RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
between
SPEAKER ACQUISITION CORP.
and
LEI HOLDINGS, INC.
Dated as of August 26, 1997
TABLE OF CONTENTS
Page
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ARTICLE I - THE MERGER
1.1 Merger.......................................................1
1.2 Closing......................................................1
1.3 Effective Time...............................................2
1.4 Certificate of Incorporation of Surviving Corporation........2
1.5 Bylaws of Surviving Corporation..............................2
1.6 Directors and Officers of the Surviving Corporation..........2
1.7 Merger Consideration.........................................3
1.7.1 Determination of Adjusted Cash Consideration........3
1.7.2 Treatment of Stock of Constituent Corporations......3
1.7.3 Options and Warrants................................6
1.7.4 Certain Adjustments to Gross Cash Consideration.....7
1.7.5 Closing Payments and Exchange of Certificates......10
1.7.6 No Further Transfers...............................11
1.8 Preliminary Merger..........................................11
1.9 Dissenters' Rights..........................................12
1.10 No Fractional Shares; Aggregation...........................12
1.11 Repayment of Funded Debt....................................13
1.12 Payment of Transaction Expenses.............................13
1.13 Management Bonus Payments...................................13
ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
2.1 Organization and Good Standing..............................14
2.2 Subsidiaries................................................14
2.3 Power, Authorization and Enforceability.....................14
2.4 No Approvals; No Conflicts..................................15
2.5 Capitalization..............................................15
2.6 Financial Statements........................................16
2.7 Absence of Certain Changes or Events........................17
2.8 Taxes.......................................................20
2.9 Property....................................................22
2.10 Compliance With Laws........................................23
2.11 Material Contracts..........................................23
2.12 Claims and Legal Proceedings................................25
2.13 Labor Matters...............................................26
2.14 Intellectual Property.......................................26
2.15 Licenses, Permits and Authorizations........................27
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2.16 Insurance...................................................27
2.17 Employee Benefit Plans......................................28
2.18 Absence of Questionable Payments............................29
2.19 Brokers.....................................................29
2.20 Bank Accounts...............................................29
2.21 Full Disclosure.............................................29
2.22 Transactions with Affiliates................................30
2.23 Product Warranties, Defects and Liabilities.................30
2.24 Accounts Receivable.........................................31
2.25 Inventories.................................................31
2.26 Environmental...............................................32
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF TRANSCO
3.1 Organization and Good Standing..............................34
3.2 Power, Authorization and Enforceability.....................34
3.3 No Approvals or Notices Required; No Conflicts With
Instruments.............................................34
3.4 Claims and Legal Proceedings................................35
3.5 Brokers.....................................................35
3.6 Capitalization..............................................35
3.7 No Subsidiaries.............................................36
3.8 Taxes.......................................................36
3.9 Compliance With Laws........................................36
3.10 Funding.....................................................36
ARTICLE IV - COVENANTS........................................................37
4.1 Access......................................................37
4.2 Management Information......................................37
4.3 Notification of Certain Matters.............................37
4.4 Cooperation.................................................37
4.5 Confidentiality.............................................38
4.6 Conduct Prior to Closing....................................38
4.7 Exclusivity.................................................41
4.8 Publicity...................................................41
4.9 Updating of Schedules; Waiver of Claims.....................41
4.10 Notice of Majority Consent Action; Drag-Along Rights........42
4.11 Preparation for Closing.....................................42
4.12 Tax Treatment...............................................43
4.13 Recipients of Confidential Information......................44
4.14 Escrow Agreement............................................44
4.15 Tax Returns.................................................44
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ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS
OF TRANSCO
5.1 Accuracy of Representations and Warranties..................45
5.2 Performance of Obligations..................................45
5.3 Opinions of Counsel for the Company.........................45
5.4 Dissenters' Rights..........................................45
5.5 Resignations................................................45
5.6 Consents and Approvals......................................46
5.7 Material Adverse Change.....................................46
5.8 Compliance Certificate......................................46
5.9 Proceedings and Documents; Secretary's Certificate..........46
5.10 Shareholder Representation Letters..........................46
5.11 Legal Proceedings...........................................47
5.12 Termination of Options and Warrants.........................47
5.13 Conversion of Preferred Stock...............................47
5.14 Funding.....................................................47
5.15 Employment Agreements.......................................47
5.16 Stockholders Agreement......................................47
5.17 Escrow Agreement............................................47
5.18 Preliminary Merger..........................................48
5.19 Noncompetition Agreement....................................48
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
6.1 Accuracy of Representations and Warranties..................48
6.2 Performance of Obligations..................................48
6.3 Compliance Certificate......................................48
6.4 Legal Proceedings...........................................48
6.5 Opinion of Counsel for Transco..............................49
6.6 Stockholders Agreement......................................49
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.................................................49
7.2 Effect of Termination.......................................50
7.3 Amendment...................................................50
7.4 Waiver......................................................50
ARTICLE VIII - SURVIVAL AND SHAREHOLDER INDEMNIFICATION
8.1 Survival....................................................51
8.2 Participating Shareholder Indemnification; Adjustment of
Merger Consideration.....................................51
8.3 Threshold and Limitations...................................52
8.4 Procedure for Indemnification...............................52
8.5 Exclusive Remedies..........................................55
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8.6 Arbitration.................................................55
8.7 No Circular Recovery........................................56
ARTICLE IX - GENERAL..........................................................56
9.1 Expenses....................................................56
9.2 Notices.....................................................56
9.3 Severability................................................59
9.4 Entire Agreement............................................59
9.5 Assignment..................................................59
9.6 Parties in Interest.........................................59
9.7 Specific Performance........................................60
9.8 Governing Law...............................................60
9.9 Headings....................................................60
9.10 Counterparts................................................60
9.11 Waiver of Jury Trial........................................60
9.12 Consent to Jurisdiction.....................................61
9.13 Survival and Independence of Representations................61
9.14 Knowledge...................................................62
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RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
This Recapitalization Agreement and Plan of Merger (this "Agreement")
is entered into as of August 26, 1997 by and between Speaker Acquisition Corp.,
a Delaware corporation ("Transco"), and LEI Holdings, Inc., a Delaware
corporation ("Holdings" or the "Company").
RECITALS
A. The Company and Transco believe it advisable and in their respective
best interests to effect a merger of Transco with and into the Company pursuant
to this Agreement (the "Merger").
B. The Board of Directors and the stockholders of the Company have
approved the Merger in accordance with applicable law.
C. The Board of Directors of Transco has approved the Merger in
accordance with applicable law.
AGREEMENT
In consideration of the terms hereof, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
1.1 MERGER
Upon the terms and subject to the conditions of this Agreement, (a) at
the Effective Time (as defined in Section 1.3 hereof) the separate corporate
existence of Transco shall cease and Transco shall be merged with and into the
Company (the Company, as the surviving corporation of the Merger, is sometimes
referred to herein as the "Surviving Corporation"), and (b) from and after the
Effective Time, the Merger shall have all the effects of a merger under the laws
of the State of Delaware and other applicable law.
1.2 CLOSING
Upon the terms and subject to the conditions of this Agreement, the
closing of the Merger pursuant to this Agreement (the "Closing") shall take
place on the earliest practicable business day after the conditions to the
Closing of the Merger set forth in Articles V and VI hereof are satisfied or
waived (the "Closing Date") at 10:00 a.m. local time at the offices of White &
Case, 1155 Avenue of the Americas, New York, New York, or at such other time or
location as Transco and
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the Company may agree. At the Closing, subject to the conditions set forth in
Articles V and VI hereof, each of the parties hereto shall deliver all
documents, instruments, certificates and other items as may be required under
this Agreement.
1.3 EFFECTIVE TIME
On the Closing Date, and subject to the terms and conditions of this
Agreement, a certificate of merger (the "Certificate of Merger") in such form
and executed in such manner as required by the applicable provisions of the
Delaware General Corporation Law ("Delaware Law"), shall be filed with the
Delaware Secretary of State (the "Delaware Secretary"). The Merger shall become
effective on the date and at the time (the "Effective Time") of filing of the
Certificate of Merger or at such other time as may be specified in the
Certificate of Merger as filed. If the Delaware Secretary requires any changes
in the Certificate of Merger as a condition to its filing or to issuing a
certificate to the effect that the Merger has become effective under Delaware
Law, the parties hereto shall execute such documents and take such actions as
may be necessary to incorporate such changes into the Certificate of Merger and
to ensure its due and proper filing with the Delaware Secretary, provided that
such changes are not inconsistent with and do not result in any substantial
change in the terms of this Agreement.
1.4 CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
The Company shall amend its Certificate of Incorporation prior to the
Effective Time to be substantially in the form attached hereto as Exhibit 1.4.
At the Effective Time, the Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time (the "Restated Certificate")
shall become the Certificate of Incorporation of the Surviving Corporation.
Thereafter, the Certificate of Incorporation of the Surviving Corporation may be
amended in accordance with its terms and as provided by law.
1.5 BYLAWS OF SURVIVING CORPORATION
At the Effective Time, the Bylaws of the Company as in effect
immediately prior to the Effective Time shall become the Bylaws of the Surviving
Corporation. Thereafter, the Bylaws of the Surviving Corporation may be amended
in accordance with their terms, the Certificate of Incorporation of the
Surviving Corporation and as provided by law.
1.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
At the Effective Time, the directors and officers of the Surviving
Corporation shall be as set forth in Exhibit 1.6 hereto.
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1.7 MERGER CONSIDERATION
1.7.1 DETERMINATION OF ADJUSTED CASH CONSIDERATION
For purposes of this Agreement, the term "Adjusted Cash Consideration"
shall be defined as follows:
(a) $18,488,000, plus the aggregate exercise price of all
options, warrants and comparable rights exercised after the date hereof and
prior to the Effective Time (including for such purposes the aggregate exercise
price with respect to all Options exercised as provided in Section 1.7.3 below)
(the "Gross Cash Consideration"), less
(b) $1,000,000 (the "Escrow Amount") and $750,000 (the
"Working Capital Holdback"), less
(c) all amounts other than unpaid principal and accrued and
unpaid interest owing in respect of the Funded Debt (as defined in Section 1.11)
of the Company being repaid at Closing by the Surviving Corporation, less
(d) any amounts paid with respect to dividends on Company
Preferred Stock from March 31, 1997 through the Closing Date including dividends
which shall be paid by the Company immediately prior to the Closing, less
(e) Transaction Expenses (as defined in Section 9.1) paid by
the Company at or prior to the Closing, less
(f) an amount (the "Management Bonus Holdback") equal to the
total amount of management bonuses that would be due in accordance with Exhibit
1.13 attached hereto assuming that the full amount of the Escrow Amount and the
full amount of the Working Capital Holdback were required to be repaid to the
Shareholders and that all the Escrow Common (as defined in Section 1.7.5(a)
below) was required to be returned to the Shareholders from escrow in accordance
with the Escrow Agreement (as defined in Section 1.7.2(b)(iii) below).
For purposes of this Agreement, the term "Adjusted Cash Consideration
Per Share" shall mean an amount equal to (x) the Adjusted Cash Consideration
divided by (y) the total number of Closing Common Shares (as defined in Section
1.7.2 below), subject, in the case of Exercised Option Shares, to Section 1.7.3
below.
1.7.2 TREATMENT OF STOCK OF CONSTITUENT CORPORATIONS
At the Effective Time, by virtue of the Merger and without any action
on the part of the holders thereof:
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(a) All shares of any class of capital stock of the Company
held by the Company as treasury shares or otherwise shall be canceled.
(b) Each share of Common Stock, $.01 par value per share, of
the Company ("Company Common Stock") issued and outstanding immediately prior to
the Effective Time (including without limitation each share of Company Common
Stock issued upon conversion of Preferred Stock, $.01 par value per share, of
the Company ("Company Preferred Stock") immediately prior to Closing and each
Exercised Option Share (as defined below) but excluding treasury shares referred
to in Section 1.7.2(a)) (the total number of such shares, after giving effect to
the amendment of the certificate of incorporation of Holdings contemplated by
Section 1.4 above and after giving effect to any stock split effected in
accordance with Section 4.6(a) below, being referred to herein as the "Closing
Common Shares") other than Dissenting Shares (as defined below) shall entitle
the holder thereof to:
(i) the right to receive from the Surviving
Corporation the Adjusted Cash Consideration Per Share;
(ii) subject to Section 1.7.2(d), Section 1.7.5(b),
Section 1.10 and Article VIII below and to the Escrow Agreement (as defined
below), the right to retain and continue to hold a number of shares of Common
Stock (the "Stock Consideration"), par value $.01 per share, of the Surviving
Corporation ("Surviving Common"), having the rights and other terms set forth in
the Restated Certificate, equal to (A) 276,470 (the "Total Stock
Consideration"), divided by (B) the total number of Closing Common Shares;
(iii) the right to receive from the Surviving
Corporation (A) such portion of the Escrow Amount, if any, as shall be remaining
after payment of any indemnity claims to Indemnified Parties pursuant to Article
VIII of this Agreement, payable in accordance with Article VIII of this
Agreement and with the Escrow Agreement in substantially the form attached
hereto as Exhibit 1.7 (the "Escrow Agreement"), divided by (B) the total number
of Closing Common Shares;
(iv) the right to receive from the Surviving
Corporation (A) such portion of the Working Capital Holdback, if any, as shall
be remaining after payment of (1) any Price Adjustment in accordance with
Section 1.7.4(b) below and (2) any Transaction Expenses paid by the Surviving
Corporation to the extent not deducted from the Gross Cash Consideration under
Section 1.7.1(e) above, payable by the Surviving Corporation as promptly as
practicable after determination of the amount, if any, thereof, in accordance
with Section 1.7.4(b) below, divided by (B) the total number of Closing Common
Shares; and
(v) the right to receive (A) the amount of any Unpaid
Management Stay Bonuses (as defined in Section 1.13 below), divided by (B) the
total number of Closing Common Shares.
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(c) Each share of capital stock of Transco issued and
outstanding immediately prior to the Effective Time (the "Closing Transco
Shares") shall be converted into the right to receive from the Surviving
Corporation a number of shares of Surviving Common (the "Investor Shares") equal
to (i) 850,000 divided by (ii) the total number of Closing Transco Shares. The
aggregate dollar amount invested in Transco (and not withdrawn prior to Closing
by dividend or other distribution) by the holders of Closing Transco Shares
entitled to receive the Investor Shares under this paragraph, plus $1,000,000,
less the aggregate amount of any transaction fees (not to exceed $1,000,000)
paid to ▇▇▇▇ Capital, Inc., Sun Capital Partners, Inc. or any of their
Affiliates (as defined in Section 2.22 hereof) in connection with the
transactions contemplated hereby, shall be defined herein as the "Investor
Capital Contribution." The Investor Capital Contribution divided by 850,000
shall be referred to herein as the "Investor Per Share Value."
(d) Notwithstanding the provisions of Section 1.7.2(b)(i) and
(ii) above, any holder of Closing Common Shares may elect (unless such
Shareholder has waived such right to elect), by delivery of written notice to
the Company no later than 15 days after the date on which such holder receives
from the Company a copy of this Agreement and written notification of the
election rights provided by this paragraph, to retain, in lieu of all, but not
less than all, of the portion of the Adjusted Cash Consideration otherwise due
to such holder in respect of each Closing Common Share held by such holder,
other than Closing Common Shares issued or issuable upon exercise of Options in
accordance with their terms or in accordance with the provisions of Section
1.7.3 below, a number of shares of Surviving Common equal to the Adjusted Cash
Consideration Per Share divided by the Investor Per Share Value; provided,
however that the total number of shares of Surviving Common that may be retained
in respect of such elections made under this paragraph may not in any event
exceed 69,075 (the "Available Shares"). The Stock Consideration to which all
Shareholders (other than Electing Shareholders (as defined below)) are entitled
to retain under Section 1.7.2(b)(ii) above shall be reduced (but not below the
number of shares constituting the Escrow Common (as defined in Section 1.7.5(a)
below)), pro rata with respect to all such Shareholders based on their ownership
of Closing Common Shares immediately prior to the Effective Time, by the total
number of shares of Surviving Common which Shareholders elect ("Electing
Shareholders") to retain in lieu of Adjusted Cash Consideration under this
paragraph ("Election Shares"); provided, however, that in no event shall the
total number of Election Shares exceed the Available Shares. In the event that
the number of Election Shares that would otherwise be issuable under this
paragraph, but for the limitation of the total number of Election Shares to the
Available Shares, would exceed the Available Shares, then (i) the number of
Election Shares to be retained by each Electing Shareholder shall be reduced by
a sufficient number so that the total number of Election Shares does not exceed
the number of Available Shares, such reduction to be pro rata according to the
number of Closing Common Shares (excluding Closing Common Shares issued or
issuable upon exercise of Options in accordance with their terms or in
accordance with the provisions of Section 1.7.3 below) held by each Electing
Shareholder immediately prior to the Effective Time, and (ii) to the extent of
any such reduction in Election Shares, such Electing Shareholder shall be
entitled to receive the Adjusted Cash Consideration that otherwise would have
been payable to such Shareholder in respect of the number of shares so excluded
from Election Shares as if no election had been made
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as to any shares so excluded. Any portion of the Adjusted Cash Consideration
that otherwise would have been payable to Electing Shareholders but for
elections under, and other provisions of, this paragraph (d) shall be paid to
the Shareholders (other than Electing Shareholders and Dissenting Shareholders)
pro rata in accordance with their ownership of Closing Common Shares immediately
prior to the Effective Time.
(e) The Company shall ensure that all outstanding Company
Preferred Stock is converted by the holders thereof into Company Common Stock
immediately prior to the Closing.
(f) The consideration payable in respect of the Closing Common
Shares under Section 1.7.2(b) above and Section 1.7.2(d) above, and Section
1.7.3 below, shall be referred to herein collectively as the "Merger
Consideration."
(g) The approval by a Shareholder of this Agreement and the
transactions contemplated hereby (whether by written consent, by vote or by
execution of the written instrument referred to in Section 1.7.3 below) shall
constitute the agreement by such Shareholder who so approves: (i) to enter into
and be bound by the Escrow Agreement and the Stockholders Agreement (as defined
in Section 5.16 below); (ii) to appoint the Shareholder Representatives (as
defined in Section 8.4(d) below) to act on such Shareholder's behalf as set
forth herein and in the Escrow Agreement; and (iii) to make the representations
set forth in the applicable Shareholder Representation Letter referred to in
Section 5.10 hereof.
(h) The Surviving Corporation shall be entitled to reduce the
amount of cash Merger Consideration to be delivered to any Shareholder hereunder
by any amount required to be withheld under applicable law with respect to the
transactions contemplated hereby; and to the extent that the amount of cash
Merger Consideration payable hereunder to any Shareholder is not sufficient to
cover such withholding obligations, such Shareholder will be required to deliver
to the Surviving Corporation, as a condition to receiving any Merger
Consideration hereunder, cash in an amount equal to such insufficiency.
1.7.3 OPTIONS AND WARRANTS
Prior to the Effective Time, the Company shall take all action
necessary so that (i) all options, warrants and other rights (other than the
conversion rights of the Company Preferred Stock) to acquire Company Common
Stock (collectively, "Options") are either exercised in full or terminated
immediately prior to the Effective Time and (ii) there shall be no Options
outstanding at the Effective Time; provided, however, that holders of Options
may elect to exercise such Options effective upon the Effective Time by signing
and delivering to the Company prior to the Effective Time a written instrument
reasonably satisfactory to Transco and the Company evidencing the agreement of
such holder to receive upon the Effective Time, in full consideration for the
exercise of such Options and the agreement of such holder to surrender the
Company Common Stock to be received upon such exercise for cancellation, the
Merger Consideration that would otherwise have been received by such holder if
such holder had exercised such Options prior to the Effective Time
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(which Merger Consideration, in the case of the Adjusted Cash Consideration Per
Share, shall be less the exercise price payable to the Company in respect of
such Options and less any amounts required to be withheld under applicable tax
withholding laws); and provided further, that the Company's obligation under
this sentence with respect to Options held by Banc One Capital Partners, L.P.
and BOCP II, Limited Liability Company (or any affiliates thereof) shall be to
use the Company's reasonable best efforts to ensure such termination or
exercise. Any holder of Options that elects to exercise his or her Options upon
the Effective Time as contemplated by this Section 1.7.3 shall be considered a
Shareholder for purposes of this Agreement. The aggregate number of shares of
Company Common Stock subject to Options as to which such election is made are
referred to herein as "Exercised Option Shares."
1.7.4 CERTAIN ADJUSTMENTS TO GROSS CASH CONSIDERATION
(a) At the Closing, each Shareholder's (including each holder
of Exercised Option Shares) pro rata portion (in each case, the "Pro Rata
Portion") of the Escrow Amount, the Working Capital Holdback and the Management
Bonus Holdback, determined (before giving effect to any elections under Section
1.7.2(d) above) by multiplying an amount equal to $1,750,000 plus the Management
Bonus Holdback by a fraction, the numerator of which is the number of Closing
Common Shares (including Exercised Option Shares) held by such Shareholder and
the denominator of which is the total number of Closing Common Shares (including
all Exercised Option Shares), shall be deducted from the Gross Cash
Consideration as set forth in Section 1.7.1 and, in the case of the Escrow
Amount, shall be placed in a third party escrow account as provided in the
Escrow Agreement, and, in the case of the Working Capital Holdback and the
Management Bonus Holdback, shall be held by the Surviving Corporation in
accordance with Section 1.7.4(b) hereof (in the case of the Working Capital
Holdback) and Section 1.13 hereof (in the case of the Management Bonus
Holdback); provided, however, that if the portion of the Adjusted Cash
Consideration actually payable to any such Shareholder under this Article I
(after giving effect to any elections made under Section 1.7.2(d) above) (the
"Actual Cash Payment") is less than such Shareholder's aggregate Pro Rata
Portion of the sum of the Escrow Amount, the Working Capital Holdback and the
Management Bonus Holdback, then the entire amount of such Actual Cash Payment
shall be placed in escrow in accordance with the Escrow Agreement, to the extent
of such Shareholder's Pro Rata Portion of the Escrow Amount, and, to the extent
any of such Actual Cash Payment remains, shall be held by the Surviving
Corporation and paid or retained, as the case may be, in accordance with Section
1.7.4(b) hereof and Section 1.13 hereof. In such event, such Shareholder shall
be obligated, as a condition of receiving any Merger Consideration to which such
Shareholder otherwise would be entitled under this Article I, to pay over to the
escrow agent and/or to the Surviving Corporation, as the case may be, any amount
by which such Actual Cash Payment was less than such Shareholder's Pro Rata
Portion of the sum of the Escrow Amount, the Working Capital Holdback and/or the
Management Bonus Holdback, as the case may be.
(b) Holdings will deliver a balance sheet to Transco at
Closing (the "Closing Balance Sheet"). The Shareholder Representatives shall
instruct, and are hereby authorized by the
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Company to so instruct, the Company's current auditors (Price Waterhouse LLP,
Portland office) (the "Company Auditors") (x) to perform audit procedures with
respect to the reserve for inventory and the reserve for allowance for doubtful
accounts receivable set forth in the Closing Balance Sheet to determine if such
reserves are in accordance with generally accepted accounting principles applied
on a basis consistent with the preparation of the March 31, 1997 audited balance
sheet and according to the same procedures and with adjustments made on the same
basis as applied to the March 31, 1997 audited balance sheet, except that the
quantities utilized in determining the value of inventory as of the date of the
Closing Balance Sheet will be based on a physical inventory to be performed by
the Company and observed by the Company Auditors on or about the Closing Date,
and (y) to deliver to the Surviving Corporation as promptly as practicable after
the Closing, but no more than 30 days thereafter, a written summary of any
adjustments to such reserves as are necessary in light of such audit procedures
(the "PW Report"). The PW Report shall also set forth:
(i) the difference of (A) the reserve for allowance
for doubtful accounts receivable set forth in the March 31, 1997 audited balance
sheet as a percentage of total accounts receivable at such date (the "March A/R
Reserve Percentage") minus (B) the reserve for allowance for doubtful accounts
receivable at Closing as a percentage of the total accounts receivable at
Closing (after any adjustments applied by the Company Auditors as contemplated
above) (the "Closing A/R Reserve Percentage"), such difference (positive or
negative) then being multiplied by the total accounts receivable reflected on
the Closing Balance Sheet (the result being the "A/R Reserve Difference");
(ii) the difference (the "A/R Write-Off Difference")
of (A) an amount equal to (x) the total amount of all adjustments and write-offs
of accounts receivable during the fiscal year ended March 31, 1997 multiplied by
(y) a fraction, the numerator of which is the number of days elapsed from and
including April 1, 1997 through and including the Closing Date and the
denominator of which is 365, minus (B) the sum of all adjustments and write-offs
to accounts receivable for the period April 1, 1997 through the Closing Date
(the "Post March 31, 1997 Receivable Write-Offs");
(iii) the difference (the "Inventory Reserve
Difference") of (A) the dollar amount of the reserve for inventory set forth in
the March 31, 1997 audited balance sheet (the "March Inventory Reserve"), minus
(B) the dollar amount of the reserve for inventory at Closing (after any
adjustments applied by the Company Auditors as contemplated above) (the "Closing
Inventory Reserve");
(iv) the difference (the "Inventory Write-Off
Difference") of (A) an amount equal to (x) the total amount of all adjustments
and write-offs of inventory during the fiscal year ended March 31, 1997
multiplied by (y) a fraction, the numerator of which is the number of days
elapsed from and including April 1, 1997 through and including the Closing Date
and the denominator of which is 365, minus (B) the sum of all adjustments and
write-offs to inventory for
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the period April 1, 1997 through the Closing Date (the "Post March 31, 1997
Inventory Write- Offs"); and
(v) the difference (the "P/I Difference") of (A) the
amount of gross inventory determined as a result of the physical inventory minus
(B) the amount of gross inventory shown on the Closing Balance Sheet.
The findings set forth in the PW Report shall be binding for all
purposes on all parties; provided, however, that the Surviving Corporation shall
be entitled to review the PW Report solely for the purpose of verifying the
arithmetic reflected in the PW Report. Any objections to such arithmetic must be
raised by the Surviving Corporation within five business days after receipt of
the PW Report. In the event of any objection, the Surviving Corporation and the
Shareholder Representatives (as defined in Section 8.4(d) below) shall resolve
such objections or, if not resolved within five business days after the
objection is raised, shall hire an independent big six accounting firm (other
than Price Waterhouse LLP) to resolve such objections as promptly as practicable
(but in no event longer than 10 business days after such firm is retained), the
determination of such firm to be binding on the parties and the expenses of such
firm to be shared equally by the Surviving Corporation and the Shareholders.
The A/R Reserve Difference, the A/R Write-Off Difference, the Inventory
Reserve Difference, the Inventory Write-Off Difference and the P/I Difference
shall be netted, with any positive numbers offsetting negative numbers, the
result thereof being the "Net Adjustment." If the Net Adjustment is a negative
number, (x) 50% of the Net Adjustment, to the extent the Net Adjustment does not
exceed $500,000, plus (y) if the Net Adjustment exceeds $500,000, 100% of the
portion of the Net Adjustment that exceeds $500,000, plus (z) 50% of the fees of
any accounting firm hired pursuant to the previous paragraph in connection with
any objection raised by the Surviving Corporation, (the sum of clauses (x), (y)
and (z) being referred to as the "Price Adjustment"), shall be deducted from the
Working Capital Holdback, to the extent the Price Adjustment does not exceed the
Working Capital Holdback, and credited to the Surviving Corporation. In the
event that the Price Adjustment exceeds the Working Capital Holdback, any such
excess shall be paid to the Surviving Corporation from the Escrow Amount in
accordance with the Escrow Agreement. To the extent that the Working Capital
Holdback exceeds the Price Adjustment, any such excess, less any Transaction
Expenses paid by the Surviving Corporation pursuant to Section 1.12 at or after
the Closing that were not deducted from the Gross Cash Consideration, shall be
paid to the Shareholders (other than Dissenting Shareholders) in cash, pro rata
according to their ownership of Closing Common Shares immediately prior to the
Effective Time, within five business days after (x) receipt by the Surviving
Corporation of the PW Report or (y) if objections thereto are raised by the
Surviving Corporation, within five business days after resolution thereof. If
the Net Adjustment is a positive number, there shall be no Price Adjustment
under this paragraph, except that 50% of the fees of any accounting firm hired
pursuant to the previous paragraph in connection with any objection raised by
the Surviving Corporation shall be deducted from the Working Capital Holdback
and credited to the Surviving Corporation.
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(c) At the Closing, an amount equal to all amounts other than
unpaid principal and accrued and unpaid interest owing in respect of the Funded
Debt (as defined in Section 1.11 below) of the Company being repaid at Closing
by the Surviving Corporation shall be deducted from the Gross Cash Consideration
as set forth in Section 1.7.1 and shall be paid by the Surviving Corporation as
provided in Section 1.11.
(d) Immediately prior to the Closing, the Company shall pay
all accrued and unpaid dividends on Company Preferred Stock through the Closing
Date in cash to the holders thereof and the amount of such dividends, together
with any amounts previously paid with respect to dividends on Preferred Stock
from March 31, 1997, shall be deducted from the Gross Cash Consideration as set
forth in Section 1.7.1.
1.7.5 CLOSING PAYMENTS AND EXCHANGE OF CERTIFICATES
(a) At the Closing, the Surviving Corporation shall make
available, and each person or entity who holds Closing Common Shares immediately
prior to the Effective Time (collectively the "Shareholders" and individually a
"Shareholder") other than Dissenting Shareholders (as defined below) shall be
entitled to receive, upon surrender to the Surviving Corporation of one or more
certificates representing Closing Common Shares (or appropriate affidavits of
loss) or of the Option exercise instrument referred to in Section 1.7.3
(together with any other documents required to be delivered pursuant to such
instrument) in the case of Exercised Option Shares, and upon compliance with the
agreement set forth in Section 1.7.2(h) and any other conditions under this
Article I, (i), subject to Section 1.7.3 in the case of Exercised Option Shares
and to Section 1.7.4(a), a check in an amount equal to the number of Closing
Common Shares (including Exercised Option Shares) so surrendered by such
Shareholder multiplied by the Adjusted Cash Consideration Per Share and (ii) a
new stock certificate evidencing (A) the total number of shares of Surviving
Common to be retained by such Shareholder as Stock Consideration in respect of
such surrendered Closing Common Shares pursuant to Section 1.7.2(b)(ii) above,
including any Election Shares to which such Shareholder is entitled under
Section 1.7.2(d) above, minus (B) a number of shares of Surviving Common equal
to (1) the Escrow Common (as defined below), multiplied by (2) a fraction, the
numerator of which is the number of Closing Common Shares held by such
Shareholder immediately prior to the Effective Time and the denominator of which
is the total number of Closing Common Shares outstanding immediately prior to
the Effective Time. For purposes of this Agreement, the term "Escrow Common"
shall mean a number of shares of Surviving Common included in the Total Stock
Consideration equal to 176,470, less a number of shares of Surviving Common
equal to the result obtained by dividing (x) the total number of Election Shares
determined under Section 1.7.2(d) above minus the lesser of (1) the number of
Election Shares and (2) 15,372, by (y) .895062; provided, however, that in no
event shall the number of shares of Surviving Common constituting the Escrow
Common be less than 116,470.
(b) At the Closing, the Surviving Corporation shall duly
prepare, execute and issue a stock certificate evidencing the total number of
shares of Escrow Common and shall deliver
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such Escrow Common certificate to the escrow agent named in the Escrow Agreement
to be held in escrow in accordance therewith. Any Escrow Common remaining in
escrow after June 30, 1999 shall be paid over to the Shareholders in accordance
with the Escrow Agreement as promptly as practicable thereafter; provided,
however, that the escrow agent shall withhold, pursuant to the Escrow Agreement,
a number of shares of the Escrow Common sufficient to cover the potential Losses
(as defined in Section 8.2) which could be recovered pursuant to any claim for
indemnity in accordance with Article VIII hereof if written notice of such claim
for indemnity has been given to the Shareholder Representatives in accordance
with Article VIII hereof on or prior to June 30, 1999.
(c) The escrow agent named in the Escrow Agreement shall
disburse to the Shareholders, as promptly as practicable in accordance
therewith, any portion of the Escrow Amount remaining in escrow after June 30,
1998; provided, however, that the Escrow Agent shall withhold, pursuant to the
Escrow Agreement, a portion of the Escrow Amount sufficient to cover the
potential Losses (as defined in Section 8.2) which could be recovered pursuant
to any claim for indemnity in accordance with Article VIII hereof if written
notice of such claim for indemnity has been given to the Shareholder
Representatives in accordance with Article VIII hereof on or prior to June 30,
1998.
(d) If all or any portion of the Merger Consideration payable
under this Section 1.7 is to be delivered to any person other than the person in
whose name the certificate or certificates representing shares of Company Common
Stock surrendered in exchange therefor is registered, it shall be a condition to
such exchange that the person requesting such exchange shall pay to the
Surviving Corporation any transfer or other taxes required by reason of the
payment of such consideration to a person other than the registered holder of
the certificate or certificates so surrendered, or shall establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. No interest shall accrue on any portion of the Merger Consideration
payable under this Section 1.7.
1.7.6 NO FURTHER TRANSFERS
From and after the Effective Time, there shall be no further transfers
of any Closing Common Shares on the stock transfer books of the Company. If,
after the Effective Time, certificates formerly representing shares of capital
stock of the Company are presented to the Surviving Corporation for transfer,
they shall be treated in accordance with this Article I.
1.8 PRELIMINARY MERGER
Subject to the condition set forth in the following sentence,
immediately prior to the Closing, the Company shall cause Labtec Enterprises,
Inc., a Washington corporation and wholly owned subsidiary of the Company
("Labtec"), to be merged with and into the Company, with the Company as the
surviving corporation of such merger (the "Preliminary Merger"). The Company's
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obligation to effect the Preliminary Merger shall be conditioned upon
satisfaction or waiver of the conditions set forth in Section 5.6 below.
1.9 DISSENTERS' RIGHTS
Any Closing Common Shares held by any Shareholder who, in accordance
with Section 262 of Delaware Law, dissents from the Merger (a "Dissenting
Shareholder") and requires appraisal of such Dissenting Shareholder's shares
("Dissenting Shares") shall not entitle such Dissenting Shareholder to receive
such Dissenting Shareholder's pro rata interest in the Merger Consideration as
described elsewhere in this Article I but instead shall become the right to
receive from the Surviving Corporation such consideration as may be determined
to be due to such Dissenting Shareholder pursuant to Delaware Law; provided,
however, that Dissenting Shares outstanding at the Effective Time and held by a
Dissenting Shareholder who shall after the Effective Time withdraw such
Dissenting Shareholder's demand for appraisal or lose such Dissenting
Shareholder's right of appraisal as provided by Delaware Law shall be deemed to
be converted as of the Effective Time into the right to receive the
consideration that would otherwise have been payable in respect thereof under,
and on the terms and conditions set forth in, this Agreement if no dissent had
been made. Promptly after execution and delivery of this Agreement, the Company
shall take such actions as are necessary to comply with the requirements of
Section 262 of Delaware Law, as it relates to mergers approved pursuant to
Section 228 of Delaware Law, and shall use commercially reasonable efforts to
ensure that the deadline under Section 262 of Delaware Law for demands for
appraisal in respect of the Merger shall have expired prior to the Effective
Time. Prior to the Effective Time, the Company will not settle any demand with
respect to any Dissenting Shares without the consent of Transco. The Company
shall give notice to Transco promptly after it is notified that any Shareholder
has elected or attempted to exercise appraisal rights. Notwithstanding anything
in Article VIII to the contrary, including without limitation provisions
relating to the Threshold (as defined in Section 8.3(a)), all amounts paid by
the Surviving Corporation to any Dissenting Shareholder pursuant to a judgment
in or settlement of a proceeding relating to Dissenting Shares which exceed the
value of the Merger Consideration which would have been paid to such Dissenting
Shareholder had he not dissented shall be paid to the Surviving Corporation from
the Escrow Amount. Nothing in this Agreement is intended or shall be construed
as an agreement or admission that any statutory appraisal rights are or may be
available with respect to the transactions contemplated hereby.
1.10 NO FRACTIONAL SHARES; AGGREGATION
No certificates or scrip representing fractional shares of Surviving
Common shall be issued pursuant to the Merger, and no dividend, stock split or
other distribution with respect to Surviving Common shall relate to any such
fractional interest, and any such fractional interests shall not entitle the
owner thereof to vote or to any rights of a security holder. Each Shareholder's
Closing Common Shares shall be aggregated, rather than considered on a share by
share basis, in determining the portion of the total Merger Consideration to
which such Shareholder is entitled under this Agreement.
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1.11 REPAYMENT OF FUNDED DEBT
At Closing, the Surviving Corporation shall repay in full all
indebtedness of the Company and its Subsidiaries (as defined below) owing under
(i) the Loan and Security Agreement dated June 27, 1996, as amended and in
effect from time to time, between Fleet Capital Corporation and Labtec, and
agreements and documents relating thereto (together, the "Fleet Facility"), and
(ii) the Subordinate Loan and Warrant Purchase Agreement dated September 6,
1994, as amended and in effect from time to time, among Banc One Capital
Partners Corporation, Banc One Capital Partners II, Limited Partnership and the
Company, and agreements and documents relating thereto (together, the "Banc One
Obligation") for borrowed money, together with all accrued and unpaid interest
thereon through the Closing Date and all prepayment penalties and other
obligations due in respect thereof upon repayment and termination (collectively,
the "Funded Debt").
1.12 PAYMENT OF TRANSACTION EXPENSES
The Surviving Corporation shall pay in full, on behalf of the
Shareholders, any and all Transaction Expenses that are presented by the
Shareholder Representatives to the Surviving Corporation or any Subsidiary
thereof for payment after the Effective Time, only to the extent that such
Transaction Expenses, together with any Price Adjustment under Section 1.7.4(b)
above, do not exceed the Working Capital Holdback, and only if such Transaction
Expenses were not deducted from the Gross Cash Consideration at Closing, and the
Transaction Expenses so paid shall be credited to the Surviving Corporation from
the Working Capital Holdback.
1.13 MANAGEMENT BONUS PAYMENTS
After the Closing, the Surviving Corporation shall satisfy the cash
payment obligations described on Exhibit 1.13 relating to the payment of bonuses
to members of management of Labtec specified in such Exhibit in the amounts, at
the times and subject to the conditions specified therein. In no event will the
total amount of all bonuses payable under this Section 1.13 exceed the amount of
the Management Bonus Holdback. Any amount of the Management Bonus Holdback not
required to be paid as provided in Exhibit 1.13 (the "Unpaid Management Stay
Bonuses") by or on behalf of the Surviving Corporation to management shall be
paid in cash by the Surviving Corporation to the Shareholders (excluding
Dissenting Shareholders), promptly after the determination not to pay any such
amounts, in accordance with Section 1.7.2(b)(v) above.
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ARTICLE II - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
To induce Transco to enter into and perform this Agreement, the Company
represents and warrants to Transco as follows in this Article II.
2.1 ORGANIZATION AND GOOD STANDING
Each of the Company and each of its Subsidiaries (as defined below) is
a corporation duly organized, validly existing and in good standing under the
laws of the state or other jurisdiction of its incorporation, and has all
requisite corporate power and authority to own, operate and lease its properties
and to carry on its business as now being conducted. Each of the Company and
each of its Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing as such in each jurisdiction in which their
operations or ownership or leasing of property makes such qualification and good
standing necessary, except as has not had and could not reasonably be expected
to have, individually or in the aggregate, a material adverse change in or
effect on the business, operations, prospects or financial or other condition of
the Company and its Subsidiaries taken as a whole (a "Company Adverse Effect").
The jurisdictions in which the Company and its Subsidiaries are incorporated and
qualified to do business are listed in Section 2.1 of the Schedule of Exceptions
attached hereto (the "Schedule of Exceptions"). The Company has delivered to
Transco true and correct copies of the charter documents and bylaws, or
equivalent organizational documents, of the Company and each of its
Subsidiaries, all as amended through the date of this Agreement.
2.2 SUBSIDIARIES
Holdings does not own or control, directly or indirectly, any
corporation, partnership, limited liability company or other business entity
other than Labtec , Labtec Enterprises (UK), Ltd., a British corporation
("Labtec UK"), and Labtec Enterprises (Hong Kong), Ltd., a Hong Kong corporation
("Labtec Hong Kong") (together, the "Subsidiaries").
2.3 POWER, AUTHORIZATION AND ENFORCEABILITY
Holdings has full corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. All corporate action on the part of Holdings
necessary for the due authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by
Holdings has been taken, except the notification referred to in Section 4.10
below. This Agreement and the consummation of the transactions contemplated
hereby have been duly authorized, and this Agreement has been duly executed and
delivered, by Holdings and is a legal, valid and binding obligation of Holdings,
enforceable against Holdings in accordance with its terms. The Merger and this
Agreement have been approved and adopted by the holder of all shares of Company
Preferred Stock issued and outstanding as of the date of this Agreement and
- 14 -
by the holders of not less than 99% of the shares of Company Common Stock issued
and outstanding as of the date of this Agreement, and such approval is
sufficient to constitute approval of this Agreement and the Merger by the
Company's stockholders pursuant to the requirements of Delaware Law. All
solicitations and other information provided to shareholders in connection with
such approval and adoption, and all steps taken by or on behalf of the Company
in connection with the foregoing, have complied in all material respects with
applicable laws.
2.4 NO APPROVALS; NO CONFLICTS
The execution, delivery and performance of this Agreement by Holdings,
and the consummation by Holdings of the transactions contemplated hereby
(including, without limitation, the consummation of the Merger and the
Preliminary Merger), will not (a) constitute a violation (with or without the
giving of notice or lapse of time or both) of any provision of any domestic or
foreign law applicable to the Company or any of its Subsidiaries, (b) require
any consent, approval or authorization of, or the making of any declaration,
filing, registration, qualification or recording with, any individual,
corporation, partnership, association, trust, joint venture, unincorporated
organization or other entity or any domestic or foreign governmental authority
("Person"), by or on behalf of the Company or any of its Subsidiaries, except as
set forth in Section 2.4(b) of the Schedule of Exceptions, (c) result in a
default under, an acceleration or termination of, or the creation in any party
of the right to accelerate, terminate, modify or cancel, or any other cause of
action under, any material agreement, lease, note or other restriction,
encumbrance, obligation or liability to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound or to which any of their assets are subject, except as set forth in
Section 2.4(c) of the Schedule of Exceptions, (d) result in the creation of any
lien or encumbrance upon, or forfeiture of, any of the Company's assets, (e)
conflict with or result in a breach of or constitute a default under any
provision of the charter documents or bylaws of the Company or any of its
Subsidiaries, or (f) require any severance payments, stay bonuses or other
special compensation to be made by the Company or its Subsidiaries other than as
contemplated by Section 1.13 hereof.
2.5 CAPITALIZATION
(a) The authorized capital stock of Holdings consists solely
of 134,000 shares of Company Common Stock (which shall be increased prior to
Closing as contemplated by Section 1.4 and 4.6(a) hereof) and 34,000 shares of
Company Preferred Stock. As of the date of this Agreement, 78,986 shares of
Company Common Stock and 34,000 shares of Company Preferred Stock are issued and
outstanding (the "Outstanding Shares"), which Outstanding Shares are held of
record as set forth in Section 2.5(a) of the Schedule of Exceptions. The
Outstanding Shares are duly authorized, validly issued, fully paid and
nonassessable. Except as specified in Section 2.5(a) of the Schedule of
Exceptions, there is no agreement or charter or by-law provision which obligates
the Company to purchase or redeem any equity securities or options, warrants or
other rights to acquire equity securities of the Company. The Company has
provided Transco
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with true and complete copies of all certificates or other documents or
instruments evidencing or representing the outstanding Company Preferred Stock
and all outstanding options, warrants and other rights, if any, to purchase
equity securities of the Company. The Company has also provided Transco with
true and complete copies of all agreements pursuant to which the Company may
exercise drag-along rights in connection with the transactions contemplated by
this Agreement and such agreements have not expired or been terminated and no
rights thereunder have been waived by the Company. Immediately prior to the
Merger, (i) the Company will have no outstanding equity securities other than as
specified in Section 2.5(a) of the Schedule of Exceptions (subject to increase
pursuant to the stock split referred to in Section 4.6(a) below) and (ii) the
Company shall have no obligation to pay any dividends or other Distributions (as
defined in Section 2.7(j), other than accrued dividends on the Company Preferred
Stock which shall be paid in cash immediately prior to Closing and the full
amount of which shall be deducted from the Gross Cash Consideration as
contemplated by Sections 1.7 and 4.6(a). All holders of the capital stock,
options, warrants and other rights to acquire equity securities of the Company
who executed the written consent of stockholders approving this Agreement are
"accredited investors" as defined in Regulation D under the Securities Act of
1933, as amended.
(b) The authorized capital stock of Labtec consists solely of
500 shares of common stock, no par value. As of the date of this Agreement, 48.7
shares of such common stock are issued and outstanding, which shares are duly
authorized, validly issued, fully paid and nonassessable. The authorized capital
stock of Labtec Hong Kong consists solely of 1,000 ordinary shares, HK$10.00 par
value. As of the date of this Agreement, 1,000 such ordinary shares are issued
and outstanding, which shares are duly authorized, validly issued, fully paid
and nonassessable. The authorized capital stock of Labtec UK consists solely of
100 ordinary shares, (pound)1,00 par value. As of the date of this Agreement,
two such ordinary shares are issued and outstanding, which shares are duly
authorized, validly issued, fully paid and nonassessable. Except as set forth in
Section 2.5(b) of the Schedule of Exceptions, Holdings owns of record and
beneficially all outstanding capital stock of Labtec, and Labtec owns of record
and beneficially all outstanding capital stock of Labtec Hong Kong and Labtec
UK, in each case free and clear of any Lien (as defined in Section 2.9(b)),
right of first refusal or option.
(c) Except as set forth in Section 2.5(c) of the Schedule of
Exceptions, there are no outstanding or authorized subscriptions, options,
warrants, calls, rights, commitments or other agreements of any character which
obligate or may obligate Holdings or any of its Subsidiaries to issue any
additional shares of capital stock or any securities convertible into or
evidencing the right to subscribe for any shares of capital stock, other than
Section 4.6(a) of this Agreement.
2.6 FINANCIAL STATEMENTS
The Company has delivered to Transco (a) audited consolidated balance
sheets and audited consolidated statements of operations and retained earnings
and cash flows of the Company as of March 31, 1995, 1996 and 1997 and
accompanying notes, certified by Price
- 16 -
Waterhouse LLP, independent certified public accountants, and (b) an unaudited
consolidated balance sheet and unaudited consolidated statements of operations
and retained earnings and cash flows of the Company as of June 30, 1997. All
such financial statements (collectively, the "Financial Statements") have been
prepared from the books and records of the Company in conformity with generally
accepted accounting principles ("GAAP") on a basis consistent with prior
accounting periods and present fairly, in all material respects, the financial
position, results of operations and changes in cash flows of the Company and its
Subsidiaries as of the dates and for the periods indicated, subject, in the case
of the unaudited Financial Statements referred to in clause (b) above, to normal
recurring period-end audit adjustments and to the absence of footnotes. The
Company has delivered to Transco the monthly unaudited consolidated financial
statements of the Company and its Subsidiaries prepared by the Company's
management in the ordinary course of business, consistent with past practice,
for internal use for the months of April, May, June and July 1997. Neither the
Company nor any of its Subsidiaries has any material liabilities or obligations
of any kind which are not reflected or reserved against in the balance sheet of
the Company dated June 30, 1997, except liabilities and obligations (x) under
contracts, agreements and similar instruments that would not be required by GAAP
to be recorded or disclosed in such balance sheet and do not result from any
breach of contract or of applicable law or, (y) incurred since such date in the
ordinary course of business. The total amount of Debt of the Company as of March
31, 1997 was $21,512,000.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as set forth in Section 2.7 of the Schedule of Exceptions, since
March 31, 1997 neither the Company nor any of its Subsidiaries has:
(a) taken any action or entered into or agreed to enter into
any transaction, agreement or commitment (other than this Agreement) other than
in the ordinary course of business, consistent with past practice;
(b) failed to administer its capital expenditures or deferred
charges program in the ordinary course of business;
(c) sold, leased to others or otherwise disposed of any
material amount of assets (except for sales of inventory in the ordinary course
of business and except as otherwise required by the terms of this Agreement);
(d) entered into any contract, agreement or other binding
obligation, other than this Agreement and any other agreements entered into by
the Company after the date hereof for the purpose of effecting the Preliminary
Merger, relating to (i) the purchase of any equity securities or options,
warrants or other rights to acquire equity securities of any Person, (ii) the
purchase of assets either material in amount or constituting a business or (iii)
any merger, consolidation or other business combination;
- 17 -
(e) canceled or compromised any Debt owing to the Company or
any material claim in excess of $20,000 individually or $100,000 in the
aggregate, waived or released any right of material value in excess of $20,000
individually or $100,000 in the aggregate, or instituted, settled or agreed to
settle any material litigation (provided that such dollar limitations set forth
in this Section (e) shall not apply with respect to claims or rights against an
Affiliate or employee of the Company and its Subsidiaries);
(f) (i) experienced any actual or threatened employee strikes,
work stoppages, slow-downs or lock-outs, or (ii) changed the compensation or
terms of employment provided to the Company's officers or employees earning more
than $100,000 per annum or (iii) except as set forth in Schedule 2.7(f), paid or
agreed or orally promised to pay, conditionally or otherwise, any extra
compensation to any such person (including, without limitation, any such
payments to be made to employees of the Company in connection with and/or from
the proceeds of the transactions contemplated hereby, excluding the payments
contemplated by Section 1.13 hereof);
(g) disposed of or permitted to lapse any rights to the use of
any material trademark, service ▇▇▇▇, trade name, patent, copyright or other
intellectual property right;
(h) (i) made any change in any method of accounting or
accounting practice or in its pricing, billing, payment, collection or credit
policies or practices other than in the ordinary course of business or (ii)
granted any extensions of credit other than in the ordinary course of business
or (iii) failed to pay any creditor any amount owed to such creditor when due
other than in the ordinary course of business in connection with bona fide
claims or disputes;
(i) made any gifts or sold, leased, transferred or exchanged
any material property for less than the fair value thereof;
(j) (i) made, declared or paid any dividend or other
distribution on or in respect of any equity security of the Company (except as
contemplated by Section 4.6(a) below); (ii) purchased, redeemed or otherwise
retired any equity security of the Company, directly or indirectly; or (iii)
made any payment or other distribution on or in respect of the principal of,
interest on, or otherwise relating to, directly or indirectly, any Debt (as
defined below) owing to any Affiliate (excluding the Banc One Obligation) (any
of the foregoing being a "Distribution") (other than (x) the accrual of
dividends on the Company Preferred Stock or (y) payment or satisfaction of
dividends accrued on the Company's Preferred Stock to the extent such dividends
are either (a) paid in cash, the full amount of which is deducted from Gross
Cash Consideration at Closing or (b) satisfied by conversion of Company
Preferred Stock into Company Common Stock included within the Closing Common
Shares);
(k) incurred or otherwise become liable in respect of any Debt
(as defined below), except for money borrowed in the ordinary course of business
by the Company and its subsidiaries under the currently existing revolving
credit facilities pursuant to the Fleet Facility (including without limitation
for the purpose of making principal and interest payments on the
- 18 -
Banc One Obligation and for the purpose of paying accrued and unpaid dividends
on Company Preferred Stock) ("Permitted Debt");
(l) experienced any material adverse change in its
relationships with its employees, agents, customers, distributors, manufacturers
or suppliers, except as has not had and could not reasonably be expected to
have, individually or in the aggregate, a Company Adverse Effect;
(m) acquired any corporation, partnership, other business
organization or division thereof;
(n) entered into any transactions otherwise than on an arms'
length basis;
(o) entered into or performed any transaction with any
Affiliate (as defined in Section 2.22 below) of the Company (other than
transactions entered into (i) among the Company and its Subsidiaries in the
ordinary course of business or (ii) as contemplated by this Agreement);
(p) entered into any contract, agreement or other binding
obligation to do any of the things referred to in clauses (a) through (o) above;
or
(q) experienced any event or series of events which has had or
could reasonably be expected to have, individually or in the aggregate, a
Company Adverse Effect.
For purposes of this Agreement:
(1) The term "Debt" shall mean, with respect to any Person,
all obligations of such Person (i) for borrowed money, (ii) evidenced by notes,
bonds, debentures or similar instruments, (iii) under or relating to letters of
credit (including without limitation any obligation to reimburse the letter of
credit issuer with respect to amounts drawn under such instruments), (iv) for
the deferred purchase price of goods or services (other than trade payables or
accruals incurred and paid in the ordinary course of business, but only to the
extent that such payables or accruals are not interest-bearing and all
applicable discounts for prompt payment are taken in the ordinary course of
business), (v) under capital leases, (vi) with respect to check overdrafts,
cash/book overdrafts or otherwise reflected as negative cash in financial
statements of such Person, (vii) for deferred compensation, (viii) to pay any
accrued dividends (except, in the case of Company Preferred Stock, to the extent
that such dividends are satisfied in full through conversion of Company
Preferred Stock into Company Common Stock included within the Closing Common
Shares or payment in cash of accrued and unpaid dividends on the Company
Preferred Stock to the extent deducted from the Gross Cash Consideration at
Closing), (ix) constituting a stated amount or liquidation preference amount of
any equity security entitled to any preference over the Company Common Stock
(except, in the case of Company Preferred Stock, to the extent that such
securities are canceled without further obligation through the conversion, at or
prior to Closing, of such securities into Company Common Stock that is
- 19 -
included within the Closing Common Shares) and (x) in the nature of Guarantees
(as defined below) of the obligations described in clauses (i) through (ix)
above of any other Person;
(2) The term "Guarantee" shall mean (A) any guarantee of the
payment or performance of, or any contingent obligation in respect of, any Debt
or other obligation of any other Person, (B) any other arrangement whereby
credit is extended to one obligor on the basis of any promise or undertaking of
another Person (i) to pay the Debt of such obligor, (ii) to purchase any
obligation owed by such obligor, (iii) to purchase or lease assets (other than
inventory in the ordinary course of business) under circumstances that would
enable such obligor to discharge one or more of its obligations, or (iv) to
maintain the capital, working capital, solvency or general financial condition
of such obligor, and (C) any liability as a general partner of a partnership or
as a venturer in a joint venture in respect of Debt or other obligations of such
partnership or venture).
2.8 TAXES
(a) The Company and Subsidiaries have filed all Tax (as
defined below) returns (including without limitation all local, state, federal
and foreign Tax returns where the Company or its Subsidiaries are required to
file) required to have been filed by them, and have paid all Taxes owed by any
of the Company any of its Subsidiaries or for which the Company and its
Subsidiaries are otherwise liable (whether or not shown as owing on any Tax
return). The Company has included on any U.S. federal, state and local income
Tax returns filed by it all income of its Subsidiaries required to be included
therein. All such Tax returns were true, correct and complete in all respects.
There is no dispute, claim, action, suit, proceeding, audit, deficiency or
assessment pending concerning any Taxes of the Company or any of its
Subsidiaries either (i) claimed or raised by any governmental authority in
writing or (ii) as to which the Company or its Subsidiaries otherwise have
knowledge. No Tax returns filed by the Company or any of its Subsidiaries in the
last three years have been audited or are currently being audited, except as set
forth in Section 2.8 of the Schedule of Exceptions. The Company has made
available to Transco correct and complete copies of all federal, state, local or
foreign income Tax returns filed by the Company or any of its Subsidiaries in
the last three years and any examinations, reports, statements of deficiencies,
assessed against or agreed to by either the Company or any of its Subsidiaries
since January 1, 1994. Neither the Company nor any of its Subsidiaries has
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax. Neither the Company nor any of its Subsidiaries
is a party to any Tax allocation or sharing agreement. Neither the Company nor
any of its Subsidiaries has been a member of an affiliated group of corporations
(within the meaning of Section 1502 of the Internal Revenue Code of 1986, as
amended (the "Code")) filing a consolidated federal income Tax return (other
than a group the common parent of which was Holdings) or has any liability for
the Taxes of any Person (other than any of the Company and its Subsidiaries)
under Treasury Regulation section 1.1502-6 (or any similar provision of state,
local or foreign law) as a transferee or successor, by contract or otherwise.
For purposes of this Agreement, the term "Tax" means any federal, state, local,
or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp,
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occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto, whether disputed or not.
(b) No written claim has ever been made by a taxing authority
in a jurisdiction where any of the Company and its Subsidiaries does not file
Tax returns that it is or may be subject to taxation by that jurisdiction. There
are no security interests in any of the assets of either the Company or any of
its Subsidiaries that arose in connection with any failure (or alleged failure)
to pay any Tax.
(c) Neither the Company nor any of its Subsidiaries has filed
a consent under Section 341(f) of the Code concerning collapsible corporations.
Neither the Company nor any of its Subsidiaries has made any payments, is
obligated (or after giving effect to the transactions contemplated by Section
1.13 hereof will be obligated) to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code. Neither the
Company nor any of its Subsidiaries has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The
Company and its Subsidiaries have disclosed on their federal income Tax returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662 of the Code.
(d) The unpaid Taxes of the Company and its Subsidiaries (A)
did not, as of March 31, 1997, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the balance sheet as of March 31,
1997 (rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company and its Subsidiaries in filing their Tax
returns.
(e) No powers of attorney with respect to Taxes of the Company
or any of its Subsidiaries are currently in force.
(f) The Company and its Subsidiaries have withheld and paid to
the IRS or the appropriate state, local, or foreign taxing authority all amounts
required to be withheld from the wages of its employees prior to the date hereof
under federal law, state law, foreign law and the applicable provisions of the
Code.
(g) All contributions and other Taxes due form the Company and
its Subsidiaries pursuant to any unemployment insurance or workers compensation
laws and all sales or use Taxes which are due or payable by the Company or
Subsidiary prior to the date hereof have been paid in full.
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(h) All Tax sharing agreements or similar agreements with
respect to or involving the Company and its Subsidiaries shall be terminated as
of the Closing Date and, after the Closing Date, the Company and its
Subsidiaries shall not be bound thereby or have any liability thereunder.
2.9 PROPERTY
(a) Section 2.9(a) of the Schedule of Exceptions contains a
complete and accurate list of all real property (the "Real Property") and all
personal property excluding inventory with a value in excess of $3,000 (the
"Personal Property") owned, leased or used by the Company or any of its
Subsidiaries. Except as set forth in Schedule 2.9(a), the Company and its
Subsidiaries have valid and subsisting leasehold interests in, or a contractual
right to use, all Real Property, with the right to occupy and use the same for
their intended purposes.
(b) The Company and its Subsidiaries have good and marketable
title to, or, in the case of property held under lease or other contractual
obligation, a valid and enforceable right to use under an enforceable lease or
license, all of its properties, rights and assets, whether real or personal and
whether tangible or intangible (excluding Intellectual Property (as defined in
Section 2.14 below)) used or useful in the conduct of the business of the
Company as currently conducted, including, without limitation, all properties,
rights and assets reflected in the Financial Statements (except as sold or
otherwise disposed of since March 31, 1997 in the ordinary course of business).
The Company has delivered to Transco true and complete copies of all leases,
subleases, rental agreements, notices, memoranda or short forms of leases and
related tenant estoppel certificates, subordination agreements, nondisturbance
agreements, recognition agreements or attornments, contracts of sale, tenancies,
easements or licenses of all or any portion of the Real Property or Personal
Property. The Real Property or Personal Property are not subject to any liens,
mortgages, pledges, deeds of trust, security interests, conditional sales
agreements, charges, encumbrances and other adverse claims of interest of any
kind (collectively, "Liens"), except Liens described in Section 2.9(b) of the
Schedule of Exceptions.
(c) Except as set forth in Section 2.9(c) of the Schedule of
Exceptions, there are no zoning, building or land use codes, rules, ordinances
or regulations that materially restrict the use of all or any portion of the
Real Property for the conduct thereon of the business of the Company. All
facilities on such Real Property have received all necessary approvals of
governmental authorities (including licenses and permits) required in connection
with use and operation thereof and such facilities have been operated and
maintained in material compliance with all applicable laws and regulations.
(d) Each lease to which the Company or any of its Subsidiaries
is a party of any portion of the Real Property, and each lease, license, rental
agreement, contract of sale or other agreement to which the Personal Property is
subject, is valid and in good standing, the Company and its Subsidiaries have
complied in all material respects with its obligations
- 22 -
thereunder, and neither the Company and its Subsidiaries nor, to the knowledge
of the Company, any other party thereto is in default thereunder in any material
respect, nor is there any event which, with the giving of notice or lapse of
time or both, would constitute a material default thereunder by the Company and
its Subsidiaries or, to the knowledge of the Company, any other party thereto.
The Company or its Subsidiaries have not received notice of any default under a
lease, license or rental agreement for Real Property or notice that any party to
any such lease, license, rental agreement, contract of sale or other agreement
to which the Company or any of its Subsidiaries is a party intends to cancel,
terminate or refuse to renew the same or to exercise or decline to exercise any
option or other right thereunder.
(e) There are no leases, subleases, service contracts,
tenancies or licenses of any portion of the Real Property, except as listed in
Section 2.9(e) of the Schedule of Exceptions.
(f) All Personal Property is in good working order, operating
condition and state of repair, ordinary wear and tear excepted. To the Company's
and its Subsidiaries' knowledge, all leased real property of the Company and its
Subsidiaries included in the Real Property is in reasonably good physical
condition commensurate with its current use.
2.10 COMPLIANCE WITH LAWS
Except as set forth in Section 2.10 of the Schedule of Exceptions, the
Company has complied and continues to comply with all federal, state, local and
foreign laws, rules, regulations, ordinances, decrees and orders applicable to
the Company or its Subsidiaries, its business and the properties owned, leased
or used by the Company or its Subsidiaries, including without limitation all
laws relating to intellectual property protection, antitrust matters, consumer
protection, import and export matters, currency exchange, environmental
protection, equal employment opportunity, health and occupational safety,
pension and employee benefit matters, securities and investor protection matters
and labor and employment matters, except as could not reasonably be expected to
have, individually or in the aggregate, a Company Adverse Effect. Neither the
Company nor any Subsidiary thereof has received notification of any unasserted
present or past unremedied material failure to comply with any laws, rules,
regulations, ordinances, decrees and orders.
2.11 MATERIAL CONTRACTS
Section 2.11 of the Schedule of Exceptions contains a complete and
accurate list of all material contracts, agreements, instruments and
arrangements to which the Company or any of its Subsidiaries is a party (a true
and complete copy of each of which has been delivered by the Company to Transco)
(the "Material Contracts"), including without limitation the following:
(a) All collective bargaining agreements and other labor
agreements; all employment or consulting agreements (including, without
limitation, all contracts concerning the management or operation of any real
property) or forms thereof, all Employee Benefit Plans (as defined below) and
all other plans, agreements, arrangements or practices which constitute
- 23 -
compensation or benefits to any of the directors, officers or employees of the
Company or any of its Subsidiaries;
(b) All contracts, agreements and similar obligations under
which the Company or any of its Subsidiaries is or may become obligated to pay
any legal, accounting, brokerage, finder's or similar fees or expenses in
connection with, or to incur any severance pay or special compensation
obligations which would become payable by reason of, this Agreement or the
consummation of the transactions contemplated hereby;
(c) All contracts, agreements and similar obligations under
which the Company or any of its Subsidiaries is or will after the Closing be (i)
restricted from carrying on any business or other activities anywhere in the
world or (ii) bound to participate in any allocation or sharing of Taxes;
(d) All contracts, agreements and similar obligations
(including, without limitation, options) to (i) sell or otherwise dispose of any
Assets except in the ordinary course of business or (ii) purchase or otherwise
acquire any material property or properties except in the ordinary course of
business;
(e) All contracts, agreements and similar obligations under
which the Company or any of its Subsidiaries has or will after the Closing have
any liability or obligation to or for the benefit of any Affiliate of the
Company;
(f) All contracts, agreements and similar obligations under
which the Company or any of its Subsidiaries has any liability or obligation for
Debt or constituting or giving rise to a Guarantee of any liability or
obligation of any Person, or under which any Person has any liability or
obligation constituting or giving rise to a Guarantee of any liability or
obligation of the Company or any of its Subsidiaries (including, without
limitation, partnership and joint venture agreements);
(g) All contracts, agreements and similar obligations under
which the Company or any of its Subsidiaries may become obligated to pay any
amount in excess of $100,000 in respect of indemnification obligations, purchase
price adjustment or otherwise in connection with any (i) acquisition or
disposition of real property or of property constituting a product line, (ii)
other acquisition or disposition of assets other than sales of inventory in the
ordinary course of business, (iii) acquisition or disposition of securities,
(iv) assumption of liabilities or warranty, (v) settlement of claims, (vi)
merger, consolidation or other business combination, or (vii) any series or
group of related transactions or events of a type specified in subclauses (i)
through (vi);
(h) All distributorship or supply agreements, all contracts
with any governmental authority and all other contracts, agreements and similar
obligations with distributors, manufacturers, suppliers, vendors, or other
suppliers of goods or services (other than contracts, agreements and similar
obligations with customers or other purchasers with respect to
- 24 -
sales of goods or services of the Company), including, without limitation,
purchase or sales or service orders, which, in the case of any of the foregoing,
individually (or together with any related agreements or orders) are likely to
involve payments by or on behalf of, or to, the Company and its Subsidiaries in
excess of $100,000 during the fiscal year ended March 31, 1998 or $100,000 over
the shorter of (x) the twelve-month period beginning on the date hereof or (y)
the remaining term of the contract;
(i) All contracts with customers or other purchasers of goods
or services of the Company, including without limitation, purchase orders, which
individually, or together with related agreements or orders, are likely to
involve payments to the Company in excess of $500,000 during the fiscal year
ended March 31, 1998 or $500,000 over the shorter of (x) the twelve-month period
beginning on the date hereof or (y) the remaining term of the contract, which
contracts represent all material sales agreements and orders with the top 30
customers (by dollar volume for the 12 months ended June 30, 1997) of the
Company and its Subsidiaries taken as a whole; and
(j) All sales representative agreements to which the Company
or any of its Subsidiaries is party.
Except as set forth in Section 2.11 of the Schedule of Exceptions, all
such Material Contracts are valid and in full force and effect, the Company has
performed in all material respects its obligations thereunder, and there are
not, under any of the Material Contracts, any defaults or events of default on
the part of the Company or, to the Company's knowledge, any other party thereto,
except in each case as could not reasonably be expected to have, individually or
in the aggregate, a Company Adverse Effect. The Company has not received notice
that any party to any such Material Contract intends to cancel, terminate or
refuse to renew such contract or to exercise or decline to exercise any option
or right thereunder.
2.12 CLAIMS AND LEGAL PROCEEDINGS
Except as set forth in Section 2.12 of the Schedule of Exceptions,
there are no material claims, actions, suits, arbitrations or proceedings
("Actions") pending or, to the Company's knowledge, threatened against the
Company, nor, to the knowledge of the Company, are there any investigations of
the Company pending or threatened, before or by any domestic or foreign
governmental or nongovernmental department, commission, board, bureau, agency or
instrumentality or any other body. There is no Action pending (or, to the
knowledge of the Company, threatened), which seeks rescission of, seeks to
enjoin the consummation of, or otherwise relates to, this Agreement or any of
the transactions contemplated hereby. There are no material outstanding or
unsatisfied judgments, orders, decrees, stipulations or settlements to which the
Company is a party which could reasonably be expected to have, individually or
in the aggregate, a Company Adverse Effect.
- 25 -
2.13 LABOR MATTERS
Except as set forth in Section 2.13 of the Schedule of Exceptions,
there are no material disputes, employee grievances or disciplinary actions
pending or, to the knowledge of the Company, threatened between the Company or
any of its Subsidiaries and any of its current or former employees. Neither the
Company nor any of its Subsidiaries is a party to any collective bargaining
agreement with any labor union, and has no knowledge of any organizational
efforts by or on behalf of any labor union with respect to the employees of the
Company or any of its Subsidiaries. Except as set forth in Section 2.13 of the
Schedule of Exceptions, and except for any matters that will be fully performed,
terminated or expired as of the Closing with no further obligation on the part
of the Company or any of its Subsidiaries, neither the Company nor any of its
Subsidiaries is a party to any management, employment or other contract
providing for the employment or rendition of executive services; employment
contract that is not terminable without penalty by the Company or its
Subsidiaries on no more than 30 days' notice; or bonus, incentive, deferred
compensation, severance pay, pension, profit-sharing, retirement, stock
purchase, stock option, employee benefit or similar plan, agreement or
arrangement.
2.14 INTELLECTUAL PROPERTY
The Company owns, or has a contractual right to use, all patents,
copyrights, trademarks, trade names, service marks, licenses, trade secrets,
know-how, other proprietary information and other intellectual property rights
("Intellectual Property") now used by the Company or any of its Subsidiaries in
its business, except as could not reasonably be expected to have, individually
or in the aggregate, a Company Adverse Effect. The Intellectual Property is free
and clear of all Liens, except as set forth in Section 2.14 of the Schedule of
Exceptions. To the Company's knowledge, its operations and the operations of its
Subsidiaries do not infringe upon any validly issued or pending trademark, trade
name, service ▇▇▇▇, copyright or, to the Company's knowledge, any validly issued
or pending patent or other intellectual property right of any other person or
entity, nor, to the Company's knowledge, is there any infringement by any other
person or entity of any of the Intellectual Property of the Company or any of
its Subsidiaries (except as set forth in Section 2.14 of the Schedule of
Exceptions). The Company, to its knowledge, has taken all commercially
reasonable actions necessary with respect to the protection and maintenance of
its registered trademarks, except as could not be reasonably expected to have a
Company Adverse Effect. The manner in which the Company has manufactured,
labeled, packaged, shipped, advertised and sold its products, or has contracted
or arranged for any of the foregoing, complies with all applicable domestic and
foreign laws and regulations, except as could not reasonably be expected to
have, individually or in the aggregate, a Company Adverse Effect, except as set
forth in Section 2.14 of the Schedule of Exceptions. A true and complete list of
(a) all U.S. and foreign patents, patent applications, patent agreements,
license agreements, consulting agreements, trademark registrations and
applications therefor, trade names, service marks and copyright registrations
and applications therefor to which the Company or any of its Subsidiaries is a
party or which are used in its business or owned by or licensed to the Company
or any of its Subsidiaries (true and complete copies of which have been
delivered to Transco) and (b) any
- 26 -
interference actions or adverse claims made or threatened in respect thereof and
any claims made or threatened for alleged infringement thereof is set forth in
Section 2.14 of the Schedule of Exceptions. Except as set forth on Section 2.14
of the Schedule of Exceptions with respect to written manufacturing/tooling
agreements under which the Company or its Subsidiaries have granted licenses to
third-party manufacturers of products for sale to the Company or its
Subsidiaries (true and correct copies of which have been provided to Transco),
there is no agreement under which the Company or any Subsidiary is liable as
licensor with respect to any Intellectual Property, and neither the Company nor
any of its Subsidiaries has granted licenses to any third party with respect to
any of the Intellectual Property. Except as set forth in Section 2.14 of the
Schedule of Exceptions, neither the Company nor any of its Subsidiaries is a
party to any Action alleging any infringement with respect to the Intellectual
Property, nor to the knowledge of the Company has any such Action been
threatened against the Company.
2.15 LICENSES, PERMITS AND AUTHORIZATIONS
The Company holds all governmental approvals, authorizations, consents,
licenses, orders, registrations and permits of all agencies (the "Permits"),
whether federal, state, local or foreign, the failure to obtain which could
reasonably be expected to have a Company Adverse Effect. All of the Permits are
in full force and effect, except where failure to be in full force and effect
has not had and could not reasonably be expected to have a Company Adverse
Effect. The operations of the Company and its Subsidiaries as heretofore or
currently conducted were not and are not in violation of any Permits, except as
could not reasonably be expected to have, individually or in the aggregate, a
Company Adverse Effect. Neither the Company nor any of its Subsidiaries has
received any written notice that any governmental authority or other licensing
authority or association currently plans to revoke, cancel, rescind, materially
modify or refuse to renew in the ordinary course any of the Permits.
2.16 INSURANCE
Except as set forth in Section 2.16 of the Schedule of Exceptions, the
Company and its Subsidiaries maintain reasonable and customary insurance
protection on their property (including leased premises) and against general
liabilities, claims and risks. Set forth in Section 2.16 of the Schedule of
Exceptions is a true and complete list of all policies of insurance issued in
the Company's name, containing in each case the name of the insurer, the policy
number, coverage amount, deductible, premium and expiration date. The Company
and its Subsidiaries have paid all premiums due under such policies, and neither
the Company nor any of its Subsidiaries is in default, in any material respect,
with respect to its obligations under any of such policies. The Company has
never been refused coverage, had its insurance coverage terminated or had its
insurance rates increased as a result of excessive risk, unfavorable loss
experience or similar factors. The Company maintains all insurance required
under the terms of any lease of the Real Property.
- 27 -
2.17 EMPLOYEE BENEFIT PLANS
(a) Disclosure. Section 2.17 of the Schedule of Exceptions
lists each employee benefit plan, policy, program, contract or arrangement,
whether for a single individual or a group of individuals, ("Employee Benefit
Plan") that is maintained or contributed to by (or required to be maintained or
contributed to by) the Company or any corporation, trade, business or other
person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (a "Related Entity")
for the benefit of any current or former officer, employee, agent, director or
independent contractor of the Company (with respect to any such person's
employment or service with the Company) or any dependents or beneficiaries of
any such person, or with respect to which the Company has any obligation or
liability (whether or not currently accrued, fixed, absolute, contingent,
unmatured or determinable), including, but not limited to, each "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") ("Company Plans"). With
respect to each Company Plan, the Company has provided to Buyer accurate,
current and complete copies of each of the following: (1) where the plan has
been reduced to writing, the most recent plan document together with all
amendments thereto; (2) where the plan has not been reduced to writing, a
written summary of all material plan terms; (3) where applicable, copies of any
trust agreements, custodial agreements, insurance policies, administration
agreements and similar agreements, and investment management or investment
advisory agreements; (4) copies of any current summary plan descriptions,
employee handbooks or similar employee communications; (5) in the case of any
plan that is intended to be qualified under Section 401(a) of the Code, a copy
of the most recent determination letter from the IRS; (6) in the case of any
funding arrangement intended to qualify as a VEBA under Section 501(c)(9) of the
Code, a copy of the IRS letter determining that it so qualifies; and (7) in the
case of any plan for which Forms 5500 are required to be filed, a copy of the
two most recently filed Forms 5500, with schedules attached.
(b) No Defined Benefit Pension Plans. Neither the Company
nor any Related Entity has ever maintained or been required to contribute to any
Company Plan subject to Title IV of ERISA.
(c) Plan Qualification; Plan Administration. Each Company
Plan that is intended to be qualified under Section 401(a) of the Code is so
qualified. Each Company Plan, including any associated trust or fund, has been
administered in all material respects in accordance with its terms and with
applicable law, and nothing has occurred with respect to any Company Plan that
has subjected or could reasonably be expected to subject the Company to a
material penalty under Section 502 of ERISA or to a material tax under Sections
4972, 4975, or 4979 of the Code.
(d) Claims. Section 2.17 of the Schedule of Exceptions sets
forth each and every pending, or to the knowledge of the Company, threatened
lawsuit, claim or other controversy relating to a Company Plan, other than
routine claims for benefits in the normal
- 28 -
course. No Company Plan is the subject of an ongoing examination or audit by a
government agency or is the subject of a pending application or filing under a
government-sponsored voluntary compliance, amnesty, or similar program.
(e) Retiree Benefits Plan. Other than as required under
Section 6.01 et seq. ERISA or Section 4980B of the Code, no Company Plan that
constitutes an "employee welfare benefit plan" within the meaning of Section
3(1) of ERISA provides benefits or coverage in the nature of health or life
insurance following retirement or other termination of employment.
2.18 ABSENCE OF QUESTIONABLE PAYMENTS
Neither the Company nor any of its Subsidiaries nor, to the Company's
knowledge, any director, officer, agent, employee or other person acting on
behalf of the Company or any of its Subsidiaries has used or agreed to use any
funds of the Company or any of its Subsidiaries for improper or unlawful
contributions, payments, gifts or entertainment or made any improper or unlawful
expenditures relating to political activity to any domestic or foreign
government official or other person. Neither the Company nor any of its
Subsidiaries nor, to its knowledge, any director, officer, agent, employee or
other person acting on behalf of the Company or any of its Subsidiaries has
accepted or received any improper or unlawful contributions, payments, gifts or
expenditures in connection with the operation of the Company's business.
2.19 BROKERS
Neither the Company nor any of its stockholders, Subsidiaries or
affiliates has retained any broker or finder in connection with the transactions
contemplated by this Agreement, except ▇▇▇▇▇▇▇▇ Inc. whose fee shall be paid at
Closing as contemplated by Section 1.7.1(e) of this Agreement.
2.20 BANK ACCOUNTS
Section 2.20 of the Schedule of Exceptions sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which the Company maintains safe deposit boxes or
accounts of any nature and the names of all persons authorized to draw thereon,
make withdrawals therefrom or have access thereto. On and after the Closing, all
monies and accounts arising out of, relating to or established for the business
of the Company or any of its Subsidiaries shall be held by, and accessible only
to, the Company or the applicable Subsidiary of the Company.
2.21 FULL DISCLOSURE
The representations and warranties and other factual statements of the
Company contained in this Agreement, and all information in the Exhibits hereto
(including without limitation in the Schedule of Exceptions and the exhibits and
attachments thereto), do not contain any untrue
- 29 -
statement of a material fact or, taken as a whole, omit to state a material fact
necessary in order to make the statements made herein and therein not
misleading.
2.22 TRANSACTIONS WITH AFFILIATES
Except for the matters set forth in Section 2.22 of the Schedule of
Exceptions and the bonuses contemplated by Section 1.13 above, (i) no Affiliate
(as defined below) of the Company is an employee, consultant, competitor,
customer, distributor, supplier or vendor of, or is party to any contractual
obligation with, the Company or any of its Subsidiaries and (ii) no officer or
director of the Company is an Affiliate of any competitor, customer,
distributor, supplier or vendor of the Company or any of its Subsidiaries. None
of the assets (real, personal, tangible or intangible) or other property owned
by or used in the conduct of the business of the Company and its Subsidiaries
are owned by any Affiliate of the Company or subject to any license or similar
arrangement allowing use thereof by any Affiliate. All transactions between the
Company and its Subsidiaries, on the one hand, and any Affiliate of the Company,
on the other hand, which occurred during the periods covered by the Financial
Statements are reflected in the Financial Statements at amounts which do not
materially overstate or understate the consolidated net worth, net income or
cash flow of the Company and its Subsidiaries taken as a whole as compared with
fair market values and prices which would be charged and paid between parties at
arms' length, except as set forth in Section 2.22 of the Schedule of Exceptions.
The term "Affiliate" shall mean, as to the Company (or, if another Person is
specified, as to such other specified Person), (i) each Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with the Company (or such specified Person), including without limitation, in
the case of the Company, each of the Shareholders and other Persons listed in
Section 2.22 of the Schedule of Exceptions, (ii) any Person who is or has been
within two years of the time in question an officer, director or direct or
indirect beneficial holder of at least 5% of any class of the outstanding
capital stock of any Person referred to in clause (i) above and the members of
the immediate family of each such officer, director or holder (and, if such
specified Person is a natural person, of such specified Person), (iii) each
Person which is a trust or foundation or similar entity controlled by,
controlling or established or maintained (in whole or in part) for the benefit
of any Affiliate (as defined in clause (i) or (ii) above), and (iv) each Person
of which the Company (or such specified Person) or an Affiliate (as defined in
clauses (i), (ii) or (iii) above) thereof shall, directly or indirectly,
beneficially own at least 5% of any class of outstanding capital stock or other
evidence of beneficial interest.
2.23 PRODUCT WARRANTIES, DEFECTS AND LIABILITIES
Except as disclosed in Section 2.23 of the Schedule of Exceptions, each
product manufactured, sold, leased, or delivered by the Company or any of its
Subsidiaries has been in conformity in all material respects with all applicable
federal, state, local or foreign laws and regulations, contractual commitments
and all express and implied warranties, except where a failure to conform,
singly or in the aggregate, could not reasonably be expected to have a Company
Adverse Effect, and to the Company's knowledge the Company has no liability for
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replacement or repair thereof or other damages in connection therewith, except
for liabilities incurred in the ordinary course of business. Other than
guaranties, warranties and indemnities granted in the ordinary course of
business (which guarantees, warranties and indemnities could not reasonably be
expected to have, individually or in the aggregate, a Company Adverse Effect),
no product manufactured, sold, leased, or delivered by the Company is subject to
any guaranty, warranty, or other indemnity beyond the Company's standard terms
and conditions of sale or lease for such products. To its knowledge, the Company
has no material liability arising out of any injury to individuals or property
as a result of the ownership, possession or use of any product manufactured,
sold, leased, or delivered by the Company and, to the knowledge of the Company,
there has been no inquiry or investigation made in respect thereof by any
Person.
2.24 ACCOUNTS RECEIVABLE
The Company has delivered to Transco a list of all accounts receivable
of the Company and its Subsidiaries as of March 31, 1997 (the "Accounts
Receivable"), which list is true, correct and complete in all material respects
and sets forth the aging of such Accounts Receivable. All Accounts Receivable of
the Company and its Subsidiaries represent sales actually made or services
actually performed in the ordinary course of their business consistent with past
practice. Since March 31, 1997, (a) no event has occurred that would, under
GAAP, applied in a manner consistent with the Company's March 31, 1997 audited
financial statements, require a material increase in the ratio of (i) the
reserve for allowances for doubtful accounts receivable to (ii) the accounts
receivable of the Company or the Subsidiary, and (b) there has been no material
adverse change in the composition of such Accounts Receivable in terms of aging.
Except as set forth in Schedule 2.24, there is no material contest, claim, right
of return or right of set-off contained in any written or oral agreement with
any account debtor relating to the amount or validity of any Account Receivable,
other than accounts receivable which do not exceed, in the aggregate, the
reserve for uncollected accounts set forth in the Company's March 31, 1997
audited balance sheet.
2.25 INVENTORIES
The inventories of the Company and the Subsidiaries on a consolidated
basis as reflected on the balance sheet dated as of March 31, 1997 consist only
of items in good condition and salable or usable in the ordinary course of
business as such business is currently conducted and historically has been
conducted, except to the extent of the inventory reserve included on the balance
sheet dated as of March 31, 1997, which reserve is adequate for such purpose,
and are recorded on such balance sheet in accordance with GAAP applied in a
manner consistent with the Company's past practices and experience with respect
to the time required to sell slow-moving inventory.
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2.26 ENVIRONMENTAL
During the preceding three years: (a) the business of the Company and
its Subsidiaries has been operated and continues to be operated in substantial
compliance with all laws and regulations of any governmental authority relating
to the protection of public health, safety and the environment, including
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Clean Air Act, as amended, the Clean Water Act, as amended, the
Occupational Safety and Health Act, as amended, and other comparable local and
foreign laws and (b) to the Company's knowledge, there have been no spills or
other discharges of hazardous materials on Real Property.
Except as disclosed in Schedule 2.26 of the Schedule of Exceptions:
(a) To the Company's knowledge, there are no circumstances
or conditions present at or arising out of the present or former assets,
properties, leaseholds, businesses or operations of the Company and its
Subsidiaries during the period of its ownership, occupancy, leasehold or
tenancy, including but not limited to on-site or off-site storage or Release of
a Chemical Substance, that may give rise to any Environmental Liabilities and
Costs;
(b) To the Company's knowledge, neither the Company nor any
of its Subsidiaries nor any of their present or past assets, properties,
businesses, leaseholds or operations (i) have received or are subject to, or
within the past three years have received or been subject to, any order, decree,
judgment, complaint, agreement, claim, citation, or notice or (ii) are subject
to any ongoing judicial or administrative proceeding indicating that the Company
or any of its Subsidiaries is or may be: (x) in violation of any Environmental
Law; (y) responsible for the on-site or off-site storage or Release of any
Chemical Substance; or (z) liable for any Environmental Liabilities and Costs;
(c) The Company has no reason to believe that it or any of
its Subsidiaries will become subject to a matter identified in subsection (b);
and no investigation or review with respect to such matters is pending or
threatened, nor has any Authority or other third party indicated an intention to
conduct the same;
(d) Neither the business as currently operated by the
Company or any of its Subsidiaries, nor any of the Real Property or Personal
Property are subject to, or as a result of the transactions contemplated by this
Agreement would be subject to, the requirements of any Environmental Laws that
require notice, disclosure, cleanup or approval prior to or upon transfer of
such Real Property or Personal Property or business or which would impose Liens
on such Assets or business;
(e) Section 2.9(a) of the Schedule of Exceptions lists all
property presently leased, owned or operated by the Company and its Subsidiaries
and identifies all such property
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(and the area within that property) that has been used by the Company and its
Subsidiaries or by any other party (including a prior owner or operator) for the
storage or disposal of Chemical Substances;
(f) The Company and its Subsidiaries have not owned or, to
the Company's knowledge, operated any underground storage tank.
(g) There are no environmental audits, inspections,
assessments, investigations or similar reports in the Company's or any
Subsidiary of the Company's possession or of which the Company is aware relating
to the Land or the business or the compliance of the same with applicable
Environmental Laws.
"Chemical Substance" means any chemical substance, including but not
limited to any (i) pollutant, contaminant, chemical, raw material, intermediate,
product, by-product, slag, construction debris; (ii) industrial, solid, toxic or
hazardous substance, material or waste, (iii) petroleum or any fraction thereof;
(iv) asbestos or asbestos-containing material; (v) polychlorinated biphenyl;
(vi) chlorofluorocarbons; and (vii) any other substance, material or waste,
which is identified or regulated under any Environmental Law, as now and
hereinafter in effect, or other comparable laws.
"Environment" includes real property and any improvements thereon, and
also includes, but is not limited to, ambient air, surface water, drinking
water, groundwater, land surface, subsurface strata and water body sediments.
"Environmental Law" means any federal, state, local or common law,
regulation or legal requirement relating to human health, safety, pollution, or
protection or cleanup of the Environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, the Resource Conservation and Recovery Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, the Occupational Safety and
Health Act, as amended, and any other law or legal requirement, as now or
hereinafter in effect, relating to: (a) the Release, containment, removal,
remediation, response, cleanup or abatement of any sort of any Chemical
Substance; (b) the manufacture, generation, formulation, processing, labeling,
distribution, introduction into commerce, use, treatment, handling, storage,
recycling, disposal or transportation of any Chemical Substance; (c) exposure of
persons, including employees, to any Chemical Substance; or (d) the physical
structure or condition of a building, facility, fixture or other structure,
including, without limitation, those relating to the management, use, storage,
disposal, cleanup or removal of asbestos, asbestos-containing materials,
polychlorinated biphenyls or any other Chemical Substance.
"Environmental Liabilities and Costs" means all claims, demands,
actions, liabilities, losses, damages, costs and expenses (including reasonable
attorneys' fees and litigation costs) incurred, whether directly or indirectly:
(i) pursuant to or in order to comply with any Environmental Law; (ii) as a
result of a Release of any Chemical Substance; or (iii) as a result of any
environmental,
- 33 -
health or safety conditions present at, created by or arising out of the past,
present or future operations of the Company or of any prior operator of a
facility or site at which the Company now operates.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of
any Chemical Substance into the Environment of any kind whatsoever (including
the abandonment or discarding of barrels, containers, tanks or other receptacles
containing or previously containing any Chemical Substance).
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF TRANSCO
To induce the Company to enter into and perform this Agreement, Transco
represents and warrants to the Company as of the date of this Agreement as
follows in this Article III:
3.1 ORGANIZATION AND GOOD STANDING
Transco is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware and has all requisite corporate
power and authority to own, operate and lease its properties and to carry on its
business as now being conducted. Transco has delivered to the Company true and
correct copies of its charter documents and bylaws, as amended through the date
of this Agreement.
3.2 POWER, AUTHORIZATION AND ENFORCEABILITY
Transco has full corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. All corporate action on the part of Transco
necessary for the due authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by
Transco has been taken. This Agreement and the consummation of the transactions
contemplated hereby have been duly authorized, and this Agreement has been duly
executed and delivered, by Transco and is a legal, valid and binding obligation
of Transco, enforceable against Transco in accordance with its terms. The Merger
and this Agreement have been approved and adopted by the board of directors of
Transco, and, by virtue of Section 251(f) of the Delaware General Corporation
Law, approval of the Merger and this Agreement by the stockholders of Transco is
not required under Delaware Law.
3.3 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICTS WITH INSTRUMENTS
The execution, delivery and performance of this Agreement by Transco,
and the consummation by Transco of the transactions contemplated hereby, will
not (a) constitute a
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violation (with or without the giving of notice or lapse of time or both) of any
provision of any domestic or foreign law applicable to Transco, (b) require any
consent, approval or authorization of, or the making of any declaration, filing,
registration, qualification or recording with, any Person, by or on behalf of
Transco, (c) result in a default under, an acceleration or termination of, or
the creation in any party of the right to accelerate, terminate, modify or
cancel, or any other cause of action under, any material agreement, lease, note
or other restriction, encumbrance, obligation or liability to which Transco is a
party or by which Transco is bound or to which any of its assets are subject,
(d) result in the creation of any lien or encumbrance upon, or forfeiture of,
any of Transco's assets, or (e) conflict with or result in a breach of or
constitute a default under any provision of Transco's charter documents or
bylaws.
3.4 CLAIMS AND LEGAL PROCEEDINGS
There are no material Actions pending or, to Transco's knowledge,
threatened against Transco, nor, to the knowledge of Transco, are there any
investigations of Transco pending or threatened, before or by any domestic or
foreign governmental or nongovernmental department, commission, board, bureau,
agency or instrumentality or any other body. There is no Action pending (or, to
the knowledge of Transco, threatened), which seeks rescission of, seeks to
enjoin the consummation of, or otherwise relates to, this Agreement or any of
the transactions contemplated hereby. There are no material outstanding or
unsatisfied judgments, orders, decrees, stipulations or settlements to which
Transco is a party which have had or could reasonably be expected to have a
material adverse effect on the business, operations or financial or other
condition of Transco prior to the Merger or the Surviving Corporation after the
Merger (a "Transco Adverse Effect").
3.5 BROKERS
Transco has not retained any broker or finder in connection with the
transactions contemplated by this Agreement. Any brokerage or finder's fee due
to any broker or finder in violation of the foregoing representation by Transco
shall be paid by Transco.
3.6 CAPITALIZATION
The authorized capital stock of Transco consists solely of 3,000 shares
of common stock, $.01 par value per share ("Transco Common Stock"). As of the
date of this Agreement, no shares of Transco Common Stock are issued and
outstanding. Immediately after the Closing, the authorized, issued and
outstanding capital stock of the Surviving Corporation shall be as set forth in
Exhibit 3.6 hereto and shall be held as set forth therein. Except for
subscription and other agreements with respect to issuance of shares and
warrants described in Exhibit 3.6 hereto, there is no agreement or charter or
by-law provision which obligates Transco to issue, purchase or redeem any equity
securities or options, warrants or other rights to acquire equity securities of
Transco. At or prior to Closing, Transco will provide the Company with true and
complete copies of all certificates or other documents or instruments evidencing
or representing the
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Transco Common Stock and all outstanding options, warrants and other rights, if
any, to purchase equity securities of Transco. Immediately prior to the Merger,
Transco will have no outstanding equity securities other than as specified in
Exhibit 3.6.
3.7 NO SUBSIDIARIES
Transco does not have any subsidiaries or own any equity interest in
any other entity.
3.8 TAXES
Transco has not been required to file any Tax returns and has incurred
no liabilities or obligations of any kind for Taxes. The Surviving Corporation
will not file any election under Section 338 of the Code (or any comparable
provision of state or local law) with respect to the Merger or the Preliminary
Merger.
3.9 COMPLIANCE WITH LAWS
Transco has complied and continues to comply with all federal, state,
local and foreign laws, rules, regulations, ordinances, decrees and orders
applicable to Transco and its activities, including without limitation all laws
relating to intellectual property protection, antitrust matters, consumer
protection, import and export matters, currency exchange, environmental
protection, equal employment opportunity, health and occupational safety,
pension and employee benefit matters, securities and investor protection matters
and labor and employment matters, except as has not had and could not reasonably
be expected to have a Transco Adverse Effect. Transco has not received
notification of any unasserted present or past unremedied material failure to
comply with any such laws, rules, regulations, ordinances, decrees and orders.
3.10 FUNDING
Bankers Trust Company and Equinox Investment Partners, L.L.C., or their
respective affiliates, have made binding commitments (the "Commitments") to
Transco to provide financing through the making of loans and the purchase of
securities of the Surviving Corporation in amounts which are, together with
capital contributions to be made by the shareholders of Transco immediately
prior to the Closing, sufficient to pay the amounts to be paid under this
Agreement and the fees and expenses incurred by Transco in connection with the
transactions contemplated hereby; provided, however, that such Commitments are
subject to the specific conditions set forth in Exhibit 3.10.
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ARTICLE IV - COVENANTS
Transco and the Company covenant and agree as follows:
4.1 ACCESS
From the date of this Agreement to and including the Closing, the
Company and its Subsidiaries shall grant Transco and its agents, employees,
accountants, lenders and attorneys reasonable access during normal business
hours to the officers, employees, agents, properties, offices, plants, other
facilities, customers, vendors, landlords and other third parties with whom the
Company and its Subsidiaries do business, and the opportunity to examine and
make copies of the books and records of the Company and its Subsidiaries, except
such books and records the disclosure to Transco of which would result in the
waiver of attorney-client privilege; provided, however, that in any event the
Company and its Subsidiaries shall notify Transco if it is relying on the
preceding exception in connection with any matter and of the nature of such
matter.
4.2 MANAGEMENT INFORMATION
From the date of this Agreement to and including the Closing, the
Company shall provide to Transco all material information requested by Transco
regarding the operation of the business of the Company and its Subsidiaries,
including, without limitation, monthly financial statements as regularly
prepared by management of Labtec, information relating to relationships with
suppliers, customers and other third parties and information concerning other
material developments in the business of the Company and its Subsidiaries.
4.3 NOTIFICATION OF CERTAIN MATTERS
From the date of this Agreement to and including the Closing, the
Company shall promptly advise Transco in writing if the Company receives notice
or knowledge of the commencement or threat of any claim, litigation or
proceeding against or directly affecting the Company or its business, or any
rulings, decrees or other material developments in any claim, action or suit
described in the Schedule of Exceptions or arising after the date hereof. Each
of the Company and Transco shall give prompt notice to the other of the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would reasonably be expected to cause the Company or Transco, as the case
may be, to be unable to satisfy the conditions set forth in Article V or Article
VI, as the case may be, of this Agreement.
4.4 COOPERATION
Each party will use commercially reasonable efforts to cooperate with
each other party and with the others' employees, agents, lenders, attorneys and
accountants in connection with any steps required to be taken as part of its
obligations under this Agreement. The Company and
- 37 -
Transco shall, and shall use all reasonable efforts to cause their respective
Subsidiaries to: (a) promptly make all filings and seek to obtain all
authorizations and approvals required under all applicable laws with respect to
the Preliminary Merger and the Merger and the other transactions contemplated
hereby and cooperate with each other with respect thereto; (b) use all
reasonable efforts to promptly take, or cause to be taken, all other actions and
do, or cause to be done, all other things necessary, proper or appropriate to
satisfy the conditions set forth in Articles V and VI and to consummate and make
effective the transactions contemplated by this Agreement on the terms and
subject to the conditions set forth herein as soon as practicable (including
seeking to remove promptly any injunction or other legal barrier that may
prevent such consummation); and (c) not take any action which might reasonably
be expected to impair the ability of the parties to consummate the Merger at the
earliest possible time (regardless of whether such action would otherwise be
permitted or not prohibited hereunder). Without limiting the generality of the
foregoing, the Company and Transco shall use commercially reasonable efforts to
prevent the entry in a judicial or administrative proceeding brought under any
antitrust law of any permanent or preliminary injunction or other order that
would make consummation of the transactions contemplated by this Agreement in
accordance with the terms hereof unlawful, or would prevent, delay or impose
conditions on such consummation. The Company and Transco shall cooperate in such
arrangements in connection with the Preliminary Merger and the Merger as may be
necessary to ensure that the capital stock of Labtec Hong Kong continues to be
held by at least two shareholders (consisting of (i) the Company and (ii) a
Subsidiary of the Company or other person satisfactory to the Surviving
Corporation).
4.5 CONFIDENTIALITY
Except as required by law, contemplated by this Agreement or necessary
to carry out the transactions contemplated hereby, all information or documents
furnished in connection with such transactions and this Agreement by any party
shall be kept confidential by the party or parties to whom furnished at all
times prior to the Closing in accordance with the confidentiality agreement
entered into by them or their representatives in connection with the
transactions contemplated hereby, and in the event such transactions are not
consummated, each such party shall promptly return to the other all documents
furnished hereunder and shall continue to keep confidential all information
furnished hereunder and shall not thereafter use the same for its advantage. The
Company will further take all steps reasonably requested by Transco to assure
that the Surviving Corporation will, from and after the Closing, have the
benefit of any confidentiality agreements entered into by ▇▇▇▇▇▇▇▇ Inc. or other
representatives of the Company or its Shareholders prior to the Closing Date in
connection with any possible sale or recapitalization of, or investment in or
business combination involving, the Company.
4.6 CONDUCT PRIOR TO CLOSING
From the date of this Agreement to and including the Closing, unless
Transco shall otherwise agree in writing, the business of the Company shall be
conducted in the ordinary course of business and in a manner consistent with
past practice and in accordance with applicable law,
- 38 -
and the Company and its Subsidiaries shall use commercially reasonable efforts
to preserve substantially intact the business organization of the Company and
its Subsidiaries, to keep available the services of the current officers,
employees and consultants of the Company and its Subsidiaries and to preserve
the current relationships of the Company and its Subsidiaries with customers,
suppliers, manufacturers, distributors, landlords and other persons with which
the Company and its Subsidiaries have significant business relations. The
Company and its Subsidiaries will maintain the compensation and terms of
employment currently paid to the officers and principal employees of the Company
and its Subsidiaries substantially unchanged until the Closing. By way of
illustration and not limitation, except as otherwise contemplated by this
Agreement, the Company and its Subsidiaries shall not, between the date of this
Agreement and the Effective Time, do any of the following without the prior
written consent of Transco (such consent not to be unreasonably withheld):
(a) declare, make or pay any Distribution, except (i)
dividends payable in respect of the Company Preferred Stock pursuant to the
Certificate of Incorporation of Holdings as in effect on the date hereof to the
extent satisfied in full at or prior to Closing through either (x) conversion of
Company Preferred Stock into Company Common Stock included within the Closing
Common Shares or (y) payment in cash of accrued and unpaid dividends on the
Company Preferred Stock to the extent deducted from the Gross Cash Consideration
at Closing and (ii) such distributions of stock or other securities, if any, as
may be deemed to occur as part of the Preliminary Merger; provided, however,
that prior to the Closing the Company may effect such stock split or splits as
may be necessary to ensure that the number of Closing Common Shares will equal
1,176,470, or as close thereto as practicable;
(b) acquire any corporation, partnership, other business
organization or division thereof;
(c) incur any Debt or other obligations, except (i) Permitted
Debt and (ii) obligations other than Debt incurred in the ordinary course of
business and consistent with past practice;
(d) enter into any material contract, lease or agreement
other than in the ordinary course of business, consistent with past practice;
(e) authorize capital expenditures in excess of, or fail to
make capital expenditures substantially in accordance with, the Company's fiscal
1998 capital expenditure budget;
(f) enter into any employment or consulting agreement, or
increase the compensation payable to its officers, employees or consultants,
except for increases in accordance with existing agreements or past practices,
or grant any severance or termination pay to, or enter into any employment or
severance agreement with, or enter into any stay bonus or other special
compensation arrangements with or with respect to, any director, officer or
other employee of the
- 39 -
Company, or establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance,
stay bonus or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer or employee;
(g) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice, with
respect to accounting policies or procedures, inventory management, pricing,
billing, warranty and return policies, payment of accounts payable or collection
of accounts receivable.
(h) enter into any transactions otherwise than on an arm's-
length basis;
(i) enter into or perform any transaction with any Affiliate
(as defined below) of the Company (other than transactions entered into (i)
among the Company and its Subsidiaries in the ordinary course of business or
(ii) as contemplated by this Agreement);
(j) mortgage, pledge or subject to any Lien any of its
property, business or Assets, except Liens specified in Section 2.9(b) of the
Schedule of Exceptions and except materialmen's liens securing payments not yet
due, tax liens in respect of Taxes not yet due and other statutory liens in
respect of obligations not yet due and that are not, individually or in the
aggregate, material to the Company and its Subsidiaries or their respective
assets taken as a whole;
(k) make any material gifts or sell, lease, transfer or
exchange any material property for less than the fair market value thereof;
(l) release any material claim;
(m) amend the charter or by-laws of the Company or any of its
Subsidiaries, except the filing of the Restated Certificate in substantially the
form attached hereto as Exhibit 1.4 (which filing the Company agrees to make
prior to the Effective Time);
(n) allow any material Permit to lapse or terminate or fail
to renew any material Permit in accordance with prudent business practice;
(o) enter into, amend, extend, terminate or permit any
renewal notice period to lapse with respect to any lease or any other
contractual obligation that contains either consideration to be given or
performed by the Company or any of its Subsidiaries of a value exceeding $25,000
or a term exceeding one year; or
(p) enter into any contractual obligation, or make any
promise, to do any of the things referred to in clauses (a) through (o) above.
- 40 -
4.7 EXCLUSIVITY
The Shareholders, the Company and the Subsidiaries shall not, directly
or indirectly, through any officer, director, agent or otherwise, solicit,
initiate or encourage the submission of any proposal or offer relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the assets of, or any significant equity interest in,
the Company or any Subsidiary or any business combination with the Company or
any Subsidiary or participate in any negotiations regarding, or furnish to any
third party any information with respect to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage, any effort or
attempt by any party to do or seek any of the foregoing. The Company immediately
shall cease and cause to be terminated all existing discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. The
Company shall notify Transco promptly if any such proposal or offer, or any
inquiry or contact with any party with respect thereto, is made and shall, in
any such notice to Transco, indicate in reasonable detail the identity of the
party making such proposal, offer, inquiry or contact and the terms and
conditions of such proposal, offer, inquiry or contact.
4.8 PUBLICITY
Except as may be required by law (in which case prior notice shall be
given to the other party hereto), no party to this Agreement shall issue, or
permit to be issued by any affiliate of such party, any press release or other
public statement regarding this Agreement or the transactions contemplated
hereby without the prior written consent of the other parties hereto.
4.9 UPDATING OF SCHEDULES; WAIVER OF CLAIMS
Subject to the provisions of this Section 4.9, the Company shall have
the right to update the Schedule of Exceptions (either by amending existing
Sections thereof or by adding new Sections thereto) at any time prior to 2:00
p.m. Pacific time on September 20, 1997 (the "Update Deadline") in respect of
Developments (as hereinafter defined) that arise after the date hereof. In the
event that the Termination Date (as defined in Section 7.1 below) is extended
from September 30, 1997 to October 14, 1997 pursuant to Section 7.1 hereof, the
Update Deadline shall be automatically extended to October 1, 1997. Transco
hereby agrees that, in the event Transco is notified by or on behalf of the
Company in writing prior to the Update Deadline, through notice sent reasonably
promptly after the Company obtains knowledge of the occurrence of the matter to
which the notice relates, which notice will contain an update of the Schedule of
Exceptions (either by amending existing Sections thereof or by adding new
Sections thereto) pursuant to this Section 4.9 (the "Update"), of any
development, circumstance, event, occurrence, fact or other matter that arises
after the date of this Agreement and prior to the Update Deadline (a
"Development"), which Development would cause any representation or warranty of
the Company contained in this Agreement to be untrue or incorrect as of the
Closing Date as though made on that date, and with respect to such untruth or
inaccuracy Transco does not have the right to terminate this Agreement in
accordance with Section 7.1(e) hereof or does not elect to
- 41 -
terminate this Agreement in accordance with Section 7.1(e) hereof and proceeds
with the Closing, then the condition set forth in Section 5.1 hereof shall be
deemed to have been waived by Transco solely with respect to such Development
(to the extent reflected on such Update), and the Schedule of Exceptions shall
be deemed to be amended as of the Effective Time to incorporate the Update
delivered to Transco under this Section 4.9, and notwithstanding any other
provision of this Agreement no claim for indemnification under this Agreement
may thereafter be asserted by Transco, the Surviving Corporation or any
Indemnified Party (as defined below) on the basis that such Development
constitutes a breach or inaccuracy of the representation or warranty of the
Company to which such Update to the Schedule of Exceptions applies; provided,
however, that the Company promptly must provide to Transco and its advisors any
information or documents reasonably requested by Transco or such advisors in
order to evaluate such Development. Nothing herein shall affect the condition to
Transco's obligations set forth in Section 5.7 of this Agreement.
4.10 NOTICE OF MAJORITY CONSENT ACTION; DRAG-ALONG RIGHTS
In connection with the approval of the Merger by the Principal
Shareholders, the Company shall comply with the requirements of Delaware Law
concerning notice to stockholders of stockholder actions taken by less than
unanimous written consent and shall distribute such notice, in form reasonably
satisfactory to Transco and the Company, promptly after the date hereof and in
no event later than the business day following the day on which the right to
terminate this Agreement under Section 7.1(f) hereof expires. Promptly after the
date hereof, the Company shall cause all "drag-along" rights of the Company or
the Principal Shareholders (meaning contractual rights to require other holders
of equity securities of the Company (or rights to acquire equity securities of
the Company) to cooperate in effecting a sale of the Company) under any
Shareholders Agreement, Warrantholder Agreement, Co-Sale Agreement and other
agreements to be exercised and all notices required thereby to be given in form
reasonably satisfactory to Transco and the Company promptly following the date
hereof and in any event no later than the business day following the day on
which the right to terminate this Agreement under Section 7.1(f) hereof expires.
In connection with the exercise of such rights, the Company shall use
commercially reasonable efforts to ensure that all Shareholders enter into and
execute such documents as are required to effectuate the Merger and the other
transactions contemplated hereby, including without limitation the Stockholders
Agreement, the Escrow Agreement and the Shareholder Representation Letters
referred to in Article V of this Agreement.
4.11 PREPARATION FOR CLOSING
(a) The Company will use commercially reasonable efforts to
cause to be delivered to Transco, not later than three business days prior to
the Closing Date, pay-off letters from the agents under each agreement relating
to the Fleet Facility and the Banc One Obligation, which letters shall specify
the aggregate amount required to be paid, and payment instructions, in order to
repay in full all loans (including a separate amount (i) for any and all accrued
but unpaid interest and unpaid principal and (ii) for prepayment penalties and
other obligations due upon
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termination and repayment) under such facilities on the projected Closing Date
as well as the per diem amount(s) to be added thereto in the event that the
actual Closing Date is on a date subsequent to such projected Closing Date. The
Company will use commercially reasonable efforts to see that such letters
include a customary undertaking by the lenders under such agreements (or their
agents, as appropriate) to release on the Closing Date in full all Liens
securing obligations under such agreements and to prepare and file with the
appropriate governmental or other offices on the Closing Date such instruments
as may be required to effect or evidence such release.
(b) On or before the Closing Date, the Company shall cause
each of the agreements listed in Exhibit 4.11 hereto to be terminated without
cost or further obligation of the Company.
(c) At least two days prior to the Closing Date, the Company
shall deliver to Transco a statement itemizing the Transaction Expenses paid or
to be paid by or on behalf of the Company or the Shareholders at or prior to
Closing, which Transaction Expenses shall be deducted from the Gross Cash
Consideration pursuant to Section 1.7.1 above.
(d) At least two days prior to the Closing Date, the Company
shall deliver to Transco a statement setting forth the amount of dividends paid
or to be paid by or on behalf of the Company at or prior to Closing on the
Company Preferred Stock from March 31, 1997 through the Closing Date, which
dividends shall be deducted from the Gross Cash Consideration pursuant to
Section 1.7.1 and Section 1.7.4(d) above.
(e) At least two days prior to the Closing Date, the Company
shall deliver to Transco a statement setting forth the aggregate exercise price
of all Options included in the Closing Common Shares, which aggregate exercise
price shall be included in the Gross Cash Consideration pursuant to Section
1.7.1 above.
(f) At least two days prior to the Closing Date, the Company
shall deliver to Transco a statement setting forth the number and ownership of
Closing Common Shares expected by the Company to be outstanding immediately
prior to the Effective Time, and the Company shall promptly notify Transco
through an update thereof in the event the Company becomes aware of any change
therein prior to the Effective Time.
4.12 TAX TREATMENT
For U.S. federal income Tax purposes, the parties hereto and their
respective Affiliates intend that the payments of the Adjusted Cash
Consideration as issued in exchange for the shares of the Surviving Corporation,
other than those shares retained under Section 1.7.2(b)(ii) above, will be
treated as a taxable exchange that is not subject to Section 301 of the Code, to
the extent that each Shareholder reduces his or its percentage interest (as
determined under Section 302 of the Code) in voting and common stock by more
than twenty percent, or to Section 368 of the
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Code. Absent a good faith determination by the Surviving Corporation after the
date hereof that such treatment is not in accordance with applicable law, the
Surviving Corporation will file all Tax returns reflecting such transactions in
a manner consistent with the intention set forth above and, in the event of any
determination that such treatment is not appropriate, shall use commercially
reasonable efforts to notify the Shareholder Representatives reasonably promptly
thereafter, and in any event shall so notify the Shareholder Representatives
prior to the Surviving Corporation filing any such return.
4.13 RECIPIENTS OF CONFIDENTIAL INFORMATION
At or prior to Closing, the Company will deliver to Transco a true,
correct and complete list of all Persons to whom the Company or any of its
Affiliates or representatives distributed the Confidential Information
Memorandum dated April 1997 or gave any other confidential information regarding
the Company or any of its Subsidiaries in connection with a proposal for the
sale or recapitalization of, merger with, or investment in the Company or any of
its Subsidiaries.
4.14 ESCROW AGREEMENT
At the Closing, the Surviving Corporation shall enter into the Escrow
Agreement and the Stockholders Agreement (as defined below).
4.15 TAX RETURNS
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The
Surviving Corporation shall prepare or cause to be prepared and file or cause to
be filed all Tax returns for the Company and its Subsidiaries for all periods
ending on or prior to the Closing Date which are filed after the Closing Date.
The Surviving Corporation shall permit the Shareholder Representatives to review
and comment on each such Tax return described in the preceding sentence prior to
filing provided that such review shall not delay timely filing of such Tax
returns.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. The Surviving Corporation shall prepare or cause to be prepared and file
or cause to be filed any Tax returns of the Company and its Subsidiaries for Tax
periods which begin before the Closing Date and end after the Closing Date.
(c) COOPERATION ON TAX MATTERS. The Surviving Corporation,
the Company and its Subsidiaries and the Shareholder Representatives shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and
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making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS
OF TRANSCO
The obligations of Transco to consummate the transactions contemplated
by this Agreement at the Closing shall be subject to the satisfaction of the
following conditions, which may be waived only in a written notice signed by
Transco and delivered to the Company:
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company contained in Article
II of this Agreement shall have been true and correct when made and shall be
true and correct in all material respects as of the Closing Date as though made
on that date.
5.2 PERFORMANCE OF OBLIGATIONS
The Company shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants and conditions contained in this Agreement to be performed or complied
with by it at or prior to the Closing.
5.3 OPINIONS OF COUNSEL FOR THE COMPANY
Transco shall have received legal opinions of ▇▇▇▇▇▇▇ Coie and Morris,
Nichols, Arsht & ▇▇▇▇▇▇▇, counsel for the Company, dated the Closing Date, in
form and substance reasonably satisfactory to Transco.
5.4 DISSENTERS' RIGHTS
There shall be no Dissenting Shares, and either (a) three business days
shall have elapsed since the twenty day period specified in Section 262(d)(2) of
Delaware Law shall have expired without notice to the Company of any assertion
of appraisal rights with respect to the Merger or (b) all Shareholders shall
have executed and delivered a Shareholder Representation Letter, the Escrow
Agreement and the Stockholders Agreement.
5.5 RESIGNATIONS
Transco shall have received copies of resignations effective as of the
Closing Date of all the directors of the Company and all officers of the Company
who are Affiliates of or employed by the Principal Shareholders.
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5.6 CONSENTS AND APPROVALS
The Company shall have received consent to the Merger and the
Preliminary Merger under each of the agreements, leases, notes and other
documents identified in Exhibit 5.6 hereto. All approvals of or notices to
public agencies, federal, state, local or foreign, the granting or delivery of
which is necessary for the consummation of the transactions contemplated hereby,
shall have been obtained.
5.7 MATERIAL ADVERSE CHANGE
Since the date of this Agreement and through the Closing, there shall
not have occurred any event which has had or could reasonably be expected to
have a Company Adverse Effect.
5.8 COMPLIANCE CERTIFICATE
Transco shall have received a certificate of the President, Chairman of
the Board or another officer of the Company dated the Closing Date certifying
that the conditions to the obligations of Transco and Merger Sub set forth in
Sections 5.1, 5.2, 5.4, 5.5, 5.6 and 5.7 have been fulfilled.
5.9 PROCEEDINGS AND DOCUMENTS; SECRETARY'S CERTIFICATE
All corporate proceedings in connection with the transactions
contemplated hereby, and all documents and instruments incident thereto, shall
have been approved by Transco's counsel, and Transco shall have received a
certificate of the Secretary of the Company in customary form as to the
authenticity and effectiveness of the actions of the Board of Directors and
Shareholders of the Company authorizing the Merger and the transactions
contemplated by this Agreement.
5.10 SHAREHOLDER REPRESENTATION LETTERS
Transco shall have received (a) from each Shareholder listed in Exhibit
5.10A, a Shareholder Representation Letter in substantially the form attached
hereto as Exhibit 5.10A, (b) from each Shareholder listed in Exhibit 5.10B, a
Shareholder Representation Letter in substantially the form attached hereto as
Exhibit 5.10B, (c) from each Shareholder listed in Exhibit 5.10C, a Shareholder
Representation Letter in substantially the form attached hereto as Exhibit
5.10C, and (d) from any other Shareholder, a Shareholder Representation Letter
in comparable form.
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5.11 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of this Agreement, and
no litigation, investigation or administrative proceeding shall be pending or
threatened which would enjoin, restrain, condition or prevent consummation of
this Agreement.
5.12 TERMINATION OF OPTIONS AND WARRANTS
All Options shall have been exercised either prior to the Closing or as
contemplated by Section 1.7.3 above or shall have expired or been terminated.
5.13 CONVERSION OF PREFERRED STOCK
All issued and outstanding shares of Company Preferred Stock shall have
been converted into Company Common Stock in accordance with the Certificate of
Incorporation of the Company.
5.14 FUNDING
Bankers Trust Company and Equinox Investment Partners, L.L.C., or their
respective affiliates, shall have indicated that they are and continue to be
prepared to make the loans and purchase the securities contemplated by the
Commitments immediately following the Effective Time, except that this condition
shall apply only if the failure of this condition to be satisfied is the result
of the non-satisfaction of one or more of the conditions set forth in Exhibit
3.10.
5.15 EMPLOYMENT AGREEMENTS
The Company shall have entered into Employment Agreements with members
of management of Labtec in form and substance reasonably satisfactory to
Transco.
5.16 STOCKHOLDERS AGREEMENT
The Shareholders (other than Dissenting Shareholders) shall have
executed and delivered counterpart signature pages to the Stockholders
Agreement, in substantially the form attached hereto as Exhibit 5.16 (the
"Stockholders Agreement").
5.17 ESCROW AGREEMENT
The Shareholders (other than Dissenting Shareholders) shall have
executed and delivered counterpart signature pages to the Escrow Agreement.
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5.18 PRELIMINARY MERGER
The Company and Labtec shall have consummated the Preliminary Merger
under applicable law.
5.19 NONCOMPETITION AGREEMENT
Northern Investment Limited Partnership II shall have executed and
delivered a counterpart signature page to the Noncompetition Agreement in
substantially the form attached hereto as Exhibit 5.19.
ARTICLE VI - CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE COMPANY
The obligations of the Company to consummate the transactions
contemplated by this Agreement at the Closing shall be subject to the
satisfaction of the following conditions, which may be waived only in a written
notice signed by the Company and delivered to Transco.
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of Transco contained in Article III
of this Agreement shall have been true and correct when made and shall be true
and correct in all material respects as of the Closing Date as though made on
that date.
6.2 PERFORMANCE OF OBLIGATIONS
Transco shall have performed in all material respects all obligations
and agreements and complied in all material respects with all covenants and
conditions contained in this Agreement to be performed or complied with by them
at or prior to the Closing.
6.3 COMPLIANCE CERTIFICATE
The Company shall have received a certificate of an officer of Transco,
dated the Closing Date certifying that the conditions to the obligations of the
Company set forth in Sections 6.1 and 6.2 have been fulfilled.
6.4 LEGAL PROCEEDINGS
No order of any court or administrative agency shall be in effect which
enjoins, restrains, conditions or prohibits consummation of this Agreement, and
no litigation, investigation or administrative proceeding shall be pending or
threatened which would enjoin, restrain, condition or prevent consummation of
this Agreement.
- 48 -
6.5 OPINION OF COUNSEL FOR TRANSCO
The Company shall have received a legal opinion of Ropes & ▇▇▇▇,
counsel for Transco, dated the Closing Date, in form and substance reasonably
satisfactory to the Company.
6.6 STOCKHOLDERS AGREEMENT
All parties to the Stockholders Agreement other than the Shareholders
(excluding the Dissenting Shareholders) shall have executed and delivered
counterpart signature pages to the Stockholders Agreement.
ARTICLE VII - TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION
This Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time:
(a) by mutual written consent of the Company and Transco duly
authorized by their respective Boards of Directors;
(b) by either the Company or Transco, if the Merger shall not
have been consummated on or prior to the Termination Date (as defined below);
provided, however, that the right to terminate this Agreement under this
subsection (b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date;
(c) by either the Company or Transco, if there shall be any
law, regulation or similar legal authority that makes consummation of the Merger
illegal or otherwise prohibited or if any judgment, injunction, order or decree
enjoining Transco or the Company from consummating the Merger is entered and
such judgment, injunction, order or decree shall become final and nonappealable;
provided, however, that the party seeking to terminate this Agreement pursuant
to this subsection (c) shall have used all reasonable efforts to remove such
judgment, injunction, order or decree;
(d) by the Company, in the event of a material breach by
Transco of any representation, warranty, covenant or other provision of this
Agreement which has not been cured or is not curable by the Termination Date; or
(e) by Transco, in the event of (i) a material breach by the
Company of any representation, warranty, covenant or other provision of this
Agreement which has not been cured
- 49 -
or is not curable by the Termination Date or (ii) the delivery of any Update
pursuant to Section 4.9 above relating to the occurrence of any Development
which Transco determines, in its reasonable discretion, would result in the
representation or warranty to which such Update disclosing such Development
relates (before giving effect to such Update) not being true and correct in all
material respects as of the Closing Date.
(f) by Transco or the Company, in the event that the parties
have not agreed on the forms of Exhibits 1.7 (Escrow Agreement), 5.16
(Stockholders Agreement) and 5.19 (Noncompetition Agreement) prior to 2:00 p.m.
Pacific time on the fifth business day after the date of this Agreement.
As used in this Agreement the term "Termination Date" shall mean
September 30, 1997; provided, however, that, if the Company has not obtained all
consents referred to in Exhibit 5.6 by September 30, 1997, upon notice from
Transco to the Company given on or prior to September 30, 1997, the Termination
Date shall be October 14, 1997 or such later date as Transco and the Company may
mutually agree.
7.2 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section
7.1 above, there shall be no further obligation on the part of any party hereto,
and this Agreement shall be of no further force or effect, except that nothing
herein shall relieve any party from liability for any breach hereof.
Notwithstanding the foregoing, Sections 4.5, 4.8, 9.1, 9.8, 9.11 and 9.12 of
this Agreement shall remain in full force and effect after termination hereof.
7.3 AMENDMENT
This Agreement may not be amended except by an instrument in writing
signed by Transco and the Company; provided, however, that no amendment shall be
effected which is not permitted under applicable law without further approval of
the stockholders of the Company under Delaware Law without obtaining required
stockholder approval to the extent so required.
7.4 WAIVER
At any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any obligation or other act of any other
party hereto, (b) waive any inaccuracy in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) waive
compliance with any agreement or condition contained herein. Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
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ARTICLE VIII - SURVIVAL AND SHAREHOLDER INDEMNIFICATION
8.1 SURVIVAL
The representations and warranties of the Company contained in Sections
2.6, 2.7, 2.24 and 2.25 of this Agreement and in any certificates or other
documents delivered by the Company pursuant to Section 5.1 hereof to the extent
relating to such Sections (the "Financial Representations") shall survive the
Closing only until June 30, 1998. All other representations and warranties of
the Company contained in this Agreement and in any certificates or other
documents delivered by the Company pursuant to Section 5.1 hereof relating to
such representations and warranties (the "General Representations") shall
survive the Closing only until June 30, 1999. Each covenant and agreement
contained in this Agreement shall continue until all obligations imposed thereby
shall have been performed or satisfied or have terminated or expired in
accordance with its terms. No claim for indemnification in respect of Losses (as
defined below) arising in connection with this Agreement may be made or asserted
by any Person, and no obligation to indemnify in respect thereof shall exist,
unless written notice of such claim shall have been given as provided in this
Article VIII on or prior to the last day of the survival period relating to the
provision(s) of this Agreement on which such claim is to be based as provided in
the preceding sentence. The termination of any such representation, warranty or
covenant shall not affect any claim for breach or inaccuracy of representations,
warranties or covenants if such written notice shall have been given on or prior
to such last day of such survival period.
8.2 PARTICIPATING SHAREHOLDER INDEMNIFICATION; ADJUSTMENT OF MERGER
CONSIDERATION
From and after the Closing Date, the Shareholders other than any
Dissenting Shareholders (the "Participating Shareholders"), jointly and
severally, shall indemnify and hold the Surviving Corporation and its officers,
directors and affiliates (the "Indemnified Parties") harmless from and against
any and all losses, damages, costs or other expenses (including but not limited
to reasonable legal and accounting fees) incurred by such Indemnified Parties as
a result of any inaccuracy in any representation or warranty made by the Company
in this Agreement (as such representations and warranties would read if all
materiality qualifiers contained therein (including in the definition of the
term Company Adverse Effect) were deleted therefrom) or any breach by the
Company of any covenant or other agreement of the Company contained in this
Agreement ("Losses"). The indemnification obligations set forth in this Article
VIII shall be binding on and enforceable against each Participating Shareholder.
The indemnification obligations of the Participating Shareholders under this
Article VIII shall be satisfied exclusively from the Escrow Amount, and the
Escrow Common, in accordance with the Escrow Agreement. The aggregate dollar
amount of the indemnification obligations of the Participating Shareholders
under this Article VIII which are so satisfied from the Escrow Amount and the
Escrow Common shall be deemed to reduce the total Merger Consideration otherwise
payable to the Participating Shareholders in the Merger pursuant to Section 1.7
of this Agreement.
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8.3 THRESHOLD AND LIMITATIONS
Notwithstanding any other provision of this Agreement, from and after
the Effective Time:
(a) No Indemnified Party shall be entitled to any amount in
respect of Losses as to which claims for indemnification are made under this
Article VIII ("Claims"), and no Participating Shareholder shall be obligated to
provide indemnification, unless and until the aggregate amount of all Losses as
to which indemnification otherwise would be required under this Agreement
exceeds $500,000 (the "Threshold"), and then, subject to paragraph (b) below,
only for the amount of such Losses in excess of the Threshold; provided,
however, that the foregoing limitation shall not apply to any Claim for Losses
resulting from any breach, inaccuracy or misrepresentation of the
representations, warranties or covenants of the Company contained in Sections
1.9, 2.1, 2.2, 2.3, 2.5, 2.19, 4.10 and 9.1 hereof.
(b) The maximum aggregate liability of the Participating
Shareholders for indemnification under this Agreement with respect to claims
made in respect of the Financial Representations shall be limited to the Escrow
Amount. Claims made in respect of the General Representations or in respect of a
breach of or noncompliance with any covenant contained in this Agreement, in
each case consisting of the dollar amount of Losses in excess of the Threshold,
if applicable, may be assessed only against the Escrow Amount and/or the Escrow
Common, in each case only to the extent thereof, in accordance with the Escrow
Agreement. The Escrow Amount and the Escrow Common shall be the exclusive
sources from which any Claims for Losses recoverable under this Article VIII may
be satisfied, and in no event shall the Participating Shareholders have any
liability for indemnification under this Article VIII beyond the Escrow Amount
and the Escrow Common. Any Claim paid from the Escrow Amount or the Escrow
Common shall be paid to the Surviving Corporation, on behalf of the Indemnified
Party, in accordance with this Article VIII and the Escrow Agreement and shall
be deemed to reduce the Escrow Amount or the Escrow Common, as the case may be,
pro rata with respect to each Participating Shareholder, as determined by
reference to the amount of Adjusted Cash Consideration and Escrow Common such
Participating Shareholder is entitled to receive in the Merger as compared to
all other Participating Shareholders.
(c) Subject to the Threshold and the other limitations set
forth in this Section 8.3, payment of any Claim required to be paid from the
Escrow Common shall be made, in accordance with the Escrow Agreement, by
cancellation of a number of shares of Escrow Common equal to the result obtained
by dividing the dollar amount of such Claim in excess of the Threshold (if
applicable, and only to the extent the Threshold has not previously been applied
to any Claims) by $28.33.
8.4 PROCEDURE FOR INDEMNIFICATION
(a) An Indemnified Party shall give written notice of any
Claim for indemnification under this Article VIII to the Shareholder
Representatives (as defined below) as
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promptly as practicable, but in any event (i) prior to the expiration of the
survival period for such Claim as provided in Section 8.1 above and (ii) if such
Claim relates to the assertion against an Indemnified Party of any claim or
dispute by a third party (a "Third Party Claim"), within 20 days after receipt
by the Surviving Corporation of written notice of a legal process relating to
such Third Party Claim; provided, however, that, with respect to the time limits
set forth in the foregoing clause (ii), no delay on the part of the Indemnified
Party in notifying the Shareholder Representatives shall relieve the
Participating Shareholders of any obligation under this Article VIII except to
the extent that the Participating Shareholders are prejudiced thereby. Any such
notice shall describe the nature of the Claim, the amount thereof if then
ascertainable and, if not then ascertainable, the estimated maximum amount
thereof, and the provision or provisions of this Agreement on which the Claim is
based.
(b) (i) The Shareholder Representatives, on behalf of the
Participating Shareholders, shall have the right, upon written notice given to
the Indemnified Party within 30 days after receipt of the notice from the
Indemnified Party of any Third Party Claim, to assume the defense or handling of
such Third Party Claim, at the Participating Shareholders' sole expense, in
which case the provisions of Section 8.4(b)(ii) below shall govern.
(ii) The Shareholder Representatives shall select counsel
to conduct the defense or handling of such Third Party Claim reasonably
satisfactory to the Indemnified Party. The Shareholder Representatives shall
defend or handle such Third Party Claim in consultation with the Indemnified
Party and in such manner as is reasonable under the circumstances and shall keep
the Indemnified Party timely apprised of the status of such Third Party Claim.
The Shareholder Representatives shall not, without the prior written consent of
the Indemnified Party, agree to a settlement of any Third Party Claim, unless
the settlement provides for only monetary damages and provides an unconditional
release and discharge of the Indemnified Party. The Indemnified Party shall
cooperate with the Shareholder Representatives and shall be entitled to
participate in the defense or handling of such Third Party Claim with its own
counsel and at its own expense. The Indemnified Party shall not, without the
prior written consent (which consent shall not be unreasonably withheld or
delayed) of the Shareholder Representatives, agree to a settlement of any Third
Party Claim that is being defended and handled by the Shareholder
Representatives pursuant to this Section 8.4(b)(ii). Notwithstanding any other
provision of this Agreement, any violation of the terms of the foregoing
sentence which is not promptly cured by the Indemnified Party shall relieve the
Shareholders from any liability to indemnify in respect of the subject matter of
the Third Party Claim so settled, unless the Shareholder Representatives shall
have failed to comply in all material respects with their obligations under this
paragraph.
(c) (i) If (1) a Shareholder Representative does not give
written notice to the Indemnified Party, within 15 days after receipt of the
notice from the Indemnified Party of a Third Party Claim, that the Shareholder
Representative has elected to assume the defense or handling of such Third Party
Claim; (2) at any time the Shareholder Representatives shall fail to carry out
such defense or handling diligently and in such manner as is reasonable under
the circumstances; (3) the Third Party Claim involves other than only money
damages; (4) settlement
- 53 -
of, or an adverse judgment with respect to, the Third Party Claim is, in the
good faith and reasonable judgment of the Board of Directors of the Surviving
Corporation, likely to establish a precedential custom or practice which is
reasonably likely to have a material adverse effect on the continuing business
interests of the Surviving Corporation; or (5) the Indemnified Party has
determined, upon advice of counsel and in its reasonable judgment, that having
common counsel with the Company or Shareholders would present such counsel with
a conflict of interest or that, upon advice of counsel, there may be legal
defenses available to such Indemnified Party which are different from or in
addition to those available to the Company or Shareholders, then the provisions
of Section 8.4(c)(ii) below shall govern.
(ii) The Indemnified Party may, at the Participating
Shareholders' expense, select counsel in connection with conducting the defense
or handling of such Third Party Claim and defend or handle such Third Party
Claim in a manner that is reasonable under the circumstances; provided, however,
that the Indemnified Party shall keep the Shareholder Representatives timely
apprised of the status of such Third Party Claim. The Indemnified Party shall
not settle such Third Party Claim without the prior written consent of the
Shareholder Representatives (which consent shall not be unreasonably withheld or
delayed). Notwithstanding any other provision of this Agreement, any violation
of the terms of the foregoing sentence shall relieve the Participating
Shareholders from any liability to indemnify in respect of the subject matter of
the Third Party Claim so settled, unless the Shareholder Representatives shall
have failed to comply in all material respects with their obligations under this
paragraph. If the Indemnified Party defends or handles such Third Party Claim,
the Shareholder Representatives shall cooperate with the Indemnified Party and
shall be entitled to participate in the defense or handling of such Third Party
Claim with their own counsel and at the Shareholders' expense.
(d) The term "Shareholder Representatives" shall mean The
Northern Group, Inc. or ▇▇▇▇▇▇▇▇ Group, Inc. or both or any successors thereto
of which the Surviving Corporation is notified in writing. The Shareholder
Representatives shall act as follows:
(i) Each Shareholder Representative shall have
authority to act for and on behalf of all Participating Shareholders with
respect to all matters arising in connection with this Agreement, including,
without limitation, the power and authority, in their sole discretion, to:
(A) take any action contemplated to be taken
by the Shareholder Representatives under this Article VIII or the Escrow
Agreement;
(B) negotiate, determine, defend and settle
any Third Party Claim and any dispute which may arise under or in connection
with this Agreement; and
(C) make, execute, acknowledge and deliver
any releases, assurances, receipts, requests, instructions, notices, agreements,
certificates and any other instruments, and to generally do any and all things
and to take any and all actions which may be requisite, proper or advisable in
connection with this Agreement or the Escrow Agreement.
- 54 -
(ii) The Shareholder Representatives shall not be
liable to any Participating Shareholder for any action taken or any omission to
act, in good faith, in connection with the Shareholder Representatives'
responsibilities as Shareholder Representatives under this Agreement.
8.5 EXCLUSIVE REMEDIES
After the Effective Time, the indemnification provided in this Article
VIII shall be the exclusive remedy available to Transco, the Surviving
Corporation and the other Indemnified Parties in respect of any breach of or
noncompliance with any provision of this Agreement by the Company, other than
claims based on fraud. Subject to Section 8.6 below, prior to the Effective
Time, each party hereto shall have available to it all remedies provided by law
or in equity in the event of any breach of or noncompliance with this Agreement
by any other party hereto, including without limitation the remedies described
in Section 9.7 below.
8.6 ARBITRATION
Any controversy, dispute or claim arising out of or relating to this
Agreement or the breach hereof which cannot be settled by mutual agreement
(except for actions by any party seeking equitable, injunctive or other relief)
shall be finally settled by arbitration as follows: Any party who is aggrieved
shall deliver a notice to the other parties hereto setting forth the specific
points in dispute. Any points remaining in dispute 45 days after the giving of
such notice shall be submitted to arbitration in Chicago, Illinois to the
American Arbitration Association ("AAA"), before a single arbitrator mutually
agreeable to the parties, and failing such agreement, appointed in accordance
with AAA's Arbitration Rules (the "Rules"), modified only as herein expressly
provided. The arbitrator may enter a default decision against any party who
fails to participate in the arbitration proceedings after having been notified
in accordance with the Rules. The decision of the arbitrator on the points in
dispute will be final, unappealable and binding and judgment on the award may be
entered in any court having jurisdiction thereof. The parties to this Agreement
hereby submit to the nonexclusive jurisdiction of the federal and state courts
located in the State of Delaware for the purpose of resolving disputes arising
out of this Agreement and the transactions contemplated hereby and hereby waive
any claim based on a lack of personal jurisdiction concerning the matter in
dispute. Notwithstanding any other provision of this Agreement, the arbitrator
will be authorized to apportion its fees and expenses and the reasonable
attorneys' fees and expenses of the parties as the arbitrator deems appropriate.
Notwithstanding any other provision of this Agreement, in the absence of any
such apportionment, the fees and expense of the arbitrator will be borne (i)
fifty percent (50%) by Transco, on the one hand, and fifty percent (50%) by the
Company if the Closing has not occurred or (ii) 50% by the Surviving Corporation
and 50% by the Shareholders if the Closing has occurred, on the other hand, and
each such party will bear the fees and expenses of its own attorneys. The
parties agree that this clause has been included to rapidly and inexpensively
resolve any disputes between them with respect to this Agreement, and that this
clause shall be grounds for dismissal of any court action commenced by either
party with respect to this Agreement, other than post-arbitration actions
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seeking to enforce an arbitration award and other than actions seeking equitable
relief. The parties shall keep confidential, and shall not disclose to any
person, except as may be required by law, the existence of any controversy
hereunder, the referral of any such controversy to arbitration or the status or
resolution thereof.
8.7 NO CIRCULAR RECOVERY
No Participating Shareholder will be entitled to make any claim for
indemnification against the Surviving Corporation or any of its Affiliates by
reason of the fact that he, she or it (or any of his, her or its officers,
directors, agents or other representatives) was a controlling person, director,
officer, employee, agent or other representative of the Company or of any of its
Subsidiaries or was serving as such for another Person at the request of any the
Company or any of its shareholders, subsidiaries or other Affiliates (whether
such claim is for Losses of any kind or otherwise and whether such claim is
pursuant to any statute, charter, by-law, contractual obligation or otherwise)
with respect to any action brought by Transco or the Surviving Corporation
against any Participating Shareholder (whether such action is pursuant to this
Agreement, applicable law, or otherwise).
ARTICLE IX - GENERAL
9.1 EXPENSES
Regardless of whether the transactions contemplated by this Agreement
are consummated, each party shall pay its own fees and expenses incident to the
negotiation, preparation and execution of this Agreement (including legal and
accounting fees and expenses), except that the total amount of all fees and
expenses of counsel, investment bankers, accountants and other advisors of the
Company and the Shareholders in connection with the transactions contemplated by
this Agreement (the "Transaction Expenses") shall be solely the responsibility
of the Shareholders; provided, however, that the fees and expenses of the
Company Auditors relating to the matters contemplated by Section 1.7.4(b) above
shall be borne 50% by the Shareholders (such 50% to be included in the
Transaction Expenses) and 50% by the shareholders of Transco.
9.2 NOTICES
Any notice or demand desired or required to be given hereunder shall be
in writing given by personal delivery, certified or registered mail, confirmed
facsimile transmission, or overnight courier service, in each case addressed as
respectively set forth below or to such other address as any party shall have
previously designated by such a notice. The effective date of any notice or
request shall be the date of personal delivery, four days after the date of
mailing by certified or registered mail, the date on which successful facsimile
transmission is confirmed, or the day following the date deposited with a
reputable overnight courier service for overnight delivery, as the case may be,
in each case properly addressed as provided herein and with all charges prepaid.
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TO TRANSCO:
Speaker Acquisition Corp.
c/o Sun Capital Partners, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with copies to:
▇▇▇▇ Capital Sun Capital
Two ▇▇▇▇▇▇ Place ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ Floor
Boston, MA 02116 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Attention: ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TO THE SHAREHOLDER REPRESENTATIVES OR, PRIOR TO THE
CLOSING, THE COMPANY:
LEI Holdings, Inc.
c/o Labtec Enterprises, Inc.
Suite J
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
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with copies to:
The Northern Group, Inc. ▇▇▇▇▇▇▇▇ Group, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ F.O. ▇▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Coie
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TO THE SURVIVING CORPORATION:
LEI Holdings, Inc.
c/o Labtec Enterprises, Inc.
Suite J
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
with copies to:
▇▇▇▇ Capital Sun Capital
Two ▇▇▇▇▇▇ Place ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ Floor
Boston, MA 02116 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and Attention: ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Ropes & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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9.3 SEVERABILITY
If any term or other provision of this Agreement is determined by a
court or by arbitration to be invalid, illegal or incapable of being enforced
under any rule of law, or public policy, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.
9.4 ENTIRE AGREEMENT
All prior or contemporaneous agreements, contracts, promises,
representations and statements among the parties to this Agreement as to the
subject matter hereof (other than the Exhibits and Schedules to this Agreement
and the other agreements specifically mentioned in this Agreement, and the
certificates and other documents delivered pursuant to this Agreement or in
connection herewith (together with this Agreement, the "Transaction Documents"))
are merged into this Agreement. The Transaction Documents set forth the entire
understanding and agreement among the parties with respect to the subject matter
hereof and thereof, and there are no terms, conditions, representations,
warranties or covenants other than those contained in the Transaction Documents
or supplied by law.
9.5 ASSIGNMENT
This Agreement shall not be assigned by operation of law or otherwise
without the prior written consent of the other parties hereto; provided,
however, that, the Surviving Corporation may, without such consent, (a) make a
collateral assignment of this Agreement to its lenders or (b) assign this
Agreement to any entity which acquires substantially all of the assets of the
Surviving Corporation.
9.6 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto and its permitted assigns, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, except that, from and after the Effective Time, each Participating
Shareholder (including for this purpose the Shareholder Representatives acting
on behalf of the Participating Shareholders) shall be deemed to be a third party
beneficiary of this Agreement for the purpose of enforcing the provisions of
Sections 1.7 and 1.10 of this Agreement; the Shareholder Representatives shall
be deemed to be third party beneficiaries of this Agreement for the purpose of
enforcing, on behalf of the Participating Shareholders, the provisions of
Section
- 59 -
1.13 and Article VIII of this Agreement; and, in connection with the foregoing,
each Participating Shareholder (including for this purpose the Shareholder
Representatives acting on behalf of the Participating Shareholders) shall be
bound by and entitled to enforce the provisions of Article IX of this Agreement,
in each case as if each such Participating Shareholder or Shareholder
Representative, as the case may be, were a party hereto.
9.7 SPECIFIC PERFORMANCE
Each of the parties acknowledges and agrees that the other parties
hereto would be damaged irreparably in the event that, prior to the Effective
Time, any of the provisions of this Agreement are not performed in accordance
with their specific terms or otherwise are breached. Accordingly, each of the
parties hereto agrees that the other parties hereto shall be entitled, prior to
the Effective Time, to an injunction to prevent breaches of the provisions of
this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any court of competent jurisdiction, in addition to any
other remedy to which they may be entitled at law or in equity.
9.8 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware applicable to contracts executed in and to be
performed in that State, without regard to principles of conflicts of laws.
9.9 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.10 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
9.11 WAIVER OF JURY TRIAL
To the extent not prohibited by applicable law which cannot be waived,
each of the parties hereto hereby waives, and agrees to cause each of its
Subsidiaries to waive, and covenants that neither it nor any of its Subsidiaries
will assert (whether as plaintiff, defendant or otherwise) any right to trial by
jury in any forum in respect of any issue or action arising out of or based upon
this Agreement or any other Closing Agreement or the subject matter hereof or
thereof or in any way connected with or related or incidental to the
transactions contemplated hereby, in each case
- 60 -
whether now existing or hereafter arising. Each party acknowledges that it has
been informed by the other parties that this Section 9.11 constitutes a material
inducement upon which such other parties are relying and will rely in entering
into this Agreement and any other agreements relating hereto or contemplated
hereby. Any party hereto may file an original counterpart or a copy of this
Section 9.11 with any court as written evidence of the consent of each such
party to the waiver of its right to trial by jury.
9.12 CONSENT TO JURISDICTION
Each party to this Agreement, by its execution hereof, (i) hereby
irrevocably submits, and agrees to cause each of its Subsidiaries to submit, to
the nonexclusive jurisdiction of the state and federal courts of the State of
Delaware for the purpose of any Action arising out of or based upon this
Agreement or relating to the subject matter hereof, (ii) hereby waives, and
agrees to cause each of its Subsidiaries to waive, to the extent not prohibited
by applicable law, and agrees not to assert, and agrees not to allow any of its
Subsidiaries to assert, by way of motion, as a defense or otherwise, in any such
action, any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that any such proceeding brought in one of the above-named courts is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court and (iii) hereby agrees not to commence or to
permit any of its Subsidiaries to commence any action arising out of or based
upon this Agreement or relating to the subject matter hereof other than before
one of the above-named courts nor to make any motion or take any other action
seeking or intending to cause the transfer or removal of any such action to any
court other than one of the above-named courts whether on the grounds of
inconvenient forum or otherwise. Each party hereby consents to service of
process in any such proceeding in any manner permitted by Delaware law, and
agrees that service of process by registered or certified mail, return receipt
requested, at its address specified pursuant to Section 9.2 is reasonably
calculated to give actual notice.
9.13 SURVIVAL AND INDEPENDENCE OF REPRESENTATIONS
All representations, warranties, covenants and agreements made by or on
behalf of any party hereto in this Agreement (including, without limitation, the
Schedules hereto), or pursuant to any document, certificate, financial statement
or other instrument referred to herein or delivered in connection with the
transactions contemplated hereby, shall be deemed to have been material and
relied upon by the other parties hereto, notwithstanding any investigation made
by or on behalf of any of the parties hereto or any opportunity therefor or any
actual or constructive knowledge thereby obtained. Neither the period of
survival nor the liability of any party with respect to such party's
representations, warranties covenants and agreements shall be reduced by any
investigation made at any time by or on behalf of any party.
- 61 -
9.14 KNOWLEDGE
Whenever reference is made herein to the knowledge of the Company with
respect to any matter, it is understood to refer to the actual knowledge of the
officers and directors of the Company and Labtec, all of whom are listed in
Exhibit 9.14 (and for such purposes shall also include the actual knowledge of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇).
- 62 -
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
SPEAKER ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
LEI HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇ F.O. ▇▇▇▇▇▇
Title: Vice President, Treasurer and Secretary
- 63 -