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Exhibit 2.2
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
Dated as of
March 15, 2004
by and among
DARR Westwood Technology Corporation,
DARR Westwood Acquisition Corporation,
The Shareholders of Westwood Computer Corporation Named Herein,
Westwood Computer Corporation,
and
Keith Grabel, as Shareholders' Agent
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER
..........................................................1
Section
1.1. The Merger.
..............................................1
Section
1.2. Effective
Time of the Merger. ............................2
Section
1.3. Effects of
the Merger. ...................................2
Section
1.4. Closing.
.................................................2
ARTICLE II THE SURVIVING AND PARENT
CORPORATIONS...............................2
Section
2.1. Articles of
Incorporation. ...............................2
Section
2.2. Bylaws.
..................................................2
Section
2.3. Directors
and Officers. ..................................2
ARTICLE III EFFECT OF THE MERGER ON THE
STOCK OF THE CONSTITUENT
CORPORATIONS; SURRENDER OF CERTIFICATES ....................3
Section
3.1. Conversion
of Shares in the Merger. ......................3
Section
3.2. Conversion
of Subsidiary Shares. .........................3
Section
3.3. Surrender
of Certificates. ...............................3
Section
3.4. Tax
Withholding. .........................................4
Section
3.5. Closing of
the Company's Transfer Books. .................5
Section
3.6. Options and
Stock Grants. ................................5
Section
3.7. Dissenters'
Rights. ......................................5
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE COMPANY ......................6
Section
4.1.
Organization and Qualification. ..........................6
Section
4.2.
Capitalization. ..........................................6
Section
4.3.
Subsidiaries. ............................................7
Section
4.4. Authority;
Non-Contravention; Approvals. .................7
Section
4.5. Financial
Statements. ....................................9
Section
4.6. Absence of
Undisclosed Liabilities. ......................9
Section
4.7. Absence of
Certain Changes or Events. ...................10
Section
4.8. Litigation.
.............................................10
Section
4.9. No
Violation of Law. ....................................11
Section
4.10. Contracts.
..............................................11
Section
4.11. Taxes.
..................................................12
Section
4.12. Employee Benefit
Plans; ERISA. ..........................14
Section
4.13. Labor
Controversies. ....................................17
Section
4.14. Environmental
Matters. ..................................18
Section
4.15. Title to Assets.
........................................19
Section
4.16. Intellectual
Property; Software. ........................19
Section
4.17. Brokers and
Finders. ....................................21
Section
4.18. New Jersey
Shareholders Protection Act and
Rights Agreement. .......................................21
Section
4.19. Affiliate
Transactions. .................................21
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Section
4.20. Products
Liability. .....................................21
Section
4.21. Relationship
with Customers and Suppliers. ..............22
Section
4.22. Indemnification
Claims. .................................22
Section
4.23. Absence of
Questionable Payments. .......................22
Section
4.24. Board
Recommendation. ...................................22
Section
4.25. Insurance.
..............................................22
Section
4.26. Government
Contracts. ...................................23
Section
4.27. Shareholders.
...........................................24
Section
4.28. Disclosures.
............................................24
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PARENT AND SUBSIDIARY ............25
Section
5.1.
Organization and Qualification. .........................25
Section
5.2. Authority;
Non-Contravention; Approvals. ................25
Section
5.3. Financing.
..............................................26
Section
5.4. Brokers and
Finders. ....................................26
Section
5.5. Subsidiary.
.............................................26
ARTICLE VI COVENANTS OF THE PARTIES
..........................................27
Section
6.1. Mutual
Covenants. .......................................27
Section
6.2. Covenants
of the Company. ...............................28
ARTICLE VII ADDITIONAL AGREEMENTS OF THE
PARTIES .............................31
Section
7.1. Access to
Information. ..................................31
Section
7.2. Acquisition
Transactions. ...............................32
Section
7.3. Expenses
and Fees. ......................................35
Section
7.4. Employee
Benefits. ......................................36
Section
7.5. Litigation.
.............................................37
Section
7.6. Third Party
Standstill Agreements. ......................37
Section
7.7. Insurance.
..............................................38
ARTICLE VIII CONDITIONS
......................................................38
Section
8.1. Conditions
to Each Party's Obligation to Effect the
Merger. .................................................38
Section
8.2. Conditions
to Obligations of Parent and Subsidiary
to Effect the Merger. ...................................39
Section
8.3. Conditions
to Obligations of the Company. ...............42
ARTICLE IX TERMINATION, AMENDMENT AND
WAIVER .................................43
Section
9.1.
Termination. ............................................43
Section
9.2. Effect of
Termination. ..................................45
Section
9.3. Amendment.
..............................................46
Section
9.4. Extension;
Waiver. ......................................46
ARTICLE X INDEMNIFICATION
....................................................46
Section
10.1. Survival of
Representations, Etc. .......................46
Section 10.2. Indemnification by Shareholders.
........................47
Section
10.3. Limitation on
Indemnification. ..........................48
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Section
10.4. Indemnification
by Parent. ..............................49
Section
10.5. No Contribution.
........................................49
Section
10.6. Interest.
...............................................50
Section
10.7. Insurance and
Tax Benefits...............................50
Section
10.8. Procedure for
Indemnification - Third-Party Claims.......50
Section
10.9. Exercise of
Remedies by Parent Indemnitees Other Than
Parent...................................................52
Section
10.10. Indemnification
Remedy...................................52
ARTICLE XI GENERAL PROVISIONS
................................................52
Section
11.1. Shareholders'
Agent. ....................................52
Section
11.2. Further
Assurances. .....................................53
Section
11.3. Notices.
................................................53
Section
11.4. Governing Law.
..........................................54
Section
11.5. Parties to
Agreement. ...................................54
Section
11.6. Interpretation.
.........................................54
Section
11.7. Severability.
...........................................54
Section
11.8. Assignment.
.............................................55
Section
11.9. Enforcement.
............................................55
Section
11.10. Submission to Jurisdiction; Waivers.
....................55
Section
11.11. Counterparts.
...........................................55
Section
11.12. Entire Agreement.
.......................................55
ARTICLE XII DEFINITIONS
......................................................56
EXHIBITS
A.
Directors
and Officers of the Surviving Corporation
B.
Allocation
of Consideration
C.
Form of 5%
Promissory Note
D.
Form of 8%
Promissory Note
E.
Form of
Letter of Transmittal
F.
Form of
Voting Agreement
G.
Form of
Amendment to Purchase and Sale Agreement
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AGREEMENT AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER, dated as of March 15, 2004 (this
"Agreement"), is made and entered into by
and among DARR Westwood Technology
Corporation, a Delaware corporation
("Parent"), DARR Westwood Acquisition
Corporation, a New Jersey corporation and a
subsidiary of Parent ("Subsidiary"),
the shareholders of the Company listed on
the signature pages hereto (each a
"Principal Shareholder" and collectively
the "Principal Shareholders"), Westwood
Computer Corporation, a New Jersey
corporation (the "Company") and Keith Grabel,
as Shareholders' Agent (as defined
herein).
BACKGROUND
WHEREAS,
Parent, Subsidiary and the Company intend to effect a merger of
Subsidiary with and into the Company (the
"Merger") in accordance with this
Agreement and the Business Corporation Act
of the State of New Jersey ("NJBCA").
Upon consummation of the Merger, Subsidiary
will cease to exist, and the Company
will continue as a subsidiary of
Parent.
WHEREAS,
this Agreement has been approved by the respective boards of
directors of Parent, Subsidiary and the
Company.
WHEREAS,
the Company's authorized capital stock consists of Class A
Series
I (Voting) stock, no par value, and Class A
Series II (Non-Voting) stock, no par
value, (the "Company Common Stock").
WHEREAS,
simultaneously with the execution and delivery of this
Agreement
and in order to induce Parent and
Subsidiary to enter into this Agreement, the
Principal Shareholders have executed and
delivered to Parent and Subsidiary an
agreement (the "Voting Agreement") pursuant
to which the Principal Shareholders
have agreed to take specified actions in
furtherance of the transactions
contemplated by this Agreement, including
voting their shares in favor of this
Agreement, the Merger and the transactions
contemplated hereby.
NOW,
THEREFORE, in consideration of the premises and the
representations,
warranties, covenants and agreements
contained herein, the parties hereto,
intending to be legally bound, agree as
follows:
ARTICLE I
THE MERGER
Section
1.1. The Merger. Upon the terms and subject to the conditions
of
this Agreement, at the Effective Time (as
defined below) Subsidiary shall be
merged with and into the Company in
accordance with the NJBCA, and the separate
existence of Subsidiary shall thereupon
cease. The Company shall continue its
existence under the laws of the State of
New Jersey and, in its capacity as the
surviving corporation in the Merger, the
Company is hereinafter sometimes
referred to as the "Surviving
Corporation."
Section
1.2. Effective Time of the Merger. The Merger shall become
effective at such time (the "Effective
Time") as shall be stated in a
certificate of merger (or if no time shall
be
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stated, upon the filing of such
certificate), in such form as required by and
executed in accordance with the NJBCA, to
be filed with the Department of
Treasury of the State of New Jersey in
accordance with Section 14A:10-4.1 of the
NJBCA (the "Merger Filing"). The Merger
Filing shall be made as soon as
practicable after the satisfaction or
waiver of the conditions set forth in
Article VIII. The parties shall, subject to
the provisions hereof use all
commercially reasonable efforts to
consummate, as soon as practicable, the
Merger in accordance with Section 1.4.
Section
1.3. Effects of
the Merger. The Merger shall have the effects
set forth in the applicable provisions of
the NJBCA. Without limiting the
generality of the foregoing, and subject
thereto, at the Effective Time, except
as otherwise provided herein, all the
property, rights, privileges, powers and
franchises of Subsidiary and the Company
shall vest in the Surviving
Corporation, and all debts, liabilities and
duties of Subsidiary and the Company
shall become the debts, liabilities and
duties of the Surviving Corporation.
Section
1.4. Closing.
The consummation of the transactions contemplated
by this Agreement (the "Closing") shall
take place at the offices of Drinker
Biddle & Reath LLP, 105 College Road
East, Princeton, NJ 08542 at 10:00 a.m. on
the second business day after satisfaction
or waiver of the latest to occur of
the conditions set forth in Article VIII
except for those conditions which are
only capable of being performed at the
Closing. The date on which the Closing
actually takes place is referred to in this
Agreement as the "Closing Date."
ARTICLE II
THE SURVIVING AND
PARENT CORPORATIONS
Section
2.1. Articles of
Incorporation. The articles of incorporation of
the Company as in effect immediately before
the Effective Time shall be the
articles of incorporation of the Surviving
Corporation as of the Effective Time,
and thereafter may be amended in accordance
with their terms and as provided in
the NJBCA.
Section
2.2. Bylaws. The
bylaws of Subsidiary as in effect immediately
before the Effective Time shall be the
bylaws of the Surviving Corporation as of
the Effective Time and thereafter may be
amended in accordance with their terms
and as provided by the Articles of
Incorporation of the Surviving Corporation
and the NJBCA.
Section
2.3. Directors
and Officers. The director and officers of the
Surviving Corporation immediately after the
Effective Time shall be the
individuals identified on Exhibit A.
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ARTICLE III EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT
CORPORATIONS; SURRENDER OF CERTIFICATES
Section
3.1.
Conversion of Shares in the Merger. At the Effective Time,
by virtue of the Merger and without any
action on the part of any holder of any
capital stock of Parent, Subsidiary or the
Company:
(a) the total
Merger Consideration (as defined below)
shall be $6,500,000, and each share of
Company Common Stock (other than shares
canceled pursuant to Section 3.1(b)) shall
be converted into the right to
receive (i) (A) a cash amount per share per
Shareholder as set forth next to
such Shareholder's name on Exhibit B,
which, in the aggregate, equals $5,245,222
(the "Cash Consideration,") (ii) a
promissory note in the original principal
amount set forth on Exhibit B next to such
Shareholder's name made by the
Company in favor of such Shareholder in the
form attached hereto as Exhibit C
and for which the aggregate principal
amount owed to all Shareholders is
$313,695 (the "5% Note") and (iii) and a
promissory note in the original
principal amount set forth on Exhibit B
next to such Shareholder's name made by
the Company in favor of such Shareholder in
the form attached hereto as Exhibit
D, and for which the aggregate principal
amount owed to all Shareholders is
$941,083 (the "8% Note", together with the
5% Note, the "Notes" and the Notes
together with the Cash Consideration, the
"Merger Consideration"), payable to
the holder thereof, in each case without
interest, upon surrender of the
certificate formerly representing such
share in the manner provided in Section
3.3, less any required withholding taxes;
and
(b) each share
of capital stock of the Company, if any,
owned by Parent or any subsidiary of Parent
or held in treasury by the Company
immediately before the Effective Time shall
be canceled and no consideration
shall be paid in exchange therefor and
shall cease to exist from and after the
Effective Time.
Section
3.2.
Conversion of Subsidiary Shares. At the Effective Time, by
virtue of the Merger and without any action
on the part of the shareholders of
Subsidiary, each issued and outstanding
share of voting common stock, par value
$.01 per share of the Subsidiary shall be
converted into one voting common
share, par value $.01 per share of the
Surviving Corporation and each issued and
outstanding share of non-voting common
stock, par value $.01 per share of
Subsidiary shall be converted into one
non-voting common share, par value $.01
per share, of the Surviving
Corporation.
Section
3.3.
Surrender of Certificates.
(a) Parent shall
serve as paying agent in the Merger
("Paying Agent"). Within three business
days after the Effective Time, the
Paying Agent shall mail to each holder of
record of a certificate or
certificates that immediately before the
Effective Time represented outstanding
shares of Company Common Stock (the
"Company Certificates") (i) a letter of
transmittal in the form attached hereto as
Exhibit E which shall specify that
delivery shall be effected, and risk of
loss and title to the Company
Certificates shall pass, only upon actual
delivery of the Company Certificates
to the Paying Agent, and (ii) instructions
for use in effecting the surrender of
the Company Certificates in exchange for
the Cash Consideration. Upon surrender
of Company Certificates for cancellation to
the Paying Agent, together with a
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duly executed letter of transmittal and the
proper execution and delivery to
Paying Agent of such reasonable
documentation, the holder of such Company
Certificates shall thereupon be entitled to
receive in exchange therefor the
Cash Consideration for each share of
Company Common Stock formerly represented
thereby, in accordance with Section 3.1,
and the Company Certificates so
surrendered shall be canceled. No interest
shall be paid or accrued, upon the
surrender of the Company Certificates, for
the benefit of holders of the
Certificates on any Cash Consideration. The
holder of the Company Certificates
shall be entitled to receive payments made
pursuant to the Notes at such times
and in such amounts as set forth
therein..
(b) At any time
following the date which is twelve
months after the Effective Time, the duties
of the Paying Agent shall terminate.
Thereafter, each holder of a Company
Certificate may surrender such Company
Certificate to the Surviving Corporation
(subject to applicable abandoned
property, escheat and similar laws), solely
as general creditors therefor, for
the payment of their claim for Merger
Consolidation, without any interest
thereon, which such holders may be
entitled. None of the Parent, Subsidiary, the
Company or the Surviving Corporation shall
be liable to a holder of shares of
Company Common Stock for any amounts
delivered to a public official pursuant to
applicable abandoned property, escheat or
similar laws. If any Company
Certificates shall not have been
surrendered prior to twelve months after the
Effective Time (or immediately prior to
such earlier date on which any Merger
Consideration in respect of such Company
Certificate would otherwise escheat to
or become the property of any Governmental
Authority), any such cash shall, to
the extent permitted by applicable law,
become the property of the Parent, free
and clear of all claims or interest of any
person previously entitled thereto.
If, after the Effective Time, subject to
the terms and conditions of this
Agreement, Company Certificates formerly
representing shares of Company Common
Stock are presented to the Surviving
Corporation, they shall be cancelled and
exchanged for Merger Consideration in
accordance with this Article III.
(c) If any
Company Certificate shall have been lost,
stolen or destroyed, upon the making of an
affidavit of that fact by the holder
claiming such Company Certificate to be
lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for
such lost, stolen or destroyed Company
Certificate the Merger Consideration
deliverable in respect thereof determined
in accordance with this Article III. When
authorizing such issuance in exchange
therefor, the Board of Directors of the
Surviving Corporation may, in its
discretion and as a condition precedent to
the issuance thereof, require the
owner of such lost, stolen or destroyed
Company Certificate to give the
Surviving Corporation such indemnity as it
may reasonably direct as protection
against any claim that may be made against
the Surviving Corporation with
respect to the Company Certificate alleged
to have been lost, stolen or
destroyed.
Section
3.4. Tax
Withholding. Parent (or any affiliate thereof) shall
be entitled to deduct and withhold from the
consideration otherwise payable
pursuant to this Agreement to any former
holder of shares of Company Common
Stock such amounts as Parent (or any
affiliate thereof) is required to deduct
and withhold with respect to the making of
such payment under the Internal
Revenue Code of 1986, as amended (the
"Code"), or any other provision of
federal, state, local or foreign tax law.
To the extent that amounts are so
withheld by Parent, such withheld amounts
shall be treated for all purposes of
this Agreement as having been paid to
the
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former holder of the shares of Company
Common Stock in respect of which such
deduction and withholding was made by
Parent.
Section
3.5.
Closing of the Company's Transfer Books. From and after
the Effective Time, the stock transfer
books of the Company shall be closed and
no transfer of shares of Company Common
Stock which were outstanding immediately
before the Effective Time shall thereafter
be made.
Section
3.6.
Options and Stock Grants. Prior to the Closing, the
Company shall use all reasonable efforts to
cause each outstanding stock option
(each an "Option") heretofore granted under
any Company stock option plan (the
"Company Stock Plan"), each outstanding
phantom stock option (the "Phantom
Stock") heretofore granted under any
Company phantom stock plan or agreement
granting phantom stock options or rights
(whether written or oral) (the "Phantom
Stock Plan") and each outstanding warrant
to purchase Common Stock (each a
"Warrant") to be exercised or terminated
effective immediately prior to the
Closing and conditioned upon the Closing.
As provided herein, the Company Stock
Plan, the Phantom Stock Plan and any
Benefit Plan (or other plan, program or
arrangement) providing for the issuance or
grant of any other interest in
respect of the capital stock of the Company
shall terminate upon the Effective
Time. The Company has taken all steps
necessary to ensure that the Company is
not or will not be bound by any Options,
Phantom Stock, Warrants, other options,
other warrants, rights or agreements which
would entitle any Person to acquire
any capital stock of the Surviving
Corporation or, except as otherwise provided
in this Agreement, to receive any payment
in respect thereof.
Section
3.7.
Dissenters' Rights. (a) Notwithstanding anything in this
Agreement to the contrary, shares of
Company Common Stock that are issued and
outstanding immediately prior to the
Effective Time and that are owned by
shareholders of the Company who have
properly perfected their rights as
dissenting shareholders within the meaning
of Section 14A:11-2 of the NJBCA (the
"Dissenting Shares") shall not be converted
into the right to receive the Merger
Consideration unless and until such
shareholders shall have failed to perfect
their right of payment under applicable
law, but, instead, the holders thereof
shall be entitled to payment of the fair
value of such Dissenting Shares
determined in accordance with Sections
14A:11-3 through 14A:11-11 of the NJBCA.
If any such holder shall have failed to
perfect or shall have effectively
withdrawn or lost such right of dissent,
each share of Company Common Stock held
by such shareholder shall thereupon be
deemed to have been converted into the
right to receive and become exchangeable
for, at the Effective Time, Merger
Consideration in the manner provided for in
Section 3.1.
(b) The Company
shall give Parent and Shareholders'
Agent (i) prompt notice of any notices of
dissent filed pursuant to Section
14A:11-2 of the NJBCA received by the
Company, withdrawals of demands for
payment and any other instruments served in
connection with the exercise by
shareholders of their dissenters' rights
pursuant to the NJBCA and received by
the Company and (ii) the opportunity to
participate in all negotiations and
proceedings with respect to notices of
dissent and demands for payment under the
NJBCA. The Company and Parent shall jointly
direct all negotiations and
proceedings with respect to notices of
dissent and demands for payment under the
NJBCA with counsel jointly selected by
Parent and the Company and any such
expenses relating to such negotiations and
proceedings
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shall be paid by the Company. Each of the
Company and Parent shall direct such
negotiations and proceedings in a prompt
manner and shall use commercially
reasonable efforts in conducting such
negotiations and proceedings. The Company
shall not, except with the prior written
consent of Parent, which consent shall
not be unreasonably withheld or delayed,
(x) make any payment with respect to
any such notice of dissent or demand for
payment or (y) offer to settle or
settle any such notice of dissent or demand
for payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Parent and Subsidiary that,
except
as set forth in the disclosure schedule
dated as of the date hereof (the
"Company Disclosure Schedule"), it being
agreed that disclosure of any item on
the Company Disclosure Schedule shall be
deemed disclosure with respect to all
sections of this Article IV if the
relevance of such item to all such other
sections is clearly apparent from the face
of the Company Disclosure Schedule:
Section 4.1. Organization and
Qualification. The Company is a
corporation duly organized, validly
existing and in good standing under the laws
of the State of New Jersey and has the
requisite corporate power and authority
to own, lease and operate its assets and
properties and to carry on its business
as it is now being conducted and is
contemplated to be conducted following the
Closing. The Company is duly qualified to
transact business and is in good
standing in each jurisdiction in which the
properties owned, leased or operated
by it or the nature of the business
conducted by it makes such qualification
necessary, except where the failure to be
so qualified and in good standing has
not and could not reasonably be expected to
have, individually or in the
aggregate, a Company Material Adverse
Effect. True, accurate and complete copies
of the Company's articles of incorporation
and bylaws, in each case as in effect
on the date hereof, including all
amendments thereto, have heretofore been
delivered to Parent.
Section
4.2.
Capitalization.
(a) The
authorized capital stock of the Company consists
of 2,000,000 shares of Class A Series I
(voting) common stock, no par value
("Series I Common Stock"), and 18,000,000
shares of Class A Series II
(non-voting) common stock, no par value
("Series II Common Stock"). 1,870,424
shares of Series I Common Stock and
16,796,866 of Series II Common Stock are
outstanding, all of which are validly
issued and are fully paid, non-assessable
and free of preemptive rights and (iii)
73,840 shares of Series I Common Stock
and 247,960 shares of Series II Common
Stock are held in treasury of the
Company.
(b) No bonds,
debentures, notes or other indebtedness of
the Company having the right to vote (or
convertible into, or exchangeable for,
securities having the right to vote) on any
matters on which shareholders of the
Company may vote are issued or
outstanding.
(c) As of the
date hereof, there are no outstanding
subscriptions, options, stock phantom
rights (or rights outstanding under any
Company phantom stock plan), grants, calls,
contracts, commitments,
understandings, restrictions, arrangements,
rights or warrants, including any
rights of conversion or exchange under any
outstanding security,
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instrument or other agreement, obligating
the Company to issue, deliver or sell,
redeem or repurchase, or cause to be
issued, delivered or sold, additional
shares of the capital stock of the Company
or obligating the Company to grant,
extend or enter into any such agreement or
commitment. Except as otherwise
contemplated by this Agreement, there are
no voting trusts, proxies or other
agreements or understandings to which the
Company is a party or is bound with
respect to the voting of any shares of
capital stock of the Company.
Section
4.3.
Subsidiaries. The only subsidiaries of the Company are
those set forth in Section 4.3 of the
Company Disclosure Schedule. Each direct
and indirect subsidiary of the Company is
duly formed or organized, validly
existing and in good standing under the
laws of its jurisdiction of formation or
incorporation and has the requisite
corporate or limited liability company power
and authority to own, lease and operate its
assets and properties and to carry
on its business as it is now being
conducted, and each subsidiary of the Company
is qualified to transact business, and is
in good standing, in each jurisdiction
in which the properties owned, leased or
operated by it or the nature of the
business conducted by it makes such
qualification necessary except in all cases
where the failure to be so qualified and in
good standing has not had and could
not reasonably be expected to have,
individually or in the aggregate, a Company
Material Adverse Effect. All of the
outstanding shares of capital stock of each
subsidiary of the Company are validly
issued, fully paid, nonassessable and free
of preemptive rights and are owned directly
or indirectly by the Company free
and clear of any liens, claims,
encumbrances, adverse rights and security
interests whatsoever. There are no
subscriptions, options, warrants, rights,
calls, contracts, voting trusts, proxies or
other commitments, understandings,
restrictions or arrangements relating to
the issuance, sale, voting or transfer
of any shares of capital stock of or
interest in any subsidiary of the Company,
including any right of conversion or
exchange under any outstanding security,
instrument or agreement. Except for the
capital stock of its subsidiaries, the
Company does not own, directly or
indirectly, any capital stock or other
ownership interest of any corporation,
partnership, limited partnership, limited
liability company, joint venture or other
entity. Except for the capital stock
of other subsidiaries of the Company, each
subsidiary of the Company does not
own, directly or indirectly, any capital
stock or other ownership interest of
any corporation, partnership, limited
partnership, limited liability company,
joint venture or other entity. The Company
has delivered to Parent complete and
correct copies of the Charter and Bylaws or
other organizational documents of
the Company's subsidiaries. The Company's
subsidiaries do not own, directly or
indirectly, any shares of Company Common
Stock.
Section
4.4.
Authority; Non-Contravention; Approvals.
(a) The Company
has full corporate power and authority
to execute and deliver this Agreement and,
subject to the Company Shareholders'
Approval (as defined herein) to consummate
the transactions. This Agreement has
been approved by the Board of Directors of
the Company and no other corporate
proceedings on the part of the Company are
necessary to authorize the execution
and delivery of this Agreement or, except
for the Company Shareholders'
Approval, the consummation by the Company
of the transactions. The only vote of
holders of any class or series of capital
stock of the Company or any of its
subsidiaries necessary to adopt and approve
this Agreement and the Merger is the
adoption and approval of this Agreement and
the Merger by the holders of a
majority of the total number of outstanding
shares of Series I Common Stock
entitled to vote at the Shareholders
Meeting (the "Company
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Shareholders' Approval"). The affirmative
vote of the holders of any capital
stock or other securities (or any separate
class thereof) of the Company or any
of its subsidiaries is not necessary to
consummate the Merger or any transaction
contemplated by this Agreement other than
as set forth in the preceding
sentence. This Agreement has been duly
executed and delivered by the Company,
and, assuming the due authorization,
execution and delivery hereof by Parent and
Subsidiary, constitutes a valid and legally
binding agreement of the Company,
enforceable against the Company in
accordance with its terms, except that such
enforcement may be subject to (a)
bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting
or relating to enforcement of
creditors' rights generally and (b) general
equitable principles.
(b) The
execution, delivery and performance of this
Agreement by the Company and the
consummation of the Merger and the other
transactions will not violate, conflict
with or result in any violation of, or
constitute a default (or an event which,
with notice or lapse of time or both,
would constitute a default) under, or give
rise to a right of termination of, or
accelerate the performance required by, or
result in a right of termination or
acceleration under, or result in the
creation of Encumbrances upon any of the
properties or assets of the Company or any
of its subsidiaries under (i) the
articles of incorporation or bylaws of the
Company or any of its subsidiaries,
(ii) any statute, law, ordinance, rule,
regulation, judgment, decree, order,
injunction, writ, permit or license of any
Governmental Authority or court
applicable to the Company or any of its
subsidiaries or any of their respective
properties or assets, or (iii) any note,
bond, mortgage, indenture, deed of
trust, license, franchise, permit,
contract, lease or other instrument,
obligation or agreement of any kind to
which the Company or any of its
subsidiaries is now a party or by which the
Company or any of its subsidiaries
or any of their respective properties or
assets are bound or affected; subject
in the case of the terms, conditions or
provisions described in clause (ii)
above, to obtaining (before the Effective
Time) the Company Required Statutory
Approvals (as defined below) and the
Company Shareholders' Approval. Excluded
from the foregoing sentences of this
paragraph (b), insofar as they apply to the
terms, conditions or provisions described
in clause (iii) of the first sentence
of this paragraph (b) (and whether
resulting from such execution and delivery or
consummation), are such violations,
conflicts, breaches, defaults, terminations,
accelerations or creations of Encumbrances
that have not had and could not
reasonably be expected to have,
individually or in the aggregate, a Company
Material Adverse Effect.
(c) Except for
(i) filings under any applicable state
securities or blue sky laws or state
takeover laws, (ii) the making of the
Merger Filing with the Department of
Treasury of the State of New Jersey in
connection with the Merger, and (iii) any
required filings with or approvals
from applicable environmental authorities,
including, without limitation, the
New Jersey Industrial Site Recovery Act, as
amended, public service commissions
and public utility commissions (the filings
and approvals referred to in clauses
(i) through (iii) are collectively referred
to as the "Company Required
Statutory Approvals"), no declaration,
filing or registration with, or notice
to, or authorization, consent or approval
of, any Governmental Authority is
necessary for the execution and delivery of
this Agreement by the Company or the
consummation by the Company of the
transactions contemplated hereby, other than
such declarations, filings, registrations,
notices, authorizations, consents or
approvals which, if not made or obtained,
as the case may be, have not had and
could not reasonably be expected to have,
individually or in the aggregate, a
Company Material Adverse Effect.
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Section
4.5.
Financial Statements.
(a) The Company
has furnished to Parent (i) the audited
balance sheets of the Company as of August
31, 2003 (the "Company Balance
Sheet") and as of August 31, 2002, and the
related audited statements of income
and cash flows of the Company for the
twelve months ended August 31, 2003 and
August 31, 2002 and (ii) the unaudited
balance sheet of the Company as of
November 30, 2003 and the related
statements of income and cash flows of the
Company for the three (3) months ended
November 30, 2003 (collectively, the
"Company Financial Statements"). The
Company Financial Statements are accurate
and complete in all material respects, have
been prepared in accordance with
generally accepted accounting principles
consistently applied ("GAAP"), and
fairly present the financial position,
assets and liabilities of the Company as
of the respective dates thereof, and the
results of operations and cash flows of
the Company for the periods covered
thereby. Since the date of the Company
Balance Sheet, (i) there has been no change
in the assets, liabilities or
financial condition of the Company from
that reflected in the Company Balance
Sheet, except for changes in the ordinary
course of business which in the
aggregate have not been materially adverse
to the Company and (ii) to the
Knowledge of the Company, no event or
condition that individually or in the
aggregate has had or could reasonably be
expected to have a Company Material
Adverse Effect has occurred or is
continuing. The Financial Statements have been
prepared from and are in accordance with
the books and records of the Company.
(b) The Company
Financial Statements reflect all
liabilities of the Company, whether
absolute, accrued or contingent, as of the
respective dates thereof, of the type
required to be reflected or disclosed in a
balance sheet (or the notes thereto)
prepared in accordance with GAAP. The
Company does not have any liabilities or
obligations of any nature that are not
reflected on the Company Financial
Statements other than current liabilities
(within the meaning of GAAP) incurred since
the respective dates thereof in the
ordinary course of business. To the
Knowledge of the Company, there is no basis
for the assertion against the Company of
any material liability (other than
current liabilities referred to above) not
fully reflected or reserved against
in the Company Financial Statements.
Section
4.6.
Absence of Undisclosed Liabilities. Neither the Company
nor any of its subsidiaries have incurred
any liabilities or obligations
(whether absolute, accrued, contingent or
otherwise) of any nature, except (a)
liabilities, obligations or contingencies
which (i) are accrued or reserved
against in the Company Financial Statements
or reflected in the notes thereto or
(ii) were incurred after August 31, 2003 in
the ordinary course of business,
consistent with past practices or (b)
liabilities, obligations or contingencies
which have not had and could not reasonably
be expected to have, individually or
in the aggregate, a Company Material
Adverse Effect.
Section
4.7.
Absence of Certain Changes or Events. Except as set forth
in Section 4.7 of the Company Disclosure
Schedule, since August 31, 2003, the
Company, its subsidiaries and their
shareholders have conducted their business
only in the ordinary course consistent with
past practice and there has been no
Company Material Adverse Effect. Without
limiting the foregoing, except as set
forth in Section 4.7 of the Company
Disclosure Schedule or as reflected in the
Company Balance Sheet, since the date of
the Company Balance Sheet, neither the
Company nor any of its subsidiaries have
(a) purchased or redeemed any shares of
their
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respective stock (including, without
limitation, the Company Common Stock), or
granted or issued any option, warrant or
other right to purchase or acquire any
such shares, (b) incurred any liabilities
or obligations (whether absolute,
accrued, contingent or otherwise), except
liabilities and obligations incurred
in the ordinary course of business which
would not have a Company Material
Adverse Effect, (c) encumbered any of their
properties or assets, tangible or
intangible, except for Encumbrances
incurred in the ordinary course of business,
consistent with past practice, (d) suffered
any change or, to the Company's
Knowledge, received any threat of any
change in any of its relations with, or
any loss or, to the Company's Knowledge,
threat of loss of, any of the
suppliers, clients, distributors, customers
or employees that are material to
the business of the Company or its
subsidiaries, including any loss or change
which may result from the transactions
contemplated by this Agreement, (e)
disposed of or has failed to keep in effect
any rights in, to or for the use of
any franchise, license, permit or
certificate material to the business of the
Company or its subsidiaries, (f) changed
any method of keeping of its books of
account or accounting practices, (g)
disposed of or failed to keep in effect any
rights in, to or for the use of any of the
Intellectual Property (as hereinafter
defined) material to the business of the
Company or its subsidiaries, (h) sold,
transferred or otherwise disposed of any
assets, properties or rights of any of
the business of the Company or its
subsidiaries, except inventory sold in the
ordinary course of business consistent with
past practice, (i) entered into any
transaction, agreement or event outside the
ordinary course of the conduct of
the business of the Company or its
subsidiaries, (j) made nor authorized any
single capital expenditure in excess of
$25,000, or capital expenditures in
excess of $100,000 in the aggregate, (k)
changed or modified in any manner its
existing credit, collection and payment
policies, procedures and practices with
respect to accounts receivable and accounts
payable, respectively, including
without limitation, acceleration of
collections of receivables, failure to make
or delay in making collections of
receivables (whether or not past due),
acceleration of payment of payables or
failure to pay or delay in payment of
payables, (l) incurred any damage,
destruction or loss, whether covered by
insurance or not, that would have a Company
Material Adverse Effect, (m) made
any declaration, payment or setting aside
for payment of any dividend or other
distribution (whether in cash, stock or
property) with respect to any securities
of the Company or its subsidiaries, other
than as identified in writing to
counsel for Parent on or prior to the date
hereof; or (n) waived or released any
material right or claim of the Company or
its subsidiaries.
Section
4.8.
Litigation. Except as specifically set forth in Section
4.8 of the Company Disclosure Schedule,
there are no claims, suits, actions or
proceedings pending or, to the Knowledge of
the Company, threatened against the
Company or any of its subsidiaries, or any
of their respective directors or
officers (in their capacity as such),
before any court or Governmental
Authority, or any arbitrator (collectively,
"Claims") that (i) seek to restrain
the consummation of the Merger or the
transactions or (ii) which if adversely
determined could reasonably be expected to
have, individually or in the
aggregate, a Company Material Adverse
Effect. Except as set forth in Section 4.8
of the Company Disclosure Schedule, neither
the Company nor any of its
subsidiary is a party to or bound by any
judgment, decree, injunction,
settlements, arbitration, awards, rule or
order of any court or Governmental
Authority or any arbitrator (collectively,
"Judgments") with respect to or
affecting the properties, assets, personnel
or business of the Company, which
prohibits or restricts the consummation of
the transactions, or has had or could
reasonably be expected to have,
individually or in the aggregate, a Company
Material Adverse Effect or could affect the
validity of this Agreement or its
enforceability against any shareholder or
the Company, or compliance by any
shareholder or the Company. Except set
forth in Section
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4.8 of the Company Disclosure Schedule as
of the date hereof, there are no
material Claims or Judgments with respect
to or affecting the properties,
assets, personnel or business of the
Company or any of its subsidiaries. The
Company Financial Statements reflect an
adequate reserve for all claims, suits,
actions, proceedings, judgments, decrees,
injunctions, rules or order pending or
threatened against the Company or any of
its subsidiaries through the date of
such financial statements.
Section
4.9. No
Violation of Law. Except as disclosed in Section 4.9 of
the Company Disclosure Schedule, the
Company and its subsidiaries are and, since
August 31, 2003 have been in compliance in
all material respects with all
applicable provisions of any law, statute,
order, rule, regulation, ordinance or
judgment (including, without limitation,
any applicable environmental law,
ordinance or regulation) of any
Governmental Authority. The Company and its
subsidiaries have all material permits,
licenses, approvals, and other
governmental authorizations, consents and
approvals necessary to conduct its
businesses as presently conducted
(collectively, the "Company Permits"). The
Company and its subsidiaries are in
compliance with the terms of the Company
Permits in all material respects.
Section
4.10. Contracts.
Section 4.10 of the Company Disclosure Schedule
lists, under the relevant heading, oral or
written contracts, agreements,
arrangements, guarantees, licenses, leases
and commitments (each a "Contract"),
that, to the Knowledge of the Company,
exist as of the date hereof to which the
Company or any subsidiary is a party or by
which it is bound and which fall
within any of the following categories
(collectively, the "Material Contracts"):
(a) Contracts not entered into in the
ordinary course of the Company's or any of
its subsidiaries' businesses and other than
those that individually or in the
aggregate are not material to the business
of the Company and any of its
subsidiaries, taken as a whole, (b) joint
venture and partnership agreements,
(c) Contracts containing covenants
purporting to limit the freedom of the
Company or any of its subsidiaries to
compete in any line of business in any
geographic area or to hire any individual
or group of individuals, (d) Contracts
which after the consummation of any of the
transactions could have the effect of
limiting the freedom of Parent or to
compete in any line of business in any
geographic area or to hire any individual
or group of individuals, (e) Contracts
which contain minimum purchase conditions
in excess of $50,000 with respect to
inventory purchases for resale, and $50,000
in the case of everything else, or
requirements or other terms that restrict
or limit the purchasing or
distribution relationships of the Company
or its subsidiaries or their
affiliates (including after consummation of
any of the transactions), Parent or
any of its affiliates, or any customer,
licensee or lessee thereof, (f)
Contracts relating to any outstanding
commitment for capital expenditures in
excess of $50,000, (g) indentures,
mortgages, promissory notes, loan agreements
or guarantees of borrowed money, letters of
credit or other agreements or
instruments of the Company or its
subsidiaries or commitments for the borrowing
or the lending by the Company or its
subsidiaries of amounts in excess of
$50,000 in the aggregate or providing for
the creation of any Encumbrance upon
any of the assets of the Company or its
subsidiaries with an aggregate value in
excess of $50,000, (h) Contracts providing
for "earn-outs" or other contingent
payments by the Company or its subsidiaries
involving more than $50,000 per
contract over the terms of all such
Contracts, (i) Contracts associated with off
balance sheet financing, including but not
limited to arrangements for the sale
of receivables, (j) Material Licenses (as
defined in Section 4.16), (k) stock
purchase agreements, asset purchase
agreements or other acquisition or
divestiture agreements entered into since
February 1, 1998 where the
consideration in any individual transaction
exceeds $50,000, (l)
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material Contracts with respect to which a
change in the ownership (whether
directly or indirectly) of shares of
Company Common Stock or the composition of
the Board of Directors of the Company may
result in a violation of or default
under, or give rise to a right of
termination, cancellation or acceleration of
any obligation or loss of benefits under
such Contract, except any such Contract
that is not material to the business of the
Company, (m) contracts with
consultants, employees, officers or
directors of the Company or any of its
subsidiaries or (n) contracts with
Governmental Entities (as defined below)
involving an obligation by the Company or
any of its subsidiaries to make a
payment in excess of $50,000 (excluding
customary rebates or credit to
Governmental Entities pursuant to such
contracts). All Material Contracts to
which the Company or any of its
subsidiaries is a party or by which they are
bound are valid and binding obligations of
the Company and, to the Knowledge of
the Company, the valid and binding
obligation of each other party thereto and
are in full force and effect. Neither the
Company, it subsidiaries, nor, to the
knowledge of the Company, any other party
thereto is in violation of or in
default in respect of, nor has there
occurred an event or condition which with
the passage of time or giving of notice (or
both) would constitute a default
under or permit the termination of, any
Material Contract. Notwithstanding the
above, Material Contracts shall not include
contracts or agreements with
customers, vendors and suppliers entered
into in the ordinary course of business
(i) which are terminable on less than 60
days prior written notice by either
party or (ii) which do not contain minimum
purchase or other commitments or
obligations provisions on the part of the
Company.
Section
4.11. Taxes.
Except as disclosed in Section 4.11 of the Company
Disclosure Schedule:
(a) All federal,
state, local and foreign returns,
estimates, information statements and
reports, including any schedule or
attachment thereto or any amendment thereof
("Tax Returns"), relating to any and
all Taxes concerning or attributable to the
Company and its subsidiaries or
their respective operations required to be
filed by or on behalf of the Company
or its subsidiaries have been timely filed
(after giving effect to any valid
extensions of time in which to make such
filings). All such Tax Returns are
true, correct and complete in all material
respects. All Taxes, whether or not
shown as due on such Tax Returns, have been
timely paid. Adequate reserves or
accruals for Taxes have been (or will be)
provided on the Company's books and
the Company Financial Statements, in
accordance with GAAP, with respect to any
period (or portion thereof) up to the
Closing Date for which Tax Returns have
not been filed or for which Taxes are not
yet due and owing. The Company has
made available to Parent all material Tax
Returns, examination reports and
statements of deficiencies filed or
received for all taxable periods since
February 1, 2000.
(b) Neither the
Company nor any of its subsidiaries have
waived any statute of limitations in
respect of the assessment and collection of
Taxes or agreed to any extension of time
with respect to a Tax assessment or
deficiency.
(c) Neither the
Company nor any of its subsidiaries is
currently the beneficiary of any extension
of time within which to file any Tax
Return. The Company and its subsidiaries
are not a party to any Tax allocation
or Tax sharing agreement.
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(d) The Company
and its subsidiaries have duly and
timely withheld from employee salaries,
wages and other compensation and has
paid over to the appropriate Governmental
Authority all material Taxes required
to be so withheld and paid over.
(e) There is no
Tax deficiency outstanding, assessed or
proposed in writing against the Company or
any of its subsidiaries. No audit or
other examination of any Tax Return of the
Company or any of its subsidiaries is
currently in progress. No Governmental
Authority with respect to which the
Company or any of its subsidiaries does not
file Tax Returns has claimed that
the Company or any of its subsidiaries are,
or may be, subject to taxation by
that jurisdiction.
(f) Neither the
Company, any of its subsidiaries nor any
other person on behalf of the Company or
its subsidiaries, has (i) filed a
consent pursuant to Section 341(f) of the
Code or agreed to have Section
341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4)
of the Code) owned by the Company or
its subsidiaries, (ii) agreed to or is
required to make any adjustments pursuant
to Section 481(a) of the Code or any
similar provision of state, local or
foreign law by reason of a change in
accounting method (and the Company and each
of its subsidiaries has no application
pending with any Governmental Authority
with respect to an accounting method
change), (iii) executed or entered into
closing agreement pursuant to Section 7121
of the Code or any predecessor
provision thereof or any similar provision
of state, local or foreign law or
(iv) granted a power of attorney with
respect to any Tax matter that would have
continuing effect after the Closing.
(g) Neither the
Company nor its subsidiaries is subject
to any private letter ruling of the
Internal Revenue Service or comparable
rulings of other Governmental
Authorities.
(h) Neither the
Company nor any subsidiary is a party to
any agreement, contract, arrangement or
plan (including this Agreement and the
consummation of the Merger) that has
resulted or could result, separately or in
the aggregate, in the payment of any
"excess parachute payment" within the
meaning of Section 280G of the Code (or any
similar provision of state, local or
foreign law) or that would bind the Company
or its subsidiaries to compensate
any individual for excise Taxes paid under
Section 4999 of the Code.
(i) The Company
and it subsidiaries have never been a
member of an affiliated group of
corporations (as that term is defined in
Section 1504(a)(1) of the Code, or any
similar provision of state, local, or
foreign law), and the Company and its
subsidiaries have no liability for the
Taxes of any person under Treasury
Regulation 'SS' 1.1502-6 (or any similar
provision of state, local, or foreign law),
or as a transferee or successor, by
contract, or otherwise.
(j) The Company
and its subsidiaries have not been the
"distributing corporation" or the
"controlled corporation" within the meaning of
Section 355(a) of the Code.
(k) There are no
Encumbrances for Taxes on the assets of
the Company or its subsidiaries, except for
Liens for Taxes not yet due and
payable.
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(l) Neither the
Company not any Shareholder is a foreign
person within the meaning of Sections 897
and 1445 of the Code.
(m) The Company
and each of its subsidiaries is not a
U.S. real property holding corporation as
defined in Section 897 of the Code and
has not been such a corporation during the
five-year period ending on the date
of the Closing Date.
(n) The Company
and its subsidiaries have disclosed on
its federal income Tax Returns all
positions taken therein that could give rise
to a substantial understatement of federal
income Tax within the meaning of
Section 6662 of the Code. The Company and
its subsidiaries have not invested in
any entity or entered into any arrangement
that is a "tax shelter" within the
meaning of Section 6662(d)(2)(C) of the
Code or that has been described in any
list or announcement published pursuant to
Section 6662(d)(2)(D) of the Code.
(o) The disallowance of a deduction
under Section 162(m)
of the Code of employee remuneration will
not apply to any amount paid or
payable by the Company under any
commitment, program, arrangement or
understanding.
Section
4.12. Employee
Benefit Plans; ERISA.
(a) For purposes
of this Agreement, (i) "Company Plan"
means (x) each employee pension benefit
plan (as such term is defined in Section
3(2) of the Employee Retirement Income
Security Act of 1974, as amended
("ERISA")) ("Pension Plan"); (y) each
employee welfare benefit plan (as such
term is defined in Section 3(1) of ERISA)
("Welfare Plan") maintained
contributed to or required to be
contributed to by the Company and any of its
ERISA Affiliates, and (z) each stock
option, stock purchase, stock appreciation
right and stock based plan and each
deferred compensation, severance,
change-in-control, incentive and bonus
plan, program, contract or agreement,
whether funded or unfunded, written or
unwritten, subject to ERISA or exempt,
maintained by the Company or any ERISA
Affiliate (as such term is defined below)
for the benefit of current or former
employees or current or former directors of
the Company; and (ii) "ERISA Affiliate"
means any trade or business whether or
not incorporated, under common control with
the Company within the meaning of
Section 414(b), (c), (m), or (o) of the
Code or Section 4001(b) of ERISA.
(b) With respect
to each Company Plan, the Company has
made available to Parent a true, correct
and complete copy of: (i) all current
plan documents, trust agreements, insurance
contracts and other funding
vehicles, and amendments thereto; (ii) all
Form 5500 series forms for the most
recently ended plan year (and any financial
statements and other schedules
attached thereto) filed with respect to any
Company Plan for which such filing
is required; (iii) all current summary plan
descriptions and subsequent
summaries of material modifications with
respect to each Company Plan for which
such descriptions and modifications are
required under ERISA; (iv) the most
recent IRS determination letter for each
Pension Plan which is intended to be
qualified under Section 401(a) of the Code
(and any current or pending
application with respect to any Pension
Plan); and (v) the most recent actuarial
report for all Pension Plans requiring
actuarial valuation.
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(c) The Company
and, with respect to the Company Plans
each ERISA Affiliate, and each of the
Company Plans, are in compliance in all
material respects with the applicable
provisions of ERISA, and those provisions
of the Code applicable to the Company
Plans.
(d) All
contributions to and payments from any Company
Plan which may have been required in
accordance with its terms and, when
applicable, Section 302 of ERISA or Section
412 of the Code, have been timely
made. All contributions with respect to the
period ending on the Closing Date
will have been paid by that date, even
though not due until a later date. No
Pension Plan which is subject to the
minimum funding requirements of Part 3 of
Subtitle B of Title I of ERISA or to
Section 412 of the Code has incurred any
"accumulated funding deficiency" within the
meaning of Section 302 of ERISA or
Section 412 of the Code and no funding
deficiency has been waived within the
meaning of Section 303 of ERISA or Section
412 of the Code. The funding method
used in connection with each Company Plan
is acceptable under current IRS
guidelines and the actuarial assumptions
used in connection with funding each
such Company Plan are reasonable. No asset
of the Company, and no asset of any
ERISA Affiliate which is to be acquired by
Parent pursuant to this Agreement, is
subject to any lien under Code Section
401(a)(29), ERISA Section 302(f) or Code
Section 412(n), ERISA Section 4068 or
arising out of any action filed under
ERISA Section 4301(b).
(e) Except as
indicated on Schedule 4.12(e), all
material reports, returns and similar
documents with respect to the Company
Plans required to be filed with any
government agency or distributed to any
Company Plan participant have been duly and
timely filed or distributed.
(f) The Company
and each ERISA Affiliate have complied
with the notice and continuation coverage
requirements of Section 4980B of the
Code and the regulations thereunder with
respect to each Company Plan that is,
or was during any taxable year of the
Company or any ERISA Affiliate for which
the statute of limitations on the
assessment of federal income taxes remains
open, by consent or otherwise, a group
health plan within the meaning of Section
5000(b)(1) of the Code.
(g) No
conditions exist that would reasonably be
expected to subject the Company, or any
ERISA Affiliate to any material
liability under Title IV of ERISA. Set
forth in Section 4.13(g) of the Company
Disclosure Schedule are the unfunded
liabilities and projected costs, as of the
date of this Agreement, of each of the
Company Plans. Unfunded liabilities
include, but are not limited to, (1) the
excess of the liabilities, determined
using both the accumulated benefit
obligation and projected benefit obligation
methodology of Statement of Financial
Accounting Standards No. 87, of any
Company Plan subject to Title IV of ERISA
over the fair market value of such
Company Plan's assets (2) the amount of any
unfunded deferred compensation,
including, without limitation the present
value, based on the methods and
assumptions described in (1) of an Company
Plan described in Section 201(2) of
ERISA and (3) the actuarially determined
present value of any obligation to
provide retiree medical or life insurance
benefits. For the purposes of this
Section 4.13(g) unfunded liabilities and
projected costs have been determined by
the Company and its actuaries using
actuarial methods and assumptions that are,
individually and in the aggregate,
reasonable taking into account circumstances
known to them as of the date of this
Agreement, specifically including
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assumptions as to mortality and expected
retirement ages, and, except as
adjusted to satisfy the requirements that
such assumptions be reasonable,
consistent with prior practice. Projected
costs include all legally required
contributions to any such plans, plus the
reasonably estimated ongoing costs of
providing the annual benefits payable under
any such Company Plans on the
assumption those plans remain in effect in
accordance with their terms.
(h) Neither the
Company nor any of its ERISA Affiliates,
currently maintains or has, within the
previous six years, maintained, been
obligated to contribute to or incurred any
liability that remains unsatisfied as
of the date of this Agreement with respect
to any multiemployer plan, as defined
in Section 3(37) of ERISA.
(i) Except as
set forth on the Company Disclosure
Schedule, neither the Company nor any of
its ERISA Affiliates is bound by any
collective bargaining agreement or legally
binding agreement to maintain or
contribute to any Company Plan.
(j) Each Company
Plan (i) has been administered in
material compliance with its terms (except
that in any case in which any Company
Plan is currently required to comply with a
provision of ERISA or of the Code,
but is not yet required to be amended to
reflect such provision, it has been
administered in accordance with such
provision); (ii) which is intended to be a
qualified plan within the meaning of
Section 401(a) of the Code has a favorable
determination from the IRS as to its
qualified status or is within the remedial
amendment period for making any required
changes and no determination letter
with respect to any Company Plan has been
revoked nor has the Company or any
ERISA Affiliate received notice of
threatened revocation, nor has any Company
Plan been amended, or failed to be amended,
since the date of its most recent
determination letter in any respect that
would adversely affect its
qualification or materially increase its
cost nor has any Company Plan been
amended in a manner that would require
security to be provided in accordance
with Section 401(a)(29) of the Code; (iii)
may, without liability, be amended,
terminated or otherwise discontinued,
except as specifically prohibited by
federal law; and (iv) which constitutes a
"Group Health Plan" under the
Administrative Simplification provisions of
the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") and
the regulations issued thereunder, such
Group Health Plans are in compliance in all
material respects with applicable
provisions of HIPAA and the HIPAA
regulations.
(k) There are no
pending investigations by any
governmental agency involving the Company
Plans, no termination proceedings
involving the Company Plans, and no
threatened or pending claims (except for
claims for benefits payable in the normal
operation of the Company Plans), suits
or proceedings against any Company Plan or
asserting any rights or claims to
benefits under any Company Plan which could
give rise to any material liability,
nor, to the best of the Company's or any
ERISA Affiliate's knowledge are there
any facts which could give rise to any
material liability in the event of any
such investigation, claim, suit or
proceeding.
(l) Neither the
Benefit Plans, the Company, any ERISA
Affiliate, nor any employee of the
foregoing, nor, to the best of the Company's
knowledge, any trusts created thereunder,
nor any trustee, administrator or
other fiduciary thereof, has engaged in a
"prohibited transaction" (as such term
is defined in Section 4975 of the Code or
Section 406 of ERISA)
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which could subject any thereof to the tax
or penalty on prohibited transactions
imposed by such Section 4975 or the
sanctions imposed under Title I of ERISA.
(m) Except as
set forth in Section 4.12(m) of the
Company Disclosure Schedule which shall
include a detailed description of the
payments and other obligations of the
Company under such Company Plan, no
Company Plan provides benefits, payments or
other remuneration to any employee,
director, former employee or former
director, including, without limitation,
death or medical benefits, upon a change of
control, or beyond termination of
service or retirement other than (A)
coverage mandated by law or (B) death or
retirement benefits under a Company Plan
qualified under Section 401(a) of the
Code. Except as set forth in Section
4.12(m) of the Company Disclosure Schedule,
neither the Company nor any ERISA Affiliate
has made a written or oral
representation to any current or former
employee promising or guaranteeing any
employer paid continuation of medical,
dental, life or disability coverage for
any period of time beyond retirement or
termination of employment.
(n) The Company
maintains, and has complied with in all
material respects, its policies or
practices, on the proper classification for
all employees, leased employees,
consultants and independent contractors, for
all purposes (including, without
limitation, for all Tax purposes and for
purposes of determining eligibility to
participate in any Company Plan).
(o) Neither the
Company nor any ERISA Affiliate has
incurred or is reasonably likely to incur
any liability with respect to any plan
or arrangement that would be included
within the definition of "Company Plan"
hereunder but for the fact that such plan
or arrangement was terminated before
the date of this Agreement.
(p) There are no
material pension, welfare, stock
option, stock purchase, stock appreciation
right, other stock based, deferred
compensation, severance, change-in-control,
incentive or bonus plan, program,
contract or agreement which would be
described in Section 4.12(a) above, but for
the fact that such plans are maintained
outside the jurisdiction of the United
States.
Section
4.13. Labor
Controversies. There are no controversies pending
or, to the knowledge of the Company,
threatened between the Company or its
subsidiaries and any of their respective
employees, except for such
controversies which have not had and could
not reasonably be expected to have,
individually or in the aggregate, a Company
Material Adverse Effect. Neither the
Company nor any of its subsidiaries is a
party to any collective bargaining
agreement or other labor union contract
applicable to persons employed by the
Company or any of its subsidiaries, nor
does the Company know of any activities
or proceedings of any labor union to
organize any such employees. The Company
and each of its subsidiaries have no
knowledge of any current strikes,
slowdowns, work stoppages, lockouts or
threats thereof, by or with respect to
any employees of the Company or its
subsidiaries.
Section
4.14.
Environmental Matters.
(a) The Company
and each of its subsidiaries is in
compliance in all material respects with
all applicable federal, state, local
and foreign laws, statutes, orders,
rules,
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regulations, ordinances, decrees, orders or
judgments relating to protection of
human health and the environment
(including, without limitation, ambient air,
surface water, ground water, land surface
or subsurface strata) and worker
health and safety (collectively,
"Environmental Laws"), which compliance
includes, but is not limited to, the
possession by the Company and its
subsidiaries of all material Permits
required under applicable Environmental
Laws, and compliance in all material
respects with the terms and conditions
thereof. Neither the Company nor its
subsidiaries have received written notice
of or, to the Knowledge of the Company, is
the subject of, any action, cause of
action, claim, investigation, penalty,
demand or notice by any Person alleging
liability under or non-compliance with any
Environmental Law (an "Environmental
Claim") that is unresolved or for which
payment or other performance is still
pending. Neither the Company nor any of its
subsidiaries have received any
unresolved written request for information,
notice of claim, demand or
notification that it is or may be
potentially responsible for any investigation,
examination or response action in
connection with any Release or threatened
Release of Hazardous Substances.
(b) No
hazardous, toxic or polluting substance, material
or waste, including, without limitation,
petroleum or fractions thereof,
polychlorinated biphenyls, asbestos or
asbestos-containing materials, and
radioactive materials ("Hazardous
Substances") have been released, spilled,
leaked, discharged, disposed of, pumped,
poured, emitted, emptied, injected,
leached, dumped or allowed to escape
("Released") by or on behalf of the
Company. Except as disclosed in Section
4.14(b) of the Company Disclosure
Schedule, to the actual Knowledge of the
Company, no person at any property now
or formerly owned, operated or leased by
the Company or any of its predecessors
has Released any Hazardous Substances. No
asbestos, asbestos-containing
materials or polychlorinated biphenyls are
present at any building on the
property operated or leased by the Company
or its subsidiaries in violation of
Environmental Laws or which requires
abatement, removal, retrofilling or other
investigation, remediation or other
response action. No Hazardous Substances
managed, used, generated, treated,
manufactured, processed, handled, stored,
recycled, transported, disposed or Released
by the Company or its subsidiaries
or any of their predecessors has come to be
located at any site listed on the
National Priorities List promulgated
pursuant to the Comprehensive Environmental
Response and Liability Act, CERCLIS or any
similar list maintained by any
Governmental Authority or which requires
investigation, remediation or other
response actions under applicable
Environmental Laws. Neither the Company nor
any of its subsidiaries have retained or
assumed by contract any material
liability or responsibility for any
environmental matters including liability
under or violations of Environmental Laws.
Except as set forth in Section 4.14
of the Company Disclosure Schedule and
heretofore provided to Parent and
Subsidiary, there have been no
environmental inspections, studies, audits,
tests, reviews or other analyses in
relation to any property or business now or
previously owned, operated or leased by
Company and its subsidiaries.
Section
4.15. Title to
Assets. The Company and each of its subsidiaries
has good and marketable title in fee simple
to all its real property and good
and valid title to all its material
leasehold interests and other material
assets and properties (real, personal or
intangible) reflected in the most
recent balance sheet included in the
Company Financial Statements, except for
properties and assets that have been
disposed of in the ordinary course of
business since the date of such balance
sheet, free and clear of all
Encumbrances, except (a) liens for current
taxes, payments of which are not yet
delinquent, and (b) such imperfections in
title and easements and
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encumbrances, if any, as do not materially
detract from the value, or interfere
with the present use of the property
subject thereto or affected thereby, or
otherwise materially impair the Company's
business operations. Section 4.15 of
the Company Disclosure Schedule sets forth
the addresses of the real property
owned by the Company and its subsidiaries.
All leases under which the Company
leases any real or personal property are in
good standing, valid and effective
in accordance with their respective terms,
and there is not, under any of such
leases, any existing default or event which
with notice or lapse of time or both
would become a default. The material
machinery and equipment owned or leased by
the Company and its subsidiaries is (i)
suitable for the uses to which it is
currently employed and (ii) in good
operating condition (except for ordinary
wear and tear).
Section
4.16.
Intellectual Property; Software.
(a) The Company
and each of its subsidiaries owns, or is
validly licensed or otherwise has the right
to use (in each case, free and clear
of all material Encumbrances) all patents,
patent applications, trademarks (both
registered and unregistered), trade names,
service marks (both registered and
unregistered), copyrights (both registered
and unregistered) and other
proprietary intellectual property rights,
computer programs and other technology
that are material to the Company's and its
subsidiaries' businesses. Section
4.16(a) of the Company Disclosure Schedule
sets forth, as of the date hereof, a
complete and accurate list of all patents
and pending patent applications,
trademarks, service marks, trade names,
material copyrights (including without
limitation, computer software programs),
and registrations and applications for
registration of copyrights, trademarks,
service marks, trade names, trade dress
and domain names (collectively
"Intellectual Property") owned or held for use by
the Company or any of its subsidiaries in
the conduct of their business.
(b) Section
4.16(b) of the Company Disclosure Schedule
sets forth a list of all material licenses,
sublicenses, consents and other
agreements (whether written or otherwise)
other than commercial off the shelf
("COTS") licenses for software ("Material
License") (A) pertaining to any
patents, trademarks, service marks, trade
names, trade dress, copyrights, trade
secrets, computer software (other than
commercially available, off-the-shelf
software applications obtained or licensed
for less than $5,000), web site
design, or other intellectual property used
by the Company or its subsidiaries
in the conduct of their businesses, and (B)
by which the Company licenses or
otherwise authorizes a third party to use
the Company's or its subsidiaries'
Intellectual Property. The Company is in
compliance in all material respects
with all applicable provisions of such
agreements, and such agreements are now,
and immediately following the Closing shall
be, in full force and effect. Except
as set forth in Section 4.16(b) of the
Company Disclosure Schedule, the
transactions contemplated under this
Agreement do not and will not trigger any
provision under any such license agreement
to (x) permit the termination of such
agreement by the licensor; (y) permit the
renegotiation of any terms, including
without limitation the amount of any
commission, royalty or other fee(s) payable
under such agreement; or (z) restrict, in
any material way, the Company's or
Surviving Corporation's use of such
intellectual property in the business
subsequent to the Effective Time. To the
Knowledge of the Company, the computer
software and information technology systems
owned, leased or licensed for use in
the business do not contain any viruses,
worms, or other disabling or malicious
code, and any such software or systems, to
the extent applicable, will
consistently and accurately interpret,
calculate, manipulate, store, and
exchange data/time date.
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(c) In each of
the following cases, except for those
matters that have not had and could not
reasonably be expected to have,
individually or in the aggregate, a Company
Material Adverse Effect: (i) to the
Knowledge of the Company, the business
operations of the Company and its
subsidiaries do not infringe, dilute,
misappropriate or otherwise violate the
patents, trademarks, service marks, trade
names, trade dress, copyrights
(including computer software), trade
secrets or other intellectual property
rights of any Person; (ii) to the Knowledge
of the Company, no Person is
challenging or infringing on or otherwise
violating any right of the Company or
any of its subsidiaries with respect to any
Company Intellectual Property; (iii)
the Company and its subsidiaries have not
received any written notice or
otherwise has Knowledge of any claim,
demand, suit, order or proceeding that the
operations of the Company or its
subsidiaries infringe, misappropriate or
otherwise violate the intellectual property
rights of any Person; (iv) to its
Knowledge, all Company Intellectual
Property is in full force and effect, is
held of record in the name of the Company
or its subsidiaries free and clear of
all Encumbrances, and is not the subject of
any cancellation or reexamination
proceeding or any proceeding challenging
their extent or validity; and (v) none
of the material trade secrets, know-how or
other confidential or proprietary
information of the Company or its
subsidiaries has been disclosed to any Person
unless such disclosure was necessary and
made pursuant to an appropriate
confidentiality agreement.
(d) The
information technology systems owned, licensed,
leased, operated on behalf of, or otherwise
held for use in the business by the
Company and its subsidiaries, including all
computer hardware, software,
firmware and telecommunications systems
used in the business of Company and its
subsidiaries perform reliably and in
material conformance with the appropriate
specifications or documentation for such
systems. Except for scheduled or
routine maintenance, the information
technology systems of Company and its
subsidiaries are fully available for use in
the business and, as applicable, by
the customers and clients of the Company,
24 hours a day, 7 days a week. The
Company and its subsidiaries have taken
commercially reasonable steps to provide
for the archival, back-up, recovery and
restoration of the critical business
data of the business.
(e) Except as
set forth in Section 4.16(e) of the
Company Disclosure Schedule, the Company
and its subsidiaries own or possess the
right to use, including without limitation
the right to modify and create
derivative works of, the design, content,
and all intellectual property rights
associated with and contained in all of the
Company's and its subsidiaries'
operating web sites. The Company and its
subsidiaries own all right, title and
interest in the design and content of the
web site free and clear of all claims,
including without limitation claims or
rights of joint owners and employees,
agents, consultants or other parties
involved in the development, creation,
maintenance or enhancement of the web
site.
Section
4.17. Brokers
and Finders. Except for its obligation to pay fees
and expenses pursuant to its agreement with
Everingham & Kerr, Inc., neither the
Company nor its subsidiaries have entered
into any contract, arrangement or
understanding with any Person which may
result in the obligation of the Company
or any of its subsidiaries or Parent or any
of its subsidiaries to pay any
finder's fees, brokerage or agent
commissions or other like payments in
connection with the transactions
contemplated hereby. Except for the fees and
expenses payable to Everingham & Kerr,
Inc., no Person is entitled to receive
any investment banking, brokerage or
finder's fee, or commission in connection
with this Agreement, the Merger or the
other
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transactions based upon arrangements made
by or on behalf of the Company or any
of its subsidiaries.
Section
4.18. New Jersey
Shareholders Protection Act and Rights
Agreement. Prior to the date hereof, the
Board of Directors of the Company has
taken all action necessary to exempt under
or make not subject to (x) the
provisions of the New Jersey Shareholders
Protection Act (the "NJSPA") and (y)
any other New Jersey takeover law or New
Jersey law that purports to limit or
restrict business combinations: (i) the
execution of this Agreement, (ii) the
Merger and (iii) the transactions
contemplated hereby.
Section
4.19. Affiliate
Transactions. Except as disclosed in Section
4.19 of the Company Disclosure Schedule,
since December 31, 2001, no director,
officer, employee or greater than five
percent (5%) shareholder of the Company
or member of the family of any such Person
or any entity in which any such
Person or any member of the family of any
such Person, has a substantial
interest or is an officer, director,
trustee, partner or holder of more than 5%
of the outstanding capital stock thereof,
is a party to any transaction with the
Company or any of its subsidiaries,
including any Contract providing for the
employment of, furnishing of services by,
rental of real or personal property
from or otherwise requiring payments to any
such Person or firm, other than
employment-at-will arrangements in the
ordinary course of business.
Section
4.20. Products
Liability. To the Knowledge of the Company, there
are no (a) liabilities, known or unknown,
fixed or contingent, with respect to
any products of the Company or any of its
subsidiaries that are based on a
theory of strict product liability,
negligence or other tort theories (as
distinct from product warranty claims
described in clause (b) below), or (b)
liabilities of the Company or its
subsidiaries, known or unknown, fixed or
contingent, which have been asserted, for
the breach of any express or implied
product warranty or any other similar claim
with respect to any product
manufactured or sold by the Company or it
subsidiaries (other than any claim
based on standard warranty obligations made
by the Company or it subsidiaries in
the ordinary course of the conduct of their
respective businesses to purchasers
of their products), which individually or
in the aggregate could reasonably be
expected to have a Company Material Adverse
Effect. Section 4.20 of the Company
Disclosure Schedule contains copies of the
Company's standard warranties and
return policies. The Company, its
subsidiaries and each of their respective
predecessors has not and does not produce,
market, distribute, sell or otherwise
use in the operation of its business any
product or component that contains
asbestos.
Section
4.21.
Relationship with Customers and Suppliers. Section 4.21 of
the Company Disclosure Schedule lists the
names and addresses of the 10
suppliers of the Company and its
subsidiaries which accounted for the largest
dollar volume of purchases by the Company
and its subsidiaries for the twelve
months ended August 31, 2003 (the "Major
Suppliers"). Section 4.21 of the
Company Disclosure Schedule lists the names
and addresses of the 10 customers of
the Company and its subsidiaries which
accounted for the largest dollar volume
of purchases from the Company and its
subsidiaries for the twelve months ended
August 31, 2003 (the "Major Customers").
The Company knows of no written or oral
communication, fact, event or action which
exists or has occurred within 12
months prior to the date hereof, which
would lead the Company reasonably to
believe that any Major Customer or any
Major Supplier will terminate or
materially and adversely modify its
business relationship with Company and its
subsidiaries.
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Section
4.22.
Indemnification Claims. Other than as set forth in Section
4.22 of the Company Disclosure Schedule,
the Company is not aware of any
indemnification, breach of contract or
similar claims by or against the Company
or any of its subsidiaries which are
pending or threatened (or which could be
reasonably expected to be made in the
future), in each case in excess of
$100,000 in amount, with respect to any
acquisition or disposition by the
Company or any of its subsidiaries of any
assets or businesses.
Section
4.23. Absence of
Questionable Payments. To the Company's
Knowledge, neither the Company, nor its
subsidiaries, nor any director, officer,
agent, employee or other person acting on
behalf of the Company or its
subsidiaries, has used any corporate or
other funds for unlawful contributions,
payments, gifts, or entertainment, or made
any unlawful expenditures relating to
political activity to government officials
or others or established or
maintained any unlawful or unrecorded funds
in violation of (i) Section 104 of
the Foreign Corrupt Practices Act of 1977
(15 U.S.C. 'SS'79dd-2), as amended, or
(ii) any other applicable foreign, federal
or state law. To the Company's
Knowledge, neither the Company, nor its
subsidiaries, nor any current director,
officer, agent, employee or other person
acting on behalf of the Company or its
subsidiaries, has accepted or received any
unlawful contributions, payments,
gifts, or expenditures.
Section
4.24. Board
Recommendation. The Board of Directors of the
Company, at a meeting duly called and held
on the date of execution of this
Agreement, has unanimously approved this
Agreement and (i) determined that this
Agreement and the transacti
