SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 20, 1998
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META GROUP, INC.
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(Exact name of Registrant as Specified in Charter)
DELAWARE 0-27280 06-0971675
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(State or other jurisdiction (Commission file (I.R.S. Employer
of incorporation or number) Identification No.)
organization)
208 Harbor Drive, Stamford, CT 06912
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (203) 973-6700
No change since last report
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(Former name or address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
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On October 20, 1998, META Group, Inc. ("META Group") acquired (the
"Acquisition") all of the capital stock of The Sentry Group, Inc. ("Sentry")
through a merger of MG Acquisition Corporation ("Acquisition Sub"), a
wholly-owned subsidiary of META Group, with and into Sentry. The Acquisition was
consummated pursuant to an Agreement and Plan of Merger by and among META Group,
Acquisition Sub and Sentry dated as of September 23, 1998 (the "Merger
Agreement").
Sentry's assets consist primarily of its information technology ("IT")
business value consulting practice. This practice consists primarily of IT
consultants. Sentry helps companies resolve the critical problem of widespread
inefficiency often found in outsourcing and the lost business value from
unrealized IT investments. META Group currently intends to operate Sentry as a
separate business unit which will expand and complement META Group's existing
META Group Consulting division.
The following summary of the Acquisition is qualified in its entirety by
the more detailed information contained in the copy of the Merger Agreement
included as Exhibit 2.1 to this Current Report on Form 8-K.
As consideration for the capital stock of Sentry, META Group paid the
holders of Sentry's common stock 195,066 shares in the aggregate of META Group
common stock, par value $.01 per share ("META Group Common Stock"), as initial
consideration. If certain financial targets for Sentry are met for the 1999
fiscal year, META Group will pay up to $7.0 million in the aggregate in META
Group Common Stock or cash, at META Group's option. In addition, META Group
issued to the holders of Sentry common stock as additional initial consideration
warrants to purchase up to 200,000 shares of META Group Common Stock at an
exercise price of $30.00 per share. Warrants to purchase 125,000 shares of META
Group Common Stock are currently exercisable and warrants to purchase 75,000
shares of META Group Common Stock are exercisable only if certain financial
targets are met by Sentry for the 1999 fiscal year. The source of the
consideration was from the authorized common stock of META Group and, to the
extent contingent consideration, if any, is paid in cash, from META Group's cash
on hand. It is anticipated that 150,101 shares of the initial payment of 195,066
shares will be registered by META Group pursuant to the terms of a Registration
Rights Agreement (attached hereto as Exhibit 4.1). The remainder of the shares
will be placed into escrow pursuant to the terms of an Escrow Agreement
(attached hereto as Exhibit 4.2).
The purchase price for shares of Sentry capital stock was determined
through arms' length negotiations between management of META Group on the one
hand and Sentry and Sentry's stockholders on the other hand. The Merger
Agreement was approved by the Boards of META Group, Acquisition Sub and Sentry
and, at a special meeting of the Sentry stockholders, by Sentry's stockholders.
Sentry's stockholders consist of 32 persons and entities. Prior to the
Acquisition, the following persons or entities beneficially owned five or more
percent of Sentry common stock: Safeguard Scientifics (Delaware), Inc., William
A. Gannon, Sr., Robert H. Cawly and Kirk K. Reiss. Neither Sentry nor its
stockholders had any material relationship prior to the Acquisition with META
Group, Acquisition Sub, any affiliate of META Group or Acquisition Sub, any
officer or director of META Group or Acquisition Sub or any associate of any
such officer or director.
META Group intends to use Sentry's assets to complement META Group's
existing META Group Consulting business. The Acquisition will be accounted for
as a purchase.
In partial response to this item, META Group's press release dated October
21, 1998 is incorporated herein by reference (and is attached hereto as Exhibit
99.1).
Item 7. Financial Statements and Exhibits
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(c) Exhibits.
2.1 Agreement and Plan of Merger by and among META Group, Inc., MG
Acquisition Corporation and The Sentry Group, Inc. dated as
of September 23,1998 ("Agreement and Plan of Merger")(with
certain confidential information deleted).
2.2 Amendment No. 1 to Agreement and Plan of Merger.
4.1 Registration Rights Agreement dated as of October 20, 1998 by
and among META Group, Inc. and the stockholders of The Sentry
Group, Inc. listed on the signature pages thereto.
4.2 Escrow Agreement dated as of October 20, 1998 among META Group,
Inc., Peter A. Naber and State Street Bank and Trust Company.
99.1 Press release dated October 21, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
META GROUP, INC.
By: /s/Dale Kutnick
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Dale Kutnick
President and Chief Executive Officer
Date: November 3, 1998
WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS
ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN
SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
META GROUP, INC.,
MG ACQUISITION CORPORATION
AND
THE SENTRY GROUP, INC.
Dated as of September 23, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I - THE MERGER.......................................................2
1.1 The Merger.............................................................2
1.2 Effective Time.........................................................2
1.3 Certain Effects of the Merger..........................................2
1.4 Articles of Organization...............................................2
1.5 By-Laws................................................................3
1.6 Directors and Officers.................................................3
1.7 Certain Other Agreements...............................................3
1.8 Escrow.................................................................3
1.9 Stockholder Representative.............................................4
ARTICLE II - CONVERSION AND EXCHANGE OF SECURITIES; MERGER CONSIDERATION.....4
2.1 Shares of the Surviving Corporation....................................4
2.2 Conversion of Company Common...........................................4
Conversion of SENTRY Securities; Warrants; Contingent Consideration;
Limitation on Shares of META Common; Book Escrow Release...................5
2.4 Exchange Agent........................................................11
2.5 No Fractional META Common or Warrants.................................11
2.6 Distribution of META Common and Warrants..............................11
2.7 Closing of Stock Transfer Books.......................................12
2.8 Dissenting Shares.....................................................12
2.9 No Liability..........................................................12
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SENTRY......................13
3.1 Corporate Existence and Power.........................................13
3.2 Corporate Authorization...............................................13
3.3 Governmental Authorization............................................14
3.4 Non-Contravention.....................................................14
3.5 Capitalization........................................................14
3.6 Subsidiaries..........................................................15
3.7 Financial Statements..................................................15
3.8 Absence of Undisclosed Liabilities....................................15
3.9 Properties............................................................16
3.10 Real Property........................................................16
3.11 Condition of Tangible Assets.........................................16
3.12 Intellectual Property................................................16
3.13 Absence of Certain Changes...........................................18
3.14 Litigation...........................................................19
3.15 Material Contracts...................................................19
3.16 Taxes................................................................21
3.17 Employees............................................................22
3.18 Transactions with Affiliates.........................................23
3.19 Insurance Coverage...................................................23
3.20 Compliance with Laws; No Defaults....................................24
3.21 Finders' Fees........................................................24
3.22 Environmental Matters................................................24
3.23 Intercompany Arrangements; Conflicts.................................25
3.24 Employee Plans.......................................................25
3.25 Other Information....................................................26
3.26 Sale of the Book.....................................................27
3.27 Closing Balance Sheet................................................27
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF META AND THE COMPANY.........27
4.1 Corporate Existence and Power.........................................27
4.2 Corporate Authorization...............................................27
4.3 Governmental Authorization............................................28
4.4 Non-Contravention.....................................................28
4.5 Capitalization........................................................28
4.6 META Common...........................................................28
4.7 META SEC Documents....................................................28
4.8 Absence of Certain Changes............................................29
4.9 Litigation............................................................29
4.10 Finders' Fees........................................................29
ARTICLE V - COVENANTS.......................................................29
5.1 Mutual Covenants and Agreements.......................................29
5.2 Certain Covenants of SENTRY...........................................31
5.3 Covenants of META and the Company.....................................35
ARTICLE VI - CLOSING MATTERS................................................35
6.1 The Closing...........................................................35
6.2 Documents and Certificates............................................36
ARTICLE VII - CONDITIONS OF CLOSING.........................................36
7.1 Conditions to Obligations of META, the Company and SENTRY.............36
7.2 Conditions Applicable to META and the Company.........................37
7.3 Conditions Applicable to SENTRY.......................................39
ARTICLE VIII - TERMINATION..................................................40
8.1 Termination...........................................................40
8.2 Notice of Termination; Effect of Termination..........................41
8.3 Procedure Upon Termination............................................41
ARTICLE IX -- SURVIVAL; INDEMNIFICATION.....................................41
9.1 Survival..............................................................41
9.2 Indemnification.......................................................42
9.3 Third Person Claims...................................................43
9.4 Limitations on Indemnification........................................44
9.5 Method of Payment; Nonexclusivity.....................................44
9.6 Directors and Officers Indemnification................................44
9.7 No Contribution.......................................................45
ARTICLE X -- MISCELLANEOUS..................................................45
10.1 Other Remedies; Specific Performance.................................45
10.2 Expenses.............................................................45
10.3 Further Assurances...................................................45
10.4 Parties in Interest..................................................46
10.5 Entire Agreement.....................................................46
10.6 Amendment or Modification............................................46
10.7 Waiver...............................................................46
10.8 Assignability........................................................46
10.9 Certain Definitions..................................................46
10.10 Headings and Interpretation.........................................49
10.11 Notices.............................................................49
10.12 Law Governing.......................................................50
10.13 Invalidity of Provisions............................................50
10.14 Counterparts; Facsimile Signatures..................................50
Exhibits
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Exhibit A -- Participation Agreement
Exhibit B -- Registration Rights Agreement
Exhibit C -- Escrow Agreement
Exhibit D-1 -- Form of Common Stock Purchase Warrant -- CurrentExercisability
Exhibit D-2 -- Form of Common Stock Purchase Warrant -- Contingent
Exercisability
Exhibit E -- Intentionally Omitted Exhibit F-- Intentionally Omitted
Exhibit G -- List of Employees Who Have Signed Noncompetition/Nondisclosure
Agreements
Exhibit H-1 -- Form of Opinion of Counsel to SENTRY
Exhibit H-2 -- Form of Opinion of Counsel to Safeguard/Safeguard
LTIP Participants
Exhibit I -- Form of Opinion of Counsel to META
Schedules
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Agreement and Plan of Merger -- Page iv
Glossary of Terms
Term Section
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Accounting Referee............................... 2.3(e)
Acquisition Proposals............................ 5.2(m)
Affiliate........................................ 10.9
Agreement........................................ Introduction
Book Closing Documents........................... 2.3(g)
Book Escrow Payments............................. 2.3(g)
Book Purchase Agreement.......................... 2.3(g)
Burdensome Condition............................. 7.1(a)
CERCLA........................................... 10.9
Certificates..................................... 2.6(b)
Closing.......................................... 6.1
Closing Balance Sheet............................ 7.2(o)
Closing Date..................................... 6.1
Code............................................. 3.16(a)
Commission....................................... 4.7
Company.......................................... Introduction
Confidentiality Agreement........................ 5.1(c)
Constituent Corporations......................... Introduction
Contingent Closing Date.......................... 2.3(e)
Contingent Consideration......................... 2.3(e)
Contingently Exercisable Warrants................ 2.3(a)
Control.......................................... 10.9
Currently Exercisable Warrants................... 2.3(a)
Damages.......................................... 9.2
Dissenting Shares................................ 2.8
EEOC............................................. 3.17(b)
Effective Time................................... 1.2
Employees........................................ 3.17(a)
Environmental Laws............................... 10.9
Environmental Liabilities........................ 10.9
ERISA............................................ 3.24(a)
ERISA Affiliate.................................. 3.24(a)
Escrow Account................................... 1.8(b)
Escrow Agent..................................... 1.8(a)
Escrow Agreement................................. 1.7(a)
Escrow Shares.................................... 1.8(c)
Exchange Act..................................... 4.3
Exchange Agent................................... 2.4
Exchange Ratio................................... 2.3(a)
Final META Stock Price........................... 10.9
Financial Statements............................. 3.7
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Agreement and Plan of Merger -- Pave v
Former SENTRY Holders............................ 2.3(e)(i)
Governmental Authority........................... 3.3
Hazardous Substance.............................. 10.9
Implied Contingent Closing Date.................. 9.1
Indemnified Parties.............................. 9.6
Indemnitee....................................... 9.2
Information Statement............................ 5.2(h)
Initial Consideration............................ 2.3(a)
IRS.............................................. 3.24(b)
Key Employees.................................... 3.17(d)
Liabilities or Obligations....................... 3.8
Lien............................................. 3.4
Major Stockholders............................... 1.7(a)
Massachusetts BCL................................ Recitals
Material Adverse Effect on META.................. 4.1
Material Adverse Effect on SENTRY................ 3.1
META............................................. Introduction
META Closing Price............................... 10.9
META Common...................................... Recitals
META Contingent Closing Price.................... 10.9
META SEC Documents............................... 4.7
Meeting.......................................... 5.2(h)
Merger........................................... 1.1
Merger Consideration............................. 2.3(a)
Non-Plan Options................................. 5.1(f)
Notice of Claim.................................. 9.3
Orchid........................................... 2.3(e)
Options Exchange Ratio........................... 10.9
Order............................................ 8.1(c)
Outstanding Options.............................. 5.1(f)
Participation Agreement.......................... 1.7(a)
person........................................... 10.9
Registration Rights Agreement.................... 1.7(a)
Release.......................................... 10.9
Resale Registration Statement.................... 5.1(g)
Return or Returns................................ 3.16(a)
Safeguard........................................ 5.2(k)
Schedules........................................ Introduction to
Article III
Securities Act................................... 4.3
SENTRY........................................... Introduction
SENTRY Common.................................... Recitals
SENTRY Employee Plans............................ 3.24(a)
SENTRY Intellectual Property Rights.............. 3.12
SENTRY Option.................................... 5.1(f)
SENTRY Securities................................ 3.5
SENTRY Stockholders.............................. 2.3(e)
SENTRY Stock Option Plans........................ 10.9
SENTRY Third Party Intellectual Property Rights.. 3.12
SENTRY Warrants.................................. 10.9
Stockholder Representative....................... 1.9
Subsidiary....................................... 10.9
Surviving Corporation............................ 1.1
Surviving Corporation Auditors................... 10.9
Surviving Corporation Operating Income........... 10.9
Surviving Corporation Operating Margin........... 10.9
Surviving Corporation Revenues................... 10.9
Tax or Taxes..................................... 3.16(a)
Third Person..................................... 9.3
Unaudited Balance Sheet.......................... 3.7
Warrants......................................... 2.3(a)
Wiesner.......................................... 2.3(g)
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger dated as of September 23, 1998 (the
"Agreement") by and among META Group, Inc., a Delaware corporation ("META"), MG
Acquisition Corporation, a Massachusetts corporation and a wholly-owned
subsidiary of META (the "Company"), and The Sentry Group, Inc., a Massachusetts
corporation ("SENTRY"; SENTRY and the Company being hereinafter sometimes called
the "Constituent Corporations"):
WITNESSETH:
WHEREAS, the authorized capital stock of META consists of (i) 2,000,000
shares of Preferred Stock, par value $.01 per share, of which no shares are
issued and outstanding, and (ii) 45,000,000 shares of Common Stock, par value
$.01 per share (the "META Common"), of which 11,357,587 shares were issued and
outstanding as of August 31, 1998;
WHEREAS, the authorized capital stock of the Company consists of 3,000
shares of Common Stock, par value $.01 per share, of which 100 shares are issued
and outstanding and are owned beneficially and of record by META;
WHEREAS, the authorized capital stock of SENTRY consists of 12,000,000
shares of Common Stock, par value $.01 per share (the "SENTRY Common"), of which
6,156,882 shares are issued and outstanding as of the date hereof;
WHEREAS, the respective Boards of Directors of the Company and SENTRY
have, by adoption of votes regarding the same, approved this Agreement and the
transactions contemplated hereby including, without limitation, the merger of
the Company with and into SENTRY under and pursuant to the Massachusetts
Business Corporation Law (the "Massachusetts BCL") upon the terms and subject to
the conditions hereinafter set forth;
WHEREAS, pursuant to and upon the effectiveness of the Merger (as
defined herein), each then outstanding share of SENTRY Common (subject to
certain limited exceptions as set forth herein) shall be converted into the
right to receive the Merger Consideration (as defined herein), net of applicable
withholding and other taxes, upon the terms and subject to the conditions set
forth herein; and
WHEREAS, to induce META and the Company to enter into this Agreement,
simultaneously with the execution and delivery of this Agreement, certain of
SENTRY's stockholders have entered into certain agreements with META and the
Company pursuant to which such SENTRY stockholders have undertaken to take
certain actions in connection with the transactions contemplated by this
Agreement.
NOW, THEREFORE, in consideration of these premises and the mutual
agreements, provisions and covenants contained in this Agreement, the
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
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ARTICLE I
THE MERGER
1.1 The Merger. In accordance with Section 78 of the Massachusetts BCL, the
Company shall be merged with and into SENTRY (the "Merger"), and SENTRY shall be
the surviving corporation (such corporation in its capacity as such surviving
corporation being hereinafter called the "Surviving Corporation"). The purpose
of the Surviving Corporation shall be as set forth in Article II of the articles
of organization of the Surviving Corporation, as amended in accordance with
Section 1.4. The terms and conditions of the Merger, the mode of carrying the
same into effect, and the manner and basis of converting shares of each of the
Constituent Corporations into the consideration which the holders of those
shares are to receive upon conversion of such shares, shall be as set forth in
this Agreement.
1.2 Effective Time. The Merger shall become effective as of the time of the
filing of the executed articles of merger with the Secretary of the Commonwealth
of the Commonwealth of Massachusetts and any required districts of
Massachusetts, all pursuant to Section 78 of the Massachusetts BCL (the
"Effective Time").
1.3 Certain Effects of the Merger. As of the Effective Time, the effect of
the Merger shall be as provided by the applicable provisions of the
Massachusetts BCL. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time: the separate existence of the Company shall
cease and the Company shall be merged into SENTRY; the Surviving Corporation
shall possess, without further act or deed, all the estate, property, rights,
privileges, powers and franchises of each of the Constituent Corporations and
all of their property, real, personal and mixed, and all the debts due on
whatever account to any of the Constituent Corporations, as well as all stock
subscriptions and other choses in action belonging to each of the Constituent
Corporations shall be transferred to and vested in the Surviving Corporation;
and all claims, demands, property and other interest shall be the property of
the Surviving Corporation, and the title to all real estate vested in any of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger but shall be vested in the Surviving Corporation; the rights of
creditors of any Constituent Corporation shall not in any manner be impaired,
nor shall any liability or obligation, including taxes due or to become due, or
any claim or demand in any cause existing against such Constituent Corporation,
or any stockholder, director, or officer thereof, be released or impaired by the
Merger, but the Surviving Corporation shall be deemed to have assumed, and shall
be liable for, all liabilities and obligations of each of the Constituent
Corporations in the same manner and to the same extent as if the Surviving
Corporation had itself incurred such liabilities or obligations; the
stockholders, directors, and officers of the Constituent Corporations shall
continue to be subject to all the liabilities, claims and demands existing
against them as such at or before the Merger; no action or proceeding then
pending before any court or tribunal of the Commonwealth of Massachusetts in
which any Constituent Corporation is a party, or in which any such stockholder,
director, or officer is a party, shall abate or be discontinued by reason of the
Merger, but any such action or proceeding may be prosecuted to final judgment as
though the Merger had not taken place, or the Surviving Corporation may be
substituted as a party in place of any Constituent Corporation by the court in
which such action or proceeding is pending.
1.4 Articles of Organization. The articles of organization of the Surviving
Corporation (other than Article I thereof) shall, from and after the Effective
<PAGE> 3
Time, be amended to read as set forth in the articles of organization of the
Company as in effect immediately prior to the Effective Time until changed as
permitted by law or by such articles of organization. ARTICLE I shall continue
to read in its entirety as follows: "The name of the Corporation is The Sentry
Group, Inc."
1.5 By-Laws. The by-laws of the Surviving Corporation shall, from
and after the Effective Time, be amended and restated to read in their entirety
as set forth in the by-laws of the Company as in effect immediately prior to the
Effective Time until changed as permitted by law, by the articles of
organization of the Surviving Corporation or by such by-laws.
1.6 Directors and Officers. The directors and officers of the Surviving
Corporation from and after the Effective Time shall be the directors and
officers of the Company immediately prior to the Effective Time, each to hold
office in accordance with applicable law and the articles of organization and
by-laws of the Surviving Corporation.
1.7 Certain Other Agreements. a)(i) Concurrently with the execution
and delivery of this Agreement, the Major Stockholders (as defined herein) shall
deliver to META and the Company a copy of the Participation Agreement in the
form of Exhibit A (the "Participation Agreement") duly executed and delivered by
the stockholders named therein (the "Major Stockholders");
(ii) On the Closing Date immediately prior to the Effective
Time, SENTRY shall deliver to META and the Company:
(A) a copy of the Registration Rights Agreement in the form of
Exhibit B (the "Registration Rights Agreement") duly executed and delivered
by the stockholders of SENTRY named therein; and
(B) a copy of the Escrow Agreement in the form of Exhibit C
(the "Escrow Agreement") duly executed and delivered by the Stockholder
Representative (as defined herein).
(b) META and the Company shall deliver to the respective other
parties thereto copies of the Participation Agreement concurrently with the
execution and delivery of this Agreement, and copies of each of the Registration
Rights Agreement and the Escrow Agreement on the Closing Date immediately prior
to the Effective Time, in each case duly executed by META, the Company or both,
as the case may be. META shall also deliver to each of SENTRY's stockholders on
the Closing Date, in accordance with Section 2.3, certain warrants to purchase
META Common, as more fully described herein.
(c) Each of the parties hereto agrees that, in accordance with
Section 78 of the Massachusetts BCL, the Surviving Corporation (i) shall
keep a copy of this Agreement in the Commonwealth of Massachusetts in one of the
offices specified in Section 32 of the Massachusetts BCL for inspection by any
of its stockholders or by any person who was a stockholder of any of the
Constituent Corporations and (ii) shall furnish a copy of this Agreement to any
such stockholder or person upon written request and without charge.
1.8 Escrow. (a) The parties hereto agree that State Street Bank and Trust
Company shall be the escrow agent (together with any successor escrow agent
appointed pursuant to the Escrow Agreement, the "Escrow Agent").
(b) The Escrow Agent shall establish an escrow account for the
purpose of holding certain shares as described below which shall be available to
satisfy claims pursuant to Article IX hereunder. The account shall be titled the
"Escrow Account." The Escrow Account shall be funded as set forth in Section
1.8(c).
<PAGE> 4
(c) Escrow Account. At the Effective Time, META shall deliver to the
Escrow Agent for deposit in the Escrow Account shares of META Common
representing 23.05% of the shares of META Common issued to SENTRY stockholders
pursuant to Section 2.3(a)(1) (the "Escrow Shares").
(d) All of the Escrow Shares referenced in Section 1.8(c) above shall
be held and applied in accordance with Article IX herein and the Escrow
Agreement.
1.9 Stockholder Representative. The stockholders of SENTRY, by virtue of
their approval of this Agreement, will be deemed to have irrevocably constituted
and appointed, effective as of the Effective Time, Peter A. Naber (together with
his permitted successors, the "Stockholder Representative"), as their true and
lawful agent and attorney-in-fact to enter into any agreement in connection with
the transactions contemplated by this Agreement and any transactions
contemplated by the Escrow Agreement, to exercise all or any of the powers,
authority and discretion conferred on him under any such agreement, to waive any
terms and conditions of any such agreement (other than the Merger
Consideration), to give and receive notices on their behalf and to be their
exclusive representative with respect to any matter, suit, claim, action or
proceeding arising with respect to any transaction contemplated by any such
agreement, including, without limitation, the defense, settlement or compromise
of any claim, action or proceeding for which META or the Company may be entitled
to indemnification and the Stockholder Representative agrees to act as, and to
undertake the duties and responsibilities of, such agent and attorney-in-fact.
This power of attorney is coupled with an interest and is irrevocable. The
Stockholder Representative shall not be liable for any action taken or not taken
by him in connection with his obligations under this Agreement (i) with the
consent of stockholders who, as of the date of this Agreement owned at least
sixty-six and two-thirds percent (66-2/3%) in interest of the outstanding shares
of SENTRY Common or (ii) in the absence of his own gross negligence or willful
misconduct. If the Stockholder Representative shall be unable or unwilling to
serve in such capacity, his successor shall be named by those persons holding at
least sixty-six and two-thirds percent (66-2/3%) in interest of the shares of
SENTRY Common outstanding at the Effective Time who shall serve and exercise the
powers of Stockholder Representative hereunder.
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES; MERGER CONSIDERATION
2.1 Shares of the Surviving Corporation. The authorized number and par
value of shares of all classes of stock of the Company immediately prior to the
Effective Time shall be the authorized number and par value of shares of the
classes of stock of the Surviving Corporation from and after the Effective Time.
2.2 Coversion of Company Common. At the Effective Time, each share of
Common Stock, par value $.01 per share, of the Company issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, automatically be converted
into and represent one validly issued, fully paid and nonassessable share of
Common Stock, par value $.01 per share, of the Surviving Corporation.
<PAGE> 5
2.3 Conversion of SENTRY Securities; Warrants; Contingent
Consideration; Limitation on Shares of META Common; Book Escrow Release
(a) Merger Consideration. At the Effective Time, each share of SENTRY
Common issued and outstanding immediately prior to the Effective Time (other
than shares of SENTRY Common held in the treasury of SENTRY, which shall not be
considered as outstanding for purposes of this Agreement, held by META or any
subsidiary of META, or which are Dissenting Shares (as defined herein)) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, automatically be canceled and extinguished and converted into the right
to receive, net of withholding and other taxes (collectively, the "Merger
Consideration"), the following:
(1) that number of shares of META Common that is obtained by
(x) dividing $5,000,000 by the META Closing Price (as defined herein)
and (y) dividing the result by the total number of issued and
outstanding shares of SENTRY Common immediately prior to the
Effective Time (the "Exchange Ratio");
(2) (A) warrants (collectively, the "Currently Exercisable
Warrants") to purchase that number of shares of META Common that is
obtained by dividing 125,000 by the total number of issued and
outstanding shares of SENTRY Common immediately prior to the
Effective Time, which Currently Exercisable Warrants shall be in the
form of the common stock purchase warrant attached hereto as Exhibit
D-1, and
(B) warrants (collectively, the "Contingently Exercisable
Warrants", and together with the Currently Exercisable Warrants, the
"Warrants") to purchase that number of shares of META Common that is
obtained by dividing 75,000 by the total number of issued and
outstanding shares of SENTRY Common immediately prior to the
Effective Time, which Contingently Exercisable Warrants shall be in
the form of the common stock purchase warrant attached hereto as
Exhibit D-2 (the consideration set forth in Sections 2.3(a)(1) and
(2), collectively, the "Initial Consideration");
(3) the right to receive the Contingent Consideration (as
defined in Section 2.3(e)(i)), if any, on a per share basis payable
pursuant to, and in accordance with, Section 2.3(e); and
(4) the right to receive Book Escrow Payments, if any, on a per
share basis payable pursuant to Section 2.3(g).
Applicable withholding taxes shall be deducted before payment is made with
respect to any Merger Consideration, and META shall be entitled to so withhold.
(b) At the Effective Time, each share of SENTRY Common held (i) in
the treasury of SENTRY or (ii) by META or any subsidiary of META, immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be canceled and retired
and all rights in respect thereof shall cease to exist.
(c) If between the date of this Agreement and the Effective Time, the
outstanding shares of META Common or SENTRY Common shall have been changed
(subject to compliance with the applicable provisions of Article V) into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, split-up, combination, exchange of
shares or the like, the Exchange Ratio (and the calculation of Contingent
Consideration pursuant to Section 2.3(e)) shall be appropriately adjusted.
<PAGE> 6
(d) Each certificate representing shares of META Common and each
Warrant to be issued in the Merger or as Contingent Consideration, if any, shall
bear a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH SECURITIES ARE
REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO META IS OBTAINED TO THE EFFECT THATSUCH
REGISTRATION IS NOT REQUIRED.
(e) Contingent Consideration.
(i) Subject to the terms and provisions of this Agreement, META
shall, or shall cause the Surviving Corporation to, pay to the persons and/or
entities who were holders or their permitted transferees (the "Former SENTRY
Holders") of SENTRY Common issued and outstanding immediately prior to the
Effective Time (other than shares of SENTRY Common (x) (for the sake of clarity)
held in the treasury of SENTRY, (y) held by META or any subsidiary of META or
(z) which are Dissenting Shares), an amount, if any (the "Contingent
Consideration"), calculated as follows:
(A) in the event the Surviving Corporation Revenues are at least
* and the Surviving Corporation Operating Margin is at
least * , an aggregate amount equal to $7,000,000, payable in
accordance with this Section 2.3(e).
(B) in the event:
(I)the Surviving Corporation Revenues are at least *
and the Surviving Corporation Operating Margin is at least
* but less than * or
(II)the Surviving Corporation Revenues are at least *
but less than * and the Surviving Corporation
Operating Margin is at least * ,
an aggregate amount equal to $5,950,000, payable in accordance
with this Section 2.3(e).
(C) in the event:
(I) the Surviving Corporation Revenues are at least
* and the Surviving Corporation Operating
Margin is at least * but less than * , or
<PAGE> 7
(II) the Surviving Corporation Revenues are at least
* but less than and the Surviving
Corporation Operating Margin is at least * but less
than * , or
(III)the Surviving Corporation Revenues are at least
* but less than * and the
Surviving Corporation Operating Margin is at least * ,
an aggregate amount equal to $3,500,000, payable in accordance
with this Section 2.3(e).
(D) in the event:
(I) the Surviving Corporation Revenues are at least
* and the Surviving Corporation Operating
Margin is at least * but less than * , or
(II) the Surviving Corporation Revenues are at least
* but less than * and the Surviving
Corporation Operating Margin is at least * but less
than * , or
(III)the Surviving Corporation Revenues are at least
* but less than * and the Surviving
Corporation Operating Margin is at least * but less
than * , or
(IV) the Surviving Corporation Revenues are at least *
but less than * and the Surviving Corporation
Operating Margin is at least * ,
an aggregate amount equal to $1,750,000, payable in accordance
with this Section 2.3(e).
(ii) Neither META nor the Surviving Corporation shall be
required to pay any Contingent Consideration unless the Surviving
Corporation meets or exceeds the financial goals set forth in Section
2.3(e)(i), which shall be in META's sole determination, subject to the
right of dispute set forth in Section 2.3(e)(viii).
(iii) The Contingent Consideration, if any, shall in no event
whatsoever exceed $7,000,000 in the aggregate.
(iv) The right to receive the Contingent Consideration, if any,
payable pursuant to this Agreement is a contract right only and no
certificate evidencing such right shall be issued. The right to receive the
Contingent Consideration pursuant to the Merger shall not be transferred or
assigned, except (a) to a partner of a SENTRY Stockholder which is a
partnership, (b) by will or the laws of descent and distribution, (c) to a
spouse or child of a SENTRY Stockholder, or a trust of which a SENTRY
Stockholder or his or her spouse or child is the beneficiary and (d) to a
beneficiary of a trust of which a SENTRY Stockholder is the trustee;
provided that the transferring SENTRY Stockholder notifies META of such
distribution in writing, provides META with the transferee's name and
address and the exact rights transferred and such transferee agrees in
writing (in form and substance reasonably satisfactory to META) to be bound
by the terms and conditions of this Agreement.
<PAGE> 8
(v) Applicable withholding and other taxes shall be deducted
before payment is made with respect to Contingent Consideration, if any.
(vi) Subject to Section 2.3(f), Contingent Consideration, if
any, shall be payable as follows:
(A) the Former SENTRY Holders shall be paid in the
aggregate that number of shares of META Common equal to the
applicable dollar amount of Contingent Consideration (as calculated
pursuant to Section 2.3(e)(i) and as adjusted, if applicable,
pursuant to the proviso to this sentence) divided by the META
Contingent Closing Price (as defined in Section 10.9); provided,
however, that, notwithstanding any other term or provision in this
Agreement, META may pay all, or any portion of, the Contingent
Consideration in cash at its sole election and shall pay Contingent
Consideration in cash to the extent the share limitation set forth in
Section 2.3(f) is invoked as to shares issuable pursuant to the first
part of this sentence. If not all of the Contingent Consideration is
to be paid in cash, the applicable dollar amount referred to in the
first part of this sentence shall be reduced, dollar for dollar, for
any cash so paid.
(B) Contingent Consideration, if any, shall be paid to each
Former SENTRY Holder pro rata based on the ratio the Initial
Consideration received by such holder on the Closing Date bears to
the total amount of Initial Consideration paid on the Closing Date to
all Former SENTRY Holders. Contingent Consideration, if any, shall be
paid on a date (as may be extended by Section 2.3(e)(viii), the
"Contingent Closing Date") chosen by META, provided that such date
shall be within forty-three (43) days after the audited financial
statements of the Surviving Corporation for the fiscal year ending
December 31, 1999 are released by the Surviving Corporation Auditors
(as defined herein).
(vii) Amounts of Contingent Consideration, if any, shall be
paid pursuant to this Section 2.3(e) only when the amount payable
exceeds an amount equal to (A) the aggregate amounts set forth in all
Notices of Claim (as defined herein) delivered by all Indemnitees (as
defined herein) on or prior to the Contingent Closing Date that have
not been withdrawn or paid, irrespective of whether any such Notices
of Claim have been disputed pursuant to the terms hereunder or
otherwise, reduced by (B) the value of the Escrow Account. The
amounts that would otherwise be payable pursuant to this Section
2.3(e), but for the operation of this Section 2.3(e)(vii), shall be
segregated by META into a separate interest bearing account. Such
amounts shall only be paid by META if, when and to the extent such
Notices of Claim are withdrawn or paid in full.
(viii)
(A) As soon as practicable following the end of the twelve
month period ending December 31, 1999, META shall cause the Surviving
Corporation Auditors to audit the financial statements for the Surviving
Corporation for the year ending December 31, 1999, which statements shall
be prepared in accordance with generally accepted accounting principles
applied on a consistent basis and consistent with the accounting principles
on the basis of which SENTRY's audited financial statements for the twelve
<PAGE> 9
month period ended December 31, 1997 were prepared except with respect to
the assumptions specified in Schedule 2.3(e) which is attached hereto and
incorporated herein by reference. META shall use such financials to
promptly prepare a written calculation of the Contingent Consideration, if
any, payable in respect of such period and shall deliver a copy of each
such calculation with reasonable back-up data and a statement showing the
method of computing each of the Contingent Consideration (if any) together
with the audited financials to the Stockholder Representative within five
(5) days after such financials are released by the Surviving Corporation
Auditors. The Stockholder Representative agrees to keep such calculations
and financials (and other delivered materials and information)
confidential; provided; however; that nothing in this sentence shall
prevent the Stockholder Representative from using such information to
exercise his right to dispute the calculation as set forth below or to file
any required tax returns.
(B) If the Stockholder Representative disagrees with META's
calculations (whether the disagreement relates to the arithmetic of the
calculations or the items or amounts used in calculating the Contingent
Consideration), the Stockholder Representative may, within 30 days after
delivery of the documents referred to in Section 2.3(e)(viii) (A), deliver
a notice to META disagreeing with any of such calculations and setting
forth the Stockholder Representative's calculation of the Contingent
Consideration. Any such notice of disagreement shall specify in reasonable
detail those items or amounts as to which the Stockholder Representative
disagrees. Upon receipt of any such notice, the Contingent Closing Date
specified in Section 2.3(e)(i) shall be extended to afford a reasonable
period of dispute resolution (agreed upon by META and the Stockholder
Representative) in accordance with this Agreement. While the Stockholder
Representative is reviewing the calculations of Contingent Consideration,
if any, and the other materials delivered to him during such 30-day period
he shall be entitled to make reasonable requests to META for back-up
information in connection with the calculations of Contingent
Consideration, if any.
(C) If the Stockholder Representative shall have delivered a
notice of disagreement within the 30 day period referred to in Section
2.3(e)(viii) (B), the Stockholder Representative and META, shall, during
the 15 days following such delivery, use good faith efforts to reach
agreement on the disputed items or amounts in order to determine the
Contingent Consideration. If the Stockholder Representative and META are
unable to reach agreement, they shall promptly thereafter cause Ernst &
Young, LLP (the "Accounting Referee") promptly to review the disputed items
or amounts for the purpose of calculating the Contingent Consideration. In
making such calculations, the Accounting Referee shall consider only those
items or amounts in META's calculations of the Contingent Consideration as
to which the Stockholder Representative has disagreed in writing. The
Accounting Referee shall deliver to the Stockholder Representative and META
as promptly as practicable, a report setting forth the Accounting Referee's
calculation of the disputed amounts. Such report shall be final and binding
upon the Stockholder Representative, META and the Surviving Corporation.
The cost of such review and report shall be borne by both the Stockholder
Representative and META as follows: each such party shall pay a portion of
the total cost according to the percentage obtained by multiplying 100 by
the quotient obtained by dividing (A) the difference between (i) such
party's calculation of the disputed item and (ii) the calculation
determined by the Accounting Referee; by (B) the difference between (i) the
calculation determined by META and (ii) the calculation determined by the
Stockholder Representative.
<PAGE> 10
(ix) Right of Offset. In addition to any rights now or
hereafter granted under applicable law or otherwise and not by way of
limitation of any such rights, META, the Surviving Corporation and/or any
Indemnitee shall have the right to offset the Contingent Consideration, if
any, payable pursuant to this Section 2.3(e), against the amounts payable
to META, the Surviving Corporation and/or any Indemnitee pursuant to
Article IX of this Agreement. To the extent META elects to pay the
Contingent Consideration, if any, in cash (as provided by Section
2.3(e)(vi) and/or Section 2.3(f) of this Agreement) and any Notices of
Claim remaining outstanding at such time are the subject of a dispute by
the Stockholder Representative, then META agrees to first offset such cash
Contingent Consideration, if any, payable pursuant to this Section 2.3(e)
against amounts payable to META, the Surviving Corporation and/or any
Indemnitee pursuant to Article IX of this Agreement and/or any outstanding
Notices of Claim before satisfying any remaining amounts payable to META,
the Surviving Corporation and/or any such Indemnitee with Escrow Shares or
otherwise.
(x) Exchange Requirement; Method of Delivery. Only those SENTRY
Stockholders who have properly transmitted their Certificates (as defined
herein) to the Exchange Agent (as defined herein) pursuant to the
instructions contained in this Agreement shall receive the Contingent
Consideration, if any, paid or payable pursuant to this Agreement.
Contingent Consideration, if any, payable hereunder in cash or in META
Common shall be delivered by mail by the Exchange Agent to each SENTRY
Stockholder at his, her or its address listed on the stock transfer records
of SENTRY immediately prior to the Effective Time (unless notice of any
change thereof is given to each of META and the Surviving Corporation in
writing by any such holder) as soon as practicable after the Contingent
Closing Date.
(xi) Warrant Value. Each party hereto and each SENTRY
Stockholder by his, her or its approval of this Agreement hereby agrees
that each Warrant to purchase one share of META Common shall be valued for
the purposes of this Agreement by Orchid Partners, Inc. ("Orchid"), which
value shall be evidenced by a letter from Orchid delivered on or prior to
the Closing.
(f) Limitation on META Common Issuable. Notwithstanding any other
term or provision of this Agreement but subject to the provisions of Section
2.3(e)(vi)(A), META shall not be required to issue (by exchange, conversion or
otherwise) more than 2,159,720 shares of META Common (including shares issued
upon exercise of the Warrants and any other shares which the Marketplace Rules
of The Nasdaq Stock Market (as interpreted by The Nasdaq Stock Market) require
be so counted) under the terms of this Agreement.
(g) Book Escrow. Any amounts (net of applicable federal and state
corporate income taxes) (the "Book Escrow Payments") released to the Surviving
Corporation by the escrow agent named in the Asset Purchase Agreement, dated as
of May 29, 1998 between SENTRY and Wiesner Publishing Company, LLC ("Wiesner")
(the "Book Purchase Agreement," and together with all closing documentation
related thereto, the "Book Closing Documents") in accordance therewith and with
the Escrow Agreement dated as of May 29, 1998 by and among SENTRY, Wiesner and
U.S. Bank National Association, as escrow agent, shall be payable, if at all, to
each SENTRY Stockholder, pro rata based on the ratio the Initial Consideration
received by such holder on the Closing Date bears to the total amount of the
Initial Consideration paid on the Closing Date to all SENTRY Stockholders (and
META shall cause the Surviving Corporation to make any such payment). Payment,
if any, of any Book Escrow Payments shall be made, if at all, by META or the
Surviving Corporation to the SENTRY Stockholders in accordance with this
<PAGE> 11
Agreement and within thirty (30) business days of the unconditional release to
the Surviving Corporation of any such amounts.
2.4 Exchange Agent. META shall act as the agent for SENTRY stockholders for
purposes of surrender and exchange of SENTRY Common and distributing
consideration to SENTRY stockholders (the "Exchange Agent").
2.5 No Fractional META Common or Warrants. Notwithstanding any other
provision of this Agreement, neither certificates nor scrip for fractional
shares of META Common shall be issued to any holder of SENTRY Common under the
provisions of this Agreement and the holder thereof shall not be entitled to any
voting or other rights of a holder of shares for a fractional share interest.
Each holder of shares of SENTRY Common who otherwise would have been entitled to
receive a fraction of a share of META Common (after aggregating all fractional
shares of META Common to be received by such holder other than represented by
Warrants) shall receive in lieu thereof cash (rounded to the nearest whole
cent), without interest and net of withholding and other taxes, in an amount
determined by multiplying such holder's fractional interest by the last sales
price per share of the META Common on the Nasdaq National Market on the
second-to-last trading day immediately preceding the Closing Date. Each holder
of shares of SENTRY Common who otherwise would have been entitled to receive a
Warrant to purchase a fraction of a share of META Common shall not receive cash
in lieu thereof. The number of shares issuable pursuant to the Warrants shall be
rounded down to the nearest whole number. All amounts of cash in respect of
fractional interests which have not been claimed at the end of one year from the
Effective Time by surrender of certificates for shares of SENTRY Common shall be
repaid to the Surviving Corporation, subject to the provisions of applicable
escheat or similar laws, for the account of the holders entitled thereto.
2.6 Distribution of META Common and Warrants. (a) As soon as practicable
after the Effective Time and upon the receipt of the Certificates, the Exchange
Agent shall distribute (i) the META Common as provided in this Section 2.6, (ii)
any cash in respect of fractional shares as provided in Section 2.5, (iii) the
Warrants pursuant to Section 2.3(a) and (iv) the Escrow Shares to the Escrow
Agent in accordance with the Escrow Agreement. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to any shares
of META Common held by it from time to time hereunder, except that it shall
receive and hold all dividends or other distributions paid or distributed with
respect to such shares for the account of the persons entitled thereto.
(b) At the Effective Time, each holder of an outstanding certificate
or certificates for shares of SENTRY Common (collectively, the "Certificates")
shall cease to have any rights as a stockholder of SENTRY, except such rights,
if any, as such holder may have with respect to Dissenting Shares. Each such
holder of an outstanding Certificate or Certificates converted in the Merger,
upon surrender of each such Certificate to the Exchange Agent, shall receive
promptly in exchange for each such Certificate the shares of META Common,
Warrants and cash for fractional shares (if any) to which such holder is
entitled pursuant to Sections 2.3 and 2.5 of this Agreement. Pending such
surrender and exchange, such holder's Certificate or Certificates for shares of
SENTRY Common shall be deemed for all corporate purposes, by virtue of the
Merger and without any action on the part of the holder thereof, to evidence
only the right to receive the shares of META Common, Warrants, cash (if any) and
Contingent Consideration, if any, and Book Escrow Payments, if any, provided for
under this Agreement. Unless and until any such outstanding Certificates shall
be so surrendered, no dividend (cash or stock) payable to holders of record of
shares of META Common as of any date subsequent to the Effective Time shall be
paid to the holder of any such outstanding Certificate and his, her or its other
rights as a stockholder of META shall be suspended, but upon such surrender of
<PAGE> 12
such Certificate there shall be paid to the record holder of the certificate of
shares of META Common issued in exchange therefor the amount of dividends, if
any, without interest and less any taxes which may have been imposed thereon,
that have theretofore become payable with respect to the number of those shares
of META Common represented by such certificate issued upon such surrender and
exchange, and his, her or its other rights as a stockholder of META shall
thereafter be restored.
2.7 Closing of Stock Transfer Books. The stock transfer books of SENTRY
shall be closed at the close of business on the business day immediately
preceding the Effective Time. In the event of a transfer of ownership of SENTRY
Common which is not registered in the transfer records of SENTRY, the shares of
META Common, Warrants, cash for fractional shares (if any) and Contingent
Consideration, if any, and Book Escrow Payments, if any, to be issued or payable
in accordance with this Agreement may be delivered to a transferee, if the
certificate representing such SENTRY Common is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by payment of any applicable stock transfer taxes.
2.8 Dissenting Shares. Shares of SENTRY Common that have not been voted for
adoption of this Agreement and with respect to which appraisal rights shall have
been properly perfected in accordance with Section 85 of the Massachusetts BCL
(the "Dissenting Shares") shall not be converted into the right to receive
shares of META Common, Warrants, cash (if any) and Contingent Consideration, if
any, and Book Escrow Payments, if any, in accordance with this Agreement at or
after the Effective Time, unless and until the holder of such Dissenting Shares
withdraws his, her or its demand for such appraisal in accordance with Section
96 of the Massachusetts BCL or shall fail to perfect or otherwise becomes
ineligible for such appraisal, in any case pursuant to the Massachusetts BCL. If
a holder of Dissenting Shares shall withdraw (in accordance with Section 96 of
the Massachusetts BCL) his, her or its demand for such appraisal, shall fail to
perfect or otherwise becomes ineligible for such appraisal, in any case pursuant
to the Massachusetts BCL, then, as of the later of the Effective Time or the
occurrence of such event, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into the right to receive (net of
withholding and other taxes) the consideration specified in Section 2.3 with
respect to such shares of SENTRY Common, without interest thereon, which shall
be payable in accordance with this Agreement. Any amounts to be paid to holders
of Dissenting Shares with respect to such Dissenting Shares shall be paid by the
Surviving Corporation.
SENTRY shall give META (i) prompt notice of any demands for appraisal of
shares of SENTRY Common received by SENTRY and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands. SENTRY shall not, without the prior written consent of META, make
any payment with respect to, or settle, offer to settle or otherwise negotiate,
any such demands.
2.9 No Liability. Notwithstanding anything to the contrary in this
Agreement, neither the Surviving Corporation nor any party hereto shall be
liable to a holder of shares of SENTRY Common for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.10 Withholding Rights. META, the Company and SENTRY shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any SENTRY Stockholder such amounts as META, the Company or SENTRY
determine they are required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local, or foreign tax
law. To the extent that amounts are so withheld, such withheld amounts shall be
<PAGE> 13
treated for all purposes hereof as having been paid to the holder of the shares
in respect of which such deduction and withholding was made. To the extent that
the amount so required to be deducted or withheld from any payment to a holder
exceeds the cash portion of the consideration otherwise payable to the holder,
META, the Company and SENTRY are hereby authorized to sell or otherwise dispose
of at fair market value such portion of such consideration as is necessary to
provide sufficient funds to META, the Company or SENTRY, as the case may be, in
order to enable it to comply with such deduction or withholding requirement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SENTRY
SENTRY hereby represents and warrants to each of META and the Company as of
the date hereof and as of the Effective Time that the statements contained in
this Article III are true and correct, except as set forth in the disclosure
schedules delivered in connection with this Agreement (the "Schedules"). The
Schedules shall be initialed by SENTRY and shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
III, and the disclosure in any paragraph of the Schedules shall qualify only to
the corresponding paragraph in this Article III, unless clearly cross-referenced
to another paragraph:
3.1 Corpoartate Existence and Power. SENTRY is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all corporate power and authority
necessary to enable it to own, lease or otherwise hold its properties and assets
and to carry on its business as now conducted. SENTRY is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except for those jurisdictions
where the failure to be so qualified would not have a material adverse effect
upon the financial condition, results of operations, business, properties,
assets or operations of SENTRY (a "Material Adverse Effect on SENTRY"). All
jurisdictions in which SENTRY is so qualified to do business are listed in
Schedule 3.1. SENTRY has previously delivered to META and the Company true and
complete copies of the articles of organization and by-laws of SENTRY, as
amended to date and as currently in effect, and all minutes of meetings
(including actions in lieu thereof) of the board of directors (and each
committee thereof) and stockholders of SENTRY.
3.2 Corporate Authorization (a) The execution, delivery and performance by
SENTRY of this Agreement, and the consummation by SENTRY of the Merger and other
transactions contemplated hereby are within SENTRY's corporate power and
authority, and have been duly authorized by all necessary corporate action. The
Board of Directors of SENTRY has (i) approved this Agreement, and the
transactions contemplated hereby and thereby, including the Merger and (ii)
resolved to submit this Agreement to the stockholders of SENTRY for their
approval. This Agreement has been duly authorized, executed and delivered by
SENTRY and constitutes a valid and binding obligation of SENTRY, enforceable
against SENTRY in accordance with its terms.
(b) The affirmative vote of the holders of at least two-thirds of the
outstanding shares of SENTRY Common, voting together as a single class, are the
only votes of SENTRY's capital stock necessary to approve this Agreement.
<PAGE> 14
3.3 Governmental Authorization. The execution, delivery and performance by
SENTRY of this Agreement, and the consummation of the Merger and other
transactions contemplated by this Agreement by SENTRY, do not and will not
require any consent, approval or action by or in respect of, or any declaration,
filing or registration with, any governmental or regulatory body, court, agency,
official or authority (each, a "Governmental Authority"), other than routine
filings with the Secretary of the Commonwealth of the Commonwealth of
Massachusetts (and any required districts thereof) necessary to consummate the
Merger and as disclosed on Schedule 3.3.
3.4 Non-Contravention. Except as disclosed on Schedule 3.4, the execution,
delivery and performance by SENTRY of this Agreement, and the consummation of
the Merger and other transactions contemplated by this Agreement by SENTRY, do
not and will not, with or without the giving of notice, the lapse of time or
both: (i) contravene or conflict with the articles of organization or by-laws of
SENTRY, (ii) assuming compliance with the matters referred to in Section 3.3,
contravene or conflict with or constitute a violation of any provision of any
law, rule, regulation, judgment, injunction, order or decree currently in effect
and binding upon or applicable to SENTRY, (iii) require any consent, approval or
other action by any person, contravene or conflict with or constitute a
violation of or a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of SENTRY or to a loss
of any benefit to which SENTRY is entitled, under any provision of (A) any
material agreement, contract, indenture, lease or other instrument binding upon
SENTRY or (B) assuming compliance with the matters referred to in Section 3.3,
any material license, franchise, permit or other similar authorization held by
SENTRY or (iv) except for the rights of any holders of Dissenting Shares, result
in the creation or imposition of any mortgage, pledge, security interest, lien,
claim, charge, restriction, encumbrance or assessment of any kind (each, a
"Lien") on any asset of SENTRY.
3.5 Capitalization. The authorized capital stock of SENTRY consists of
12,000,000 shares of SENTRY Common, of which 6,156,882 shares are issued and
outstanding and 209,595 shares are held in the treasury of SENTRY. All issued
and outstanding shares of SENTRY Common are validly issued, fully paid and
nonassessable, and have not been issued in violation of any preemptive, first
refusal or other subscription rights of any stockholder of SENTRY or any other
person. Except as set forth on Schedule 3.5, there are no outstanding (i) shares
of capital stock or other voting securities of SENTRY, (ii) securities of SENTRY
convertible into or exchangeable for shares of capital stock or voting
securities of SENTRY, (iii) options, warrants, exchange rights, subscription
rights or other agreements, commitments or rights to purchase or otherwise
acquire from SENTRY, or agreements, commitments or obligations of SENTRY to
issue or sell, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of SENTRY or (iv)
any agreement, commitment or obligation of SENTRY to grant, or enter into any
such option, warrant, call, right, commitment or agreement (the items in clauses
(i), (ii) (iii) and (iv) being referred to collectively as the "SENTRY
Securities"). Except as set forth on Schedule 3.5, there are no outstanding
obligations of SENTRY or to repurchase, redeem or otherwise acquire, any SENTRY
Securities. Schedule 3.5 sets forth a true and complete list of the record, and,
to the knowledge of SENTRY, the beneficial, owners of all SENTRY Securities.
Schedule 3.5 sets forth, with respect to all options and warrants to purchase
shares of SENTRY Common, the holder of record, the exercise price, the
expiration date and the vesting schedule, including the extent vested to date
and the extent, if any, to which the exercisability of such option or warrant
will be accelerated by the transactions contemplated by this Agreement. Schedule
3.5 shall set forth the information required by this Section 3.5 by making
reference to the name of the holder, the name of the option plan or agreement
pursuant to which such SENTRY Security was issued, the exercise price, the
number of shares exercisable and unexercisable, vested or unvested, and all
other similar information.
<PAGE> 15
3.6 Susidiaries. SENTRY does not hold or own, directly or indirectly, any
capital stock or other equity securities of any other corporation, or have any
direct or indirect equity or ownership interest in any association, partnership,
joint venture or other entity.
3.7 Financial Statements. SENTRY has previously delivered to META and the
Company the following financial statements (collectively, the "Financial
Statements"):
(i) the audited balance sheets of SENTRY as of December 31, 1997 and
1996 and the related statements of operations, stockholders' equity and
cash flows for each of the years ended December 31, 1997 and 1996 together
with the notes thereto, in each case audited by, and accompanied by the
report thereon, of KPMG Peat Marwick LLP; and
(ii) the unaudited balance sheet of SENTRY as of June 30, 1998 (the
"Unaudited Balance Sheet") and the related statements of operations and
cash flows for the six months then ended.
Except as set forth in Schedule 3.7, each of the Financial Statements has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis and fairly presents the financial position of SENTRY as of
its date or the results of operations or cash flows, as is appropriate, of
SENTRY for the periods then ended (subject, in the case of unaudited interim
financial statements, to recurring year-end adjustments, which adjustments will
not be material in amount or effect). Except as may be set forth in the
Financial Statements or Schedule 3.7, (a) all of the revenues and expenses of
SENTRY reflected in the Financial Statements were derived or incurred in the
ordinary course of business of SENTRY and (b) SENTRY's books of account have
been maintained in accordance with generally accepted accounting practices
applied on a consistent basis. The account records underlying the Financial
Statements accurately and fairly reflect, in reasonable detail, the transactions
of SENTRY. Except as set forth in Schedule 3.7, all accounts, notes and other
receivables of SENTRY are valid and enforceable, are not subject to any valid
defense, set off, counterclaim or claim for returns or refunds, and are
collectible in full in accordance with their terms in the ordinary course of
business of SENTRY, except to the extent of any reserves therefor reflected on
the Unaudited Balance Sheet or taken in the ordinary course of business
consistent with past practice which in the aggregate are not material to SENTRY.
3.8 Absence of Undisclosed Liabilities. SENTRY has no material liabilities
or obligations, except those liabilities or obligations which are (a) fully
reflected or adequately reserved against in the Unaudited Balance Sheet, (b)
disclosed in this Agreement or in the Schedules hereto (including Schedule 3.8),
or (c) incurred in the ordinary course of business consistent with past
practice. To the knowledge of SENTRY, there is no basis for any assertion
against SENTRY of any material liability or obligation of any nature or in any
amount not (a) fully reflected or adequately reserved against in the Unaudited
Balance Sheet, (b) disclosed in this Agreement or in the Schedules hereto, or
(c) incurred in the ordinary course of business consistent with past practice.
For the purposes of this Agreement the phrase "liabilities or obligations" shall
include any direct or indirect indebtedness, claim, loss, damage, deficiency
(including deferred income tax and other tax deficiencies), cost, expense,
obligation, guarantee, or responsibility, whether accrued, absolute or
contingent, known or unknown, fixed or unfixed, liquidated or unliquidated,
secured or unsecured.
3.9 Properties. Except as set forth in Schedule 3.9, all of the assets and
properties of SENTRY are reflected on the Unaudited Balance Sheet (except to the
extent not required to be so reflected by generally accepted accounting
principles), and SENTRY has good, valid and marketable title to all of its owned
assets and properties, whether real, personal or mixed, tangible or intangible,
that are material to the business of SENTRY, free and clear of all Liens, except
<PAGE> 16
(a) Liens for current taxes not delinquent or being contested in good faith by
appropriate proceedings, (b) Liens in connection with worker's compensation,
unemployment insurance or other social security obligations, (c) deposits or
pledges to secure bids, tenders, contracts (other than contracts or the payment
of money), leases, statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of business, (d)
mechanic's, workman's, materialmen's or other like Liens arising in the ordinary
course of business with respect to obligations which are not due or which are
being contested in good faith, and (e) such imperfections of title, Liens,
easements and encumbrances, if any, as are not substantial and do not materially
detract from the value, or materially interfere with the present use, of any of
the properties subject thereto or affected thereby, or otherwise have a Material
Adverse Effect on SENTRY.
3.10 Real Property. Set forth on Schedule 3.10 is an accurate and complete
list and summary description of all real property currently owned or leased by
SENTRY and, except as set forth on Schedule 3.10, none of the described leases
require any consent to the transactions contemplated by this Agreement. SENTRY
has previously delivered to META and the Company accurate and complete copies of
all leases listed and described on Schedule 3.10. Except as set forth on
Schedule 3.10, SENTRY has possession of each of the aforementioned properties
and, to the knowledge of SENTRY, no event has occurred which, with the lapse of
time or notice or both, could result in a material default under any of the
described leases. All rents or other material payment obligations which have
become due in respect of each of such leased properties have been paid, SENTRY
has complied in all material respects with its obligations under the said leases
and SENTRY has not received any notice of any breach of its obligations under
any covenants, agreements, statutory requirements, planning consents, by-laws,
orders and regulations affecting any of such properties (whether owned or
leased), their use and any business of SENTRY there carried on.
3.11 Condition of Tangible Assets. All material tangible property,
including the real property and structures thereon, owned by SENTRY is in good
operating condition, reasonable wear and tear excepted, and the operation and
use of such property in the business of SENTRY conforms in all material respects
to all applicable laws, ordinances, regulations, permits, licenses and
certificates.
3.12 Intellectual Property. SENTRY owns, or is licensed or otherwise
possesses legally enforceable rights to use all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material that are used or proposed to be
used in the business of SENTRY as currently conducted currently. Schedule
3.12(a) lists all patents, registered and unregistered trademarks and service
marks, registered and unregistered copyrights, trade names and any applications
therefor, which relate to or are part of SENTRY's products or are used in the
business of SENTRY (the "SENTRY Intellectual Property Rights"), and specifies
the jurisdictions in which each such SENTRY Intellectual Property Right issued
or registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners. Schedule 3.12(b) lists (i) all licenses,
sublicenses and other agreements as to which SENTRY is a party and pursuant to
which any person is authorized to use any SENTRY Intellectual Property Right or
any trade secret material to SENTRY and includes any SENTRY Intellectual
Property Right or any trade secret material to SENTRY and includes the identity
of all parties thereto; and (ii) all licenses, sublicenses and other agreements
as to which SENTRY is a party and pursuant to which SENTRY is authorized to use
any third party patents, trademarks or copyrights (including software) (the
"SENTRY Third Party Intellectual Property Rights") which are incorporated in,
are, or form a part of, any SENTRY product, or other trade secret of a third
<PAGE> 17
party in or as to any product, and includes the identity of all parties thereto,
a description of the nature and subject matter thereof, the applicable royalty
and the term thereof.
SENTRY is not, nor will it be as a result of the execution and delivery of
this Agreement or the performance of its obligations hereunder, in violation of
any license, sublicense or agreement described on Schedule 3.12(b). No claims
with respect to SENTRY Intellectual Property Rights, any trade secret material
to SENTRY, or SENTRY Third Party Intellectual Property Rights to the extent
arising out of any use, reproduction or distribution of such SENTRY Third Party
Intellectual Rights by or through SENTRY, have been asserted or are threatened
by any person, nor, except as disclosed by SENTRY to META in Schedule 3.12(b),
does SENTRY know of any valid grounds for any bona fide claims (i) to the effect
that the manufacture, sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by SENTRY infringes on any
copyright, patent, trademark, service mark or trade secret; (ii) against the use
by SENTRY of any trademarks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and applications used in
SENTRY's business as currently conducted or as proposed to be conducted by
SENTRY; (iii) challenging the ownership, validity or effectiveness of any of
SENTRY Intellectual Property Rights or other trade secret material to SENTRY; or
(iv) challenging SENTRY's license or legally enforceable right to use, or the
validity or effectiveness of SENTRY Third Party Intellectual Rights.
All registered trademarks, service marks and copyrights held by SENTRY are
valid and subsisting. There is no unauthorized use, disclosure, infringement or
misappropriation of any of SENTRY Intellectual Property Rights, any trade secret
material to SENTRY, or any SENTRY Third Party Intellectual Property Right to the
extent licensed by or through SENTRY, by any third party, including any employee
or former employee of SENTRY. Except as disclosed by SENTRY to META in Schedule
3.14, SENTRY (i) has not been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim of infringement of any
patents, trademarks, service marks, copyrights or violation of any trade secret
or other proprietary right of any third party; (ii) has no knowledge of the
basis for any such charge or claim; and (iii) has no knowledge of any
infringement liability with respect to, or infringement or violation by, SENTRY
of any patent, trademark, service mark, copyright, trade secret or other
proprietary right of another.
No SENTRY Intellectual Property Right, trade secret material to SENTRY, or
SENTRY Third Party Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting in any manner the
licensing thereof by SENTRY. Except for contracts licensing SENTRY's products
executed in the ordinary course of business and in accordance with SENTRY's past
practices, SENTRY has not entered into any agreement to indemnify any other
person against any charge of infringement of any SENTRY Third Party Intellectual
Property Right.
SENTRY has taken reasonable measures consistent with industry practice to
protect and preserve the validity and enforceability of the SENTRY Intellectual
Property Rights. No trade secret or confidential information of SENTRY has been
used, divulged or appropriated for the benefit of any person other than SENTRY
or otherwise to the detriment of SENTRY. No employee or consultant of SENTRY has
used any trade secrets or other confidential information of any other person in
the course of their work for SENTRY.
SENTRY has no reason to believe any employee of SENTRY is, or is now
expected to be, in violation of any term of any employment contract, patent
disclosure agreement, proprietary information agreement, noncompetition
agreement, nonsolicitation agreement, confidentiality agreement, or any other
similar contract or agreement or any restrictive covenant relating to the right
<PAGE> 18
of any such employee to be employed or engaged by SENTRY because of the nature
of the business conducted or to be conducted by SENTRY or relating to the use of
trade secrets or proprietary information of others and the continued employment
or retention of its employees does not subject SENTRY to any liability with
respect to any of the foregoing matters.
3.13 Absence of Certain Changes. Except as disclosed in Schedule 3.13,
since June 30, 1998 the business of SENTRY has been conducted in the ordinary
course consistent with past practices and there has not been:
(i) any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to result in or have a
Material Adverse Effect on SENTRY;
(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of SENTRY,
or any repurchase, redemption or other acquisition by SENTRY of any
outstanding shares of capital stock or other securities of, or other equity
or ownership interests in, SENTRY;
(iii) any amendment of any material term of any outstanding
security of SENTRY;
(iv) any incurrence, assumption or guarantee by SENTRY of any
indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices, but in
any event not exceeding an aggregate of $10,000;
(v) any creation or assumption by SENTRY of any Lien on any asset,
other than Liens that do not in the aggregate materially detract from the
value of such assets or materially impair the use thereof in the operation
of the business of SENTRY;
(vi) any making of any loan, advance or capital contributions to or
investment in any person other than loans, advances or capital
contributions to or investments in wholly owned subsidiaries made in the
ordinary course of business consistent with past practices;
(vii) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of SENTRY which has
had or would reasonably be expected to result in or have a Material Adverse
Effect on SENTRY;
(viii) any acquisitions of any capital assets or any other investments
for aggregate consideration in excess of $10,000;
(ix) any sale, lease, pledge, transfer or other disposition of any
capital assets for aggregate consideration in excess of $10,000;
(x) any transaction or commitment made, or any contract or agreement
entered into, by SENTRY relating to its assets or business (including the
acquisition or disposition of any assets) or any relinquishment by SENTRY
of any contract or other right, in either case, material to SENTRY, other
than transactions, commitments and relinquishments in the ordinary course
of business consistent with past practices and those contemplated by this
Agreement;
(xi) any change in any method of accounting or accounting practice by
SENTRY;
<PAGE> 19
(xii) any (A) grant of any severance or termination pay to any
director, officer or employee of SENTRY, (B) entering into of any
employment, severance, management, consulting, deferred compensation or
other similar agreement (or any amendment to any such existing agreement)
with any director, officer or employee of SENTRY, (C) change in benefits
payable under existing severance or termination pay policies or employment,
severance, management, consulting or other similar agreements or (D) change
in compensation, bonus or other benefits payable to directors, officers or
employees of SENTRY, other than increases in the ordinary course of
business of the compensation of the employees (other than the directors,
officers and Key Employees (as defined herein)) of SENTRY;
(xiii) any labor dispute or any activity or proceeding by a labor union
or representative thereof to organize any employees of SENTRY, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to any employees of SENTRY; or
(xiv) any agreement, undertaking or commitment to do any of the
foregoing.
3.14 Litigation. Except as disclosed in Schedule 3.14, (a) there is no
action, suit, investigation or proceeding pending against or, to the knowledge
of SENTRY, threatened against or affecting, SENTRY or any of its properties or
assets before any court, arbitrator or Governmental Authority; (b) SENTRY is not
subject to any judgment, order or decree entered in any lawsuit or proceeding or
issued by any court, arbitrator or Governmental Authority; and (c) there is no
litigation pending or threatened against any officer or Key Employee relating to
SENTRY or its business.
3.15 Material Contracts. (a) Except for agreements, contracts, plans,
leases, arrangements or commitments disclosed in Schedule 3.15 or any other
Schedule to this Agreement, SENTRY is not a party to or subject to:
(i) any collective bargaining agreement;
(ii) any agreements that contain any unpaid severance liabilities or
obligations;
(iii) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit
plans or arrangements;
(iv) any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or consulting or
sales agreement, contract or commitment with a firm or other organization
not terminable by SENTRY on 90 days' notice without liability except to the
extent applicable local law and/or general principles of wrongful
termination law may limit SENTRY's ability to terminate such employees;
(v) agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement;
(vi) any fidelity or surety bond or completion bond;
<PAGE> 20
(vii) any lease of personal property having a remaining value
individually in excess of $10,000;
(viii) any agreement of indemnification or guaranty;
(ix) any agreement, contract or commitment containing any covenant
limiting the freedom of SENTRY to engage in any line of business or compete
with any person;
(x) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $10,000;
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise;
(xii) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money or extension of credit, including guaranties referred to in clause
(viii) hereof;
(xiii) any purchase order or contract for the purchase of raw materials
or acquisition of assets involving $10,000 or more;
(xiv) any construction contracts;
(xv) any distribution, joint marketing or development agreement;
or
(xvi) any other agreement, contract or commitment which involves
$25,000 or more and is not cancelable without penalty within thirty (30)
days.
SENTRY has not breached, or received in writing any claim or threat that it
has breached, any of the terms or conditions of (i) any agreement, contract or
commitment set forth in any of SENTRY's Schedules or (ii) any other material
agreement, contract or commitment in such a manner as would permit any other
party to cancel or terminate the same or would permit any other party to seek
damages from SENTRY that would have a Material Adverse Effect on SENTRY.
(b) Each agreement, contract, plan, lease, arrangement and commitment
disclosed in any Schedule to this Agreement or required to be disclosed pursuant
to this Section 3.15 (other than those required to be terminated by the terms of
this Agreement) is a valid and binding agreement of SENTRY and is in full force
and effect, and SENTRY is not, nor is, to the knowledge of SENTRY, any other
party thereto, in default or breach in any material respect under the terms of
any such agreement, contract, plan, lease, arrangement or commitment.
(c) There is no contract, agreement, commitment or obligation to
which SENTRY is a party or is bound that at the time it was entered into or made
was, or is currently, known or expected by SENTRY to result in any loss to
SENTRY upon completion or performance thereof, or any bid, offer or proposal
which if accepted would result as such a contract, agreement, commitment or
obligation.
<PAGE> 21
(d) Except as disclosed in Schedule 3.15, SENTRY is not a party to
any agreement with any of its securityholders or optionholders, or any affiliate
thereof, nor, to the knowledge of SENTRY, without inquiry by SENTRY, is any
securityholder or optionholder of SENTRY a party to any agreement with any other
such securityholder or optionholder relating to SENTRY or any of its securities.
3.16 Taxes. (a) The term "Taxes" as used herein means all federal, state,
local, foreign and other net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs duties, unemployment insurance,
environmental, worker's compensation, Pension Benefit Guaranty Corporation
premiums and all other taxes, fees, assessments or other charges of any kind
similar to Taxes, together with any interest and any penalties, additions to tax
or additional amounts with respect thereto, and the term "Tax" means any one of
the foregoing taxes. The term "Returns" as used herein means all returns,
declarations, reports, statements and other documents required to be filed in
respect of Taxes, including information returns or reports with respect to
backup withholding and other payments to third parties, and "Return" means any
one of the foregoing returns. All citations to the Internal Revenue Code of
1986, as amended (the "Code"), or the Treasury Regulations promulgated
thereunder, shall include any amendments or any substitute or successor
provisions thereto. The representations and warranties contained in this Section
3.16 shall pertain to the period from SENTRY's inception up to and including the
Effective Time.
(b) SENTRY has filed all Returns required to be filed by or on its
behalf on a timely basis and such Returns are true, complete and correct. None
of the Returns filed or required to be filed by SENTRY contains or will contain
a disclosure statement under former Section 6661 or Section 6662 of the Code or
any similar provision of any state, local or foreign law.
(c) All Taxes shown to be payable by SENTRY on the Returns or on
subsequent assessments with respect thereto have been paid in full on a timely
basis, and no other Taxes are payable by SENTRY with respect to items or periods
covered by such Returns (whether or not shown on or reportable on such Returns)
or with respect to any period. SENTRY has withheld and paid over all Taxes
required to have been withheld and paid over by it, and complied in all respects
with all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid or owing to any employee, creditor, independent contractor or other third
party. There are no Liens on any of the assets of SENTRY with respect to Taxes,
other than Liens for Taxes not yet due and payable or for ad valorem Taxes that
SENTRY is contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established, which reserves are fully reflected
in the Financial Statements; and no Liens will arise as a result of the
transactions contemplated by this Agreement.
(d) The amount of SENTRY's liability for unpaid Taxes for all
periods does not, in the aggregate, exceed the amount of the net current
liability accruals for Taxes set forth on the Unaudited Balance Sheet and SENTRY
will incur no additional Taxes subsequent to the date of the Unaudited Balance
Sheet until the Effective Time except in the ordinary course of business.
(e) No issues have been raised (and are currently pending) by any
taxing authority in connection with any of the Returns of SENTRY. No waivers of
statutes of limitation with respect to any of the Returns have been given by or
requested from SENTRY. All deficiencies asserted or assessments made as a result
of any examinations have been fully paid, or are fully reflected as a liability
in the Financial Statements, or are being contested and an appropriate reserve
therefor has been established and is fully reflected in the Financial
<PAGE> 22
Statements. All elections with respect to Taxes affecting SENTRY, as of the date
hereof, are set forth in the Returns, other than any such elections which are
not required to be included in the Returns, copies of which have been made
available to Buyer. SENTRY is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of (i) any "excess parachute payments" within the
meaning of Section 280G of the Code (without regard to the exceptions in
Sections 280G(b)(4) and 280G(b)(5) of the Code) or (ii) any other amount for
which a deduction would be disallowed under Section 162 or Section 404 of the
Code. SENTRY has not agreed or been required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise, and SENTRY will not be required to make any such adjustment as a
result of the transactions contemplated by this Agreement. SENTRY is not a party
to any safe harbor lease within the meaning of Section 168(f)(8) of the Code, as
in effect prior to amendment by the Tax Equity and Fiscal Responsibility Act of
1982. SENTRY is not and has not ever been a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code. None of the
holders of SENTRY Common is a "foreign person" as that term is defined in
Section 1445 of the Code. SENTRY is not and has not ever been a party to a
tax-sharing agreement and has not assumed the liability of any other person for
Taxes under contract. SENTRY has never been a member of a group of corporations
filing a consolidated, unitary or combined Return. SENTRY has not taken any
action that would have the effect of deferring any material liability for Taxes
for SENTRY from any taxable period ending at or before the Effective Time to any
taxable period thereafter. SENTRY has not participated in or cooperated with any
international boycott within the meaning of Section 999 of the Code. As of the
Closing Date the ability of SENTRY to use its net operating losses and other
carryovers will not have been affected by Sections 382, 383 or 384 of the Code
(other than as a result of the Merger). No claim by a tax authority in a
jurisdiction where SENTRY does not file returns that it is or may be subject to
Tax in that jurisdiction is currently outstanding. No claim has ever been
sustained by a tax authority in a jurisdiction where SENTRY does not file
Returns that it is or may be subject to Tax in that jurisdiction. The
transactions set forth in this Agreement are not subject to the Tax withholding
provisions of Section 3406 of the Code, or of Subchapter A of Chapter 3 of the
Code or of any other provision of law. SENTRY is not a party to any joint
venture, partnership, or other arrangement or contract which could be treated as
a partnership for federal income tax purposes. SENTRY does not have and has not
had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country. SENTRY has never filed a consent pursuant to Section 341(f) of the Code
(or any corresponding provision of state, local or foreign law), relating to
collapsible corporations, or agreed to have Section 341(f)(2) of the Code (or
any corresponding provision of state, local or foreign law) apply to the
disposition of any asset owned by it. SENTRY shall have fully complied with all
federal, state, local and foreign Tax withholding Tax obligations arising in
connection with the cancellation or exercise of SENTRY options, rights and
warrants, and META shall have no liability therefor. Any adjustment of Taxes
made by the Internal Revenue Service in any examination which is required to be
reported to state, local, foreign or other taxing authorities has been so
reported, and any additional Taxes due with respect thereto have been paid. No
power of attorney has been granted by SENTRY, and is currently in force, with
respect to any matter relating to Taxes.
3.17 Employees. (a) Schedule 3.17(a) sets forth a true and complete list
of (i) the names, titles, annual salaries and other compensation or benefits
(including, but not limited to, any vacation, holiday or sick pay) of all
employees of SENTRY (the "Employees") and all consultants of SENTRY and the
location at which such Employees and consultants regularly perform services for
SENTRY and (ii) the wage rates for non-salaried Employees of SENTRY (by
classification) and consultants. Any oral or written agreements, commitments or
understandings between SENTRY and any Employee concerning such Employee's future
salary, compensation or terms of employment are described in Schedule 3.17(a).
<PAGE> 23
Except as set forth on Schedule 3.17(a), none of such Employees has indicated to
SENTRY that he or she intends to resign or retire as a result of the
transactions contemplated by this Agreement or otherwise.
(b) SENTRY is in compliance in all material respects with all U.S.
federal, state, and local laws, as applicable, respecting employment and
employment practices, employee benefit plans, terms and conditions of
employment, wages and hours, and is not engaged in any unfair labor or unlawful
employment practice. There is no unlawful employment practice or discrimination
charge involving SENTRY pending before the Equal Employment Opportunity
Commission ("EEOC"), EEOC recognized state "referral agency," any state or local
administrative agency, or any other governmental authority. None of the
Employees of SENTRY are represented by any labor union. There are no grievance
or arbitration proceedings relating to the Employees of SENTRY pending and no
written claim therefore exists with respect to SENTRY.
(c) Each of the persons listed on Schedule 3.17(c) is a former
employee of SENTRY whose employment with SENTRY has been terminated and who has
executed a severance and release agreement which has previously been provided to
META. No such former employee has filed or made, or, to SENTRY's knowledge,
threatened to file or make, any action, complaint, dispute or claim, with a
court, governmental entity or agency, or otherwise, with respect to, concerning,
arising out of, or relating to, his or her employment (or severance or
termination of employment) with SENTRY, nor does any such former employee have
any present or future claims or causes of action under any applicable federal,
state, local law, rule or regulation or any contract or any common laws against
SENTRY. No such former employee has a right, claim or entitlement to any
compensation for any services rendered to SENTRY. No such former employee, when
he or she was employed by SENTRY, was in violation of any term of any employment
contract, nondisclosure or noncompetition or nonsolicitation agreement, or other
similar agreement with SENTRY or any person.
(d) "Key Employees" are denoted on Schedule 3.17(d).
3.18 Transactions with Affiliates. Except as set forth in Schedule 3.18,
there are no loans, leases, royalty agreements or other continuing transactions
between SENTRY, on the one hand, and any affiliate of SENTRY, any of the
stockholders of SENTRY, any person known to be an affiliate of any stockholder
of SENTRY, or any member of any such stockholder's family, on the other hand. To
the knowledge of SENTRY, none of the officers or directors of SENTRY (a) has any
material direct or indirect interest in any entity which does business with
SENTRY; (b) has any direct or indirect interest in any property, asset or right
which is used by SENTRY in the conduct of its business; or (c) has any
contractual relationship with SENTRY other than such relationships which occur
from being an officer, director or stockholder of SENTRY.
3.19 Insurance Coverage. Schedule 3.19 sets forth an accurate and complete
list of all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of SENTRY.
There is no claim by SENTRY pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums payable under all such policies and bonds
have been paid or are reflected in accounts payable, and SENTRY has otherwise
complied in all material respects with the terms and conditions of all such
policies and bonds. Such policies of insurance and bonds (or other policies and
bonds providing substantially similar insurance coverage) have been in effect
since January 1, 1997 and remain in full force and effect. In the opinion of
SENTRY, such insurance is adequate to cover all reasonably foreseeable risks
associated with the business of SENTRY and is in such amounts, with such
<PAGE> 24
deductibles and with such other terms as is prudent for a business such as that
of SENTRY. SENTRY has no knowledge of any threatened termination of, or has
received written notice of, any premium increase with respect to, any of such
policies or bonds.
3.20 Compliance with Laws; No Defaults. (a) Except as disclosed in Schedule
3.20, SENTRY is not in violation of any applicable provisions of any law,
statute, ordinance, regulation, judgment, order, injunction, permit, license,
certificate or other authorization, or its governing instruments, except for
violations that have not had and could not reasonably be expected to have a
Material Adverse Effect on SENTRY.
(b) SENTRY is not in material default under, and to its knowledge no
condition exists that with notice or lapse of time or both would constitute a
material default under, any applicable law, statute, ordinance, regulation,
judgment, order, injunction, permit, license, certificate or other
authorization, or its governing instruments.
(c) Except as set forth on Schedule 3.20, SENTRY is in compliance
with all currently applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice, failure to comply with which or engagement
in which, as the case may be, has had, or could reasonably be expected to have,
a Material Adverse Effect on SENTRY. There is no unfair labor practice complaint
pending or, to the knowledge of SENTRY, threatened against SENTRY before the
National Labor Relations Board.
3.21 Finder's Fees. Except as set forth on Schedule 3.21, there is no
investment banker, broker, finder or other intermediary that has been retained
by or is authorized to act on behalf of SENTRY who might be entitled to any fee
or commission from META, the Company, SENTRY or any other person upon
consummation of the transactions contemplated by this Agreement.
3.22 Environmental Matters. (a) Except as disclosed on Schedule 3.22,
(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending or, to SENTRY's knowledge, threatened by any governmental entity or
other person with respect to any (A) alleged violation by SENTRY of any
Environmental Law (as defined herein) or liability thereunder, (B) alleged
failure by SENTRY to have any permit, certificate, license, approval,
registration or authorization required under any Environmental law in
connection with the conduct of its business or (C) Release of Hazardous
Substances;
(ii) no polychlorinated biphenyls, radioactive material, urea
formaldehyde, lead, asbestos, asbestos-containing material or underground
storage tank (active or abandoned) is or was present at any property now
owned or leased by SENTRY or was present at any property owned or leased by
SENTRY in the five years preceding the date of this Agreement at, or at any
time before, the time such property was sold or such lease was terminated
by SENTRY or the applicable of its subsidiaries; and
(iii) there are no Environmental Liabilities (as defined herein) that
have had or may reasonably be expected to have a Material Adverse Effect on
SENTRY.
<PAGE> 25
(b) There has been no environmental investigation, study, audit,
test, review or other analysis conducted of which SENTRY has possession, or to
the knowledge of SENTRY, to which it has access, in relation to the current or
prior business of SENTRY or any property or facility now or previously owned or
leased by SENTRY which has not been delivered to META at least five days prior
to the date hereof.
(c) SENTRY has not transported or arranged for the transportation
(directly or indirectly) of any Hazardous Substance to any location which is
listed or, to SENTRY's knowledge, proposed for listing under CERCLA, or on any
similar state list or which is the subject of Federal, state or local
enforcement actions or, to SENTRY's knowledge, other investigations which may
lead to claims for clean-up costs, remedial work, damages to natural resources
or for personal injury claims, including, but not limited to, claims under
CERCLA or analogous state environmental clean-up laws.
3.23 Intercompany Arrangements; Conflicts. (a) Except as set forth on
Schedule 3.23, SENTRY does not own any note, bond, debenture or other
indebtedness, or is otherwise a creditor, of any stockholder of SENTRY. Except
as disclosed in Schedule 3.23, since June 30, 1998 there has not been any
payment by SENTRY to any stockholder of SENTRY (except for compensation to
employees of SENTRY in their capacities as such), charge by any stockholder of
SENTRY, or any other transaction between SENTRY and any stockholder of SENTRY.
(b) Except as set forth on Schedule 3.23, none of the officers or
directors of SENTRY (i) has any material direct or indirect interest in any
entity which does business with SENTRY; (ii) has any direct or indirect interest
in any property, asset or right which is used by SENTRY in the conduct of its
business; or (iii) has any contractual relationship with SENTRY other than such
relationships that arise from being an officer, director or stockholder of
SENTRY.
3.24 Employee Plans. (a). SENTRY has set forth on Schedule 3.24 all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance, insurance (including any self-insured or post-retirement
arrangements), disability, vacation, profit-sharing and other similar employee
benefit plans, arrangements, policies or agreements, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of SENTRY or any trade or business (whether or not
incorporated) which, together with SENTRY would be treated as a single employer
under Section 414 of the Code (an "ERISA affiliate") (together, the "SENTRY
Employee Plans").
(b) With respect to each SENTRY Employee Plan, SENTRY has made
available to META, a true and correct copy of (i) the most recent annual report
(Form 5500) filed with the Internal Revenue Service ("IRS"), (ii) such SENTRY
Employee Plan, (iii) each trust agreement and group annuity contract, if any,
relating to such SENTRY Employee Plan, (iv) the most recent actuarial report or
valuation relating to a SENTRY Employee Plan subject to Title IV of ERISA and
(v) an accurate summary plan description of such SENTRY Employee Plan.
(c) With respect to the SENTRY Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of SENTRY, there
exists no condition or set of circumstances in connection with which SENTRY
could be subject to any liability under ERISA, the Code or any other applicable
law.
<PAGE> 26
(d) Each SENTRY Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. SENTRY has furnished to
META copies of the most recent Internal Revenue Service determination letters
with respect to each such plan.
(e) Each SENTRY Employee Plan has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including but not limited to ERISA and the Code, which
are applicable to such SENTRY Employee Plan.
(f) Neither SENTRY nor any of its ERISA affiliates maintains or has
ever maintained or contributed to any "multiemployer plan" (as that term is
defined in Section 3(37) of ERISA) or any plan subject to Title IV of ERISA. No
"prohibited transaction" (as that term is defined in Section 406 of ERISA or
Section 4975 of the Code) has occurred with respect to any SENTRY Employee Plan.
No tax under Section 4980B or Section 4980D of the Code has been incurred in
respect to any SENTRY Employee Plan that is a group health plan, as defined in
Section 5000(b)(1) of the Code. With respect to the employees and former
employees of SENTRY or any of its ERISA affiliates, there are no employee
post-retirement medical or health plans in effect, except as required by Section
4980B of the Code.
(g) With respect to the SENTRY Employee Plans, individually and in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
financial statements of SENTRY, which obligations are reasonably likely to have
a Material Adverse Effect on SENTRY.
(h) None of the SENTRY Employee Plans listed on Schedule 3.24 covers
any non-United States employee or former employee of SENTRY or any ERISA
affiliate.
(i) No provision of this Section 3.24 shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of SENTRY in respect of continued employment
(or resumed employment) with SENTRY and no provision of this Section 3.24 shall
create any such rights in any such Persons in respect of any benefits that may
be provided, directly or indirectly, under any SENTRY Employee Plan or any plan
or arrangement that may be established by META or any of its ERISA affiliates.
No provision of this Agreement shall constitute a limitation on rights to amend,
modify or terminate after the Closing Date any SENTRY Employee Plan.
(j) Except as set forth in Schedule 3.24, SENTRY is not a party to
any oral or written (i) union or collective bargaining agreement, (ii) agreement
with any officer or any other key employee of SENTRY, the benefits of which are
contingent, or the terms of which are enhanced or materially altered, upon the
occurrence of a transaction involving SENTRY of the nature contemplated by this
Agreement, (iii) agreement with any officer of SENTRY providing any term of
employment or compensation guarantee, or (iv) agreement or plan, including any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
<PAGE> 27
3.25 Other Information. This Agreement and the Schedules hereto, taken as a
whole with respect to SENTRY, do not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading. The financial projections relating to SENTRY previously
delivered to META constitute SENTRY's good faith estimate as of the date of this
Agreement of the information purported to be shown therein, and SENTRY is not
aware of any fact or information that would lead it to reasonably believe that
such projections are incorrect or misleading in any material respect. META
recognizes that such projections are based on certain assumptions and that such
assumptions may not prove to be correct and, accordingly, such projections may
not prove to be correct.
3.26. Sale of Book. SENTRY has furnished to META and the Company true and
complete copies of the Book Closing Documents. The representations and
warranties of SENTRY set forth in Section 4 of the Book Purchase Agreement were
true and correct when made.
3.27 Closing Balance Sheet. As of the Closing Date, the Closing Balance
Sheet (as defined herein) will have been prepared in accordance with past
practice and generally accepted accounting principles applied on a consistent
basis and will fairly present the financial position of SENTRY as of the Closing
Date (subject to recurring year-end adjustments, which adjustments will not be
material in amount or effect).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF META AND THE COMPANY
META and the Company hereby represent and warrant, jointly and severally,
to SENTRY as follows:
4.1 Corporate Existence and Power. Each of META and the Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, in the case of META, and under the laws of the
Commonwealth of Massachusetts, in the case of the Company, and has all corporate
power and authority necessary to enable it to own, lease or otherwise hold its
properties and assets and to carry on its business as now conducted and proposed
to be conducted. Except as set forth on Schedule 4.1, META is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not have a material
adverse effect upon the financial condition, results of operations, business,
properties, assets or operations of META and its subsidiaries, taken as a whole
(a "Material Adverse Effect on META").
4.2 Corporate Authorization. The execution, delivery and performance by
META and the Company of this Agreement, the Participation Agreement, the
Registration Rights Agreement and the Escrow Agreement and the consummation by
META and the Company of the Merger and the other transactions contemplated
hereby and thereby, are within the corporate power and authority of META and the
Company, respectively, and, have been duly authorized by all necessary corporate
action. Each of the Agreement, the Participation Agreement, the Registration
Rights Agreement and the Escrow Agreement has been duly and validly authorized,
executed and delivered by META and the Company and constitutes a valid and
<PAGE> 28
binding obligation of META and the Company, enforceable against META and the
Company in accordance with its terms.
4.3 Governmental Authorization. The execution, delivery and performance by
META and the Company of this Agreement, and the consummation of the Merger and
other transactions contemplated by this Agreement by META and the Company, do
not and will not require any consent, approval or action by or in respect of, or
any declaration, filing or registration with, any Governmental Authority, other
than routine filings with the Secretary of the Commonwealth of the Commonwealth
of Massachusetts and any required districts thereof necessary to consummate the
Merger, and compliance with the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and any applicable state securities and blue sky
laws in connection with the offering, sale and delivery of the shares of META
Common and Warrants to be issued in the Merger.
4.4 Non-Contravention. The execution, delivery and performance by META and
the Company of this Agreement, and the consummation of the Merger and the other
transactions contemplated by this Agreement by META and the Company, do not and
will not, with or without the giving of notice, the lapse of time or both: (i)
contravene or conflict with the certificate of incorporation or by-laws of META
or the articles of organization or by-laws of the Company, or (ii) assuming
compliance with the matters referred to in Section 4.3, contravene or conflict
with or constitute a violation of any provision of any law, rule, regulation,
judgment, injunction, order or decree binding upon or applicable to META or the
Company.
4.5 Capitalization. (a) As of August 31, 1998, the authorized capital stock
of META consisted of (i) 2,000,000 shares of Preferred Stock, par value $.01 per
share, none of which were issued and outstanding or held in the treasury of
META, and (ii) 45,000,000 shares of Common Stock, of which 11,357,587 shares
were issued and outstanding and no shares were held in the treasury of META.
(b) The authorized capital stock of the Company consists of 3,000
shares of Common Stock, par value $.01 per share, 100 of which are issued and
outstanding and owned of record by META. All issued and outstanding shares of
META Common and Common Stock, par value $.01 per share, of the Company are
validly issued, fully paid and nonassessable, and have not been issued in
violation of any preemptive, first refusal or other subscription rights of any
stockholder of META, the Company or any other person.
4.6 META Common. The shares of META Common to be issued as Initial
Consideration and exchanged for shares of SENTRY Common in the Merger will, at
the Effective Time, be duly authorized, validly issued, fully paid and
nonassessable and subject to no preemptive rights other than pursuant to the
terms hereof and the shares of META Common to be issued, if any, as Contingent
Consideration, if any, will, on the Contingent Closing Date, be duly authorized,
validly issued, fully paid and nonassessable and subject to no preemptive rights
other than as set forth in this Agreement.
4.7 META SEC Documents. META has made available to SENTRY a true and
complete copy of the following META documents: (i) its annual report on Form
10-K for the fiscal year ended December 31, 1997; (ii) its quarterly reports on
Form 10-Q for the fiscal quarters ended March 31, 1998 and June 30, 1998; (iii)
its current report on Form 8-K dated April 27, 1998, filed on June 12, 1998; and
(iv) its proxy statement on Schedule 14A dated April 13, 1998 (collectively, the
"META SEC Documents"), each as filed with the Securities and Exchange Commission
(the "Commission"). As of their respective dates, the META SEC Documents
<PAGE> 29
complied in all material respects with the requirements of the Exchange Act, and
the rules and regulation of the Commission thereunder applicable to such META
SEC Documents.
4.8 Absence of Certain Changes. Since June 30, 1998, the business of META
has been conducted in the ordinary course consistent with past practices and
there has not been any event, occurrence, development or state of circumstances
or facts which has had or could reasonably be expected to result in or have a
material adverse effect on the financial condition, results of operations,
business, properties, assets or operations of META.
4.9 Litigation. Except as disclosed in any of the META SEC Documents or any
other document filed with the Commission, there is no action, suit,
investigation or proceeding pending against or, to the knowledge of META,
threatened against or affecting, META or any of its properties or assets before
any court, arbitrator or Governmental Authority. META is not subject to any
judgment, order or decree entered in any lawsuit or proceeding or issued by any
court, arbitrator or Governmental Authority.
4.10 Finder's Fees. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of META
who might be entitled to any fee or commission from SENTRY, META or the Company
or any other person upon consummation of the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS
5.1 Mutual Covenants and Agreements. Each of the parties hereby covenants
and agrees with the other parties as follows:
(a) Cooperation. It shall cooperate fully with the other parties
hereto in furnishing any information or performing any action reasonably
requested by any such party, which information or action is necessary to the
successful consummation of the transactions contemplated by this Agreement or is
necessary, appropriate or desirable for the corporate purposes of META. Subject
to its further rights under this Agreement, it shall use all commercially
reasonable efforts to cause the Closing to occur at the earliest practicable
time.
(b) Other Required Information. It shall furnish to the other parties
hereto any application or statement, and all information concerning itself and
its subsidiaries, if applicable, as is required to be set forth in any
application or statement, to be filed with any Governmental Authority in
connection with the transactions contemplated by this Agreement, or otherwise.
(c) Confidentiality. SENTRY and META have agreed in a confidentiality
agreement dated January 30, 1998 (the "Confidentiality Agreement") to, among
other things, protect the confidential information of the other party. The
Company and META each hereby affirm each of their obligations under such
agreement. If this Agreement is terminated in accordance with Section 8.1
hereof, META shall, and shall cause its agents, accountants, advisors, counsel
and other representatives to deliver to SENTRY all documents and other material,
and all copies thereof, obtained by META or on its behalf from SENTRY in
connection with this Agreement, whether so obtained before or after the
execution hereof, and will not disclose any such information or documents to any
third parties or make any use of any confidential information contained therein.
<PAGE> 30
If this Agreement is terminated in accordance with Section 8.1 hereof, SENTRY
shall, and shall cause its agents, accountants, advisors, counsel and other
representatives to, deliver to META (or destroy in accordance with META's
instructions) all documents and other material, and all copies thereof, obtained
by SENTRY or on its behalf or by a stockholder of SENTRY from META in connection
with this Agreement, whether so obtained before or after the execution hereof,
and will not disclose any such information or documents to any third parties or
make any use of any confidential information contained therein.
(d) Publicity. Except as otherwise required by applicable law or by
any applicable rules of any securities exchange or market, SENTRY shall not
issue any press release or make any other public statement without obtaining the
prior approval of META.
(e) Miscellaneous Agreements and Consents. Subject to the terms and
conditions provided in this Agreement, it shall use all reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, appropriate or desirable under applicable laws and regulations
to consummate the transactions contemplated by this Agreement. It will, and will
cause each of its subsidiaries to, use their respective reasonable efforts to
obtain consents of all third parties and Governmental Authorities necessary,
appropriate or desirable for the consummation of the transactions contemplated
by this Agreement.
(f) SENTRY Stock Options. (i) At the Effective Time, each outstanding
option to purchase shares of SENTRY Common under the SENTRY Stock Option Plans
(as defined herein) (each a "SENTRY Option" and collectively, the "Outstanding
Options"), whether or not exercisable, will be assumed by META. Each SENTRY
Option so assumed by META under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the applicable SENTRY
Stock Option Plan immediately prior to the Effective Time, except that (A) each
SENTRY Option will be exercisable (or will become exercisable in accordance with
its terms) for that number of whole shares of META Common equal to the product
of the number of shares of SENTRY Common that were issuable upon exercise of
such SENTRY Option immediately prior to the Effective Time multiplied by the
Options Exchange Ratio (as defined herein), rounded down to the nearest whole
number of shares of META Common, and (B) the per share exercise price for the
shares of META Common issuable upon exercise of such assumed SENTRY Option will
be equal to the quotient determined by dividing the exercise price per share of
SENTRY Common at which such SENTRY Option was exercisable immediately prior to
the Effective Time by the Options Exchange Ratio, rounded up to the nearest
whole cent;
(ii) It is the intention of the parties that the Outstanding Options
assumed by META qualify following the Effective Time as incentive stock options
as defined in Section 422 of the Code to the extent such Outstanding Options
qualified as incentive stock options immediately prior the Effective Time;
however the parties acknowledge that there can be no assurance that such options
will continue following the Effective Time to so qualify;
(iii) META shall (A) reserve out of its authorized but unissued shares of
Common Stock sufficient shares to provide for the exercise of the Outstanding
Options and (B) use all commercially reasonable efforts to register under the
Securities Act, as promptly as practicable after the Effective Time, those
shares of META Common to be issued upon the exercise of the Outstanding Options
for a period ending on the first date on which all Outstanding Options have been
exercised, which registration shall initially be effective under a registration
statement on Form S-8 or such other form as may be permitted under the
Securities Act; and
<PAGE> 31
(iv) Options (the "Non-Plan Options") to purchase SENTRY Common not granted
pursuant to a SENTRY Stock Option Plan shall be terminated prior to the
Effective Time pursuant to Section 5.2(k).
(g) Resale Registration Statement. Not later than thirty (30) days
after the Effective Time, META shall file a registration statement (the "Resale
Registration Statement") on Form S-3 registering the shares of META Common
issued to the stockholders of SENTRY who are signatories to the Registration
Rights Agreement (and their permitted transferees) as Initial Consideration
(other than the Escrow Shares) pursuant to Section 2.3(a)(1) upon consummation
of the Merger under the Securities Act and shall use all commercially reasonable
efforts to cause the Resale Registration Statement to become effective and to
remain effective until the first anniversary of the Effective Time, all as more
fully described in the Registration Rights Agreement.
5.2 Certain Covenants of SENTRY. SENTRY hereby covenants and agrees with
META and the Company as follows:
(a) Preservation of Business Organization. SENTRY shall use its best
efforts to preserve without material impairment the business organization of
SENTRY and its goodwill as to payors, providers, suppliers, distributors,
clients and others having business relations with SENTRY and to keep available
the services of its present officers and employees and shall promptly advise
META with respect to any inability or potential inability to preserve or keep
available the foregoing.
(b) Carry on in Regular Course. SENTRY shall carry on its business in
the ordinary course in a manner consistent with its past practices.
(c) Consents. SENTRY shall use its best efforts to obtain consents in
writing to the transactions contemplated by this Agreement and/or such
amendments, assignments or modifications of such documents or instruments as may
be required in order that the transactions contemplated by this Agreement shall
not result in any default with respect to any law, rule, regulation, order,
decree, license, agreement, contract, commitment or instrument to which SENTRY
is a party or by which SENTRY, or any of its assets, is bound.
(d) Capital Stock. Without the prior written consent or approval of
META, SENTRY shall not redeem, purchase or otherwise acquire, any SENTRY
Securities, or agree to do any of the foregoing. SENTRY shall not accelerate,
amend or change the period of exercisability of options or restricted stock
granted under employee stock plans or authorize cash payments in exchange for
any options granted under any of such plans. Without the prior written consent
or approval of META, SENTRY shall not issue, deliver, sell or grant or authorize
or propose the issuance, delivery, sale or grant of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance by SENTRY of shares of SENTRY
Common pursuant to the exercise of stock options therefor outstanding as of the
date of this Agreement.
(e) Other Actions. Without the prior written consent or approval of
META or as otherwise required by this Agreement, SENTRY shall not (i) amend its
articles of organization or by-laws; (ii) declare, set aside or pay any dividend
or otherwise make a distribution with respect to any shares of capital stock of
SENTRY; (iii) amend any material term of any outstanding security of SENTRY;
(iv) incur, assume or guarantee any indebtedness for borrowed money other than
<PAGE> 32
in the ordinary course of business and in amounts and on terms consistent with
past practices, but in any event not exceeding an aggregate of $10,000; (v)
create or assume any Lien on any asset, other than Liens that do not in the
aggregate materially detract from the value of such assets or materially impair
the use thereof in the operation of the business of SENTRY; (vi) make any loan,
advance or capital contributions to or investment in any person other than
loans, advances or capital contributions to or investments in wholly owned
subsidiaries made in the ordinary course of business consistent with past
practices; (vii) acquire any capital assets or any other investments for
aggregate consideration in excess of $10,000; (viii) sell lease, pledge,
transfer or dispose of any capital assets for aggregate consideration in excess
of $10,000; (ix) enter into any transaction or make any commitment or any
contract or agreement relating to its assets or business (including the
acquisition or disposition of any assets) or relinquish any contract or other
right, in either case, material to SENTRY, other than transactions, commitments
and relinquishments in the ordinary course of business consistent with past
practices and those contemplated by this Agreement; (x) other than in the
ordinary course of business, make or change any election in respect of Taxes,
adopt or change any method of accounting or accounting practice in respect of
Taxes, enter into any closing agreement, settle any claim in respect of Taxes,
or consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes; (xi) grant any severance or termination
pay to any director, officer or employee of SENTRY, enter into any employment,
severance, management, consulting, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of SENTRY, change the benefits payable under existing
severance or termination pay policies or employment, severance, management,
consulting or other similar agreements or change the compensation, bonus or
other benefits payable to directors, officers or employees of SENTRY, other than
increases in the ordinary course of business of the compensation of the
employees of SENTRY; (xii) enter into any transaction with any of their
respective stockholders, other than in the ordinary course of, and pursuant to
the reasonable requirements of, business and upon terms that are no less
favorable to SENTRY than SENTRY could obtain in a comparable transaction with a
person who was not such a stockholder or other than as contemplated by this
Agreement; or (xiii) agree to do any of the foregoing.
(f) Access. SENTRY shall, permit officers, employees, agents,
attorneys and accountants and other persons designated by META full access after
reasonable notice during normal business hours to the properties, books, audit
work papers, contracts, commitments, Returns, examinations and all other reports
of the Internal Revenue Service and any state, local, foreign or other taxing
authority and other records of SENTRY. Unless prohibited by law or contract,
such designees of META shall be furnished with true, accurate and complete
copies of such contracts, commitments and other records and all other
information with respect to the assets and business of SENTRY as such designees
may reasonably request.
(g) Documents and Information to be Furnished. SENTRY shall deliver
to META promptly after such documents are available SENTRY's unaudited monthly
financial reports with respect to periods ending after the date hereof and all
other documents, financial statements, budgets, proxy or information statements,
reports, correspondence, notices and other items SENTRY delivers, or is required
to deliver, to any of its stockholders.
(h) Stockholder Meeting. SENTRY shall take all action necessary in
accordance with applicable law to convene a meeting of its stockholders to be
held no later than October 21, 1998 (the "Meeting"), for the purpose of
approving this Agreement. On or before September 30, 1998 SENTRY shall mail to
each stockholder who was a stockholder on the record date for determining
stockholders entitled to notice of the Meeting, (A) a notice of special meeting
(which notice may be included in the Information Statement (as defined herein)),
(B) an information statement and letter of transmittal (the "Information
Statement") with respect to the matters to be submitted for stockholder approval
<PAGE> 33
at the Meeting; and (C) a notice that appraisal rights are available for the
shares of SENTRY Common held by each such stockholder of SENTRY, together with a
statement of rights of objecting stockholders, in satisfaction of SENTRY's
obligations under Section 87 of the Massachusetts BCL. Within ten (10) days
after the Effective Time, the Surviving Corporation shall notify each
stockholder who filed written objection meeting the requirements of Section 86
of the Massachusetts BCL and whose shares were not voted in favor of this
Agreement that the Merger has become effective under the Massachusetts BCL, in
satisfaction of the Surviving Corporation's obligation under Section 88 of the
Massachusetts BCL. Such notices shall be sent by certified or registered mail,
return receipt requested, addressed to such stockholders at their addresses as
they appear on the records of the Surviving Corporation. In addition, the
Information Statement shall include or be accompanied by such other information
provided by META as META deems necessary in order to provide for the offer and
sale of the META Common and the Warrants to be issued in the Merger to be exempt
from any applicable registration or qualification requirements under either
federal or state securities or "Blue Sky" laws. SENTRY shall use its best
efforts to obtain all votes and approvals of its stockholders necessary for the
approval of this Agreement under the Massachusetts BCL and its articles of
organization and by-laws.
(i) Notices of Certain Events. SENTRY shall promptly notify META of:
(i) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced relating to or involving or otherwise affecting SENTRY that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Article III or that relate to the consummation
of the transactions contemplated by this Agreement; and
(iv) any matter arising and discovered after the date of this
Agreement that, if existing or known on the date of this Agreement, would
have been required to be disclosed pursuant to this Agreement or the
Participation Agreement, or that constitutes a breach or prospective breach
of this Agreement or the Participation Agreement by SENTRY, the Major
Stockholders or any of their affiliates.
(j) Accuracy of Representations and Warranties. SENTRY shall not
(i)take or agree or commit to take any action that would make any
representation and warranty of SENTRY hereunder inaccurate in any respect at, or
as of any time prior to, the Closing Date or (ii) omit or agree or commit to
omit to take any action necessary to prevent any such representation or warranty
from being inaccurate in any respect at any such time.
(k) Termination of Agreements. SENTRY shall terminate (and pay any
sums due thereunder), effective immediately prior to the Effective Time, all
agreements listed at the end of this sentence and all agreements, whether listed
or not, among SENTRY and any of its securityholders or optionholders or
employees, or among any SENTRY securityholders or optionholders, providing for
registration rights, rights of first refusal or co-sale, relating to the voting
of SENTRY securities or requiring SENTRY to obtain the consent or approval of
any such securityholders prior to taking or failing to take any action:
<PAGE> 34
(1) Employment Agreement dated November 13, 1998 by and between
SENTRY Technology Group, Inc. and Robert H. Cawly except for Sections 7, 8 and 9
thereof;
(2) Employment Agreement dated November 13, 1996 by and
between SENTRY Technology Group, Inc. and William A. Gannon, Sr. except for
Sections 7, 8 and 9 thereof;
(3) Voting, Stock Restriction and Co-Sale Agreement among
Safeguard Scientifics (Delaware), Inc. ("Safeguard"), SENTRY Technology
Group, Inc., William A. Gannon, Sr., William A. Gannon, Jr., Robert H. Cawly,
Carl Sempier and Kirk K. Reiss dated November 12, 1996, as amended by
Amendment No. 1 dated as of August 6, 1997;
(4) the Shareholder Agreements and the Subscription Agreements
(as defined in Schedule 3.15);
(5) the Safeguard-Cawly-Reiss Agreements (as defined in
Schedule 3.15);
(6) the Safeguard Agreements (as defined in Schedule 3.5);
and
(7) Options to purchase SENTRY Common referenced in subclause
(i) of clause (iii) of Schedule 3.13.
(l) Warrants. SENTRY shall either cause the exercise of, or
terminate all of the SENTRY Warrants (as defined herein) prior to the Closing,
with all rights to purchase SENTRY Common under the SENTRY Warrants or any
registration rights relating to the shares of SENTRY Common issuable upon
exercise of the SENTRY Warrants relinquished in a manner satisfactory to META.
(m) No Solicitation. From and after the date of this Agreement until
the earlier of the Effective Time or termination of this Agreement pursuant to
its terms, SENTRY shall not, and will instruct its directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, initiate, solicit, encourage or participate in
discussions with, provide information to, or approve a transaction with, any
corporation, partnership, person or other entity or group concerning any merger,
purchase or sale of substantial assets, sale of shares of capital stock (or
securities convertible or exchangeable or otherwise evidencing, or any agreement
or instrument evidencing, the right to acquire capital stock) or similar
transaction involving SENTRY (all such transactions being referred to herein as
"Acquisition Proposals"). If any, SENTRY will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. SENTRY will (i) notify META as
promptly as practicable if any inquiry or proposal is made or any information or
access is requested in writing in connection with an Acquisition Proposal or
potential Acquisition Proposal and (ii) as promptly as practicable notify META
of the significant terms and conditions of any such Acquisition Proposal. In
addition, subject to the other provisions of this Section 5.2(m), from and after
the date of this Agreement until the earlier of the Effective Time and
termination of this Agreement pursuant to its terms, SENTRY will not, and will
instruct its directors, officers, employees, representatives, investment
bankers, agents and affiliates not to, directly or indirectly, make or authorize
any public statement, recommendation or solicitation in support of any
Acquisition Proposal made by any person, entity or group (other than META).
<PAGE> 35
(n) Continuing Disclosure. SENTRY shall have the continuing
obligation promptly to advise META with respect to any matter hereafter arising
or discovered that, if existing or known at the date of this Agreement, would
have been required to be set forth or described in a schedule to this Agreement,
or that constitutes a breach or prospective breach of this Agreement by SENTRY.
The delivery of any such notice shall not affect META's or the Company's
remedies hereunder.
5.3 Covenants of META and the Company. META and the Company hereby covenant
and agree with SENTRY as follows:
(a) Preservation of Business Organization. META shall use all
commercially reasonable efforts to cause to preserve without material impairment
the business organization of META and its subsidiaries and their goodwill as to
payors, providers, suppliers, distributors, clients and others having business
relations with META and its subsidiaries.
(b) Carry on in Regular Course. META shall, carry on its business in
the ordinary and usual course, in a manner consistent with its past practices.
Without the prior written consent or approval of SENTRY, META shall not amend
its certificate of incorporation or by-laws.
(c) Consents. META shall use all commercially reasonable efforts to
obtain consents in writing to the transactions contemplated by this Agreement
and/or such amendments, assignments or modifications of such documents or
instruments as may be required in order that the transactions contemplated by
this Agreement shall not result in any default with respect to any law, rule,
regulation, order, decree, license, agreement, contract, commitment or
instrument to which META is a party or by which META or any of its assets is
bound.
(d) Documents and Information to be Furnished. META shall furnish to
SENTRY, promptly after filed with the Commission, its unaudited quarterly
financial reports in the form filed with the Commission on Form 10-Q prescribed
under the Exchange Act and such other reports, statements, documents and other
items META delivers, or is required to deliver, to any of its stockholders.
(e) Notices of Certain Events. META shall promptly notify SENTRY of:
(i) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this
Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced relating to or involving or otherwise affecting META or any of
its subsidiaries that, if pending on the date of this Agreement, would have
been required to have been disclosed pursuant to Article IV or that relate
to the consummation of the transactions contemplated by this Agreement.
<PAGE> 36
ARTICLE VI
CLOSING MATTERS
6.1 The Closing. Subject to the satisfaction or waiver of all conditions
precedent set forth in Article VII, the closing of the Merger (the "Closing")
shall be held at the offices of Testa, Hurwitz & Thibeault, LLP, High Street
Tower, 125 High Street, Boston, Massachusetts 02110, at 11:00 a.m. on October
21, 1998 or as soon as thereafter as practicable (the "Closing Date"). If any
condition in Article VII is not satisfied in any material respect (or is not
duly waived) at the Closing, any party whose obligations are subject to such
condition may extend the period in which the Closing must be consummated (during
which period each other party shall use its respective commercially reasonable
efforts to cause all such conditions to be satisfied in all material respects).
If all conditions are determined to be satisfied in all material respects (or
are duly waived) at the Closing (whether or not delayed), the Closing shall be
consummated by the making of all necessary filings with the Secretary of the
Commonwealth of the Commonwealth of Massachusetts (and any required districts
thereof) under the Massachusetts BCL.
6.2 Documents and Certificates. Each of META, the Company and SENTRY shall
use their respective best efforts, on or prior to the Closing, to execute and
deliver all such instruments, documents or certificates as may be necessary or
advisable, on the advice of counsel, for the consummation at the Closing of the
transactions contemplated by this Agreement or to cause the Effective Time,
subject to consummation at the Closing, to occur as soon as practicable.
ARTICLE VII
CONDITIONS OF CLOSING
7.1 Conditions to Obligations of META, the Company and SENTRY. The
obligations of each of META, the Company and SENTRY under this Agreement to
cause the Merger to be consummated are, at its option, subject to the
satisfaction of the following conditions:
(a) Governmental Approvals. META, the Company and SENTRY shall have
received all necessary approvals of Governmental Authorities of the transactions
contemplated by this Agreement, and each of such approvals shall remain in full
force and effect at the Closing Date. It is understood that none of such
approvals shall be deemed to have been received if any such approval is subject
to satisfaction of or compliance with a Burdensome Condition. "Burdensome
Condition" shall mean the imposition of a material restriction on META's or
SENTRY's ability to operate SENTRY following the Effective Time or requiring
META or SENTRY to dispose of a material amount of the assets of SENTRY or META
or its subsidiaries following the Effective Time. Any of META, the Company or
SENTRY may, but is not obligated to, seek the removal or otherwise
satisfactorily resolve the Burdensome Condition.
(b) Litigation. No action, suit, litigation, proceeding or
investigation shall (i) have been formally instituted and be pending with regard
to the Merger or (ii) be threatened by any Governmental Authority with regard to
the Merger which, if resolved substantially in accordance with plaintiff's
demand, would be reasonably likely to have a Material Adverse Effect on META. On
the Closing Date, there shall not be in force any order or decree restraining or
enjoining consummation of the Merger or placing any limitation upon such
consummation or to invalidate, suspend or require modification of any provision
of this Agreement.
<PAGE> 37
(c) Nasdaq Listing. The shares of META Common to be issued and
exchanged for shares of SENTRY Common in the Merger as Initial Consideration
pursuant to this Agreement will, at the Effective Time, be authorized for
listing on the Nasdaq National Market.
7.2 Conditions Applicable to META and the Company. The obligations of META
and the Company under this Agreement to cause the Merger to be consummated are,
at their option, subject to the satisfaction of the following conditions, in
addition to the conditions contained in Section 7.1:
(a) Agreements and Covenants. SENTRY shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by SENTRY on or prior to the Closing
Date.
(b) Accuracy of Representations and Warranties. The representations
and warranties of SENTRY set forth in Article III shall be true and correct in
all material respects both on the date of this Agreement and as of the Closing
Date with the same force and effect as if such representations and warranties
were made anew at and as of the Closing Date, except: (i) to the extent such
representations and warranties are by their express provisions made as of the
date of this Agreement or another specified date; and (ii) for the effect of any
activities or transactions which may have taken place after the date of this
Agreement which are contemplated by this Agreement.
(c) No Material Adverse Change. Since the date of this Agreement,
there shall have been no material adverse change in the financial condition,
results of operations, business, properties, assets or operations of SENTRY.
(d) Officers' Certificate Concerning this Agreement. SENTRY shall
have furnished to META and the Company a certificate dated the Closing Date,
signed by its chief executive officer and its chief financial officer, to the
effect that the conditions set forth in Sections 7.2(a) through 7.2(c) have been
satisfied.
(e) Opinion of Counsel. META and the Company shall have received from
counsel to SENTRY and counsel for Safeguard and the participants in the
Safeguard Long-Term Incentive Plan an opinion dated the Closing Date
substantially in the form set forth in Exhibit H-1 and Exhibit H-2,
respectively.
(f) Required Consents. The holders of any note, guarantee or other
evidence of indebtedness of SENTRY, the lessors of any material real or personal
property or assets leased by SENTRY, the parties (other than SENTRY) to any
other material contract, commitment or agreement to which SENTRY is a party, and
any other person (other than Governmental Authorities) which owns or has
authority to grant any franchise, license, permit, easement, rights or other
authorization necessary for the business or operations of SENTRY, to the extent
that their consent or approval of the Merger or any other transactions
contemplated by this Agreement is required under the pertinent lease, contract,
commitment or agreement or other document or instrument or under applicable
laws, rules or regulations for the consummation of the transactions contemplated
hereby in the manner herein provided, shall have granted such consent or
approval and no Burdensome Condition shall exist.
(g) Voting. Holders of not less than 70% of the outstanding shares of
SENTRY Common shall have voted for the approval of this Agreement.
<PAGE> 38
(h) Performance of Participation Agreement. All the terms, covenants
and conditions of the Participation Agreement to be complied with and performed
by the Major Stockholders on or before the Closing Date shall have been fully
complied with and performed in all material respects.
(i) Termination of Agreements. All agreements listed in Section
5.2(k) and, whether listed thereon or not, all agreements among SENTRY and any
of its securityholders or optionholders or employees, or among any of the SENTRY
securityholders or optionholders, providing for registration rights, rights of
first refusal, rights of co-sale, an adjustment to the number, or conversion or
exercise price, of any of the shares of capital stock of SENTRY (other than an
adjustment as a result of a subdivision, combination, reorganization or
reclassification of the shares of capital stock of SENTRY generally), relating
to the voting of SENTRY securities or requiring SENTRY to obtain the consent or
approval of any such securityholders prior to taking or failing to take any
action, including without limitation all of the Agreements listed in Section
5.2(k), shall have been terminated in their entirety as provided by Section
5.2(k).
(j) Warrants. All SENTRY Warrants shall be either exercised or
terminated prior to the Closing.
(k) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to META, and META shall
have received copies of all such documents and other evidence as it may
reasonably request to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
(l) Purchaser Representative. SENTRY shall have entered into a
Purchaser Representative Agreement, in form and substance satisfactory to META
and SENTRY, with a purchaser representative who shall certify thereunder that
(i) he is familiar with the definition and qualifications of a "Purchaser
Representative" as set forth in Rule 501(h) of Regulation D promulgated by the
Commission under the Securities Act, (ii) he meets the conditions applicable to
a Purchaser Representative and is qualified to act in such capacity in
connection with the transactions contemplated hereunder, (iii) he is not an
affiliate, director, officer or other employee of META and (iv) he has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the transactions contemplated hereunder.
(m) Tax Certificate. SENTRY shall have delivered to META a clearance
certificate or similar document(s) which may be required by any tax authority to
relieve META of any obligation to withhold Taxes in connection with the
transactions set forth in this Agreement. SENTRY shall have paid any sales, use,
transfer and documentary Taxes and recording and filing fees applicable to the
transactions set forth in this Agreement. SENTRY shall have delivered to META a
properly executed statement satisfying the requirements of Treasury Regulation
Sections 1.897-2 and 1.1445 in a form reasonably acceptable to META.
(n) Intention to Exercise Appraisal Rights. The date on which the
stockholders of SENTRY shall have voted on this Agreement pursuant to Section 78
of the Massachusetts BCL shall have passed and holders of not more than 5% of
the outstanding shares of SENTRY Common shall have (i) not voted in favor of the
approval of such Agreement and (ii) filed with SENTRY a written objection to the
<PAGE> 39
approval of this Agreement prior to such vote, which objection states an
intention to demand payment for shares if approval is given and complies with
Section 86 of the Massachusetts BCL.
(o) Balance Sheet. On the Closing Date immediately prior to the
Effective Time, SENTRY's total assets (net of goodwill) shall be greater than or
equal to its total liabilities, as certified by a certificate of the Chief
Financial Officer of SENTRY, which certificate shall be accompanied by an
unaudited balance sheet as of such date prepared by such officer in accordance
with past practice and generally accepted accounting principles applied on a
consistent basis (the "Closing Balance Sheet").
(p) Employees. None of the persons set forth on Exhibit G shall have:
(i) voluntarily terminated their employment with SENTRY on or prior to the
Effective Time or (ii) refused to accept employment with, or given notice that
they do not intend to continue employment with, the Surviving Corporation.
(q) Consents, etc. All required consents, waivers or amendments
pursuant to the Amended and Restated Revolving Credit and Term Loan Agreement
dated as of May 15, 1997, as amended as of July 1, 1997, September 11, 1997 and
May 28, 1998, by and between The SENTRY Group, Inc. and State Street Bank and
Trust Company shall have been obtained.
7.3 Conditions Applicable to SENTRY. The obligations of SENTRY under this
Agreement to cause the Merger to be consummated are, at its option, subject to
the satisfaction of the following conditions, in addition to the conditions
contained in Section 7.1:
(a) Agreements and Covenants. META and the Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement or the Participation Agreement to be performed or
complied with by them on or prior to the Closing Date.
(b) Accuracy of Representations and Warranties. The representations
and warranties of META and the Company set forth in Article IV shall have been
true and correct in all material respects on the date of this Agreement and as
of the Closing Date with the same force and effect as if such representations
and warranties were made anew at and as of the Closing Date, except: (i) to the
extent such representations and warranties are by their express provisions made
as of the date of this Agreement or another specified date; and (ii) for the
effect of any activities or transactions which may have taken place after the
date of this Agreement which are contemplated by this Agreement.
(c) Officers' Certificate Concerning This Agreement. META shall have
furnished to SENTRY a certificate dated the Closing Date, signed by the chief
financial officer of META, to the effect that, the conditions set forth in
Sections 7.3(a) through 7.3(b) hereof have been satisfied.
(d) Opinion of Counsel. SENTRY shall have received from counsel to
META an opinion or opinions dated the Closing Date substantially in the form set
forth on Exhibit I.
(e) Required Consents. META shall have received all consents or
approvals of the Merger or any other transactions contemplated by this Agreement
required under any material lease, contract, commitment, note, guaranty or other
evidence of indebtedness of META or any of its subsidiaries, or any lease of any
material real property of META and its subsidiaries, or under applicable law for
the consummation of the transactions contemplated hereby.
<PAGE> 40
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of the Merger by
the stockholders of the Company and SENTRY:
(a) by mutual written consent duly authorized by the Boards of
Directors of META and SENTRY;
(b) by either SENTRY or META, if the Merger shall not have been
consummated by November 15, 1998; provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(c) by either SENTRY or META, if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (an "Order"), in any
case having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree or ruling is final and
nonappealable;
(d) by either SENTRY or META, if the required approvals of the
stockholders of SENTRY contemplated by this Agreement shall not have been
obtained by November 15, 1998 or by reason of the failure to obtain the required
vote upon a vote taken at a meeting of stockholders duly convened therefor or at
any adjournment thereof;
(e) by META, if SENTRY shall have accepted an Acquisition Proposal
or if the SENTRY Board of Directors recommends an Acquisition Proposal to the
stockholders of SENTRY;
(f) by META, if the Board of Directors of SENTRY shall have
withheld, withdrawn or modified in a manner adverse to META its approval of this
Agreement;
(g) (1) by META, if there shall have occurred any material adverse
change in the financial condition, results of operations, business, properties,
assets or operations of SENTRY since the date of this Agreement, it being
understood that conditions affecting the information technology consulting
industry as a whole or the U.S. economy as a whole shall not be deemed by itself
to constitute such a material adverse change or,
(2) by SENTRY, if there shall have occurred any material
adverse change in the financial condition, results of operations, business,
properties, assets or operations of META since the date of this Agreement, it
being understood that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute such a material
adverse change: (i) a change in the market price or trading volume of META
Common, (ii) a failure by META to meet the earnings predictions of equity
analysts as reflected in the First Call consensus estimate, or any other revenue
or earnings predictions or expectations, for any period ending (or for which
<PAGE> 41
earnings are released) on or after the date of this Agreement and prior to the
Closing Date or, (iii) conditions affecting the information technology services
and consulting industry as a whole or the U.S. economy as a whole.
(h) by META, upon breach of any representation, warranty, covenant
or agreement on the part of SENTRY set forth in this Agreement, or if any
representation or warranty of SENTRY shall have become untrue, in either case
such that the conditions set forth in Section 7.2(a) or Section 7.2(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in
SENTRY's representations and warranties or breach by SENTRY is curable by SENTRY
through the exercise of its commercially reasonable efforts within five (5) days
of the time such representation or warranty shall have become untrue or such
breach, then META may not terminate this Agreement under Section 8.1(h) during
such five-day period provided SENTRY continues to exercise such commercially
reasonable efforts;
(i) by SENTRY, upon a breach of any representation, warranty,
covenant or agreement on the part of META set forth in this Agreement, or if any
representation or warranty of META shall have become untrue, in either case such
that the conditions set forth in Section 7.3(a) or Section 7.3(b) would not be
satisfied as of the time of such breach or as of the time such representation or
warranty shall have become untrue, provided, that if such inaccuracy in META's
representations and warranties or breach by META is curable by META through the
exercise of its commercially reasonable efforts within five (5) days of the time
such representation or warranty shall have become untrue or such breach, then
SENTRY may not terminate this Agreement under this Section 8.1(i) during such
five-day period provided META continues to exercise such commercially reasonable
efforts.
8.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 8.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 8.2, Section 8.3 and Article X (Miscellaneous), each of which
shall survive the termination of this Agreement, and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms. In the
event this Agreement is terminated, the agreements of SENTRY and META contained
in Sections 5.1(c), 5.1(d), Article IX and 10.1 shall survive such termination.
8.3 Procedure Upon Termination. In the event of the termination of this
Agreement, the Board or Boards of Directors so terminating may direct its or
their officers not to file the articles of merger in the office of the Secretary
of the Commonwealth of the Commonwealth of Massachusetts, notwithstanding
favorable action by the stockholders of the Company and SENTRY.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.1 Survival. The covenants, agreements, representations and warranties of
SENTRY contained in this Agreement shall survive the Closing until the earlier
of (i) the Contingent Closing Date (assuming no objections to the Contingent
<PAGE> 42
Consideration are filed pursuant to the terms hereunder), (ii) if objections are
so filed, the second anniversary of the date hereof and (iii) if no Contingent
Consideration is payable hereunder, the date on which Contingent Consideration
would have been paid on a Contingent Closing Date if it were being paid pursuant
to the terms hereof (the "Implied Contingent Closing Date"); provided, however,
that the covenants, agreements, representations and warranties set forth in
Section 3.16 shall survive until the applicable statutes of limitations with
respect to Taxes shall have expired; provided, further, that any such
termination pursuant to this sentence shall not terminate or limit in any manner
whatsoever any liabilities SENTRY has or may have for knowing and intentional
misrepresentations, breaches, nonfulfillments and violations. Notwithstanding
the preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under Section 9.2 shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right to
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time. The covenants, agreements, representations and
warranties of SENTRY and the rights and remedies that may be exercised by any
Indemnitee shall not be limited, diminished or otherwise affected by or as a
result of any information that may have been provided, any investigation or
examination that may have or be made by, or any knowledge of, any Indemnitee or
any other party on the behalf of any Indemnitee.
The agreement of the Stockholder Representative set forth in the last
sentence of Section 2.3(e)(viii)(A) shall survive the Closing.
The covenants, agreements, representations and warranties of META and the
Company contained in this Agreement shall not survive the Closing; provided,
however, that the covenants and agreements set forth in Sections 1.8 and 2.3
shall survive the Closing until the Contingent Closing Date or, if there is no
Contingent Closing Date, the Implied Contingent Closing Date.
9.2 Indemnification. Except as set forth in Section 9.4, by their approval
of this Agreement, the stockholders of SENTRY, jointly and severally (except
with respect to Sections 9.2(i) and 9.2(ii) as they apply to Major Stockholders
with respect to the Participation Agreement or Section 9.2(iii), in which cases
the indemnification obligations set forth in this Section 9.2 shall be several
but not joint), agree to indemnify, defend, protect, and hold harmless each of
META and its officers, directors, shareholders and employees and, effective at
and as of the Effective Time, without duplication, the Surviving Corporation and
its officers, directors, shareholders and employees and each of their respective
subsidiaries and affiliates (each in its capacity as an indemnified party, an
"Indemnitee") at all times from and after the date of this Agreement from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, losses, costs and expenses (including specifically, but without
limitation, the reasonable fees and expenses of one counsel (subject to Section
9.3), costs and expenses in connection with any action or proceeding or in
connection with any investigation, whether or not resulting in any liability)
(collectively "Damages") incurred by such Indemnitee as a result of, arising out
of or incident to (i) any inaccuracy or breach (or alleged inaccuracy or breach)
of any representation or warranty, covenant or agreement of SENTRY or any of the
Major Stockholders set forth herein or, with respect to the Major Stockholders,
in the Participation Agreement, or in any certificate or other document
<PAGE> 43
delivered in connection herewith or therewith (as such representation or
warranty, covenant or agreement would read if all qualifications as to knowledge
and materiality and Material Adverse Effect on SENTRY were deleted from it and,
with respect to the representations and warranties qualified by Schedule 3.14,
as though such representations and warranties were not so qualified, such that
any matters set forth in such Schedule are subject to indemnification hereunder)
with respect to which a claim for indemnification is brought by an Indemnitee
within the applicable survival period described in Section 9.1, (ii) any breach
or nonfulfillment by SENTRY or any of the Major Stockholders, any failure to
perform or any noncompliance by SENTRY or any of the Major Stockholders with,
any covenant, agreement, or obligation contained herein, with respect to the
Major Stockholders, in the Participation Agreement, or in any certificate or
other document delivered in connection herewith except to the extent waived by
META, (iii) any claim by a stockholder or former stockholder of SENTRY or any
other person, firm, corporation or entity, seeking to assert, or based upon: (A)
ownership or rights of ownership to any shares of capital stock of SENTRY; (B)
any rights of the stockholder (other than the right to receive the Merger
Consideration pursuant to this Agreement or appraisal rights under the
applicable provisions of the Massachusetts BCL), including any option,
preemptive rights, or rights to notice or to vote; (C) any rights under the
articles of organization or bylaws of SENTRY; or (D) any claim that his, her or
its shares were wrongfully repurchased by SENTRY, regardless of whether an
action, suit or preceding can or has been made against SENTRY, (iv) any suits,
actions, proceedings or claims brought by any former employee of SENTRY which
suits, actions, proceedings or claims arise out of or relate to such former
employee's employment (or severance from or termination of employment) with
SENTRY or any agreements, oral or written, including, without limitation,
severance and release agreements, between SENTRY and such former employee, (v)
the sale of SENTRY's magazine publishing operations and certain lists related
thereto to Wiesner and any and all other transactions contemplated by the Book
Purchase Agreement, (vi) SENTRY options, warrants, exchange rights, subscription
rights, rights to convert or exchange securities, call or put rights, or
commitments or agreements with respect to any of the foregoing, (vii) any
inaccuracy or misstatement or omission in the Closing Balance Sheet, or (viii)
subject to compliance with the procedures set forth in Section 9.3, the
settlement of any alleged inaccuracy, breach, failure to perform or
noncompliance of the type referred to in clause (i) and (ii) of this Section
9.2.
By their approval of this Agreement, the stockholders of SENTRY agree that
the Escrow Account shall be available to satisfy any claims brought by an
Indemnitee under this Article IX.
9.3 Third Person Claims. Promptly after an Indemnitee has received notice
of or has knowledge of any actual or threatened claim or potential claim by a
person not a party to this Agreement ("Third Person") or the commencement of any
action or proceeding by a Third Person, the Indemnitee shall, as a condition
precedent to a claim with respect thereto being made against the stockholders of
SENTRY, give the Stockholders' Representative written notice of any actual or
threatened claim or potential claim or the commencement of such action or
proceeding (a "Notice of Claim"); provided, however, that the failure to give
such Notice of Claim will not effect the Indemnitees' right to indemnification
hereunder with respect to such claim, action or proceeding, except to the extent
that the Stockholders' Representative has, or the stockholders have, been
actually and materially prejudiced as a result of such failure. If the
Stockholder Representative notifies the Indemnitee within 30 days from the
receipt of the foregoing Notice of Claim that he wishes to defend against the
claim by the Third Person and if the estimated amount of the claim, together
with all other claims made against the Escrow Account that have not been
settled, is less than the remaining balance of the Escrow Account, then the
Stockholder Representative shall have the right to assume and control the
defense of the claim by appropriate proceedings with counsel reasonably
acceptable to Indemnitee, and the Stockholder Representative shall be entitled
to reimbursement out of the Escrow Account for such defense; provided, however,
that in no event shall any such reimbursement exceed 20% of the value of the
Escrow Account. The Indemnitee may participate in the defense, at its sole
expense of any such claim for which the Stockholder Representative shall have
assumed the defense pursuant to the preceding sentence, provided that counsel
for the Stockholder Representative shall act as lead counsel in all matters
pertaining to the defense or settlement of such claims, suit or proceedings;
provided, however, that Indemnitee shall have the exclusive right to control the
<PAGE> 44
defense of any claim or proceeding that in Indemnitee's reasonable judgment
could have a material and adverse effect on Indemnitee's business apart from the
payment of money damages, except that Indemnitee shall not make any settlement
with respect to any Third Person claim, suit or proceeding without the prior
consent of the Stockholder Representative, which such consent shall not be
unreasonably withheld. The Indemnitee shall be entitled to indemnification for
the reasonable fees and expenses of its counsel for any period during which the
Stockholder Representative has not assumed the defense of any claim. Each
Indemnitee shall have the right to employ separate counsel and to participate in
the defense of any action in which the Stockholder Representative has assumed
the defense, but the fees and expenses of such counsel subsequent to any
assumption of the defense by the Stockholder Representative shall not be at the
expense of the Stockholder Representative except in the event (i) the employment
of such counsel has been specifically authorized in writing by the Stockholder
Representative, (ii) the defendants in any such action include both the
Indemnitee and any SENTRY Stockholder and the interests of the Indemnitee
reasonably may be deemed to conflict with the interests of such SENTRY
Stockholder or (iii) the Stockholder Representative shall have failed to assume
the defense within a reasonable period of time after notice of commencement of
the action. The Stockholder Representative shall not make any settlement with
respect to any claim, suit or proceeding without the prior consent of META,
which can be withheld for any or no reason.
9.4 Limitations on Indemnification. An Indemnitee shall be entitled to
indemnification under Section 9.2 for Damages relating to breaches of
representations and warranties set forth herein or in the Participation
Agreement or in any certificate or document delivered in connection herewith or
therewith all as provided in Section 9.2(i), only with respect to amounts by
which Damages incurred exceeds $100,000. The limitation provided in the first
sentence of this Section 9.4 on an Indemnitee's right to indemnification under
this Article IX shall not apply to Damages for any matters set forth in Sections
9.2(ii)-(viii). An Indemnitee shall not be entitled to indemnification under
this Article IX for a claim to the extent insurance proceeds are received in
respect of such claim pursuant to a valid insurance policy (provided such policy
is not voided or nullified in any respect by reason of this sentence or the
limits on indemnification contained herein).
9.5 Method of Payment; Nonexclusivity. Any claims for indemnification
pursuant to this Article IX shall be satisfied first from the Escrow Account
prior to satisfying claims for indemnification directly from one or more of
SENTRY's stockholders. Other than with respect to claims made pursuant to
Sections 9.2(v), 9.2(vi) and 9.2(vii), and except for claims based on knowing
and intentional misrepresentations, breaches, nonfulfillments and violations or
based on common law fraud, no SENTRY stockholder shall be liable for an amount
in excess of the value (such consideration to be valued at the time of such
receipt) of the shares of META Common, the Warrants and Contingent
Consideration, if any, actually received by such stockholder pursuant to this
Agreement; provided, however, that if a stockholder receives additional
consideration hereunder or under the Escrow Agreement, such consideration shall
become available to satisfy indemnification claims which, but for the first part
of this sentence, would have been satisfied; provided, further, that, for the
sake of clarity, any Escrow Shares held by the Escrow Agent for the account of a
shareholder shall be deemed "actually received" for the purposes of this
sentence. Any availability of the Escrow Account for satisfaction of
indemnification claims hereunder shall in no way limit the obligations of the
stockholders of SENTRY to indemnify the Indemnitees hereunder in accordance with
this Article IX. To the extent that any Indemnitee makes a claim against any
Escrow Shares in the Escrow Account pursuant to the Escrow Agreement, and such
claim is paid in shares of META Common, then for purposes of such payment, the
shares of META Common shall be valued at the Final META Stock Price. If the
Escrow Shares in the Escrow Account are to be valued for any other reason
hereunder, such shares shall also be valued at the Final META Stock Price.
9.6 Directors and Officers Indemnification. The Articles of Organization
and By-laws of the Surviving Corporation will contain the provisions with
respect to indemnification and elimination of liability for monetary damages set
forth in the Articles of Organization and By-laws of SENTRY immediately prior to
<PAGE> 45
the Effective Time, which provisions will not be amended, repealed or otherwise
modified for a period of two years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who, at the
Effective Time, were directors, officers, employees or agents of SENTRY, unless
such modification is required by law. Notwithstanding Sections 1.4 and 1.5,
after the Effective Time the Surviving Corporation will, to the fullest extent
permitted under applicable law or under the Surviving Corporation's Articles of
Organization or By-laws, indemnify, defend and hold harmless each present and
former officer or director of SENTRY (collectively, the "Indemnified Parties")
against costs or expenses (including reasonable attorneys' fees and expenses),
judgments, losses, claims, action, suit, proceeding (whether civil, criminal or
administrative), to the extent arising out of or pertaining to any action or
omission in his or her capacity as a director or officer of SENTRY arising out
of or pertaining to the transactions contemplated by this Agreement. This
Section 9.6 will survive the consummation of the Merger at the Effective Time,
is intended to benefit SENTRY, the Surviving Corporation and the Indemnified
Parties, and will be binding on all successors and assigns of the Surviving
Corporation.
9.7 No Contribution. The stockholders of SENTRY acknowledge and agree that
they shall not have and shall not exercise or assert any right of contribution,
indemnification, subrogation or other remedy or right against the Surviving
Corporation in connection with any indemnification obligation or other liability
to which they may become subject under or in connection with this Agreement, or
any certificate or other document delivered in connection herewith.
ARTICLE X
MISCELLANEOUS
10.1 Other Remedies:Specific Performance. Any and all remedies herein
expressly conferred upon a party will be deemed cumulative and not exclusive of
any other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
10.2 Expenses. All fees and expenses (including all accounting, legal and
investment banking fees and expenses and all other expenses) incurred by META
and the Company in connection with this Agreement and the transactions
contemplated hereby will be borne by META. All fees and expenses (including
without limitation all accounting, legal and investment banking fees and
expenses) incurred by SENTRY in connection with this Agreement and the
transactions contemplated hereby will be borne by SENTRY. All fees and expenses
(including all accounting, legal and investment banking fees and expenses)
incurred by the stockholders of SENTRY in connection with this Agreement and the
transactions contemplated hereby will be borne by such stockholders.
10.3 Further Assurances. If at any time after the Effective Time, META or
the Company shall consider it advisable that any further conveyance, agreements,
documents, instruments and assurances of law or any other things are necessary
or desirable to vest, perfect, confirm or record in the Surviving Corporation
the title to any property, rights, privileges, powers and franchises of SENTRY,
<PAGE> 46
the officers of SENTRY last in office and such other persons, if any, as the
Board of Directors of SENTRY last in office may authorize shall execute and
deliver, upon META's or the Company's request, any and all proper conveyances,
agreements, documents, instruments and assurances of law, and do all things
reasonably necessary or proper to vest, perfect, confirm or record title to such
property, rights, privileges, powers and franchises in the Surviving
Corporation, and otherwise to carry out the provisions of this Agreement. By
their approval of this Agreement, the stockholders of SENTRY agree to make
themselves available and to otherwise assist META and the Surviving Corporation
after the Effective Time in carrying out the terms and intent of this Agreement.
10.4 Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be enforceable by
the respective successors and permitted assigns of the parties hereto. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give any person, firm or corporation other than the parties
hereto, their permitted successors or assigns, and their respective stockholders
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
10.5 Entire Agreement. This Agreement , together with the Schedules and
Exhibits hereto, supersede any other agreement, whether written or oral, that
may have been made or entered into by META and SENTRY (or by any officer or
officers of such parties) relating to the matters contemplated hereby or
thereby. This Agreement, the Participation Agreement, the Registration Rights
Agreement and the Escrow Agreement, together with the Schedules and Exhibits
hereto and thereto, constitute the entire agreement by the parties, and there
are no agreements or commitments except as set forth herein and therein.
10.6 Amendment or Modification. At any time before or after the adoption of
this Agreement by the stockholders of SENTRY, this Agreement may be amended or
supplemented by additional agreements, articles or certificates, as may be
mutually determined by the parties hereto to be necessary, desirable or
expedient to further the purposes of this Agreement, or to clarify the intention
of the parties hereto, or to add to or to modify the covenants, terms or
conditions hereof or to effect or facilitate any governmental approval or
acceptance of the Merger or of this Agreement or to effect or facilitate the
filing or recording of this Agreement or the consummation of any of the
transactions contemplated hereby.
10.7 Waiver. Any party to this Agreement may, by written notice to the
other parties to this Agreement, (a) extend the time for the performance of any
of the obligations or other actions of the other parties under this Agreement;
(b) waive any inaccuracies in the representations or warranties of the other
parties contained in this Agreement or in any document delivered pursuant to
this Agreement; (c) waive compliance with any of the conditions or covenants of
the other parties contained in this Agreement; or (d) waive or modify
performance of any of the obligations of the other parties under this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including without limitation any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, conditions or
agreements contained in this Agreement. The failure of any party hereto to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every such provision. No waiver of any breach of
or non-compliance with this Agreement shall be held to be a waiver of any other
or subsequent breach or non-compliance.
10.8 Assignability. This Agreement shall not be assignable by SENTRY, on
the one hand, or META or the Company, on the other hand, without the prior
<PAGE> 47
written consent of META, on the one hand, or SENTRY, on the other hand, as the
case may be.
10.9 Certain Definitions: For purposes of this Agreement, the following
terms shall have the meanings set forth below:
"affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the person
specified;
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
"control" (including, with its correlative meanings, "controlled by" and
"under common control with") shall mean possession, directly or indirectly, of
power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise);
"Environmental Laws" means any and all laws or regulations, judicial
decisions, orders or permits relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic, radioactive or hazardous substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products, chemicals
or industrial, toxic, radioactive or hazardous substances medical wastes or
other wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" means all liabilities arising in connection
with or in any way relating to the assets of SENTRY or SENTRY's use or ownership
thereof, whether vested or unvested, contingent or fixed, actual or potential,
which (i) arise under or relate to Environmental Laws or arise in connection
with or relate to any matter disclosed or required to be disclosed in Schedule
3.22 and (ii) arise from or relate in any way to actions occurring or conditions
existing before the Closing Date.
"Final META Stock Price" shall mean the average closing price of META
Common (rounded to the nearest penny) for the five (5) trading days ending on
and including the second-to-last trading day which immediately precedes the date
on which a payment is made pursuant to Section 9.5 or a valuation is made of
Escrow Shares for any other reason hereunder, as the case may be, in each case
calculated on the basis of the last reported sales price of META Common on the
Nasdaq National Market.
"Hazardous Substance" means petroleum products or hazardous substances as
defined in Section 101 of CERCLA.
"META Closing Price" shall mean the average closing price of META Common
(rounded to the nearest penny) for the twenty (20) trading days ending on and
including the second-to-last trading day which immediately precedes the Closing
Date, calculated on the basis of the last reported sales price of META Common on
the Nasdaq National Market.
<PAGE> 48
"META Contingent Closing Price" shall mean the average closing price of
META Common (rounded to the nearest penny) for the twenty (20) trading days
ending on and including the second-to-last trading day which immediately
precedes the Contingent Closing Date, calculated on the basis of the last
reported sales price of META Common on the Nasdaq National Market.
"Options Exchange Ratio" shall mean that number obtained by computing (to
four decimal places) the following formula:
A / E
----------
B + (C-D)
, where:
A = *
B = the number of issued and outstanding shares of SENTRY Common
immediately prior to the Effective Time
C = 722,582
D = the number of shares of SENTRY Common underlying options to purchase
SENTRY Common listed on Schedule 10.9, which options are subsequently
terminated for any reason prior to the Effective Time
E = the META Closing Price
"person" shall mean any individual, corporation, partnership, limited
liability company, trust, joint venture, unincorporated association,
Governmental Authority or other entity; and
"Release" has the meaning specified in 42 U.S.C. ss. 9601(22).
"SENTRY Stock Option Plans" shall mean the Amended and Restated 1996 Equity
Compensation Plan.
"SENTRY Warrants" shall mean the outstanding SENTRY Common Purchase Warrant
to purchase an aggregate of 103,820 shares of SENTRY Common with a stated
exercise price of $3.615 and issued on November 12, 1996 to Safeguard
Scientifics (Delaware), Inc.
"subsidiary" of any person shall mean a corporation, company or other
entity (i) more than 50% of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority)
are, or (ii) which does not have outstanding shares or securities (as may be the
case in a partnership, limited liability company, joint venture or
unincorporated association), but more than 50% of whose ownership interest
representing the right to make decisions for such other entity is, now or
hereafter owned or controlled, directly or indirectly, by such person.
"Surviving Corporation Auditors" shall mean a nationally recognized
independent auditing firm chosen by META, which firm may be META's auditors.
"Surviving Corporation Operating Income" shall be prepared in accordance
with the principles set forth in Schedule 2.3(e) and shall mean the Surviving
Corporation Revenues less operating expenses of the Surviving Corporation for
the twelve month period ending December 31, 1999 determined in accordance with
generally accepted accounting principles applied on a consistent basis and
consistent with the accounting principles on the basis of which SENTRY's audited
financial statements for the twelve month period ended December 31, 1997 were
prepared, including, but not limited to:
<PAGE> 49
(v) cost of services and fulfillment,
(w) selling and marketing,
(x) general and administrative, and
(y) depreciation and amortization (including, without
limitation, amortization of goodwill associated with the
Initial Consideration).
"Surviving Corporation Operating Margin" shall mean the percentage computed
by multiplying 100 by the quotient obtained by dividing the Surviving
Corporation Revenues into the Surviving Corporation Operating
Income.
"Surviving Corporation Revenues" shall mean the total revenues of the
Surviving Corporation for the twelve month period ending December 31, 1999
determined in accordance with generally accepted accounting principles applied
on a consistent basis and consistent with the accounting principles on the basis
of which SENTRY's audited financial statements for the twelve month period ended
December 31, 1997 were prepared, and appropriately adjusted to eliminate
intercompany accounts and Book Escrow Payments, if any, and the other principles
set forth in Schedule 2.3(e).
10.10 Headings and Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein," "hereof" and
"hereinafter" refer to this Agreement as a whole and not to the particular
sentence or paragraph where they appear, unless the context otherwise requires.
Whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without limitation."
The phrase "made available" in this Agreement shall mean that the information
referred to has been made available if requested by the party to whom such
information is to be made available. Unless the context otherwise requires, (i)
terms used in the plural include the singular, and vice versa, and (ii) words in
the masculine gender include the feminine, and vice versa.
10.11 Notices. All notices and other communications under this Agreement
shall be in writing and shall be delivered by hand or overnight courier service,
mailed or sent by telex, graphic scanning or other telegraphic communications
equipment of the sending party, as follows:
If to META or the Company:
META Group Inc.
208 Harbor Drive
Stamford, CT 06912-0061
Attention: Bernard F. Denoyer, Chief Financial Officer
with a copies to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, Massachusetts 02110
Attention: Mark J. Macenka, Esq.
<PAGE> 50
If to SENTRY:
The Sentry Group, Inc.
One Research Drive, Suite 400B
Westborough, MA 01581
Attention: Allan Shriber, Chief Financial Officer
with a copy to:
Robert DeN. Cope, Esq.
44 Elm Street, Suite 503
Worcester, Massachusetts 01609-2523
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telex, graphic scanning or other
telegraphic communications equipment of the sender, or on the date five business
days after dispatch by certified or registered mail if mailed, in each case
delivered, sent or mailed (properly addressed) to such party as provided in this
Section 10.11 or in accordance with the latest unrevised direction from such
party given in accordance with this Section 10.11.
10.12 Law Governing. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of conflicts of law thereof.
10.13 Invalidity of Provisions. Each of the provisions contained in this
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof. The parties agree to replace such invalid or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such invalid or unenforceable provision.
10.14 Counterparts; Facsimile Signatures. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one and the same
instrument. For the purposes of executing this Agreement, (a) a document signed
and transmitted by facsimile machine or telecopier shall be treated as an
original document; (b) the signature of any party on such document shall be
considered as an original signature; (c) the document transmitted (or the
document of which the page containing the signature or signatures of one of more
parties is transmitted) shall have the same effect as a counterpart thereof
containing original signatures; and (d) at the request of a party, each party
who executed a document and transmitted such document by facsimile machine or
telecopier, shall provide such original document to the other party. No party
may raise as a defense to the enforcement of this Agreement or any other
document required to be delivered in accordance with its terms, including any
amendment thereof, that a facsimile machine or telecopier was used to transmit a
signature of that party or another party on the Agreement, other document, or
amendment.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
<PAGE> 51
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties on the date first above written.
Attest: META GROUP, INC.
/S/ Bernard F. Denoyer
- --------------------- By: /s/ Dale Kutnick
Name: Bernard F. Denoyer -----------------------------
Title: CFO, VP-Finance Name: Dale Kutnick
Title: President
[seal]
By: /s/ Bernard F. Denoyer
--------------------------
Name: Bernard F. Denoyer
Title: Treasurer
Attest:
MG ACQUISITION CORPORATION
/s/ Bernard F. Denoyer
- ----------------------
Name: Bernard F. Denoyer By: /s/Dale Kutnick
Title:CFO, VP-Finance, ---------------------------
Secretary & Treasurer Name: Dale Kutnick
Title: President
[seal] By: /s/ Bernard F. Denoyer
---------------------------
Name: Bernard F. Denoyer
Title: Vice President
Attest:
THE SENTRY GROUP, INC.
/s/ Robert DeN. Cope
- ----------------------------- By: /s/ Robert H. Cawly
Name: Robert DeN. Cope ----------------------------
Title: Clerk Name: Robert H.Cawly
Title: President and CEO
[seal]
By: /s/ Allan N. Shriber
-----------------------------
Name: Allan N. Shriber
Title: Treasurer
<PAGE>
In accordance with Item 601 (b)(2) of Regulation S-X, the Schedules to
this Agreement have not been filed. The omitted schedules principally contain
disclosure information with respect to Sentry which supplements Sentry's
representations and warranties and consist of various corporate matters,
financial matters, liabilities, properties, material contracts, employee
matters, and other matters. The registrant hereby agrees to furnish
supplementally a copy of any omitted schedule to the Commission upon request.
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 (the "Amendment") to Agreement and Plan of Merger
by and among META Group, Inc. ("META"), MG Acquisition Corporation
("Acquisition Sub") and The Sentry Group, Inc. ("SENTRY") dated as of
September 23, 1998 (the "Agreement"):
WITNESSETH:
WHEREAS, each of the parties hereto is a party to the Agreement; and
WHEREAS, each of META, Acquisition Sub and SENTRY desires to amend the
Agreement as set forth below to permit the Closing Date to be October 20, 1998
and to provide for an additional Currently Exercisable Warrant to purchase one
share of META Common for each Former SENTRY Holder;
NOW, THEREFORE, in consideration of these premises and the mutual
agreements contained in this Amendment, in accordance with Section 10.6 of the
Agreement each of META, Acquisition Sub and SENTRY hereby agrees as follows:
ARTICLE I
AMENDMENTS TO AGREEMENT
1.1 Amendment to Section 6.1 of the Agreement. Each of the parties hereto
hereby agrees to amend Section 6.1 of the Agreement by substituting "October 20,
1998" in the first sentence of Section 6.1 in lieu of "October 21, 1998."
1.2 Amendment regarding Additional Currently Exercisable Warrant.
Notwithstanding Section 2.3(a)(2)(A) and Section 2.5 of the Agreement, META
hereby agrees to aggregate all fractional Currently Exercisable Warrants which
result from the calculation of Currently Exercisable Warrants to be issued as
Initial Consideration in accordance with Section 2.3(a)(2)(A) of the Agreement,
and in exchange for such resultant fractional Currently Exercisable Warrants,
META hereby agrees to increase the number of Currently Exercisable Warrants to
be issued to each Former SENTRY Holder pursuant to Section 2.3(a)(2)(A) of the
Agreement by one Currently Exercisable Warrant for each such Former Sentry
Holder.
<PAGE>
ARTICLE II
MISCELLANEOUS
2.1 Ratification/Confirmation of Agreement. Except as herein expressly
amended, the Agreement is ratified and confirmed in all respects and shall
remain in full force and effect in accordance with its terms.
2.2 Definitions. Capitalized terms used herein without definition shall
have the respective meanings ascribed to such terms in the Agreement.
2.3 Assignment. Neither this Amendment nor any of the rights, interests or
obligations under this Amendment shall be assigned by any of the parties without
the prior written consent of the other parties.
2.4 Headings and Captions. The headings and captions in this Amendment are
for convenience and reference purposes only and shall not be considered a part
of or affect the construction or interpretation of any provision of this
Amendment.
2.5 Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
2.6 Successors and Assigns. This Amendment shall be binding upon, inure to
the benefit of and may be enforced by, each of the parties to this Amendment and
their successors and assigns.
2.7 Governing Law. This Amendment shall be governed by and construed,
interpreted, and enforced in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of law
thereof.
2.8 Counterparts; Facsimile Signatures. This Amendment may be executed
simultaneously in one or more counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one and the same
instrument. For the purposes of executing this Amendment, (a) a document signed
and transmitted by facsimile machine or telecopier shall be treated as an
original document; (b) the signature of any party on such document shall be
considered as an original signature; (c) the document transmitted (or the
document of which the page containing the signature or signatures of one of more
parties is transmitted) shall have the same effect as a counterpart thereof
containing original signatures; and (d) at the request of a party, each party
who executed a document and transmitted such document by facsimile machine or
telecopier, shall provide such original document to the other party. No party
may raise as a defense to the enforcement of this Amendment, that a facsimile
machine or telecopier was used to transmit a signature of that party or another
party on the Amendment.
<PAGE>
IN WITNESS WHEREOF, each of META, Acquisition Sub and Sentry have caused
this Amendment to be duly executed and delivered as of October 20, 1998.
META GROUP, INC.
By: /s/Bernard F. Denoyer
-----------------------------
Name: Bernard F. Denoyer
Title:CFO, SVP-Finance, Secretary and Treasurer
MG ACQUISITION CORPORATION
By: /s/Bernard F. Denoyer
------------------------------
Name: Bernard F. Denoyer
Title:Vice President
THE SENTRY GROUP, INC.
By: /s/Allan Shriber
------------------------------
Name: Allan Shriber
Title:Treasurer
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement dated as of October 20, 1998 (the
"Agreement") by and among META Group, Inc., a Delaware corporation ("META"), and
the stockholders of SENTRY (as defined below) listed on the signature pages
hereto (collectively, the "Stockholders"):
WITNESSETH:
WHEREAS, META has entered into an Agreement and Plan of Merger (the
"Merger Agreement") dated as of the date hereof with MG Acquisition Corporation,
a Massachusetts corporation (the "Merger Sub"), and The Sentry Group, Inc., a
Massachusetts corporation ("SENTRY"), pursuant to which the Merger Sub will be
merged with and into SENTRY (the "Merger");
WHEREAS, in the Merger, the Stockholders SENTRY will receive, among other
things, shares of Common Stock, par value $.01 per share (the "Common Stock"),
of META in exchange for shares of capital stock of SENTRY now owned by such
stockholders; and
WHEREAS, the Stockholders desire to have, and META is willing to grant to
the Stockholders, certain rights to have shares of Common Stock issued to the
Stockholders in the Merger registered for resale to the public subject to the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of these premises and the mutual
agreements, provisions and covenants contained in this Agreement and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, META and the Stockholders agree as follows:
ARTICLE I
DEFINITIONS AND EFFECTIVENESS
1.1 Common Definitions. Unless otherwise defined in this Agreement,
capitalized terms used in this Agreement that are defined in the Merger
Agreement shall have the meanings assigned to them in the Merger Agreement, and
the rules of construction and documentary conventions set forth in the Merger
Agreement shall apply to this Agreement.
1.2 Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Black-out Period" shall mean, with respect to META, that period
commencing on the 15th day of each of March, June, September, and December of
any year and ending 48 hours after the public announcement by META of its
earnings for its fiscal year or quarter, as the case may be.
"Potential Material Event" shall mean any of the following: (a) the
possession by META of material non-public information required to be disclosed
in the Resale Registration Statement, and the determination in good faith by the
<PAGE>
Board of Directors of META that disclosure of such information in the Resale
Registration Statement at that time would either not be advisable or may be
detrimental to the business and affairs of META; or (b) any material engagement
or activity by META which would, in the good faith determination of the Board of
Directors of META, be adversely affected by disclosure in the Resale
Registration Statement at such time, which determination shall be accompanied by
a good faith determination by the Board of Directors of META that the Resale
Registration Statement would be materially misleading absent the inclusion of
such information.
"Registration Expenses" means the expenses incurred by META in
complying with Section 2.1 hereof, including registration and filing fees,
securities exchange or market listing fees, printing expenses, fees and
disbursements of counsel for META, state Blue Sky fees and expenses, and the
expense of any special audits incident to or required by any such registration,
but excluding any underwriting commissions, discounts and selling concessions
and any stock transfer, issuance or other taxes and fees and expenses of counsel
to the Stockholders, if any.
"Registrable Shares" means any shares of Common Stock received by
the Stockholders as Initial Consideration (other than Escrow Shares) pursuant to
Section 2.3(a)(1) of the Merger Agreement and any additional unregistered shares
received by the Stockholders, during the period for which the effectiveness of
the Resale Registration Statement is required to be maintained pursuant to
Article II, as a stock dividend on the Registrable Shares, or pursuant to a
stock split or similar recapitalization of the Common Stock, provided, however,
that Registrable Shares shall not include any such shares of Common Stock that
as of the date of the determination (x) have previously been sold, transferred
or assigned by a Stockholder (except as provided in Section 2.13 of this
Agreement) or (y) may be sold either without limitation pursuant to Rule 144(k)
under the Securities Act of 1933, as amended (the "Securities Act") or within
the volume limitations of Rule 144 under the Securities Act.
"Transfer" means any offer to sell, sale, assignment, pledge,
transfer, contract to sell, grant of any option or other right to purchase,
grant of any ownership interest, or other disposition or change of legal, record
or beneficial ownership, whether direct or indirect, voluntary or involuntary.
1.3 Additional Definitions. Each of the following terms is defined in
the Section set forth opposite such term:
Term Section
---- -------
Agreement Recitals
Common Stock Recitals
Indemnified Party 2.4
Indemnifying Party 2.4
Merger Recitals
Merger Agreement Recitals
Merger Sub Recitals
META Recitals
Resale Registration Statement 2.1
Securities Act 1.2
SENTRY Recitals
Stockholders Recitals
1.4 Effectiveness. This Agreement shall become effective as of the
Effective Time.
<PAGE>
ARTICLE II
REGISTRATION RIGHTS
2.1 Resale Registration Statement. Not later than thirty (30) days after
the Effective Time, META shall file a registration statement (the "Resale
Registration Statement") on Form S-3 registering the Registrable Shares under
the Securities Act and shall use all commercially reasonable efforts to cause
the Resale Registration Statement to become effective as expeditiously as
possible and to remain effective until the first anniversary of the Effective
Time. Notwithstanding the foregoing, during any Black-out Period, and, if at any
time or from time to time after the date of effectiveness of the Resale
Registration Statement, META notifies the Stockholders in writing of the
existence of a Potential Material Event, the Stockholders and any transferee of
a Stockholder, shall not offer or sell any Registrable Shares, or engage in any
other transaction involving or relating to the Registrable Shares, until the
Black-out Period has expired or from the time of the giving of notice with
respect to a Potential Material Event until such Stockholder or any transferee
of a Stockholder receives written notice from META that such Potential Material
Event either has been disclosed to the public or no longer constitutes a
Potential Material Event. In addition, META shall be entitled, upon notice to
the Stockholders in writing of the existence of a Potential Material Event, to
withdraw or suspend the Resale Registration Statement until such time as such
Potential Material Event either has been disclosed to the public or no longer
constitutes a Potential Material Event, at which time META shall use all
commercially reasonable efforts to refile or reinstate the Resale Registration
Statement and cause it to become effective.
2.2 Indemnification of Stockholders. META shall indemnify and hold
harmless each Stockholder and each underwriter of the Registrable Shares
(including their officers, directors, affiliates and partners) so registered
(including any broker or dealer through whom such shares may be sold) and each
person, if any, who controls a Stockholder or any such underwriter within the
meaning of Section 15 of the Securities Act from and against any and all losses,
claims, damages, expenses and/or liabilities (including, if any, applicable
taxes, interest, penalties and/or additions to tax)to which they or any of them
become subject under the Securities Act, applicable state securities laws or
under any other statute or at common law or otherwise, as incurred, and, except
as hereinafter provided, shall reimburse each Stockholder, each such underwriter
and each such controlling person, if any, for any legal or other expenses
reasonably incurred by them or any of them in connection with investigating or
defending any actions whether or not resulting in any liability, as incurred,
insofar as such losses, claims, damages, expenses, liabilities (including, if
any, applicable taxes, interest, penalties and/or additions to tax), or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Resale Registration Statement or in the
final prospectus (or the Resale Registration Statement or prospectus as from
time to time amended or supplemented by META) or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, or any violation by META of any rule or regulation promulgated under
the Securities Act or any state securities law applicable to META and relating
to action or inaction required of META in connection with such registration,
unless (i) such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Resale Registration Statement or final
prospectus in reliance upon and in conformity with information furnished to META
in connection therewith by any such Stockholder (in the case of indemnification
of such Stockholder), any such underwriter (in the case of indemnification of
such underwriter) or any such controlling person (in the case of indemnification
of such controlling person) expressly for use therein, or (ii) in the case of a
sale directly by any such Stockholder (including a sale of shares through any
underwriter retained by such Stockholder to engage in a distribution solely on
behalf of such Stockholder), such untrue statement or alleged untrue statement
<PAGE>
or omission or alleged omission was contained in a final prospectus and
corrected in an amended prospectus, copies of which were delivered to such
Stockholder or such underwriter on a timely basis, and such Stockholder or such
underwriter failed to deliver a copy of the amended prospectus at or prior to
the confirmation of the sale of the Registrable Shares to the person asserting
any such loss, claim, damage or liability in any case where such delivery is
required by the Securities Act.
2.3 Indemnification of META. Each Stockholder shall indemnify and hold
harmless META, each of its directors, each of its officers who have signed or
otherwise participated in the preparation of the registration statement, each
underwriter of the Registrable Shares so registered (including any broker or
dealer through whom such of the shares may be sold) and each person, if any, who
controls META within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages, expenses and/or liabilities to
which they or any of them may become subject under the Securities Act,
applicable state securities laws or under any other statute or at common law or
otherwise, and, except as hereinafter provided, shall reimburse META and each
such director, officer, underwriter or controlling person for any legal or other
expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or in the
final prospectus (or in the registration statement or prospectus as from time to
time amended or supplemented) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with written information furnished to META in connection therewith by
such Stockholder expressly for use therein. Notwithstanding any of the foregoing
to the contrary, in no event shall the liability of any Stockholder for
indemnification under this Section 2.3 exceed the lesser of (i) that percentage
of the total amount of such losses, claims, damages or liabilities indemnified
against which equals the percentage obtained by dividing the total number of
Registrable Shares sold by such Stockholder pursuant to the Resale Registration
Statement by the total number of Registrable Shares sold pursuant to the Resale
Registration Statement, or (ii) the net proceeds received by such Stockholder
from the resale of its Registrable Shares.
2.4 Indemnification Procedures. (a)Promptly after receipt by any person
entitled to indemnification under Sections 2.2 or 2.3 (an "Indemnified Party")
of notice of the commencement of any action in respect of which indemnity may be
sought against any person under Sections 2.2 or 2.3 (an "Indemnifying Party"),
such Indemnified Party shall notify all Indemnifying Parties in writing of the
commencement thereof (provided, however, that failure to so notify an
Indemnifying Party shall not relieve any Indemnifying Party from any liability
it may have hereunder except to the extent that the Indemnifying Party who did
not receive such notice shall have been materially prejudiced by such failure)
and, subject to the provisions hereinafter stated, the Indemnifying Party shall
be entitled to assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to such Indemnified
Party), and the payment of expenses insofar as such action shall relate to any
alleged liability in respect of which indemnity may be sought against the
Indemnifying Party.
(b) The Indemnified Party shall have the right to employ separate
counsel and assume its own legal defense in any such action and to participate
in the defense thereof, but the fees and expenses of such counsel subsequent to
any assumption of the defense by the Indemnifying Party shall not be at the
expense of the Indemnifying Party unless the employment of such counsel has been
specifically authorized in writing by the Indemnifying Party. The Indemnifying
Party shall not be liable to indemnify any Indemnified Party for any settlement
of any such action effected without the Indemnifying Party's written consent.
META shall not, except with the approval of each party being indemnified under
<PAGE>
this Agreement, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to the parties being so indemnified of a release from all
liability in respect to such claim or litigation.
2.5 Contribution. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which any Indemnified
Party exercising rights under this Agreement, or any controlling person of any
such Indemnified Party, makes a claim for indemnification pursuant to Section
2.2 or 2.3 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Agreement provides for
indemnification in such case, then the Indemnifying Party and such Indemnified
Party will contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Indemnifying Party on the one hand and of the Indemnified Party on the other,
and each party's relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, however,
that, in any such case, no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
2.6 Exchange Act Registration. As long as META is subject to the reporting
requirements of either Section 13 or Section 15(d) of the Exchange Act, META
will use commercially reasonable efforts to timely file with the Commission such
information as the Commission may require under either Section 13 or Section
15(d) of the Exchange Act and shall use commercially reasonable efforts to take
all action as may be required as a condition to the availability of Rule 144
under the Securities Act (or any successor exemptive rule hereafter in effect)
with respect to the Registrable Shares. META shall furnish to the Stockholders
forthwith upon request (i) a written statement by META as to its compliance with
the reporting requirements of Rule 144, (ii) a copy of the most recent annual or
quarterly report of META as filed with the Commission, and (iii) such other
reports and documents as a Stockholder may reasonably request in availing itself
of any rule or regulation of the Commission allowing such Stockholder to sell
any such Registrable Shares pursuant to Rule 144 without registration. META
shall use commercially reasonable efforts to facilitate and expedite transfers
of the Registrable Shares pursuant to Rule 144 under the Securities Act, which
efforts shall include prompt notice to its transfer agent to expedite such
transfers of Registrable Shares.
2.7 Further Obligations of META. META shall also do the following:
(a) Notify the Stockholders promptly upon the effectiveness of the
Resale Registration Statement. Furnish to each Stockholder such copies of each
preliminary and final prospectus and such other documents as such Stockholder
may reasonably request to facilitate the public offering of its Registrable
Shares;
(b) Use commercially reasonable efforts to register or qualify the
shares covered by said registration statement under the applicable securities or
Blue Sky laws of such jurisdictions as any selling Stockholder may reasonably
request; provided, however, that META shall not be obligated to qualify to do
<PAGE>
business in any jurisdictions where it is not then so qualified or to take any
action which would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities covered by the
registration statement in any jurisdiction where it is not then so subject; and
(c) Furnish, upon request, to each selling Stockholder a copy of all
documents filed with and all correspondence from or to the Commission in
connection with any such offering of the Registrable Shares.
2.8 Further Obligations of Stockholders. In connection with any
registration pursuant to this Agreement in which Registrable Shares held by a
Stockholder are to be registered, such Stockholder shall furnish to META in
writing such information with respect to such Stockholder and the sale or
distribution proposed by such Stockholder as META requests for use in connection
with any such registration statement or prospectus or otherwise as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement. Such provision of information is a condition
precedent to the obligations of META pursuant to this Agreement.
2.9 Allocation of Expenses. META shall pay all of the Registration
Expenses incurred by META in complying with Section 2.1 of this Agreement. In no
event shall META have any obligation to pay or otherwise bear any portion of the
underwriters' commissions or discounts and selling concessions, any fees and
expenses of counsel to the Stockholders, if any, or stock transfer, issuance or
other tax attributable to the Registrable Shares being offered and sold by any
of the Stockholders.
2.10 Selection of Broker. The Registrable Shares registered pursuant to
this Agreement shall be sold by the selling Stockholders through one broker or
dealer selected by META at the time of such registration.
2.11 "Lock-Up" Agreement. If META proposes to offer for sale to the public
any of its equity securities, and (i) if requested by META and an underwriter of
shares of Common Stock or other securities of META and (ii) if all "affiliates"
are requested by META and such underwriter to sign a lock-up agreement (as
described below), then such Stockholder shall not offer, sell, grant any option
or right to buy or sell, or otherwise transfer or dispose of in any manner any
Common Stock or other securities of META held by it during the 180-day period
following the effective date of the registration statement of META filed under
the Securities Act and will sign a "lock-up agreement" to such effect. Such
agreement shall be in writing and in form and substance reasonably satisfactory
to META and such underwriter and pursuant to customary and prevailing terms and
conditions. META may impose stop-transfer instructions with respect to the
securities subject to the foregoing restrictions until the end of such 180-day
period.
2.12 Sale or Transfer of Shares. (a) The Registrable Shares shall not be
sold or transferred unless either (i) they shall have been registered under the
Securities Act, or (ii) META shall have been furnished with an opinion of legal
counsel, satisfactory to META, to the effect that such sale or transfer is
exempt from the registration requirements of the Securities Act.
(b) Each certificate representing Registrable Shares shall bear a
legend substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,AND
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED
<PAGE>
OR HYPOTHECATED UNLESS AND UNTIL SUCH SHARES ARE REGISTERED
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS
NOT REQUIRED.
2.13 Transferability. The registration rights granted in this Agreement
may be assigned or transferred in connection with a sale of Registrable Shares
or otherwise if (a) such person (i) is a partner of a Stockholder that is a
partnership and such Registrable Shares were received by such person upon a
distribution to such partner, (ii) is a transferee of a Stockholder by will or
the laws of descent and distribution, (iii) is a spouse or child of a
Stockholder, or a trust of which a Stockholder or his or her spouse or child is
the beneficiary and (iv) is a beneficiary of a trust of which a Stockholder is a
or the trustee and (b) such person notifies META of such distribution in
writing, provides META with his or her name and address and the number of
Registrable Shares acquired, and agrees in writing (in form and substance
satisfactory to META) to be bound by the terms and conditions of this Agreement.
Except as provided in the previous sentence, the registration rights granted in
this Agreement may not be assigned or transferred in connection with a sale of
the Registrable Shares or otherwise. Nothing herein shall be construed to modify
a Stockholder's obligation under the Participation Agreement signed by such
Stockholder pursuant to the Merger Agreement.
ARTICLE III
MISCELLANEOUS
3.1 Termination. The registration rights set forth in this Agreement shall
terminate on the first anniversary of the Effective Time.
3.2 Law Governing. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of conflicts of law thereof.
3.3 Amendment; Waiver. This Agreement may be amended, and any provision
hereof may be waived, only with the written consent of META and the holders of a
majority of the then outstanding Registrable Shares.
3.4 Headings and Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein", "hereof",
"hereinafter" refer to this Agreement in which they appear as a whole and not to
the particular sentence or paragraph where they appear, unless the context
otherwise requires. Unless the context otherwise requires, (i) terms used in the
plural include the singular, and vice versa, and (ii) words in the masculine
gender include the feminine and neuter, and vice versa.
3.5 Notices. All notices, consents and other communications under this
Agreement shall be in writing and shall, except as otherwise provided herein, be
deemed to have been duly given when (i) delivered by hand, (ii) sent by telex or
telecopier (with receipt confirmed), provided that a copy is mailed by certified
mail, return receipt requested, or (iii) when received by the addressee, if sent
by Express Mail, Federal Express or other express delivery service (receipt
requested), in each case, at the appropriate addresses, telex numbers and
telecopier numbers as set forth below (or to such other addresses, telex numbers
and telecopier numbers as a party may designate as to itself by notice to the
other parties):
If to META:
208 Harbor Drive
Stamford, CT 06912-0061
Attention: Chief Financial Officer
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Attention: Mark J. Macenka, Esq.
If to a Stockholder:
At their respective addresses as reflected in the books
and records of META or its transfer agent
3.6 Invalidity of Provisions. Each of the provisions contained in this
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof or thereof.
3.7 Counterparts; Facsimile Signatures. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed to be
an original but all of which together shall constitute one and the same
instrument. Any holder of Registrable Shares (other than the Stockholders) may,
after the date hereof, become a "Stockholder" for all purposes hereunder upon
execution of a counterpart to this Agreement. For the purposes of executing this
Agreement, (a) a document signed and transmitted by facsimile machine or
telecopier shall be treated as an original document; (b) the signature of any
party on such document shall be considered as an original signature; (c) the
document transmitted (or the document of which the page containing the signature
or signatures of one of more parties is transmitted) shall have the same effect
as a counterpart thereof containing original signatures; and (d) at the request
of a party, each party who executed a document and transmitted such document by
facsimile machine or telecopier, shall provide such original document to the
other party. No party may raise as a defense to the enforcement of this
Agreement or any other document required to be delivered in accordance with its
terms, including any amendment thereof, that a facsimile machine or telecopier
was used to transmit a signature of that party or another party on the
Agreement, other document, or amendment.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties on the date first above written.
META GROUP, INC.
By:/s/Bernard F. Denoyer
----------------------------------
Name: Bernard F. Denoyer
Title: CFO, SVP-Finance, Secretary and
Treasurer
STOCKHOLDERS:
/s/Paul M. Beals
------------------------------------
Paul M. Beals
Address:
1174 Hurst Park Court
Lawrenceville, GA 30243
------------------------------------
David R. Brousell
Address:
2 Jefferson Way
Medfield, MA 02052
/s/Robert H. Cawly
-------------------------------------
Robert H. Cawly
Address:
35 Flagg Road
Southborough, MA 01772
/s/Patricia A. Cawly
--------------------------------------
Patricia A. Cawly
Address:
35 Flagg Road
Southborough, MA 01772
<PAGE>
THE ROBERT DEN. COPE 1995 TRUST, NEW
LONDON TRUST FSB AND JOHN F. SHORO,
TRUSTEES
By:/s/Gerald Milkowski
--------------------------------------
Its: Trustee
Address:
c/o New London Trust FSB
80 South Main Street
Hanover, NH 03755
/s/Kathleen M. Flynn (O'Keefe)
--------------------------------------
Kathleen M. Flynn (O'Keefe)
Address:
69 Hunter Avenue
Hudson, MA 01749
/s/Carol G. Gannon
--------------------------------------
Carol G. Gannon
Address:
74 Brook Street
Franklin, MA 02038
/s/Damon P. Gannon
--------------------------------------
Damon P. Gannon
Address:
c/o William A. Gannon, Sr.
74 Brook Street
Franklin, MA 02038
/s/William A. Gannon, Jr.
---------------------------------------
William A. Gannon, Jr.
Address:
9 Arrowhead Lane
Franklin, MA 02038
<PAGE>
/s/William A. Gannon, Sr.
-------------------------------------
William A. Gannon, Sr.
Address:
74 Brook Street
Franklin, MA 02038
/s/John B. Hartman
------------------------------------
John B. Hartman
Address:
1295 Midland Way
Lawrenceville, GA 30243
/s/Thomas B. Hickey
--------------------------------------
Thomas B. Hickey
Address:
266 Weston Road
Wellesley, MA 02181
/s/William D. Hoffman
-------------------------------------
William D. Hoffman
Address:
1349 Garrick Way
Marietta, GA 30068
/s/Robert D. Kelley
------------------------------------
Robert D. Kelley
Address:
7850 North Spalding Lake Road
Atlanta, GA 30350
------------------------------------
William J. McMillan
Address:
120 Cross Street
Winchester, MA 01890
<PAGE>
/s/Philip J. Morrison
-------------------------------------
Philip J. Morrison
Address:
1015 Park Meadow Lane
Roswell, GA 30076
/s/Kirk K. Reiss
--------------------------------------
Kirk K. Reiss
Address:
1085 Marka Lane
Alpharetta, GA 30201
SAFEGUARD SCIENTIFICS (DELAWARE), INC.
By:/s/James A. Ounsworth
------------------------------------
Its:Vice President
Address:
103 Springer Building
3411 Silverside Road
P.O. Box 7048
Wilmington, DE 19803
/s/Carl G. Sempier
---------------------------------------
Carl G. Sempier
Address:
3 Roselawn Lane
Malvern, PA 19355
/s/Anthony W. Stein
---------------------------------------
Anthony W. Stein
Address:
205 Quiet Stream Court
Roswell, GA 30075-1872
/s/Michael P. Walsh
---------------------------------------
Michael P. Walsh
Address:
60 Langley Road
Brighton, MA 02135
*
_____________________________________
Donald R. Caldwell
Address:
531 North Rose Lane
Haverford, PA 19041
*
______________________________________
Charles A. Root
Address:
1361 South Leopard Road
Berwyn, PA 19312
*
_______________________________________
Delbert W. Johnson
Address:
1359 Colleen Avenue
Arden Hills, MN 55112
*
________________________________________
James A. Ounsworth
Address:
7721 St. Martins Lane
Philadelphia, PA 19118
*
_______________________________________
Gerald M. Wilk
Address:
11 Pickwick Lane
Malvern, PA 19355
*
_______________________________________
Walter W. Buckley
Address:
428 Glenwyth Road
Strafford, PA 19087
*
_______________________________________
Michael W. Miles
Address:
1333 Argyle Road
Berwyn, PA 19312
/s/Glenn T. Rieger
----------------------------------------
Glenn T. Rieger
Address:
2 Forest Road
Wayne, PA 19087
*
______________________________________
Jerry L. Johnson
Address:
1075 Green Valley Road
Bryn Mawr, PA 19010
*
_____________________________________
Thomas C. Lynch
Address:
1236 Denbigh Lane
Radnor PA 19087
*
______________________________________
Steven J. Rosard
Address:
12 Penarth Road
Bala Cynwyd, PA 19004
<PAGE>
*/s/Glenn T. Rieger
_____________________________________
By Glenn T. Rieger,
Attorney-in-Fact
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of October 20, 1998 among META Group, Inc., a
Delaware corporation ("META"), Peter A. Naber (the "Stockholder
Representative"), as representative of stockholders of The Sentry Group, Inc.
listed on Exhibit A hereto (the "Stockholders") and the other stockholders of
The Sentry Group, Inc., and State Street Bank and Trust Company, as escrow agent
(the "Escrow Agent").
RECITALS
1. META and its wholly-owned subsidiary, MG Acquisition Corporation, a
Massachusetts corporation ("Merger Sub"), have executed a definitive Agreement
and Plan of Merger dated as of September 23, 1998 (the "Merger Agreement") with
The Sentry Group, Inc., a Massachusetts corporation ("SENTRY"), pursuant to
which Merger Sub will merge with and into SENTRY (the "Merger"). The
stockholders of SENTRY (including the Stockholders) have selected the
Stockholder Representative to act on their behalf in connection with the Merger,
though such stockholders are not a party to, and such stockholders (except for
the Stockholders) will have no rights under, this Escrow Agreement. Certain
defined terms used in this Escrow Agreement are defined in Section 6 of this
Escrow Agreement.
2. The Escrow Agent will establish an escrow account (the "Escrow
Account").
3. Pursuant to the Merger Agreement, at the Effective Time, META will
deliver to the Escrow Agent for deposit in the Escrow Account 44,965 shares of
META Common (the "Escrow Shares").
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
Section 1. Establishment of Escrow Account.
(a) Pursuant to Section 1.8 of the Merger Agreement, simultaneously with
the Closing, META will deposit with the Escrow Agent a stock certificate in the
name of the Escrow Agent (or its nominee) representing the Escrow Shares, to be
held in an account designated as "META/SENTRY Escrow Account" or having a
similar designation and disbursed in accordance with the terms hereof. The
Escrow Agent agrees to accept the Escrow Shares and to hold and distribute them
in the manner provided herein. The Escrow Agent shall have no responsibility for
the genuineness, validity, market value or title for any intended purpose of the
Escrow Shares.
(b) All dividends and distributions (other than cash dividends and
distributions) made by META with respect to the Escrow Shares will be paid or
made to the Escrow Agent to be held in escrow with the other Escrow Shares as
provided herein as additional assets of the escrow to satisfy indemnification
claims in accordance with Article IX of the Merger Agreement. Such dividends and
distributions shall be deemed to be a part of the Escrow Shares to which they
relate. Cash dividends and distributions, if any, with respect to the Escrow
Shares will be made by META directly to the Stockholders of SENTRY for whose
account such shares are being held hereunder. If a meeting or written action of
stockholders of META occurs while this Escrow Agreement is still in effect, the
<PAGE>
Escrow Agent shall promptly send to the Stockholder Representative copies of any
notices, proxies and proxy materials which it receives in connection with such
meeting or written action. The Escrow Agent shall vote the Escrow Shares in
accordance with the instructions set forth in any proxies returned to the Escrow
Agent by the Stockholder Representative and received by the Escrow Agent three
business days prior to the date of any such meeting or written action; provided,
however, that the Escrow Agent will use reasonable efforts to vote any proxies
received thereafter. If no proxy is received, the Escrow Agent shall not vote
such shares.
(c) Exhibit A hereto contains a list of all of the Stockholders whose
shares will be held in the Escrow Account, their addresses and the number of
Escrow Shares held for their account hereunder at the Effective Time of the
Merger. The number of Escrow Shares held for the account of a particular
Stockholder as of the date of this Escrow Agreement relative to the Escrow
Shares held for the account of all Stockholders as of the date of this Escrow
Agreement is referred to herein as such Stockholder's "Proportionate
Percentage." Upon any distribution of Escrow Shares to META in satisfaction of a
Notice of Claim (as defined below) the number of Escrow Shares held for the
account of each Stockholder will be reduced by its Proportionate Percentage,
except for any distribution of Escrow Shares to META in satisfaction of a Notice
of Claim that applies solely to a Major Stockholder with respect to the
Participation Agreement (as expressly set forth in such Notice of Claim), in
which case such distribution shall be applied in reduction of the Escrow Shares
held for the account of such Major Stockholder). In the event that any loss set
forth in a Notice of Claim becomes due in accordance with the provisions of
Section 2 hereof and exceeds any Stockholder's remaining number of Escrow Shares
(a "Deficiency"), then the other Stockholders shall be obligated to cover such
Deficiency according to each Stockholders' relative Proportionate Percentage.
(d) As set forth in the Merger Agreement and other materials, by virtue of
the Stockholders' approval of the Merger Agreement, the Stockholders have,
without any further actions required, consented to: (i) the establishment of the
escrow hereunder to secure the Stockholders' indemnification obligations under
Article IX of the Merger Agreement in the manner set forth herein, (ii) the
appointment of the Stockholder Representative as their representative for
purposes of this Escrow Agreement and as attorney-in-fact and agent for and on
behalf of each such Stockholder and the taking by the Stockholder Representative
of any and all actions and the making of any decisions required or permitted to
be taken or made by him under this Escrow Agreement and (iii) all of the other
terms, conditions and limitations in this Escrow Agreement.
Section 2. Payment by Escrow Agent with Respect to the Escrow Shares.
(a) (i) If META reasonably believes that it, or any other Indemnitee
entitled to indemnification under Section 9.2 of the Merger Agreement (the "META
Indemnitees") has or may suffer a loss that entitles or may entitle it to
indemnification under the Merger Agreement, META may deliver to the Escrow Agent
a written notice (a "Notice of Claim") setting forth in reasonable detail the
nature of the claim, an estimate of the aggregate amount at that time to which
META believes such META Indemnitee is, or may be, entitled to be paid pursuant
to the Merger Agreement, and the amount of Escrow Shares to be delivered to META
in satisfaction of such claim pursuant to Section 2(e) hereof. META shall
deliver a copy of each Notice of Claim to the Stockholder Representative no
later than the date on which such Notice of Claim was delivered to the Escrow
Agent. Each Notice of Claim delivered to the Escrow Agent shall include a
certification that META has delivered a copy of such Notice of Claim to the
Stockholder Representative.
(ii) The Escrow Agent shall deliver to META's transfer agent (as
identified in Section 4 of this Escrow Agreement) (the "Transfer Agent") the
stock certificate representing the Escrow Shares held in the Escrow Account in
exchange for a new stock certificate representing a number of shares of META
Common (which will remain Escrow Shares) equal to the number of Escrow Shares
previously held by the Escrow Agent, less the number of Escrow Shares having a
value (such value to be determined pursuant to Section 2(e) hereof) equal to the
amount set forth in such Notice of Claim as soon as practicable, but no earlier
than 20 business days following receipt by the Escrow Agent of such Notice of
Claim.
Notwithstanding the preceding paragraph, if within the period of 20
business days following receipt by the Escrow Agent of such Notice of Claim the
Escrow Agent shall have received from the Stockholder Representative a written
notice (a "Dispute Notice") stating that he or it disputes the validity or the
amount specified in such Notice of Claim or any portion thereof (a "Disputed
Amount"), the Escrow Agent shall not deliver the Escrow Shares as provided above
for any such disputed amount other than pursuant to Section 2(b).
Except as expressly provided in Section 1(c) hereof, upon any distribution
of Escrow Shares to META in satisfaction of a Notice of Claim by the Escrow
Agent the number of Escrow Shares held for the account of each Stockholder will
be reduced by its Proportionate Percentage of the Escrow Shares distributed to
satisfy the Notice of Claim, except that, with respect to the distribution of
Escrow Shares to META in satisfaction of a Notice of Claim that applies solely
to a Major Stockholder with respect to the Participation Agreement (as specified
in such Notice of Claim), the number of Escrow Shares held for the account of
such Major Stockholder will be reduced by such number of Escrow Shares so
distributed. Any fractional interests will be carried forward until the
distribution of Escrow Shares to the Stockholders, at which time fractional
interests will be rounded in the discretion of META. Within 10 business days
after any payment of a META Indemnitee claim, including a payment made at the
direction of an arbitration panel pursuant to Section 2(c), META will deliver to
the Escrow Agent and the Stockholder Representative a revised Exhibit A, which
will be attached hereto in lieu of the then existing Exhibit A. The Escrow Agent
may rely upon such revised Exhibit A unless and until the Stockholder
Representative delivers an objection thereto in writing to the Escrow Agent and
META. Any disputes regarding Exhibit A will be resolved in the manner provided
in Section 2(c) hereof. Without altering the Escrow Agent's obligations set
forth herein, the Stockholder Representative shall include in each Dispute
Notice, reasonable detail of the nature of the Stockholder Representative's
dispute. The Stockholder Representative shall send a copy of each Dispute Notice
to META no later than the date on which such Dispute Notice was sent to the
Escrow Agent. Each Dispute Notice delivered to the Escrow Agent shall include a
certification that the Stockholder Representative has sent a copy of such
Dispute Notice to META.
(iii) If the Escrow Agent shall not have actually received a Dispute
Notice with respect to the validity or amount specified in a Notice of Claim, or
a portion thereof, within the period of 20 business days following its receipt
of such Notice of Claim, the Stockholder Representative shall be forever barred
and precluded from contesting in any manner or forum whatsoever the distribution
of Escrow Shares on account of such amount not so disputed.
(b) Upon receipt by the Escrow Agent of a notice (a "Resolution Notice")
from META and/or the Stockholder Representative with respect to a Disputed
Amount specifying the amount of such Disputed Amount to which any META
Indemnitee is entitled, accompanied by (A) a written agreement between META and
the Stockholder Representative with respect to such Disputed Amount, or (B) a
final order from an arbitrator pursuant to Section 2(c) of this Escrow Agreement
determining that META is entitled to indemnification, the Escrow Agent shall
cause to be delivered to such META Indemnitee the Escrow Shares having a value
equal to the amount to which such META Indemnitee, or any other META Indemnitee
is entitled, if any, in each case such Escrow Share amount to be specified in
such written agreement or final order, as applicable. META and the Stockholder
Representative agree that the only methods for resolving a Disputed Amount will
be through negotiations between themselves or through use of an arbitrator
pursuant to Section 2(c).
(c) In the event of a Disputed Amount, a dispute regarding revisions to
Exhibit A, or any other dispute regarding this Escrow Agreement, META and the
Stockholder Representative shall in good faith negotiate to settle such dispute.
If no resolution is reached within 30 days after delivery of the Dispute Notice,
a revised Exhibit A or any other written dispute notice regarding this Escrow
Agreement to the Escrow Agent, either party may commence an arbitration
proceeding (a "Proceeding") by submitting the Disputed Amount or other disputed
matters to arbitration within 60 days after the date of delivery of the Dispute
Notice, the revised Exhibit A or other written dispute notice to the Escrow
Agent. Any such arbitration shall be before an arbitral tribunal composed of
three arbitrators; one selected by META, one selected by the Stockholder
Representative and one selected by mutual agreement of the parties (the
"Panel"). If the parties are unable to agree on such third arbitrator, the
arbitrator shall be selected by the American Arbitration Association (the "AAA")
in accordance with its Commercial Arbitration Rules. The Panel will resolve the
Disputed Amount in accordance with the rules of the AAA. The venue for the
arbitration shall be Stamford, Connecticut or such other venue mutually agreed
to by META and the Stockholder Representative. The Panel's award or order shall
be final and binding on META, the Stockholder Representative and the
Stockholders and all costs of such proceeding shall be borne as specified in the
award or order. The provisions of this Section may be enforced in any court
having jurisdiction over the award or any of the Stockholders and META and or
any of their respective assets, and judgment on the award (including without
limitation equitable remedies) granted in any arbitration hereunder may be
entered in any such court. Nothing contained in this Section shall prevent any
party from seeking interim measures of protection in the form of pre-award
attachment of assets or preliminary or temporary equitable relief.
(d) (i) Within 20 business days after the First Termination Date (as
defined below), the Escrow Agent shall deliver the stock certificate
representing the Escrow Shares to the Transfer Agent in exchange for:
(A) stock certificates for and in the name of each Stockholder
with respect to 2,045 of the Escrow Shares minus (1) the number of Escrow
Shares previously released to META in connection with resolved Notices of
Claim (without duplication with respect to Section 2(d)(ii)) other than
any Notices of Claim made by META under Section 9.2(vi) of the Merger
Agreement, (2) the number of Escrow Shares previously released to META in
connection with resolved Notices of Claim (without duplication with
respect to Section 2(d)(ii)) made by META under Section 9.2(vi) of the
Merger Agreement in excess of 42,920, (3) the number of Escrow Shares
subject to any outstanding and unresolved Notices of Claim other than any
outstanding and unresolved Notices of Claim made by META under Section
9.2(vi) of the Merger Agreement and (4) the number of Escrow Shares
<PAGE>
subject to any outstanding and unresolved Notices of Claim made by META
under Section 9.2(vi) of the Merger Agreement in excess of 42,920, in the
case of each of subclauses (1)-(4) of this Section 2(d)(i) based on the
amounts set forth in the Notice of Claim, whether or not a Dispute Notice
has been delivered with respect thereto, unless such dispute has been
subsequently resolved; and
(B) a new stock certificate in the name of the Escrow Agent
representing, in the aggregate, the number of Escrow Shares determined
pursuant to Section 2(d)(i)(A)(3), Section 2(d)(i)(A)(4) above and Section
2(d)(ii)(A) below. The "First Termination Date" shall mean October 31,
2000.
Upon receipt of such stock certificates from the Transfer Agent, the
Escrow Agent will promptly deliver such stock certificates for and in the name
of the Stockholders in accordance with Exhibit A to them at such addresses as
the Stockholder Representative shall direct in writing, and the Escrow Agent
will retain the new stock certificate in its name as provided in Section
2(d)(ii) and pending resolution of all outstanding and unresolved claims.
Within 10 business days after the First Termination Date, META will
deliver to the Escrow Agent and the Stockholder Representative a letter (the
"First Release Letter") confirming for the Escrow Agent the name of each
Stockholder, the number of Escrow Shares each such Stockholder will receive
pursuant to Section 2(d)(i)(A) above, and the number of Escrow Shares delivered
to the Escrow Agent pursuant to Section 2(d)(i)(B) above. The Escrow Agent may
rely upon the First Release Letter unless and until the Stockholder
Representative delivers an objection thereto in writing to the Escrow Agent and
META. The Escrow Agent shall have no responsibility for any of the calculations
required by this Section 2(d)(i). Any disputes regarding the First Release
Letter will be resolved in the manner provided in Section 2(c) hereof.
(ii) Within 20 business days after the Final Termination Date (as
defined below), the Escrow Agent shall deliver the stock certificate
representing the Escrow Shares to the Transfer Agent in exchange for:
(A) stock certificates for and in the name of each Stockholder
with respect to 42,920 of the Escrow Shares plus the number of Escrow
Shares determined pursuant to Section 2(d)(i)(A)(3) and Section
2(d)(i)(A)(4) above) minus the number of Escrow Shares previously released
to META in connection with resolved Notices of Claim without duplication
with respect to Section 2(d)(i); provided, however, that the Escrow Agent
shall exclude from such number of Escrow Shares a number of Escrow Shares
equal to the number of Escrow Shares subject to any outstanding and
unresolved Notices of Claim (based on the amounts set forth in the Notice
of Claim, whether or not a Dispute Notice has been delivered with respect
thereto, unless such dispute has been subsequently resolved) and as
provided in the Final Release Letter (as hereinafter defined); and
(B) if applicable, a new stock certificate in the name of the
Escrow Agent representing the aggregate number of Escrow Shares as to
which Notices of Claim are outstanding and not resolved.
In the event that on the Final Termination Date all the matters set forth
in any previously delivered Notice of Claim have not been finally resolved, then
<PAGE>
a number of Escrow Shares shall be withheld from the distributions described
above in Sections 2(d)(i) and (ii) in order to provide for the remaining
indemnification obligations of the Stockholders of SENTRY. The "Final
Termination Date" shall mean April 30, 2001.
Upon receipt of such stock certificates from the Transfer Agent, the
Escrow Agent will promptly deliver such stock certificates for and in the name
of the Stockholders in accordance with Exhibit A to them at such addresses as
the Stockholder Representative shall direct in writing, and the Escrow Agent
will retain the new stock certificate in its name pending resolution of all
outstanding and unresolved claims.
Within 10 business days after the Final Termination Date, META will
deliver to the Escrow Agent and the Stockholder Representative a letter (the
"Final Release Letter") confirming for the Escrow Agent the name of each
Stockholder, the number of Escrow Shares each such Stockholder will receive
pursuant to Section 2(d)(ii)(A) above, and, if applicable, the number of Escrow
Shares delivered to the Escrow Agent pursuant to Section 2(d)(ii)(B) above. The
Escrow Agent may rely upon the Final Release Letter unless and until the
Stockholder Representative delivers an objection thereto in writing to the
Escrow Agent and META. The Escrow Agent shall have no responsibility for any of
the calculations required by this Section 2(d)(ii). Any disputes regarding the
Final Release Letter will be resolved in the manner provided in Section 2(c)
hereof.
(iii) If at any time after the First Termination Date with respect
to Section 2(d)(i)(B) or after the Final Termination Date, as the case may be,
there are Escrow Shares in excess of outstanding Notices of Claim due to the
resolution of such outstanding claims either META or the Stockholder
Representative may deliver a certificate to that effect to the Escrow Agent with
a copy to the other party, which certificate will specify the amount of Escrow
Shares to be released by the Escrow Agent. If no written objection has been
delivered within 10 business days by the other party, a distribution will be
effected, as provided in Section 2(d)(i) or Section 2(d)(ii), as applicable. If
a written objection has been delivered within such time period, the controversy
will be resolved pursuant to Section 2(c) hereof. Notwithstanding anything
herein to the contrary, at any time and from time to time by mutual agreement
META and the Stockholder Representative may deliver a certificate signed by both
of them to the Escrow Agent, which certificate will specify the amount of Escrow
Shares to be released by the Escrow Agent, directing it to release Escrow Shares
by the distribution method in Section 2(d)(i) and/or Section 2(d)(ii).
(e) For purposes of this Section 2, Escrow Shares shall be valued at the
Final META Stock Price. The Escrow Agent shall be under no duty or
responsibility with regard to the valuation of the Escrow Shares or the
calculation of the amounts of Escrow Shares to be released or delivered
hereunder.
(f) (i) No Stockholder will offer, sell, assign, pledge, hypothecate,
transfer or otherwise dispose of any Escrow Shares until released from the
Escrow Account.
(ii) META and the Stockholder Representative shall have the right to
inspect and obtain copies of the records of the Escrow Agent upon reasonable
notice and during reasonable business hours and to receive monthly reports of
the status of the Escrow Shares.
<PAGE>
Section 3. Concerning the Escrow Agent.
(a) The Escrow Agent will have no duties or obligations other than those
specifically set forth in or contemplated by this Escrow Agreement, each of
which is ministerial (and shall not be construed as fiduciary) and the Escrow
Agent will not be responsible for any of the agreements referred to herein,
including the Merger Agreement.
(b) The Escrow Agent will be fully protected in acting on and relying upon
any written notice, direction, request, waiver, consent, receipt or other paper
or document which the Escrow Agent in good faith believes to have been signed or
presented by the proper party or parties, but will not act on oral instructions
alone of any party.
(c) The Escrow Agent will not be obligated to take any action hereunder
which might in its reasonable judgment involve any extraordinary expense or
liability, unless the payment of such expense or liability is provided for in a
manner satisfactory to the Escrow Agent.
(d) The Escrow Agent and its directors, officers or employees will not be
liable for any error of judgment, or for any act done or step taken or omitted
by it in good faith or for any mistake in fact or law, or for anything which it
may do or refrain from doing in connection with this Escrow Agreement, except
for its own gross negligence, willful misconduct or act of bad faith.
(e) The Escrow Agent may seek the advice of legal counsel, including
in-house counsel, in the event of any dispute or question as to the construction
of any of the provisions of this Escrow Agreement or its duties hereunder, and
it will incur no liability and will be fully protected in respect of any action
taken, omitted or suffered by it in good faith in accordance with the opinion of
such counsel.
(f) The Escrow Agent will be compensated on the basis of its regular fees
as set forth on Exhibit B, plus reasonable out-of-pocket expenses, including the
reasonable fees and costs of attorneys or agents in connection with the
preparation of this Escrow Agreement or which it may find necessary to engage in
performing its duties under this Escrow Agreement (the "Escrow Fees") which will
be invoiced to META. META will be responsible for all of such Escrow Fees.
(g) The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository or
subescrow agent employed by the Escrow Agent than any such book-entry depository
or subescrow agent has to the Escrow Agent, except to the extent that such
action or omission of any book-entry depository or subescrow agent was caused by
the Escrow Agent's own gross negligence, bad faith or willful misconduct.
(h) META and the Stockholder Representative agree to treat the Escrow
established hereunder either as (i) a "grantor trust" or (ii) an agency or
custody arrangement for all tax purposes, and META and the Stockholder
Representative will be responsible for all tax and other filings with respect to
the Escrow Shares. The Escrow Agent shall have no obligation to prepare, sign or
file any federal, state or local tax returns and shall not be deemed to be a
trustee or fiduciary on account of the foregoing. Furthermore, META and the
Stockholder Representative shall instruct the Escrow Agent in writing as to the
identity of the grantor and the trustee under the grantor trust (if META and the
Stockholder Representative agree to treat the Escrow established hereunder as a
grantor trust) or as to the principal of the agency or custody arrangement (if
META and the Stockholder Representative agree to treat the Escrow established
hereunder as an agency or custody arrangement), and with respect to the Escrow
Agent's responsibility for withholding and other taxes, assessments or other
<PAGE>
governmental charges, and shall instruct the Escrow Agent with respect to any
certifications and governmental reporting that may be required under any laws or
regulations that may be applicable in connection with its acting as Escrow Agent
under this Agreement; provided however, that such written instructions shall be
reasonably acceptable to the Escrow Agent. Except as provided below, neither
META, the Stockholder Representative nor the Escrow Agent shall have any
liability to any person on account of taxes, assessments, additions for late
payment, interest, penalties, expenses and other governmental charges that may
be assessed or asserted against META, the Stockholder Representative or the
Escrow Agent in connection with or relating to any payment made or other
activities performed under the terms of this Agreement, including, without
limitation, any liability for the withholding or deduction of (or the failure to
withhold or deduct) the same, and any liability for failure to obtain proper
certifications or to report properly to governmental authorities in connection
with this Agreement, including costs and expenses (including reasonable legal
fees and expenses), interest and penalties (individually, a "Tax Liability").
Notwithstanding the foregoing, META shall indemnify and hold the Escrow Agent
harmless from any Tax Liability. The Escrow Agent hereby agrees to act in
accordance with the written instructions delivered to the Escrow Agent by META
and the Stockholder Representative in accordance with this Section 3(h); and
notwithstanding the foregoing, if the Escrow Agent is grossly negligent in
failing to comply with such written instructions, the immediately preceding
sentence shall not apply to the Escrow Agent, and the Escrow Agent shall not be
entitled to the limitation on Tax Liability provided in the fourth sentence of
this Section 3(h). The Stockholder Representative acknowledges and agrees with
META that the Stockholders shall contribute to the amount paid or payable by
META as a result of any indemnification obligation or other liability (including
reasonable legal fees and expenses) to which META may become subject under or in
connection with this Section 3(h) in such proportion as is appropriate to
reflect, as between META and the Stockholders, the party responsible for the
payment of any such Tax Liability.
(i) The Escrow Agent will be, and hereby is, indemnified and saved
harmless by META and the Stockholder Representative, jointly and severally, from
all liabilities, losses, costs and expenses (including reasonable attorneys'
fees and expenses) which may be incurred by it as a result of or arising out of
this Escrow Agreement, including its involvement in any arbitration or
litigation arising from performance of its duties under this Escrow Agreement,
other than litigation or arbitration resulting from or with respect to any
action taken or omitted by the Escrow Agent for which it will have been adjudged
grossly negligent or guilty of willful misconduct or bad faith. Such
indemnifications in Sections 3(h) and (i) hereof will survive termination of
this Escrow Agreement.
(j) The Escrow Agent may at any time resign as Escrow Agent hereunder by
giving thirty (30) days prior written notice of resignation to META and the
Stockholder Representative. Prior to the effective date of the resignation as
specified in such notice, META will issue to the Escrow Agent a written
instruction authorizing redelivery of the Escrow Shares to a bank or trust
company that it selects. Such bank or trust company shall have capital, surplus
and undivided profits in excess of $100,000,000. If, however, META shall fail to
name a successor escrow agent within twenty (20) days after the notice of
resignation from the Escrow Agent, the Stockholder Representative shall be
entitled to name such successor escrow agent. If no successor escrow agent is
named by META or the Stockholder Representative, the Escrow Agent may apply to a
court of competent jurisdiction for appointment of a successor escrow agent.
<PAGE>
(k) If a controversy arises between one or more of the parties to this
Escrow Agreement, as to whether or not the Escrow Agent will distribute any of
the Escrow Shares, or as to any other matter arising out of or relating to this
Escrow Agreement or the Escrow Shares, the Escrow Agent will not be required to
determine the controversy and need not make any distribution of the Escrow
Shares but may retain the same without liability to any party until the rights
of the parties to the dispute will have finally been determined by an
arbitration panel as provided for in Section 2(c) of this Escrow Agreement or
until it receives joint written instructions with respect thereto from the
Stockholder Representative and META. If a controversy of the type referred to in
this Section 3 arises, the Escrow Agent may, but shall be under no duty
whatsoever to, request that the parties commence arbitration proceedings as
provided in Section 2(c) of this Escrow Agreement for determination of the
controversy, and the parties will promptly comply with such request.
Section 4. Miscellaneous Provisions.
(a) All notices, consents and other communications under this Escrow
Agreement shall be in writing and shall, except as otherwise provided herein, be
deemed to have been duly given when (i) delivered by hand, (ii) sent by telex or
telecopier (with receipt confirmed), provided that a copy is mailed by certified
mail, return receipt requested, and actually received by the addressee or (iii)
when received by the addressee, if sent by Express Mail, Federal Express or
other express delivery service (receipt requested), in each case, at the
appropriate addresses, telex numbers and telecopier numbers as set forth below:
If to Escrow Agent, to:
State Street Bank & Trust Company
Corporate Trust Department, 4th Floor
Two International Place
Boston, MA 02110
Attention: Lynn Palmiter - META/SENTRY Escrow Agreement
Telephone: (617) 664-5646
Telecopier: (617) 664-5374
If to Transfer Agent, to:
ChaseMellon Shareholder Services, LLC
111 Founders Plaza, 11th Floor
East Hartford, Connecticut 06108
Attention: Shareholder Services
Telephone: (860) 282-3512
Telecopier: (860) 528-6472
If to META, to:
META Group, Inc.
208 Harbor Drive
Stamford, CT 06912-0061
Attention: Bernard Denoyer, Chief Financial Officer
Telephone: (203) 973-6700
Telecopier: (203) 359-8066
<PAGE>
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
High Street Tower
Boston, Massachusetts 02110
Telephone: (617) 248-7000
Telecopier: (617) 248-7100
Attention: Mark J. Macenka, Esq.
If to the Stockholder Representative, to:
Peter A. Naber
c/o Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Telephone: (610) 975-4949
Telecopier: (610) 995-0325
with a copy to:
Robert DeN. Cope
44 Elm Street
Suite 503
Worcester, MA 01609
Telephone: (508) 753-2714
Telecopier: (508) 753-1325
(or to such other addresses, telex numbers and telecopier numbers as a party may
designate as to itself by written notice to the other parties). Notwithstanding
any of the foregoing, no notice or instructions to the Escrow Agent or
Stockholder Representative shall be deemed to have been received by it prior to
actual receipt, no notice to the Escrow Agent or Stockholder Representative
shall be deemed effective until such receipt by it, and any computation of a
time period which is to begin after receipt of a notice by the Escrow Agent
shall run from the date of such receipt by it.
(b) Nothing in this Escrow Agreement shall be construed to limit the right
of META or any other META Indemnitee under any provision of the Merger
Agreement.
(c) This Escrow Agreement shall be governed by, and construed in
accordance with, the laws (other than the choice or conflicts of laws rules and
provisions) of the Commonwealth of Massachusetts. META and the Stockholder
Representative hereby absolutely and irrevocably consent and submit to the
jurisdiction of the courts in the Commonwealth of Massachusetts and of any
Federal court located in said Commonwealth in connection with any actions or
proceedings brought against them (or each of them) by the Escrow Agent arising
out of or relating to this Escrow Agreement. In any such action or proceeding,
META and the Stockholder Representative hereby absolutely and irrevocably (i)
waive any objection to jurisdiction or venue, (ii) waive personal service of any
<PAGE>
summons, complaint, declaration or other process, and (iii) agree that the
service thereof may be made by certified or registered first-class mail directed
to such party, as the case may be, at their respective addresses in accordance
with Section 4(a) hereof.
(d) This Escrow Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original instrument and all of which
together shall constitute a single agreement.
(e) Neither META nor the Stockholders Representative nor the Escrow Agent
shall be responsible for delays or failures in performance resulting from acts
beyond its control. Such acts shall include but not be limited to acts of God,
strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, computer
viruses, power failures, earthquakes or other disasters.
(f) This Escrow Agreement shall be binding upon the respective parties
hereto and their heirs, executors, successors and assigns.
(g) This Escrow Agreement may not be altered or modified without the
express written consent of META, the Stockholder Representative and the Escrow
Agent. No course or conduct shall constitute a waiver of any of the terms and
conditions of this Escrow Agreement, unless such waiver is specified in writing,
and then only to the extent so specified. A waiver of any of the terms and
conditions of this Escrow Agreement on one occasion shall not constitute a
waiver of the other terms of this Escrow Agreement, or of such terms and
conditions on any other occasion.
(h) This Escrow Agreement and all documents relating thereto, including,
without limitation, (i) consents, waivers and modifications which may hereafter
be executed, and (b) certificates and other information previously or hereafter
furnished, may be reproduced by an photographic, photostatic, microfilm, optical
disk, micro-card, miniature photographic or other similar process. The parties
agree that any such reproduction shall be admissible in evidence as the original
itself in any proceeding, whether or not the original is in existence and
whether or not such reproduction was made by a party in the regular course of
business, and that any enlargement, facsimile, or further reproduction of such
reproduction shall likewise be admissible in evidence.
Section 5. The Stockholder Representative.
(a) As long as there are Escrow Shares held in escrow pursuant to this
Escrow Agreement, the Stockholders, and each of them, will be represented by the
Stockholder Representative, who is empowered to receive any notice under this
Escrow Agreement for the Stockholders, and each of them, and to give any and all
notices and instructions and take any and all action for and on behalf of the
Stockholders, and each of them, under this Escrow Agreement. The Stockholders
will have the right to remove the Stockholder Representative and, upon such
removal or, in the event of the Stockholder Representative's death or
resignation, to appoint as the new Stockholder Representative any former
stockholder of SENTRY at any time and from time to time during the period when
any shares are held in escrow, by a vote of at least three Stockholders holding
in the aggregate a majority interest in the Escrow Shares held in escrow at such
time evidenced by a writing executed by such Stockholders. The appointment of a
new Stockholder Representative will be of no force or effect whatsoever upon
META or the Escrow Agent or otherwise under this Escrow Agreement until three
days after the date when both META and the Escrow Agent have received written
<PAGE>
notice of such appointment, which notice must include at least: (i) the identity
and address of the new Stockholder Representative and a statement that such
Stockholder Representative has been appointed by a vote of at least three
Stockholders holding in the aggregate a majority interest in the Escrow Shares
then held in escrow; (ii) the duly acknowledged signatures of each of the
Stockholders voting for the new Stockholder Representative;(iii) a statement
that any non-signing Stockholder has been notified in writing of the appointment
of the new Stockholder Representative and (iv) a statement by the new
Stockholder Representative that it agrees to accept and assume its duties and
obligations under this Escrow Agreement, including any indemnification
obligations. META and the Escrow Agent will be entitled to rely on any notice
received in such form without conducting an investigation of the contents
thereof. Any notice given to the Stockholder Representative will constitute
notice to each and all of the Stockholders at the time notice is given to the
Stockholder Representative. Any action taken by, or notice or instruction
received from, the Stockholder Representative will be deemed to be action by, or
notice or instruction from, each and all of the Stockholders. META may and the
Escrow Agent will disregard any notice or instruction received from any
Stockholder other than the then acting Stockholder Representative with regard to
this Escrow Agreement.
(b) The Stockholder Representative shall not suffer any liability or loss
for any act performed or omitted to be performed by him under this Escrow
Agreement in the absence of gross negligence or willful misconduct. The
Stockholder Representative may consult with counsel in connection with his
duties hereunder and shall be fully protected by any act taken, suffered,
permitted, or omitted in good faith in accordance with the advice of counsel.
The Stockholder Representative shall not be responsible for the sufficiency or
accuracy of the form, execution, validity or genuineness of documents or
securities now or hereafter deposited hereunder, or of any endorsement thereof
or for any lack of endorsement thereof or for any description therein, nor shall
he be responsible or liable in any respect on account of the identity, authority
or rights of the persons executing or delivering or purporting to execute or
deliver any such document, security or endorsement, and the Stockholder
Representative shall be fully protected in relying upon any written notice
demand, certificate or document which he in good faith believes to be genuine.
(c) The Stockholder Representative shall be entitled to employ such legal
counsel and other experts as he may deem necessary to advise him properly with
respect to his rights and obligations hereunder and to evaluate claims and to
pursue challenges to claims or to defend third party claims. The expenses and
fees of such counsel and experts, and any out of pocket expenses which the
Stockholder Representative incurs under Sections 2 or 3 hereunder in relation to
evaluating, challenging or contesting claims, shall be reimbursed by the
Stockholders in accordance with the Proportionate Percentages.
(d) The Stockholder Representative hereby agrees to do such acts, and
execute further documents, as shall be necessary to carry out the provisions of
this Escrow Agreement or to transfer any Escrow Shares pursuant to the terms
hereof.
Section 6. Certain Defined Terms. For purposes of this Escrow
Agreement, the following terms shall have the meanings set forth below:
(a) "Effective Time" means the time of filing of the executed articles of
merger to effectuate the Merger with the Secretary of the Commonwealth of the
Commonwealth of Massachusetts pursuant to Section 78 of the Massachusetts
Business Corporation Law.
<PAGE>
(b) "Final META Stock Price" means the average closing price of META
Common (rounded to the nearest penny) for the five (5) trading days ending on
and including the second-to-last trading day which immediately precedes the date
on which a payment is made pursuant to Section 9.5 of the Merger Agreement or a
valuation is made of Escrow Shares for any other reason provided for in the
Merger Agreement, as the case may be, in each case calculated on the basis of
the last reported sales price of META Common on the Nasdaq National Market, and
as certified to the Escrow Agent in the First Release Letter, the Final Release
Letter or Notice of Claim.
(c) "Indemnitee" means each of META and its officers, directors,
shareholders and employees and, effective at and as of the Effective Time,
without duplication, Sentry (as the surviving corporation) and its officers,
directors, shareholders and employees and each of their respective subsidiaries
and affiliates.
(d) "Major Stockholders" means Safeguard Scientifics (Delaware), Inc.,
William A. Gannon, Sr., Robert H. Cawly, Kirk K. Reiss, Donald R. Caldwell,
Charles A. Root, Delbert W. Johnson, James A. Ounsworth, Gerald M. Wilk, Walter
W. Buckley, Michael W. Miles, Glenn T. Rieger, Jerry L. Johnson, Thomas C.
Lynch, Steven J. Rosard and Carl G. Sempier.
(e) "META Common" means shares of Common Stock, par value $.01 per share,
of META.
(f) "Participation Agreement" means that certain Participation Agreement
dated as of September 23, 1998, by and between META and the Major Stockholders.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as
of the date first written above.
STATE STREET BANK AND TRUST COMPANY,
as Escrow Agent
By:/s/E. Decker Adams
-----------------------------------
Name: E. Decker Adams
Title:
META GROUP, INC.
By:/s/ Bernard F. Denoyer
------------------------------------
Name: Bernard F. Denoyer
Title:CFO, SVP-Finance, Secretary and
Treasurer
By:/s/Peter A. Naber
---------------------------------
Peter A. Naber, as Stockholder
Representative
<PAGE>
Exhibit A
---------
Stockholders Escrow Shares Proportionate Percentage
- ------------ ------------- -----------------------
Gannon, Carol G. 2,028 4.510%
74 Brook Street
Franklin, MA 02038
Gannon, Damon P. 1,521 3.383
c/o William A. Gannon, Sr.
74 Brook Street
Franklin, MA 02038
Gannon, William A. Sr. 8,112 18.041
74 Brook Street
Franklin, MA 02038
McMillan, William J. 2,293 5.100
120 Cross Street
Winchester, MA 01890
Safeguard Scientifics 27,349 60.822
(Delaware), Inc.
103 Springer Building
3411 Silverside Road
P.O. Box 7048
Wilmington, DE 19803
Sempier, Carl G. 1,691 3.761
3 Roselawn Lane
Malvern, PA 19355
Caldwell, Donald R. 314 0.698
531 North Rose Lane
Haverford, PA 19041
Root, Charles A. 314 0.698
602 Dundee Drive
Wilmington, NC 28405
<PAGE>
Stockholders Escrow Shares Proportionate Percentage
------------ ------------- ------------------------
Johnson, Delbert W. 101 0.225
8325 Via Del Sole Drive East
Scottsdale, AZ 85255
Ounsworth, James A. 233 0.518
7721 St. Martins Lane
Philadelphia, PA 19118
Wilk, Gerald M. 233 0.518
11 Pickwick Lane
Malvern, PA 19355
Buckley, Walter W. 53 0.118
428 Glenwyth Road
Strafford, PA 19087
Miles, Michael W. 174 0.387
1333 Argyle Road
Berwyn, PA 19312
Rieger, Glenn T. 174 0.387
201 Wyndom Lane
Radnor, PA 19087
Johnson, Jerry L. 152 0.338
1075 Green Valley Road
Bryn Mawr, PA 19010
Lynch, Thomas C. 152 0.338
1236 Denbigh Lane
Radnor, PA 19087
Rosard, Steven J. 71 0.158
412 Academy Circle
Merion, PA 19066
--------------------------------------
Totals: 44,965 100.000%
<PAGE>
News Release
FOR IMMEDIATE RELEASE Contact: Bernard F. Denoyer
Investor Relations/CFO
(203)973-6813
[email protected]
Suzanne Novak
Director, Marketing
Communications
(203) 973-6938
[email protected]
META Group Acquires The Sentry Group, Inc.
STAMFORD, CT, October 21, 1998 -- META Group, Inc. (NASDAQ:METG), a leading
independent provider of information technology (IT) advisory, publication, and
consulting services, announced today it has completed the previously announced
acquisition of all capital stock of The Sentry Group, Inc., for an initial
payment of 195,066 shares of META Group common stock and a contingent payment of
up to $7.0 million in stock or cash (at META Group's option) in the event
certain financial targets are met by Sentry for the 1999 fiscal year. In
addition, META Group issued to Sentry stockholders warrants to purchase up to
200,000 shares of META Group common stock at $30.00 per share, 125,000 shares of
which are currently exercisable and 75,000 shares of which are contingent on
Sentry achieving certain financial targets in fiscal year 1999. This acquisition
will be accounted for as a purchase and META Group management expects the
acquisition to be slightly accretive to earnings in fiscal 1999. It is
anticipated that 150,101 shares of the initial payment of 195,066 shares will be
registered by META Group pursuant to the terms of a registration rights
agreement.
Sentry, headquartered in Westborough, Massachusetts, helps companies
resolve the critical problems of widespread inefficiency often found in
outsourcing and the lost business value from unrealized IT investments. Sentry
has worked with various Global 2000 companies, including Marriott, Emery
Worldwide, and Georgia-Pacific. Sentry became a partnership company of Safeguard
Scientifics, Inc., (NYSE:SFE) in 1996, when it was created from the merger of
Value Sourcing Group and Sentry Technology Group.
"The Sentry acquisition continues to evolve META Group's service offering
toward a rapidly growing sector of the market, which is demanding more
definitive value base services. Sentry's strong business value consulting
methodology extends and complements META Group Consulting's IT subject-matter
expertise, and increases our addressable market on the consultative side of the
spectrum," said Dale Kutnick, president, CEO and co-research director of META
Group.
-- More --
<PAGE> 2
"We look at this as an excellent investment opportunity -- to take our
original investment in Sentry and turn it into an investment in META
Group, a successful public company, which we believe is well positioned to
capitalize on the Sentry value proposition," said Warren V. Musser, chairman and
CEO of Safeguard Scientifics, Inc., and Sentry's largest shareholder before the
acquisition by META Group.
About META Group
META Group helps companies make better IT decisions by providing research
and unlimited analyst consultation relevant to their specific business needs.
Offering advisory services, consulting/ benchmarking, and publications that span
the full spectrum of IT, META Group addresses the latest technologies, industry
trends, and business challenges. With more than 1,600 client companies
worldwide, META Group differentiates itself from other information providers
through its commitment to highly personal service (enabling "analysis in
context"), bottom-line answers, and objectivity. To support this promise, META
Group maintains a client-to-analyst ratio of 50:1 -- among the lowest in
the industry -- and reinvests almost 50% of its revenue back into research and
client services. For details, connect with www.metagroup.com.
Statements above that are not historical facts may be considered
forward-looking statements that involve risks and uncertainties. Actual results
could differ materially as a result of a variety of factors, including the level
and timing of renewals of subscription to Continuous Services; the timing and
amount of business generated by META Group; the mix of domestic versus
international business; the timing of the development, introduction, marketing,
and market acceptance of new products and services; the timing of the hiring of
research analysts; changes in the spending patterns of the META Group target
clients; changes in the market demand for IT research and analysis and
competitive conditions in the industry; as well as other risks and uncertainties
detailed from time to time in the META Group filings with the Securities and
Exchange Commission.
