MHR Capital Partners LP v. Presstek, Inc.

OPINION OF THE COURT Buckley, J. In 2003, defendant Presstek and its wholly owned subsidiary, defendant Silver Acquisitions Corp. (Silver), began to explore the possibility of purchasing A.B. Dick Company (ABD) from its parent, Paragon Corporate Holdings, Inc. (Paragon). Those entities negotiated a Stock Purchase Agreement, which incorporated ancillary agreements, including one whereby plaintiffs, MHR Capital Partners LP and its affiliates (collectively, MHR), major creditors of ABD, waived rights they held under ABD notes in return for payment of cash and Presstek stock. On June 16, 2004, Presstek, Silver, ABD, Paragon, and MHR executed an Escrow Agreement, pursuant to which the Stock Purchase Agreement was deposited in escrow, to be released upon the satisfaction of certain conditions by specified dates; if the conditions were not met by their expiration dates, then the escrowed documents were to be destroyed. Among the express conditions was the requirement that Key Corporate Capital, Inc. (Key Bank), ABD’s lender, sign the consent form attached to the Escrow Agreement by the close of business on June 22, 2004. A “WHEREAS” clause recited that the parties had agreed to hold the documents in escrow for a “four (4) day period (the ‘Key Escrow Period’) to obtain the consent of Key ... to the Proposed Transaction.” Another “WHEREAS” clause stated that the parties had “agreed that the escrow provided for hereunder shall in no event be released unless and until Key consents to the transaction on the terms and conditions [14] contained herein.” Section 3 (b) of the Escrow Agreement provided: “From the date hereof through the close of business on June 22, 2004, [Paragon] shall endeavor to obtain Key’s consent and agreement to the Proposed Transaction, such consent and agreement to be evidenced by Key’s execution of [the consent and agreement] attached hereto.” Section 4 (b) stated: “On or prior to the expiration of the Key Escrow Period, if Key shall have consented to the transaction and executed the Consent and Agreement in accordance with Section 3 (b) above, then, subject to the completion of 3 (a) above [outlining other requirements], the parties hereby agree that the Escrow Deposit shall be released from any condition relating to obtaining Key’s consent” (emphasis added). Section 4 (c) continued: “Upon the earlier of (i) the failure of the occurrence of the items set forth in Section 4 (a) or 4 (b) above ... or (iii) the expiration of the Key Escrow Period without receiving the consent and agreement of Key, [Presstek] shall . . . destroy all of the [escrowed documents].” Finally, section 7 set forth: “This Escrow Agreement may not be altered or modified without the express prior written consent of the Parties hereto. No course of conduct shall constitute a waiver of any terms or conditions of this Escrow Agreement, unless such waiver is specified in writing, and then only to the extent so specified.” It is uncontested that Key Bank did not execute the consent form by the close of business on June 22, 2004. Moreover, it is uncontroverted that Key Bank never signed the consent form. In fact, a Key Bank senior vice-president, Michael Lugli, testified at his deposition that Key Bank “would not sign it” because the bank “would not accept” certain of the conditions set forth in the consent form. Among the provisions that Key Bank objected to were that it provide unlimited funding to ABD through the closing of the sale (section 3 [a] of the consent [15] form), forbear from declaring any loan default until the closing of the sale (section 3 [b] of the consent form), and accept payment in the form of cash and Presstek stock (section 2 [a] of the consent form) rather than only cash. Fundamentally, Key Bank was “not willing to undertake the risk” of “an unconditional commitment to fund” ABD. Key Bank was willing to agree to a more limited commitment, and by letter dated June 22, 2004, signed by Lugli, agreed to lend up to $26 million “between now and the closing of the transaction ... on or about July 16, 2004.” As the foregoing makes clear, there is no question that Key Bank did not sign the consent form, by the cutoff date or ever, and that Key Bank refused to agree to several substantive provisions of the consent form. Thus, by the terms of the Escrow Agreement, Presstek was relieved of any obligation to proceed to closing under the Stock Purchase Agreement. MHR’s assertion that Key Bank’s signing of the consent form was not a condition precedent to the release of the Stock Purchase Agreement from escrow is belied by the plain language of the Escrow Agreement. Insofar as MHR contends that Key Bank’s signature was a mere formality, Lugli confirmed at his deposition that the bank objected to the substance of certain requirements contained in the consent form. With respect to MHR’s argument that the consent form was poorly worded or created conditions additional to those set forth in the Escrow Agreement or Stock Purchase Agreement, it should have voiced those concerns at the time the documents were drafted and agreed to by the parties. While MHR faults Presstek for not using more strenuous efforts to convince Key Bank to agree to the consent form, the Escrow Agreement placed that duty on Paragon. Because there are no factual issues concerning the termination of the parties’ agreements, summary judgment was properly granted to Presstek. Inasmuch as we are affirming the dismissal of the action, we need not discuss the alternative grounds for dismissal invoked by Presstek. Accordingly, the judgment of the Supreme Court, New York County (Richard B. Lowe, III, J.), entered August 3, 2007, dismissing the complaint as against defendant Presstek, should be affirmed, without costs. The appeal from the order, same court and Justice, entered July 26, 2007, which granted Presstek’s motion for summary judgment, should be dismissed, without costs, as subsumed in the appeal from the judgment.