inquiry to the effect that it is not considering any such sale inquiries at
the present time.
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Section
4.11. Notification
of Certain Matters.
The
Company, on the one hand, and the Parent and the Acquirer, on the other hand,
shall give written notice to the other promptly after becoming aware of (i) the
occurrence or non-occurrence of any event whose occurrence or non-occurrence
could reasonably be expected to result in any representation or warranty made by
such party contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Closing Date or (ii)
any failure of the Company or any officer, director, employee or agent of the
Company, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by them hereunder; provided,
however, the
delivery of any notice pursuant to this Section
4.11 shall
not limit or otherwise affect the remedies available hereunder to the Parent
and/or the Acquirer.
Section
4.12. Stockholders’
Meeting.
(a) The
Company will take all action necessary in accordance with the MBCA and the
Company’s Articles of Organization and By-Laws to cause a meeting of its
stockholders (the “Special
Meeting”) to be
duly called and held to consider and vote upon the approval and adoption of this
Agreement and the Merger, and the Company will use its commercially reasonable
efforts to hold the Special Meeting on a date on which the Parent and the
Acquirer find agreeable. The Company’s Board of Directors will, subject to
Section
4.12(b) and
Section
4.10,
recommend such approval and adoption of this Agreement and the Merger by the
Company’s stockholders as provided herein and will use its commercially
reasonable efforts to solicit such approval.
(b) The
Company’s Board of Directors will not withdraw, modify or change in a manner
adverse to the Parent or the Acquirer, its recommendation to the Company’s
stockholders unless the Company’s Board of Directors determines in good faith,
after consultation with counsel, that such withdrawal or modification is
required by Law in order for the Company’s Board of Directors to comply with its
duties to the Company and the Company’s stockholders. Any withdrawal, change or
modification of the recommendation of the Company’s Board of Directors in
accordance with the previous sentence will not constitute a breach of the
Company’s representations, warranties, covenants or agreements contained in this
Agreement. Unless this Agreement is previously terminated in accordance with
Article
8, the
Company will submit this Agreement to its stockholders at the Special Meeting in
accordance with Section
4.12(a) even if
the Company’s Board of Directors has withdrawn, modified or changed its
recommendation of this Agreement or the transactions contemplated by this
Agreement and will not postpone or adjourn such meeting or the vote by the
Company’s stockholders upon this Agreement to another date without the Parent’s
and the Acquirer’s approval or as otherwise required by Law.
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ARTICLE
5
CONDITIONS
PRECEDENT TO
PARENT’S
AND ACQUIRER’S OBLIGATIONS
Notwithstanding
the provisions of Article
1, the
Parent and the Acquirer shall be obligated to perform the acts contemplated for
performance by them under Article
1 only if
each of the following conditions is satisfied at or prior to the Closing Date,
unless any such condition is waived in writing by the Parent and the
Acquirer:
Section
5.1. Accuracy
of Representations and Warranties by the Company. Each
representation and warranty of the Company contained in this Agreement (a) that
is qualified as to materiality or Material Adverse Effect shall be true and
correct in all respects as of the Effective Date and as of the Closing Date as
though each such representation and warranty had been made on and as of the
Effective Date and as of the Closing Date, except to the extent any such
representation and warranty expressly speaks only as of an earlier date (in
which case as of such earlier date), and (b) that is not so qualified shall be
true and correct in all material respects as of the Effective Date and as of the
Closing Date as though each such representation and warranty had been made on
and as of the Effective Date and as of the Closing Date, except to the extent
any such representation and warranty expressly speaks only as of an earlier date
(in which case as of such earlier date).
Section
5.2. Compliance
by the Company. The
Company shall have performed and complied in all material respects with all of
its covenants, agreements and obligations under this Agreement required to be
performed or complied with by it on or before the Closing Date.
Section
5.3. Company
Closing Deliverables. Prior
to or at the Closing, the Company shall have delivered the following documents
as shall be reasonably requested by the Parent and/or the Acquirer in form and
substance reasonably acceptable to the Parent’s and the Acquirer’s
counsel:
(a) a
certificate of the President or any Vice President of the Company and the
Stockholder Representative, dated the Closing Date, to the effect that the
conditions specified in this Article
5 have
been satisfied by the Company or waived by the Parent and the Acquirer;
and
(b) a
certificate of the Secretary or Assistant Secretary of the Company, dated the
Closing Date, as to the incumbency of any officer of the Company executing this
Agreement or any document related thereto and covering such other customary
matters as the Parent and/or the Acquirer may reasonably request;
(c) a
certified copy of the resolutions of the Company’s Board of Directors
authorizing the execution, delivery and consummation of this Agreement and the
transactions contemplated hereby; and
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(d) a
certified copy of the resolutions of the stockholders of the Company whereby at
least two-thirds of the stockholders of the Company voted in favor of adopting
and approving this Agreement, the Merger and the transactions contemplated
hereby.
Section
5.4. Delivery
of Articles of Merger. The
Company shall have duly executed and delivered the Articles of
Merger.
Section
5.5. No
Pending Litigation. No
action, suit or proceeding shall be pending or threatened against the Company
wherein any unfavorable injunction, judgment, order, decree ruling or charge
would prohibit the consummation of the Merger or any of the transactions
contemplated hereby.
Section
5.6. Resignations
of Directors and Officers. Except
as set forth on Schedule
5.6 all of
the directors and officers of the Company shall have resigned their positions
with the Company, on or prior to the Closing Date and prior thereto shall have
executed such appropriate documents with respect to the transfer or
establishment of bank accounts, signing authority, and other similar matters, as
the Acquirer shall have reasonably requested.
Section
5.7. Certificates
of Good Standing. The
Company shall have delivered a certificate of the Secretary of the Commonwealth
of the Commonwealth of Massachusetts, dated as of a recent date prior to the
Closing, with respect to the legal existence and good standing of the Company
under the laws of the Commonwealth of Massachusetts.
Section
5.8. Consents
and Approvals. The
Company shall have received all consents and approvals of all Governmental
Entities and all third parties identified on Schedule
5.8.
Section
5.9. Legal
Opinion. The
Parent and the Acquirer shall have received from Bowditch & Dewey, LLP,
special counsel for the Company, a legal opinion, which shall be addressed to
the Parent and the Acquirer, dated as of the Closing Date, and in substantially
the form attached hereto as Exhibit
E.
Section
5.10. Termination
of Employees.
The
Company shall have terminated the Employees listed on Schedule
5.10 and
shall have provided sufficient evidence thereof to the Parent.
Section
5.11. Employment
Agreements. There
shall have been executed and delivered to the Acquirer, Employment Agreements in
substantially the form attached hereto as Exhibit
F from
each of Jim
Averill, Scott Moore, Mark Michalski, Gerald Miller, Greg Zvonar and
Andrew
Ferencz (the
“Employment
Agreements”).
Section
5.12. Non-competition
Agreements. There
shall have been executed and delivered to Acquirer, Noncompetition
Agreements in substantially the form attached hereto as Exhibit
G from
each of Howard Kaepplein, William Ng and Bernhard Schroter (the
“Noncompetition
Agreements”).
Section
5.13. Settlement
of Disputes. The
Company
shall have satisfied all of its obligations under the Artesyn Settlement
Agreement and shall have provided sufficient evidence thereof to the Parent. The
Company shall have paid any and all amounts due and owing to Datatronics and
shall have provided sufficient evidence thereof to the Parent.
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Section
5.14. Termination
of Consulting Agreement. The
Company shall have terminated that certain Consulting Agreement dated as of
March 12, 2002 by and between the Company and Atlantic Management Associates,
Inc. and shall have provided sufficient evidence thereof to the
Parent.
Section
5.15. Escrow
Agreement. The
Shareholder Representative shall have executed and delivered to the Parent, and
shall have caused the Escrow Agent to have executed and delivered to the Parent,
an Escrow Agreement in substantially the form attached hereto as Exhibit
H (the
“Escrow
Agreement”)
pursuant to which the Escrow Amount shall be deposited in escrow to, among other
things, secure payment of indemnification payable to the Parent and the
Surviving Corporation hereunder.
Section
5.16. FIRPTA. Each of
the Company Shareholders and the Company Optionholders who are to receive a
portion of the Exchange Fund shall have furnished a certification of nonforeign
status in accordance with Treasury Regulations Section 1.1445-2(b)(2)(iv), or as
otherwise required by Law.
Section
5.17. Section
1.7 Deliveries. The
Company shall have delivered to the Parent and the Acquirer the Estimated
Accounts Receivable Report, the Inventory Report and the Estimated Closing
Report in the manner provided for in Section
1.7.
Section
5.18. Company
Stockholder Approval. The
holders of at least two-thirds of the shares of Company Common Stock shall have
adopted and approved this Agreement, the Merger and the transactions
contemplated hereby in accordance with the MBCA.
Section
5.19. Amendment
of Option Plans, Option Documents and Warrant Documents. The
Company shall have amended, in a manner reasonably acceptable to the Parent, (i)
the Plans and (ii) the Stock Option Agreements and Warrants identified on
Schedule
2.6(b) to
provide
for cashless exercise of Company Options and Company Warrants and partial
acceleration of the unvested Company Options.
Section
5.20. Limitation
of Dissenting Shares. The
amount of Dissenting Shares shall not exceed five percent (5%) of the issued and
outstanding shares of Company Common Stock.
ARTICLE
6
CONDITIONS
PRECEDENT TO COMPANY’S OBLIGATIONS
Notwithstanding
the provisions of Article
1, the
Company shall be obligated to perform the acts contemplated for performance by
it under Article
1 only if
each of the following conditions is satisfied at or prior to the Closing Date,
unless any such condition is waived in writing by the Company:
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Section
6.1. Accuracy
of Representations and Warranties by the Parent and the
Acquirer. Each
representation and warranty of the Parent and the Acquirer contained in this
Agreement (a) that is qualified as to materiality shall be true and correct in
all respects as of the Effective Date and as of the Closing Date as though each
such representation and warranty had been made on and as of the Effective Date
and as of the Closing Date, except to the extent any such representation and
warranty expressly speaks only as of an earlier date (in which case as of such
earlier date), and (b) that is not so qualified shall be true and correct in all
material respects as of the Effective Date and as of the Closing Date as though
each such representation and warranty had been made on and as of the Effective
Date and as of the Closing Date, except to the extent any such representation
and warranty expressly speaks only as of an earlier date (in which case as of
such earlier date).
Section
6.2. Compliance
by the Parent and the Acquirer. The
Parent and the Acquirer shall have performed and complied in all material
respects with all of their covenants, agreements and obligations under this
Agreement to be performed or complied with by them on or before the Closing
Date.
Section
6.3. Parent/Acquirer
Closing Deliverables. Prior
to or at the Closing, the Parent and the Acquirer shall have delivered to the
Company the following documents as shall be reasonably requested by the Company
in form and substance reasonably acceptable to the Company’s
counsel:
(a) a
certificate of the President or any Vice President of the Parent and the
Acquirer, dated the Closing Date, to the effect that the conditions specified in
this Article
6 have
been satisfied by the Parent and/or the Acquirer or waived by the
Company;
(b) certificates
of the Secretary or Assistant Secretary of the Parent and the Acquirer, dated
the Closing Date, as to the incumbency of any officer of the Parent or the
Acquirer executing this Agreement or any document related thereto and covering
such other customary matters as the Company may reasonably request;
and
(c) certified
copies of the resolutions of the Parent’s and the Acquirer’s Board of Directors
authorizing the execution, delivery and consummation of this Agreement and the
transactions contemplated hereby and thereby.
Section
6.4. Delivery
of Certificates of Merger. The
Acquirer shall have duly executed and delivered the Articles of
Merger.
Section
6.5. No
Pending Litigation. No
action, suit or proceeding shall be pending or threatened against the Company
wherein any unfavorable injunction, judgment, order, decree ruling or charge
would prohibit the consummation of the Merger or any of the transactions
contemplated hereby.
Section
6.6. Delivery
of Merger Proceeds. At the
Closing, the Paying Party shall have delivered or shall simultaneously deliver
the Escrow Amount to the Escrow Agent and the amounts due the Company
Stockholders, Company Optionholders and Company Warrant Holders pursuant to, and
in accordance with, the provisions of Sections
1.2(k) and
1.3
hereof.
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Section
6.7. Resolutions
Adopted by the Parent and the Acquirer. Each of
the Boards of Directors of the Parent and the Acquirer shall have approved this
Agreement and the transactions contemplated hereby.
Section
6.8. Certificate
of Good Standing. Each of
the Parent and the Acquirer shall have delivered a certificate of the Secretary
of State of the jurisdiction of incorporation of such entity, dated as of a
recent date prior to the Closing, with respect to the legal existence and good
standing of such entity under the Laws of such jurisdiction.
Section
6.9. Company
Stockholder Approval. The
holders of at least two-thirds of the shares of Company Common Shares shall have
adopted and approved this Agreement, the Merger and the transactions
contemplated hereby in accordance with the MBCA.
ARTICLE
7
SURVIVAL
AND INDEMNIFICATION
Section
7.1. Survival. The
representations and warranties made in Articles
2 and
3 of this
Agreement shall survive the Closing until the first anniversary thereof and will
thereupon expire together with any right to indemnification for breach thereof
(except to the extent a written notice asserting a Claim for breach of any such
representation or warranty has been given prior to such date to the party which
made such representation and warranty, in which case such representation or
warranty shall survive until such Claim is resolved). Notwithstanding the
foregoing, the representations and warranties contained in Sections
2.6,
2.9,
2.11,
2.12,
2.13,
2.16,
2.21 and
2.24 of this
Agreement and the right to indemnification for breach thereof shall survive
until sixty (60) days after the expiration of the applicable statutes of
limitations.
Section
7.2. Indemnity.
(a) Prior to
the Closing, the Company, and after the Closing, each of the Company
Stockholders (jointly and severally), agree to indemnify, defend and hold
harmless the Parent, the Acquirer and the Surviving Corporation (and their
respective directors, officers, employees and Affiliates) from and against any
and all claims, liabilities, losses, damages, costs and expenses, including
without limitation the reasonable fees and disbursements of counsel
(collectively, the “Losses”), which
any of such parties shall suffer and which relate to or arise, directly or
indirectly, out of (i) any breach by the Company of any representation, warranty
or covenant made by the Company in this Agreement or any other certificate or
instrument delivered pursuant hereto, (ii) the termination of any employee of
the Company prior to the Closing Date, including Losses attributable to chapter
149, section 183 of the Massachusetts General Law, (iii) any Taxes (or the
non-payment thereof) of the Company for all Tax periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any
Pre-Closing Tax Period, (iv) any Taxes of any member of an affiliated,
consolidated, combined, or unitary group of which the Company (or any
predecessor of any of the foregoing) is or was a member on or prior to the
Closing Date, including pursuant to Treasury Regulation Section 1.1502-6 or any
analogous or similar state, local, or foreign law or regulation, (v) any and all
Taxes of any Person (other than the Company) imposed on the Company as a
transferee or successor, by contract or pursuant to any Law, which Taxes relate
to an event or transaction occurring before the Closing, and (vi) any and all
Losses related to claims asserted by holders of Non-Eligible Company Options
pertaining to the cancellation and termination of the Non-Eligible Company
Options by the Company prior to the Effective Time.
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(b) The
Parent and the Acquirer, jointly and severally, agree to indemnify, defend and
hold harmless the Company (and its directors, officers, employees and
Affiliates) from and against any Losses resulting from which any of such parties
shall suffer and which relate to or arise, directly or indirectly, out of any
breach by the Acquirer or the Parent of any representation, warranty or covenant
made by the Acquirer or the Parent in this Agreement or any other certificate or
instrument delivered pursuant hereto.
Section
7.3. Claims.
(a) Any party
seeking indemnification hereunder (“Indemnified
Party”) shall
promptly notify the party or parties from which it is seeking indemnification
(the “Indemnifying
Party”), of
any action, suit, proceeding, demand or breach (a “Claim”) with
respect to which the Indemnified Party claims indemnification hereunder,
provided that failure of the Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations under this Article
7 except
to the extent, if at all, that such Indemnifying Party shall have been actually
prejudiced thereby.
(b) If such
Claim relates to any action, suit, proceeding or demand instituted against the
Indemnified Party by a third party (a “Third
Party Claim”), then
the Indemnifying Party shall be entitled to participate in the defense of such
Third Party Claim after receipt of notice of such claim from the Indemnified
Party. Within sixty (60) days after receipt of notice of a particular matter
from the Indemnified Party, the Indemnifying Party may assume the defense of
such Third Party Claim by providing the Indemnified Party with written notice of
its election to assume such defense. Notwithstanding the right of the
Indemnified Party to retain its own counsel as described below, the Indemnifying
Party shall have the authority to negotiate, compromise and settle such Third
Party Claim if and only if the following conditions are satisfied:
(i) the
Indemnifying Party shall have confirmed in writing that it is obligated
hereunder to indemnify the Indemnified Party with respect to such Third Party
Claim; and
(ii) the
Indemnifying Party shall not, without the consent of the Indemnified Party,
consent to the entry of any judgment or settle any such Third Party Claim unless
the Indemnified Party is unconditionally released from all liability in respect
of such Third Party Claim and the Indemnified Party receives assurances that
there will be no continuing restrictions on the business of the Indemnified
Party with respect to such Third Party Claim.
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The
Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation, unless (i) the Indemnified Party has been
advised by counsel that representation of the Indemnified Party and the
Indemnifying Party by the same counsel presents a conflict of interest under
applicable standards of professional conduct, (ii) the Indemnified Party has
been advised by counsel that there may be legal defenses available to it which
are different from or in addition to the defenses available to the Indemnifying
Party, the Indemnifying Party is not and has no plans to employ such different
or additional defenses, and in the reasonable judgment of such counsel it is
advisable for the Indemnified Party to employ separate counsel or (iii) the
Indemnifying Party has failed to prosecute such defense in good faith.
Notwithstanding the foregoing, the Indemnifying Party shall retain sole
authority to negotiate, compromise and settle such Third Party Claim subject to
the conditions set forth above. In no event will the Indemnified Party consent
to the entry of any judgment or enter into any settlement with respect to any
Third Party Claim for which it seeks indemnification hereunder without the prior
written consent of the Indemnifying Party.
Section
7.4. Limitations
on Indemnification.
(a) No
Indemnifying Party shall be required to indemnify an Indemnified Party hereunder
for any Claim arising from any breaches of representations and warranties
contained in Article
II or
III hereof,
except to the extent that the aggregate amount of Losses for which all
Indemnified Parties are otherwise entitled to indemnification pursuant to this
Article
7 for
breaches of the representations and warranties contain in either Article
II or
III hereof,
as applicable, exceeds $100,000, whereupon the Indemnified Party shall be
entitled to be paid the full amount of all Losses incurred, subject to the
limitations on the maximum amount of recovery set forth in Section
7.4(b).
(b) The
maximum aggregate post-Closing liability of the Acquirer and the Parent, on the
one hand, and the Company and the Stockholders, on the other hand, under this
Article
7 shall be
One Million Seven Hundred Fifty Thousand Dollars ($1,750,000).
(c) All
Claims of the Acquirer, the Parent, the Surviving Corporation or any Person
claiming by or through any or all of the foregoing against the Company
Stockholders, the Company Optionholders or the Company Warrant Holders shall be
satisfied by payment out of the WC/Indemnity Escrow Amount, which shall be the
exclusive source of satisfaction of any such Claims.
ARTICLE
8
TERMINATION
OF AGREEMENT
Section
8.1. Termination. This
Agreement may be terminated at any time prior to the Closing as
follows:
(a) by mutual
written consent of the Company, the Parent and the Acquirer;
(b) by either
the Company, on the one hand, or the Parent and the Acquirer, on the other hand,
if the other party hereto shall breach in any material respect any of its
representations, warranties, covenants or obligations contained in this
Agreement and such breach is not cured within ten (10) Business Days of receipt
of written notice of such breach from the other party;
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(c) by the
Parent and/or the Acquirer if any authorization, consent, waiver or approval
required for the consummation of the transactions contemplated hereby shall
impose any condition or requirement, which condition or requirement the Parent
and/or the Acquirer determines, in its good faith judgment, to be materially
burdensome or to deny to the Parent and/or the Acquirer in any material respect
the benefits intended to be obtained by the Parent and/or the Acquirer pursuant
to the transactions contemplated by this Agreement;
(d) by the
Parent and/or the Acquirer if there occurs damage or destruction to the assets
of the Business or the Facility in excess of One Hundred Fifty Thousand and
No/100 Dollars ($150,000.00) which is not repaired or replaced by the Company to
the Parent’s and the Acquirer’s reasonable satisfaction prior to the Closing
Date;
(e) by the
Parent and/or the Acquirer if notice of any action, suit or proceeding shall be
given to the Company by any Governmental Entity concerning the condemnation of
any portion of the Facility;
(f) by either
the Company and the Principal Stockholders, on the one hand, or the Parent and
the Acquirer, on the other hand, if the transactions contemplated hereby are not
consummated on or before the first Business Day that is thirty (30) days
following the date hereof;
(g) by the
Parent and/or the Acquirer if the conditions stated in Article
5 become
incapable of being satisfied or by the Company if the conditions stated in
Article
6 become
incapable of being satisfied; provided, however, that a termination under this
Section
8.1(g) shall
not be effective unless the terminating party has given the other party written
notice of its intent to terminate the Agreement, stating the reasons therefor,
and the non-terminating parties shall fail to cure such condition within ten
(10) days after the receipt of such notice; and
(h) by the
Company, if the Company's Board of Directors shall have (i) exercised its right
to withdraw or adversely modify its recommendation to the Company’s stockholders
that the stockholders approve the transactions contemplated by this Agreement in
accordance with Section
4.12(b) and (ii)
approved an alternative Transaction Proposal (the “Alternative
Proposal”);
provided,
however, the
Company shall not have the right to terminate this Agreement unless (1) at least
48 hours prior to entering into the Alternative Proposal, the Company provides a
copy of the Alternative Proposal to the Parent, (2) the Board of Directors of
the Company, after consultation with outside legal counsel and after considering
any response that the Parent may have after reviewing the Alternative Proposal,
determines in good faith that approving the Alternative Proposal is legally
necessary for the proper discharge of its duties under applicable law, (3) the
Board of Directors of the Company, after consultation with its financial
advisor, if any, and after considering any response that the Parent may have
after reviewing the Alternative Proposal, determines in good faith that the
transactions contemplated by the Alternative Proposal are reasonably likely to
be consummated, taking into account all legal, financial and regulatory aspects
of the transaction and the party offering to enter into the Alternative
Proposal, (4) the Board of Directors of the Company determines in good faith
that the transactions contemplated by the Alternative Proposal would, if
consummated, be more favorable to the Company’s stockholders as a group than the
transaction contemplated by this Agreement; and (5) concurrent with terminating
this Agreement, the Company (A) pays to the Parent the Termination Fee (as
hereinafter defined) and (B) delivers to the Parent a mutual release signed by
the parties to the Alternative Proposal, which release shall be in form and
substance reasonably satisfactory to the Parent and shall irrevocably waive any
right the releasing parties may have to challenge the payment to the Parent of
the Termination Fee (the “AP
Release”). Upon
receipt of the AP Release, the Termination Fee and written notice from the
Company evidencing the Company’s determination to terminate this Agreement in
accordance with the provisions of this Section
8.1(h), the
Parent shall execute and deliver the AP Release to the parties to the
Alternative Proposal.
-48-
Section
8.2. Effect
of Termination. If this
Agreement is terminated pursuant to Section
8.1(a) or
8.1(c) through
(h) hereof,
all rights and obligations of the Company, the Parent and the Acquirer hereunder
shall terminate and no party shall have any liability to the other party, except
for obligations pursuant to Section
8.4 and the
obligations of the parties hereto in Section
10.2, which
shall survive the termination of this Agreement. Notwithstanding anything
contained in Article
8 to the
contrary, in the event that this Agreement is terminated pursuant to
Section
8.1(b), nothing
herein (including without limitation, the payment of the Termination Fee in
accordance with Section 8.4) shall be construed to relieve any party from
liability associated with the failure of the transactions contemplated herein to
close; provided,
however, in the
event the Parent and the Acquirer terminates this Agreement pursuant to
Section
8.1(b), the
Parent’s and the Acquirer’s only recourse shall be against the
Company.
Section
8.3. Right
to Proceed.
Anything in this Agreement to the contrary notwithstanding, if any of the
conditions specified in Article
5 hereof
have not been satisfied, the Parent and the Acquirer shall have the right to
waive the satisfaction of any such condition and to proceed with the
transactions contemplated hereby, and if any of the conditions specified in
Article
6 hereof
have not been satisfied, the Company shall have the right to waive the
satisfaction of any such condition and to proceed with the transactions
contemplated hereby.
Section
8.4. Termination
Fee. If this
Agreement is terminated by the Company pursuant to Section
8.1(h), or by
the Parent of the Acquirer pursuant to Section
8.1(b), the
Company shall promptly pay to the Parent or the Acquirer a termination fee of
$250,000.00 (the “Termination
Fee”). If this
Agreement is terminated by the Company pursuant to Section
8.1(b) hereof,
the Parent and the Acquirer, jointly and severally, shall promptly pay to the
Company the Termination Fee.
ARTICLE
9
DEFINITIONS
Section
9.1. Glossary
of Defined Terms. The
definitions of the following terms may be found in the Section references set
forth opposite each such term:
-49-
|
Defined
Terms
|
Section
|
|
AP
Release |
Section
8.1(h) |
|
Accounts |
Section
1.11 |
|
Acquirer |
Preamble |
|
Actual
Working Capital Amount |
Section
1.7(e) |
|
Adjusted
Closing Cash Merger Proceeds |
Section
1.7(d) |
|
Adjusted
Option/Warrant Per Share Closing Amount |
Section
1.2(l) |
|
Adjusted
Per Share Closing Amount |
Section
1.2(k) |
|
Agreed
Upon Inventory Values |
Section
1.7(b) |
|
Agreement |
Preamble |
|
Alternative
Proposal |
Section
8.1(h) |
|
Arbiter |
Section
1.7(e) |
|
Articles
of Merger |
Section
1.1 |
|
Audited
Financial Statements |
Section
2.7(a) |
|
Balance
Sheet |
Section
2.7(a) |
|
Benchmark
Working Capital Amount |
Section
1.7(d) |
|
Business |
Recitals |
|
Business
Real Properties |
Section
2.21(a) |
|
Cash
Amount |
Section
1.7(c) |
|
CERCLA |
Section
9.2 |
|
Claim |
Section
7.3(a) |
|
Closing |
Section
1.1 |
|
Closing
Date |
Section
1.1 |
|
Closing
RM/WIP/FG Amount |
Section
1.7(b) |
|
COBRA |
Section
2.16(f) |
|
Company |
Preamble |
|
Company
Common Stock |
Recitals |
|
Company
Employees |
Section
4.6 |
|
Company
Options |
Recitals |
|
Company
Warrants |
Recitals |
|
Covenants
Agreements |
Section
2.20(a) |
|
Disputed
Items |
Section
1.7(e) |
|
Dissenting
Shares |
Section
1.4 |
|
Dissenting
Stockholder |
Section
1.3(e) |
|
Effective
Date |
Section
1.1 |
|
Effective
Time |
Section
1.1 |
|
Eligible
Company Options |
Recitals |
|
Employee |
Section
2.14(e) |
|
Employment
Agreements |
Section
5.11 |
|
Environmental
Claims |
Section
2.21(c) |
|
Escrow
Agreement |
Section
5.15 |
|
Estimated
Accounts Receivable Amount |
Section
1.7(a) |
|
Estimated
Accounts Receivable Report |
Section
1.7(a) |
|
Estimated
Closing Report |
Section
1.7(c) |
|
Estimated
Working Capital Amount |
Section
1.7(c) |
|
Exchange
Fund |
Section
1.3(a) |
-50-
|
FG |
Section
1.7(b)(ii) |
|
Final
Working Capital Amount |
Section
1.7(e) |
|
Financial
Statements |
Section
2.7(a) |
|
Indemnified
Party |
Section
7.3(a) |
|
Indemnifying
Party |
Section
7.3(a) |
|
Inventory
Audit |
Section
1.7(b) |
|
Inventory
Category Value |
Section
1.7(b) |
|
Inventory
Certificates |
Section
1.7(b) |
|
Inventory
Report |
Section
1.7(b) |
|
IRS |
Section
2.12(a) |
|
Leases |
Section
2.10(c) |
|
Liabilities
Amount |
Section
1.7(c) |
|
Losses |
Section
7.2(a) |
|
Material
Contracts |
Section
2.15 |
|
MBCA |
Section
1.1 |
|
Merger |
Recitals |
|
Multi-employer
Plan |
Section
2.16(a) |
|
NAICS |
Section
2.21(b) |
|
Negative
Amount |
Section
1.7(d) |
|
Noncompetition
Agreements |
Section
5.12 |
|
Non-Eligible
Company Options |
Section
2.6(a) |
|
Notices |
Section
2.21(c) |
|
Parent |
Preamble |
|
Paying
Party |
Section
1.3(a) |
|
Per
Option/Warrant Share Closing Amount |
Section
1.2(l) |
|
Per
Share Closing Amount |
Section
1.2(k) |
|
Per
Share/Option/Warrant Escrow Amount |
Section
1.3(b) |
|
Plans |
Section
2.6(a) |
|
Principal
Stockholders |
Recitals |
|
Positive
Amount |
Section
1.7(d) |
|
Post-Closing
Account Payment |
Section
1.11 |
|
Pre-Closing
Receivable |
Section
1.11 |
|
Prepaid
Assets Amount |
Section
1.7(c) |
|
Proceedings |
Section
2.21(c) |
|
Raw
Materials |
Section
1.7(b)(i) |
|
Receivable
Cut-Off Date |
Section
1.11 |
|
SIC |
Section
2.21(b) |
|
Single
Employer Plan |
Section
2.16(a) |
|
Special
Meeting |
Section
4.12(a) |
|
Stockholder
Notice |
Section
4.5 |
|
Stockholder
Representative |
Section
1.9(a) |
|
Straddle
Period |
Section
4.8(b) |
|
Surviving
Corporation |
Section
1.2(b) |
|
Termination
Fee |
Section
8.4 |
|
Third
Party Claim |
Section
7.3(b) |
|
Transaction
Proposal |
Section
4.10 |
-51-
|
Unaudited
Financial Statements |
Section
2.7(a) |
|
Voting
Agreement |
Recitals |
|
WC
Objection |
Section
1.7(e) |
|
WIP |
Section
1.7(b)(iii) |
Section
9.2. Defined
Terms. As used
herein the following terms not otherwise defined have the following respective
meanings:
“Accounts
Receivable” means
any and all accounts receivable, notes receivable and other amounts receivable
owed to the Company as of the Closing Date.
“Affiliate” means,
with respect to any specified Person, any other Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person. As used in this definition the
term “control” (including the terms “controlled by” and “under common control
with”) means, with respect to the relationship between or among two or more
Persons, the possession, directly or indirectly, of the power to direct or cause
the direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
“Aggregate
Company Optionholder Exercise Price” means
the aggregate per share exercise price for all Eligible Company
Options.
“Artesyn
Settlement Agreement” means
that certain Settlement Agreement dated as of December 2004 by and between the
Company and Artesyn North America, Inc.
“Business
Day” means
any day that is not a Saturday, Sunday or other day on which banks are required
or authorized by law to be closed in Boston, Massachusetts.
“Cash
Merger Proceeds” means
Eighteen Million and No/100 Dollars ($18,000,000.00).
“Certificates” means
the original stock certificates which, immediately prior to the Effective Time,
represented shares of Company Stock, or the right to receive shares of Company
Stock, other than Dissenting Shares.
“Code” means
the Internal Revenue Code of 1986, as amended.
“Company
Optionholder” means
the holder of any outstanding Eligible Company Options at the Effective
Time.
“Company
Stockholder” means
any holder of record of shares of Company Common Stock outstanding immediately
prior to the Effective Time; provided,
however, that
the term “Company Stockholder” shall not include any holder of Dissenting
Shares.
“Company
Warrant Holder” means
the holder of any outstanding Company Warrants.
-52-
“Discharge” means
any manner of spilling, leaking, dumping, discharging, releasing or emitting, as
any of such terms may further be defined in any Environmental Law, into or
through any medium including, without limitation, ground water, surface water,
land, soil or air.
“Encumbrance” means
any title defect or objection, lien, pledge, mortgage, deed of trust, security
interest, claim (whether or not made, known or contingent), judgment, lease,
license, charge, pledge, option, escrow, right of first refusal or offer,
preemptive right, conditional sale or other title retention agreement, easement,
encroachment or other real estate declaration, covenant, condition, restriction
or servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever, in each case
other than Permitted Encumbrances.
“Environmental
Laws” means
all federal, state, regional or local statutes, laws, rules, regulations, codes,
orders, plans, injunctions, decrees, rulings, and changes or ordinances or
judicial or administrative interpretations thereof, or similar laws of foreign
jurisdictions where the Company conducts business, whether currently in
existence or hereafter enacted or promulgated, any of which govern (or purport
to govern) or relate to pollution, protection of the environment, public health
and safety, air emissions, water discharges, hazardous or toxic substances,
solid or hazardous waste or occupational health and safety, as any of these
terms are or may be defined in such statutes, laws, rules, regulations, codes,
orders, plans, injunctions, decrees, rulings and changes or ordinances, or
judicial or administrative interpretations thereof, including, without
limitation: the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of
1986, 42 U.S.C. §9601, et seq. (collectively “CERCLA”); the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. §6901 et seq. (collectively “RCRA”); the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. §1801, et seq.;
the Clean Water Act, as amended, 33 U.S.C. §1311, et seq.; the Clean Air Act, as
amended (42 U.S.C. §7401-7642); the Toxic Substances Control Act, as amended, 15
U.S.C. §2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as
amended, 7 U.S.C. §136-136y (“FIFRA”); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C.
§11001, et seq. (Title III of SARA) (“EPCRA”); the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651, et seq.
(“OSHA”); the
Massachusetts Clean Air Act, M.G.L. c. 111, §§ 142A - 142K; the Massachusetts
Clean Waters Act, M.G.L. c. 21, §§26 - 53; the Massachusetts Water Management
Act, M.G.L. c. 21G, §§1- 9; the Massachusetts Wetlands Protection Act, M.G.L. c.
131, §40; the Massachusetts Hazardous Waste Management Act, M.G.L. c. 21C; the
Massachusetts Underground Storage Tank Petroleum Product Cleanup Fund, M.G.L. c.
21J; the Massachusetts Oil and Hazardous Material Release Prevention Act, M.G.L.
c. 21E, §1 - 19; the Massachusetts Right-to-Know Act, c. 111F; the Massachusetts
Toxics Use Reduction Act, c. 21I; and M.G.L. c. 21A, §4A; c.21 F; c. 21H; c.
21K; c. 21L; c. 91; c. 92, §§104, 105, 107A, ansd108 - 111; c. 111, §§150A and
150A½; and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damages due to or threatened as a result of the release of, the
presence of, exposure to, or ingestion of, any Regulated Substance.
-53-
“Environmental
Licenses” means
all licenses, certificates, permits, approvals, consents and registrations
required to be issued by a Governmental Entity under Environmental
Laws.
“ERISA” means
the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate” means
any member of the same controlled group of businesses as the Company within the
meaning of Section 4001(a)(14) of ERISA.
“Escrow
Agent” means
Boston Private Bank & Trust Company.
“Escrow
Amount” means
the sum of the WC/Indemnity Escrow Amount and the Stockholder Representative
Escrow Amount.
“Exchange
Agent” means
EquiServe Trust Company, N.A.
“Facility” means
the Company’s manufacturing facility (inclusive of the land and all other
improvements thereon associated therewith) located at 155 Flanders Road,
Westborough, Massachusetts, and leased by the Company.
“Fully
Diluted Shares” means
the sum of (i) all shares of Company Common Stock outstanding immediately prior
to the Effective Time plus (ii) all
shares of Company Common Stock issuable on full exercise of all Eligible Company
Options and all Company Warrants that are outstanding immediately prior to the
Effective Time.
“GAAP” means
United States generally accepted accounting principles which are consistent with
the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, in effect for the applicable fiscal
year.
“Gross
Merger Proceeds” means
the Adjusted Closing Cash Merger Proceeds plus the
Aggregate Company Optionholder Exercise Price.
“Governmental
Entity” means
any government or any court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency,
Federal, state, local, transnational or foreign.
“Handle” means
any manner of generating, accumulating, storing, treating, disposing of,
transporting, transferring, labeling, handling, manufacturing or using, as any
of such terms may further be defined in any Environmental Law, of any Hazardous
Material.
“Hazardous
Material” means
all substances and materials designated as hazardous or toxic or otherwise
regulated as of the date hereof pursuant to any applicable Environmental
Law.
“Indebtedness” means,
as applied to any Person, at any particular time, without duplication, (a)
indebtedness of such Person for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (b) indebtedness of such Person
evidenced by any note, bond, debenture or other debt security, (c) indebtedness
of such Person for the deferred purchase price of property or services with
respect to which such Person is liable, contingently or otherwise, as obligor or
otherwise (other than trade payables and other current liabilities incurred in
the ordinary course of business which are not more 30 days past due), (d)
contingent reimbursement obligations of such Person with respect to letters of
credit, (e) indebtedness guaranteed in any manner by such Person (including
guarantees in form of an agreement to repurchase or reimburse), (f) obligations
under capitalized leases with respect to which such Person is liable as obligor
or guarantor, (g) any indebtedness secured by an Encumbrance on such Person’s
assets, (h) liabilities under any interest rate swap agreement, currency or
other hedge agreement, derivative instrument, or other similar agreement
designed to protect the Company against fluctuations in interest rates, (i)
liabilities owed in respect of the termination or cancellation of any Material
Contract, including under any employment or non-competition agreements, (j)
liabilities for bank overdrafts and outstanding checks to the extent treated as
bank overdrafts or otherwise included in any of the Company’s financial
statements and (k) any unsatisfied obligation for “withdrawal liability,” as
such term is defined under ERISA, to a Multiemployer Plan (as such term is
defined under ERISA).
-54-
“Intellectual
Property Rights” means
all (i) patents, patent applications, patent disclosures and inventions, (ii)
trademarks, service marks, trade dress, trade names, logos and corporate names
and registrations and applications for registration thereof together with all of
the goodwill associated therewith, (iii) copyrights (registered and
unregistered) and copyrightable works and registrations and applications for
registration thereof, (iv) mask works and registrations and applications for
registration thereof, (v) computer software, data, data bases and documentation
thereof, (vi) trade secrets and other confidential information (including,
without limitation, ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, financial and marketing plans and customer and supplier lists and
information), (vii) domain name registrations; (viii) other intellectual
property rights and (ix) copies and tangible embodiments thereof (in whatever
form or medium).
“Knowledge” shall
mean knowledge of a particular fact or other matter based upon (i) actual
knowledge of a Person of such fact or other matter, (ii) knowledge a Person
would have upon a reasonable inquiry of employees of the Company who are
responsible for such fact or matter in question or a reasonable review of the
Company’s books and records relating to such fact or matter. A Person (other
than an individual) shall be deemed to have “knowledge” of a particular fact or
other matter if any individual who is serving, or who has at any time served, as
a director, officer, partner, executor, or trustee of such Person (or in any
similar capacity) has, or at any time had knowledge (as defined in items (i)
and/or (ii) of the immediately preceding sentence), of such fact or other
matter.
“Law” means
any federal, state, local or foreign law, statute, ordinance, rule, regulation,
interpretation, directive, order, writ, decree, injunction, judgment, stay or
restraining order, provisions and conditions of permits, licenses, registrations
and other operating authorizations and any other requirement of any Governmental
Entity.
“Material
Adverse Effect” means,
with respect to any Person, any material adverse effect in the business,
operations, assets, liabilities, financial condition or results of operations of
such Person and its Subsidiaries taken as a whole.
-55-
“Off-Site
Warehouse” means
each of the following facilities at which the Company maintains an inventory of
raw materials and/or finished goods.
“Option
Documents” means
any and all documents, contracts, agreements and/or letter agreements concerning
the grant, issuance, modification or amendment of an Eligible Company
Option.
“PBGC” means
the Pension Benefit Guaranty Corporation.
“Pension
Plan” means a
Plan that is subject to Title IV of ERISA (other than a Multi-employer Plan) or
Section 412 of the Code.
“Permitted
Encumbrances” means
(a) Encumbrances that arise out of Taxes not in default and payable without
penalty or interest or the validity of which is being contested in good faith by
appropriate proceedings and for which appropriate reserves have been established
in accordance with GAAP, (b) workmen’s, repairmen’s or other similar
Encumbrances arising or incurred by the operation of law and in the ordinary
course of business in respect of obligations which are not overdue, (c) minor
title defects, recorded easements or Encumbrances affecting real property, which
defects, easements or Encumbrances do not, individually or in the aggregate,
impair the continued use, occupancy, value or marketability of title of the real
property to which they relate, assuming that the property is used on
substantially the same basis as such property is currently being used by the
Company or (d) Encumbrances listed in Schedule
2.10(a) (other
than those noted as being discharged prior to Closing).
“Per
Share Escrow Amount” shall
mean the quotient of dividing (i) the Escrow Amount by (ii) the sum of the
number of Fully Diluted Shares minus the
number of Dissenting Shares.
“Person” means
any corporation, association, partnership, limited liability company,
organization, business, individual, government or political subdivision thereof
or governmental agency.
“Plan” means
(i) each “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA), which any past or current employee of the Company or any of its ERISA
Affiliates participated or participates in or was or is covered under and with
respect to which the Company or any of its ERISA Affiliates is or ever was a
sponsor or participating employer or makes contributions or is required to make
contributions, and (ii) any employment, severance or other arrangement or policy
of the Company or any of their ERISA Affiliates (whether written or oral)
providing for health, life, vision or dental insurance coverage (including
self-insured arrangements), workers’ compensation, disability benefits,
supplemental unemployment benefits, vacation benefits or retirement benefits,
fringe benefits, or for profit sharing, deferred compensation, bonuses, stock
options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits.
“Pre-Closing
Tax Period” means
any Tax period ending on or before the Closing Date and that portion of the
Straddle Period ending on and including the Closing Date.
“Principal
Stockholders” means
the stockholders of the Company set forth on Exhibit
A
hereto.
-56-
“Pro
Rata Portion” means
for each Company Stockholder, Company Optionholder and/or Company Warrant Holder
a fraction (i) the numerator of which is the number of shares of Company Common
Stock (x) owned beneficially and of record by such Company Stockholder and/or
(y) issuable to the Company Optionholder upon the full exercise of all Eligible
Company Options held by the Company Optionholder and/or (z) issuable to the
Company Warrant Holder upon the full exercise of all Company Warrants held by
the Company Warrant Holder and (ii) the denominator of which is the number of
Fully Diluted Shares.
“Regulated
Substances” shall
be construed broadly to include any toxic or hazardous substance, material, or
waste, and any other contaminant, pollutant, or constituent thereof, whether
liquid, solid, semi-solid, sludge and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing materials,
petroleum or petroleum products, flammable or explosive material, urea
formaldehyde foam insulation, and polychlorinated biphenyls, the presence of
which requires assessment, investigation, removal, response, remediation or
notice under any Environmental Laws or which are or become regulated, listed or
controlled by, under or pursuant to any Environmental Laws or which has been or
shall be determined or interpreted at any time by any Governmental Entity to be
a hazardous or toxic substance regulated under any other statute, law,
regulation, order, code, rule, order, or decree.
“Stockholder
Representative Escrow Amount” means
an aggregate amount of cash equal to $100,000.
“Subsidiary” means,
with respect to any Person, any corporation a majority (by number of votes) of
the outstanding shares of any class or classes of which shall at the time be
owned by such Person or by a subsidiary of such Person, if the holders of the
shares of such class or classes (a) are ordinarily, in the absence of
contingencies, entitled to vote for the election of a majority of the directors
(or persons performing similar functions) of the issuer thereof, even though the
right so to vote has been suspended by the happening of such a contingency, or
(b) are at the time entitled, as such holders, to vote for the election of a
majority of the directors (or persons performing similar functions) of the
issuer thereof, whether or not the right so to vote exists by reason of the
happening of a contingency.
“Taxes” means
any of the following imposed by or payable to any Governmental Entity: any
income, gross receipts, license, payroll, employment, excise, severance, stamp,
business, occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), capital stock, franchise, profits, withholding,
social security (or similar tax), unemployment, disability, real property,
personal property, sales, use, transfer, registration, or value added tax, any
alternative or add-on minimum tax, any estimated tax, and any levy, impost,
duty, assessment or withholding, in each case including any interest, penalty,
or addition thereto, whether or not disputed.
“Tax
Return” means
any return, declaration, report, claim for refund, information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof, to be filed (whether on a mandatory or elective
basis) with any Governmental Entity responsible for the collection or imposition
of Taxes.
-57-
“Warrant
Documents” means
any and all documents, contracts, agreements and/or letter agreements concerning
the grant, issuance, modification or amendment of a Company
Warrant.
“WC/Indemnity
Escrow Amount” means
an aggregate amount of cash equal to $1,750,000.
Section
9.3. References
to Dollars. All
references to “$” or “dollars” are to United States currency.
ARTICLE
10
MISCELLANEOUS
PROVISIONS
Section
10.1. Amendments. This
Agreement may be amended only pursuant to an agreement in writing between the
Parent, on the one hand, and the Stockholder Representatives, on the other hand,
provided that such written agreement states that it is an amendment of this
Agreement.
Section
10.2. Expenses. All
expenses incurred by any party hereto shall be borne by the party incurring the
same. In the event of any dispute among the parties hereto, the prevailing party
shall be entitled to recover all reasonable legal fees and expenses incurred in
connection with such dispute from the non-prevailing party.
Section
10.3. Notices. Any
notice expressly provided for under this Agreement shall be in writing, and
shall be deemed to have been duly given if (a) delivered personally (effective
upon delivery), (b) mailed by registered or certified mail, return receipt
requested, postage prepaid (effective five (5) days after dispatch), (c) sent
via a reputable, established courier service that guarantees next business day
delivery (effective the next business day after delivery to such courier) or (d)
sent via telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon the transmission of the telecopy in complete,
readable form) addressed as set forth below. Any party and any representative
designated below may, by notice to the others, change its address for receiving
such notices.
Address
for notices to the Parent and/or the Acquirer:
Bel Fuse
Inc.
206 Van
Vorst Street
Jersey
City, New Jersey 07302
Attn: Mr.
Daniel Bernstein and Mr. Colin Dunn
Fax:
(201) 432-9542
-58-
with a
copy to:
Lowenstein
Sandler PC
65
Livingston Avenue
Roseland,
New Jersey 07068
Attn:
Peter H. Ehrenberg, Esq.
Fax:
(973) 597-2351
Address
for notices to the Company, the Company Stockholders, the Company Warrant
Holders, the Company Optionholders and/or the Stockholder
Representatives:
Galaxy
Power Inc.
155
Flanders Road
Westborough,
MA 01581
Attn: Lou
DeBartelo, President
with
copies to:
Robert W. Chmielinski, Esq.
25 Walnut Street, 3rd Floor
Wellesley, MA 02481
25 Walnut Street, 3rd Floor
Wellesley, MA 02481
and
Bowditch
& Dewey, LLP
311 Main
Street, P.O. Box 15156
Worcester,
MA 01615-0156
Attn:
George W. Tetler III, Esq.
Section
10.4. Assignment
and Benefits of Agreement. This
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective successors, but may not be assigned by any of the foregoing
without the written consent of the others. Except as aforesaid and except for
provisions set forth in this Agreement which purport to grant rights to Persons
who are not parties hereto, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
successors and assigns, any rights under or by reason of this
Agreement.
Section
10.5. Entire
Agreement. This
Agreement, including all Exhibits, Schedules and Recitals hereto, contains the
entire understanding of the parties, supersedes all prior agreements and
understandings relating to the subject matter hereof and thereof.
Section
10.6. Severability. In the
event that any covenant, condition, or other provision herein contained is held
to be invalid, void, or illegal by any court of competent jurisdiction, the same
shall be deemed to be severable from the remainder of this Agreement and shall
in no way affect, impair, or invalidate any other covenant, condition, or other
provision contained herein.
-59-
Section
10.7. Governing
Law.
This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the Commonwealth of Massachusetts, without reference to the choice of
law principles thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the Commonwealth of Massachusetts and
the United States District Court for the District of Massachusetts for the
purpose of any suit, action, proceeding or judgment relating to or arising out
of this Agreement and the transactions contemplated hereby. Service of process
in connection with any such suit, action or proceeding may be served on each
party hereto anywhere in the world by the same methods as are specified for the
giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section
10.8. Section
Headings; Singular and Plural, Etc. All
enumerated subdivisions of this Agreement are herein referred to as “Section” or
“Subsection.” The headings of Sections or Subsections are for reference only and
shall not limit or control the meaning thereof. Whenever a singular number is
used herein where required by context, the same shall include the plural, and
the neutral gender shall include the masculine and feminine genders. Whenever
the words “include,” “includes” or “including” are used in this Agreement, they
are deemed to be followed by the words “without limitation.”
Section
10.9. No
Strict Construction. The
parties hereto have participated jointly in the negotiation and drafting of this
Agreement. Each of the parties hereto represents to the other party hereto that
it has discussed this Agreement with its counsel. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
Section
10.10. Counterparts. This
Agreement may be executed by the parties in separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute but one and the same instrument.
Section
10.11. Specific
Performance. The
parties hereto agree that if any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached,
irreparable damage would occur, no adequate remedy at law would exist and
damages would be difficult to determine, and that the parties shall be entitled
to seek specific performance on the terms hereof, in addition to any other
remedy at law or equity.
-60-
IN
WITNESS WHEREOF, the
parties hereto have duly executed this Merger Agreement as an instrument under
seal as of the date and year first above written.
GALAXY
POWER INC.
By:
s/s
Lou DeBartelo
Name: Lou
DeBartelo
Title:
President
BEL
FUSE INC.
By:
s/s
Colin Dunn
Name:
Colin Dunn
Title:
Vice President
BEL
WESTBORO INC.
By:
s/s
Colin Dunn
Name:
Colin Dunn
Title:
Vice President
-61-
Bel
Agrees to Acquire Galaxy Power
FOR
RELEASE: IMMEDIATELY
March
4, 2005
JERSEY
CITY, New Jersey, March 4,
2005 . . . Bel
Fuse Inc. (NASDAQ:BELFA & NASDAQ:BELFB) today
announced that is has entered into a definitive agreement to acquire
Westborough, MA based Galaxy Power, Inc. for approximately $18 million in cash
and the assumption of approximately $2 million in liabilities. Galaxy, a private
company, is a leading
designer and manufacturer of high-density dc-dc converters for distributed power
and telecommunications applications. The acquisition is subject to certain
customary conditions, including the approval of Galaxy’s
shareholders.
“By
acquiring Galaxy and merging it with our existing Bel Power Products division,
we significantly broaden the range of on-board power solutions we can offer our
customers,” said Dan Bernstein, CEO of Bel. “Whereas Bel has historically been
strong in non-isolated converters, Galaxy has a strong track record in the
development of high-density isolated converters. We believe that the combined
portfolio will be second to none in the power industry.”
“We
believe that Bel’s cost-effective manufacturing facilities in China can provide
the competitive edge needed to grow the Galaxy business in the coming years,”
added Marshall Miles, General Manager for Bel Power Products. “The combination
of strengths in manufacturing, design and packaging coupled with the broad
product portfolio should serve to make Bel a formidable competitor in the dc-dc
converter market.”
Unaudited
net sales for Galaxy during the year ended December 31, 2004 were approximately
$18.6 million. Galaxy’s unaudited net income for 2004 was approximately $0.8
million. It is expected that this acquisition will be immediately accretive to
Bel shareholders. The transaction is anticipated to close by the end of this
month.
Stephens
Inc. (www.stephens.com), an
investment banking firm based in Little Rock, AR, acted as an advisor to Bel for
this transaction.
About
Bel
Bel
(www.BelFuse.com) and its
subsidiaries are primarily engaged in the design, manufacture and sale of
products used in networking, telecommunications, high speed data transmission,
automotive and consumer electronics. Products include magnetics (discrete
components, power transformers and MagJack®s) modules (dc/dc converters,
integrated analog front end modules, custom designs), circuit protection
(miniature, micro and surface mount fuses) and interconnect devices (passive
jacks, plugs and cable assemblies). The Company operates facilities around the
world.
Except
for historical information contained in this news release, the matters discussed
(including the anticipated timing of the acquisition, the potential market
impact of the acquisition and the expected impact on Bel’s results of
operations) are forward looking statements that involve risks and uncertainties.
Among the factors that could cause actual results to differ materially from such
statements are: the market concerns facing our customers, the continuing
viability of sectors that rely on our products, the effect of business and
economic conditions; the difficulties inherent in integrating remote businesses
that may have followed business practices that differ from the Company's
business practices; capacity and supply constraints or difficulties; product
development, commercializing or technological difficulties; the regulatory and
trade environment; the market's acceptance of the acquisition and competitive
responses to the Company’s new products, and other risk factors detailed from
time to time in the Company's SEC reports. Such risks and uncertainties could
cause actual results to differ materially from the results reflected in such
forward-looking statements. There can be no assurance that any forward-looking
statement will in fact prove to be correct. We undertake no obligation to update
or revise any forward-looking statements.