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AMENDED AND RESTATED
AGREEMENT AND PLAN OF
REORGANIZATION AND MERGER
by and among
VIDEO SENTRY CORPORATION,
KNOGO NORTH AMERICA INC.,
SENTRY TECHNOLOGY CORPORATION
VIKING MERGER CORP.
and
STRIP MERGER CORP.
Dated as of November 27, 1996
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TABLE OF CONTENTS
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ARTICLE I SENTRY.............................................. 2
1.1 Certificate of Incorporation and Bylaws............. 2
1.2 Directors and Officers.............................. 2
ARTICLE II THE MERGERS......................................... 2
2.1 The VIDEO Merger.................................... 2
2.2 VIDEO Effective Time................................ 2
2.3 The KNOGO Merger.................................... 3
2.4 KNOGO Effective Time................................ 3
2.5 Certificates of Incorporation and Bylaws............ 3
2.6 Directors and Officers.............................. 4
2.7 Effective Time...................................... 4
2.8 Closing............................................. 4
ARTICLE III CONVERSION OF SHARES................................ 4
3.1 VIDEO Stock......................................... 4
3.2 KNOGO Stock......................................... 5
3.3 SENTRY Stock........................................ 6
3.4 VMC Stock........................................... 6
3.5 SMC Stock........................................... 6
3.6 Exchange of Certificates............................ 6
3.7 Adjustment of Merger Consideration.................. 11
3.8 VIDEO Stock Options................................. 11
3.9 KNOGO Stock Options................................. 12
3.10 Stockholder Approval................................ 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF KNOGO............. 13
4.1 Organization and Qualification...................... 13
4.2 Capitalization...................................... 13
4.3 Authorization and Validity of Agreement............. 14
4.4 Consents and Approvals.............................. 15
4.5 No Violation........................................ 15
4.6 SEC Reports; Financial Statements................... 16
4.7 Joint Proxy Statement/Prospectus.................... 17
4.8 Compliance with Law................................. 17
4.9 Absence of Certain Changes.......................... 18
4.10 No Undisclosed Liabilities.......................... 18
4.11 Litigation.......................................... 18
4.12 Employee Benefit Matters............................ 18
4.13 Taxes............................................... 19
4.14 Intellectual Property............................... 20
4.15 Labor Matters....................................... 20
4.16 Brokers and Finders................................. 20
4.17 Opinion of Financial Advisor........................ 20
4.18 Section 351/Reorganization Treatment................ 20
4.19 VIDEO Shares Ownership.............................. 20
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF VIDEO,
SENTRY, VMC AND SMC................................. 21
5.1 Organization and Qualification...................... 21
5.2 Capitalization...................................... 21
5.3 Authorization and Validity of Agreement............. 24
5.4 Consents and Approvals.............................. 24
5.5 No Violation........................................ 25
5.6 SEC Reports; Financial Statements................... 25
5.7 Joint Proxy Statement/Prospectus.................... 26
5.8 Compliance with Law................................. 26
5.9 Absence of Certain Changes.......................... 27
5.10 No Undisclosed Liabilities.......................... 27
5.11 Litigation.......................................... 27
5.12 Employee Benefit Matters............................ 28
5.13 Taxes............................................... 28
5.14 Intellectual Property............................... 29
5.15 Labor Matters....................................... 29
5.16 Brokers and Finders................................. 29
5.17 Opinion of Financial Advisor........................ 29
5.18 Section 351/Reorganization Treatment................ 29
5.19 KNOGO Shares Ownership.............................. 30
5.20 Operations of SENTRY, VMC and SMC................... 30
ARTICLE VI COVENANTS........................................... 30
6.1 Conduct of the Business of KNOGO and VIDEO
Pending the Reorganization.......................... 30
6.2 Access; Confidentiality............................. 32
6.3 Meetings of Stockholders............................ 32
6.4 Reasonable Efforts.................................. 32
6.5 Public Announcements................................ 33
6.6 Acquisition Proposals............................... 33
6.7 Registration Statement and Joint Proxy
Statement/Prospectus................................ 34
6.8 Listing Application................................. 35
6.9 Affiliate Letters................................... 35
6.10 D&O Indemnification and Insurance................... 36
6.11 Employee Benefits................................... 37
6.12 Fees and Expenses................................... 38
6.13 Cancellation of SENTRY Common Stock................. 39
ARTICLE VII CLOSING CONDITIONS.................................. 39
7.1 Conditions to Obligations of Each Party to
Effect the Reorganization........................... 39
7.2 Conditions Precedent to the Obligations of
KNOGO............................................... 40
7.3 Conditions Precedent to the Obligations of
VIDEO, SENTRY, VMC and SMC.......................... 41
ARTICLE VIII TERMINATION......................................... 42
8.1 Termination......................................... 42
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8.2 Effect of Termination............................... 43
ARTICLE IX MISCELLANEOUS....................................... 44
9.1 Nonsurvival of Representations, Warranties and
Covenants........................................... 44
9.2 Notices............................................. 44
9.3 Certain Definitions................................. 45
9.4 Entire Agreement.................................... 46
9.5 Assignment; Binding Effect.......................... 46
9.6 Amendments.......................................... 47
9.7 Waiver.............................................. 47
9.8 Validity............................................ 47
9.9 Captions............................................ 47
9.10 Counterparts........................................ 47
9.11 Governing Law....................................... 47
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AND MERGER, dated as of November 27, 1996, (the "Agreement") is by and among
VIDEO SENTRY CORPORATION, a Minnesota corporation ("VIDEO"), KNOGO NORTH AMERICA
INC., a Delaware corporation ("KNOGO"), SENTRY TECHNOLOGY CORPORATION, a
Delaware corporation ("SENTRY"), VIKING MERGER CORP., a Minnesota corporation
and a wholly owned subsidiary of SENTRY formed solely to effectuate the
transactions contemplated hereby ("VMC"), and STRIP MERGER CORP., a Delaware
corporation and wholly owned subsidiary of SENTRY formed solely to effectuate
the transactions contemplated hereby ("SMC").
RECITALS
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WHEREAS, the Boards of Directors of VIDEO and KNOGO each have
approved, and deem it advisable and in the best interests of their respective
companies and stockholders to consummate the reorganization and mergers provided
for herein, pursuant to which SENTRY will acquire all of the common stock of
each of VIDEO and KNOGO through mergers of VMC and SMC, subsidiaries of SENTRY,
with and into each of VIDEO and KNOGO, respectively, and accordingly have agreed
to effect the Reorganization (as defined in Section 2.3 below) upon the terms
and subject to the conditions set forth herein;
WHEREAS, it is intended that, for Federal income tax purposes,
(i) the VIDEO Merger (as hereinafter defined) qualify as a reorganization under
the provisions of Section 368(a) of the United States Internal Revenue Code of
1986, as amended, and the regulations thereunder (the "Code") and/or as an
exchange under the provisions of Section 351 of the Code and (ii) that the KNOGO
Merger (as hereinafter defined) qualify as an exchange under the provisions of
Section 351 of the Code;
WHEREAS, KNOGO, VIDEO, SENTRY, VMC and SMC desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement; and
WHEREAS, on October 10, 1996, the above-named parties entered
into that certain Agreement and Plan of Reorganization and Merger (the "Initial
Merger Agreement"), and the parties thereto and hereto now desire to amend and
restate the Initial Merger Agreement as provided herein.
NOW, THEREFORE, in consideration of the foregoing and of the
respective representations, warranties, covenants and agreements set forth in
this Agreement, the parties hereto hereby agree as follows:
AGREEMENT
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ARTICLE I
SENTRY
1.1 Certificate of Incorporation and Bylaws. At the Effective
Time (as defined in Section 2.7), the certificate of incorporation of SENTRY
(the "SENTRY Certificate of Incorporation") shall be in form substantially
similar to Exhibit A attached hereto. At the Effective Time, the Bylaws of
SENTRY (the "SENTRY Bylaws") shall be in form as mutually agreed upon by VIDEO
and KNOGO.
1.2 Directors and Officers. At the Effective Time, the initial
directors of SENTRY shall be as set forth in Exhibit B hereto, each to hold
office in accordance with the SENTRY Certificate of Incorporation and SENTRY
Bylaws until such directors' successors are elected and qualified. The initial
officers of SENTRY shall be as set forth in Exhibit B hereto and shall serve at
the discretion of its Board of Directors in accordance with the SENTRY Bylaws.
ARTICLE II
THE MERGERS; CLOSING
2.1 The VIDEO Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with applicable provisions of the
Minnesota Business Corporation Act (the "Minnesota Act"), at the VIDEO Effective
Time (as defined in Section 2.2 below), VMC shall be merged with and into VIDEO
(the "VIDEO Merger"). As a result of the VIDEO Merger, the separate corporate
existence of VMC shall cease and VIDEO shall continue as the surviving
corporation of the VIDEO Merger (the "VIDEO Surviving Corporation").
2.2 VIDEO Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto will cause an articles of merger (the "Articles of
Merger") to be executed and filed with the Secretary of State of the State of
Minnesota in accordance with the Minnesota Act. The VIDEO Merger shall become
effective at such time as the Articles of Merger are filed with the Secretary of
State of the State of Minnesota in accordance with the Minnesota
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Act, or at such later time as may be specified in the Articles of Merger in
accordance with applicable law (such time and date herein referred to as the
"VIDEO Effective Time"). At the VIDEO Effective Time, the VIDEO Merger shall
have the effects set forth in the applicable provisions of the Minnesota Act.
2.3 The KNOGO Merger. Upon the terms and subject to the
conditions of this Agreement and in accordance with applicable provisions of the
Delaware General Corporation Law (the "DGCL"), at the KNOGO Effective Time (as
defined in Section 2.4 below), SMC shall be merged with and into KNOGO (the
"KNOGO Merger")(together with the VIDEO Merger, the "Reorganization"). As a
result of the KNOGO Merger, the separate corporate existence of SMC shall cease
and KNOGO shall continue as the surviving corporation of the KNOGO Merger (the
"KNOGO Surviving Corporation").
2.4 KNOGO Effective Time. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, the parties hereto will cause a certificate of merger (the "Certificate of
Merger") to be executed and filed with the Secretary of State of the State of
Delaware in accordance with the DGCL. The KNOGO Merger shall become effective at
such time as the Certificate of Merger is filed with the Secretary of State of
the State of Delaware in accordance with the DGCL, or at such later time as may
be specified in the Certificate of Merger in accordance with applicable law
(such time and date herein referred to as the "KNOGO Effective Time"). At the
KNOGO Effective Time, the KNOGO Merger shall have the effects set forth in the
applicable provisions of the DGCL.
2.5 Certificates of Incorporation and Bylaws. (a) The
Certificate of Incorporation of VMC as in effect immediately prior to the VIDEO
Effective Time (the "VMC Certificate") shall be the Certificate of Incorporation
of the VIDEO Surviving Corporation immediately after the VIDEO Effective Time.
(b) The Certificate of Incorporation of SMC as in effect
immediately prior to the KNOGO Effective Time (the "SMC Certificate") shall be
the Certificate of Incorporation of the KNOGO Surviving Corporation immediately
after the KNOGO Effective Time.
(c) The Bylaws of VMC as in effect immediately prior to the
VIDEO Effective Time (the "VMC Bylaws") shall be the Bylaws of the VIDEO
Surviving Corporation immediately after the VIDEO Effective Time.
(d) The Bylaws of SMC as in effect immediately prior to the
KNOGO Effective Time (the "SMC Bylaws") shall be the Bylaws of the KNOGO
Surviving Corporation immediately after the KNOGO Effective Time.
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2.6 Directors and Officers. (a) The directors of VMC
immediately prior to the VIDEO Effective Time shall be the directors of the
VIDEO Surviving Corporation as of the VIDEO Effective Time and until their
successors are duly appointed or elected in accordance with applicable law.
(b) The directors of SMC immediately prior to the KNOGO
Effective Time shall be the directors of the KNOGO Surviving Corporation as of
the KNOGO Effective Time and until their successors are duly appointed or
elected in accordance with applicable law.
(c) The officers of VIDEO immediately prior to the VIDEO
Effective Time shall be the officers of the VIDEO Surviving Corporation as of
the VIDEO Effective Time until their successors are duly appointed or elected in
accordance with applicable law.
(d) The officers of KNOGO immediately prior to the KNOGO
Effective Time shall be the officers of the KNOGO Surviving Corporation as of
the KNOGO Effective Time until their successors are duly appointed or elected in
accordance with applicable law.
2.7 Effective Time. The term "Effective Time" shall mean the
time and date which is (A) the later of (i) the VIDEO Effective Time and (ii)
the KNOGO Effective Time, or (B) such other time and date as may be agreed to in
writing by VIDEO and KNOGO. The parties hereto agree that each will use its best
efforts to ensure that the VIDEO Effective Time and the KNOGO Effective Time
occur upon the same date and at the same time.
2.8 Closing. Unless this Agreement shall have been terminated
pursuant to Article VIII and subject to the satisfaction or, if permissible,
waiver of the conditions set forth in Article VII, the consummation of the VIDEO
Merger, the KNOGO Merger, and the other transactions contemplated hereby (the
"Closing") shall take place at the offices of Xxxxx Xxxxxxxxxx, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as promptly as practicable following the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII, unless another place, date or time is agreed to in writing by VIDEO and
KNOGO.
ARTICLE III
CONVERSION OF SHARES
3.1 VIDEO Stock. At the VIDEO Effective Time, by virtue of the
VIDEO Merger and without any action on the part of any of the parties hereto or
the holders of any shares of the capital stock of SENTRY, VIDEO OR KNOGO, each
share of VIDEO common stock, par value $0.01 per share (the "VIDEO Shares"),
which is issued and outstanding immediately prior to the VIDEO Effective Time
shall be
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converted into and represent the right to receive one share of common stock, par
value $0.001 per share, of SENTRY ("SENTRY Common Stock") (the "VIDEO Merger
Consideration"). All such VIDEO Shares shall no longer be outstanding and shall
automatically be canceled and extinguished and shall cease to exist, and each
certificate which immediately prior to the VIDEO Effective Time evidenced any
such VIDEO Shares ("VIDEO Certificates") shall thereafter represent the right to
receive (without interest), upon surrender of such VIDEO Certificate in
accordance with the provisions of Section 3.6, the VIDEO Merger Consideration
multiplied by the number of VIDEO Shares evidenced by such VIDEO Certificate.
The holders of VIDEO Certificates previously evidencing VIDEO Shares outstanding
immediately prior to the VIDEO Effective Time shall cease to have any rights
with respect thereto (including, without limitation, any rights to vote or to
receive dividends and distributions in respect of such VIDEO Shares), except as
otherwise provided herein or by law. At the VIDEO Effective Time, each VIDEO
Share held in VIDEO's treasury immediately prior to the Effective Time shall, by
virtue of the VIDEO Merger, be canceled and retired and cease to exist, without
any conversion thereof. All other classes of VIDEO stock held in treasury shall
also be canceled.
3.2 KNOGO Stock. At the KNOGO Effective Time, by virtue of the
KNOGO Merger and without any action on the part of any of the parties hereto or
the holders of any shares of the capital stock of SENTRY, VIDEO OR KNOGO, each
1.2022 shares of KNOGO common stock, par value $0.01 per share (the "KNOGO
Shares"), which is issued and outstanding immediately prior to the KNOGO
Effective Time shall be converted into and represent the right to receive one
share of SENTRY Common Stock (the "KNOGO Common Stock Consideration"), plus one
share of preferred stock, par value $0.001 per share, of SENTRY ("SENTRY Class A
Preferred Stock"; such SENTRY Class A Preferred Stock having the terms set forth
in Exhibit A attached hereto) (together with the KNOGO Common Stock
Consideration, the "KNOGO Merger Consideration" and with the VIDEO Merger
Consideration, collectively, the "Merger Consideration"). All such KNOGO Shares
shall no longer be outstanding and shall automatically be canceled and
extinguished and shall cease to exist, and each certificate which immediately
prior to the KNOGO Effective Time evidenced any such KNOGO Shares ("KNOGO
Certificates") shall thereafter represent the right to receive (without
interest), upon surrender of such KNOGO Certificate in accordance with the
provisions of Section 3.6, the KNOGO Merger Consideration multiplied by the
number of KNOGO Shares evidenced by such KNOGO Certificate. The holders of KNOGO
Certificates previously evidencing KNOGO Shares outstanding immediately prior to
the KNOGO Effective Time shall cease to have any rights with respect thereto
(including, without limitation, any rights to vote or to receive dividends and
distributions in respect of such KNOGO Shares), except as otherwise provided
herein or by law. At the KNOGO Effective Time, each KNOGO Share held in KNOGO's
treasury immediately prior to the KNOGO Effective Time shall, by virtue of
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the KNOGO Merger, be canceled and retired and cease to exist, without any
conversion thereof. All other classes of KNOGO stock held in treasury shall also
be canceled.
3.3 SENTRY Stock. At the Effective Time, each share of SENTRY
Common Stock, which immediately prior to the Effective Time is owned by VIDEO,
shall be canceled and extinguished and shall cease to exist and no consideration
shall be delivered with respect thereto.
3.4 VMC Stock. Each share of common stock, par value $.001 per
share, of VMC (the "VMC Common Stock") outstanding immediately prior to the
VIDEO Effective Time shall, by virtue of the VIDEO Merger and without any
further action by the holder thereof, be converted into and become one share of
common stock, par value $.001 per share, of the VIDEO Surviving Corporation (the
"VIDEO Surviving Corporation Common Stock"). Each certificate which immediately
prior to the VIDEO Effective Time represented outstanding shares of VMC Common
Stock shall, on and after the VIDEO Effective Time, be deemed for all purposes
to represent the number of shares of VIDEO Surviving Corporation Common Stock
into which the shares of VMC Common Stock represented by such certificate shall
have been converted pursuant to this Section 3.4.
3.5 SMC Stock. Each share of common stock, par value $.001 per
share, of SMC (the "SMC Common Stock") outstanding immediately prior to the
KNOGO Effective Time shall, by virtue of the KNOGO Merger and without any
further action by the holder thereof, be converted into and become one share of
common stock, par value $.001 per share, of the KNOGO Surviving Corporation (the
"KNOGO Surviving Corporation Common Stock"). Each certificate which immediately
prior to the KNOGO Effective Time represented outstanding shares of SMC Common
Stock shall, on and after the KNOGO Effective Time, be deemed for all purposes
to represent the number of shares of KNOGO Surviving Corporation Common Stock
into which the shares of SMC Common Stock represented by such certificate shall
have been converted pursuant to this Section 3.5.
3.6 Exchange of Certificates. (a) As of the Effective Time,
SENTRY shall deposit, or shall cause to be deposited, with an exchange agent
mutually selected by VIDEO and KNOGO (the "Exchange Agent"), for the benefit of
the holders of VIDEO Shares and KNOGO Shares, for exchange in accordance with
this Article III, certificates representing the shares of SENTRY Common Stock
and SENTRY Class A Preferred Stock (such certificates for shares of SENTRY
Common Stock and SENTRY Class A Preferred Stock, together with any dividends or
distributions with respect thereto (relating to record dates for such dividends
or distributions after the Effective Time), being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to this Article III and paid pursuant to
this Section 3.6 in exchange for outstanding VIDEO Shares and KNOGO Shares.
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(b) Promptly after the Effective Time, SENTRY shall cause the
Exchange Agent to mail to each holder of record of VIDEO Shares (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to such VIDEO Shares shall pass, only upon delivery of the VIDEO
Certificates representing such VIDEO Shares to the Exchange Agent and which
shall be in such form and have such other provisions as SENTRY may reasonably
specify and (ii) instructions for use in effecting the surrender of such VIDEO
Certificates in exchange for certificates representing shares of SENTRY Common
Stock and cash in lieu of fractional shares. Upon surrender of a VIDEO
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of VIDEO Shares represented by such VIDEO Certificate shall
be entitled to receive in exchange therefor (x) a certificate representing that
number of whole shares of SENTRY Common Stock and (y) a check representing the
amount of cash in lieu of fractional shares (in accordance with Section 3.6(f)
below), if any, and unpaid dividends and distributions, if any, which such
holder has the right to receive in respect of the VIDEO Certificate surrendered
pursuant to the provisions of this Article III, after giving effect to any
required withholding tax, and the VIDEO Shares represented by the VIDEO
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on the cash in lieu of fractional shares and unpaid dividends and
distributions, if any, payable to holders of VIDEO Shares. In the event of a
transfer of ownership of VIDEO Shares which is not registered in the transfer
records of VIDEO, a certificate representing the proper number of shares of
SENTRY Common Stock, together with a check for the cash to be paid in lieu of
fractional shares (in accordance with Section 3.6(f) below), may be issued to
such a transferee if the VIDEO Certificate representing such VIDEO Shares is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) Promptly after the Effective Time, SENTRY shall cause the
Exchange Agent to mail to each holder of record of KNOGO Shares (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to such KNOGO Shares shall pass, only upon delivery of the KNOGO
Certificates representing such KNOGO Shares to the Exchange Agent and which
shall be in such form and have such other provisions as SENTRY may reasonably
specify and (ii) instructions for use in effecting the surrender of such KNOGO
Certificates in exchange for certificates representing shares of SENTRY Common
Stock, SENTRY Class A Preferred Stock and cash in lieu of fractional shares.
Upon surrender of a KNOGO Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of KNOGO Shares represented
by such KNOGO Certificate
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shall be entitled to receive in exchange therefor (x) a certificate representing
that number of whole shares of SENTRY Common Stock, (y) a certificate
representing that number of whole shares of SENTRY Class A Preferred Stock, and
(z) a check representing the amount of cash in lieu of fractional shares (in
accordance with Section 3.6(f) below), if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect of
the KNOGO Certificate surrendered pursuant to the provisions of this Article
III, after giving effect to any required withholding tax, and the KNOGO Shares
represented by the KNOGO Certificate so surrendered shall forthwith be canceled.
No interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of KNOGO Shares.
In the event of a transfer of ownership of KNOGO Shares which is not registered
in the transfer records of KNOGO, a certificate representing the proper number
of shares of SENTRY Common Stock and SENTRY Class A Preferred Stock and a check
for the cash to be paid in lieu of fractional shares (in accordance with Section
3.6(f) below), may be issued to such a transferee if the KNOGO Certificate
representing such KNOGO Shares is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
(d) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions declared after the Effective Time on SENTRY
Common Stock or SENTRY Class A Preferred Stock shall be paid with respect to any
shares represented by a VIDEO or KNOGO Certificate, as the case may be, until
such Certificate is surrendered for exchange as provided herein. Subject to the
effect of applicable laws, following surrender of any such VIDEO or KNOGO
Certificate, there shall be paid to the holder of the certificates representing
whole shares of SENTRY Common Stock or SENTRY Class A Preferred Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of SENTRY
Common Stock or SENTRY Class A Preferred Stock and not paid, less the amount of
any withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of SENTRY Common Stock or
SENTRY Class A Preferred Stock, less the amount of any withholding taxes which
may be required thereon.
(e) At or after the VIDEO Effective Time, there shall be no
transfers on the stock transfer books of VIDEO of the VIDEO Shares which were
outstanding immediately prior to the VIDEO Effective Time. At or after the KNOGO
Effective Time, there shall be no transfers on the stock transfer books of KNOGO
of the KNOGO Shares which were outstanding immediately prior to the KNOGO
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Effective Time. If, after the Effective Time, VIDEO or KNOGO Certificates are
presented to SENTRY, they shall be canceled and exchanged for certificates for
shares of SENTRY Common Stock (and SENTRY Class A Preferred Stock in the case of
KNOGO Shares) and cash in lieu of fractional shares (in accordance with Section
3.6(f) below), if any, deliverable in respect thereof pursuant to this Agreement
in accordance with the procedures set forth in this Article III. Certificates
surrendered for exchange by any person constituting an "affiliate" of KNOGO or
VIDEO for purposes of Rule 145(c) under the Securities Act of 1933, as amended
(the "Securities Act"), shall not be exchanged until SENTRY has received a
written agreement from such person as provided in Section 6.9.
(f) No fractional shares of SENTRY Common Stock or SENTRY
Class A Preferred Stock shall be issued pursuant hereto. As promptly as possible
following the Effective Time, the Exchange Agent shall determine the excess of
(i)(A) the number of full shares of SENTRY Common Stock delivered to the
Exchange Agent by SENTRY pursuant to Section 3.6(a) over (B) the number of full
shares of SENTRY Common Stock to be distributed to the holders of VIDEO Shares
and KNOGO Shares pursuant to Sections 3.6(b) and 3.6(c) (such excess being
herein referred to as the "Excess Common Shares"), and (ii)(A) the number of
full shares of SENTRY Class A Preferred Stock delivered to the Exchange Agent by
SENTRY pursuant to Section 3.6(a) over (B) the number of full shares of SENTRY
Class A Preferred Stock to be distributed to the holders of KNOGO Shares
pursuant to Sections 3.6(c) (such excess being herein referred to as the "Excess
Preferred Shares"). As soon after the Effective Date as practicable, the
Exchange Agent, as agent for the holders of SENTRY Common Stock and SENTRY Class
A Preferred Stock, shall sell the Excess Common Shares and Excess Preferred
Shares at the then prevailing prices on the NASDAQ Stock Market's National
Market ("NASDAQ"), or such other national securities exchange as is applicable,
through one or more member firms of NASDAQ, or other national securities
exchange, as the case may be, in round lots to the extent practicable. SENTRY
shall pay all commissions, transfer taxes and other out-of-pocket transactions
costs, including the expenses and compensation of the Exchange Agent incurred in
connection with such sale of the Excess Common Shares and Excess Preferred
Shares. Until the proceeds of such sale or sales have been distributed to the
holders of SENTRY Common Stock or SENTRY Class A Preferred Stock entitled to
receipt of such proceeds, the Exchange Agent shall hold such proceeds in trust
for those holders of SENTRY Common Stock and SENTRY Class A Preferred Stock. The
Exchange Agent shall determine the portion of the proceeds from the sale of (i)
the Excess Common Shares (the "Excess Common Shares Proceeds") to which each
holder of SENTRY Common Stock is entitled, if any, by multiplying the amount of
the Excess Common Shares Proceeds by a fraction, the numerator of which is the
amount of the fractional share interest to which such holder of SENTRY Common
Stock is entitled, and the denominator of which is the aggregate
9
amount of fractional share interests to which all of the holders of SENTRY
Common Stock are entitled, and (ii) the Excess Preferred Shares (the "Excess
Preferred Shares Proceeds") to which each holder of SENTRY Class A Preferred
Stock is entitled, if any, by multiplying the amount of the Excess Preferred
Shares Proceeds by a fraction, the numerator of which is the amount of the
fractional share interest to which such holder of SENTRY Class A Preferred Stock
is entitled, and the denominator of which is the aggregate amount of fractional
share interests to which all of the holders of SENTRY Class A Preferred Stock
are entitled. As soon as practicable after the sale of the Excess Common Shares
and the Excess Preferred Shares and the determination of the amount of cash, if
any, to be paid to each holder of SENTRY Common Stock and SENTRY Class A
Preferred Stock in lieu of any fractional share interests, the Exchange Agent
shall distribute such amounts to the holders of SENTRY Common Stock and SENTRY
Class A Preferred Stock entitled thereto and who have theretofore delivered
VIDEO Certificates or KNOGO Certificates for SENTRY Company Common Stock and/or
SENTRY Class A Preferred Stock, as the case may be, pursuant to this Article
III.
(g) Any portion of the Exchange Fund (including the proceeds
of any investments thereof and any shares of SENTRY Common Stock and SENTRY
Class A Preferred Stock) that remains unclaimed by the former stockholders of
KNOGO or VIDEO one year after the Effective Time shall be delivered to SENTRY.
Any former stockholder of KNOGO or VIDEO who has not theretofore complied with
this Article III shall thereafter look only to SENTRY for payment of their
shares of SENTRY Common Stock, SENTRY Class A Preferred Stock, cash in lieu of
fractional shares and unpaid dividends and distributions on the SENTRY Common
Stock and SENTRY Class A Preferred Stock deliverable in respect of each VIDEO or
KNOGO Share such stockholder holds as determined pursuant to this Agreement, in
each case, without any interest thereon.
(h) None of VIDEO, KNOGO, SENTRY, VMC, SMC, the Exchange Agent
or any other person shall be liable to any former holder of VIDEO Shares or
KNOGO Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(i) In the event any VIDEO or KNOGO Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by SENTRY, the posting by such person of a bond in such reasonable
amount as SENTRY may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the shares of SENTRY
Common Stock (and SENTRY Class A Preferred Stock in the case of KNOGO Shares)
and cash in lieu of fractional shares (in accordance with Section 3.6(f) below),
and
10
unpaid dividends and distributions on shares of SENTRY Common Stock (and SENTRY
Class A Preferred Stock in the case of KNOGO Shares) as provided in this Section
3.6, deliverable in respect thereof pursuant to this Agreement.
3.7 Adjustment of Merger Consideration. In the event that, (i)
subsequent to the date of this Agreement but prior to the VIDEO Effective Time,
the outstanding shares of VIDEO shall have been changed into a different number
of shares or a different claim as a result of a stock split, reverse stock
split, stock dividend, subdivision, reclassification, split, combination,
exchange, recapitalization or other similar transaction, or (ii) subsequent to
the date of this Agreement but prior to the KNOGO Effective Time, the
outstanding shares of KNOGO shall have been changed into a different number of
shares or a different claim as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, split, combination, exchange,
recapitalization or other similar transaction, then the Merger Consideration
shall be appropriately adjusted.
3.8 VIDEO Stock Options. (a) At the VIDEO Effective Time, all
outstanding options and other rights to acquire shares granted to employees
under any stock option or purchase plan, program or similar arrangement (each,
as amended, an "Option Plan" and, such options and other rights, "Stock
Options") of VIDEO and, with respect to employees and non-employees, all
outstanding warrants to purchase VIDEO Shares (the "Warrants"), whether or not
such Stock Options or Warrants are then exercisable or vested, will be assumed
by SENTRY and shall be exercisable upon the same terms and conditions as under
the applicable Warrant or Option Plan and option agreement issued thereunder,
except that (i) each such Stock Option or Warrant shall be exercisable for that
whole number of shares of SENTRY Common Stock (to the nearest share) into which
the number of VIDEO Shares subject to such Stock Option or Warrant immediately
prior to the Effective Time would be converted under Section 3.1, and (ii) the
option exercise price or Warrant exercise price per share of SENTRY Common Stock
shall be an amount equal to the option exercise price or warrant exercise price
per VIDEO Share of such Stock Option or Warrant in effect immediately prior to
the VIDEO Effective Time divided by the VIDEO Merger Consideration (the option
exercise price or Warrant exercise price per VIDEO Share, as so determined,
being rounded upwards to the nearest full cent). No payment shall be made for
fractional interests.
(b) Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans, the Option Plans of
VIDEO shall terminate as of the VIDEO Effective Time and any rights under any
provisions in any other plan, program or arrangement providing for the issuance
or grant by VIDEO of any interest in respect of the capital stock of VIDEO shall
be canceled as of the VIDEO Effective Time.
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3.9 KNOGO Stock Options. (a) At the KNOGO Effective Time, all
outstanding options and other rights to acquire Shares granted to employees
under any Option Plan of KNOGO, whether or not then exercisable or vested, will
be assumed by SENTRY and shall be exercisable upon the same terms and conditions
as under the applicable Option Plan and option agreement issued thereunder,
except that (A)(i) each such Stock Option shall be exercisable for that whole
number of shares of SENTRY Common Stock (to the nearest share) into which the
number of KNOGO Shares subject to such Stock Option immediately prior to the
Effective Time would be converted under Section 3.2, and (ii) each such Stock
Option shall be exercisable for that whole number of shares of SENTRY Class A
Preferred Stock (to the nearest share) into which the number of KNOGO Shares
subject to such Stock Option immediately prior to the Effective Time would be
converted under Section 3.2, provided that if all of the issued and outstanding
SENTRY Class A Preferred Stock has been theretofore redeemed or converted in the
manner set forth in the SENTRY Certificate of Incorporation, attached hereto as
Exhibit A, then in lieu of the SENTRY Class A Preferred Stock, the holders of
such Stock Options shall receive the same consideration paid to the holders of
SENTRY Class A Preferred Stock upon such redemption or conversion, and (B) the
option exercise price per share of SENTRY Common Stock (including SENTRY Class A
Preferred Stock) shall be an amount equal to the option exercise price per KNOGO
Share of such Stock Option in effect immediately prior to the KNOGO Effective
Time divided by the KNOGO Common Stock Consideration (the option exercise price
per KNOGO Share, as so determined, being rounded upwards to the nearest full
cent). No payment shall be made for fractional interests.
(b) Except as provided herein or as otherwise agreed to by the
parties and to the extent permitted by the Option Plans, the Option Plans of
KNOGO shall terminate as of the KNOGO Effective Time and any rights under any
provisions in any other plan, program or arrangement providing for the issuance
or grant by KNOGO of any interest in respect of the capital stock of KNOGO shall
be canceled as of the KNOGO Effective Time.
3.10 Stockholder Approval. (a) This Agreement shall be
submitted for consideration and approval to the holders of VIDEO Shares at a
special meeting of stockholders duly held for such purpose by VIDEO (the "VIDEO
Stockholders' Meeting").
(b) This Agreement shall be submitted for consideration and
approval to the holders of KNOGO Shares at a special meeting of stockholders
duly held for such purpose by KNOGO (the "KNOGO Stockholders' Meeting").
(c) VIDEO and KNOGO shall coordinate with respect to the
timing of the VIDEO Stockholders' Meeting and the KNOGO Stockholders' Meeting
and shall endeavor to hold such meetings on the same day and time and as soon as
practicable after the date
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hereof. Subject to their fiduciary duties, the respective boards of directors of
VIDEO and KNOGO shall recommend that their respective stockholders approve this
Agreement and the transactions contemplated hereby, and such recommendation
shall be contained in the Joint Proxy Statement/Prospectus (as defined in
Section 6.7) of VIDEO and KNOGO included in the Registration Statement (as
defined in Section 6.7) and distributed to the stockholders of VIDEO and KNOGO
in connection with the VIDEO Stockholders' Meeting and the KNOGO Stockholders'
Meeting.
(d) SENTRY shall take any and all actions necessary for the
proper approvals and authorizations to be adopted by the boards of directors and
stockholders of SENTRY, VMC and SMC, respectively, to effectuate the
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF KNOGO
Except as set forth in KNOGO's disclosure schedule delivered
to VIDEO in connection with this Agreement (the "KNOGO Disclosure Schedule") or
the KNOGO SEC Documents (as defined in Section 4.6 below), KNOGO hereby
represents and warrants to VIDEO as follows:
4.1 Organization and Qualification. Each of KNOGO and its
subsidiaries (a) is duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, (b) has
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted and (c) is in good
standing and duly qualified to do business in each jurisdiction in which the
transaction of its business makes such qualification necessary, except where the
failure to be so organized, existing, qualified and in good standing or to have
such power or authority would not have a Material Adverse Effect (as defined in
Section 9.3(d) below) on KNOGO. True and complete copies of the Certificate of
Incorporation and the By-Laws, as amended to date, of KNOGO and its subsidiaries
have been made available to VIDEO.
4.2 Capitalization. (a) The authorized capital stock of KNOGO
consists of 10,000,000 KNOGO Shares and 3,000,000 shares of preferred stock, par
value $.01 per share (the "KNOGO Preferred Stock"). As of the date of this
Agreement, (i) 5,772,032 KNOGO Shares are issued and outstanding and no KNOGO
Shares are held in treasury, (ii) 678,700 KNOGO Shares are reserved for issuance
pursuant to outstanding Stock Options and 575,300 Shares are reserved for
issuance in respect of future grants of Stock Options and (iii) no shares of
KNOGO Preferred Stock are issued and outstanding. All outstanding KNOGO Shares
are validly issued, fully paid and nonassessable and are not subject to
preemptive
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rights. Except as disclosed in the KNOGO SEC Documents or in Section 4.2(a) of
the KNOGO Disclosure Schedule, there are no outstanding subscriptions, options,
warrants, calls, rights, commitments or any other agreements to which KNOGO is a
party or by which KNOGO is bound which obligate KNOGO to (i) issue, deliver or
sell or cause to be issued, delivered or sold any additional KNOGO Shares or any
other capital stock of KNOGO or any other securities convertible into, or
exercisable or exchangeable for, or evidencing the right to subscribe for, any
such KNOGO Shares or (ii) purchase, redeem or otherwise acquire any KNOGO Shares
and any other capital stock of KNOGO.
(b) All outstanding KNOGO Shares are duly listed for trading
on the American Stock Exchange ("AMEX").
(c) KNOGO owns, directly or indirectly, all of the outstanding
shares of or other interests in each of its subsidiaries, which subsidiaries are
listed in Section 4.2(c) of the KNOGO Disclosure Schedule. Each of the
outstanding shares of capital stock of each of KNOGO's subsidiaries has been
duly authorized, is validly paid and nonassessable, and is owned, directly or
indirectly, by KNOGO, free and clear of all liens, pledges, security interests,
claims or other encumbrances, except for such liens, pledges, security
interests, claims or encumbrances that would not have a Material Adverse Effect
on KNOGO. Schedule 4.2(c) of the KNOGO Disclosure Schedule sets forth the
following information for each of KNOGO's subsidiaries, if applicable: (i) name
and jurisdiction of incorporation or organization; (ii) authorized capital stock
or share capital; and (iii) number of issued and outstanding shares of capital
stock or share capital.
(d) Except as set forth in Section 4.2(d) of the KNOGO
Disclosure Schedule, KNOGO does not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments in short-term
investment securities).
(e) Except as provided in the KNOGO SEC Documents or in
Section 4.2(e) of the KNOGO Disclosure Schedule, there are no voting trusts or
shareholder agreements to which KNOGO is a party with respect to the voting of
the capital stock of KNOGO.
4.3 Authorization and Validity of Agreement. KNOGO has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby in accordance with the
terms hereof (subject to the approval and adoption of this Agreement and the
KNOGO Merger by the holders of a majority of the outstanding KNOGO Shares, and
the filing and recordation of appropriate merger documents as required by the
DGCL). KNOGO's Board of Directors (the "KNOGO Board") has duly authorized the
execution, delivery and performance of this Agreement by KNOGO, and no other
corporate proceedings on the part
14
of KNOGO are necessary to authorize this Agreement or the transactions
contemplated hereby (other than the approval and adoption of this Agreement and
the KNOGO Merger by the holders of a majority of the outstanding KNOGO Shares).
This Agreement has been duly executed and delivered by KNOGO and, assuming this
Agreement constitutes the legal, valid and binding obligation of VIDEO, SENTRY,
VMC and SMC, constitutes the legal, valid and binding obligation of KNOGO,
enforceable against KNOGO in accordance with its terms, except as may be limited
by any bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other similar laws affecting the enforcement of creditors' rights generally
or by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4 Consents and Approvals. (a) Neither the execution and
delivery of this Agreement by KNOGO nor the consummation by KNOGO of the
transactions contemplated hereby will require on the part of KNOGO any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) as may be required in
connection with the applicable requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) pursuant to the
applicable requirements of the Securities Act, the Securities and Exchange Act
of 1934, as amended (the "Exchange Act"), the AMEX on which the KNOGO Shares are
listed, and state securities or "blue sky" laws and state takeover laws, (iii)
the filing and recordation of the Certificate of Merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in which
KNOGO is authorized to do business, (iv) as set forth in Section 4.4 of the
KNOGO Disclosure Schedule or (v) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not have a Material Adverse Effect on KNOGO or prevent the consummation of the
transactions contemplated hereby. The affirmative vote of the holders of a
majority of the outstanding KNOGO Shares is the only vote of the holders of
capital stock of KNOGO necessary to approve the KNOGO Merger.
(b) The KNOGO Board has approved the execution of the
Support/Voting Agreements to be entered into between KNOGO and certain VIDEO
stockholders.
4.5 No Violation. Except as set forth in Section 4.5 of the
KNOGO Disclosure Schedule, assuming the KNOGO Merger has been duly approved by
the holders of a majority of the outstanding KNOGO Shares, neither the execution
and delivery of this Agreement by KNOGO nor the consummation by KNOGO of the
transactions contemplated hereby will (a) conflict with or violate the Articles
of Incorporation, as amended, or By-Laws of KNOGO or any of its subsidiaries,
(b) result in a violation or breach of, constitute a default (with or without
notice or lapse of time, or both) under,
15
give rise to any right of termination, cancellation or acceleration of, or
result in the imposition of any lien, charge or other encumbrance on any assets
or property of KNOGO or any of its subsidiaries pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license or other instrument or
obligation to which KNOGO or any of its subsidiaries is a party or by which
KNOGO, any of its subsidiaries, or any of their respective assets or properties
are bound, except for such violations, breaches and defaults (or rights of
termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained or
which would not have a Material Adverse Effect on KNOGO or prevent the
consummation of the transactions contemplated hereby or (c) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in Section 4.4 and this Section 4.5 are duly and timely obtained or
made and the approval of the KNOGO Merger by the holders of a majority of the
outstanding KNOGO Shares has been obtained, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to KNOGO, any of its subsidiaries
or any of their respective assets and properties, except for such violations
which would not have a Material Adverse Effect on KNOGO or prevent the
consummation of the transactions contemplated hereby.
4.6 SEC Reports; Financial Statements. (a) Since January 1,
1995, KNOGO has filed with the Securities and Exchange Commission (the "SEC")
all forms, reports, schedules, statements and other documents required to be
filed by it with the SEC pursuant to the Exchange Act, the Securities Act and
the SEC's rules and regulations thereunder (collectively, the "KNOGO SEC
Documents"). The KNOGO SEC Documents, including, without limitation, any
financial statements or schedules included therein, at the time filed, or in the
case of registration statements on their respective effective dates, (i)
complied as to form in all material respects with the applicable requirements of
the Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder and (ii) did not at the time filed
(or, in the case of registration statements, at the time of effectiveness),
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements of KNOGO
(including any related notes thereto) included in the KNOGO SEC Documents
(excluding the KNOGO SEC Documents described in Section 4.7 hereof) comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the period involved (except as may be indicated in
such financial statements or in the notes thereto or,
16
in the case of unaudited financial statements, as permitted by the requirements
of Form 10-Q) and fairly present in all material respects (subject, in the case
of the unaudited statements, to normal year-end adjustments and the absence of
footnotes) the financial position of KNOGO as of the dates thereof and the
results of KNOGO's operations and cash flows for the periods presented therein.
4.7 Joint Proxy Statement/Prospectus. None of the information
supplied by KNOGO to be included in the Joint Proxy Statement/Prospectus or the
Registration Statement will, in the case of the Joint Proxy Statement/Prospectus
or any amendments thereof or supplements thereto, at the time of the mailing of
the Joint Proxy Statement/Prospectus or any amendments thereof or supplements
thereto, and at the time of the KNOGO Stockholders' Meeting, or, in the case of
the Registration Statement, at the time it becomes effective and at the
Effective Time, contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Joint Proxy Statement/Prospectus will comply as to form in
all material respects with the provisions of the Securities Act and the Exchange
Act. Notwithstanding the foregoing, KNOGO makes no representation or warranty
with respect to the statements made in the Joint Proxy Statement/Prospectus
based on information supplied by or on behalf of VIDEO, SENTRY, VMC or SMC or
any of their respective affiliates specifically for inclusion therein.
4.8 Compliance with Law. Except as set forth in the KNOGO SEC
Documents or in Section 4.8 of the KNOGO Disclosure Schedule, neither KNOGO nor
any of its subsidiaries is in violation of any applicable statute, rule,
regulation, decree or order of any governmental or regulatory authority
applicable to KNOGO or its subsidiaries, except for violations which would not
have a Material Adverse Effect on KNOGO. Without limiting the foregoing, except
for matters which would not have a Material Adverse Effect on KNOGO and those
matters disclosed in the KNOGO SEC Documents or in Section 4.8 of the KNOGO
Disclosure Schedule, to the Knowledge of KNOGO, (a) the businesses of KNOGO and
its subsidiaries are being conducted in compliance with applicable Environmental
Laws (as defined below), (b) the businesses of KNOGO and its subsidiaries have
not made, caused or contributed to any material release of any hazardous or
toxic waste or substance into the environment and (c) neither KNOGO nor any of
its subsidiaries is subject to any compliance agreement or settlement agreement
from an alleged violation of Environmental Laws. For purposes hereof,
"Environmental Laws" shall mean all applicable laws relating to pollution or
protection of the environment, including the Resource Conservation and Recovery
Act, the Federal Water Pollution Control Act, the Toxic Substances Control Act
and the Comprehensive Environmental Response, Compensation and Liability Act.
Except as
17
set forth in the KNOGO SEC Documents or in Section 4.8 of the KNOGO Disclosure
Schedule or as contemplated or permitted by this Agreement, KNOGO and its
subsidiaries hold all permits, licenses, exemptions, orders and approvals of
governmental and regulatory authorities necessary for the conduct of their
respective businesses, as now being conducted, except where the failure to hold
permits, licenses, exemptions, orders and approvals would not have a Material
Adverse Effect on KNOGO.
4.9 Absence of Certain Changes. Except as disclosed in the
KNOGO SEC Documents or in Section 4.9 of the KNOGO Disclosure Schedule, since
June 30, 1996 through the date of this Agreement, KNOGO and its subsidiaries
have conducted their respective businesses only in the ordinary course and there
has not been (a) any changes which could have a Material Adverse Effect on
KNOGO; (b) any declaration, setting aside or payment of any dividend or payment
in cash, stock or property or other distribution with respect to KNOGO's capital
stock; (c) any reclassification, combination, split, subdivision, redemption,
purchase or other acquisition, directly or indirectly, of any of KNOGO's capital
stock; (d) any material change in KNOGO's accounting principles, practices or
methods; or (e) any material alteration in the character or conduct of KNOGO's
business from that conducted and contemplated as of June 30, 1996.
4.10 No Undisclosed Liabilities. Except (a) for liabilities
incurred in the ordinary course of business, (b) liabilities incurred in
connection with the transactions contemplated by this Agreement, (c) liabilities
which would not have a Material Adverse Effect on KNOGO and (d) as disclosed in
the KNOGO SEC Documents or as set forth in Section 4.10 of the KNOGO Disclosure
Schedule, from June 30, 1996 until the date of this Agreement, KNOGO and its
subsidiaries had not incurred any material liabilities that would be required to
be reflected in or reserved against a consolidated balance sheet of KNOGO
prepared in accordance with generally accepted accounting principles.
4.11 Litigation. Except as disclosed in the KNOGO SEC
Documents or in Section 4.11 of the KNOGO Disclosure Schedule, there are no
claims, actions, proceedings or governmental investigations pending, nor has
KNOGO or any of its subsidiaries received notice of any threatened, claims,
actions, proceedings or governmental investigations against KNOGO or any of its
subsidiaries by or before any court or other governmental or regulatory body,
which, if adversely determined, would have a Material Adverse Effect on KNOGO.
Neither KNOGO or any of its subsidiaries nor their respective assets is subject
to any outstanding and unsatisfied order, writ, judgment, injunction or decree
which would have a Material Adverse Effect on KNOGO.
4.12 Employee Benefit Matters. All employee benefit plans and
other benefit arrangements covering employees of KNOGO
18
and its subsidiaries (the "KNOGO Benefit Plans") are listed in Section 4.12 of
the KNOGO Disclosure Schedule, except such benefit plans and other benefit
arrangements which are not material. True and complete copies of the KNOGO
Benefit Plans have been made available to VIDEO. To the extent applicable, the
KNOGO Benefit Plans comply in all material respects with the requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
Code, except as disclosed in Section 4.12(a) of the KNOGO Disclosure Schedule,
and any KNOGO Benefit Plan intended to be qualified under Section 401(a) of the
Code has been determined by the Internal Revenue Service (the "IRS") to be so
qualified. No KNOGO Benefit Plan is covered by Title IV of ERISA or Section 412
of the Code. Neither KNOGO nor any of its subsidiaries has incurred any
liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA
with respect to any KNOGO Benefit Plan, except as would not have a Material
Adverse Effect on KNOGO. Except as disclosed in Section 4.12(a) of the KNOGO
Disclosure Schedule, each KNOGO Benefit Plan has been maintained and
administered in all material respects in compliance with its terms and with
ERISA and the Code to the extent applicable thereto. To the Knowledge of KNOGO,
there are no pending, nor has KNOGO or any of its subsidiaries received notice
of any threatened, claims against or otherwise involving any of the KNOGO
Benefit Plans, except as would not have a Material Adverse Effect on KNOGO. All
material contributions required to be made as of the date this Agreement to the
KNOGO Benefit Plans have been made or provided for. Neither KNOGO nor any entity
under "common control" with KNOGO within the meaning of Section 4001 of ERISA
has contributed to, or been required to contribute to, any "multi-employer plan"
(as defined in Sections 3(37) and 4001(a)(3) of ERISA).
4.13 Taxes. Except as disclosed in the KNOGO SEC Documents or
in Section 4.13 of the KNOGO Disclosure Schedule, KNOGO and each of its
subsidiaries (a) have filed all federal, state and foreign tax returns required
to be filed by KNOGO or any of its subsidiaries for tax years ended prior to the
date of this Agreement, except for those tax returns the failure of which to
file would not have a Material Adverse Effect on KNOGO or for which requests for
extensions have been timely filed, and all such returns are complete in all
material respects, (b) have paid or accrued all taxes shown to be due and
payable on such returns, (c) have accrued all such taxes for such periods
subsequent to the periods covered by such returns ending on or prior to the date
hereof and (d) have "open" years for federal income tax returns only as set
forth in the KNOGO SEC Documents or in Section 4.13 of the KNOGO Disclosure
Schedule. There are no liens for taxes on the assets of KNOGO or any of its
subsidiaries, except for liens that would not have a Material Adverse Effect on
KNOGO, and there is no pending, nor has KNOGO or any of its subsidiaries
received notice of any threatened, tax audit, examination, refund litigation or
adjustment in controversy which, if determined adversely, would have a Material
Adverse Effect on KNOGO. Neither KNOGO nor any of
19
its subsidiaries is a party to any agreement providing for the allocation or
sharing of taxes.
4.14 Intellectual Property. To the Knowledge of KNOGO, KNOGO
and its subsidiaries own or possess rights in all patents, trademarks,
tradenames, copyrights and other intellectual property rights used in or
necessary for the conduct of the businesses of KNOGO and its subsidiaries as now
operated (collectively, "KNOGO Intellectual Property"), except where the failure
to own or possess any such KNOGO Intellectual Property would not have a Material
Adverse Effect on KNOGO. Neither KNOGO nor any of its subsidiaries has received
any notice that the products of KNOGO and its subsidiaries, or the use thereof,
violate, infringe or otherwise conflict with the Intellectual Property of third
parties, except for such violations, infringements or conflicts that would not
have a Material Adverse Effect on KNOGO or as disclosed in the KNOGO SEC
Documents or in Section 4.14 of the KNOGO Disclosure Schedule.
4.15 Labor Matters. Neither KNOGO nor any of its subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or, to
the Knowledge of KNOGO, threatened against KNOGO or any of its subsidiaries
relating to their respective businesses, except for any such proceeding that
would not have a Material Adverse Effect on KNOGO.
4.16 Brokers and Finders. No broker, finder or investment bank
has acted directly or indirectly for KNOGO, nor has KNOGO incurred any
obligation to pay any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby, other than Xxxxxx & Co.
Securities, the fees and expenses of which shall be borne by KNOGO.
4.17 Opinion of Financial Advisor. Xxxxxx & Co. Securities,
KNOGO's financial advisor, has delivered its opinion, dated the date of this
Agreement, to the KNOGO Board to the effect that, as of such date, the KNOGO
Merger Consideration is fair, from a financial point of view, to the holders of
KNOGO Shares.
4.18 Section 351/Reorganization Treatment. Neither KNOGO nor
any KNOGO subsidiary has taken or failed to take any action or has knowledge of
any fact or circumstance that is reasonably likely to, (i) prevent the KNOGO
Merger from qualifying as an exchange governed by Section 351 of the Code or
(ii) prevent the VIDEO Merger from constituting a reorganization within the
meaning of Section 368(a) of the Code or from qualifying as an exchange governed
by Section 351 of the Code.
4.19 VIDEO Shares Ownership. Except as disclosed in Section
4.19 of the KNOGO Disclosure Schedule, neither KNOGO nor
20
any of its affiliates owns any VIDEO Shares or other securities or rights
convertible, exchangeable or otherwise exercisable into VIDEO Shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF VIDEO, SENTRY, VMC AND SMC
Except as set forth in VIDEO's disclosure schedule delivered
to KNOGO in connection with this Agreement (the "VIDEO Disclosure Schedule") or
the VIDEO SEC Documents (as defined in Section 3.6 below), VIDEO, SENTRY, VMC
and SMC hereby represent and warrant to KNOGO as follows:
5.1 Organization and Qualification. Each of VIDEO, SENTRY, VMC
and SMC (a) is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, (b) has the requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted and (c) is in good standing
and duly qualified to do business in each jurisdiction in which the transaction
of its business makes such qualification necessary, except where the failure to
be so organized, existing, qualified and in good standing or to have such power
or authority would not have a Material Adverse Effect on VIDEO, SENTRY, VMC or
SMC. True and complete copies of the Articles or Certificate of Incorporation,
as the case may be, and the By-Laws as amended to date, of VIDEO and its
subsidiaries have been made available to KNOGO.
5.2 Capitalization. (a) The authorized capital stock of VIDEO
consists of 10,000,000 VIDEO Shares. As of the date of this Agreement, (i)
4,841,962 VIDEO Shares are issued and outstanding and no VIDEO Shares are held
in treasury, (ii) 370,000 VIDEO Shares are reserved for issuance pursuant to
outstanding stock options and 180,000 VIDEO Shares are reserved for issuance in
respect of future grants of stock options and (iii) 454,114 VIDEO Shares are
reserved for issuance pursuant to the warrants set forth in Section 5.2(a) of
the VIDEO Disclosure Schedule (the "Warrants"). All outstanding VIDEO Shares are
validly issued, fully paid and nonassessable and are not subject to preemptive
rights. Except as disclosed in the VIDEO SEC Documents (as defined in Section
5.6) or in Section 5.2(a) of the VIDEO Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, calls, rights, commitments or any
other agreements to which VIDEO is a party or by which VIDEO is bound which
obligate VIDEO to (i) issue, deliver or sell or cause to be issued, delivered or
sold any additional VIDEO Shares or any other capital stock of VIDEO or any
other securities convertible into, or exercisable or exchangeable for, or
evidencing the right to subscribe for, any such VIDEO Shares or (ii) purchase,
21
redeem or otherwise acquire any VIDEO Shares and any other capital stock of
VIDEO.
(b) All outstanding VIDEO Shares are duly listed for trading
on the NASDAQ Stock Market's SmallCap Market (the "NASDAQ SmallCap").
(c) VIDEO owns, directly or indirectly, all of the outstanding
shares of or other interests in each of its subsidiaries, which subsidiaries are
listed in Section 5.2(c) of the VIDEO Disclosure Schedule. Each of the
outstanding shares of capital stock of each of VIDEO's subsidiaries has been
duly authorized, is validly paid and nonassessable, and is owned, directly or
indirectly, by VIDEO, free and clear of all liens, pledges, security interests,
claims or other encumbrances, except for such liens, pledges, security
interests, claims or encumbrances that would not have a Material Adverse Effect
on VIDEO. Schedule 5.2(c) of the VIDEO Disclosure Schedule sets forth the
following information for each of VIDEO's subsidiaries, if applicable: (i) name
and jurisdiction of incorporation or organization; (ii) authorized capital stock
or share capital; and (iii) number of issued and outstanding shares of capital
stock or share capital.
(d) Except as set forth in Section 5.2(d) of the VIDEO
Disclosure Schedule, VIDEO does not own, directly or indirectly, any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity (other than investments in short-term
investment securities).
(e) Except as provided in the VIDEO SEC Documents or in
Section 5.2(e) of the VIDEO Disclosure Schedule, there are no voting trusts or
shareholder agreements to which VIDEO is a party with respect to the voting of
the capital stock of VIDEO.
(f) The authorized capital stock of SENTRY consists of
100,000,000 shares of SENTRY Common Stock and 25,000,000 shares of preferred
stock, par value $0.001 per share (the "SENTRY Preferred Stock"). As of the date
of this Agreement, (i) one (1) share of SENTRY Common Stock is issued and
outstanding and no shares of SENTRY Common Stock are held in treasury, (ii) no
shares of SENTRY Common Stock are reserved for issuance pursuant to outstanding
Stock Options and no shares of SENTRY Common Stock are reserved for issuance in
respect of future grants of Stock Options and (iii) no shares of SENTRY
Preferred Stock are issued and outstanding. All outstanding shares of SENTRY
Common Stock are validly issued, fully paid and nonassessable and are not
subject to preemptive rights. There are no outstanding subscriptions, options,
warrants, calls, rights, commitments or any other agreements, other than this
Agreement, to which SENTRY is a party or by which SENTRY is bound which obligate
SENTRY to (i) issue, deliver or sell or cause to be issued, delivered or sold
any additional capital stock of SENTRY or
22
any other securities convertible into, or exercisable or exchangeable for, or
evidencing the right to subscribe for, any such shares of SENTRY Common Stock or
(ii) purchase, redeem or otherwise acquire any capital stock of SENTRY. All of
the shares of SENTRY Common Stock and SENTRY Class A Preferred Stock to be
issued to holders of KNOGO Shares and VIDEO Shares have been duly authorized for
issuance and, when issued in accordance with the VIDEO Merger and the KNOGO
Merger and this Agreement, will be validly issued, fully paid and nonassessable,
and will not be subject to and will not be issued in violation of any preemptive
rights.
(g) The authorized capital stock of VMC consists of 100 shares
of VMC Common Stock. As of the date of this Agreement, (i) one share of VMC
Common Stock is issued and outstanding and no shares of VMC Common Stock are
held in treasury, and (ii) no shares of VMC Common Stock are reserved for
issuance pursuant to outstanding stock options and no shares of VMC Common Stock
are reserved for issuance in respect of future grants of stock options. All
outstanding shares of VMC Common Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights. There are no outstanding
subscriptions, options, warrants, calls, rights, commitments or any other
agreements to which VMC is a party or by which VMC is bound which obligate VMC
to (i) issue, deliver or sell or cause to be issued, delivered or sold any
additional shares of VMC Common Stock or any other capital stock of VMC or any
other securities convertible into, or exercisable or exchangeable for, or
evidencing the right to subscribe for, any such shares of VMC Common Stock or
(ii) purchase, redeem or otherwise acquire any shares of VMC Common Stock and
any other capital stock of VMC.
(h) The authorized capital stock of SMC consists of 100 shares
of SMC Common Stock. As of the date of this Agreement, (i) one share of SMC
Common Stock is issued and outstanding and no shares of SMC Common Stock are
held in treasury, and (ii) no shares of SMC Common Stock are reserved for
issuance pursuant to outstanding stock options and no shares of SMC Common Stock
are reserved for issuance in respect of future grants of stock options. All
outstanding shares of SMC Common Stock are validly issued, fully paid and
nonassessable and are not subject to preemptive rights. There are no outstanding
subscriptions, options, warrants, calls, rights, commitments or any other
agreements to which SMC is a party or by which SMC is bound which obligate SMC
to (i) issue, deliver or sell or cause to be issued, delivered or sold any
additional shares of SMC Common Stock or any other capital stock of SMC or any
other securities convertible into, or exercisable or exchangeable for, or
evidencing the right to subscribe for, any such shares of SMC Common Stock or
(ii) purchase, redeem or otherwise acquire any shares of SMC Common Stock and
any other capital stock of SMC.
23
5.3 Authorization and Validity of Agreement. Each of VIDEO,
SENTRY, VMC and SMC has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby in accordance with the terms hereof (subject to the approval and adoption
of this Agreement, the VIDEO Merger and the KNOGO Merger by the holders of a
majority of the outstanding VIDEO Shares, SENTRY Common Stock, VMC Common Stock
and SMC Common Stock, as applicable, and the filing and recordation of
appropriate merger documents as required by the DGCL and the Minnesota Act). The
Boards of Directors of VIDEO (the "VIDEO ----- Board"), SENTRY, VMC and SMC,
respectively, and VIDEO, as the sole ----- stockholder of SENTRY, and SENTRY, as
the sole stockholder of VMC and SMC, have duly authorized the execution,
delivery and performance of this Agreement by each of VIDEO, SENTRY, VMC and
SMC, and no other corporate proceedings on the part of either VIDEO, SENTRY, VMC
or SMC are necessary to authorize this Agreement or the transactions
contemplated hereby (other than the approval and adoption of this Agreement, the
VIDEO Merger and the KNOGO Merger by the holders of a majority of the
outstanding VIDEO Shares). This Agreement has been duly executed and delivered
by each of VIDEO, SENTRY, VMC and SMC and, assuming this Agreement constitutes
the legal, valid and binding obligation of KNOGO, constitutes the legal, valid
and binding obligation of each of VIDEO, SENTRY, VMC and SMC, enforceable
against each of VIDEO, SENTRY, VMC and SMC in accordance with its terms, except
as may be limited by any bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.4 Consents and Approvals. (a) Neither the execution and
delivery of this Agreement by VIDEO, SENTRY, VMC and SMC nor the consummation by
VIDEO, SENTRY, VMC and SMC of the transactions contemplated hereby will require
on the part of VIDEO, SENTRY, VMC or SMC any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, except (i) as may be required in connection with the applicable
requirements of the HSR Act, (ii) pursuant to the applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations promulgated
thereunder, the NASDAQ SmallCap on which VIDEO Shares are listed, and state
securities or "blue sky" laws and state takeover laws, (iii) the filing and
recordation of the Certificate of Merger, the Articles of Merger and other
merger documents pursuant to the DGCL and the Minnesota Act, (iv) as set forth
in Section 5.4 of the VIDEO Disclosure Schedule or (v) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not have a Material Adverse Effect on VIDEO, SENTRY, VMC
or SMC or prevent the consummation of the transactions contemplated hereby. The
affirmative vote of the holders of a majority of the outstanding
24
VIDEO Shares is the only vote of the holders of capital stock of VIDEO necessary
to approve the VIDEO Merger.
(b) The VIDEO Board has approved the execution of the
Support/Voting Agreements to be entered into between VIDEO and certain KNOGO
stockholders.
5.5 No Violation. Except as set forth in Section 5.5 of the
VIDEO Disclosure Schedule, assuming the VIDEO Merger has been duly approved by
the holders of a majority of the outstanding VIDEO Shares, neither the execution
and delivery of this Agreement by VIDEO, SENTRY, VMC or SMC nor the consummation
by VIDEO, SENTRY, VMC and SMC of the transactions contemplated hereby will (a)
conflict with or violate the Articles of Incorporation or By-Laws of VIDEO, the
SENTRY Certificate of Incorporation, the SENTRY Bylaws, the VMC Certificate of
Incorporation, the VMC Bylaws, the SMC Certificate of Incorporation, or the SMC
Bylaws, (b) result in a violation or breach of, constitute a default (with or
without notice or lapse of time, or both) under, give rise to any right of
termination, cancellation or acceleration of, or result in the imposition of any
lien, charge or other encumbrance on any assets or property of either of VIDEO,
SENTRY, VMC or SMC pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license or other instrument or obligation to which either of
VIDEO, SENTRY, VMC or SMC is a party or by which either of VIDEO, SENTRY, VMC or
SMC or any of their respective assets or properties are bound, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or lien or other charge or encumbrance) as to which requisite
waivers or consents have been obtained or which would not have a Material
Adverse Effect on either of VIDEO, SENTRY, VMC or SMC or prevent the
consummation of the transactions contemplated hereby or (c) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in Section 5.4 and this Section 5.5 are duly and timely obtained or
made, and the approval of the VIDEO Merger by the holders of a majority of the
outstanding VIDEO Shares has been obtained, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to either of VIDEO, SENTRY, VMC
or SMC or any of their respective assets or properties, except for such
violations which would not in the aggregate have a Material Adverse Effect on
either of VIDEO, SENTRY, VMC or SMC, or prevent the consummation of the
transactions contemplated hereby.
5.6 SEC Reports; Financial Statements. (a) Since September 30,
1994, VIDEO has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it with the SEC pursuant to the Exchange
Act, the Securities Act and the SEC's rules and regulations thereunder
(collectively, the "VIDEO SEC Documents"). The VIDEO SEC Documents, including,
without limitation, any financial statements or schedules included therein, at
the time filed, or in the case of
25
registration statements on their respective effective dates, (i) complied as to
form in all material respects with the applicable requirements of the Exchange
Act and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder and (ii) did not at the time filed (or, in the
case of registration statements, at the time of effectiveness), contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements of VIDEO
(including any related notes thereto) included in the VIDEO SEC Documents
(excluding the VIDEO SEC Documents described in Section 5.7 hereof) comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the period involved (except as may be indicated in
such financial statements or in the notes thereto or, in the case of unaudited
financial statements, as permitted by the requirements of Form 10-Q) and fairly
present in all material respects (subject, in the case of the unaudited
statements, to normal year-end adjustments and the absence of footnotes) the
financial position of VIDEO as of the dates thereof and the results of the
VIDEO's operations and cash flows for the periods presented therein.
5.7 Joint Proxy Statement/Prospectus. None of the information
supplied by VIDEO, SENTRY, VMC or SMC to be included in the Joint Proxy
Statement/Prospectus or the Registration Statement will, in the case of the
Joint Proxy Statement/Prospectus or any amendments thereof or supplements
thereto, at the time of the mailing of the Joint Proxy Statement/Prospectus or
any amendments thereof or supplements thereto, and at the time of the VIDEO
Stockholders' Meeting, or, in the case of the Registration Statement, at the
time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act. Notwithstanding the
foregoing, neither VIDEO, SENTRY, VMC nor SMC makes any representation or
warranty with respect to the statements made in the Joint Proxy
Statement/Prospectus based on information supplied by or on behalf of KNOGO or
any of its affiliates specifically for inclusion therein.
5.8 Compliance with Law. Except as set forth in the VIDEO SEC
Documents or in Section 5.8 of the VIDEO Disclosure Schedule, VIDEO is not in
violation of any applicable statute,
26
rule, regulation, decree or order of any governmental or regulatory authority
applicable to VIDEO, except for violations which would not have a Material
Adverse Effect on VIDEO. Without limiting the foregoing, except for matters
which would not have a Material Adverse Effect on VIDEO and those matters
disclosed in the VIDEO SEC Documents or in Section 5.8 of the VIDEO Disclosure
Schedule, to the Knowledge of VIDEO, (a) the business of VIDEO is being
conducted in compliance with applicable Environmental Laws, (b) the business of
VIDEO has not made, caused or contributed to any material release of any
hazardous or toxic waste or substance into the environment and (c) VIDEO is not
subject to any compliance agreement or settlement agreement from an alleged
violation of Environmental Laws. Except as set forth in the VIDEO SEC Documents
or in Section 5.8 of the VIDEO Disclosure Schedule or as contemplated or
permitted by this Agreement, VIDEO holds all permits, licenses, exemptions,
orders and approvals of governmental and regulatory authorities necessary for
the conduct of its businesses, as now being conducted, except where the failure
to hold permits, licenses, exemptions, orders and approvals would not have a
Material Adverse Effect on VIDEO.
5.9 Absence of Certain Changes. Except as disclosed in the
VIDEO SEC Documents or in Section 5.9 of the VIDEO Disclosure Schedule, since
June 30, 1996 through the date of this Agreement, VIDEO has conducted its
business only in the ordinary course and there has not been (a) any changes
which could have a Material Adverse Effect on VIDEO; (b) any declaration,
setting aside or payment of any dividend or payment in cash, stock or property
or other distribution with respect to VIDEO's capital stock; (c) any
reclassification, combination, split, subdivision, redemption, purchase or other
acquisition, directly or indirectly, of any of VIDEO's capital stock; (d) any
material change in VIDEO's accounting principles, practices or methods; or (e)
any material alteration in the character or conduct of VIDEO's business from
that conducted and contemplated as of June 30, 1996.
5.10 No Undisclosed Liabilities. Except (a) for liabilities
incurred in the ordinary course of business, (b) liabilities incurred in
connection with the transactions contemplated by this Agreement, (c) liabilities
which would not have a Material Adverse Effect on VIDEO, SENTRY, VMC or SMC and
(d) as disclosed in the VIDEO SEC Documents or as set forth in Section 5.10 of
the VIDEO Disclosure Schedule, from June 30, 1996 until the date of this
Agreement, VIDEO, SENTRY, VMC and SMC had not incurred any material liabilities
that would be required to be reflected in or reserved against a consolidated
balance sheet of VIDEO prepared in accordance with generally accepted accounting
principles.
5.11 Litigation. Except as disclosed in the VIDEO SEC
Documents or in Section 5.11 of the VIDEO Disclosure Schedule, there are no
claims, actions, proceedings or governmental investigations pending, nor has
VIDEO, SENTRY, VMC or SMC received
27
notice of any threatened, claims, actions, proceedings or governmental
investigations against VIDEO, SENTRY, VMC or SMC by or before any court or other
governmental or regulatory body, which, if adversely determined, would have a
Material Adverse Effect on VIDEO, SENTRY, VMC or SMC. Neither VIDEO, SENTRY, VMC
or SMC nor their respective assets is subject to any outstanding and unsatisfied
order, writ, judgment, injunction or decree which would have a Material Adverse
Effect on VIDEO, SENTRY, VMC or SMC.
5.12 Employee Benefit Matters. All employee benefit plans and
other benefit arrangements covering employees of VIDEO (the "VIDEO Benefit
Plans") are listed in Section 5.12 of the VIDEO Disclosure Schedule, except such
benefit plans and other benefit arrangements which are not material. True and
complete copies of the VIDEO Benefit Plans have been made available to KNOGO. To
the extent applicable, the VIDEO Benefit Plans comply in all material respects
with the requirements of ERISA, the Code, and any VIDEO Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined by the IRS to
be so qualified. No VIDEO Benefit Plan is covered by Title IV of ERISA or
Section 412 of the Code. VIDEO has not incurred any liability or penalty under
Section 4975 of the Code or Section 502(i) of ERISA with respect to any VIDEO
Benefit Plan, except as would not have a Material Adverse Effect on VIDEO. Each
VIDEO Benefit Plan has been maintained and administered in all material respects
in compliance with its terms and with ERISA and the Code to the extent
applicable thereto. To the Knowledge of VIDEO, there are no pending, nor has
VIDEO received notice of any threatened, claims against or otherwise involving
any of the VIDEO Benefit Plans, except as would not have a Material Adverse
Effect on VIDEO. All material contributions required to be made as of the date
this Agreement to the VIDEO Benefit Plans have been made or provided for.
Neither VIDEO nor any entity under "common control" with VIDEO within the
meaning of Section 4001 of ERISA has contributed to, or been required to
contribute to, any "multi-employer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA).
5.13 Taxes. Except as disclosed in the VIDEO SEC Documents or
in Section 5.13 of the VIDEO Disclosure Schedule, VIDEO and each of its
subsidiaries (a) have filed all federal, state and foreign tax returns required
to be filed by VIDEO or any of its subsidiaries for tax years ended prior to the
date of this Agreement, except for those tax returns the failure of which to
file would not have a Material Adverse Effect on VIDEO or for which requests for
extensions have been timely filed, and all such returns are complete in all
material respects, (b) have paid or accrued all taxes shown to be due and
payable on such returns, (c) have accrued all such taxes for such periods
subsequent to the periods covered by such returns ending on or prior to the date
hereof and (d) have "open" years for federal income tax returns only as set
forth in the VIDEO SEC Documents or in Section 5.13 of the VIDEO Disclosure
Schedule. There are no liens for taxes on the
28
assets of VIDEO or any of its subsidiaries, except for liens that would not have
a Material Adverse Effect on VIDEO, and there is no pending, nor has VIDEO or
any of its subsidiaries received notice of any threatened, tax audit,
examination, refund litigation or adjustment in controversy which, if determined
adversely, would have a Material Adverse Effect on VIDEO. Neither VIDEO nor any
of its subsidiaries is a party to any agreement providing for the allocation or
sharing of taxes.
5.14 Intellectual Property. To the Knowledge of VIDEO, VIDEO
owns or possesses rights in all patents, trademarks, tradenames, copyrights and
other intellectual property rights used in or necessary for the conduct of
VIDEO's business as now operated (collectively, "VIDEO Intellectual Property"),
except where the failure to own or possess any such VIDEO Intellectual Property
would not have a Material Adverse Effect on VIDEO. VIDEO has not received any
notice that VIDEO's products or its use thereof violate, infringe or otherwise
conflict with the intellectual property of third parties, except for such
violations, infringements or conflicts that would not have a Material Adverse
Effect on VIDEO or as disclosed in the VIDEO SEC Documents or in Section 5.14 of
the VIDEO Disclosure Schedule.
5.15 Labor Matters. VIDEO is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the Knowledge of VIDEO,
threatened against VIDEO relating to its business, except for any such
proceeding that would not have a Material Adverse Effect on VIDEO.
5.16 Brokers and Finders. No broker, finder or investment bank
has acted directly or indirectly for either of VIDEO, SENTRY, VMC or SMC, nor
has either of VIDEO, SENTRY, VMC or SMC incurred any obligation to pay any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby, other than Alex. Xxxxx & Sons Incorporated
("Xxxx Xxxxx"), the fees and expenses of which shall be borne by VIDEO.
5.17 Opinion of Financial Advisor. Xxxx Xxxxx, VIDEO's
financial advisor, has delivered its opinion, dated the date of this Agreement,
to the VIDEO Board to the effect that, as of such date, the VIDEO Merger
Consideration is fair, from a financial point of view, to the holders of VIDEO
Shares.
5.18 Section 351/Reorganization Treatment. Neither VIDEO nor
any VIDEO subsidiary has taken or failed to take any action or has any knowledge
of any fact or circumstance that is reasonably likely to (i) prevent the VIDEO
Merger from qualifying as at least one of (A) a reorganization described in
Section 368(a) of the Code or (B) an exchange governed by Section 351 of the
Code, or (ii)
29
prevent the KNOGO Merger from qualifying as an exchange governed by Section 351
of the Code.
5.19 KNOGO Shares Ownership. Except as disclosed in Section
5.19 of the VIDEO Disclosure Schedule, neither VIDEO nor any of its affiliates
or subsidiaries owns any KNOGO Shares or other securities or rights convertible,
exchangeable or otherwise exercisable into KNOGO Shares.
5.20 Operations of SENTRY, VMC and SMC. SENTRY, VMC and SMC
have been formed solely for the purpose of engaging in the transactions
contemplated hereby and prior to the Effective Time will have engaged in no
other business activities.
ARTICLE VI
COVENANTS
6.1 Conduct of the Business of KNOGO and VIDEO Pending the
Reorganization. From the date hereof until the Effective Time, each of KNOGO and
VIDEO shall use commercially reasonable efforts to conduct its business in all
material respects only in the ordinary course consistent with past practice, and
to preserve intact its business organization and keep available the services of
its present key officers and employees (provided, that to satisfy the foregoing
obligation, KNOGO and VIDEO shall not be required to make any payments or enter
into or amend any contractual arrangements or understandings, except in the
ordinary course of business consistent with past practice) and, except as
otherwise required by applicable law or as set forth in Section 6.1 of the KNOGO
Disclosure Schedule or the VIDEO Disclosure Schedule, as the case may be,
neither KNOGO nor VIDEO shall, without the prior written consent of the other
party (which consent shall not be unreasonably withheld):
(a) amend its Articles or Certificate of Incorporation, as
amended, as the case may be, or By-Laws;
(b) declare, set aside or pay any dividend or other
distribution or payment in cash, stock or property in respect of its
capital stock, or reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(c) issue, grant, sell or pledge or agree to or authorize the
issuance, grant, sale or pledge of any shares of, or rights of any kind
to acquire any shares of, its capital stock other than KNOGO Shares or
VIDEO Shares issuable upon the exercise of Stock Options and Warrants;
30
(d) in the case of VIDEO, sell, assign or otherwise transfer
the shares of SENTRY Common Stock held by VIDEO;
(e) acquire, sell, transfer, lease or encumber any material
assets except in the ordinary course of business;
(f) adopt a plan of complete or partial liquidation or adopt
resolutions providing for the complete or partial liquidation,
dissolution, consolidation, merger, restructuring or recapitalization;
(g) grant any severance or termination pay to, or enter into
any employment agreement with, any of its executive officers or
directors, other than in the ordinary course of business;
(h) except in the ordinary course of business, increase the
compensation payable or to become payable to its executive officers or
employees, enter into any contract or other binding commitment in
respect of any such increase (other than pursuant to a KNOGO Benefit
Plan or VIDEO Benefit Plan, as the case may be, or policy or agreement
existing as of the date hereof) to, or enter into any severance
agreement with any of its directors, executive officers or other
employees, or establish, adopt, enter into, make any new grants or
awards under or amend, any KNOGO Benefit Plan or VIDEO Benefit Plan, as
the case may be, except as required by applicable law, including any
obligation to engage in good faith collective bargaining, to maintain
tax-qualified status or as may be required by any KNOGO Benefit Plan or
VIDEO Benefit Plan as of the date hereof;
(i) settle or compromise any material claims or litigation or,
except in the ordinary course of business, modify, amend or terminate
any of its material contracts or waive, release or assign any material
rights or claims, or make any payment, direct or indirect, of any
material liability before the same becomes due and payable in
accordance with its terms;
(j) take any action, other than in the ordinary course of
business, with respect to accounting policies or procedures (including
tax accounting policies and procedures), except as may be required by
law or generally accepted accounting principles;
(k) make any material tax election or permit any material
insurance policy naming it as a beneficiary or a loss payable payee to
be canceled or terminated, except in the ordinary course of business;
and
31
(l) authorize or enter into an agreement to do any of the
foregoing.
6.2 Access; Confidentiality. (a) From the date of this
Agreement until the Effective Time, upon reasonable prior notice to VIDEO or
KNOGO, as the case may be, VIDEO and KNOGO shall give one another and their
respective authorized representatives reasonable access during normal business
hours to their respective executive officers, properties, books and records, and
shall furnish one another and their respective authorized representatives with
such financial and operating data and other information concerning the
businesses and properties of VIDEO and KNOGO as VIDEO and KNOGO may from time to
time reasonably request.
(b) Each of VIDEO, SENTRY, VMC, SMC and KNOGO will hold and
treat, and will cause their respective affiliates, agents and other
representatives to hold and treat, all documents and information concerning
VIDEO, SENTRY, VMC, SMC or KNOGO, as the case may be, furnished to one another
or their respective representatives in connection with the transactions
contemplated by this Agreement confidential in accordance with the
Confidentiality Agreements dated July 11, 1996 and September 6, 1996, between
KNOGO and VIDEO, which Confidentiality Agreements shall remain in full force and
effect until termination in accordance with their terms.
6.3 Meetings of Stockholders. Each of VIDEO and KNOGO will
take all action necessary in accordance with applicable law and the Certificates
or Articles of Incorporation, as the case may be, and By-Laws of VIDEO and KNOGO
to convene a meeting of its stockholders as promptly as practicable to consider
and vote upon the approval of this Agreement and the transactions contemplated
hereby. The Board of Directors of each of VIDEO and KNOGO shall recommend such
approval and VIDEO and KNOGO shall each take all lawful action to solicit such
approval, including, without limitation, timely mailing of the Joint Proxy
Statement/Prospectus; provided, that such recommendation or solicitation is
subject to any action (including any withdrawal or change of its recommendation)
taken by, or upon authority of, the KNOGO Board or the VIDEO Board in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law. VIDEO, as sole stockholder of SENTRY, and SENTRY,
as sole stockholder of VMC and SMC, shall as promptly as practicable duly
approve this Agreement and the transactions contemplated hereby.
6.4 Reasonable Efforts. Subject to the terms and conditions of
this Agreement and applicable law, each of the parties shall act in good faith
and use commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement as soon as practicable, including such actions or things as any other
party may reasonably request in order to cause any of
32
the conditions to such other party's obligation to consummate the transactions
contemplated by this Agreement to be fully satisfied. Without limiting the
foregoing, the parties shall (and shall cause their respective subsidiaries, and
use commercially reasonable efforts to cause their respective affiliates,
directors, officers, employees, agents, attorneys, accountants and
representatives, to) consult and fully cooperate with and provide assistance to
each other in (a) the preparation and filing with the SEC of the Joint Proxy
Statement/Prospectus, and any necessary amendments or supplements thereto; (b)
seeking to have the Joint Proxy Statement/Prospectus cleared by the SEC as soon
as reasonably practicable after filing; (c) obtaining all necessary consents,
approvals, waivers, licenses, permits, authorizations, registrations,
qualifications, or other permission or action by, and giving all necessary
notices to and making all necessary filings with and applications and
submissions to, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (collectively,
"Governmental Entity"), or other person or entity as soon as reasonably
practicable after filing; (d) seeking early termination of any waiting period
under the HSR Act; (e) providing all such information concerning such party, its
subsidiaries and its officers, directors, partners and affiliates and making all
applications and filings as may be necessary or reasonably requested in
connection with any of the foregoing; (f) in general, consummating and making
effective the transactions contemplated hereby; and (g) in the event and to the
extent required, amending this Agreement so that this Agreement, the KNOGO
Merger and the VIDEO Merger comply with the DGCL and the Minnesota Act. Prior to
making any application to or filing with any Governmental Entity or other person
or entity in connection with this Agreement (other than filing under the HSR
Act), each party shall provide the other party with drafts thereof and afford
the other party a reasonable opportunity to comment on such drafts.
6.5 Public Announcements. KNOGO, VIDEO, SENTRY, VMC and SMC
will consult with one another prior to issuing any release or otherwise making
any public statements with respect to the transactions contemplated hereby and
shall not issue any such press release or make any public statement prior to
such consultation, except as may be required by applicable law or any listing
agreement with a national securities exchange by which such party is bound.
6.6 Acquisition Proposals. Except as contemplated hereby, each
of KNOGO and VIDEO agree not to (and shall use reasonable efforts to cause its
officers, directors and employees and any investment banker, attorney,
accountant, or other agent retained by it not to) solicit, directly or
indirectly, any proposal or offer to acquire all or any significant part of its
business and properties or its capital stock, whether by merger, purchase of
assets, tender offer or otherwise (an "Acquisition
33
Proposal" and, any such transaction, an "Acquisition Transaction") or provide
any non-public information concerning the respective company to any third party
in connection with an Acquisition Proposal. Notwithstanding the foregoing, KNOGO
and VIDEO may furnish information or cause information to be furnished to, and
may participate in discussions and negotiations directly or through their
respective representatives and enter into an agreement relating to an
Acquisition Proposal with, any third party (including parties with whom KNOGO
and VIDEO or their respective representatives have had discussions on any basis
on or prior to the date hereof) who makes an unsolicited proposal or offer to
it, if the KNOGO Board or VIDEO Board, as the case may be, determines in good
faith, after consultation with outside counsel, that the failure to consider
such proposal or offer could reasonably be deemed to cause its directors to
breach their fiduciary duties under applicable law. In addition, nothing
contained in this Agreement shall prohibit KNOGO or VIDEO and their respective
directors from (a) issuing a press release or otherwise publicly disclosing the
terms of any Acquisition Proposal, (b) taking and disclosing to its stockholders
any position, and making related filings with the SEC, as required by Rules
14e-2 and 14d-9 under the Exchange Act with respect to any tender offer or (c)
taking any action and making any disclosure to its stockholders which the KNOGO
Board or VIDEO Board, as the case may be, determines in good faith, after
consultation with outside counsel, would likely be required to be taken or made
under applicable law (including, without limitation, laws relating to the
fiduciary duties of directors). In the event KNOGO or VIDEO receives an
Acquisition Proposal, it shall promptly inform the other party as to the receipt
of such Acquisition Proposal, unless the KNOGO Board or VIDEO Board, as the case
may be, determines, after consultation with outside counsel, that giving such
notice could reasonably be deemed to cause its directors to breach their
fiduciary duties under applicable law.
6.7 Registration Statement and Joint Proxy
Statement/Prospectus. KNOGO and VIDEO shall promptly furnish all information as
may be required for inclusion in the Registration Statement on Form S-4 to be
filed with the SEC in connection with the issuance of shares of SENTRY Common
Stock in the Reorganization (the "Registration Statement") and the joint proxy
statement/prospectus which will form a part thereof (the "Joint Proxy
Statement/Prospectus"). VIDEO and KNOGO shall cooperate and promptly prepare and
VIDEO shall file with the SEC as soon as practicable the Registration Statement
under the Securities Act. VIDEO shall use reasonable efforts, and KNOGO will
cooperate with VIDEO, to have the Registration Statement declared effective by
the SEC as promptly as practicable. VIDEO shall use reasonable efforts to
obtain, prior to the effective date of the Registration Statement, all necessary
state securities law or "blue sky" permits or approvals required to consummate
the transactions contemplated by this Agreement. If at any time prior to the
Effective Time, any
34
information pertaining to KNOGO or VIDEO contained in or omitted from the
Registration Statement makes such information false or misleading, KNOGO and
VIDEO shall promptly inform the other party and provide such other party with
information necessary to make the statements contained therein not misleading.
No amendment or supplement to the Joint Proxy Statement/Prospectus will be made
by VIDEO or KNOGO without the approval of the other party.
6.8 Listing Application. VIDEO shall promptly prepare and
submit to NASDAQ, or another nationally recognized exchange, a listing
application covering the shares of SENTRY Common Stock issuable in the
Reorganization, and shall use its best efforts to obtain, prior to the Effective
Time, approval for the listing of such SENTRY Common Stock, subject to official
notice of issuance.
6.9 Affiliate Letters. (a) At least 30 days prior to the
Closing Date, KNOGO shall deliver to VIDEO a list of names and addresses of
those persons who were, in KNOGO's reasonable judgment, at the record date for
the KNOGO Stockholders' Meeting, "affiliates" of KNOGO (each such person, a
"KNOGO Affiliate") within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act. KNOGO shall provide VIDEO with such
information and documents as VIDEO shall reasonably request for purposes of
reviewing such list. KNOGO shall use reasonable efforts to deliver or cause to
be delivered to VIDEO, prior to the Closing Date, from each of the KNOGO
Affiliates identified in the foregoing list, an Affiliate Letter in the form
attached hereto as Exhibit C. SENTRY shall be entitled to place legends as
specified in such Affiliate Letters on the certificates evidencing any SENTRY
Common Stock to be received by such KNOGO Affiliates pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the SENTRY Common Stock, consistent with the terms of such
Affiliate Letters.
(b) At least 30 days prior to the Closing Date, VIDEO shall
deliver to KNOGO a list of names and addresses of those persons who were, in
VIDEO's reasonable judgment, at the record date for VIDEO Stockholders' Meeting,
"affiliates" of VIDEO (each such person, a "VIDEO Affiliate") within the meaning
of Rule 145 of the rules and regulations promulgated under the Securities Act.
VIDEO shall provide KNOGO with such information and documents as KNOGO shall
reasonably request for purposes of reviewing such list. VIDEO shall use
reasonable efforts to deliver or cause to be delivered to KNOGO, prior to the
Closing Date, from each of the VIDEO Affiliates identified in the foregoing
list, an Affiliate Letter in the form attached hereto as Exhibit C. SENTRY shall
be entitled to place legends as specified in such Affiliate Letters on the
certificates evidencing any SENTRY Common Stock to be received by such VIDEO
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer
35
agent for the SENTRY Common Stock, consistent with the terms of such Affiliate
Letters.
6.10 D&O Indemnification and Insurance. (a) From the Effective
Time through the later of (i) the sixth anniversary of the date on which the
Effective Time occurs and (ii) the expiration of any statute of limitations
applicable to any claim, action, suit, proceeding or investigation referred to
below, SENTRY shall, or shall cause the VIDEO Surviving Corporation and KNOGO
Surviving Corporation to, indemnify and hold harmless each present and former
officer, director, employee or agent of KNOGO and VIDEO, including, without
limitation, each person controlling any of the foregoing persons (the
"Indemnified Parties"), against all claims, losses, liabilities, damages,
judgments, fines, fees, costs or expenses, including, without limitation,
attorneys' fees and disbursements (collectively, "Costs"), incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time (including,
without limitation, this Agreement and the transactions and actions contemplated
hereby), whether asserted or claimed prior to, at or after the Effective Time,
to the fullest extent permitted under applicable law and the Certificate of
Incorporation, as amended, or By-Laws of KNOGO or indemnification agreements in
effect on the date hereof, including provisions relating to advancement of
expenses incurred in the defense of any claim, action, suit, proceeding or
investigation. Without limiting the foregoing, in the event that any claim,
action, suit, proceeding or investigation is brought against an Indemnified
Party (whether arising before or after the Effective Time), the Indemnified
Party may retain counsel satisfactory to such Indemnified Party, and SENTRY
shall, or shall cause the VIDEO Surviving Corporation and KNOGO Surviving
Corporation to, advance the fees and expenses of such counsel for the
Indemnified Party in accordance with the Certificate of Incorporation, as
amended, or By-Laws of KNOGO in effect on the date of this Agreement.
(b) SENTRY shall, or shall cause the VIDEO Surviving
Corporation and KNOGO Surviving Corporation, to keep in effect in its
Certificate of Incorporation and Bylaws, provisions of KNOGO providing for
exculpation of director and officer liability and its indemnification of the
Indemnified Parties to the fullest extent permitted under the DGCL, which
provisions shall not be amended except as required by applicable law or except
to make changes permitted by law that would enlarge the Indemnified Parties'
right to indemnification.
(c) SENTRY shall maintain, or shall cause the VIDEO Surviving
Corporation and KNOGO Surviving Corporation to maintain, with respect to matters
occurring at, prior to or subsequent to the Effective Time, at no expense to the
beneficiaries, directors' and officers', liability insurance ("D&O Insurance")
for the
36
Indemnified Parties, issued by a carrier or carriers assigned a claims-paying
ability rating by A.M. Best & Co. of "A (Excellent)" or higher, providing at
least the same coverage as the D&O Insurance currently maintained by KNOGO and
containing terms and conditions which are no less favorable to the
beneficiaries, for a period of at least six years from the Effective Time. In
the event any claim is made against present or former directors, officers or
employees of KNOGO or VIDEO that is covered or potentially covered by insurance,
neither SENTRY, the VIDEO Surviving Corporation nor the KNOGO Surviving
Corporation shall do anything that would forfeit, jeopardize, restrict or limit
the insurance coverage available for that claim until the final disposition
thereof.
(d) Notwithstanding anything herein to the contrary, if any
claim, action, suit, proceeding or investigation (whether arising before, at or
after the Effective Time) is made against any Indemnified Party, on or prior to
the sixth anniversary of the Effective Time, the provisions of this Section 6.10
shall continue in effect until the final disposition of such claim, action,
suit, proceeding or investigation.
(e) This covenant is intended to be for the benefit of, and
shall be enforceable by, each of the Indemnified Parties and their respective
heirs and legal representatives. The indemnification provided for herein shall
not be deemed exclusive of any other rights to which an Indemnified Party is
entitled, whether pursuant to law, contract or otherwise. SENTRY shall pay all
expenses, including attorneys' fees, that may be incurred by any Indemnified
Party in enforcing the indemnity and other obligations provided for in this
Section 6.10.
(f) In the event that SENTRY or the VIDEO Surviving
Corporation or the KNOGO Surviving Corporation or any of their respective
successor or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, to the
extent necessary to effectuate the purposes of this Section 6.10, proper
provision shall be made so that the successors and assigns of SENTRY or the
VIDEO Surviving Corporation or the KNOGO Surviving Corporation shall succeed to
the obligations set forth in this Section 6.10 and none of the actions described
in clauses (i) or (ii) shall be taken until such provision is made.
6.11 Employee Benefits. (a) From and after the Effective Time,
SENTRY, the VIDEO Surviving Corporation and the KNOGO Surviving Corporation and
their respective affiliates will honor in accordance with their terms all
existing employment, severance, consulting and salary continuation agreements
(i) between KNOGO and any of its current or former officers, directors,
employees or consultants, and (ii) between VIDEO and any
37
of its current or former officers, directors, employees or consultants.
(b) SENTRY agrees that, for a three (3) year period after the
Effective Time, SENTRY shall provide, or shall cause the VIDEO Surviving
Corporation and the KNOGO Surviving Corporation to provide, those persons who,
prior to the Effective Time, were employees of KNOGO ("KNOGO Employees") or
VIDEO ("VIDEO Employees") with employee plans and programs which provide
benefits that are no less favorable in the aggregate to those provided to other
employees of SENTRY of comparable status and seniority. With respect to such
benefits, past service, compensation and expense credits of such KNOGO Employees
and VIDEO Employees shall be recognized for all purposes under such plans
(including, but not limited to, participation, eligibility vesting and
calculation benefits), and each employee or fringe benefit plan or program
available to KNOGO Employees or VIDEO Employees as contemplated hereby shall be
applied to such KNOGO Employees and VIDEO Employees, respectively.
(c) In the event that SENTRY or the VIDEO Surviving
Corporation or the KNOGO Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any Person, then, and in each such case, to the
extent necessary to effectuate the purposes of this Section 6.11, proper
provision shall be made so that the successors and assigns of SENTRY or the
VIDEO Surviving Corporation or the KNOGO Surviving Corporation shall succeed to
the obligations set forth in this Section 6.11 and none of the actions described
in clauses (i) or (ii) shall be taken until such provision is made.
6.12 Fees and Expenses. (a) Whether or not the VIDEO Merger or
the KNOGO Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby (including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants) shall be borne by the party which incurs such cost or expense;
provided, that if this Agreement is terminated pursuant to Section 8.1 as a
result of the willful and material misrepresentation by a party or the willful
and material breach by a party of any of its covenants or arrangements set forth
herein, such party shall pay the costs and expenses incurred by the other party
in connection with this Agreement; and provided, further, that all costs and
expenses related to the preparation, printing, filing and mailing (as
applicable) of the Joint Proxy Statement/Prospectus and all SEC filing fees
incurred in connection with the Joint Proxy Statement/Prospectus shall be borne
equally by KNOGO, on the one hand, and VIDEO, on the other hand.
38
(b)(i)Notwithstanding the foregoing, provided that neither
VIDEO, SENTRY, VMC nor SMC shall be in breach of their respective obligations
under this Agreement, if (A) the KNOGO Board shall withdraw or modify in a
manner adverse to VIDEO its approval or recommendation of the KNOGO Merger or
shall have resolved to do any of the foregoing pursuant to Section 6.6 and (B)
VIDEO or KNOGO shall have terminated this Agreement pursuant to Section 8.1(g)
and (C) within six months of any such termination, KNOGO shall have consummated
an Acquisition Transaction, then KNOGO agrees that it will pay, or reimburse
VIDEO for, all reasonable fees and expenses incurred by VIDEO and its affiliates
in connection with the Reorganization and the consummation of the transactions
contemplated by this Agreement, in an amount not to exceed $750,000 in the
aggregate, in addition to the amount otherwise payable pursuant to the second
proviso contained in Section 6.12(a) above.
(ii) Notwithstanding the foregoing, provided that KNOGO shall
not be in breach of its obligations under this Agreement, if (A) the VIDEO Board
shall withdraw or modify in a manner adverse to KNOGO its approval or
recommendation of the VIDEO Merger or shall have resolved to do any of the
foregoing pursuant to Section 6.6 and (B) KNOGO or VIDEO shall have terminated
this Agreement pursuant to Section 8.1(h) and (C) within six months of any such
termination, VIDEO shall have consummated an Acquisition Transaction, then VIDEO
agrees that it will pay, or reimburse KNOGO for, all reasonable fees and
expenses incurred by KNOGO and its affiliates in connection with the
Reorganization and the consummation of the transactions contemplated by this
Agreement, in an amount not to exceed $750,000 in the aggregate, in addition to
the amount otherwise payable pursuant to the second proviso contained in Section
6.12(a) above.
6.13 Cancellation of SENTRY Common Stock. As of the Effective
Time, all authorized SENTRY Common Stock issued and outstanding immediately
prior to the Effective Time shall automatically be canceled and extinguished and
shall cease to exist.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Obligations of Each Party to Effect the
Reorganization. The respective obligations of each party hereto to effect the
VIDEO Merger or the KNOGO Merger, respectively, shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
or all of which may be waived in accordance with Section 9.7 hereof, in whole or
in part, to the extent permitted by applicable law:
39
(a) Stockholder Approval. This Agreement shall have been
adopted, and the VIDEO Merger and KNOGO Merger shall have been approved
in the manner required by applicable law or by the applicable
regulations of any stock exchange or other regulatory body, as the case
may be, by a majority vote of the holders of the outstanding VIDEO
Shares and KNOGO Shares, respectively.
(b) No Injunction. No federal or state governmental or
regulatory body or court of competent jurisdiction shall have enacted,
issued, promulgated or enforced any statute, rule, regulation,
executive order, decree, judgment, preliminary or permanent injunction
or other order which is in effect and which prohibits, enjoins or
otherwise restrains the consummation of the VIDEO Merger or the KNOGO
Merger; provided, that the parties shall use commercially reasonable
efforts to cause any such decree, judgment, injunction or order to be
vacated or lifted.
(c) HSR Act. Any waiting period under the HSR Act applicable
to the Reorganization shall have terminated or otherwise expired.
(d) Registration Statement. The Registration Statement shall
have become effective and shall be effective at the Effective Time, and
no stop order suspending effectiveness of the Registration Statement
shall have been issued, no action, suit, proceeding or investigation by
the SEC to suspend the effectiveness thereof shall have been initiated
and be continuing, and all necessary approvals under state securities
laws relating to the issuance or trading of the SENTRY Common Stock to
be issued to VIDEO and KNOGO stockholders in connection with the
Reorganization shall have been received.
(e) Listing of SENTRY Common Stock. The SENTRY Common Stock
and the Sentry Class A Preferred Stock to be issued to VIDEO and KNOGO
stockholders, as the case may be, in connection with the Reorganization
shall have been approved for listing on NASDAQ, or another nationally
recognized exchange, subject only to official notice of issuance.
7.2 Conditions Precedent to the Obligations of KNOGO. The
obligation of KNOGO to effect the KNOGO Merger is also subject to the
satisfaction at or prior to the Effective Time of each of the following
additional conditions, unless waived by KNOGO:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by VIDEO, SENTRY, VMC and SMC
herein shall be true and correct in all material respects on and as of
the Effective Time, with the same force and effect as though such
representations and warranties had been made on and as of the Effective
Time, except for changes
40
permitted or contemplated by this Agreement and except for
representations and warranties that are made as of a specific date or
time, which shall be true and correct in all material respects only as
of such specific date or time.
(b) Compliance with Covenants. Each of VIDEO, SENTRY, VMC and
SMC shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants,
contained in this Agreement to be performed or complied with by it
prior to or on the Effective Time.
(c) Officer's Certificates. KNOGO shall have received such
certificates of VIDEO, SENTRY, VMC and SMC, dated the Closing Date,
signed by an executive officer of VIDEO, SENTRY, VMC and SMC to
evidence satisfaction of the conditions set forth in this Article V
(insofar as each relates to VIDEO, SENTRY, VMC or SMC) as may be
reasonably requested by KNOGO.
(d) Legal Opinion. KNOGO shall have received the opinion of
Stroock & Stroock & Xxxxx, special counsel to KNOGO, based upon
reasonably requested representation letters and dated the Closing Date,
to the effect that the KNOGO Merger will be treated for federal income
tax purposes as a transfer of property to SENTRY by holders of KNOGO
Shares governed by Section 351 of the Code.
7.3 Conditions Precedent to the Obligations of VIDEO, SENTRY,
VMC and SMC. The obligation of VIDEO, SENTRY, VMC and SMC to effect the
Reorganization is also subject to the satisfaction at or prior to the Effective
Time of each of the following additional conditions, unless waived by VIDEO:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by KNOGO herein shall be true and
correct in all material respects on and as of the Effective Time, with
the same force and effect as though such representations and warranties
had been made on and as of the Effective Time, except for changes
permitted or contemplated by this Agreement and except for
representations and warranties that are made as of a specific date or
time, which shall be true and correct in all material respects only as
of such specific date or time.
(b) Compliance with Covenants. KNOGO shall have performed in
all material respects all obligations and agreements, and complied in
all material respects with all covenants, contained in this Agreement
to be performed or complied with by it prior to or on the Effective
Time.
(c) Officer's Certificates. VIDEO shall have received such
certificate of KNOGO, dated the Closing Date, signed by
41
an executive officer of KNOGO to evidence satisfaction of the
conditions set forth in this Article V (insofar as each relates to
KNOGO) as may be reasonably requested by VIDEO.
(d) Legal Opinion. VIDEO shall have received the opinion of
Xxxxx Xxxxxxxxxx, special counsel to VIDEO, based upon reasonably
requested representation letters and dated the Closing Date, to the
effect that the VIDEO Merger will be treated for federal income tax
purposes as a reorganization described in Section 368(a) of the Code
and/or as a transfer of property to SENTRY by holders of VIDEO Shares
governed by Section 351 of the Code.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and the
Reorganization may be abandoned at any time (notwithstanding approval of the
KNOGO Merger by the stockholders of KNOGO and the VIDEO Merger by the
stockholders of VIDEO, if required by applicable provisions of the DGCL and the
Minnesota Act), prior to the Effective Time:
(a) by mutual written consent of KNOGO and VIDEO;
(b) by either KNOGO or VIDEO, if the Effective Time shall not
have occurred on or before 180 days from the date hereof; provided,
that the right to terminate this Agreement under this clause (b) shall
not be available to any party whose misrepresentation in this Agreement
or whose failure to perform any of its covenants and agreements or to
satisfy any obligation under this Agreement has been the cause of or
resulted in the failure of the Reorganization to occur on or before
such date;
(c) by either KNOGO or VIDEO, if (i) any federal or state
court of competent jurisdiction or other federal or state governmental
or regulatory body shall have issued any judgment, injunction, order or
decree prohibiting, enjoining or otherwise restraining the transactions
contemplated by this Agreement and such judgment, injunction, order or
decree shall have become final and nonappealable (provided, that the
party seeking to terminate this Agreement pursuant to this clause (c)
shall have used commercially reasonable efforts to remove such
judgment, injunction, order or decree) or (ii) any statute, rule,
regulation or executive order promulgated or enacted by any federal or
state governmental authority after the date of this Agreement which
prohibits the consummation of the Reorganization shall be in effect;
42
(d) by either KNOGO or VIDEO, if this Agreement is not adopted
or the VIDEO Merger or the KNOGO Merger is not approved by the
stockholders of VIDEO or KNOGO as required by Section 7.1;
(e) by VIDEO, if there shall have been a material breach of
any representation, warranty or material covenant or agreement on the
part of KNOGO, which is not cured after thirty (30) days' written
notice by VIDEO to KNOGO; or
(f) by KNOGO, if there shall have been a material breach of
any representation, warranty or material covenant or agreement on the
part of VIDEO, which is not cured after thirty (30) days' written
notice by KNOGO to VIDEO.
(g) by either VIDEO or KNOGO, if (i) the KNOGO Board shall
withdraw or modify in a manner adverse to VIDEO its approval or
recommendation of the KNOGO Merger or shall have resolved to do any of
the foregoing pursuant to Section 6.6 or (ii) any Person or group of
Persons shall have made an Acquisition Proposal that the KNOGO Board
determines in good faith, after consultation with outside counsel, that
the failure to accept such Acquisition Proposal could reasonably be
deemed to cause the members of the KNOGO Board to breach their
fiduciary duties under applicable law.
(h) by either KNOGO or VIDEO, if (i) the VIDEO Board shall
withdraw or modify in a manner adverse to KNOGO its approval or
recommendation of the VIDEO Merger or shall have resolved to do any of
the foregoing pursuant to Section 6.6 or (ii) any Person or group of
Persons shall have made an Acquisition Proposal that the VIDEO Board
determines in good faith, after consultation with outside counsel, that
the failure to accept such Acquisition Proposal could reasonably be
deemed to cause the members of the VIDEO Board to breach their
fiduciary duties under applicable law.
8.2 Effect of Termination. In the event of any termination of
this Agreement pursuant to Section 8.1, this Agreement forthwith shall become
void and of no further force or effect, and no party hereto (or any of its
affiliates, directors, officers, agents or representatives) shall have any
liability or obligation hereunder, except in any such case (a) as provided in
Sections 6.2(b) (Confidentiality), 6.5 (Public Announcements) and 6.12 (Fees and
Expenses), which shall survive any such termination and (b) to the extent such
termination results from the breach by such party of any of its representations,
warranties, covenants or agreements contained in this Agreement.
43
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations, Warranties and Covenants.
None of the representations, warranties, covenants or agreements contained in
this Agreement or in any certificate or other instrument delivered pursuant to
this Agreement shall survive the Effective Time, except for the covenants and
agreements contained in Sections 6.2(b) (Confidentiality), 6.5 (Public
Announcements), 6.10 (D&O Indemnification and Insurance), 6.11 (Employee
Benefits) and 6.12 (Fees and Expenses).
9.2 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) or sent by fax (with
immediate confirmation) or nationally recognized overnight courier service, as
follows:
(a) if to VIDEO, to:
Video Sentry Corporation
0000 Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx, President
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxxxx
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
(b) if to KNOGO, to:
Knogo North America Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxx Xxxxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxxx, President
Fax: (000) 000-0000
44
with a copy to:
Stroock & Stroock & Xxxxx
0 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
(c) if to SENTRY prior to the Effective Time, to:
Sentry Technology Corporation
c/o Video Sentry Corporation
0000 Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxxxxxxx
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Fax: (000) 000-0000
(d) if to SENTRY subsequent to the Effective Time, to:
Sentry Technology Corporation
c/o Knogo North America Inc.
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Attn: President
Fax: (000) 000-0000
with a copy to:
Stroock & Stroock & Xxxxx
0 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
or to such other Person or address or facsimile number as any party shall
specify by like written notice to the other parties hereto (any such notice of a
change of address to be effective only upon actual receipt thereof).
9.3 Certain Definitions. The following terms, when used in
this Agreement, shall have the following respective meanings:
45
(a) "affiliate" shall have the meaning assigned to such term
in Section 12(b)-2 of the Exchange Act.
(b) "business day" shall have the meaning set forth in Rule
14d-1(c)(6) under the Exchange Act.
(c) "Knowledge" means the actual knowledge of the executive
officers of KNOGO or VIDEO, as the case may be.
(d) "Material Adverse Effect" means, with respect to any
Person, any change or effect which is materially adverse to the
financial condition or results of operations of such Person and its
subsidiaries, taken as a whole, excluding in all cases: (i) events or
conditions generally affecting the industry in which such Person and
its subsidiaries operate or arising from changes in general business or
economic conditions; (ii) any effect resulting from any change in law
or generally accepted accounting principles, which affect generally
entities such as such Person; (iii) events resulting directly or
indirectly from the execution and/or announcement of this Agreement,
including, without limitation, the cancellation or postponement of
customer orders or the absence of new customer sales during the
pendency of the Agreement; and (iv) any effect resulting from
compliance by such Person with the terms of this Agreement.
(e) "Person" means any natural person, corporation, limited
liability company, partnership, unincorporated organization or other
entity.
(f) "subsidiary" of any Person means any other corporation or
entity of which such Person owns, directly or indirectly, stock or
other equity interests having a majority of the votes entitled to be
cast in the election of directors of such corporation or entity under
ordinary circumstances or of which such Person owns a majority
beneficial interest.
9.4 Entire Agreement. This Agreement (including the schedules,
exhibits and other documents referred to herein), together with the
Confidentiality Agreements referred to in Section 4.2(b), constitutes the entire
agreement between and among the parties hereto and supersedes all prior
agreements and understandings, oral and written, between or among any of the
parties with respect to the subject matter hereof.
9.5 Assignment; Binding Effect. Neither this Agreement nor any
of the rights, benefits or obligations hereunder may be assigned, in whole or in
part, by any party (whether by operation of law or otherwise) without the prior
written consent of the other parties hereto. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
46
Nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, other than rights conferred upon third parties under Sections 6.10
and 6.11.
9.6 Amendments. This Agreement may be amended by the parties
at any time prior to the Effective Time; provided, that, after approval of this
Agreement and either the KNOGO Merger or the VIDEO Merger by the stockholders of
VIDEO or KNOGO if required under applicable law, no amendment shall be made
which by law requires further approval by the stockholders of VIDEO and KNOGO,
without such approval. This Agreement may not be amended or modified except by
an instrument in writing signed on behalf of each of the parties hereto.
9.7 Waivers. At any time prior to the Effective Time, VIDEO,
on the one hand, or KNOGO, on the other hand, may, to the extent legally
allowed, (a) extend the time specified herein for the performance of any of the
obligations or other acts of the other, (b) waive any inaccuracies in the
representations and warranties of the other contained herein or in any document
delivered pursuant hereto, or (c) waive compliance by the other with any of the
agreements or covenants of such other party or parties (as the case may be)
contained herein. Any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of the party or parties to be bound
thereby. No such extension or waiver shall constitute a waiver of, or estoppel
with respect to, any subsequent or other breach or failure to strictly comply
with the provisions of this Agreement. The failure of any party to insist on
strict compliance with this Agreement or to assert any of its rights or remedies
hereunder or with respect hereto shall not constitute a waiver of such rights or
remedies.
9.8 Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
9.9 Captions. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
9.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
47
Delaware, without regard to any applicable principles of conflicts of law.
* * *
48
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Agreement and Plan of Reorganization and Merger as of the date first
above written.
VIDEO SENTRY CORPORATION
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------
Name: Xxxxxx X. Xxxxx, Xx.
--------------------------
Title: Chairman of the Board
and Chief Executive
Officer
--------------------------
KNOGO NORTH AMERICA INC.
By: /s/ X.X. Xxxxxxxxx
----------------------------
Name: X.X. Xxxxxxxxx
--------------------------
Title: President and Chief
Executive Officer
--------------------------
SENTRY TECHNOLOGY CORPORATION
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------
Name: Xxxxxx X. Xxxxx, Xx.
--------------------------
Title: Chairman of the Board
and Chief Executive
Officer
--------------------------
VIKING MERGER CORP.
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------
Name: Xxxxxx X. Xxxxx, Xx.
--------------------------
Title: Chairman of the Board
and Chief Executive
Officer
--------------------------
STRIP MERGER CORP.
By: /s/ Xxxxxx X. Xxxxx, Xx.
---------------------------
Name: Xxxxxx X. Xxxxx, Xx.
--------------------------
Title: Chairman of the Board
and Chief Executive
Officer
--------------------------
EXHIBIT A
---------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SENTRY TECHNOLOGY CORPORATION
(a Delaware corporation)
------------------------------
FIRST. The name of the corporation is SENTRY TECHNOLOGY CORPORATION
(the "Corporation")
SECOND. The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxx 00000. The name of the Corporation's registered agent at such address
is Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law ("DGCL").
FOURTH. The total number of shares of stock which the Corporation shall
have the authority to issue is one hundred million (100,000,000) shares of
common stock, par value $0.001 per share (the "Common Stock"), and twenty-five
million (25,000,000) shares of preferred stock, par value $0.001 per share (the
"Preferred Stock"), of which six million (6,000,000) shares shall be designated
Class A Preferred Stock (the "Class A Preferred Stock"). Each share of Class A
Preferred Stock shall have a face value of $5.00 (the "Face Value").
I. Common Stock.
A statement of the designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the Common Stock is
as follows:
A. Dividends. Subject to the provisions of this Article FOURTH, the
Board of Directors (the "Board") of the Corporation may cause dividends to be
paid to the holders of shares of Common Stock out of funds legally available for
the payment of dividends by declaring an amount per share as a dividend.
B. Liquidation. Subject to the provisions of this Article FOURTH, in
the event of any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, the holders of shares
A-1
of Common Stock shall be entitled to share in all remaining assets of the
Corporation available for distribution to its stockholders.
C. Voting Rights. Subject to the provisions of this Article FOURTH, and
except as otherwise required by law, each outstanding share of Common Stock
shall be entitled to vote on each matter on which the stockholders of the
Corporation shall be entitled to vote, and each holder of Common Stock shall be
entitled to one vote for each share of such stock held by such holder.
II. Preferred Stock.
Shares of the Preferred Stock may be issued from time to time in one or
more classes or series, each of which class or series shall have such
distinctive designation or title as shall be set forth below or fixed by the
Board prior to the issuance of any shares thereof. Each such class or series of
the Preferred Stock shall be issued for such consideration and shall have such
voting powers, full or limited, or no voting powers, and such preferences and
relative participating optional and other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated in such
resolution providing for the issue of such class or series of the Preferred
Stock as may be adopted from time to time by the Board prior to the issuance of
any shares thereof pursuant to the authority hereby expressly vested in it, all
in accordance with the laws of the State of Delaware. All shares of any one
class or series of the Preferred Stock shall be alike in every particular. The
Board is further authorized to increase or decrease (but not below the number of
such shares of series then outstanding) the number of shares of any series
subsequent to the issuance of shares of that series.
Statements of the designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the Class A Preferred
Stock are as follows:
A. Class A Preferred Stock.
1. Rank. The Class A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up or dissolution, rank (i)
on parity with, or junior to, as the case may be, any other class or series of
Preferred Stock established by the Board, the terms of which shall specifically
provide that such class or series shall rank on parity with, or senior to, the
Class A Preferred Stock with respect to dividend rights and rights on
liquidation, winding up or dissolution, and (ii) except as set forth below,
prior to any other equity securities of the Corporation with respect to dividend
rights and rights on liquidation, winding up or dissolution (all of such equity
securities of the Corporation to which the Class A Preferred Stock ranks prior,
including the Common Stock, are at times collectively referred to herein as the
"Junior Stock").
A-2
2. Dividend.
(a) The annual dividend rate on each share of the
Class A Preferred Stock shall be fixed at five percent (5%) of the Face Value,
payable in accordance with this paragraph 2 (the "Dividend"). The holders of
shares of the Class A Preferred Stock shall be entitled to receive Dividends on
the following dates (each, a "dividend payment date"): _______________, 1997/8,
_________________, 1998/9,_________________ , 1998/9,_________________ ,
1999/2000,_________________ , 1999/2000 and _________________ , 2000/2001; the
12 month period ending on each of the first two dividend payment dates is an
"annual dividend period," the six month period ending on each of the next four
dividend payment dates is a "semi-annual dividend period" and each such annual
dividend period or semi-annual dividend period is a "dividend period." Dividends
(whether or not declared) shall be payable in additional shares of the Class A
Preferred Stock during the two annual dividend periods ending on the first two
dividend payment dates subsequent to issuance of the Class A Preferred Stock,
such that holders shall receive a Dividend of 1/20th of a share of Class A
Preferred Stock for each share of Class A Preferred Stock held. Thereafter, the
holders of shares of the Class A Preferred Stock shall be entitled to receive,
in preference to dividends on the Junior Stock, and whether or not declared the
Dividend (including any Dividend accrued and unpaid) payable in cash, out of
funds legally available for the payment of dividends, such that holders shall
receive a Dividend of $0.25 for each share of Class A Preferred Stock held,
which Dividend shall accrue semi-annually and be due in equal installments on
each of the last four dividend payment dates. Dividends shall be paid on the
applicable dividend payment date to the holders of record at the close of
business on the date (the "record date") specified by the Board at the time such
Dividend is declared; provided, however, that such record date shall not be more
than 60 days nor less than 10 days prior to the applicable dividend payment
date. For the purposes of this paragraph, each additional share of the Class A
Preferred Stock issued as a Dividend shall be valued at the Face Value.
Dividends (whether payable in cash or in stock) shall be fully cumulative and
shall accrue, with additional payments thereon, from the first day of the
dividend period in which such Dividend may be payable as herein provided on all
shares of the Class A Preferred Stock issued and outstanding on the first day of
such dividend period, except that with respect to the initial dividend period,
such Dividend shall accrue from the date of issue. If the dividend payment date
is not a business day, the dividend payment date shall be the next succeeding
business day.
(b) All Dividends paid with respect to shares of the
Class A Preferred Stock pursuant to paragraph 2(a) shall be paid pro rata to the
holders entitled thereto.
A-3
(c) If at any time the Corporation shall have failed
to pay all dividends which have accrued on any outstanding shares of any other
class or series of the Preferred Stock having cumulative dividend rights ranking
on parity with the shares of the Class A Preferred Stock at the times such
dividends are payable or the Corporation shall fail to redeem any of such stock
on the date set for the redemption thereof, no cash Dividend shall be declared
by the Board or paid or set apart for payment by the Corporation on shares of
the Class A Preferred Stock unless prior to or concurrently with such
declaration, payment or setting apart for payment, all accrued and unpaid
dividends on all outstanding shares of such other series of the Preferred Stock
shall have been or be declared, paid or set apart for payment, with additional
payments thereon, if any; provided, however, that in the event such failure to
pay accrued dividends is with respect only to the outstanding shares of the
Class A Preferred Stock and any outstanding shares of any other class or series
of the Preferred Stock having cumulative dividend rights on parity with the
shares of the Class A Preferred Stock, cash dividends may be declared, paid or
set apart for payment, with additional payment thereon, pro rata on shares of
the Class A Preferred Stock and shares of such other class or series of the
Preferred Stock so that the amounts of any cash dividends declared, paid or set
apart for payment on shares of the Class A Preferred Stock and shares of such
other series of the Preferred Stock shall in all cases bear to each other the
same ratio that, at the time of such declaration, payment or setting apart for
payment, all accrued but unpaid cash dividends on shares of the Class A
Preferred Stock and shares of such other series of the Preferred Stock bear to
each other. Any Dividend not paid pursuant to paragraph 2(a) hereof or this
paragraph 2(c) shall be fully cumulative and shall accrue with additional
payments thereon, as set forth in paragraph 2(a) hereof.
(d) (i) Holders of shares of the Class A Preferred
Stock shall be entitled to receive the Dividends provided for in
paragraph 2(a) hereof in preference to and in priority over any
dividends other than dividends paid in Junior Stock upon any of the
Junior Stock.
(ii) So long as any shares of the Class A Preferred
Stock are outstanding, the Corporation shall not declare, pay or set
apart for payment any dividend on any of the Junior Stock (other than
dividends paid in such Junior Stock) or make any payment on account of,
or set apart for payment money for a sinking or other similar fund for,
the purchase, redemption or other retirement of, any of the Junior
Stock or any warrants, rights, calls or options exercisable for any of
the Junior Stock, or make any distribution in respect thereof, either
directly or indirectly, and whether in cash, obligations or shares of
the capital stock of the Corporation or other property (other than
distributions or dividends in stock to the holders of such stock), and
shall not permit any
A-4
corporation or other entity directly or indirectly controlled by the
Corporation to purchase or redeem any of the Junior Stock or any
warrants, rights, calls or options exercisable for any of the Junior
Stock, unless prior to or concurrently with such declaration, payment,
setting apart for payment, purchase or distribution, as the case may
be, all accrued and unpaid cash Dividends, including additional
payments thereon, on shares of the Class A Preferred Stock not paid in
accordance with the provisions of paragraph 2(a) hereof shall have been
or be paid and the Corporation shall have redeemed those shares of the
Class A Preferred Stock required to be redeemed theretofore by the
terms hereof.
(e) Subject to the foregoing provisions of this
paragraph 2, the Board may declare and the Corporation may pay or set apart for
payment dividends and other distributions on any of the Junior Stock, and may
purchase or otherwise redeem any of the Junior Stock or any warrants, rights or
options exercisable for any of the Junior Stock; provided, however, that a
decision by the Board to declare a dividend on any of the Junior Stock shall
require approval by that number of directors representing at least 662/3% of the
Board, less any vacancies on the Board. In such event, the holders of the Class
A Preferred Stock and the holders of such Junior Stock shall share equally,
share and share alike, in the distribution of any and all dividends declared on
such Junior Stock, provided that for this purpose each share of Class A
Preferred Stock shall be treated as one share of such Junior Stock.
(f) The Corporation shall not be required to issue
fractional shares of Class A Preferred Stock as a result of the payment of
Dividends. If any fraction of a share of Class A Preferred Stock would be
issuable upon the payment of a Dividend, the Corporation may, in lieu of issuing
such fractional share, pay to such holder for any such fraction of a share an
amount in cash equal to the product obtained by multiplying (i) such fraction by
(ii) the Face Value.
(g) Whenever, at any time or times, any Dividend
payable shall be in arrears, the holders of the outstanding shares of Class A
Preferred Stock shall have the right, voting separately as a class, to elect one
director of the Corporation. Upon the vesting of such right of the holders of
Class A Preferred Stock, the maximum authorized number of members of the Board
shall automatically be increased by one and the one vacancy so created shall be
filled by vote of the holders of the outstanding shares of Class A Preferred
Stock. The right of the holders of Class A Preferred Stock to elect a member of
the Board as aforesaid shall continue until such time as all Dividends in
arrears shall have been paid in full, at which time such right shall terminate,
except as herein or by law expressly provided, subject to revesting in the event
of each and every subsequent default of the character above described. Upon
termination of such special voting rights
A-5
attributable to holders of the Class A Preferred Stock pursuant to this
paragraph, the term of office of any director elected by the holders of shares
of Class A Preferred Stock (any such director, a "Class A Preferred Stock
Director") pursuant to such special voting rights shall immediately terminate
and the number of directors constituting the entire Board shall be reduced by
one. Any Class A Preferred Stock Director may be removed by, and shall not be
removed otherwise than by, a majority vote of the outstanding shares of Class A
Preferred Stock. If the office of any Class A Preferred Stock Director becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office, or otherwise, a successor who shall hold office for the unexpired
term in respect of which such vacancy occurred shall be elected by the holders
of the outstanding shares of Class A preferred Stock, voting separately as a
class.
3. Adjustment of Hurdle Price.
(a) To preserve the actual or potential economic
value of the Class A Preferred Stock, if at any time after the date of this
Amended and Restated Certificate of Incorporation (the "Certificate"), there
shall be any change in the Common Stock, whether by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combinations or
exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other
similar changes in capitalization, any distribution or issuance of cash, assets,
evidences of indebtedness or subscription rights, options or warrants to holders
of Common Stock (other than regular cash dividends) or otherwise, then, in each
such event the Board shall make such appropriate adjustments in the Hurdle Price
(as defined below) such that following such adjustments, such event shall not
have had the effect of increasing, reducing or limiting the benefits the holders
of shares of Class A Preferred Stock would have had absent such event.
(b) The "Deemed Value" as used herein shall equal the
Face Value plus the amount by which the Closing Price exceeds the Hurdle Price
on the date of the relevant event. The "Hurdle Price" as used herein shall mean
the amount that is the average of the closing prices for a share of Sentry
Common Stock on the 20 consecutive trading days ending on the trading date last
preceding the first anniversary of the filing of this Certificate; provided,
however, that in no event shall the Hurdle Price be less than $5.00 or more than
$6.50, such that (x) if such average amount is less than $5.00 the Hurdle Price
shall equal $5.00, and (y) if such average amount is more than $6.50 the Hurdle
Price shall equal $6.50, subject to adjustment pursuant to paragraph 3 above.
The "Closing Price" as used herein shall mean the average of the closing prices
for a share of Common Stock on the twenty (20) consecutive trading days ending
on the trading date last preceding an optional redemption date, the Mandatory
Redemption Date (as defined below), the date of an event described in paragraph
4(a)
A-6
above or the closing date of an Acquisition (as defined below), as the case may
be, as reported on the National Association of Securities Dealers, Inc.'s
Automated Quotations System ("Nasdaq") or if such closing prices shall not be
reported on Nasdaq, the average of the closing prices, regular way, for a share
of such security on the principal national securities exchange on which such
security is listed on such twenty (20) consecutive trading days, or if such
security is not listed on any national securities exchange, the average of the
mean between the closing bid and asked prices of a share of such security on
such twenty (20) consecutive trading days as reported, or if such prices shall
not be so reported, as the same shall be reported by the National Quotation
Bureau, Incorporated or, in all other cases, the value set in good faith by the
Board.
4. Liquidation Preference.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, the
holders of shares of the Class A Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash for each share outstanding
equal to (i) the Deemed Value on the date of such an event plus (ii) an amount
in cash equal to all accrued but unpaid Dividends thereon, plus additional
dividends on unpaid Dividends accrued prior to the commencement of the
then-current dividend period, to the date fixed for liquidation, before any
payment shall be made or any assets distributed to the holders of any of the
Junior Stock. If the assets of the Corporation are not sufficient to pay in full
the liquidation payments payable to the holders of outstanding shares of the
Class A Preferred Stock and any other class or series of the Preferred Stock
having liquidation rights on parity with the shares of the Class A Preferred
Stock, then the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amount which would be payable on
such distribution if the amounts to which the holders of outstanding shares of
the Class A Preferred Stock and the holders of outstanding shares of such other
series of the Preferred Stock are entitled were paid in full.
(b) The liquidation payment with respect to each
fractional share of the Class A Preferred Stock outstanding, if any, shall be
equal to a ratably proportionate amount of the liquidation payment with respect
to each outstanding share of the Class A Preferred Stock.
(c) For purposes of this paragraph 4, neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the property or
assets of the Corporation nor the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution or
A-7
winding up, voluntary or involuntary, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a dissolution or winding up of
the business of the Corporation.
(d) Any sale, lease or conveyance of all or
substantially all of the Corporation's assets or merger or consolidation of the
Corporation which results in the holders of the Common Stock receiving in
exchange for such Common Stock either cash or notes, debentures or other
evidences of indebtedness or obligations to pay cash or preferred stock of the
surviving entity which ranks on parity with the Class A Preferred Stock in
liquidation or dividends shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation within the meaning of this
paragraph 4. In the cases of merger or consolidation of the Corporation where
holders of the Common Stock receive, in exchange for such Common Stock, common
stock or preferred stock which is junior in liquidation and dividends to the
Class A Preferred Stock in the surviving entity (whether or not such surviving
entity is the Corporation) of such merger or consolidation or preferred stock of
another entity, the Class A Preferred Stock shall be deemed to be preferred
stock of such surviving entity or other entity, as the case may be, with the
same annual dividend rate and equivalent rights to the rights set forth herein
and the merger or consolidation agreement shall expressly so provide. In the
event of a merger or consolidation of the Corporation where the consideration
received by the holders of the Common Stock consists of two or more of the types
of consideration set forth above, the holders of the Class A Preferred Stock
shall be entitled to receive either cash or securities based upon the foregoing
in the same proportion as the holders of the Common Stock of the Corporation are
receiving cash or debt securities, or equity securities in the surviving entity
or another entity.
(e) Notwithstanding paragraph 4(a), in the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation, the holders of Class A Preferred Stock shall receive
the greater of (i) the amount payable under paragraph 4(a) above or (ii) the
amount which would be the liquidation payment per share of Common Stock if the
Class A Preferred Stock were effectively redeemed for Common Stock prior to such
liquidation, for which purpose the Class A Preferred Stock shall be treated as
representing an equal number of shares of Common Stock.
5. Redemption.
(a) Optional Redemption. Prior to the first
anniversary of the date of issuance of the Class A Preferred Stock, the
Corporation shall not redeem the Class A Preferred Stock. Subject to the
preceding sentence and the requirements of paragraph 5(b) hereof, the
Corporation may, at its option, redeem the Class A Preferred Stock for cash, at
any time in whole at the
A-8
Deemed Value, together with accrued and unpaid Dividends, if any, thereon. If
the Corporation has completed a Public Offering (as defined below) or an
Acquisition more than 35 days prior to the Mandatory Redemption Date, then the
Corporation may, at its option, redeem the Class A Preferred Stock for Sentry
Common Stock, in whole at the Deemed Value, together with accrued and unpaid
Dividends, if any, thereon, subject to the following conditions: (i) the
redemption shall be declared on the closing date of such Public Offering or
Acquisition, (ii) the redemption date shall be fixed no later than 35 days after
such closing date, (iii) for purposes of determining the Deemed Value in the
case of a Public Offering, the Closing Price shall equal the price per share at
which Common Stock is issued in such Public Offering and (iv) for purposes of
determining the Deemed Value in the case of an Acquisition, the Closing Price
shall be determined as of the closing date of such Acquisition. "Public
Offering" as used herein shall mean an underwritten public offering of Common
Stock with net proceeds resulting therefrom in excess of $12,000,000.
"Acquisition" as used herein shall mean an acquisition by the Corporation of
property of or securities issued by a third party in which the consideration
paid by the Corporation (i) consists, in whole or in part, of shares of Common
Stock and (ii) the aggregate value of such shares of Common Stock exceeds
$12,000,000; provided that such aggregate value shall equal the number of such
shares of Common Stock multiplied by the Closing Price as of the closing date of
such Acquisition.
(b) Mandatory Redemption. On the fourth anniversary
of the date of issuance of the Class A Preferred Stock (the "Mandatory
Redemption Date"), so long as any shares of the Class A Preferred Stock shall be
outstanding, the Corporation shall redeem any issued and outstanding Class A
Preferred Stock at the Deemed Value, together with accrued and unpaid Dividends,
if any, thereon, for cash (to the extent the Corporation shall have funds
legally available for such payment) or Common Stock, at Sentry's option. The
price of such Common Stock shall be its Closing Price. To the extent that funds
are not legally available on the Mandatory Redemption Date for the payment in
cash for the mandatory redemption of the Class A Preferred Stock and the
Corporation does not issue Common Stock as payment for such mandatory
redemption, the provisions of paragraph 7 shall apply.
(c) Acquired Shares. Shares of the Class A Preferred
Stock which have been issued and reacquired in any manner, including shares
purchased or redeemed, shall (upon compliance with any applicable provisions of
the laws of the State of Delaware) have the status of authorized and unissued
shares of Preferred Stock undesignated as to class or series and may be
redesignated and reissued as part of any class or series of the Preferred Stock;
provided, however, that no such issued and reacquired shares of the Class A
Preferred Stock shall be reissued or sold as Class A Preferred Stock.
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6. Procedure for Redemption.
(a) Manner of Notice. In the event the Corporation
shall redeem shares of the Class A Preferred Stock, notice of such redemption
shall be given by first class mail, postage prepaid, mailed not less than 30
days nor more than 60 days prior to the redemption date, to each holder of
record of the shares to be redeemed at such holder's address as the same appears
on the stock register of the Corporation. Each such notice shall state (i) the
redemption date; (ii) the aggregate number of shares of the Class A Preferred
Stock to be redeemed; (iii) the redemption payment and to what extent such
redemption payment will be paid in cash and/or Common Stock; (iv) the place or
places where certificates for such shares are to be surrendered for the
redemption payment; and (v) that Dividends on the shares to be redeemed will
cease to accrue on such redemption date.
(b) Effect of Notice; Redemption. Notice having been
mailed as aforesaid, from and after the redemption date (unless default shall be
made by the Corporation in providing money for the payment of the redemption of
the shares so called for redemption), Dividends on the shares of the Class A
Preferred Stock so called for redemption shall cease to accrue, and said shares
shall no longer be deemed to be outstanding, and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive from the
Corporation the redemption payment) shall cease. Upon surrender in accordance
with said notice of the certificates for any shares so redeemed (properly
endorsed or assigned for transfer, if the Board shall so require and the notice
shall so state), such shares shall be redeemed by the Corporation at the Deemed
Value plus accrued and unpaid Dividends.
7. Conversion to Notes.
(a) To the extent that funds are not legally
available on the Mandatory Redemption Date for the payment in cash for the
mandatory redemption of the Class A Preferred Stock, and the Corporation does
not issue Common Stock as payment for such mandatory redemption, as required
herein, each outstanding share of Class A Preferred Stock shall automatically
convert (the "Conversion") into a subordinated note (the "Subordinated Note")
given by the Corporation for the benefit of the holder thereof. Each
Subordinated Note shall be in a principal amount equal to the Deemed Value plus
accrued and unpaid Dividends. The Subordinated Notes (i) shall bear interest at
a rate of six percent (6%) per annum, (ii) shall mature at the end of one year
from the date of Conversion, and (iii) upon maturity, shall become due and
payable as to any outstanding principal and interest.
(b) At the time of the Conversion, the holders of the
Subordinated Notes shall have the right, voting separately as a class, to elect
one director of the Corporation. Upon the
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vesting of such right of the holders of the Subordinated Notes, the maximum
authorized number of members of the Board shall automatically be increased by
one and the one vacancy so created shall be filled by vote of the holders of the
Subordinated Notes. The right of the holders of the Subordinated Notes to elect
a member of the Board as aforesaid shall continue until such time as the
Subordinated Notes have been paid in full, at which time such right shall
terminate, except as herein or by law expressly provided. Upon termination of
such special voting rights attributable to holders of the Subordinated Notes
pursuant to this paragraph, the term of office of any director elected by the
holders of Subordinated Notes (any such director, a "Subordinated Notes
Director") pursuant to such special voting rights shall immediately terminate
and the number of directors constituting the entire Board shall be reduced by
one. Any Subordinated Notes Director may be removed by, and shall not be removed
otherwise than by, a majority vote of the outstanding Subordinated Notes. If the
office of any Subordinated Notes Director becomes vacant by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise, a
successor who shall hold office for the unexpired term in respect of which such
vacancy occurred shall be elected by a majority of the outstanding Subordinated
Notes, voting separately as a class.
(b) The indebtedness represented by the Subordinated
Notes and the payment of the principal of and any interest on each and all of
the Subordinated Notes shall be subordinate and subject in right of payment to
the prior payment in full of all Senior Indebtedness (as defined below). "Senior
Indebtedness" as used herein shall mean the principal of and premium, if any,
and interest on (a) all indebtedness of the Corporation for money borrowed,
other than Preferred Stock, whether outstanding as of the date hereof or
thereafter created, incurred or assumed, except indebtedness that by the terms
of the instrument or instruments by which such indebtedness was created or
incurred expressly provides that it (i) is junior in right of payment to the
Subordinated Notes or (ii) ranks pari passu with the Subordinated Notes, (b)
amendments, renewals, extensions, modifications, refinancings and refundings of
any such indebtedness and (c) all of the Corporation's trade payables. For
purposes of the preceding sentence, "indebtedness for money borrowed" when used
with respect to the Corporation means: (a) all indebtedness of the Corporation
for money borrowed (including any indebtedness secured by a mortgage,
conditional sales contract or other lien which is (i) given to secure all or
part of the purchase price of property subject thereto, whether given to the
vendor of such property or to another or (ii) existing on property at the time
of acquisition thereof); (b) all indebtedness of the Corporation evidenced by
notes, debentures, bonds or other securities; (c) all lease obligations of the
Corporation which are capitalized on the books of the Corporation in accordance
with generally accepted accounting principles; (d) all indebtedness of others of
the kinds described
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in the preceding clause (c) assumed by or guaranteed in any manner by the
Corporation or in effect guaranteed by the Corporation through an agreement to
purchase, contingent or otherwise; and (e) all renewals, extensions or
refundings of indebtedness of the kinds described in any of the preceding
clauses (a), (b) or (d) and all renewals or extensions of lease obligations of
the kinds described in either of the preceding clauses (c) or (d).
8. Voting Rights. The holders of record of shares of the Class
A Preferred Stock shall not be entitled to any voting rights except as provided
by law or otherwise specifically provided herein.
9. Consent. No consent of holders of the Class A Preferred
Stock shall be required for (a) the creation of any indebtedness of any kind of
the Corporation, (b) the creation of any class of stock of the Corporation
ranking junior as to dividends and upon liquidation to the Class A Preferred
Stock, or (c) any increase or decrease in the amount of authorized Common Stock.
10. Amendments. The Board reserves the right by subsequent
amendment of this Certificate from time to time to decrease the number of shares
which constitute the Class A Preferred Stock (but not below the number of shares
thereof then outstanding and required for the payment of Dividends pursuant to
paragraph 2).
FIFTH. To the full extent permitted by the DGCL or any other applicable
laws presently or hereafter in effect, no director of the Corporation shall be
personally liable to the Corporation or its stockholders for or with respect to
any acts or omissions in the performance of his or her duties as a director of
the Corporation. Any repeal or modification of this Article FIFTH shall not
adversely affect any right or protection of a director of the Corporation
existing immediately prior to such repeal or modification.
SIXTH. Each person who is or was or had agreed to become a director or
officer of the Corporation, or each such person who is or was serving or who had
agreed to serve at the request of the Board or an officer of the Corporation as
an employee or agent of the Corporation or as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other entity
(including the heirs, executors, administrators or estate of such person), shall
be indemnified by the Corporation to the full extent permitted by the DGCL or
any other applicable laws as presently or hereafter in effect. Without limiting
the generality or the effect of the foregoing, the Corporation may adopt bylaws
or enter into one or more agreements with any person which provide for
indemnification greater or different than that provided in this Article or the
DGCL. Any repeal or modification of this Article
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SIXTH shall not adversely affect any right or protection existing hereunder
immediately prior to such repeal or modification.
SEVENTH. The number of directors of the Corporation shall be five (5)
until changed by amendment to this Certificate.
EIGHTH. In furtherance and not in limitation of the rights, powers,
privileges, and discretionary authority granted or conferred by the DGCL or
other statutes or laws of the State of Delaware, the Board is expressly
authorized to make, alter, amend or repeal the bylaws of the Corporation,
without any action on the part of the stockholders, but the stockholders may
make additional bylaws and may alter, amend or repeal any bylaw whether adopted
by them or otherwise. The Corporation may in its bylaws confer powers upon its
Board in addition to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board by applicable law.
NINTH. The Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate and other provisions authorized by the laws of the State of Delaware
at the time in force may be added or inserted, in the manner now or hereafter
prescribed herein or by applicable law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate in its present form
or as hereafter amended are granted subject to this reservation.
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EXHIBIT B
DIRECTORS AND OFFICERS
OF
SENTRY TECHNOLOGY CORPORATION
Sentry directors shall be:
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. Xxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxx, Xx.
Xxxxxx X. Xxxxxxxxx
Sentry's officers shall be:
C.E.O.Xxxxxx X. Xxxxxxxxx
V.P. Xxxxxx X. Xxxxxx
C.F.O.Xxxxx X. Xxxxx
B-1
EXHIBIT C
---------
FORM OF AFFILIATE LETTER
October ___, 1996
Sentry Technology Corporation
[Address]
[Address]
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of ______________________________, a ______________________
corporation (the "Company"), as the term "affiliate" is (i) defined for purposes
of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), or (ii)
used in and for purposes of Accounting Series, Releases 130 and 135, as amended,
of the Commission. Pursuant to the terms of the Agreement and Plan of
Reorganization and Merger dated as of October 10, 1996 (the "Merger Agreement"),
by and among Video Sentry Corporation, a Minnesota corporation ("Video"), Knogo
North America Inc., a Delaware corporation ("Knogo"), Sentry Technology
Corporation, a Delaware corporation ("Sentry"), Viking Merger Corp., a Minnesota
corporation and wholly owned subsidiary of Sentry ("Viking"), and Strip Merger
Corp., a Delaware corporation and wholly owned subsidiary of Sentry ("Strip"),
Viking will be merged with and into Video and Strip will be merged with and into
Knogo (the "Merger").
As a result of the Merger, I may receive shares of the common stock,
par value $0.001 per share, of Sentry (the "Sentry Securities") in exchange for
shares owned by me of the common stock, par value $0.01 per share, of ________ .
I represent, warrant and covenant to Sentry that in the event I
received any Sentry Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Sentry Securities in violation of the Securities Act or the Rules and
Regulations.
B. I have carefully read this letter and the Merger Agreement, and
discussed the requirements of such documents and other applicable limitations
upon my ability to sell, transfer or
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otherwise dispose of the Sentry Securities to the extent I deemed necessary with
my counsel or counsel for the Company.
C. I have been advised that the issuance of Sentry Securities to me
pursuant to the Merger has been registered with the Commission under the
Securities Act on a Registration Statement on Form S-4. However, I have also
been advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, I may be deemed to have been an affiliate of the
Company and the distribution by me of the Sentry Securities has not been
registered under the Securities Act, I may not sell, transfer or otherwise
dispose of the Sentry Securities issued to me in the Merger unless (i) such
sale, transfer or other disposition has been registered under the Securities
Act, (ii) such sale, transfer or other disposition is made in conformity with
Rule 145 promulgated by the Commission under the Securities Act, or (iii) in the
opinion of counsel reasonably acceptable to Sentry, or pursuant to a "no action"
letter obtained by the undersigned from the staff of the Commission, such sale,
transfer or other disposition is otherwise exempt from registration under the
Securities Act.
D. I understand that Sentry is under no obligation to register the
sale, transfer or other disposition of the Sentry Securities by me or on my
behalf under the Securities Act or to take any other action necessary in order
to make compliance with an exemption from such registration available.
E. I also understand that stop transfer instructions will be given to
Sentry's transfer agents with respect to the Sentry Securities and that there
will be placed on the certificates for the Sentry Securities issued to me, or
any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
__________________, 1996 BETWEEN THE REGISTERED HOLDER HEREOF AND
SENTRY TECHNOLOGY CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICES OF SENTRY TECHNOLOGY CORPORATION."
F. I also understand that unless the transfer by me of my Sentry
Securities has been registered under the Securities Act or is a sale made in
conformity with the provisions of Rule 145, Sentry reserves the right to place
the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933
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APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW
TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Securities Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall have elapsed from the
date the undersigned acquired the Sentry Securities received in the Merger and
the provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
three years shall have elapsed from the date the undersigned acquired the Sentry
Securities received in the Merger and the provisions of Rule 145(d)(3) are then
available to the undersigned, or (iii) Sentry has received either an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to Sentry,
or a "no action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under the
Securities act no longer apply to the undersigned.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of the Company as described in the first paragraph
of this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
__________________________________________
Name:
Accepted this ____ day of
October, 1996
SENTRY TECHNOLOGY CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
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