AGREEMENT
AND
PLAN OF MERGER
dated as of
September 18, 1997
by and among
▇▇▇▇▇▇▇▇ INDUSTRIES,
MI HOLDINGS NEVADA, INC.
and
STERLING ELECTRONICS CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGER . . . . . . . . . . . . . 1
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time. . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation . . . . . . . . . . . . . . 2
1.5 By-Laws . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Officers and Directors. . . . . . . . . . . . . . . . 2
1.7 Conversion of Shares. . . . . . . . . . . . . . . . . 2
1.8 Delivery of Merger Consideration. . . . . . . . . . 3
1.9 Company Options . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY . . . . . 4
2.1 Organization; Subsidiaries. . . . . . . . . . . . . . 4
2.2 Capitalization. . . . . . . . . . . . . . . . . . . . 5
2.3 Authority; Validity . . . . . . . . . . . . . . . . . 6
2.4 No Conflict . . . . . . . . . . . . . . . . . . . . . 6
2.5 Consents. . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Financial Statements; SEC Filings . . . . . . . . . . 7
2.7 Tax Matters . . . . . . . . . . . . . . . . . . . . . 8
2.8 Absence of Certain Changes or Events. . . . . . . . . 8
2.9 Material Contracts. . . . . . . . . . . . . . . . . . 9
2.10 Title and Related Matters . . . . . . . . . . . . . . 9
2.11 Employee Benefit Plans. . . . . . . . . . . . . . . . 10
2.12 Employment Agreements . . . . . . . . . . . . . . . . 12
2.13 Legal Proceedings . . . . . . . . . . . . . . . . . . 12
2.14 Compliance with Law . . . . . . . . . . . . . . . . . 12
2.15 Accuracy of Proxy Statement and Other
Information . . . . . . . . . . . . . . . . . . . . . 12
2.16 Related Party Transactions. . . . . . . . . . . . . . 13
2.17 Insurance . . . . . . . . . . . . . . . . . . . . . . 13
2.18 No Brokers or Finders . . . . . . . . . . . . . . . . 13
2.19 Dissenters' Rights. . . . . . . . . . . . . . . . . . 13
2.20 Environmental Matters . . . . . . . . . . . . . . . . 13
2.21 Bank Accounts, Powers, etc. . . . . . . . . . . . . . 14
2.22 Intangible Property . . . . . . . . . . . . . . . . . 14
2.23 Fairness Opinion. . . . . . . . . . . . . . . . . . . 14
2.24 Full Disclosure . . . . . . . . . . . . . . . . . . . 14
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUBSIDIARY . . 14
3.1 Organization. . . . . . . . . . . . . . . . . . . . . 14
3.2 Authority; Validity . . . . . . . . . . . . . . . . . 15
3.3 No Conflict . . . . . . . . . . . . . . . . . . . . . 15
3.4 Consents. . . . . . . . . . . . . . . . . . . . . . . 15
3.5 No Brokers or Finders . . . . . . . . . . . . . . . . 15
3.6 Legal Proceedings . . . . . . . . . . . . . . . . . . 15
3.7 Financial Statements. . . . . . . . . . . . . . . . . 15
3.8 Buyer's Financing . . . . . . . . . . . . . . . . . . 16
ARTICLE IV
COVENANTS . . . . . . . . . . . . . 16
4.1 Access and Information. . . . . . . . . . . . . . . . 16
4.2 Governmental Filings. . . . . . . . . . . . . . . . . 17
4.3 Consents and Approvals. . . . . . . . . . . . . . . . 17
4.4 Stockholders' Meeting . . . . . . . . . . . . . . . . 18
4.5 Conduct of Business . . . . . . . . . . . . . . . . . 18
4.6 Publicity . . . . . . . . . . . . . . . . . . . . . . 19
4.7 Financial Statements. . . . . . . . . . . . . . . . . 19
4.8 Notification of Defaults and Adverse Events . . . . . 19
4.9 Indemnification by Company. . . . . . . . . . . . . . 20
4.10 Commercially Reasonable Efforts . . . . . . . . . . . 20
4.11 Buyer's Undertaking Regarding Subsidiary. . . . . . . 20
4.13 No Solicitation . . . . . . . . . . . . . . . . . . . 20
4.15 Anti-takeover Statutes. . . . . . . . . . . . . . . . 21
4.16 Indemnification; Insurance. . . . . . . . . . . . . . 21
ARTICLE V
CONDITIONS . . . . . . . . . . . . . 22
5.1 Conditions to Obligations of Company and Buyer. . . . 22
5.2 Conditions to Obligations of Buyer. . . . . . . . . . 22
5.3 Conditions to Obligations of Company. . . . . . . . . 24
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER . . . . . . . 24
6.1 Termination and Abandonment . . . . . . . . . . . . . 24
6.2 Effect of Termination . . . . . . . . . . . . . . . . 25
6.3 Amendment . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Extension; Waiver . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
MISCELLANEOUS . . . . . . . . . . . . 26
7.1 Termination of Representations and Warranties . . . . 26
7.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Remedies. . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Notices . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Further Assurances. . . . . . . . . . . . . . . . . . 27
7.6 Assignability . . . . . . . . . . . . . . . . . . . . 27
7.7 Governing Law . . . . . . . . . . . . . . . . . . . . 27
7.8 Interpretation. . . . . . . . . . . . . . . . . . . . 27
7.9 Counterparts. . . . . . . . . . . . . . . . . . . . . 27
7.10 Integration . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VIII
DEFINITIONS. . . . . . . . . . . . . 28
8.1 Definitions . . . . . . . . . . . . . . . . . . . . . 28
SCHEDULES
Schedule 1.6 Officers and Directors of Surviving Corporation
Schedule 2.1(b) Capitalization of Company and Company's
Subsidiaries
Schedule 2.2(a) Rights to Purchase Company Common Stock
Schedule 2.4 Company Required Consents
Schedule 2.7 Certain Tax Matters
Schedule 2.8 Certain Events
Schedule 2.9 Material Contracts
Schedule 2.11(a) Employee Benefit Plans
Schedule 2.11(b) Certain Benefit Plan Reports
Schedule 2.11(c) Certain Benefit Plan Contributions
Schedule 2.11(d) Certain Benefit Plan Matters
Schedule 2.11(g) Certain Retirement Benefits
Schedule 2.11(h) Certain Benefit Plan Liabilities
Schedule 2.12 Employment Agreements
Schedule 2.14 Compliance with Law
Schedule 2.20 Certain Environmental Matters
Schedule 2.21 Bank Accounts
Schedule 2.22 Intangible Property
Schedule 3.4 Buyer Required Consents
Schedule 5.2(f) Required Material Contracts Consents
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (this "Agreement") is entered into as of
September 18, 1997 by and among ▇▇▇▇▇▇▇▇ Industries, a California
corporation having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Buyer"), MI Holdings Nevada,
Inc., a Nevada corporation and a wholly owned subsidiary of Buyer
having its principal place of business at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Subsidiary"), and Sterling Electronics
Corporation, a Nevada corporation having its principal place of
business at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
("Company"; for purposes of this Agreement, and unless the context
otherwise requires, the term "Company" shall include Company and
all of its subsidiaries).
RECITALS
WHEREAS, the Board of Directors of Buyer and the Board
of Directors of Company have each determined that it is in the
respective best interests of Buyer and Company for Buyer to acquire
Company through the merger of Subsidiary with and into Company upon
the terms and subject to the conditions set forth herein; and
WHEREAS, Buyer, Company and Subsidiary desire to make
certain representations, warranties, covenants and agreements in
connection with this Agreement and prescribe various conditions to
the Merger (as such term is defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing
premises and of the representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of
this Agreement, at the Effective Time (as defined below) Subsidiary
shall be merged with and into Company and the separate corporate
existence of Subsidiary shall thereupon cease (the "Merger").
Company shall be the surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the Laws of the State of Nevada. The
separate corporate existence of Company with all its rights,
privileges, immunities, powers and franchises shall continue
unaffected by the Merger and Company shall succeed, without other
transfer, to all of the rights and properties of Subsidiary and
shall be subject to all of the debts and liabilities of Subsidiary.
The Merger shall have the effects specified in the NRS.
1.2 Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place (i) at the
offices of O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ at 10:00 A.M., Los Angeles time on the second
business day after the day on which the last of the conditions set
forth in Article V hereof shall be fulfilled or waived in
accordance with this Agreement or (ii) at such other place and time
or on such other date as Buyer and Company may agree.
1.3 Effective Time. As soon as practicable following
the Closing, and provided that this Agreement has not been
terminated or abandoned pursuant to Article VI hereof, the
Surviving Corporation shall file Articles of Merger which contain
all information required by Section 92A.200 of the NRS and are
executed in accordance with Section 92A.230 of the NRS with the
Secretary of State of the State of Nevada. The Merger shall
thereupon become effective in accordance with the NRS; the time of
such effectiveness is hereinafter referred to as the "Effective
Time;" and the date of such effectiveness is hereinafter referred
to as the "Effective Date."
1.4 Articles of Incorporation. The Articles of
Incorporation of Subsidiary in effect at the Effective Time shall
be the Articles of Incorporation of the Surviving Corporation until
duly amended in accordance with the terms thereof and the
applicable provisions of the NRS, except that the name of the
Surviving Corporation shall be Sterling Electronics Corporation.
1.5 By-Laws. The By-Laws of Subsidiary in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation
until duly amended in accordance with the terms thereof and the
applicable provisions of the NRS.
1.6 Officers and Directors. The officers and directors
of the Surviving Corporation shall be as set forth on Schedule 1.6.
The directors and officers so determined shall remain as such until
their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-
Laws.
1.7 Conversion of Shares. At the Effective Time, each
outstanding share of common stock, par value $0.50 per share, of
Company (the "Company Common Stock") will be converted into the
right to receive $21.00 in cash (the "Merger Consideration"),
except that any shares of Company Common Stock held by Company or
Buyer or their wholly-owned subsidiaries (other than shares held in
trust) will be cancelled (the "Cancelled Shares"). After the
Effective Time and until surrendered for payment, each certificate
representing Company Common Stock (each a "Certificate") will
represent only the right to receive the Merger Consideration
(without interest). Buyer and Subsidiary will be entitled to rely
on Company's stock records at the Effective Time. At the Effective
Time, each issued and outstanding share of common stock, no par
value, of Subsidiary shall be converted into and become one fully
paid and non-assessable share of common stock, par value $0.50 per
share, of the Surviving Corporation.
1.8 Delivery of Merger Consideration.
(a) Buyer shall select a bank or trust company
reasonably acceptable to Company to act as the paying agent for the
Merger (the "Paying Agent"). At or prior to the Effective Time,
Buyer shall deposit or cause to be deposited in trust (the "Payment
Fund") with the Paying Agent an amount equal to the product of (i)
the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (excluding the Cancelled
Shares) multiplied by (ii) the Merger Consideration. Out of the
Payment Fund, the Paying Agent shall, pursuant to irrevocable
instructions, make the payments referred to in Section 1.8(c)
below. The Payment Fund shall not be used for any other purpose.
The Payment Fund may be invested by the Paying Agent, as directed
by the Surviving Corporation, in (i) obligations of or guaranteed
by the United States, (ii) commercial paper rated A-1, P-1 or A-2,
P-2, and (iii) certificates of deposit, bank repurchase agreements
and bankers acceptances of any bank or trust company organized
under federal law or under the law of any state of the United
States or of the District of Columbia that has capital, surplus and
undivided profits of at least $1 billion or in money market funds
which are invested substantially in such investments. Any net
earnings with respect thereto shall be paid to the Surviving
Corporation as and when requested by the Surviving Corporation.
(b) As soon as reasonably practicable after the
Effective Time, Paying Agent shall mail to each holder of record as
of the Effective Time of a Certificate a transmittal letter for
return to the Paying Agent (the "Paying Agent Letter"): (i)
notifying of the effectiveness of the Merger, (ii) providing
instructions for effecting the surrender and exchange of the
Certificates for the Merger Consideration, (iii) specifying that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
Paying Agent, and (iv) including such other provisions as Buyer and
Company may mutually agree.
(c) Buyer and the Surviving Corporation shall cause
the Paying Agent to pay to the holders of a Certificate, as soon as
practicable after receipt of any Certificate (or in lieu of such
Certificate an affidavit of lost share certificates (including a
customary indemnity against loss) in form and substance reasonably
satisfactory to Buyer) together with the Paying Agent Letter, duly
executed, and any other items specified by the Paying Agent Letter,
an amount equal to the product of (i) the number of shares of
Company Common Stock represented by the Certificate so surrendered
multiplied by (ii) the Merger Consideration, less any applicable
withholding Taxes. No interest shall be paid or accrued on any
cash payable upon the surrender of any Certificate. Each
Certificate surrendered in accordance with the provisions of this
Section 1.8(c) shall be cancelled forthwith.
(d) In the event of a transfer of ownership of
shares of Company Common Stock which is not registered in the
transfer records of Company, the Merger Consideration may be paid
to the transferee only if (i) the Certificate representing such
shares of Company Common Stock surrendered to the Paying Agent in
accordance with Section 1.8(c) hereof is properly endorsed for
transfer or is accompanied by appropriate and properly endorsed
stock powers and is otherwise in proper form to effect such
transfer, (ii) the Person requesting such transfer pays to the
Paying Agent any transfer or other taxes payable by reason of such
transfer or establishes to the satisfaction of the Paying Agent
that such taxes have been paid or are not required to be paid, and
(iii) such Person establishes to the satisfaction of Buyer that
such transfer would not violate any applicable federal or state
securities laws.
(e) At and after the Effective Time, each holder of
a Certificate that represented issued and outstanding shares of
Company Common Stock immediately prior to the Effective Time shall
cease to have any rights as a stockholder of Company, except for
the right to surrender his or her Certificate in exchange for the
Merger Consideration and except as otherwise provided by applicable
law, and no transfer of shares of Company Common Stock shall be
made on the stock transfer books of the Surviving Corporation.
(f) Any portion of the Payment Fund (including any
interest received with respect thereto) which remains unclaimed for
one year after the Effective Time shall be paid to the Surviving
Corporation upon demand. Any holders of Certificates who have not
theretofore complied with this Section 1.8 shall thereafter look
only to the Surviving Corporation and Buyer for payment (subject to
applicable abandoned property, escheat and similar laws) of their
claim for the Merger Consideration, without interest thereon.
Notwithstanding the foregoing, neither Buyer, the Surviving
Corporation nor the Paying Agent shall be liable to a holder of a
Certificate for the Merger Consideration properly delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
1.9 Company Options. At the Effective Time, all
outstanding Company Options shall terminate, and the holders
thereof shall be entitled to receive from Buyer or the Surviving
Corporation an amount equal to the product of (i) the Merger
Consideration minus the exercise price of the Company Options held
by him/her multiplied by (ii) the number of shares of Company
Common Stock covered by such Company Options, less any applicable
withholding taxes, and without interest paid thereon.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Buyer and
Subsidiary that:
2.1 Organization; Subsidiaries.
(a) Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Nevada and each of its subsidiaries is either a corporation duly
organized, validly existing and in good standing under the laws of
its respective jurisdiction of incorporation or a limited
partnership duly formed and validly existing under the laws of the
State of Texas, and each of the foregoing is in good standing as a
foreign corporation or limited partnership, as the case may be,
qualified to business in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require
such qualification, except for such failure to so qualify or be in
such good standing, which, when taken together with all other such
failures, is not reasonably likely to have a material adverse
effect on the business, financial condition, results of operations,
prospects, properties or capitalization of Company and its
subsidiaries, taken as a whole ("Company's Business"). Each of
Company and each of its subsidiaries has the requisite corporate or
partnership power and authority to carry on its respective
businesses as they are now being conducted and as described in
Company's Annual Report on Form 10-K for the fiscal year ended
March 29, 1997.
(b) Schedule 2.1(b) lists all subsidiaries of
Company and correctly sets forth the capitalization of each such
subsidiary, the jurisdiction in which Company and each such
subsidiary is organized or formed and each jurisdiction in which
Company and each such subsidiary is qualified or licensed to do
business as a foreign corporation or limited partnership. Schedule
2.1(b) correctly lists the current directors and executive officers
of Company and of each of its subsidiaries. True, correct and
complete copies of the respective charter documents of Company and
each of its subsidiaries as in effect on the date hereof have been
delivered to Buyer.
(c) All outstanding securities or other ownership
interests in each of Company's subsidiaries listed on Schedule
2.1(b): (i) are owned of record and beneficially by Company or
another of Company's wholly-owned subsidiaries, subject to no lien,
claim, charge or encumbrance, and Company has full power to
transfer such shares without obtaining the consent or approval of
any Governmental Entity or any other Person; and (ii) have been
duly authorized, are validly issued, fully paid and nonassessable.
Company does not directly or indirectly own or hold any interest in
any corporation, association or business entity other than those
listed on Schedule 2.1(b).
(d) The minute books of Company and each of its
corporate subsidiaries have been made available to Buyer and its
Representatives and contain true and complete records of all
meetings and consents in lieu of meetings of the Board of Directors
(and committees thereof) of each of Company and its corporate
subsidiaries and of their respective stockholders.
2.2 Capitalization.
(a) The authorized capital stock of Company
consists of (i) 2,000,000 shares of Cumulative Convertible
Preferred Stock and 2,000,000 shares of Preferred Stock, none of
which are issued and outstanding; and (ii) 20,000,000 shares of
Common Stock, 7,187,704 shares of which are issued and outstanding
as of August 31, 1997. All of such outstanding shares and any
shares outstanding at the Effective Time have or will have been
duly authorized, are validly issued, fully paid and nonassessable,
free of pre-emptive rights, and were issued in compliance with all
applicable Laws. Schedule 2.2(a) lists all outstanding Company
Options, warrants and other rights to purchase shares of Company
Common Stock as of August 31, 1997.
(b) As of August 31, 1997, Company has reserved for
issuance shares of its Common Stock as follows: (i) 1,902,685
shares upon exercise of Company Options granted or reserved for
future grant; (ii) 145,078 shares for stock grants under incentive
bonus plans; (iii) 266,979 shares for sales to employees under
Company's employee stock purchase plan; and (iv) 44,164 shares for
Company's 401(k) matching contributions. Since August 31, 1997:
(A) no Company Options, warrants, or other rights to purchase
shares of Company Common Stock have been granted; and (B) no shares
of Company Common Stock have been issued except for those issued
pursuant to the exercise of outstanding Company Options and grants
under Company's 401(k) matching contributions and incentive bonus
plans, in each case in the ordinary course of business.
(c) Except as set forth in paragraphs (a) and (b)
above and on Schedule 2.2(a), Company does not have any shares of
its capital stock issued or outstanding and does not have any
outstanding subscriptions, options, warrants, convertible
securities, rights or other agreements or commitments obligating
Company to issue shares of its capital stock or other securities of
Company or any of its subsidiaries. Any equity securities which
were issued and reacquired by Company were so reacquired in
compliance with all applicable Laws, and Company does not have any
obligation or liability with respect thereto.
2.3 Authority; Validity. Company has the corporate
power and authority to execute and deliver this Agreement and to
carry out its obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contem-
plated hereby have been duly authorized by Company's Board of
Directors. Company's Board of Directors has directed that this
Agreement and the transactions contemplated hereby be submitted to
Company's stockholders for consideration at a meeting of such
stockholders and, except for the approval of its stockholders, no
other corporate proceedings on the part of Company are necessary to
authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. Upon
execution and delivery hereof (assuming that this Agreement is the
legal, valid and binding obligation of Buyer and Subsidiary), this
Agreement will be the valid and binding obligation of Company
enforceable against Company in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors rights generally.
2.4 No Conflict. Except as set forth on Schedule 2.4,
neither Company nor any of its subsidiaries nor any of its or their
assets is subject to or obligated under any charter, bylaw,
Contract, lease or other instrument or any license, franchise or
permit, or subject to any law, statute, rule, regulation, judgment,
order, decree or award, which would be defaulted, breached,
terminated, forfeited or violated by or in conflict with (or upon
the failure to give notice or the lapse of time, or both, would
result in a default, breach, termination, forfeiture or conflict)
Company's execution, delivery and performance under this Agreement
and the transactions contemplated hereby. Except as set forth on
Schedule 2.4 and except for compliance with the HSR Act, Company's
execution, delivery and performance under this Agreement and the
transactions contemplated hereby will not result in the creation of
a lien, pledge, security interest or any other encumbrance on the
assets of Company or any of its subsidiaries or result in any
change in the rights or obligations of any party under or the
acceleration of (with or without the giving of notice or the lapse
of time), any provision of any Material Contract of Company or any
of its subsidiaries or any change in the rights or obligations of
Company or any of its subsidiaries under any law, statute, rule,
regulation, judgment, order, decree or award or permit or license
to which the Company or any of its subsidiaries is subject.
2.5 Consents. Except as set forth on Schedule 2.4, no
consent of any Person not a party to this Agreement, nor consent of
or filing with (including any waiting period) any Governmental
Entity is required to be obtained or performed on the part of
Company to permit the Merger and the other transactions
contemplated hereby or to permit the continuation by Company of the
business activities of Company as conducted prior to the date
hereof without material adverse change.
2.6 Financial Statements; SEC Filings.
(a) Company has delivered copies of the following
financial statements to Buyer: (i) the consolidated balance sheet
of Company at March 29, 1997 and the consolidated statements of
income, stockholders' equity and changes in financial position for
the two years ended March 29, 1997, in each case including the
notes thereto and the related report of Ernst & Young LLP,
independent certified public accountants, and (ii) the unaudited
consolidated statements of financial position of Company and its
subsidiaries at June 28, 1997 and the unaudited consolidated
statements of stockholders' equity and changes in financial
position for the thirteen-week period ended June 28, 1997, and the
unaudited consolidated statements of income for the thirteen-week
period ended June 28, 1997, in each case including any notes
thereto.
(b) All such financial statements delivered
pursuant to Section 2.6(a) hereof are in accordance with the books
and records of Company and have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods indicated. Such consolidated balance sheets
present fairly in all material respects the financial position of
Company as of the dates thereof. Except as and to the extent
reflected or reserved against in such consolidated balance sheets
(including the notes thereto), Company does not have any
liabilities or obligations (absolute or contingent) of a nature
required to be or customarily reflected in a consolidated balance
sheet (or the notes thereto) prepared in accordance with generally
accepted accounting principles consistently applied. The con-
solidated statements of income present fairly in all material
respects the results of operations of Company for the periods indi-
cated.
(c) Since April 2, 1994, Company has filed with the
SEC all material forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto)
required to be filed by it under the Securities Act, the Exchange
Act and the respective rules and regulations thereunder, all of
which complied in all material respects with all applicable
requirements of the appropriate act and the rules and regulations
thereunder (such forms, statements, reports and documents are
collectively referred to as the "SEC Filings"). Company has
delivered or made available to Buyer accurate and complete copies
of all of its SEC Filings since March 29, 1997. Company will
promptly deliver any future SEC Filings to Buyer.
(d) As of their respective dates, (i) each of
Company's past SEC Filings was, and each of its future SEC Filings
will be, prepared in compliance in all material respects with the
laws, regulations and forms governing such SEC Filing; and
(ii) none of its past SEC Filings did, and none of its future SEC
Filings will, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.7 Tax Matters.
(a) Company has timely filed all Tax Returns
required of it and, except for Taxes which in the aggregate do not
exceed $100,000 or which are being contested in good faith, has
paid all Taxes due for all periods or portions of periods ending on
or before March 29, 1997. Adequate provision has been made in the
books and records of Company and, in the financial statements
referred to in Section 2.6 above, for all Taxes whether or not due
and payable and whether or not disputed to the extent not paid.
(b) Neither Company nor any of its subsidiaries has
elected to be treated as a consenting corporation under Section
341(f) of the IRC.
(c) Schedule 2.7 lists the date or dates through
which the IRS and any other Governmental Entity have examined the
United States federal income tax returns and any other Tax Returns
of Company and its subsidiaries. Except as set forth on Schedule
2.7: (i) no Governmental Entity has examined or is in the process
of examining any Tax Returns of Company or any of its subsidiaries;
(ii) no Governmental Entity has proposed in writing any deficiency,
assessment or claim for Taxes and there is no basis for any such
deficiency, assessment or claim; and (iii) no waiver of the statute
of limitations with respect to Tax Returns of Company has been
given by or requested from Company.
As a result of the transactions contemplated
hereby, Company will not be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified
individual" as such terms are defined in IRC Section 280G.
2.8 Absence of Certain Changes or Events. Except as set
forth on Schedule 2.8, since March 29, 1997, there has not been (a)
any event which has or is likely to have a material adverse effect
on Company's Business; (b) any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting
Company's Business; (c) any declaration, setting aside or payment
of any dividend (whether in cash, stock or property) in respect of
the capital stock of Company, or any redemption or other acquisi-
tion of such stock by Company; (d) any increase in the compensation
payable or to become payable by Company to its officers or key
employees, except those occurring in the ordinary course of
business, or any material increase in any bonus, insurance, pension
or other employee benefit plan, payment or arrangement made to, for
or with any such officers or key employees; (e) any labor dispute,
other than routine matters, none of which is material to Company's
Business; (f) any borrowing or lending of money or guarantee of any
obligation by Company; (g) any amendment to or termination of any
Material Contract (as such term is defined below); (h) any adoption
or amendment of any employee benefit plan or arrangement of
Company; (i) any disposition of any material properties or assets
used in Company's Business; (j) any engagement by Company in activ-
ities outside the ordinary course of Company's Business as con-
ducted on the date hereof; or (k) the incurring of any liability
(absolute or contingent) except liabilities incurred in the
ordinary course of business.
2.9 Material Contracts. Schedule 2.9 lists each of the
following Contracts to which Company or any of its subsidiaries is
a party or to which Company, any of its subsidiaries or any of
their respective properties is subject or by which any thereof is
bound (each of which shall be deemed to be Material Contracts):
any Contract that (a) relates to indebtedness for money borrowed
(other than trade payables in the ordinary and usual course of
business), including, but not limited to, letters of credit,
guaranties and swap and similar agreements in excess of $100,000,
(b) would be required by Rule 601(b)(10) of SEC Regulation S-K to
be filed as an exhibit to an Annual Report on Form 10-K (other than
any Benefit Plan), (c) Company's Business is substantially
dependent upon or which is otherwise material to Company's Business
including, without limitation, any agreement with a supplier whose
products accounted for more than three percent of Company's
revenues in fiscal 1997, (d) provides for an extension of credit by
Company or any of its subsidiaries (other than standard payment
terms for customers), (e) limits or restricts the ability of
Company or any of its subsidiaries to compete or otherwise to
conduct its business in any manner or place (other than
confidentiality provisions entered into in the ordinary course of
business) (f) grants to a third party a right of first refusal or
(g) provides for the purchase of products from a supplier (which
products account for more than $500,000 of Company's inventory at
June 28, 1997) and does not obligate such supplier to repurchase
the Company's inventory of such products upon termination of the
Contract by the supplier. Each Material Contract is valid, binding
and in full force and effect in all material respects, and, to the
best of Company's knowledge, is valid, binding and enforceable by
Company in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating
to or limiting creditors rights generally. Company or the
applicable subsidiary has duly performed all its obligations under
each Material Contract to the extent that such obligations to
perform have accrued; and, except as set forth on Schedule 2.9, no
material breach or default, alleged material breach or default, or
event which would (with the passage of time, notice or both)
constitute a material breach or default thereunder by Company or
any of its subsidiaries, as the case may be, or, to Company's
knowledge, any other party or obligor with respect thereto, has
occurred or as a result of this Agreement or performance of any
transactions contemplated hereby will occur. To Company's
knowledge, no party to any Material Contract intends to cancel,
withdraw, modify or amend such Material Contract.
2.10 Title and Related Matters. Company has good
and indefeasible title to all of its properties, interests in
properties and assets, real and personal, reflected in Company's
March 29, 1997 consolidated balance sheet or acquired after
March 29, 1997 or necessary to conduct its business as now
conducted (except properties, interests on properties and assets
sold or otherwise disposed of since March 29, 1997 in the ordinary
course of business), free and clear of all mortgages, liens,
pledges, charges or encumbrances of any kind or character, except
(a) the lien of current taxes not yet due and payable, (b) liens
for mechanics', carriers', workmens', repairmens', landlord,
statutory or common law liens either not delinquent or being
contested in good faith, (c) such imperfections of title, liens,
restrictions, variances and easements as do not materially detract
from the value of or interfere with the value or the present or
presently contemplated future use of the properties subject thereto
or affected thereby, or otherwise materially impair the present or
presently contemplated future business operations at such
properties and (d) liens securing debt which is reflected on
Company's March 29, 1997 consolidated balance sheet. The plants
and equipment of Company that are necessary to the operation of
Company's Business are in good operating condition and repair.
Other than Company's distribution facility in Grapevine, Texas, all
properties material to the operations of Company are reflected in
Company's March 29, 1997 consolidated balance sheet to the extent
generally accepted accounting principles require the same to be
reflected.
2.11 Employee Benefit Plans.
(a) Schedule 2.11(a) lists all employee benefit
plans, programs, agreements and commitments covering any employee
or former employee, or the beneficiary of either, of Company or any
entity which would be aggregated at any relevant time with Company
pursuant to Section 414(b), (c), (m), or (o) of the IRC (referred
to herein as an "ERISA Affiliate"), providing benefits in the
nature of pension, profit sharing, deferred compensation,
retirement, severance, bonus, incentive compensation, stock option,
stock bonus, stock purchase, health, medical, life, disability,
sick leave, vacation, or other welfare or fringe benefits,
including, without limitation, all employee benefit plans (as
defined in Section 3(3) of ERISA (referred to herein as the "ERISA
Plans"), and fringe benefit plans (as defined in IRC Section 6039D)
(collectively referred to herein as the "Benefit Plans"). Except
as set forth on Schedule 2.11(a), neither Company nor any ERISA
Affiliate has ever contributed to, or been obligated to contribute
to, (i) a multiemployer plan (as defined in Section 3(37) of ERISA)
or (ii) a Benefit Plan subject to Title IV of ERISA.
(b) Each Benefit Plan is currently, and has been in
the past, operated and administered in compliance in all material
respects with its terms and with the requirements of all applicable
Laws, including, without limitation, ERISA, the IRC and the Family
and Medical Leave Act of 1993. Each Benefit Plan which is, or was,
intended to qualify under IRC Section 401(a) (referred to herein as
a "Qualified Plan") is, or was, so qualified and either (i) has
been determined by the IRS to be so qualified by the issuance of a
favorable determination letter a copy of which has been furnished
to Buyer, which remains in effect as of the date hereof and, to
Company's knowledge, nothing has occurred since the date of such
letter to cause such letter to be no longer valid, or (ii) is
within the "remedial amendment period" as defined in IRC Section
401(b) and the regulations thereunder. Except as set forth on
Schedule 2.11(b), all reports, notices and other documents required
to be filed with any Governmental Entity or furnished to employees
or participants with respect to the Benefit Plans have (to the best
knowledge of Company with respect to items other than Form 5500)
been timely filed or furnished. With respect to the most recent
Form 5500 regarding each funded Benefit Plan, such liabilities do
not exceed assets, and no material adverse change has occurred with
respect to the financial materials covered thereby since the last
Form 5500.
(c) Except as set forth on Schedule 2.11(c), all
contributions required to be paid on or prior to the date hereof to
or with respect to any Benefit Plan by its terms or applicable law
have been timely paid in full and proper form.
(d) Except as set forth on Schedule 2.11(d), the
transactions contemplated by this Agreement (i) do not constitute
or result in a severance or termination of employment under any
Benefit Plan for which severance or termination benefits may be
payable with respect to any employee covered thereby, (ii)
accelerate the time of payment or vesting or increase the amount of
benefits due under any Benefit Plan or compensation to any employee
of Company, or (iii) result in any payments (including parachute
payments) under any Benefit Plan or Law becoming due to any such
employee or result in any obligation or liability of Buyer to any
employee of Company or any ERISA Affiliate.
(e) Neither Company nor any ERISA Affiliate, nor to
Company's knowledge any other "disqualified person" or "party in
interest" (as defined in IRC Section 4975 and Section 3(14) of
ERISA, respectively) with respect to any ERISA Plan has engaged in
any transaction in violation of Section 406 of ERISA for which no
class, individual or statutory exemption exists or any "prohibited
transaction" (as defined in IRC Section 4975(c)(1)) for which no
class, individual or statutory exemption exists under IRC Section
4975(c)(2) or (d), nor has any "fiduciary" (as defined in Section
3(21) of ERISA) of any ERISA Plan breached or participated in the
breach of any fiduciary obligation imposed pursuant to Part 4 of
Title I of ERISA.
(f) There are no actions, suits, disputes or claims
pending or, to Company's knowledge, threatened (other than routine
claims for benefits) or legal, administrative or other proceedings
or governmental investigations pending or, to Company's knowledge,
threatened, against or with respect to any Benefit Plan or the
assets of any Benefit Plan.
(g) Except as set forth on Schedule 2.11(g), no
Benefit Plan provides or provided health or medical benefits
(whether or not insured) with respect to current or former
employees of Company or its subsidiaries beyond their retirement or
other termination of service (other than coverage mandated by
statutory law).
(h) Each ERISA Plan that is an "employee welfare
benefit plan" as that term is defined in Section 3(1) of ERISA is
either (as identified on Schedule 2.11(a)): (i) funded through an
insurance company contract, (ii) funded throughout a tax-exempt
"VEBA" trust or (iii) unfunded. Except as set forth on Schedule
2.11(h), there is no liability in the nature of a retroactive rate
adjustment or loss-sharing or similar arrangement, with respect to
any ERISA Plan which is an employee welfare benefit plan.
(i) Company has provided to Buyer true and complete
copies of the following with respect to each of the Benefit Plans:
(i) each plan document and summary plan description if any; (ii)
each trust agreement, insurance policy or other instrument relating
to the funding thereof; (iii) the most recent Annual Report (Form
5500 series) and associated schedules filed with the IRS or the
United States Department of Labor; (iv) the most recent audited
financial statement report; (v) the most recent actuarial report if
any; and (vi) a description of each unwritten Benefit Plan and the
individuals covered thereby.
2.12 Employment Agreements. Except as set forth on
Schedule 2.12, none of Company or any of its subsidiaries is a
party to any employment, consulting, non-competition, severance, or
indemnification agreement with any current or former executive
officer or director of Company or any of its subsidiaries. True
and complete copies of the agreements set forth on Schedule 2.12
have been furnished to Buyer prior to the date hereof. Neither
Company nor any of its subsidiaries is a party to any collective
bargaining agreement.
2.13 Legal Proceedings. (a) There is no pending or
threatened judicial or administrative proceeding or investigation
affecting Company or any of its subsidiaries that (i) if resolved
adversely to it would: (A) have a material adverse effect on
Company's Business or (b) require Company or any of its
subsidiaries to pay damages in excess of $50,000, or (ii) could
reasonably be expected to impair its ability to consummate the
Merger; and (b) Company is not aware of any judicial or
administrative decision affecting it or any of its subsidiaries
that could reasonably be expected to impair its ability to
consummate the Merger.
2.14 Compliance with Law. Except as set forth on
Schedule 2.14, all licenses, franchises, permits and other
governmental authorizations held by Company that are material in
connection with Company's Business are valid and sufficient for all
business presently carried on by Company. No suspension,
cancellation or termination of any such licenses, franchises,
permits and other governmental authorizations is threatened or
imminent. Except as set forth on Schedule 2.14, Company's Business
is not being conducted in violation of any Law, except for
violations which either individually or in the aggregate do not and
will not have a material adverse effect on Company's Business.
2.15 Accuracy of Proxy Statement and Other
Information. On the date on which Company mails to its
stockholders its proxy materials relating to the Merger (the "Proxy
Statement"), on the date its stockholder meeting is held, and on
the Effective Date, the Proxy Statement will contain all material
statements concerning Company which are required to be set forth
therein in accordance with the Exchange Act; and at such respective
times, the Proxy Statement will not include any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. The information concerning Company set forth in the
Schedules hereto and the copies of the documents furnished by
Company to Buyer in accordance herewith, are complete and accurate.
2.16 Related Party Transactions. No director or
officer of Company or any subsidiary of Company and no Person
related to any of them has any interest in (i) any equipment or
other property, real or personal, tangible or intangible,
including, but without limitation, any item of intellectual
property, used in connection with or pertaining to Company's
Business, or (ii) any creditor, supplier, customer, manufacturer,
agent, representative, or distributor of products of Company;
provided, however, that (A) no such director or officer or other
Person shall be deemed to have such an interest solely by virtue of
the ownership of less than 5% of the outstanding voting stock or
debt securities of any publicly-held company, the stock or debt
securities of which are traded on a recognized stock exchange or
quoted on the National Association of Securities Dealers Automated
Quotation System, and (B) no such director or officer or other
Person shall be deemed to have such an interest solely by virtue of
the ownership by a partnership in which he is a partner of less
than 10% of the outstanding voting stock or debt securities of any
privately held company.
2.17 Insurance. All material properties of Company
and its subsidiaries are insured for their respective benefits, in
amounts customary and reasonable for the line of business of
Company and against all risks usually insured against by Persons
operating similar properties in the localities where such
properties are located under valid and enforceable policies issued
by insurers of recognized responsibility. Neither Company nor any
of its subsidiaries is in default under any such policy or bond,
and all such policies are in full force and effect, with all
premiums due thereon paid. Company and its subsidiaries have
timely filed claims with their respective insurers with respect to
all matters and occurrences for which they believe they have
coverage except for such failures as will not have a material
adverse effect on Company's Business.
2.18 No Brokers or Finders. All negotiations
relative to this Agreement and the transactions contemplated hereby
have been carried on by Company directly with Buyer and without the
intervention of any Person, either as a result of the act of
Company, or, to the knowledge of Company, otherwise, in such a
manner as to give rise to any valid claim against any of the
parties for a finder's fee, broker's commission or other similar
payment, other than that of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
2.19 Dissenters' Rights. The effectiveness of the
Merger will not give rise to any holder of the Company Common Stock
having dissenters' rights pursuant to the NRS.
2.20 Environmental Matters. Except as set forth on
Schedule 2.20, to Company's knowledge, neither Company nor any of
its subsidiaries has disposed of any Hazardous Substances on or
about any properties at any time owned, leased or occupied by
Company or any of its present or former subsidiaries. To Company's
knowledge, neither Company nor any of its present or former
subsidiaries has disposed of any materials at any site being
investigated or remediated for contamination or possible
contamination of the environment. Except as set forth on Schedule
2.20, to Company's knowledge, Company and each of its present and
former subsidiaries have conducted their respective businesses in
accordance with all applicable Environmental Regulation. Except as
set forth on Schedule 2.20, to Company's knowledge, Company has not
received any notice of any investigation, claim or proceeding
against Company or any of its present or former subsidiaries
relating to Hazardous Substances and Company is not aware of any
fact or circumstance which could involve Company or any of its
present or former subsidiaries in any environmental litigation,
proceeding, investigation or claim or impose any environmental
liability upon Company or any of its present or former
subsidiaries.
2.21 Bank Accounts, Powers, etc. Schedule 2.21
lists each bank, trust company, savings institution, brokerage
firm, mutual fund or other financial institution with which Company
or any of its subsidiaries has an account or safe deposit box and
the names and identification of all Persons authorized to draw
thereon or to have access thereto.
2.22 Intangible Property. Schedule 2.22 lists all
Marks used by Company or any of its subsidiaries in connection with
the Company's Business and denotes whether such Marks are owned or
licensed by Company or any of its subsidiaries, and, if licensed,
the payments required to be made to others with respect thereto.
Company and its subsidiaries own or have valid, binding,
enforceable and adequate rights to use all Intangible Property used
or held for use in connection with Company's Business, without any
conflict with the rights of others. Neither Company nor any of its
subsidiaries has received any notice from any other Person
pertaining to or challenging the right of Company or any such
subsidiary to use any Intangible Property owned or used by or
licensed to Company or such Subsidiary.
2.23 Fairness Opinion. Company has received from
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. an opinion, dated the date hereof, to the
effect that the Merger Consideration is fair, from a financial
point of view, to the stockholders of Company.
2.24 Full Disclosure. No statements by Company
contained in this Agreement and the Schedules attached hereto and
any written statement or certificate furnished or to be furnished
to Buyer pursuant hereto or in connection with the transactions
contemplated hereby (when read together) contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which
they were made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND SUBSIDIARY
Each of Buyer and Subsidiary hereby represents and war-
rants to Company as follows:
3.1 Organization. Each of Buyer and Subsidiary is a
corporation duly organized, validly existing and in good standing
under the laws of the State of California and Nevada, respectively,
and has corporate power to carry on its business as it is now being
conducted.
3.2 Authority; Validity. Each of Buyer and Subsidiary
has all corporate power and authority to execute and deliver this
Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by
Buyer's and Subsidiary's Boards of Directors, respectively, and by
Buyer as the sole stockholder of Subsidiary, and no other corporate
proceedings on the part of Buyer or Subsidiary are necessary to
authorize this Agreement and the transactions contemplated hereby.
Upon execution and delivery hereof (assuming that this Agreement is
the legal, valid and binding obligation of Company), this Agreement
will be the valid and binding obligation of Buyer and Subsidiary
enforceable against each in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors rights generally.
3.3 No Conflict. Neither Buyer nor Subsidiary is
subject to or obligated under any charter, bylaw, Contract, lease
or other instrument or any license, franchise or permit, or subject
to any statute, rule, order or decree, which would be materially
defaulted, materially breached, terminated, forfeited or materially
violated by or in material conflict (or upon the failure to give
notice or the lapse of time, or both, would result in a material
default, material breach, termination, forfeiture or material
conflict) with its executing and carrying out this Agreement and
the transactions contemplated hereunder.
3.4 Consents. Except as contemplated by this Agreement
or set forth on Schedule 3.4, no consent of any Person not a party
to this Agreement, nor consent of or filing with (including any
waiting period) any Governmental Entity, is required to be obtained
on the part of Buyer or Subsidiary to permit the Merger.
3.5 No Brokers or Finders. All negotiations relative to
this Agreement and the transactions contemplated hereby have been
carried on by Buyer directly with Company and without the inter-
vention of any Person, either as a result of the act of Buyer or,
to the knowledge of Buyer, otherwise, in such a manner as to give
rise to any valid claim against any of the parties for a finder's
fee, broker's commission or other similar payment, other than DLJ.
3.6 Legal Proceedings. There is no pending or
threatened judicial or administrative proceeding or investigation
affecting Buyer or Subsidiary that if resolved adversely to either
or them could reasonably be expected to impair their ability to
consummate the Merger. Buyer is not aware of any judicial or
administrative decision affecting it or Subsidiary that could
reasonably be expected to impair the ability of Buyer or Subsidiary
to consummate the Merger.
3.7 Financial Statements. The financial statements
contained in Buyer's Annual Report on Form 10-K for the fiscal year
ended May 31, 1997 are in accordance with the books and records of
Buyer, have been prepared in accordance with generally accepted
accounting principles consistently applied and present fairly in
all material respects the financial position of Buyer as of such
date and the results of operations of Buyer for the periods
indicated therein.
3.8 Buyer's Financing. Buyer has received separate
signed commitment letters from two of the ten largest banks in the
United States to provide financing in amounts sufficient to pay the
Aggregate Merger Consideration pursuant to this Agreement.
ARTICLE IV
COVENANTS
4.1 Access and Information.
(a) Subject to applicable laws and regulations,
upon reasonable notice during the period from the date hereof
through the Effective Time, Company will give to Buyer and Buyer's
Representatives full access during normal business hours to all of
its and its subsidiaries' properties, books, records, documents
(including, without limitation, tax returns for all periods open
under the applicable statute of limitations), personnel, auditors
and counsel, and Company shall (and shall cause its subsidiaries
to) furnish promptly to Buyer all information concerning Company's
Business as Buyer or Buyer's Representatives may reasonably
request, including, without limitation true and complete copies of
all Material Contracts, including all amendments and supplements
thereto.
(b) In addition to Buyer's obligations under the
Letter Agreement, all non-public information disclosed by any party
(or its Representatives) whether before or after the date hereof,
in connection with the transactions contemplated by, or the
discussions and negotiations preceding, this Agreement to any other
party (or its Representatives) shall be kept confidential by such
other party and its Representatives and shall not be used by any
such Persons other than as contemplated by this Agreement. Subject
to the requirements of applicable Law, Buyer and Company will keep
confidential, and each will cause their respective Representatives
to keep confidential, all such non-public information and documents
unless such information (i) was already known to Buyer or Company,
as the case may be, (ii) becomes available to Buyer or Company, as
the case may be, from other sources not known by Buyer or Company,
respectively, to be bound by a confidentiality obligation, (iii) is
independently acquired by Buyer or Company, as the case may be, as
a result of work carried out by any Representative of Buyer or
Company, respectively, to whom no disclosure of such information
has been made, (iv) is disclosed with the prior written approval of
Company or Buyer, as the case may be, or (v) is or becomes readily
ascertainable from publicly available information. Upon any
termination of this Agreement, each party hereto will collect and
deliver to the other, or certify as to the destruction of, all
documents obtained by it or any of its Representatives then in
their possession and any copies thereof.
(c) Subject to applicable Law, if between the date
hereof and the Effective Date any Governmental Entity shall
commence any examination, review, investigation, action, suit or
proceeding against Company with respect to the Merger, Company
shall (i) give Buyer prompt notice thereof, (ii) keep Buyer
informed as to the status thereof and (iii) permit Buyer to observe
and be present at each meeting, conference or other proceeding and
have access to and be consulted in connection with any document
filed or provided to such Governmental Entity in connection with
such examination, review, investigation, action, suit or
proceeding.
(d) Upon Buyer's request, officers of Company shall
meet with Buyer's potential sources of financing for the Merger and
shall otherwise cooperate as reasonably requested by Buyer in
connection with Buyer's efforts to secure financing.
(e) Prior to October 6, 1997, Company shall make
available to Buyer data confirming the tax basis of Company's
assets, and the amount of consolidated net operating losses, net
capital losses, foreign Tax credits and investment and other Tax
credits of the Company allocable to Company and its subsidiaries
under Treasury Regulation 1.1502-79.
4.2 Governmental Filings. Subject to the terms and
conditions herein provided, Company and Buyer shall: (a) promptly
make their respective filings and thereafter make any other
required submissions under the HSR Act with respect to the Merger;
(b) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective
Time from, any Governmental Entity in connection with the execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (ii) timely making all such
filings and timely seeking all such consents, approvals, permits or
authorizations; and (c) use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done,
all other things necessary, proper or appropriate to consummate and
make effective the transactions contemplated by this Agreement.
4.3 Consents and Approvals.
(a) Company shall use its commercially reasonable
efforts to obtain any and all consents from other parties to all
Material Contracts, if necessary or appropriate to allow the
consummation of the Merger and the continuation of Company's
Business in the ordinary course after consummation of the Merger.
Each party hereto shall use its commercially reasonable efforts to
obtain any and all permits or approvals of any Governmental Entity
required by such party for the lawful consummation of the Merger.
(b) Buyer and Company shall, upon request, furnish
each other with all information concerning themselves, their
respective subsidiaries, directors, officers and stockholders and
such other matters as may be reasonably necessary or advisable in
connection with the Proxy Statement or any other statement, filing,
notice or application made by or on behalf of Buyer or Company to
any Governmental Entity in connection with the Merger and the other
transactions contemplated hereby.
(c) Buyer and Company shall promptly furnish each
other with copies of all written communications received by Buyer
or Company, as the case may be, or any of their respective
subsidiaries from, or delivered by any of the foregoing to, any
Governmental Entity in respect of the transactions contemplated
hereby.
4.4 Stockholders' Meeting. Company shall take all steps
necessary to duly call, give notice of, convene and hold a meeting
of its stockholders to be held as soon as is reasonably practicable
after the date on which the Proxy Statement has been cleared by the
SEC for the purpose of voting on the approval of this Agreement and
the transactions contemplated hereby, including the Merger.
Company will, through its Board of Directors, recommend to its
stockholders approval of this Agreement and the transactions
contemplated hereby, including the Merger, and such other matters
as may be submitted to its stockholders in connection with this
Agreement; provided, however, that nothing contained in this
Section 4.4 shall prohibit Company's Board of Directors from
failing to make such recommendation or modifying or withdrawing its
recommendation, if it shall have concluded in good faith based upon
the written advice of independent legal counsel which may be
Company's regular counsel (i.e. Schlanger, Mills, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
LLP) that such action is required to prevent it from breaching its
fiduciary duties to the stockholders of Company under applicable
Law.
4.5 Conduct of Business. Company covenants and agrees
that after the date hereof and prior to the Effective Time (unless
Buyer shall have agreed in writing):
(a) Ordinary Course. Company will, and will cause
its subsidiaries to, operate Company's Business only in the
ordinary course of business consistent with past practices and use
its commercially reasonable efforts to (i) preserve its existing
business organization, insurance coverage, material rights,
material licenses or permits, advantageous business relationships,
material agreements and credit facilities; and (ii) retain its key
officers and employees. Company and its subsidiaries will not:
(A) enter into any material transaction or commitment, or dispose
of or acquire any material properties or assets, except purchases
and sales of inventory in the ordinary course of business
consistent with past practices; (B) implement any new employee
benefit plan, or employment, compensatory or severance agreement;
(C) amend any existing employee benefit plan or employment
agreement except as required by Law or by this Agreement; (D) enter
into, amend or terminate any Material Contract, other than the
consulting agreement with ▇▇▇▇▇ ▇▇▇▇▇ (but only upon substantially
the same terms as are contained in the draft revised agreement
provided to Buyer prior to the date hereof); (E) take any action
that would jeopardize the continuance of its material supplier or
customer relationships; (F) make any material change in the nature
of their businesses and operations; (G) enter into any transaction
or agreement with any officer, director or affiliate of Company or
any of its subsidiaries; (H) incur or agree to incur any obligation
or liability (absolute or contingent) that individually calls for
payment by Company or any of its subsidiaries of more than $100,000
in any specific case or $500,000 in the aggregate, excluding
purchases of inventory in the ordinary course of business; or (I)
make any Tax election or make any change in any method or period of
accounting or in any accounting policy, practice or procedure.
(b) Charter Documents. Company will not amend its
Articles of Incorporation or By-Laws.
(c) Dividends. Company will not declare or pay any
dividend or make any other distribution in respect of its capital
stock.
(d) Stock. Company will not split, combine or
reclassify any shares of its capital stock, or issue, redeem or
acquire (or agree to do so) any of its equity securities, options,
warrants, or convertible instruments, except (i) pursuant to
existing obligations under Benefit Plans; or (ii) pursuant to the
existing commitments or conversion rights listed on Schedule
2.2(a). Company will not grant any Company Options.
4.6 Publicity. The initial press release with respect
to the Merger shall be a joint press release. Thereafter, Company
and Buyer shall coordinate all publicity relating to the
transactions contemplated by this Agreement and no party shall
issue any press release, publicity statement or other public notice
relating to this Agreement, or the transactions contemplated by
this Agreement, without obtaining the prior consent of both Company
and Buyer, except to the extent that the disclosing party is
advised by its counsel that such action is required by applicable
Law, and then, if practicable, only after consultation with the
other party. Company shall obtain the prior consent of Buyer to
the form and content of any application or report made to any
Governmental Entity which relates to this Agreement.
4.7 Financial Statements. Company will deliver to
Buyer, as soon as reasonably practicable after the end of each
fiscal month and each fiscal quarter prior to the Effective Date,
beginning with the periods included in the second fiscal quarter of
1998, an unaudited balance sheet as of such date and related
unaudited statements of income and changes in stockholders' equity
for the period then ended. Such financial statements will be
prepared in accordance with generally accepted accounting princi-
ples consistently applied and will fairly reflect Company's
consolidated financial condition and the consolidated results of
its operations for the periods then ended, subject, in the case of
unaudited interim statements, to the absence of notes and to normal
year-end adjustments. Company will also deliver to Buyer the
related consolidating statements for each such period.
4.8 Notification of Defaults and Adverse Events.
Company will promptly notify Buyer if, subsequent to the date of
this Agreement and prior to the Effective Date: (i) an event occurs
that may materially and adversely affect Company's Business, (ii)
it receives any notice of default under any Material Contract,
which default would, if not remedied, result in any material
adverse change in Company's Business or which would render
incorrect any representation made herein, or (iii) any suit, action
or proceeding is instituted or, to the knowledge of Company,
threatened against or affecting Company or any of its subsidiaries
which, if adversely determined, would result in any material
adverse change in Company's Business or which would render
incorrect any representation made herein. Each of Company and
Buyer will promptly notify the other if it determines it is or will
be unable to comply with any of its obligations under this Agree-
ment or fulfill any conditions under its control.
4.9 Indemnification by Company. Company agrees to
indemnify and hold harmless Buyer, each Person who controls Buyer
within the meaning of the Securities Act, and each director and
officer of the Buyer against any losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and
costs of investigation and defense) that are based on the ground or
alleged ground that the Proxy Statement contains any material
misstatement or omission. This indemnification obligation does
not, however, extend to information provided in writing by Buyer
expressly for inclusion in the Proxy Statement.
4.10 Commercially Reasonable Efforts. Buyer and
Company shall each use its commercially reasonable efforts to cause
all conditions to Closing to be satisfied.
4.11 Buyer's Undertaking Regarding Subsidiary.
Buyer covenants and agrees with Company that, subject to the terms
and conditions of this Agreement, Buyer shall take all actions as
may be necessary to cause Subsidiary to consummate the Merger.
4.12 Employee Matters.
(a) Company shall amend, terminate or suspend its
1996 Employee Stock Purchase Plan such that no options will be
granted pursuant thereto after September 30, 1997.
(b) Company's Board of Directors shall take all
actions necessary or appropriate such that the Merger, the
transactions contemplated by this Agreement and any steps taken in
connection therewith are not deemed to be either (i) a "Change in
Control" as such term is defined in the Company Broad Base
Severance Plan or (ii) a "Hostile Change of Control" as such term
is defined in the Company Upper Management Severance Plan.
4.13 No Solicitation. Company will, and will cause
its subsidiaries and their respective Representatives to,
immediately cease any discussions or negotiations with any Persons
that may be ongoing with respect to any Acquisition Proposal. The
Company will not, nor will it permit any of its subsidiaries to,
nor will it authorize or permit any of its Representatives to,
directly, or indirectly, (a) solicit or initiate, or knowingly
encourage the submission of, any Acquisition Proposal or (b)
participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to any proposal
that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal; provided, however, that, notwithstanding the
foregoing, if, prior to the Closing, Company's Board of Directors
determines in good faith, based upon written advice of independent
counsel, which may be the Company's regularly engaged outside
counsel, that not to do so would be inconsistent with the Board of
Directors' fiduciary duties to the Company's stockholders under
applicable Law, the Company may, in response to an unsolicited
Acquisition Proposal and so long as it provides notice to Buyer of
its receipt of such unsolicited Acquisition Proposal, (i) furnish
information with respect to the Company pursuant to a customary
confidentiality and standstill agreement (which is substantially
similar to the agreement with Buyer) and (ii) participate in
discussions or negotiations regarding such Acquisition Proposal.
Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the previous sentence by any
subsidiary of Company or any of Company's Representatives, whether
or not such Person is purporting to act on behalf of Company or any
of its subsidiaries or otherwise, shall be deemed to be a breach of
this Section 4.13 by Company.
4.14 Termination Fee. If this Agreement is
terminated (a) by Subsidiary and/or Buyer pursuant to Section
6.1(d) or Section 6.1(h) hereof, or (b) by Company pursuant to
Section 6.1(d) or Section 6.1(g), then Company shall pay to Buyer,
upon demand, a fee, to be paid in cash, of $5,000,000 (the
"Termination Fee"). The Termination Fee will be Buyer's sole and
exclusive remedy against Company for a termination pursuant to such
Sections and Buyer shall not pursue in any manner, directly or
indirectly, any claim or cause of action based upon tortious or
other interference with rights under this Agreement against any
Person submitting an Acquisition Proposal.
4.15 Anti-takeover Statutes. If any anti-takeover
or similar statute is applicable to the transactions contemplated
hereby, Company represents that it has and will grant such
approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to
eliminate the effects of such takeover statute on the transactions
contemplated hereby.
4.16 Indemnification; Insurance.
(a) Buyer and Subsidiary agree that all rights to
indemnification by Company existing in favor of each present and
former director of Company (the "Company Indemnified Parties") as
provided in Company's Articles of Incorporation and By-Laws on the
date hereof shall survive the Merger and shall continue in full
force and effect for a period of four years from the Effective
Date. Without limiting the foregoing, in the event that any claim,
action, suit, proceeding or investigation is brought against any
Company Indemnified Party, the Surviving Corporation shall have the
right to assume the defense of any such action or proceeding (using
counsel reasonably satisfactory to the Company Indemnified Party)
and to settle, in its sole discretion, any such action or
proceeding. Neither Buyer nor the Surviving Corporation shall be
liable for any settlement of any claim effected without its written
consent. Subject to the foregoing, upon assumption by the
Surviving Corporation of the defense of any such action or
proceeding, the Company Indemnified Party may participate in such
defense, but neither the Surviving Corporation nor Buyer shall have
any liability to the Company Indemnified Party for any legal fees
or expenses subsequently incurred by the Company Indemnified Party
in connection with such defense. Any Company Indemnified Party
wishing to claim indemnification under this Section 4.16(a), upon
learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation of
the same (but the failure to so notify the Surviving Corporation
shall not relieve it or Buyer from any liability which it may have
under this Section 4.16(a) except to the extent that such failure
prejudices the Surviving Corporation or Buyer).
(b) For a period of three years after the Effective
Date, Buyer shall cause to be maintained officers' and directors'
liability insurance covering the Company's existing officers and
directors who are currently covered in such capacities by Company's
existing officers' and directors' liability insurance policies on
terms substantially no less advantageous to such officers and
directors than such existing insurance; provided, however, that
Buyer shall not be required in order to maintain or procure such
coverage to pay an annual premium in excess of two times the
current annual premium paid by Company for its existing coverage
(the "D&O Cap") and provided further that if equivalent coverage
cannot be obtained, or can be obtained only by paying an annual
premium in excess of such amount, Buyer shall only be required to
obtain as much coverage as can be obtained by paying an annual
premium equal to the D&O Cap.
ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of Company and Buyer. The
respective obligations of the parties to effect the Merger are
subject to the fulfillment at or prior to the Effective Date of the
following conditions unless waived in writing by all parties:
(a) Corporate Approval. All corporate actions
necessary to authorize the execution, delivery and performance of
this Agreement and the Merger shall have been duly and validly
taken by the other parties. The stockholders of Company shall have
approved the Merger in accordance with applicable Law.
(b) Approval from Government Entities. All
approvals required by any Governmental Entity and all other actions
required to effect the Merger and related transactions shall have
been obtained. The waiting period under the HSR Act shall have
expired, or early termination of the waiting period under the HSR
Act shall have been granted.
(c) Absence of Governmental Litigation. No
Governmental Entity shall have instituted a proceeding seeking
injunctive or other relief in connection with the Merger and
related transactions. There shall not be any judgment, decree,
injunction, ruling or order of any Governmental Entity that
prohibits, restricts, or delays consummation of the Merger.
5.2 Conditions to Obligations of Buyer. The obligations
of Buyer and Subsidiary to effect the Merger are subject to the
fulfillment at or prior to the Effective Date of the following
conditions except to the extent waived in writing by Buyer:
(a) Representations and Compliance. The represen-
tations and warranties of Company in this Agreement shall be true
and correct in all material respects as of the date of this
Agreement and on the Effective Date with the same effect as though
made on and as of such date, except for any changes contemplated by
this Agreement; Company shall have complied in all material
respects with all covenants requiring compliance by it prior to the
Effective Date; and Buyer shall have received an officer's
certificate signed by the Chief Executive Officer of Company
certifying as to each of the foregoing.
(b) Comfort Letter. Buyer shall have received from
Ernst & Young LLP, the independent auditors of Company, a comfort
letter dated the date of the mailing of the Proxy Statement and a
second comfort letter dated the Effective Date, each in form and
substance reasonably satisfactory to Buyer.
(c) Opinion of Counsel. Buyer shall have received
from Schlanger, Mills, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, counsel to Company,
an opinion in form and substance reasonably satisfactory to Buyer.
(d) Governmental Approvals. All statutory
requirements for the valid consummation by Buyer and Subsidiary of
the transactions contemplated by this Agreement shall have been
fulfilled; all authorizations, consents and approvals of all
Governmental Entities required to be obtained in order to permit
consummation by Buyer and Subsidiary of the transactions
contemplated by this Agreement shall have been obtained.
(e) No Material Adverse Change. From the date
hereof, there shall not have occurred any event which has or is
likely to have a material adverse effect on Company's Business (it
being understood that events or changes affecting the entire
electronics components distribution industry generally will not be
considered in making such determination). Without limiting the
foregoing, a material adverse effect on Company's Business shall
include the termination (or notice of termination) of franchise
agreements with suppliers which in the aggregate accounted for at
least seven percent of Company's revenues in fiscal 1997.
(f) Material Contracts. All consents from other
parties to the Material Contracts listed on Schedule 5.2(f), if
necessary or appropriate to allow the consummation of the Merger
and the continuation of Company's Business in the ordinary course
after consummation of the Merger, shall have been received.
(g) Market Conditions. There shall have not
occurred (i) any general suspension of, trading in or limitation on
prices for securities on the New York Stock Exchange Inc., the
American Stock Exchange, Inc., or the National Association of
Securities Dealers Automated Quotation System, (ii) a declaration
of a banking moratorium or any suspension of payments in respect of
banks in the United States (whether or not mandatory), (iii) the
commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United
States, (iv) any limitation by any Governmental Entity on, or any
other event that, in the reasonable judgment of Buyer is
substantially likely to materially adversely affect the extension
of credit by banks or other lending institutions, or (v) from the
date of this Agreement through the date immediately prior to the
Effective Time, a decline of at least 25% in the Standard & Poor's
500 Index.
5.3 Conditions to Obligations of Company. The
obligations of Company to effect the Merger are subject to the
fulfillment at or prior to the Effective Date of the following
conditions unless waived in writing by Company:
(a) Representations and Compliance. The represen-
tations and warranties of Buyer in this Agreement shall be true and
correct in all material respects as of the date of this Agreement
and on the Effective Date with the same effect as though made on
and as of such date, except for any changes contemplated by this
Agreement; Buyer shall have complied in all material respects with
all covenants requiring compliance by it prior to the Effective
Date; and Company shall have received an officer's certificate
signed by the Chief Executive Officer of Buyer certifying as to
each of the foregoing.
(b) Opinion of Counsel. Company shall have
received from O'Melveny & ▇▇▇▇▇ LLP, counsel for Buyer, an opinion
in form and substance reasonably satisfactory to Company.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination and Abandonment. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the
Effective Time, whether before or after approval by the
stockholders of Company:
(a) by mutual consent of Subsidiary, Buyer and
Company in a written instrument, if the Board of Directors of each
so determines by a vote of a majority of the members of its entire
Board of Directors;
(b) by any of Subsidiary, Buyer or Company upon
written notice to the other parties if any Governmental Entity of
competent jurisdiction shall have issued a final nonappealable
order denying, enjoining or otherwise prohibiting the consummation
of any of the transactions contemplated by this Agreement;
(c) by any of Subsidiary, Buyer or Company if the
Merger shall not have been consummated on or before January 31,
1998, unless the failure of the Merger to occur by such date shall
be due to the failure of the party seeking to terminate this
Agreement to perform or observe in any material respect the
covenants and agreements of such party set forth herein;
(d) by Company or Buyer if any approval of the
stockholders of Company required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of stockholders or at any
adjournment or postponement thereof;
(e) by any of Subsidiary, Buyer or Company (so long
as the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein) if there shall have been a breach of any of the
representations or warranties set forth in this Agreement on the
part of the other party;
(f) by any of Subsidiary, Buyer or Company (so long
as the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein) if there shall have been a breach of any of the covenants
or agreements or conditions or obligations set forth in this
Agreement on the part of the other party, which breach shall not
have been cured within ten days following receipt by the breaching
party of written notice of such breach from the other party hereto
or which breach, by its nature, cannot be cured prior to the
Effective Time;
(g) by Company if, prior to the consummation of the
transactions contemplated hereby, a Person shall have made a bona
fide Acquisition Proposal that the Board of Directors of Company
determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion
of legal counsel and as to financial matters on the written opinion
of an investment banking firm of national reputation, is more
favorable to Company's stockholders than the Merger and that the
failure to terminate this Agreement and accept such alternative
Acquisition Proposal would be inconsistent with the proper exercise
of such fiduciary duties under applicable Law; and
(h) by Subsidiary and Buyer prior to the
consummation of the transactions contemplated hereby if the Board
of Directors of Company shall have withdrawn its approval or
modified its approval or recommendation of this Agreement or shall
have recommended another offer for the purchase of Company Common
Stock.
6.2 Effect of Termination. Except as provided in
Section 4.14 and Section 7.2 hereof with respect to expenses and
fees (including the Termination Fee), and except as provided in
Section 4.1(b) hereof with respect to information obtained in
connection with the transactions contemplated hereby, in the event
of the termination of this Agreement and the abandonment of the
Merger, this Agreement shall thereafter become null and void and
have no effect, and no party hereto shall have any liability to any
other party hereto or its stockholders or directors or officers in
respect thereof, and each party shall be responsible for its own
expenses, except that nothing herein shall relieve any party for
liability for any willful breach hereof.
6.3 Amendment. This Agreement may be amended by the
parties hereto at any time before or after approval hereof by the
stockholders of Company, but, after any such approval, no amendment
shall be made which would have a material adverse effect on the
stockholders of Company without the further approval of such
stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
6.4 Extension; Waiver. At any time prior to the
Effective Date, the parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements
or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party.
ARTICLE VII
MISCELLANEOUS
7.1 Termination of Representations and Warranties. The
representations and warranties of each party will terminate on the
Effective Date.
7.2 Expenses. Subject to Section 4.14, each party will
pay its own expenses relating to this Agreement and the
transactions contemplated hereby; provided, however that following
any termination of this Agreement by Buyer pursuant to Section
6.1(e) or 6.1(f), Company shall reimburse Buyer and its affiliates
(not later than five business days after submission of statements
therefor) for all out-of-pocket fees and expenses actually and
reasonably incurred by any of them or on their behalf in connection
with this Agreement and the transactions contemplated hereby
(including, without limitation, fees payable to investment bankers,
commercial bankers, counsel, consultants and accountants) in an
amount not to exceed $2,000,000.
7.3 Remedies. If, in accordance with the terms of the
proviso contained in Section 4.4, Company's Board of Directors
fails to recommend this Agreement (and the transactions
contemplated hereby, including the Merger) to Company's
stockholders, or modifies or withdraws its recommendation thereof
to Company's stockholders, Buyer's sole remedy in connection
therewith shall be Company's payment of the Termination Fee to
Buyer pursuant to Section 4.14. This Section 7.3 shall not be
deemed to preclude or otherwise limit in any way Buyer's exercise
of any rights or pursuit of any remedies, including, without
limitation, any legal or equitable remedies, with respect to any
breach by Company of any of its obligations under this Agreement,
including, without limitation, those contained in Section 4.13
hereof.
7.4 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if
delivered in person, sent by registered or certified mail (return
receipt requested), or telexed or telecopied to the parties at the
following addresses (or at such other address for a party as shall
be specified by like notice):
if to Buyer or Subsidiary:
▇▇▇▇▇▇▇▇ Industries
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
if to Company:
Sterling Electronics Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Schlanger, Mills, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
7.5 Further Assurances. Buyer, Subsidiary and
Company each agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such
other actions as may be reasonably necessary or desirable in
order to expeditiously consummate or implement the transactions
contemplated by this Agreement.
7.6 Assignability. Neither this Agreement nor any
rights or obligations under it are assignable.
7.7 Governing Law. This Agreement will be governed by
the laws of the State of California except to extent that the
certain matters are governed as a matter of controlling law by the
law of the jurisdiction of incorporation of Company.
7.8 Interpretation. Headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement.
7.9 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
7.10 Integration. This Agreement and the Letter
Agreement constitute the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
ARTICLE VIII
DEFINITIONS
8.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context
otherwise requires: (a) the terms defined in this Article VIII
have the meaning assigned to them in this Article VIII and include
the plural as well as the singular; (b) all accounting terms not
otherwise defined herein have the meanings assigned under generally
accepted accounting principles; (c) all references in this
Agreement to designated "Articles," "Sections" and other
subdivisions are to the designated Articles, Sections and other
subdivisions of the body of this Agreement; (d) pronouns of either
gender or neuter shall include, as appropriate, the other pronoun
forms; and (e) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as whole and
not to any particular Article, Section nor other subdivision.
As used in this Agreement and the Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"Acquisition Proposal" means any proposal or offer from
any Person relating to any direct or indirect acquisition or
purchase of all or a substantial part of the assets of the Company
or any of its subsidiaries or of over 15% of any class of equity
securities of the Company or any of its subsidiaries, any tender
offer or exchange offer that if consummated would result in any
Person beneficially owning 15% or more of any class of equity
securities of the Company or any of its subsidiaries, any merger,
consolidation, business combination, sale of all or substantially
all of the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its
subsidiaries, other than the transactions contemplated by this
Agreement.
"Aggregate Merger Consideration" means an amount equal
to the sum of (i) the amount required to be deposited with the
Paying Agent pursuant to Section 1.8(a) plus (ii) the aggregate
amount to be paid to holders of Company Options pursuant to Section
1.9.
"Benefit Plans" has the meaning set forth in Section
2.11(a).
"Buyer" has the meaning set forth in the first paragraph
hereof.
"Cancelled Shares" has the meaning set forth in Section
1.7.
"Certificates" has the meaning set forth in Section 1.7.
"Closing" has the meaning set forth in Section 1.2.
"Company" has the meaning set forth in the first
paragraph hereof.
"Company Common Stock" has the meaning set forth in
Section 1.7.
"Company Indemnified Parties" has the meaning set forth
in Section 4.16(a).
"Company Options" means any option granted by Company to
purchase shares of Company Common Stock pursuant to the Company's
1967 Stock Option Plan, 1968 Stock Option Plan, 1992 Incentive
Stock Option Plan, 1993 Directors' Non-Qualified Stock Option Plan,
1994 Stock Option Plan and 1997 Stock Option Plan, and any
individual option grant made prior to the date hereof.
"Company's Business" has the meaning set forth in
Section 2.1(a).
"Contract" means any agreement, arrangement, bond,
commitment, franchise, indemnity, indenture, instrument, lease,
license or understanding, whether or not in writing.
"DLJ" means ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities
Corporation.
"D&O Cap" has the meaning set forth in Section 4.16(b).
"Effective Date" has the meaning set forth in Section
1.3.
"Effective Time" has the meaning set forth in Section
1.3.
"Environmental Regulation" means, collectively, all
Laws, regulations, orders and other requirements of any
Governmental Entity relating to Hazardous Substances and the use,
storage, treatment, disposal, transport, generation, release of,
and exposure of others to, Hazardous Substances.
"ERISA" means the Employee Retirement Income Security
Act of 1974.
"ERISA Affiliate" has the meaning set forth in Section
2.11(a).
"ERISA Plans" has the meaning set forth in Section
2.11(a).
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Governmental Entity" means any governmental agency,
district, bureau, board, commission, court, department, official
political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
"Hazardous Substances" means (but shall not be limited
to) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable Laws as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic
substances," or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as
ignitibility, corrosivity, reactivity, radioactivity,
carcinogenicity, reproductive toxicity or "EP toxicity," and
petroleum and drilling fluids, produced waters and other wastes
associated with the exploration, development, or production of
crude oil, natural gas or geothermal energy.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
"Intangible Property" means any trade secret, secret
process or other confidential information or know-how and any and
all Marks.
"IRC" means the Internal Revenue Code of 1986, as
amended.
"IRS" means the Internal Revenue Service.
"Laws" means any constitutional provision, statute,
ordinance, or other law, code, rule, regulation or interpretation
of any Governmental Entity and any decree, injunction, judgment,
award, order, ruling, assessment or writ.
"Letter Agreement" means that certain letter agreement
between Buyer and Company dated June 3, 1997.
"Marks" means any brand name, copyright, patent, service
▇▇▇▇, trademark, trade name, and all registrations or applications
for registration of any of the foregoing.
"Merger" has the meaning set forth in Section 1.1.
"Merger Consideration" has the meaning set forth in
Section 1.7.
"NRS" means the Nevada Revised Statutes.
"Paying Agent" has the meaning set forth in Section
1.8(a).
"Paying Agent Letter" has the meaning set forth in
Section 1.8(b).
"Payment Fund" has the meaning set forth in Section
1.8(a).
"Person" means any individual, partnership, joint
venture, corporation, bank, trust, unincorporated organization or
other entity.
"Proxy Statement" has the meaning set forth in Section
2.15.
"Qualified Plans" has the meaning set forth in Section
2.11(b).
"Representatives" means a Person's officers, directors,
employees, consultants, investment bankers, accountants, attorneys
and other advisors, representatives and agents.
"Securities Act" means the Securities Act of 1933, as
amended.
"SEC" means the Securities and Exchange Commission.
"SEC Filings" has the meaning set forth in Section
2.6(c).
"Subsidiary" has the meaning set forth in the first
paragraph hereof.
"Surviving Corporation has the meaning set forth in
Section 1.1.
"Tax" means any foreign, federal, state, county or local
income, sales, use, excise, franchise, ad valorem, real and
personal property, transfer, gross receipt, stamp, premium,
profits, customs, duties, windfall profits, capital stock,
production, business and occupation, disability, employment,
payroll, severance or withholding taxes, fees, assessments or
charges of any kind whatever imposed by any Governmental Entity,
and interest and penalties (civil or criminal), additions to tax,
payments in lieu of taxes or additional amounts related thereto or
to the nonpayment thereof, and any loss in connection with the
determination, settlement or litigation of any Tax liability.
"Tax Return" means a declaration, statement report,
return or other document or information required to be filed or
supplied with respect to Taxes, including, where permitted or
required, combined or consolidated returns for any group of
entities that includes the Company or any of its subsidiaries.
"Termination Fee" has the meaning set forth in Section
4.14.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
▇▇▇▇▇▇▇▇ INDUSTRIES
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
President
and Chief Executive Officer
MI HOLDINGS NEVADA, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
President
STERLING ELECTRONICS CORPORATION
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chairman & CEO