SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1999
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_______ TO _________
Commission File No. 0-27302
LABTEC INC.
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(Exact name of Registrant as specified in its charter)
Massachusetts 04-3116697
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1499 S.E. Tech Center Place, Suite 350, Vancouver, WA 98683
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (360) 896-2000
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Issuer's revenues for its most recent fiscal year: $64,273,000.
The aggregate market value, calculated on the basis of the average bid and asked
prices of such stock on the National Association of Securities Dealers Automated
Quotation System, of Common Stock held by non-affiliates of the Registrant as of
June 24, 1999 was approximately $14,161,871
There were 6,908,030 shares of Common Stock outstanding as of June 24, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of the Registrant's Proxy Statement relating to its 1999 Annual Meeting
of Shareholders is incorporated by reference herein
<PAGE>
PART I
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ITEM 1. BUSINESS.
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OVERVIEW
Labtec Inc. (the "Company") was incorporated in Massachusetts in
April 1991 under the name Spacetec IMC Corporation. On February 17, 1999, SIMC
Acquisition Corporation ("SIMC"), a Delaware corporation and a newly formed,
wholly owned subsidiary of the Company, merged with and into Labtec Corporation,
a Delaware corporation formed in 1994 and formerly known as Labtec Inc.
("Labtec"), with Labtec as the surviving legal entity. After the completion of
the merger, the Company changed its name from Spacetec IMC Corporation to Labtec
Inc. and contributed substantially all of its assets, except cash and cash
equivalents, and all of its liabilities to a newly formed, wholly owned
subsidiary, Spacetec Corporation, a Delaware corporation ("Spacetec").
The operations of the Company prior to the merger consisted of the
development and marketing of high-technology, multimedia peripheral products for
the personal computer ("PC") industry, including computer speakers, subwoofers,
PC voice access and personal audio products. These operations continue to be
conducted by Labtec as a wholly owned subsidiary of the Company. Historically,
the operations of the Company consisted of the development and marketing of
controllers and the related software that enable a user to manipulate three
dimensional ("3D") graphical images in real-time. These operations are currently
performed through Spacetec.
As a result of the merger, Spacetec's operations have been
substantially consolidated into Labtec under the name "The Labtec 3D Motion
Control Division." Approximately $2.0 million of operating expenses have been
eliminated at Spacetec as a result of such consolidation. A description of the
business of the Company following the merger and consolidation is provided
below.
GENERAL
The Company is a leading developer and marketer of high-technology,
multimedia peripheral products for the personal computer and workstation
industries. The Company offers an array of proprietary products, including
computer speakers, subwoofers, PC voice access and personal audio products, 3D
controllers and 3D gamepads. The Company's strategy is to offer an assortment of
high technology products through multiple channels of distribution. The Company
currently sells to numerous retailers (e.g, CompUSA, Target, Sears, Fry's
Electronics, Media Mart, Best Buy, Wal-Mart, Staples, Office Depot, Vobis and
Dixons), master distributors (e.g, Ingram Micro, Merisel, Avnet and Tech Data)
and original equipment manufacturers ("OEMs")(e.g, Hewlett Packard, IBM, Compaq
and Dell). The Company serves these multiple channels of distribution on a
worldwide basis.
The Company's product line is composed entirely of PC peripheral
products. Within such product category, the Company maintains a leading market
position in each of its three product lines: PC speakers, PC voice access and 3D
controllers. The Company first introduced the PC speaker in the early 1990s and
continues to provide a broad product offering, a recognized industry brand name
and consistent technological innovations such as a proprietary Dynamic Bass
Equalization circuit, the industry's first Laminar Bass Flow Port and the Unique
Clear Desk(TM) mounting system. The Company attempts to provide the best
performing product based on sound quality, industrial design and product
features at each
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retail price point. The Company's management believes that the growth in audio
content from streaming audio over the Internet to DVD is driving penetration of
PC speakers. This growth is being further supported by the proliferation of low
priced PCs that typically include inexpensive speakers, which the Company's
management believes often results in upgrade PC speaker purchases. In addition,
with the growing popularity of the MP3 music format, management believes that
the Company is strongly positioned to leverage this growth with its multimedia
speaker format.
According to PC Data, the Company also has the leading share of the
United States market for PC voice access and personal audio products, a product
segment management believes it commercialized in 1996. The Company's management
believes the advent of robust speech recognition and voice command technology
will make speech an accepted interface for the PC, driving the demand for high
performance voice input peripherals. The Company's Noise Canceling and
Amplification Technology ("NCAT1"(TM) and "NCAT2"(TM)) provides an input/output
solution to these applications.
The Company's 3D Motion Control Division is the leading developer
and marketer of controllers and the related software that enable a user to
manipulate three dimensional graphical images in real-time. Unlike traditional
hardware controllers such as keyboards, gamepads, mice, trackballs and
joysticks, the Company's products enable the user to manipulate images as if the
user were moving actual objects or moving through actual scenes in the real
world. The Company's products are used in the mechanical CAD market, the
consumer market and the emerging desktop market as typified by the Internet.
Three-dimensional graphical capability, once found only in UNIX
workstations and gaming consoles, is now widely available and used by electronic
design engineers, architectural engineers, industrial designers, film, video and
broadcast television animators, graphic artists and game developers. With both
Microsoft and Intel promoting 3D graphical interfaces, the Company believes that
the use of 3D graphical capability will become increasingly available.
THE INDUSTRY
The Company competes in the worldwide market for personal computer
and workstation products that is estimated at approximately $185 billion by
International Data Corporation ("IDC"). Personal computer shipments increased
12.1% to 90 million units in 1998, from 80.3 million units in 1997, according to
IDC. The workstation market increased 22% in 1998 to 2.3 million units, compared
to 1.9 million units in the prior year, according to IDC. Despite this growth,
the home penetration rate for PCs in the United States (approximately 50%) is
still far below that of many other consumer electronic items such as televisions
(98%) or VCRs (80%). Furthermore, worldwide PC penetration is substantially
lower than in the United States.
The Company targets three niche markets within the broader personal
computer and workstation industries. The Company believes that PC speakers, PC
voice access and 3D controllers are growing at or above the overall PC and
workstation industry rates.
The Company's business is seasonal, with slightly greater sales in
the second and third fiscal quarters, preceding and during the Christmas season.
The second and third fiscal quarters accounted for 53% of net annual sales in
both fiscal 1999 and fiscal 1998.
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<PAGE>
COMPANY PRODUCTS
Within the category of PC peripheral products, the Company's product
lines are broadly grouped into three types: PC speakers, PC voice access and 3D
controllers.
PC SPEAKERS
In fiscal 1999, PC speakers represented the Company's
largest product line, contributing more than 50% of its net sales. The
Company offers a line of 12 retail speaker models ranging in suggested retail
price from $9.99 to $199.99. Product positioning covers both entry-level and
upgrade speaker segments, encompassing most addressable industry volume.
The Company believes the following industry trends should support
the continued growth of the PC speaker segment: (i) shipments of new computer
systems with multimedia capabilities installed, often with very inexpensive
speakers; (ii) increasing capability and demand for Internet on-line audio; and
(iii) introduction of new software titles with ever-improving audio
capabilities.
The Company's line of PC speakers is oriented toward three different
user groups: EDUTAINMENT for the users of basic multimedia software such as
educational or basic music software, AUDIO ENTHUSIASTS desiring crisp audio
sound for music, and GAMERS desiring a strong bass component in their systems.
The Company offers a variety of models across a wide price range targeted at
users in each of these groups.
PC VOICE ACCESS
The Company offers a complete line of PC voice access products sold
under the Company's PC VoiceAccess brand name. This line is designed to
complement several emerging applications, including basic PC telephony (voice
mail, call forwarding, etc.), Internet communications (long distance), voice
command software (activation and response) and gaming (multi-player
interaction).
The PC VoiceAccess product line is composed of four product classes:
(i) headset/boom microphones that allow comfortable hands-free use of basic
telephony and Internet communications applications; (ii) headsets for use with
PC systems for private listening; (iii) PC microphones that allow for effective
voice input for voice command and voice recognition software; and (iv) a special
reference-level headset/boom microphone designed to deliver high performance
sound for the serious gaming enthusiast.
An important element of this emerging industry is the need for the
computer to clearly recognize voice input, in addition to delivering quality
sound. The Company developed and utilizes Noise Canceling and Amplification
Technology, which improves performance in two ways: by focusing on direct voice
input, dramatically reducing ambient background noise, and through a high output
internal amplification stage, ensuring output compatibility with virtually all
Soundblaster(TM) standard soundcards.
3D CONTROLLERS
The Company has several 3D controller products that serve the
workstation market. The recently introduced SPACEBALL 4003 is aimed at the
higher-performance applications and the SPACEBALL 3003 at the lower end. The
SPACEBALL 4003 "FLX", featuring fully programmable capability with tactile
buttons, is targeted at a more rigorous environment using UNIX-based
workstations and high-end NT-based PCs.
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The SPACEBALL "FLX" product line has become a standard input controller for
industrial as well as digital content creation applications. Using these
products, designers and engineers can pan, zoom and rotate 3D models as smoothly
and easily as if they were holding them in their hands. The SPACEBALL 3003 "FLX"
mid-range 3D controller is primarily targeted at the emerging 3D animation and
multimedia markets, and for the rapidly growing NT Mechanical-CAD market. The
SPACEBALL 3003 "FLX" series provides an improved PowerSensor ball that moves
with a displacement for easier use and improved motion control, delivering three
powerful advantages: less force for model movement; improved ergonomics; and a
reduced learning curve for new users. The SPACEBALL 4003 "FLX" and 3003 "FLX"
are sold by a number of OEMs, including Hewlett Packard, IBM, Compaq and Dell,
together with a number of value-added resellers and distributors.
As part of its 3D controller hardware sales, the Company offers
(without charge to its hardware customers) software products which enable and
enhance the performance of its 3D controllers. These software products include
SpaceWare 7.4, SpaceWare AniMotion and the recently released SpaceWare 8.1.
CUSTOMERS
The Company's customers consist of many of the largest retailers,
OEMs and market distributors in the United States. Because the Company's
customer base is so diverse, only one customer, Ingram Micro, accounted for more
than 10% of net sales during fiscal 1999. Ingram Micro accounted for 15.7%,
14.6% and 14.7% of net sales in fiscal 1999, 1998 and 1997, respectively.
However, the loss of this customer or a substantial decrease in sales to such
customer could have a material adverse effect on the Company's sales and
operating results. In addition, customers may demand price concessions from the
Company that could adversely affect profit margins.
RESEARCH AND DEVELOPMENT
Product development at the Company begins with understanding
customers' needs and requirements. This process is typically accomplished
through a combination of primary market research, solicitation of suggestions
from retail, master distributor and OEM partners, and internal brainstorming
sessions to anticipate future needs. In addition, technology developments and
the competitive environment are key inputs to this effort.
Throughout the development process, the Company involves internal
engineers, outside consultants and its contract manufacturers to minimize the
time to market and maximize the probability of a successful product. The product
development process can last up to 12 months for a brand new product whereas a
derivative can take as little as three months.
The industrial, mechanical, electrical and acoustical design is
managed by the Company's in-house engineering team in Vancouver, WA. The
Company's software and firmware engineers with capability in both UNIX and
Windows NT also are located in Vancouver, WA. The engineering team utilizes the
Company's Hong Kong subsidiary to search for new components that meet desired
specifications. The Company believes that this interaction between design
engineers and component manufacturers enables the Company to develop innovative,
high performance, low cost products. Final specification of all components and
designs is the responsibility of the United States-based engineering team.
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<PAGE>
During the years ended March 31, 1999, 1998 and 1997, the Company
expended $1,716,705, $1,507,145 and $1,368,866, respectively, on its research
and development efforts.
PATENTS AND PROPRIETARY RIGHTS
The Company relies on a combination of patents, copyrights, trade
secrets, trademark laws, confidentiality procedures and license arrangements to
establish and protect its proprietary technology.
The Company has received 11 patents in the United States, Canada,
Australia, Japan and certain European countries covering its core technologies
relating to audio input, audio output and the POWERSENSOR of its 3D controllers.
The Company further has one issued United States patent and three pending United
States patent applications, as well as five pending international patent
applications, covering input sensing technology not yet incorporated into the
Company's products.
In addition to the protection afforded by patent registrations and
copyright laws, generally Company employees and consultants to the Company have
executed proprietary information agreements designed to protect the Company's
trade secrets, inventions created in the course of employment with the Company
and other proprietary information of the Company. Additionally, certain senior
officers and technical personnel are required to sign non-competition
agreements.
MANUFACTURING
The Company contracts its production requirements with several
manufacturers in Hong Kong, Taiwan and China. From the Company's Hong Kong
office, Company personnel supervise daily product development activities,
initiate placement of orders, expedite shipments, arrange and track
transportation and oversee the quality assurance function. This 20-person team
plays an important role in assuring a steady and timely supply of products to
distribution centers in the United States, Europe and Canada.
MARKETING AND DISTRIBUTION
The Company's sales and distribution strategy is to offer a broad
line of high-technology, multimedia peripheral products through multiple
channels of distribution. The Company currently sells through numerous
retailers, master distributors and OEM accounts. In addition, the Company sells
through each of these three channels both domestically and worldwide.
RETAILERS. The Company maintains an extensive North American retail
distribution network, selling high-technology multimedia peripheral products to
computer superstores, consumer electronic chains, mass merchandisers, software
retailers, office superstores and wholesale clubs.
MASTER DISTRIBUTORS. The Company serves many small to mid-sized
accounts through master distributors, including Ingram Micro, Avnet, Tech Data
and Merisel.
OEM ACCOUNTS. Retail and master distributor sales are complemented
by the Company's support of the OEM marketplace. Customers include: primary
computer manufacturers, component manufacturers, Internet product suppliers and
"bundlers," or firms who package the Company's PC speakers, PC Voice Access
products or 3D controllers with other hardware components or complete systems.
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<PAGE>
Although the Company profitably serves such OEM customers as Hewlett
Packard, IBM, Compaq and Dell, it also focuses its efforts on serving the
mid/small OEM market due to its growth potential. The Company has grown its base
of OEM customers from less than 15 in 1995 to over 50 today.
INTERNATIONAL SALES. The Company's international distribution
includes more than 40 distributors serving 24 countries. Key customers include
Dixon's (U.K.), Byte (U.K.), Vobis (Germany), Virgin Megastores (U.K.), Fnac
(France), Media Market (Germany) and Staples (U.K.). The establishment of sales
offices in London and Germany has enhanced the Company's performance in Europe.
International gross sales were $14,599,749, $10,886,626 and $11,298,433 in
fiscal 1999, 1998 and 1997, respectively, accounting for 22.2%, 17.4% and 17.6%,
respectively, of the Company's total gross sales for the year.
COMPETITION
The computer products industry is intensely competitive and rapidly
changing. The Company's competitors vary by product line. In the PC speaker
business, competitors include Altec Lansing Corporation and Creative Technology,
Ltd. In the PC voice access market, competitors include Andrea Electronics
Corporation and Telex Communications, Inc. In the 3D graphical applications
market, the Company's competitor is Logitech International SA. Within each
market, these competitors offer similar products to the Company and target the
same customers as the Company. Further, many of these competitors are
substantially larger and have significantly greater financial, technical and
marketing resources than the Company.
EMPLOYEES
The Company currently employs approximately 100 individuals,
including 28 who staff the Company's U.K., Germany and Hong Kong subsidiaries.
The Company is not subject to any collective bargaining agreements, has never
been subject to a work stoppage, and believes that its relations with its
employees is generally good.
ITEM 2. PROPERTIES.
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The Company's corporate offices are located in 14,335 square feet of
office space in Vancouver, WA. This facility is leased to the Company through
April 2006. In addition, the Company currently leases a 60,000 square foot
warehouse facility in Vancouver, WA which commenced in May 1999 and terminates
in April 2006. The Company also leases 3,600 square feet of office space for its
3D Motion Control Division in Lowell, MA under a lease which expires in December
2004. The Company also maintains office space in the U.K., Germany and Hong
Kong. The Company's management believes its current facilities are adequate to
meet its requirements for the near term.
ITEM 3. LEGAL PROCEEDINGS.
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There are no pending material legal proceedings to which the Company
or any of its properties is subject nor, to the knowledge of the Company, are
any such legal proceedings threatened.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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On February 17, 1999 the Company held a Special Meeting of
Stockholders to consider and vote upon the following proposals:
1. The issuance of approximately 14,363,954 shares of
Spacetec common stock and such additional shares as have
been required to be issued in connection with the
potential valuation or sale of the Spacetec industrial
business, in each case as pursuant to the Agreement and
Plan of Merger dated as of October 21, 1998, as amended
and restated on November 13, 1998, among the Company,
SIMC and Labtec. The Merger Agreement provided for,
among other things, the assumption of all outstanding
options to purchase Labtec common stock and the merger
of Labtec with and into SIMC, with Labtec being the
surviving corporation and a wholly owned subsidiary of
the Company.
2. An amendment to the Amended and Restated Articles of
Organization of Spacetec (i) to increase the number of
authorized shares of the Company's common stock, $.01
par value per share (the "Common Stock"), from
20,000,000 to 25,000,000 and (ii) to change the
corporate name of the Company from "Spacetec IMC
Corporation" to "Labtec Inc.," both subject to and upon
completion of the merger.
3. An amendment to the Amended and Restated Articles of
Organization of the Company to authorize a reverse stock
split whereby one share of the Common Stock was to be
issued in exchange for each three shares of Common Stock
outstanding immediately following the merger, subject to
completion of the merger (the "Reverse Stock Split").
4. To authorize Spacetec to adjourn the special meeting to
solicit additional proxies in the event that the number
of proxies sufficient to approve any of the proposals
had not been received by the date of the special
meeting.
The proposals were approved based upon the following votes:
For Against Abstain
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Proposal 1 4,062,965 102,221 18,396
Proposal 2 4,088,831 113,220 29,846
Proposal 3 3,921,684 244,452 17,446
Proposal 4 4,007,998 193,553 30,346
The Company's stockholders also elected twelve directors, four to
each of Class I, II and III, to serve terms of one, two and three years,
respectively, subject to and upon completion of the merger. Proxies for the
meeting were solicited pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended, there was no solicitation in opposition to the
management nominees as listed in the proxy statement and all of such nominees
were elected.
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PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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The Common Stock is quoted on the National Association of Securities
Dealers' Automated Quotation ("NASDAQ") National Market under the symbol LABT.
Effective February 19, 1999, the Company implemented the Reverse Stock Split,
whereby one share of Common Stock was issued for each three shares of Common
Stock outstanding after the merger. The following table sets forth the high and
low closing bid prices for the Common Stock during each quarter of the fiscal
years ended March 31, 1998 and 1999 as reported by NASDAQ, adjusted to reflect
the Reverse Stock Split. The prices reported reflect inter-dealer quotations,
may not represent actual transactions and do not include retail mark-ups,
mark-downs or commissions.
High Low
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YEAR ENDED MARCH 31, 1998
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First Quarter $13 11/16 $6
Second Quarter $13 7/8 $7 11/16
Third Quarter $11 5/8 $8 5/8
Fourth Quarter $10 11/16 $9 3/16
YEAR ENDED MARCH 31, 1999
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First Quarter $10 7/8 $7 11/16
Second Quarter $9 3/8 $4 11/16
Third Quarter $8 13/16 $3 15/16
Fourth Quarter $8 1/4 $5 1/16
As of June 24, 1999, there were 6,908,030 shares of Common Stock
outstanding held by 405 holders of record.
The Company has never declared or paid any cash dividends on its
capital stock. The Company currently anticipates that it will retain all future
earnings, if any, to fund the development and growth of its business and does
not anticipate paying any cash dividends on its Common Stock in the foreseeable
future.
The Company was incorporated in Massachusetts in April 1991 under
the name Spacetec IMC Corporation. On February 17, 1999, SIMC merged with and
into Labtec, with Labtec as the surviving legal entity. After the completion of
the merger, the Company changed its name from Spacetec IMC Corporation to Labtec
Inc. and contributed substantially all of its assets, except cash and cash
equivalents, and all of its liabilities to a newly formed, wholly owned
subsidiary, Spacetec. Holders of shares of Labtec common stock outstanding at
the time of the merger received for each share of Labtec stock: (i) .55430739
shares of Common Stock and (ii) a pro rata share of all principal and interest
payments made under a six-year, 10% interest promissory note issued by the
Company in the principal amount of $1,065,000. Prior
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to completion of the merger, Labtec waived the right of its stockholders to
receive their pro rata share of additional shares, if any, of Common Stock
issuable in connection with a potential valuation or sale of the Company's
industrial business, which such stockholders had approved at the February 17,
1999 special meeting. In addition, each outstanding option to purchase a share
of Labtec common stock was assumed by the Company and adjusted, so that an
option to purchase a share of Labtec common stock was converted into a right to
purchase .55430739 shares of Common Stock at a similarly adjusted exercise
price. The shares of the Common Stock were reissued in the current name of the
Company in connection with the Reverse Stock Split and name change by the
Company.
The common stock issued pursuant to the merger was not registered
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), and was offered solely in reliance on an exemption from
registration provided by Section 4(2) of the Act.
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ITEM 6. SELECTED FINANCIAL DATA.
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The following selected financial data has been derived from the
Company's audited financial statements. The Income Statement Data relating to
the fiscal years 1999, 1998 and 1997 and the Balance Sheet Data as of March 31,
1999 and 1998 should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
June 24,1994 Predecessor
Fiscal Year Ended March 31, through company April
------------------------------------------- March 31, 1, 1994 through
1999 1998 1997 1996 1995(2) June 24, 1994(2)
------ -------- -------- ----- ------------ -------------------
(in thousands, except per share data)
STATEMENTS OF OPERATIONS:
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $64,273 $60,113 $61,943 $43,664 $39,923 $11,616
Income (loss) from operations......... (2,533) 1,504 4,503 (324) 1,835 1,983
Net income (loss)(1).................. (4,942) (2,277) 601 (2,578) (1,612) 1,274
Basic:
Net income (loss) per share(1)........ (0.99) (0.64) .24 (1.03) (.65) 26,154.39
Weighted average shares outstanding... 4,987 3,540 2,506 2,496 2,492 48.70
Diluted:
Net income (loss) per share........... (0.99) (0.64) .16 (1.03) (.65) 26,154.39
Weighted average shares outstanding... 4,987 3,540 3,723 2,496 2,492 48.70
BALANCE SHEET DATA:
Working capital....................... 14,935 19,544 3,407 2,997 3,380 N/A
Total assets.......................... 46,968 36,202 34,528 30,034 27,309 N/A
Long term liabilities, less current
portion............................... 26,086 31,986 4,407 6,598 8,175 N/A
Total shareholders' equity (deficit). 4,701 (3,798) 6,667 6,027 6,066 N/A
</TABLE>
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(1) Net income (loss) and net income (loss) per share include extraordinary
losses in fiscal 1998 and fiscal 1999. See consolidated financial
statements.
(2) Labtec underwent a 100% ownership change effective June 24, 1994 and the
financial statements for all periods after this date reflect a new basis
of accounting.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS.
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OVERVIEW
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere herein.
On February 17, 1999, SIMC merged with and into Labtec, with Labtec
as the surviving legal entity. After the completion of the merger, the Company
changed its name from Spacetec IMC Corporation to Labtec Inc. and contributed
substantially all of its assets, except cash and cash equivalents, and all of
its liabilities to a newly formed, wholly owned subsidiary, Spacetec. The merger
transaction was accounted for as a purchase in a "reverse acquisition." The
results of operations for this acquisition have been included in the financial
statements since the date of acquisition.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve a number
of risks and uncertainties. The following are among the factors that could cause
actual results to differ materially from the forward-looking statements:
business conditions and growth in the personal computer and workstation
industries; general economies, both domestic and international; lower than
expected customer orders or variations in customer order patterns; competitive
factors, including increased competition, new product offerings by competitors
and pricing pressures; the availability of parts and components; changes in
product mix; resource constraints encountered in developing new products; and
product shipment interruptions due to manufacturing difficulties. The
forward-looking statements contained in the MD&A regarding industry trends,
product development and liquidity and future business activities should be
considered in light of these factors.
RESULTS OF OPERATIONS
The following table sets forth certain operating data as a
percentage of net sales for the years ended March 31, 1999, 1998 and 1997.
Fiscal Year Ended March 31,
-----------------------------------
1999 1998 1997
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of sales 63.3 63.5 64.1
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Gross margin 36.7 36.5 35.9
Selling and marketing 23.3 20.0 16.1
General and administrative 8.5 6.4 5.6
Research and development 2.7 2.5 2.2
Depreciation and amortization 6.2 5.1 4.8
---- ---- ----
Income (loss) from operations (4.0) 2.5 7.3
Interest expense, net 5.5 5.4 4.2
---- ---- ----
Income (loss) before extraordinary loss and (9.5) (2.9) 3.1
income taxes
Provision (benefit) for income taxes (2.1) (0.0) 2.1
Extraordinary loss on extinguishment of debt (0.4) (0.8) 0.0
----- ----- ----
Net income (loss) (7.7) (3.8) 1.0
===== ===== ====
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FISCAL 1999 COMPARED TO FISCAL 1998
Net sales for fiscal 1999 increased $4,159,958, or 6.9%, to
$64,273,410 for fiscal 1999 from $60,113,452 for fiscal 1998. The increase in
net sales over the period was primarily due to the increase in sales by the
Company's European operation. The Company's largest customer represented 15.7%
of sales for fiscal 1999, as compared to 14.6% of sales for fiscal 1998.
Cost of sales increased $2,494,081, or 6.5%, to $40,657,361 in
fiscal 1999 from $38,163,280 in fiscal 1998. The increase over the periods was
primarily the result of an increase in net sales. As a percentage of net sales,
the cost of sales decreased slightly to 63.3% for fiscal 1999 as compared to
63.5% for fiscal 1998. The decrease as a percentage of net sales is attributable
to a change in product mix from a larger portion of higher cost products
(speakers) to a larger portion of lower cost products (voice access and personal
audio), as well as higher retail sales verses OEM sales, which generate higher
cost of sales.
Selling and marketing expenses increased over the periods by
$2,984,273, or 24.9%, to $14,993,624 from $12,009,351. As a percentage of net
sales, selling and marketing expenses increased to 23.3% from 20.0%. The dollar
increase and the increase as a percentage of net sales are due primarily to
costs incurred relating to the introduction of the new PC voice access products
and increased sales efforts in the European and United States markets.
General and administrative expenses, which include the Company's
corporate finance, human resources and administrative functions, increased over
the periods by $1,599,936, or 41.5%, to $5,457,227 from $3,857,291. As a
percentage of net sales, general and administrative expenses increased to 8.5%
from 6.4%. The dollar increase and the increase as a percentage of net sales are
due primarily to costs related to the merger, compensation expense on Common
Stock sold to management and severance costs incurred by the Company in
connection with the termination of three Company officers during fiscal 1999.
Research and development expenses increased over the periods by
$209,560, or 13.9%, to $1,716,705 from $1,507,145, primarily due to the
increased investment in the development of new speaker and voice access products
and the enhancement of current products.
Depreciation increased over the periods by $500,859, or 53.1%, to
$1,444,308 from $943,449. The increase was primarily the result of increased
capital expenditures for tooling, molds, equipment and retail displays during
fiscal 1999 and 1998.
Amortization increased over the periods by $408,350, or 19.2%, to
$2,537,674 from $2,129,324. This entire increase was the result of amortization
of goodwill associated with the merger.
Interest expense increased over the periods by $262,758, or 8.1%, to
$3,516,553 from $3,253,795, primarily due to the increased borrowing on the
Company's line of credit and because long term debt was not reduced until late
in the fiscal year period.
The benefit for income taxes was $1,370,471 for fiscal 1999, as
compared to a provision for income taxes of $13,555 in fiscal 1998. The primary
reason for the large benefit in fiscal 1999 was the pre-tax loss of $6,041,871.
-13-
<PAGE>
In fiscal 1999 there was an extraordinary loss of $270,754, net of a
tax benefit of $77,841, which was due to the write off of debt issuance costs
related to the extinguishment of debt on February 17, 1999.
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales decreased $1,829,359, or 3.0%, to $60,113,452 for fiscal
1998 from $61,942,811 for fiscal 1997. The decrease in net sales over the period
was primarily caused by the loss of one large OEM customer, which was partially
offset by continued growth in the Company's North American and international
retail businesses. The Company's largest customer represented 14.6% of sales for
fiscal 1998, as compared to 14.7% for fiscal 1997.
Cost of sales decreased $1,517,478, or 3.8%, to $38,163,280 in
fiscal 1998 from $39,680,758 in fiscal 1997. As a percentage of net sales, cost
of sales decreased to 63.5% for fiscal 1998 as compared to 64.1% for fiscal
1997. The decrease as a percentage of net sales is attributable to the
aforementioned decrease in sales to one large OEM account, which had a higher
cost of sales.
Selling and marketing expenses increased over the periods by
$2,040,779, or 20.5%, to $12,009,351 from $9,968,572, primarily due to the costs
related to the introduction of new PC voice access products and efforts to
replace lost sales of the Company's large OEM customer. As a percentage of net
sales, selling and marketing expenses increased to 20.0% from 16.1%. The
increase as a percentage of net sales is due primarily to costs incurred
relating to the introduction of the new PC voice access products and increased
sales efforts.
General and administrative expenses increased over the periods by
$408,803, or 11.9%, to $3,857,291 from $3,448,488, primarily due to costs
associated with the Company's move to new corporate headquarters in Vancouver,
Washington, in August 1997, communication expenses related to implementing a
frame relay system between the Vancouver office and offices in the U.K. and Hong
Kong, and legal expenses. As a percentage of net sales, general and
administrative expenses increased over the periods to 6.4% from 5.6%. The
increase as a percentage of net sales is due primarily to costs related to the
corporate office move and legal expenses.
Research and development expenses increased over the periods by
$138,279, or 10.0%, to $1,507,145 from $1,368,866, primarily from increased new
product development.
Depreciation increased over the periods by $220,543, or 30.5%, to
$943,449 from $722,906. The increase was primarily the result of increased
capital expenditures for tooling, molds, equipment and retail displays during
fiscal 1998.
Interest expense increased over the periods by $643,224, or 24.6%,
to $3,253,795 from $2,610,571, primarily due to the increased borrowing as a
result of the Company's recapitalization in October 1997.
The provision for income taxes decreased over the periods by
$1,309,005, or 99.0%, to $13,555 from $1,322,560, primarily due to the loss of
$1,752,139 in fiscal 1998 as compared to income of $1,923,850 in fiscal 1997.
-14-
<PAGE>
In fiscal 1998 there was an extraordinary loss of $510,834, after
tax benefit of $263,156, which was due to the write off of debt issuance costs
and other costs related to the extinguishment of debt as a result of the
Company's recapitalization in October 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1999, the Company had $768,150 in cash and cash
equivalents and working capital of $14,935,181. The working capital balance
decreased primarily due to the decrease in inventories and increases in accounts
payable and other current liabilities, which were partially offset by the
increase in accounts receivable.
Net cash provided by operating activities was $3,635,068 and
$1,189,892 for 1999 and 1998, respectively. Operating activities used cash of
$2,574,004 in 1997. The increase in net cash provided by operating activities in
1999 was largely due to the decrease in inventories and increases in accounts
payable and accrued expenses, which were partially offset by the increase in
accounts receivable.
Net cash provided by investing activities was $2,155,625 for 1999,
which was principally due to the proceeds from the sale of marketable securities
purchased from Spacetec as part of the merger, and partially offset by capital
expenditures and costs associated with the merger. Net cash used by investing
activities was $1,536,872 and $743,116 for 1998 and 1997, respectively, which
was caused by capital expenditures, including tooling and molds for new products
and retail displays.
Financing activities used $5,981,469 in 1999, principally for the
repayment of long-term debt. Financing activities provided $1,263,526 and
$3,045,867 in 1998 and 1997, respectively, which was the result of the Company's
recapitalization in 1998 and the increase in short-term borrowing in 1997.
In connection with the Company's recapitalization in October 1997
the Company obtained funds from a $27,000,000 term loan, a $6,000,000
subordinated note, and a $13,000,000 revolving line of credit. The revolving
line of credit was reduced to $7,500,000 during fiscal 1999. On February 17,
1999, $7,000,000 was paid on the term loan as a result of the merger. Also in
conjunction with the closing of the merger, a six-year promissory note in the
principal amount of $1,065,000 was issued to the holders of Labtec common stock
outstanding just prior to the time of the merger. The note is unsecured and
accrues interest at the rate of 10% per year. Outstanding at March 31, 1999 was
$19,250,000 on the term loan, $6,000,000 on the subordinated debt and $4,000,000
on the line of credit. At March 31, 1999, the term loan was accruing interest at
the Eurodollar rate plus 3%, the subordinated note at 12% and the line of credit
at the prime rate plus 1.5%.
Capital expenditures were $1,437,498, $1,473,142 and $743,116 in
1999, 1998 and 1997, respectively. These capital expenditures were primarily for
the purchase of tooling and molds, retail displays and equipment.
The Company believes that its existing cash and revolving line of
credit, together with future funds from operations, will satisfy its need for
working capital and other cash requirements.
-15-
<PAGE>
INFLATION AND SEASONALITY
Inflation has not had any significant adverse effects on the
Company's business and the Company does not believe it will have any significant
effect on its future business. The Company's business is seasonal, with slightly
greater sales in the second and third fiscal quarters, preceding and during the
Christmas season.
YEAR 2000 ISSUES
The year 2000 issue is the result of date-sensitive devices, systems
and computer programs that were deployed using two digits rather than four to
define the applicable year. Any such technologies may recognize a year
containing "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculation causing disruption of operations including,
among other things, a temporary inability to process transactions or engage in
similar normal business activities.
The Company has completed its assessment of its information systems
which support business applications and has completed the process of modifying
or replacing those portions of the software that were required.
The assessment of products sold to customers has also been
completed. No date-sensitive devices or applications are included in the
Company's products, and no risk relating to Year 2000 is considered to exist
regarding the functionality of the Company's products. However, since some of
the Company's products are intended to be used in conjunction with other
hardware and applications through third-party suppliers, there can be no
assurance that the users of these products will not experience Y2K problems as a
result of the integration of the Company's products with non-compliant Y2K
products of such third-party suppliers. In addition, in certain circumstances,
the Company has warranted that the use or occurrence of dates on or after
January 1, 2000 will not adversely affect the performance of the Company's
products with respect to the lack in such products of any date-related
processing of the hardware or driver software.
The Company also is assessing the readiness of its key suppliers and
business partners to determine whether the products obtained by it from such
vendors are Y2K complaint. Its vendors are under no contractual obligation to
provide such information to the Company.
Based on the information available and compliance measures
implemented by the Company to date, the Company believes it will be able to
complete its Y2K compliance review and make necessary modifications by the end
of 1999.
The costs associated with required modifications to become Y2K
compliant has not been and is not expected to be material to the Company's
result of operations, liquidity and financial condition. The Company estimates
that it has incurred, and will incur, a total of approximately $50,000 for its
Y2K readiness programs.
The above statements contain certain risks and uncertainties. These
risks and uncertainties could include risk of unidentified bugs in the source
code of prepackaged or custom software, misrepresentation of third-party
vendors, unidentified dependency upon a system that is not Y2K ready,
unidentified non-IT systems, or misdiagnosed Y2K readiness in existing systems.
Although the Company believes that its efforts described above have
significantly reduced the risk that Year 2000 issues could significantly
-16-
<PAGE>
interrupt the Company's normal business operations or adversely affect the
performance of the Company's products, due to general uncertainty inherent in
the Year 2000 problem and in particular about the readiness of third parties,
the Company is unable to determine at this time whether the consequences of Year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition.
Disclosure Regarding Private Securities Litigation Reform Act of 1995
From time to time, the Company, through its management, may make
forward-looking public statements in press releases or other communications,
such as statements concerning then expected future revenues or earnings or
concerning projected plans, performance, marketing initiatives, corporate
alliances, product development and commercialization as well as other estimates
relating to future operations. Forward-looking statements may be in reports
filed under the Securities Exchange Act of 1934, as amended, in press releases
or in oral statements made with the approval of an authorized executive officer.
The words or phrases "will likely result," "are expected to," "will continue,"
"is anticipated," "estimate," or similar expressions are intended to identify
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 and Section 27A of the Securities Act of 1933, as enacted
by the Private Securities Litigation Reform Act of 1995.
The Company wishes to caution readers not to place undue reliance on
these forward-looking statements which speak only as of the date on which they
are made. Various factors could affect the Company's financial or other
performance and could cause the Company's actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods or events in any current statement. These factors include, but
are not limited to: business conditions and growth in the personal computer and
workstation industries and general economies, both domestic and international;
dependence on a limited number of retail customers; dependence on a limited
number of source suppliers; lower than expected customer orders or variations in
customer order patterns due to changes in demand for customers' products and
customers' inventory levels; competitive factors, including increased
competition, new product offerings by competitors and pricing pressures; changes
in product mix; dependency on proprietary technology; technological difficulties
and resource constraints encountered in developing new products; product
shipment interruptions and other factors discussed herein and in the Company's
other filings with the Securities and Exchange Commission.
The Company will not undertake and specifically declines any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events which may cause management to re-evaluate such forward-looking
statements.
-17-
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
----------------------------------------------------------
None.
-18-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
LABTEC INC.
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1999
-19-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Labtec Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and comprehensive income (loss), of
changes in shareholders' equity (deficit) and of cash flows present fairly, in
all material respects, the financial position of Labtec Inc. and its
subsidiaries (the Company) at March 31, 1998 and 1999 and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 1999, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Portland, Oregon
May 21, 1999
-20-
<PAGE>
<TABLE>
<CAPTION>
LABTEC INC.
CONSOLIDATED BALANCE SHEET
- -----------------------------------------------------------------------------------------
MARCH 31,
------------------------------------------
ASSETS 1998 1999
------------------- ----------------
<S> <C> <C>
Current assets:
Cash $ 988,417 $ 768,150
Accounts receivable, net 13,548,320 17,889,858
Interest and other receivables 19,790 211,468
Income taxes receivable - 594,973
Inventories 12,664,421 10,661,758
Prepaid expenses - 160,523
Current deferred income taxes 337,477 829,713
-------------- ---------------
Total current assets 27,558,425 31,116,443
Property and equipment, net 2,190,910 2,329,880
Noncurrent deferred income taxes 1,591,552 1,892,850
Noncompete agreement 361,800 -
Debt issuance costs 2,614,880 1,983,637
Other noncurrent assets 117,116 253,535
Goodwill, net 1,767,522 9,392,044
-------------- ---------------
$ 36,202,205 $ 46,968,389
-------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Lines of credit $ 2,500,000 $ 4,000,000
Current portion of long-term debt 625,000 -
Accounts payable 3,644,113 8,491,828
Income taxes payable 270,925 -
Accrued payroll and benefits 125,645 1,588,855
Accrued interest 202,260 223,214
Other accrued expenses 646,054 1,877,365
-------------- ---------------
Total current liabilities 8,013,997 16,181,262
Long-term debt 31,985,988 26,086,184
-------------- ---------------
39,999,985 42,267,446
-------------- ---------------
Commitments and contingencies (Notes 5, 6 and 10)
Shareholders' equity (deficit):
Preferred stock, par value $.01, 34,000 and 1,000,000 shares authorized
and no shares outstanding at March 31, 1998 or 1999 - -
Common stock, par value $.01, 35,000,000 and 25,000,000 shares
authorized, 25,164,720, and 6,903,598 shares issued and outstanding
at March 31, 1998 and 1999 251,647 69,036
Additional paid-in capital 5,942,139 20,551,252
Stock subscription receivable (134,554) (25,688)
Accumulated deficit (9,857,012) (15,864,166)
Accumulated other comprehensive income (loss):
Cumulative foreign currency translation to adjustment - (29,491)
-------------- ---------------
(3,797,780) 4,700,943
-------------- ---------------
$ 36,202,205 $ 46,968,389
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-21-
<PAGE>
LABTEC INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1997 1998 1999
-------------- ------------ ---------------
<S> <C> <C> <C>
Net sales $ 61,942,811 $ 60,113,452 $ 64,273,410
Cost of sales 39,680,758 38,163,280 40,657,361
-------------- ------------ ---------------
Gross profit 22,262,053 21,950,172 23,616,049
-------------- ------------ ---------------
Operating expenses:
Selling and marketing 9,968,572 12,009,351 14,993,624
General and administrative 3,448,488 3,857,291 5,457,227
Research and development 1,368,866 1,507,145 1,716,705
Depreciation 722,906 943,449 1,444,308
Amortization of goodwill 1,767,524 1,767,524 2,175,874
Amortization of noncompete agreement 482,400 361,800 361,800
-------------- ------------ ---------------
17,758,756 20,446,560 26,149,538
-------------- ------------ ---------------
Income (loss) from operations 4,503,297 1,503,612 (2,533,489)
Interest expense, net 2,610,571 3,253,795 3,516,553
Other nonoperating (income) expense (31,124) 1,956 (8,171)
-------------- ------------ ---------------
Income (loss) before extraordinary loss and income taxes 1,923,850 (1,752,139) (6,041,871)
Provision (benefit) for income taxes 1,322,560 13,555 (1,370,471)
-------------- ------------ ---------------
Income (loss) before extraordinary loss 601,290 (1,765,694) (4,671,400)
Extraordinary loss on extinguishment of debt, less applicable
income tax benefit of $263,156 and $77,841, respectively - (510,834) (270,754)
-------------- ------------ ---------------
Net income (loss) $ 601,290 $ (2,276,528) $ (4,942,154)
============== ============ ===============
Net income (loss) per share before extraordinary loss
Basic $ 0.24 $ (0.50) $ (0.94)
============== ============ ===============
Diluted $ 0.16 $ (0.50) $ (0.94)
============== ============ ===============
Net income (loss) per share
Basic $ 0.24 $ (0.64) $ (0.99)
============== ============ ===============
Diluted $ 0.16 $ (0.64) $ (0.99)
============== ============ ===============
Comprehensive income (loss):
Net income (loss) $ 601,290 $(2,276,528) $ (4,942,154)
Change in cumulative translation adjustment - - (29,491)
-------------- ------------ ---------------
Comprehensive income (loss) $ 601,290 $(2,276,528) $ (4,971,645)
============== ============ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-22-
<PAGE>
<TABLE>
<CAPTION>
LABTEC INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
- ------------------------------------------------------------------------------------------------------------------------------------
ACCUMULATED
ADDITIONAL COMMON OTHER
PREFERRED STOCK COMMON STOCK PAID-IN STOCK COMPREHENSIVE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL SUBSCRIPTION INCOME DEFICIT TOTAL
------ ------- ------ ------ ------- ------------ ------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 34,000 $2,500,000 78,986 $ 790 $7,886,810 $(170,902) $ - $(4,189,401) $ 6,027,297
-------- ---------- ---------- --------- ---------- ---------- -------- ------------ -----------
Compensation expense on
stock options granted 37,000 37,000
Net income 601,290 601,290
-------- ---------- ---------- --------- ---------- ---------- -------- ------------ -----------
Balance at March 31, 1997 34,000 2,500,000 78,986 790 7,923,810 (170,902) - (3,588,111) 6,665,587
Payments on common stock
subscription 36,348 36,348
Preferred stock dividend (435,314) (435,314)
Preferred stock converted
to common stock (34,000) (2,500,000) 34,000 340 2,499,660 -
Compensation expense on
stock options granted 73,000 73,000
Exercise of warrant
(including cancellation
of "put" rights) 5,319 53 1,901,884 1,901,937
Exercise of stock options 18,728 187 1,872,613 1,872,800
8.5823 to 1 stock split 1,039,436 10,394 (10,394) -
Repurchase and retirement
of common stock (1,017,659) (10,176) (14,260,573) (3,557,059) (17,827,808)
Issuance of common stock 1,049,426 10,494 5,900,094 5,910,588
Issuance of shares to
subordinated debt holder 50,000 500 281,110 281,610
20 to 1 stock split 23,906,484 239,065 (239,065) -
Net loss (2,276,528) (2,276,528)
-------- ---------- ---------- --------- ---------- ---------- -------- ------------ -----------
Balance at March 31, 1998 - - 25,164,720 251,647 5,942,139 (134,554) (9,857,012) (3,797,780)
Repurchase and retirement
of common stock (1,217,240) (12,172) (182,929) 134,554 (60,547)
Translation adjustment (29,491) (29,491)
Issuance of common stock
to management 1,031,919 10,319 1,061,525 (25,688) 1,046,156
Reduction to common stock
outstanding related to
merger (Note 2) (11,133,149) (111,331) 111,331 -
Issuance of shares for
Spacetec IMC
Corporation acquisition 6,846,857 68,468 12,735,409 12,803,877
Common stock issued for
the Spacetec employee
stock purchase plan 18,000 180 3,390 3,570
Dividend declared to former
Labtec owners (1,065,000) (1,065,000)
Stock options granted to
Spacetec employees 742,312 742,312
1 for 3 stock split (13,807,509) (138,075) 138,075 -
Net loss (4,942,154) (4,942,154)
-------- ---------- ---------- --------- ---------- ---------- -------- ------------ -----------
Balance at March 31, 1999 - $ - 6,903,598 $ 69,036 $20,551,252 $ (25,688) $(29,491) $(15,864,166) $ 4,700,943
======== ========== ========== ========= =========== ========== ======== ============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-23-
<PAGE>
<TABLE>
<CAPTION>
LABTEC INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
YEAR ENDED MARCH 31,
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 601,290 $ (2,276,528) $(4,942,154)
Adjustments to reconcile net income (loss) to net cash provided by (used
for) operating activities:
Depreciation 722,906 943,449 1,444,308
Amortization of goodwill 1,767,524 1,767,524 2,175,874
Amortization of noncompete agreement 482,400 361,800 361,800
Amortization of debt issuance costs 619,854 474,857 382,649
Change in deferred income taxes (304,640) (349,932) (793,534)
Loss on disposal of assets - 1,200 -
Compensation expense on common stock sold to management - - 780,844
Compensation expense on stock options granted 37,000 73,000 -
Write-off of debt issuance costs - 296,468 348,595
Write-off of unamortized discount on refinanced subordinated debt - 307,185 -
Changes in current assets and liabilities, net of effects of acquisition:
Accounts receivable 456,467 (3,143,437) (3,084,495)
Interest and other receivables (13,604) 4,585 46,770
Inventories (7,080,728) 3,432,747 2,724,429
Income taxes receivable - - (594,973)
Prepaid expenses - - 31,906
Accounts payable (232,847) (272,573) 3,224,665
Accrued interest 126,494 75,766 20,954
Accrued payroll and other expenses 388,744 (533,336) 1,792,345
Income taxes payable (144,864) 27,117 (284,915)
------------- ---------------- --------------
Net cash (used for) provided by operating activities (2,574,004) 1,189,892 3,635,068
------------- ---------------- --------------
Cash flows from investing activities:
Costs associated with purchase of Spacetec - - (1,633,250)
Capital expenditures (743,116) (1,473,142) (1,437,498)
Other assets - (63,730) 19,962
Proceeds from sale of securities purchased from Spacetec - - 5,206,411
------------- ---------------- --------------
Net (cash used) provided by investing activities: (743,116) (1,536,872) 2,155,625
------------- ---------------- --------------
Cash flows from financing activities:
Net increase in short-term credit facility - 2,500,000 1,500,000
Net increase (decrease) in short-term borrowing facility 5,672,671 (15,672,671) -
Proceeds from issuance of long-term debt - 33,000,000 -
Repayments of long-term debt (2,375,000) (5,750,000) (7,589,804)
Debt issuance costs (251,804) (2,820,417) (100,000)
Proceeds from exercise of stock options and warrants - 2,322,800 -
Repurchase and cancellation of common stock - (17,827,808) (60,547)
Proceeds from issuance of common stock - 5,910,588 3,570
Preferred stock dividend - (435,314) -
Payments on common stock subscription - 36,348 265,312
------------- ---------------- --------------
Net cash provided by (used in) financing activities 3,045,867 1,263,526 (5,981,469)
------------- ---------------- --------------
Effect of foreign currency on cash - - (29,491)
Net increase (decrease) in cash (271,253) 916,546 (220,267)
Cash at beginning of year 343,124 71,871 988,417
------------- ---------------- --------------
Cash at end of year $ 71,871 $ 988,417 $ 768,150
============= ================ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-24
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Summary of Operations and Significant Accounting Policies
LEI Holdings, Inc. was formed June 24, 1994 to acquire, own and
operate Labtec Enterprises, Inc. (Labtec) and its wholly owned
subsidiary, Labtec Electronics (HK) Limited, located in Hong Kong.
In 1996, LEI Holdings, Inc. incorporated a new subsidiary under
Labtec Enterprises, Inc. in Windsor, Great Britain (Labtec
Enterprises UK Limited) to facilitate sales on the European
continent. On October 6, 1997 Labtec merged with LEI Holdings, Inc.,
with LEI Holdings being the survivor, in conjunction with a
recapitalization transaction through which it refinanced its debt
and obtained new equity capital and repurchased a significant
portion of its previously outstanding equity interests
(approximately 86.5%) (the Recapitalization) (see Notes 5 and 8).
Labtec was dissolved and LEI Holdings, Inc. changed its name to
Labtec Enterprises, Inc. On October 7, 1997 Labtec Enterprises, Inc.
consummated the Recapitalization and changed its name to Labtec Inc.
(the Company). The accompanying consolidated financial statements
reflect the financial position and results of operations of Labtec
Inc. and its subsidiaries. On February 17, 1999, Labtec, Inc.
acquired Spacetec IMC Corporation (Spacetec). See Note 2.
The Company designs, manufactures and distributes multimedia
computer peripheral products. Its worldwide customers include
original computer equipment manufacturers, distributors and
retailers. The Company's products are manufactured by various
factory suppliers located in Asia and are imported to the Company's
headquarters in Vancouver, Washington and to warehouses in Great
Britain, the Netherlands and Canada for distribution.
The principal accounting policies followed by Labtec Inc. and its
subsidiaries in maintaining their financial records and preparing
these consolidated financial statements are as follows:
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the
Company, as well as all of the accounts of its wholly owned
subsidiaries. All significant intercompany transactions and balances
have been eliminated.
REVENUE RECOGNITION
Revenues are recognized upon shipment of the Company's products, net
of an estimated allowance for sales returns. Gross revenues from one
customer were $9.1 million, $8.8 million and $10.1 million for the
years ended March 31, 1997, 1998 and 1999, respectively, while
revenues from another customer were $7.4 million for the year ended
March 31, 1997. Each of these revenue amounts accounted for more
than 10% of consolidated sales for the respective period.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts of cash, accounts receivable, accounts payable,
notes payable, and accrued liabilities as presented in the financial
statements approximate fair value because of the short-term maturity
of these instruments. The recorded amount of long-term debt
approximates fair value because actual interest rates approximate
current competitive rates.
-25-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ACCOUNTS RECEIVABLE
Accounts receivable are net of allowances for doubtful accounts and
for sales returns. The allowance for doubtful accounts was $89,736
and $937,990 at March 31, 1998 and 1999, respectively. The allowance
for returns of merchandise was $578,067 and $505,153 at March 31,
1998 and 1999, respectively. At March 31, 1998 and 1999, 10%, and
18%, respectively, of receivables were from one customer.
CONCENTRATION OF CREDIT RISK
The Company is subject to credit risk primarily from its accounts
receivable. The Company mitigates its credit risk on receivables by
control procedures to monitor the credit worthiness of its customers
and utilization of credit limits. The Company's customers are
concentrated in the technology industry. Therefore, the Company's
operations and collection of its accounts receivable are directly
associated with the results of the technology industry.
INVENTORIES
Inventories are stated at the lower of landed cost (first-in,
first-out method) or market. Landed cost includes the cost of
merchandise, freight, duty and handling fees.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost. Depreciation is provided
on the straight-line method for financial reporting purposes and on
an accelerated method for tax purposes over estimated useful lives
ranging from three to seven years. Depreciation expense for the
years ended March 31, 1997, 1998 and 1999 was $722,906, $943,449 and
$1,444,308, respectively.
Repair and maintenance costs are expensed as incurred.
DEBT ISSUANCE COSTS
Debt issuance costs, including bank fees of $1,608,545 and other
transaction fees relating to the Company's debt of $1,211,872, are
included in debt issuance costs and represent all costs and fees
incurred to obtain bank financing for the refinancing of debt in
October 1997 (see Notes 5 and 8). These costs are being amortized
over the term of the related debt. Debt issuance costs of $296,468
related to financing arrangements prior to the Recapitalization were
written off and included in extraordinary loss on extinguishment of
debt in October 1997 and are included in the extraordinary loss on
extinguishment of debt. Debt of $5 million was paid off on February
17, 1999. As such, debt issuance costs of $348,595 were written off
and included in extraordinary loss on extinguishment of debt in
fiscal 1999. Amortization expense for fiscal years 1997, 1998 and
1999 was $197,864, $285,695 and $382,649, respectively, and is
included in interest expense.
GOODWILL AND OTHER INTANGIBLE ASSETS
Costs in excess of the fair value of the net tangible assets of
Labtec acquired in fiscal 1995 consist primarily of goodwill
associated with product trade names originally recorded at
$8,837,618 and a $3,350,000 noncompete agreement with the former
owner. Goodwill is being amortized using the straight-line method
over 5 years, which represents the estimated lives of the underlying
product
-26-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
GOODWILL AND OTHER TANGIBLE ASSETS (CONTINUED)
trade names. The noncompete agreement is being amortized using the
double-declining balance method over the agreement's life of 5 years
to reflect management's belief that the noncompete provision has
more value in the earliest years of the noncompete period.
Amortization expense recognized related to this goodwill was
$1,767,524 for each of the years ended March 31, 1997, 1998 and
1999. Amortization expense recognized related to the noncompete
agreement was $482,400, $361,800 and $361,800 for the years ended
March 31, 1997, 1998 and 1999, respectively.
Cost in excess of the fair value of tangible assets of Spacetec
acquired in fiscal 1999 (Note 2) consisted of goodwill associated
primarily with the existing technology acquired and was recorded at
$7,557,529. Direct costs of acquisition totaled $2,242,867. These
costs have also been capitalized as part of cost in excess of fair
value of tangible assets acquired. Amortization expense recognized
related to this goodwill was $408,350 in fiscal 1999.
Periodically, the Company reviews the recoverability of its
intangible assets based on estimated undiscounted future cash flows
from operating activities compared with the carrying value of the
intangible assets. If the aggregate future cash flows are less than
the carrying value, a write-down would be required, measured by the
difference between the fair value and the carrying value of the
intangible assets. The Company has not recorded any provision
related to impairment of intangible assets.
DISCOUNT ON SUBORDINATED DEBT
In connection with the Recapitalization, the Company issued 184,769
shares of common stock to a subordinated lender and recorded the
$281,610 of fair value of these shares as a discount on the face
amount of the debt. This non-cash transaction is excluded from the
accompanying statement of cash flows. The discount is being
amortized using the effective interest method over eight years,
which is the life of the subordinated note. Amortization during
fiscal 1998 and fiscal 1999 aggregated $17,598 and $35,196,
respectively.
STOCK SUBSCRIPTION RECEIVABLE
In fiscal year 1995 the Company issued 56,250 shares of common stock
to the Company's president in exchange for a note aggregating
$177,300. This note receivable has been recorded as a reduction to
shareholders' equity. During fiscal year 1999, the unpaid balance of
$134,554 was forgiven.
During fiscal year 1999, the Company sold shares of common stock to
certain members of management for a note aggregating $25,688. This
note receivable has been recorded as a reduction of shareholders'
equity.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
-27-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
ADVERTISING EXPENSES
The Company expenses advertising costs when incurred. Total
advertising expenses for the years ended March 31, 1997, 1998 and
1999 were $615,102, $818,984 and $781,711, respectively.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109 (FAS 109), ACCOUNTING FOR
INCOME TAXES. FAS 109 requires the recognition of deferred tax
assets and liabilities for the expected tax effects from differences
between the financial reporting and tax bases of assets and
liabilities. In estimating future tax effects, FAS 109 generally
considers all expected future events other than enactments of
changes in tax law or statutorily imposed rates.
FOREIGN CURRENCY TRANSLATION
The financial statements and transactions of the Company's foreign
subsidiary are maintained in their functional currency and
translated into U.S. dollars for purposes of consolidation.
Translation adjustments are accumulated as a separate component of
shareholders' equity. The translation adjustments for 1998 and 1997
were not significant.
EARNINGS PER SHARE
In fiscal year 1998 the Company adopted Statement of Financial
Accounting Standards No. 128 (FAS 128), EARNINGS PER SHARE. FAS 128
requires a dual presentation of basic and diluted earnings per share
(EPS). Basic EPS is computed by dividing net income (loss) by the
weighted-average shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if contracts to
issue common stock were exercised or converted to common stock.
Prior periods have been restated to conform to SFAS No. 128. All
amounts below and earnings per share amounts in the statement of
operations are calculated after retroactively considering the stock
splits that occurred during fiscal 1998 and 1999, and the conversion
of Labtec shares as discussed in Note 2.
The following table sets forth the reconciliation of the denominator
utilized in the computation of basic and diluted (loss) earnings per
share (in thousands, except per share amounts).
FISCAL 1999
--------------------------------------------
INCOME AVERAGE PER SHARE
(LOSS) SHARES AMOUNT
------------ ------------- -------------
Loss before extraordinary item $ (4,671) 4,987 $ (.94)
Extraordinary loss, net of tax (271) 4,987 (.05)
----------- ------------
Loss per common share (4,942) 4,987 (.99)
Effect of dilutive securities:
Stock options - - -
----------- ------------ -------------
Loss per share-assuming dilution $ (4,942) 4,987 $ (.99)
=========== ============ =============
-28-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
EARNINGS PER SHARE (CONTINUED)
FISCAL 1998
--------------------------------------
INCOME AVERAGE PER SHARE
(LOSS) SHARES AMOUNT
---------- ---------- ----------
Loss before extraordinary item $ (1,766) 3,540 $ (.50)
Extraordinary loss, net of tax (511) 3,540 (.14)
---------- ----------
Loss per common share (2,277) 3,540 (.64)
Effect of dilutive securities:
Stock options - - -
---------- ---------- ----------
Loss per share-assuming dilution $ (2,277) 3,540 $ (.64)
========== ========== ==========
FISCAL 1997
--------------------------------------
INCOME AVERAGE PER SHARE
(LOSS) SHARES AMOUNT
------------ ----------- ----------
Income before extraordinary item $ 601 2,506 $ .24
Extraordinary loss, net of tax - - -
--------- ---------
Income per common share 601 2,506 .24
Effect of dilutive securities:
Stock options 138 (.01)
Assumed conversion of preferred stock 1,079 (.07)
--------- -------- ---------
Income per share-assuming dilution $ 601 3,723 $ .16
========= ======== =========
DERIVATIVE FINANCIAL INSTRUMENTS
In June 1998 the Financial Accounting Standards Board issued
Statement on Financial Accounting Standards No. 133 (SFAS 133),
"Accounting for Derivative Instruments and Hedging Activities". The
Statement is effective beginning with the Company's fiscal year
ended March 31, 2001, and will require the Company to record all
derivative instruments at fair value on its balance sheet. The
Company has not elected to adopt the statement early, and does not
expect the standard to have a material effect on the Company's
financial position or results of operations upon adoption.
COMPREHENSIVE INCOME
The Company adopted SFAS No. 130, "Reporting Comprehensive Income"
as of April 1, 1998. Comprehensive income is defined by SFAS No. 130
as the changes in equity of a business enterprise during a period
that results from transactions and other economic events and
circumstances from non-shareholder sources. It includes all changes
in equity during a period except those resulting from investments by
shareholders. Consequently, the Company has reported its Foreign
Currency Translation Adjustment, as required by SFAS No. 130, as
comprehensive income in the appropriate consolidated financial
statements presented herein.
-29-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
SEGMENT REPORTING
The Company has adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" in fiscal year 1999. This
statement establishes standards for reporting information about
operating segments in annual financial statements and requires
selected information about operating segments in interim financial
reports issued to shareholders. The Company does not have separate
operating segments which meet the requirements for SFAS No. 131
disclosure. The Company does sell its products internationally.
Sales to Europe and Asia were as follows:
YEAR ENDED MARCH 31,
----------------------------------------------
1997 1998 1999
------------- ------------ -----------
Europe $ 9,276,696 $ 9,560,990 $13,396,516
Asia $ 1,200,926 $ 1,168,453 $ 769,772
RELATED PARTIES
The former controlling shareholders of the Company provided certain
management services for which they charged a monthly fee of
approximately $14,500 for April 1998 through September 1998 (prior
to the Recapitalization - Note 8) and for the year ended March 31,
1997. The new majority shareholders charge an annual management
services fee of $500,000, of which $250,000 and $500,000 was charged
during fiscal 1998 and fiscal 1999, respectively, and $250,000 and
$750,000 remained payable at March 31, 1998 and 1999, respectively.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with
the 1999 presentation. Such reclassifications had no impact on net
income or shareholders' equity.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates. Significant estimates and
judgements made by the Company include items such as the
collectibility of accounts receivable; the level of sales returns;
realizability of inventories and realizability of intangible assets
and deferred income tax assets.
2. PURCHASE OF SPACETEC IMC CORPORATION
Effective February 17, 1999, Labtec merged with Spacetec IMC
Corporation, a publicly traded company. Spacetec is involved in the
development, manufacture and distribution of three-dimensional (3D)
input controller devices for the PC and workstation marketplace used
in both CAD/CAM industrial applications and in consumer electronic
games. The merger called for issuance of 0.55430739 of Spacetec
common shares for each Labtec common share outstanding. As a result
-30
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. PURCHASE OF SPACETEC IMC CORPORATION (CONTINUED)
of the merger, Labtec shareholders acquired 67% of Spacetec and
therefore, Labtec has accounted for the transaction as a purchase of
Spacetec in a "reverse acquisition."
The acquisition of Spacetec for 6,846,857 common shares valued at
$12.8 million has been accounted for under the purchase method of
accounting. The financial statements reflect the allocation of the
purchase price and assumption of Spacetec's liabilities and include
its operating results from the date of the acquisition.
The following sets forth the reconciliation of fair value of the
assets acquired and the liabilities assumed.
Purchase price $ 12,803,877
Fair value of tangible assets acquired (8,527,876)
Liabilities assumed 2,539,216
Fair value of options granted to Spacetec employees 742,312
Direct costs of acquisition 2,242,867
------------
Excess of purchase price over fair value of tangible assets 9,800,396
============
The excess of purchase price over fair value of tangible assets
acquired is being amortized over a useful life of three years.
The following unaudited pro forma information presents the results
of the Company's operations assuming the Spacetec acquisition
occurred at the beginning of each period presented (in thousands,
except per share data):
YEAR ENDED MARCH 31,
1999 1998
---------- ---------
(UNAUDITED)
Net sales $ 70,411 $ 66,704
Net loss (11,424) (8,351)
Net loss per share:
Basic and diluted (2.29) (2.36)
The pro forma financial information is not necessarily indicative of
the operating results that would have occurred had the Spacetec
acquisition been consummated as of the beginning of each period, nor
is it necessarily indicative of future operating results.
In conjunction with the closing of the merger, Spacetec issued a six
year promissory note in the principal amount of $1,065,000 payable
to the holders of Labtec common stock outstanding just prior to the
time of the merger. This transaction was accounted for as a dividend
distribution. This note is unsecured and accrues interest at the
rate of 10% per year.
-31-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. PURCHASE OF SPACETEC IMC CORPORATION (CONTINUED)
In conjunction with the acquisition, the Company accrued costs
associated with closing of certain acquired facilities and severance
payments to terminate employees of the acquired company. The
following table presents the activity in the related accrued
liabilities:
FACILITY
CLOSURE EMPLOYEE
COSTS SEVERANCE TOTAL
---------- ---------- ----------
Balance at March 31, 1998 $ - $ - $ -
Additions 426,000 872,658 1,298,658
Payments in fiscal 1999 - - -
--------- ---------- ----------
Balance at March 31, 1999 426,000 872,658 1,298,658
========= ========== ==========
These items are included in accrued payroll costs and other accrued
liabilities in the accompanying balance sheet.
3. INVENTORIES
Inventories represent merchandise produced for the Company by
foreign factories subcontracted by the Company. Of the total
inventories, $716,715 and $2,169,918 was in transit at March 31,
1998 and 1999, respectively. In 1998, the Company took title upon
shipment. During 1999, the Company began taking title upon receipt.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of:
MARCH 31,
1998 1999
------------- ------------
Leasehold improvements $ 238,948 $ 238,948
Tooling and molds 1,676,727 2,328,602
Furniture and equipment 1,381,983 1,878,998
Retail displays 1,093,227 1,526,915
------------- ------------
4,390,885 5,973,463
Less accumulated depreciation and amortization (2,199,975) (3,643,583)
------------- ------------
$ 2,190,910 $ 2,329,880
============= ============
-32-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. BORROWINGS
In connection with the Recapitalization in October of 1997, the
Company repaid its $16.5 million revolving line of credit and
subordinated notes with funds obtained from a $27 million term note,
a $6 million subordinated note, and a $13 million revolving line of
credit with other lenders. A termination fee of $170,337 related to
the old credit line is included in the extraordinary loss on
extinguishment of debt. At March 31, 1998 and 1999, $2.5 million and
$4 million, respectively, was outstanding on the Company's lines of
credit. At March 31, 1998, $2,000,000 and $500,000 of the
outstanding amount was accruing interest at the EURODOLLAR rate plus
2.5% and at the prime rate plus 1.5%, respectively. At March 31,
1999, the outstanding amount was accruing interest at the prime-rate
plus 1.50%. The line of credit is secured by substantially all of
the Company's assets. Loan fees paid to the banks and transaction
fees relating to the term note, subordinated note, and line of
credit were $2,820,417 and have been recorded in debt issuance costs
(see Note 1). The current line of credit agreement expires in
October of 2002.
Long-term debt consists of:
<TABLE>
<CAPTION>
MARCH 31,
1998 1999
-------------- ------------
<S> <C> <C>
Bank note payable with varying quarterly payments, 26,875,000 19,250,000
interest at the bank's Eurodollar rate plus 3%, (8% at
March 31, 1999), with the final payment due September
30, 2004 secured by the Company's assets $ $
Bank subordinated note payable (net of $264,012 and
$228,816 discount at March 31, 1998 and 1999,
respectively) at 12%, with principal due October 1, 2005 5,735,988 5,771,184
Note payable to former Labtec shareholders; interest at
10%, with principal due at February 17, 2005 (Note 2) - 1,065,000
-------------- ------------
32,610,988 26,086,184
Less amounts payable in one year (625,000) -
-------------- ------------
Total long-term debt $ 31,985,988 $ 26,086,184
============== ============
</TABLE>
In fiscal year 1995, under the terms and conditions of the
subordinated note payable agreement, the Company issued warrants to
purchase 168,750 shares of Class A common stock to the lender at an
exercise price of $2.67 per share for nominal consideration of $200.
The aggregate exercise price of the warrants was $450,000. The
estimated fair value of the warrants of $1,451,937 was recorded as
redeemable warrants and as a discount to long-term debt. The warrant
holder had certain "put" rights that would require the Company to
repurchase the warrants at a price to be determined on the date the
warrants are put to the Company. These warrants were exercised and
converted into common stock in conjunction with the Recapitalization
discussed in Note 8, and the $1,451,937 was reclassified as
additional paid-in capital. The reclassification of the fair value
of the warrants has been excluded from the accompanying consolidated
statement of cash flows.
Debt discount amortization expense for the years ended March 31,
1997, 1998 and 1999 was $420,090, $189,162 and $35,196,
respectively. The discount on the new subordinated note payable is
being amortized over the life of the note. These amounts were
recorded as part of interest expense in the consolidated statement
of operations. The unamortized balance of $307,185 on the old debt
was written off during fiscal 1998 concurrent with the
Recapitalization and is included in the extraordinary loss on
extinguishment of debt.
-33-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. BORROWINGS (CONTINUED)
The bank line of credit agreement and long-term debt agreements are
subject to certain restrictive covenants. The Company was in
compliance with these covenants for all periods presented in the
accompanying financial statements.
Interest payments for the years ended March 31, 1997, 1998 and 1999
were $1,886,319, $2,758,083 and $3,159,745, respectively.
Principal repayments of the long-term debt are required as follows:
FISCAL YEAR
2000 $ -
2001 1,250,000
2002 2,250,000
2003 3,500,000
2004 9,750,000
Thereafter 9,565,000
Less debt discount (228,816)
---------------
$ 26,086,184
===============
6. EMPLOYEE BENEFITS
The Company has a defined contribution profit sharing plan for its
employees who meet certain requirements of age and length of
service. Employees may voluntarily contribute up to a maximum of 20%
of their annual compensation to the plan. In fiscal year 1997, the
Company matched 50% of the employee contributions up to a maximum of
5%. For the years ended March 31, 1997, 1998 and 1999, matching
contributions for eligible employees amounted to $91,583, $56,212
and $0, respectively.
Discretionary bonuses of $700,700, $175,485 and $140,584 were
awarded to employees for the years ended March 31, 1997, 1998 and
1999, respectively.
7. INCOME TAXES
The income tax provision (benefit) consists of the following:
FISCAL YEAR ENDED MARCH 31,
1997 1998 1999
------------ ------------ ----------------
Current tax expense (benefit) $ 1,627,200 $ 363,487 $ (576,936)
Deferred tax benefit (304,640) (349,932) (793,535)
----------- ----------- ----------------
$ 1,322,560 $ 13,555 $ (1,370,471)
=========== =========== ================
-34-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. INCOME TAXES (CONTINUED)
Deferred tax assets are comprised of the following:
MARCH 31,
1998 1999
-------------- --------------
Nondeductible accruals and allowances $ 273,004 $ 652,475
Capitalized inventory costs 64,473 177,238
Property and equipment depreciation 283,193 535,764
Intangibles 1,308,359 1,357,086
Research and experimentation credits - 522,558
Net operating loss carryforward - 2,985,834
-------------- --------------
Gross deferred tax asset 1,929,029 6,230,955
Valuation allowance - (3,508,392)
-------------- --------------
Net deferred tax assets $ 1,929,029 $ 2,722,563
============== ==============
The net increase in the valuation allowance for fiscal year 1999 of
$3,508,392, relates to the net operating loss carryforwards and
research and experimentation credits resulting from the acquisition
of Spacetec in fiscal year 1999. The Company's net operating loss
carryforwards aggregate approximately $8.8 million at March 31, 1999
and expire in 2012 - 2014. The utilization of the Spacetec net
operating loss carryforwards is limited to approximately $600,000
per year for income tax purposes. The credit carryforwards are also
limited to taxable earnings of Spacetec and expire in 2012 and 2013.
As of March 31, 1999, a valuation allowance has been provided for
these deferred tax assets because management cannot conclude that it
is presently more likely than not that such deferred income tax
assets will be utilized.
The income tax provision is reconciled to the tax computed at the
statutory federal rate as follows:
FISCAL YEAR ENDED MARCH 31,
1997 1998 1999
------- ------- -------
Tax expense (benefit) at federal statutory rate 34.00% (34.00)% (34.00)%
Foreign taxes .04 .39 .09
Permanent differences 31.24 35.38 11.41
Other 3.47 (1.00) (.18)
------- ------- -------
68.75% .77% (22.68)%
======= ======= =======
Permanent differences primarily include nondeductible goodwill and
nondeductible meals and entertainment expense.
Income taxes paid for the years ended March 31, 1997, 1998 and 1999
were $1,791,287, $75,960 and $200,000, respectively.
8. SHAREHOLDERS' EQUITY (DEFICIT)
On October 7, 1997 the Company undertook the Recapitalization
whereby the Company:
a) refinanced its existing debt by obtaining a $13 million line of
credit, a $27 million term note and a
-35-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
$6 million subordinated term note, and by issuing 1,099,426 shares
of common stock for aggregate proceeds of $6,192,198 representing
approximately 87.4% of the stock ownership of the Company; and b)
repurchased 1,017,659 shares of its previously existing outstanding
stock for aggregate cash consideration of $17,827,808, including
direct expenses of approximately $690,000. The repurchase of
existing stock resulted in the old shareholder group maintaining an
approximate 12.6% interest in the Company.
All holders of common stock are entitled to one vote per share and
are entitled to dividends, provided that equivalent dividends are
declared and paid on all outstanding shares of common stock. The
Company has granted stock options and warrants to purchase shares of
Class A common stock of the Company. (See Note 9).
In fiscal year 1996, the Company authorized and issued 34,000 shares
of preferred stock. At March 31, 1996 and 1997, 34,000 shares were
issued and outstanding. During fiscal year 1998 all shares of
preferred stock were converted to shares of common stock. The shares
were converted in accordance with the original terms of the
preferred stock, resulting in no beneficial conversion interests.
Certain employees of Spacetec were eligible to participate in an
Employee Stock Purchase Plan. This plan terminated upon Spacetec
being acquired by Labtec and 18,000 shares were issued at such time.
On September 30, 1998 the Company sold 190,667 shares of common
stock (post stock splits) to certain members of management for $1.53
per share. $265,312 was received in cash and the remaining $25,688
in proceeds was recorded as a stock subscription receivable. The
difference between the fair market value of the Company's common
stock and the proceeds received was recorded as compensation expense
aggregating $780,844 during the year ended March 31, 1999. During
the year ended March 31, 1998, the Company effected an 8.5853 to 1
stock split followed by a second split at 20 to 1. On February 17,
1999, directly following the acquisition of Spacetec, the Company
effected a 1 for 3 stock split. All share and per share amounts in
the consolidated statement of operations and comprehensive income
(loss) and the notes to consolidated financial statements have been
retroactively adjusted for these splits.
9. STOCK OPTIONS
The Company provided an employee incentive stock option plan (the
Plan) which commenced on January 27, 1995. Options under the Plan
were granted at the discretion of the Board of Directors. The
exercise price of these options generally was the fair market value
of shares at the date of grant as determined by the Board of
Directors. Such options were exercisable generally over ten years
from the time the options were granted, and vested over a period of
three years. Compensation cost recognized on the Company's stock
option grants which provided an exercise price below the fair value
on the date of the grant was $37,000 and $73,000 for the years ended
March 31, 1997 and 1998, respectively.
The Plan allowed the granting of options to purchase up to an
aggregate of 496,353 shares (before considering stock splits) of the
Company's Class A common stock. Options granted under the Plan were
nonqualified stock options as defined by the Internal Revenue Code.
All options were exercised and the Plan was terminated pursuant to
the completion of the Recapitalization in October of 1997. In
connection with the Recapitalization, the Company established a new
employee incentive stock option plan, which commenced on October 7,
1997 (the New Plan). The Company reserved 884,951
-36-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. STOCK OPTIONS (CONTINUED)
shares of common stock for issuance to certain employees under the
plan. The exercise price of these options range from $1.5241
(estimated fair value based upon the price paid for new shares) to
$4.5722 per share. Such options may be exercised generally over 10
years from the time the options are granted, and vest over a period
of four years.
The Company has elected to follow APB No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and related interpretations in
accounting for its employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of the grant, no
compensation expense has been recognized. Pro forma information
regarding net income per share is required by SFAS No. 123,
"Accounting for Stock- Based Compensation", and has been determined
as if the Company had accounted for its employee stock options under
the fair value method of that statement. The 1997 and 1998 options
were valued using the minimum value pricing model as prescribed by
SFAS 123 for nonpublic companies. The options issued subsequent to
fiscal 1998 have been valued using the Black-Scholes pricing model
as prescribed by SFAS 123.
The following weighted-average assumptions have been used for grants
of stock options.
1999 1998 1997
----------- ------------- --------
Risk-free interest rate 5.20% 5.61% 6.57%
Expected dividend yield - - -
Expected lives 5 years 5 years 5 years
Expected volatility 71% - -
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting
restrictions and are fully transferable. Because the Company's
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
the Company's opinion the existing available models do not
necessarily provide a reliable single measure of the fair value of
the Company's employee stock options.
Using the Black-Scholes option valuation model, the weighted-average
grant date value of options granted during fiscal 1999 was $4.03 per
option.
The pro forma effect of applying FAS 123 would have an immaterial
effect for fiscal 1998 and 1997 based on the above assumptions. The
Company's pro forma information for fiscal 1999 is as follows:
YEAR ENDED MARCH 31, 1999
----------------------------------
REPORTED PRO FORMA
----------- ------------
Net loss (in thousands) $ (4,942) $ (4,988)
Loss per share:
Basic and diluted (0.99) (1.00)
-37-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
9. STOCK OPTIONS (CONTINUED)
The following table summarizes the stock option transactions under
the Plan and the New Plan described above.
SHARES AVERAGE
UNDER EXERCISE
OPTION PRICE
---------- --------
Balance, March 31, 1996 2,998 $ 541.22
Options granted 462 541.22
---------
Balance, March 31, 1997 3,460 541.22
Options exercised (3,460) 541.22
Options granted 717,182 2.54
Options cancelled (68,365) 2.54
---------
Balance, March 31, 1998 648,817 2.54
Options granted 307,851 7.39
Options cancelled (467,020) 2.54
---------
Balance March 31, 1999 489,648 6.12
=========
A summary of options outstanding and exercisable at March 31, 1999
is as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ------------------------
WEIGHTED WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
OUTSTANDING LIFE PRICE EXERCISABLE PRICE
----------- ---------- ------------ ------------ ------
$0.05 - $1.00 10,000 3.42 $ .15 10,000 $ .15
$1.01 - $3.00 217,257 8.76 $ 1.52 62,980 $ 1.52
$3.01 - $5.00 131,523 8.18 $ 4.42 40,213 $ 4.17
$5.01 - $9.00 35,899 8.10 $ 7.89 26,478 $ 8.52
$9.01 - $10.00 82,638 8.08 $ 9.66 28,657 $ 9.64
$10.01 - $20.00 7,999 7.89 $12.79 3,200 $ 12.79
$20.01 - $39.00 4,332 7.00 $29.31 2,200 $ 27.55
-38-
<PAGE>
LABTEC INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company is contractually obligated under various operating lease
agreements for warehouse and office space until April of 2006. The
total rent expense related to warehouse and office space under
leases amounted to $356,822, $352,464 and $620,657 for the fiscal
years ended March 31, 1997, 1998 and 1999, respectively.
Future minimum lease payments under these leases are as follows:
FISCAL YEAR
- -----------
2000 $ 659,840
2001 610,588
2002 589,585
2003 611,902
2004 622,704
Thereafter 1,311,894
-------------
Total minimum lease payments $ 4,406,513
=============
CONTINGENCIES
Pursuant to the Recapitalization agreement, the shareholder group
that received redemption proceeds are contingently entitled to
receive from the Company up to $1,500,000 upon a "Change in Control"
(as defined in the Stockholders Agreement), or up to $3,000,000 in
the event of an "Initial Public Offering" (as defined in the
Stockholders Agreement).
The Company becomes involved in litigation, disputes, employment
matters and other proceedings in the normal course of its business.
In the opinion of management, and after consultation with legal
counsel, the Company's liability, if any, under any pending matters
would not materially affect its financial condition or results of
operations.
-39-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE.
--------------------
None.
-40-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------
The information required by this item is incorporated by reference
herein in the "Election of Directors" section of the Company's Proxy Statement
to be filed pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The information required by this item is incorporated by reference
herein in the "Executive Compensation" section of the Company's Proxy Statement
to be filed pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
The information required by this item is incorporated by reference
herein in the "Security Ownership of Management" section of the Company's Proxy
Statement to be filed pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
The information required by this item is incorporated by reference
herein in the "Certain Transactions" section of the Company's Proxy Statement to
be filed pursuant to Regulation 14A.
-41-
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
---------------------------------------------------------------
(A) 1. FINANCIAL STATEMENTS
The financial statements are listed beginning on page 19 of
this report.
2. FINANCIAL STATEMENT SCHEDULES
The following schedule is filed as part of this report:
Schedule II -- Valuation and Qualifying Accounts Report of
Independent Accountants on Financial Statement Schedule
No other schedules are included because the required
information is inapplicable, not required or is presented in the financial
statements or the related notes thereto.
3. EXHIBITS
The exhibits are listed below under Part IV, Item 14(C) of
this report.
(B) REPORTS ON FORM 8-K:
On March 5, 1999, the Company filed a report on Form 8-K relating to
Item 1, Changes in Control of Registrant, and Item 2, Acquisition or Disposition
of Assets, in connection with the consummation of the merger of SIMC with and
into Labtec.
(C) EXHIBITS:
<TABLE>
<CAPTION>
Number Description of Exhibit Method of Filing
- ------ ---------------------- ----------------
<S> <C> <C>
3.1 Restated Articles of Organization Filed herewith
3.2 Articles of Amendment Filed herewith
3.3 Amended and Restated By-Laws of the Filed herewith
Company
4.1 Specimen certificate for shares of common Filed herewith
stock of the Company
10.1 Labtec Inc. Amended and Restated 1997 Filed herewith
Employee Stock Option Plan
10.2 1997 Employee Stock Option Plan - Filed herewith
Option Certificate and Agreement
-42-
<PAGE>
Number Description of Exhibit Method of Filing
- ------ ---------------------- ----------------
10.3 Amended and Restated 1997 Employee Filed herewith
Stock Option Plan - Option Certificate and
Agreement
10.4 Amended and Restated Stock Option Plan Incorporated by reference to Exhibit
10.1 to the Spacetec IMC
Corporation ("Spacetec") Registration
Statement on Form S-1 (Commission
File No. 33-98064) (the "Registration
Statement")
10.5 Amended and Restated 1995 Director Incorporated by reference to Exhibit
Stock Option Plan 10.2 to the Spacetec Annual Report
on Form 10-K for the fiscal year
ended March 31, 1997
10.6 1995 Employee Stock Purchase Plan Incorporated by reference to Exhibit
10.3 to the Spacetec Registration
Statement
10.7 Amended and Restated Agreement and Incorporated by reference to Exhibit
Plan of Merger among Spacetec IMC 2.1 to the Spacetec Current Report on
Corporation, SIMC Acquisition Form 8-K dated October 21, 1998
Corporation and Labtec Inc., dated as of (date of earliest event reported) filed
October 2, 1998, as amended and restated with the Commission (File No. 0-
as of November 13, 1998 27302) on November 17, 1998
10.8 Spacetec IMC Corporation Unsecured Filed herewith
Subordinated Promissory Note for
$1,065,000 dated February 17, 1999
10.9 Credit Agreement, dated as of October 7, Filed herewith
1997, among Labtec Inc., various lending
institutions and Bankers Trust Company,
as agent
10.10 First Amendment, dated as of December Filed herewith
15, 1998, among Labtec Inc., the lending
institutions party to the Credit Agreement
and Bankers Trust Company, as agent
10.11 Second Amendment and Agreement to Filed herewith
Amend and Restate, dated February 17,
1999, among Labtec Inc., the lending
institutions party to the Credit Agreement
and Bankers Trust Company, as agent
-43-
<PAGE>
Number Description of Exhibit Method of Filing
- ------ ---------------------- ----------------
10.12 Recapitalization Agreement and Plan of Filed herewith
Merger between Speaker Acquisition
Corp. and LEI Holdings, Inc., dated as of
August 26, 1997
10.13 Lease Agreement, dated April 24, 1997, Filed herewith
between Pacific Realty Associates, L.P.,
and Labtec Enterprises, Inc.
10.14 Lease Agreement, dated February 4, 1998, Filed herewith
between Columbia Tech Center, L.L.C.,
and Labtec Inc.
10.15 Sublease Agreement, dated December 26, Incorporated by reference to Exhibit
1995, between Spacetec and TRC 10.4 to the Spacetec IMC
Environmental Corporation Corporation Annual Report on Form
10-K for the fiscal year ended March 31,
1996 (the "Spacetec 1996 Form 10-K")
10.16 Labtec Enterprises, Inc. $6,000,000 Filed herewith
Principal Amount of Senior Subordinated
Notes and 50,000 Shares of Common
Stock Purchase Agreement, dated October
7, 1997
10.17 Recognition, Non-Disturbance and Incorporated by reference to Exhibit
Attorney Agreement, dated December 26, 10.5 to the Spacetec 1996 Form 10-K
1995, between the Company and Historic
Boott Mill Limited Partnership
10.18 Royalty Agreement, dated May 29, 1991, Incorporated by reference to Exhibit
between the Company and John A. Hilton 10.6 to the Spacetec Registration
Statement
10.19 Resale Agreement, dated as of May 1, Incorporated by reference to Exhibit
1991, between the Company and 10.8 to the Spacetec Registration
Electronic Data Systems Corporation (as Statement. See also footnote 1
successors to McDonnell Douglas below.
Corporation), as amended by Amendment
No. 1 dated December 23, 1993, and
Amendment No. 2 dated October 6, 1994
10.20 Distribution and Marketing Agreement, Incorporated by reference to Exhibit
dated April 28, 1994, between the 10.9 to the Spacetec Registration
Company and Sumisho Electronic Devices Statement. See also footnote 1
Corporation below.
-44-
<PAGE>
Number Description of Exhibit Method of Filing
- ------ ---------------------- ----------------
10.21 Form of Confidentiality and Inventions Incorporated by reference to Exhibit
Agreement between the Company and its 10.11 to the Spacetec Registration
employees Statement.
10.22 Form of Non-Disclosure Agreement Incorporated by reference to Exhibit
between the Company and its consultants 10.12 to the Spacetec Registration
Statement.
10.23 Severance Agreement, dated March 18, Incorporated by reference to Exhibit
1998, between the Company and Dennis 10.15 to the Spacetec IMC
T. Gain Corporation Annual Report on Form
10-K for the fiscal year ended
March 31, 1998 (the "Spacetec
1998 Form 10-K")
10.24 Employment Agreement, dated June 1, Filed herewith
1998, between the Company and Gregory
Jones
21.1 List of Subsidiaries Filed herewith
23.1 Consent of PricewaterhouseCoopers LLP Filed herewith
27.1 Financial Data Schedule Filed herewith
</TABLE>
- ---------
(1) Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule
406 of the Securities Act of 1933, as amended, and Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.
-45-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Date: June 28, 1999
LABTEC INC.
By: /s/ Robert G. Wick
----------------------------
Robert G. Wick
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert G. Wick President and Director June 28, 1999
- ----------------------------- (principal executive officer)
Robert G. Wick
/s/ Marc J. Leder Co-Chairman, Senior Vice June 28, 1999
- ----------------------------- President, Finance, Chief
Marc J. Leder Financial Officer, Director and
Treasurer (principal financial
officer and principal accounting
officer)
/s/ Rodger R. Krouse Co-Chairman, Clerk and June 28, 1999
- ----------------------------- Director
Rodger R. Krouse
----------------------------- Director June 28, 1999
J. Grant Jagelman
/s/ Caroline Merison Director June 28, 1999
- -----------------------------
Caroline Merison
/s/ Joseph Pretlow Director June 28, 1999
- -----------------------------
Joseph Pretlow
/s/ Dennis T. Gain Director June 28, 1999
- -----------------------------
Dennis T. Gain
----------------------------- Director June 28, 1999
Geoffrey Rehnert
<PAGE>
- ----------------------------- Director June 28, 1999
Patrick J. Sullivan
- ----------------------------- Director June 28, 1999
Marc Wolpow
----------------------------- Director June 28, 1999
George R. Rea
/s/ Bradley A. Krouse
----------------------------- Director June 28, 1999
Bradley A. Krouse
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Labtec, Inc.
Our audits of the consolidated financial statements referred to in our report
dated May 21, 1999 in this Form 10-K also included an audit of the Financial
Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion,
this Financial Statement Schedule present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Portland, Oregon
May 21, 1999
<PAGE>
SCHEDULE II
LABTEC INC.
VALUATION AND QUALIFYING ACCOUNTS
1997 1998 1999
---- ---- ----
BAD DEBT RESERVE
Beginning Balance 34,938 120,000 89,736
Additions - charged to expense 162,417 62,910 762,335
Spacetec Reserve - purchase accounting 252,673
Writeoffs 77,355 93,174 166,754
ENDING BALANCE 120,000 89,736 937,990
INVENTORY RESERVE
Beginning Balance 200,000 200,000 ---
Additions - charged to expense 500,000
Writeoffs 200,000 100,149
ENDING BALANCE 200,000 --- 399,851
RETURNS & ALLOWANCE RESERVE
Beginning Balance 435,503 599,162 578,067
Additions - charged to expense 2,150,708 2,509,109 2,077,055
Deletions 1,987,049 2,530,204 2,149,969
ENDING BALANCE 599,162 578,067 505,153
ADVERTISING ALLOWANCE RESERVE
Beginning Balance 270,130 241,821 233,392
Additions - charged to expense 2,135,168 2,284,720 3,459,843
Deletions 2,163,477 2,293,149 3,395,248
ENDING BALANCE 241,821 233,392 297,987
ALLOWANCE FOR DEFERRED TAX ASSETS --- --- ---
- ---------------------------------
Beginning Balance --- --- ---
Additions - charged to expense --- --- 3,508,392
Spacetec reserve - purchase accounting --- --- ---
Deletions --- --- 3,508,392
ENDING BALANCE
EXHIBIT 3.1
Federal Identification
No. 04-3116697
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
We, Dennis T. Gain , President,
--------------------------------------------------
and Lynette C. Fallon , Clerk,
--------------------------------------------------
of Spacetec IMC Corporation ,
----------------------------------------------------------------
(Exact name of corporation)
located at 600 Suffolk Street, Lowell, MA 01854
---------------------------------------------------------
(Street address of corporation Massachusetts)
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted at a meeting held on October 6, 1995 by a vote of the
directors/or:
Common Stock, Series A
Preferred Stock and
3,583,366 shares of Series B Preferred Stock of 4,725,908 shares outstanding,
- --------- ------------------------ ---------
(type, class & series, if any)
shares of of shares outstanding, and
- --------- --------------- ----------
shares of of shares outstanding,
- --------- --------------- ----------
**being at least a majority of each type, class or series outstanding and
entitled to vote thereon:
ARTICLE I The name of the
corporation is:
Spacetec IMC Corporation
ARTICLE II
The purpose of the corporation is to engage in the following
business activities:
See attached sheets
<PAGE>
ARTICLE III
The total number of shares and par value, if any, of each class of stock which
the corporation is authorized to issue:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
- -----------------|--------------------------|------------------|---------------------|----------------
TYPE | NUMBER OF SHARES | TYPE | NUMBER OF SHARES | PAR VALUE
- -----------------|--------------------------|------------------|---------------------|----------------
<S> <C> <C> <C> <C>
Common: | | Common: | 20,000,000 | $.01 per share
| | | |
Preferred: | | Preferred: | 1,000,000 | $.01 per share
- ------------------------------------------------------------------------------------------------------
</TABLE>
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See attached sheets
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See attached sheets
-2-
<PAGE>
Spacetec IMC Corporation
Restated Articles of Organization
ARTICLE II
Purpose of the Corporation
To invent, design, develop, manufacture, license, market and distribute
computer hardware, systems, peripheral devices, software and other technologies,
systems, methods and techniques; to invent, design or contrive processes,
formulae or systems related to the foregoing; to do every other act necessary,
incidental or appropriate to the accomplishment of any of the above purposes or
the exercise of any of the above powers; and to engage in any lawful act or
activity permitted under the General Laws of the Commonwealth of Massachusetts
to corporations organized under Chapter 156B of said laws or successor statutes
thereto.
ARTICLE IV
Description of Capital Stock
The total number of shares of all classes of capital stock which the
Corporation shall be authorized to issue is twenty-one million (21,000,000)
shares, consisting of twenty million (20,000,000) shares of Common Stock, $0.01
par value per share (the "Common Stock"), and one million (1,000,000) shares of
Preferred Stock, $0.01 par value per share (the "Preferred Stock").
The shares of Preferred Stock may be issued from time to time in one or
more series. The directors may determine, in whole or in part, the preferences,
voting powers, qualifications and special or relative rights or privileges of
any such series before the issuance of any shares of that series. The directors
shall determine the number of shares constituting each series of Preferred Stock
and each series shall have a distinguishing designation.
Common Stock
1. The holders of the Common Stock shall have the exclusive right to
vote for the election of directors and on all other matters requiring action by
the stockholders or submitted to the stockholders for action, except as
determined by the Board of Directors in establishing a series of Preferred Stock
or as may otherwise be required by law, and each share of the Common Stock shall
entitle the holder thereof to one vote.
2. The holders of the Common Stock shall be entitled to receive, to the
extent permitted by law, such dividends as may from time to time be declared by
the directors.
-3-
<PAGE>
3. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the corporation, the holders of the Common Stock shall be entitled
to receive the net assets of the corporation, after the corporation shall have
satisfied or made provision for its debts and obligations and for payment to the
holders of shares of any class or series having preferential rights to receive
distributions of the net assets of the corporation.
ARTICLE VI
Other Lawful Provisions
A. Board of Directors
1. Classification. The directors shall be divided into three classes,
as nearly equal in number as the then total number of directors constituting the
entire Board permits, with the term of office of one class expiring each year.
The initial Class I directors elected by the stockholders of the Corporation
shall hold office for a term expiring at the 1996 annual meeting of
stockholders; the initial Class II directors elected by the stockholders of the
Corporation shall hold office for a term expiring at the 1997 annual meeting of
stockholders; and the initial Class III directors elected by the stockholders of
the Corporation shall hold office for a term expiring at the 1998 annual meeting
of stockholders. At each such annual meeting of stockholders and at each annual
meeting thereafter, successors to the class of directors whose term expires at
that meeting shall be elected for a term expiring at the third annual meeting
following their election and until their successors shall be elected and
qualified, subject to prior death, resignation, retirement or removal. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, but in no event will a decrease in the number of
directors shorten the term of any incumbent director. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of any
one or more series of Preferred Stock shall have the right, voting separately as
a class, to elect one or more directors of the Corporation, the election, terms
of office and other features of such directorships shall be governed by the
terms of the vote establishing such series, and such directors so elected shall
not be divided into classes pursuant to this Article VI unless expressly
provided by such terms.
2. Vacancies. Except as otherwise determined by the Board of Directors
in establishing a series of Preferred Stock as to directors elected by holders
of such series, any vacancies in the Board of Directors, including a vacancy
resulting from the enlargement of the Board, may be filled by the directors then
in office, though less than a quorum. Each director so chosen to fill a vacancy
shall be elected to complete the term of office of the director who is being
succeeded. In the case of any election of a new director to fill a directorship
created by an enlargement of the Board, the Board shall in such election assign
the class of directors to which such additional director is being elected, and
each director so elected shall hold office for the same term as the other
members of the class to which the director is assigned.
-4-
<PAGE>
3. Removal. Except as otherwise determined by the Board of Directors in
establishing a series of Preferred Stock as to directors elected by holders of
such series, at any special meeting of the stockholders called at least in part
for the purpose, any director or directors may, by the affirmative vote of the
holders of at least a majority of the stock entitled to vote for the election of
directors, be removed from office for cause. The provisions of this subsection
shall be the exclusive method for the removal of directors.
B. Stockholder Vote Required for Certain Actions
The Corporation, by vote of a majority of the stock outstanding and
entitled to vote thereon may (i) authorize any amendment to these Articles of
Organization, (ii) authorize the sale, lease or exchange of all or substantially
all of the Corporation's property and assets, including its goodwill and (iii)
approve a merger or consolidation of the Corporation with or into any other
corporation; so long as such amendment, sale, lease, exchange, merger or
consolidation shall have been approved by the Board of Directors.
C. Additional Provisions
1. Meetings of the stockholders may be held anywhere within the United
State.
2. No contract or other transaction of this corporation with any other
person, corporation, association, or partnership shall be affected or
invalidated by the fact that (i) this corporation is a stockholder or partner in
such other corporation, association, or partnership, or (ii) any one or more of
the officers or directors of this corporation is an officer, director or partner
of such other corporation, association or partnership, or (iii) any officer or
director of this corporation, individually or jointly with others, is a party to
or is interested in such contract or transaction. Any director of this
corporation may be counted in determining the existence of a quorum at any
meeting of the board of directors for the purpose of authorizing or ratifying
any such contract or transaction, and may vote thereon, with like force and
effect as if he were not so interested or were not an officer, director, or
partner of such other corporation, association, or partnership.
3. The corporation may be a partner in any business enterprise which it
would have power to conduct itself.
4. The by-laws may provide that the directors may make, amend, or
repeal the by-laws in whole or in part, except with respect to any provision
thereof which by law, these Articles of Organization, or the by-laws requires
action by the stockholders.
5. A director shall not be liable to the corporation or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except to the extent that the elimination or limitation of liability
is not permitted under the Massachusetts Business Corporation Law as in effect
when such liability is determined. No amendment or repeal of this provision
shall
-5-
<PAGE>
deprive a director of the benefits hereof with respect to any act or omission
occurring prior to such amendment or repeal.
6. Except as otherwise required by law, any action required or
permitted to be taken by the stockholders of the Corporation must be taken at a
duly called annual or special meeting of such holders and may not be taken by
any consent in writing by such holders.
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
The information contained in Article VIII is not a permanent part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
600 Suffolk Street, Lowell, MA 01854
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President: Dennis T. Gain 30 Boren Lane Same
Boxford, MA 01921
Treasurer: Linda S. Linsalata 20 Surrey Lane Same
Weston, MA 02193
Clerk: Lynnette Fallon 54 Hundreds Road Same
Wellesley, MA 02181
Directors: Dennis T. Gain See above Same
Linda S. Linsalata 20 Surrey Lane Same
Weston, MA 02193
Morton E. Goulder 97 Ridge Road Same
Hollis, NH 03049, P.O. Box 419
J. Grant Jagelman 3 Cranbrook Road Same
Rose Bay NSW 2029
Australia
-6-
<PAGE>
Jerry H. Loyd 910 Central Road, P.O. Box 640 Same
Rye Beach, NH 03871
c. The fiscal year (i.e., tax year) of the corporation shall end on the last day
of the month of:
March
d. The name and business address of the resident agent, if any, of the
corporation is:
N/A
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
Article 3, Article 4, Article 6
SIGNED UNDER THE PENALTIES OF PERJURY, this 11th day of December, 1995.
/s/ Dennis T. Gain , *President
- ------------------------------------------------------------
Dennis T. Gain
/s/ Lynnette C. Fallon , Clerk.
- ------------------------------------------------------------
Lynnette C. Fallon
-7-
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
-----------------------------------------------------
I hereby approve the within Restated Articles of Organization
and, the filing fee in the amount of $10,409.05 having been
paid, said articles are deemed to have been filed with me this
11th day of December, 1995.
Effective Date:_______________________________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to
Marc A. Rubenstein
Palmer & Dodge
One Beacon Street
Boston, MA 02108
Telephone: (617) 573-0100
-8-
EXHIBIT 3.2
FEDERAL IDENTIFICATION
NO. 04-3116697
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, George Rea *Acting President,
_______________________________________________ ,
and John M. Hession Assistant Clerk,
_______________________________________________ ,
of Spacetec IMC Corporation
__________________________________________________________________,
(Exact name of corporation)
located at The Boott Mills, 100 Foot of John Street, Lowell, MA 01852-1126,
______________________________________________________________________
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
I, III and IV
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held on February
17, 1999, by vote of:
3,752,263 shares of Common Stock of 6,846,993 shares outstanding,
(type, class & series, if any)
__________ shares of ___________ of_________ shares outstanding, and
(type, class & series, if any)
__________ shares of ___________ of_________ shares outstanding,
(type, class & series, if any)
1**being at least a majority of each type, class or series outstanding and
entitled to vote thereon
*Delete the inapplicable words. **Delete the inapplicable clause.
1 For amendments adopted pursuant to Chapter 156B, Section 70.
2 For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only ofseparate 8 1/2 x
11 sheets of paper with a left margin of at least 1 inch. Additions to more than
one article may be made on a single sheet so long as each article requiring each
addition is clearly indicated.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -----------------|--------------------------|------------------|---------------------|----------------
TYPE | NUMBER OF SHARES | TYPE | NUMBER OF SHARES | PAR VALUE
- -----------------|--------------------------|------------------|---------------------|----------------
<S> <C> <C> <C> <C>
Common: | | Common: | 20,000,000 | $.01 per share
| | | |
Preferred: | | Preferred: | 1,000,000 | $.01 per share
- ------------------------------------------------------------------------------------------------------
</TABLE>
Change the total authorized to:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -----------------|--------------------------|------------------|---------------------|----------------
TYPE | NUMBER OF SHARES | TYPE | NUMBER OF SHARES | PAR VALUE
- -----------------|--------------------------|------------------|---------------------|----------------
<S> <C> <C> <C> <C>
Common: | | Common: | 25,000,000 | $.01 per share
| | | |
Preferred: | | Preferred: | 1,000,000 | $.01 per share
- ------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
That Article I of the Restated Articles of Organization, as amended, be deleted
in their entirety, and replaced with the following:
"Article I The name of the corporation is: Labtec Inc."
That Article III of the Amended and Restated Articles of Organization be deleted
in their entirety, and replaced with the following:
"Article III The total number of shares and par value, if any, of each class of
stock which the corporation is authorized to issue:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- -----------------|--------------------------|------------------|---------------------|----------------
TYPE | NUMBER OF SHARES | TYPE | NUMBER OF SHARES | PAR VALUE
- -----------------|--------------------------|------------------|---------------------|----------------
<S> <C> <C> <C> <C>
Common: | | Common: | 25,000,000 | $.01 per share
| | | |
Preferred: | | Preferred: | 1,000,000 | $.01 per share
- ------------------------------------------------------------------------------------------------------
</TABLE>
Upon the filing of these Articles of Amendment with the secretary of
State of the Commonwealth of Massachusetts, each three (3) shares of Common
Stock of the Corporation, $.01 par value per share (the "Old Common Stock"),
issued and outstanding or held in the treasury of the Corporation immediately
after the filing of the Certificate of Merger on behalf of SIMC Acquisition
Corporation, a wholly-owned subsidiary of the Corporation, into Labtec Inc.,
shall be consolidated and combined into one (1) share of Common Stock.
Each holder of record of a certificate or certificates for one or more
shares of the Old Common Stock shall be entitled to receive as soon as
practicable, upon surrender of such certificate, a certificate or certificates
representing the largest whole number of shares of Common Stock to which such
holder shall be entitled pursuant to the provisions of the immediately preceding
paragraph. Any certificate for one or more shares of the Old Common Stock not so
surrendered shall be deemed to represent one share of the Common Stock for each
three (3) shares of the Old Common Stock previously represented by such
certificate. No fractional shares of Common Stock shall be issued upon such
reverse stock split; any holder who would otherwise be entitled to receive a
fractional share will instead receive cash equal to the average market value of
the Old Common Stock for the five most recent days that Spacetec has traded
ending on the trading day immediately prior to the date on which these Articles
of Amendment were filed with the Secretary of State of the Commonwealth of
Massachusetts."
That the first paragraph of Article IV of the Amended and Restated Articles of
Organization be deleted in their entirety, and replaced with the following:
"Article IV The total number of shares of all classes of capital stock which
the Corporation shall be authorized to issue is twenty-six million (26,000,000)
shares, consisting of twenty-five million (25,000,000) shares of Common Stock,
$.01 par value per share (the "Common Stock"), and one million (1,000,000)
shares of Preferred Stock, $.01 par value per share (the "Preferred Stock"),"
-3-
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: .
SIGNED UNDER THE PENALTIES OF PERJURY, this 17th day of February, 1999,
/s/ George Rea
__________________________________________ , *Acting President,
George Rea
/s/ John M. Hession
_________________________________________ , *Assistant Clerk.
John M. Hession
*Delete the inapplicable words.
-4-
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within Articles of Amendment
and, the filing fee in the amount of $ having been
paid, said articles are deemed to have been filed
with me this day of 19 .
Effective date:_____________________________________
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Parker Chapin Flattau & Klimpl
1211 Avenue of Americas
New York, NY 10036
Attn: Mark S. Hirsch
-5-
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-311-6697
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
CERTIFICATE OF CHANGE OF DIRECTORS OR OFFICERS
OF DOMESTIC BUSINESS CORPORATIONS
(General Laws, Chapter 156B, Section 53)
I, Rodger R. Krouse , *Clerk
___________________________________________________
of Labtec Inc. (f/k/a Spacetec IMC Corporation)
___________________________________________________
(Exact name of corporation)
having a principal office at
The Boott Mills, 100 Foot of John St., Lowell, MA 01852 ,
------------------------------------------------------------------------------
(Street address of corporation in Massachusetts)
certify that pursuant to General Laws, Chapter 156B, Section 53, a change in the
directors and/or the president, treasurer and/or clerk of said corporation has
been made and that the name, residential address and expiration of term of the
president, treasurer, clerk and each director are as follows:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS EXPIRATION OF TERM OF
OFFICE
<S> <C> <C> <C>
President: Robert G. Wick 4640 N.W. Valley Street UNTIL SUCCESSORS ARE
Camas, WA 98607 DULY ELECTED & QUALIFIED
Treasurer: Marc J. Leder 12 Bermuda Lake Drive UNTIL SUCCESSORS ARE
Palm Beach Gardens, FL 33418 DULY ELECTED & QUALIFIED
Clerk: Rodger R. Krouse 1141 Southwest 19th Ave. UNTIL SUCCESSORS ARE
Boca Raton, FL 33486 DULY ELECTED & QUALIFIED
</TABLE>
**Assistant Clerk:
Directors: (SEE ATTACHED LIST)
SIGNED UNDER THE PENALTIES OF PERJURY, THIS 17th day of February, 1999,
/s/ Rodger R. Krouse , Clerk
- ---------------------------------------------------------------
Rodger R. Krouse
*Delete the inapplicable words.
**Please provide the name and residential address of the assistant clerk if
he/she is executing this certificate of change.
-6-
<PAGE>
Directors of Labtec Inc.
Expiration of
Name | Address | Term of Office
- --------------------|-------------------------------|---------------------------
J. Grant Jagelman | 3 Crannook | UNTIL SUCCESSORS ARE DULY
| Rosebay, New South Wales | ELECTED & QUALIFIED
| AUSTRALIA |
| |
Caroline Merison | 129 East 69th Street, Apt #3B | UNTIL SUCCESSORS ARE DULY
| New York, NY 10021 | ELECTED AND QUALIFIED
| |
Joseph Pretlow | 20 Wellington Street, Apt #4 | UNTIL SUCCESSORS ARE DULY
| Boston, MA 02118 | ELECTED AND QUALIFIED
| |
Robert G. Wick | 4640 N.W. Valley Street | UNTIL SUCCESSORS ARE DULY
| Camas, WA 98607 | ELECTED AND QUALIFIED
| |
Dennis Gain | 30 Boren Lane | UNTIL SUCCESSORS ARE DULY
| Boxforad, MA 01921 | ELECTED AND QUALIFIED
| |
Geoffrey Rehnert | 18 Meadowbrook Road | UNTIL SUCCESSORS ARE DULY
| Weston, MA 02193 | ELECTED AND QUALIFIED
| |
Pat Sullivan | 438 Howard Street | UNTIL SUCCESSORS ARE DULY
| Northboro, MA 01532 | ELECTED AND QUALIFIED
| |
Marc Wolpow | 17 Clark Road | UNTIL SUCCESSORS ARE DULY
| Wellesley, MA 02481 | ELECTED AND QUALIFIED
| |
Rodger R. Krouse | 1141 Southwest 19th Avenue | UNTIL SUCCESSORS ARE DULY
| Boca Raton, FL 33486 | ELECTED AND QUALIFIED
| |
Marc J. Leder | 12 Bermuda Lake Drive | UNTIL SUCCESSORS ARE DULY
| Palm Beach Gardens, FL 33418 | ELECTED AND QUALIFIED
| |
George Rea | 2262 S.W. Whitemarsh Way | UNTIL SUCCESSORS ARE DULY
| Palm City, FL 34990 | ELECTED AND QUALIFIED
| |
Bradley Krouse | 1431 Sandy Circle | UNTIL SUCCESSORS ARE DULY
| Narberth, PA 19072 | ELECTED AND QUALIFIED
-7-
AMENDED AND RESTATED
BY-LAWS
of
LABTEC INC., A MASSACHUSETTS CORPORATION
ARTICLE I.
MEETINGS OF STOCKHOLDERS
SECTION A. PLACE. Meetings of the stockholders shall be held at the
principal office of the corporation in Massachusetts or at such other place as
may be named in the notice.
SECTION B. ANNUAL MEETINGS. The annual meeting of the stockholders
shall be held on the third Thursday of August or on such other date within six
months after the end of the fiscal year of the corporation and at such hour and
place as either of the co-chairmen of the board or a majority of the directors
or an officer designated by either of the co-chairmen of the board or a majority
of the directors shall determine. In the event that the annual meeting has not
been held on such date, a special meeting in lieu of the annual meeting may be
held with all of the force and effect of an annual meeting.
SECTION C. SPECIAL MEETINGS. Special meetings of the stockholders may
be called only by any of the co-chairmen of the board or by a majority of the
directors, and shall be called by the clerk or, in case of the death, absence,
incapacity or refusal of the clerk, by any other officer, upon written
application of one or more stockholders who hold not less than 40% in interest
of the capital stock entitled to vote thereat. If a special meeting is called
pursuant to this section, whereby information is required from the corporation
in connection with solicitations of proxies for election of directors or other
matters pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, the corporation will cooperate in the prompt filing of any such proxy
materials.
SECTION D. NOTICE. A written notice of the date, place and hour of all
meetings of stockholders stating the purposes of the meeting shall be given by
the clerk or an assistant clerk (or by any other officer who is entitled to call
such a meeting) at least seven (7) days before the meeting to each stockholder
entitled to vote thereat and to each stockholder who is entitled to such notice,
by leaving such notice with him or at his residence or usual place of business,
or by mailing it, postage prepaid, and addressed to such stockholder at his
address as it appears in the records of the corporation. Notwithstanding the
foregoing, in the case of any special meeting called upon the written
application of stockholders, such meeting shall be called not less than fifteen
(15) days nor more than thirty (30) days after such application is received by
the corporation and written notice thereof shall be given in accordance with the
preceding sentence at least fifteen (15) days before the meeting. Whenever
notice of a meeting is required to be given a stockholder under applicable law,
<PAGE>
the articles of organization or these by-laws, a written waiver thereof,
executed before or after the meeting by such stockholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders need be specified
in any written waiver of notice. Notice by mail shall be deemed to be given when
deposited, with postage thereon prepaid, in the United States Mail.
SECTION E. STOCKHOLDER NOMINATIONS OF DIRECTORS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors at any annual or special meeting. Nominations of persons
for election as directors may be made by or at the direction of the directors,
or by any stockholder entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in this section. Such
nominations, other than those made by or at the direction of the board, shall be
made pursuant to timely notice in writing to the chairman or co-chairmen of the
board, if any, the president, the treasurer or the clerk. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that (except as to an
annual meeting held on the date specified in these by-laws, such date not having
been changed since the last annual meeting), if less than 65 days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of capital stock of the corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required to
be disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as
to the stockholder giving the notice (i) the name and record address of such
stockholder and (ii) the class and number of shares of capital stock of the
corporation which are beneficially owned by such stockholder. No person shall be
eligible for election as a director at any annual or special meeting of
stockholders unless nominated in accordance with the procedures set forth
herein.
SECTION F. ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL
MEETINGS. At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be brought
properly before an annual meeting, business must be either (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the president, the co-chaimen of the board or a majority of the directors, (b)
otherwise properly brought before the meeting by or at the direction of the
co-chairmen of the board or a majority of the board, or (c) otherwise properly
brought before the meeting by a stockholder. In addition to any other applicable
requirements, for business to be brought properly before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the chairman or co-chairmen of the board, if any, the president, the clerk or
the treasurer. To be timely,
-2-
<PAGE>
a stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that (except as to an
annual meeting held on the date specified in the by-laws, such date not having
been changed since the last annual meeting), if less than 65 days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the corporation which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in these by-laws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the procedures set
forth in this section; provided, however, that nothing in this section shall be
deemed to preclude discussion by any stockholder of any business properly
brought before the annual meeting in accordance with said procedure.
SECTION G. QUORUM. A majority in interest of all stock issued,
outstanding and entitled to vote at a meeting shall constitute a quorum, but a
smaller number may adjourn from time to time without further notice until a
quorum is secured.
SECTION H. ACTION BY VOTE. When a quorum is present at any meeting, a
plurality of the votes properly cast for election to any office shall effect
such election and a majority of the votes properly cast upon any question other
than an election to an office shall decide the question, except when a larger
vote is required by law, the articles of organization or these by-laws or when
the directors require a larger vote upon any election or question (to the extent
permitted by law). No ballot shall be required for any election unless requested
by a stockholder present or represented at the meeting and entitled to vote in
the election.
SECTION I. VOTING. Stockholders entitled to vote shall have one vote
for each share of stock entitled to vote held by them of record according to the
records of the corporation, unless otherwise provided by the articles of
organization. The corporation shall not, directly or indirectly, vote any shares
of its own stock. Stockholders may vote in person or by proxy. Every stockholder
may authorize another person or persons to act for him or her by proxy in all
matters in which a stockholder is entitled to participate, whether by waiving
notice of any meeting, voting or participating at a meeting, or expressing
consent or dissent without a meeting. Every proxy must be signed by the
stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon
after three years from its date unless such proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is irrevocable
and, if, and only as long as, it is coupled with an interest sufficient in law
to support an irrevocable power. A proxy may be made irrevocable regardless of
-3-
<PAGE>
whether the interest with which it is coupled is an interest in the stock itself
or an interest in the corporation generally.
SECTION J. ACTION BY CONSENT. Except as otherwise required by law, any
action required or permitted to be taken by the stockholders must be taken at a
duly called annual or special meeting of such holders and may not be taken by
any consent in writing by such holders.
ARTICLE II.
OFFICERS AND DIRECTORS
SECTION A. ENUMERATION. The corporation shall have a board of not less
than three directors, except that whenever there shall be fewer than three
stockholders, the number of directors may be less than three but in no event
less than the number of stockholders. The number of directors shall be fixed by
the directors and may be enlarged at any time by vote of a majority of the
directors then in office. The officers of the corporation shall consist of a
president, a treasurer and a clerk, and such other officers with such titles as
the resolution of the board of directors choosing them shall designate.
SECTION B. QUALIFICATIONS. Directors and officers need not be
stockholders. No officer, including the president, need be a director. Two or
more offices may be held by the same person. The clerk shall be a resident of
Massachusetts unless a resident agent shall have been appointed pursuant to the
Massachusetts Business Corporation Law.
SECTION C. ELECTION. The directors shall be elected in the manner
provided in the articles of organization, by such stockholders as have the right
to vote thereon. The directors at their annual meeting each year shall elect all
of the officers of the corporation, including the treasurer and clerk. Except as
hereinafter provided, such officers shall hold office until the next annual
meeting of stockholders and until their respective successors are elected and
qualified
SECTION D. REMOVAL. Directors may be removed from office only as
provided in the articles of organization. Officers elected or appointed by a
majority of the directors may be removed from their respective offices with or
without cause by vote of a majority of the directors then in office.
SECTION E. RESIGNATION. Resignations by officers or directors shall be
given in writing to the president, treasurer, clerk or directors. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time.
SECTION F. VACANCIES. Continuing directors may act despite a vacancy or
vacancies in the board and shall for this purpose be deemed to constitute the
full board. Any vacancy in the board of directors, however occurring, including
a vacancy resulting from the enlargement of the board, may be filled by the
co-chairmen of the board or a majority of directors then in office, though less
than a quorum. Vacancies in any other office may be filled by the directors.
-4-
<PAGE>
ARTICLE III.
MEETING OF THE DIRECTORS
SECTION A. REGULAR MEETINGS. Regular meetings of the directors may be
held without call or notice at such times and places within or without the
Commonwealth of Massachusetts as the directors may fix provided that reasonable
notice of the first regular meeting following any such determination shall be
given to absent directors. An annual meeting of the directors may be held in
each year without call or notice immediately after and at the place of the
meeting at which the board is elected.
SECTION B. SPECIAL MEETINGS. Special meetings of the directors may be
held at any time and at any place designated in the call of the meeting, when
called by either of the co-chairmen of the board, or by a majority of the
directors, reasonable notice thereof being given to each director by the clerk
or by the officer or one of the directors calling the meeting.
SECTION C. NOTICE. No notice need be given for a regular or annual
meeting of the directors. Twenty-four (24) hours' notice by mail, telegraph,
telephone or word of mouth shall be given for a special meeting unless shorter
notice is adequate under the circumstances. A notice or waiver of notice need
not specify the purpose of any special meeting. Notice of a meeting need not be
given to any director, if a written waiver of notice, executed by him before or
after the meeting, is filed with the records of the meeting, or to any director
who attends the meeting without protesting prior thereto or at its commencement
the lack of notice to him.
SECTION D. QUORUM. A majority of the directors then in office shall
constitute a quorum, but a smaller number may adjourn finally or from time to
time without further notice until a quorum is secured. If a quorum is present, a
majority of the directors present may take any action on behalf of the board
except to the extent that a larger number is required by law, the articles of
organization or these by-laws.
SECTION E. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the directors may be taken without a meeting if all the
directors consent to the action in writing and the written consents are filed
with the records of the meetings of directors. Such consents shall be treated
for all purposes as a vote at a meeting.
SECTION F. COMMITTEES. The directors may elect from their number an
executive committee or other committees and may by like vote delegate to
committees so elected some or all of their powers to the extent permitted by
law. Except as a majority of the directors may otherwise determine, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided by these by-laws for the
directors. A majority of the directors or the co-
-5-
<PAGE>
chairmen shall have the power at any time to fill vacancies in any such
committee, to change its membership or to discharge the committee.
ARTICLE IV.
POWERS AND DUTIES OF DIRECTORS AND OFFICERS
SECTION A. DIRECTORS. The business of the corporation shall be managed
by the directors, who may exercise all such powers of the corporation as are not
by law, by the articles of organization or by these by-laws required to be
otherwise exercised. The directors may from time to time to the extent permitted
by law delegate any of their powers to committees, officers, attorneys or agents
of the corporation, subject to such limitations as the directors may impose.
SECTION B. CHAIRMAN AND PRESIDENT. The directors may appoint a chairman
or co-chairmen of the board who, unless otherwise determined by the directors,
shall, when present, preside at all meetings of the directors and shall have
such other powers and duties as customarily belong to the office of chairman of
the board or as may be designated from time to time by the directors. The
president shall be the chief executive officer of the corporation unless a
majority of the directors designate another officer. The chief executive officer
shall, subject to the direction of the directors, have general supervision and
control of the business of the corporation. Except as provided above regarding
the chairman or co-chairmen of the board and unless the directors specify
otherwise, the chief executive officer shall preside at all meetings of
stockholders and of the directors at which he is present. The president and
chief executive officer shall perform such other duties and shall have such
other powers as a majority of the directors or the co-chairmen may designate
from time to time.
SECTION C. VICE PRESIDENTS. The vice presidents, if any, shall have
such powers and duties as may be designated from time to time by a majority of
the directors, the co-chairmen or by the president.
SECTION D. TREASURER. Except as a majority of the directors shall
otherwise determine, the treasurer shall be the chief financial and accounting
officer of the corporation and shall have such other powers and duties as
customarily belong to the office of treasurer or as may be designated from time
to time by a majority of the directors, the co-chairmen or by the president.
SECTION E. CLERK. The clerk shall record all proceedings of the
stockholders and directors in a book or books to be kept therefor and shall have
custody of the seal of the corporation.
ARTICLE V.
EMPLOYMENT CONTRACTS
The corporation may enter into employment contracts authorized by a
majority of the directors or the co-chaimen extending beyond the terms of the
directors. An employment contract
-6-
<PAGE>
shall be valid despite any inconsistent provision of these by-laws relating to
terms of officers and removal of officers with or without cause but shall not
affect the authority of the directors to remove officers. Any removal or failure
to reelect an officer shall be without prejudice to the officer's contract
rights, if any.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the extent legally permissible, indemnify
each person who may serve or who has served at any time as a director or officer
of the corporation or of any of its subsidiaries, or who at the request of the
corporation may serve or at any time has served as a director, officer or
trustee of, or in a similar capacity with, another organization or an employee
benefit plan, against all expenses and liabilities (including counsel fees,
judgments, fines, excise taxes, penalties and amounts payable in settlements)
reasonably incurred by or imposed upon such person in connection with any
threatened, pending or completed action, suit or other proceeding, whether
civil, criminal, administrative or investigative, in which he may become
involved by reason of his serving or having served in such capacity (other than
a proceeding voluntarily initiated by such person unless he is successful on the
merits, the proceeding was authorized by the corporation or the proceeding seeks
a declaratory judgment regarding his own conduct); provided that no
indemnification shall be provided for any such person with respect to any matter
as to which he shall have been finally adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the corporation or, to the extent such matter relates to service
with respect to any employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan; and provided,
further, that as to any matter disposed of by a compromise payment by such
person, pursuant to a consent decree or otherwise, the payment and
indemnification thereof have been approved by the corporation, which approval
shall not unreasonably be withheld, or by a court of competent jurisdiction.
Such indemnification shall include payment by the corporation of expenses
incurred in defending a civil or criminal action or proceeding in advance of the
final disposition of such action or proceeding, upon receipt of an undertaking
by the person indemnified to repay such payment if he shall be adjudicated to be
not entitled to indemnification under this article, which undertaking may be
accepted without regard to the financial ability of such person to make
repayment.
A person entitled to indemnification hereunder whose duties include
service or responsibilities as a fiduciary with respect to a subsidiary or other
organization shall be deemed to have acted in good faith in the reasonable
belief that his action was in the best interests of the corporation if he acted
in good faith in the reasonable belief that his action was in the best interests
of such subsidiary or organization or of the participants or beneficiaries of,
or other persons with interests in, such subsidiary or organization to whom he
had a fiduciary duty.
Where indemnification hereunder requires authorization or approval by
the corporation, such authorization or approval shall be conclusively deemed to
have been obtained, and in any case where
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<PAGE>
a director of the corporation approves the payment of indemnification, such
director shall be wholly protected, if:
1. the payment has been approved or ratified (1) by a majority
vote of a quorum of the directors consisting of persons who are not at that time
parties to the proceeding, (2) by a majority vote of a committee of two or more
directors who are not at that time parties to the proceeding and are selected
for this purpose by the full board (in which selection directors who are parties
may participate), or (3) by a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the proceeding; or
2. the action is taken in reliance upon the opinion of
independent legal counsel (who may be counsel to the corporation) appointed for
the purpose by vote of the directors or in the manner specified in clauses (1),
(2) or (3) of subparagraph (i); or
3. the payment is approved by a court of competent
jurisdiction; or
4. the directors have otherwise acted in accordance with the
standard of conduct set forth in the Massachusetts Business Corporation Law.
Any indemnification or advance of expenses under this article shall be
paid promptly, and in any event within 30 days, after the receipt by the
corporation of a written request therefor from the person to be indemnified,
unless with respect to a claim for indemnification the corporation shall have
determined that the person is not entitled to indemnification. If the
corporation denies the request or if payment is not made within such 30 day
period, the person seeking to be indemnified may at any time thereafter seek to
enforce his rights hereunder in a court of competent jurisdiction and, if
successful in whole or in part, he shall be entitled also to indemnification for
the expenses of prosecuting such action. Unless otherwise provided by law, the
burden of proving that the person is not entitled to indemnification shall be on
the corporation.
The right of indemnification under this article shall be a contract
right inuring to the benefit of the directors, officers and other persons
entitled to be indemnified hereunder and no amendment or repeal of this article
shall adversely affect any right of such director, officer or other person
existing at the time of such amendment or repeal.
The indemnification provided hereunder shall inure to the benefit of
the heirs, executors and administrators of a director, officer or other person
entitled to indemnification hereunder. The indemnification provided hereunder
may, to the extent authorized by the corporation, apply to the directors,
officers and other persons associated with constituent corporations that have
been merged into or consolidated with the corporation who would have been
entitled to indemnification hereunder had they served in such capacity with or
at the request of the corporation.
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<PAGE>
The right of indemnification under this article shall be in addition to
and not exclusive of all other rights to which such director or officer or other
persons may be entitled. Nothing contained in this article shall affect any
rights to indemnification to which corporation employees or agents other than
directors and officers and other persons entitled to indemnification hereunder
may be entitled by contract or otherwise under law.
ARTICLE VII.
STOCK AND TRANSFER BOOKS
The corporation shall keep in the Commonwealth of Massachusetts at its
principal office (or at an office of its transfer agent or of its clerk or of
its resident agent) stock and transfer records, which shall contain the names of
all stockholders and the record address and the amount of stock held by each.
The corporation for all purposes may conclusively presume that the registered
holder of a stock certificate is the absolute owner of the shares represented
thereby and that his record address is his proper address. A majority of the
directors or the co-chairmen may fix in advance a time, which shall not be more
than sixty days before the date of any meeting of stockholders or the date for
the payment of any dividend or the making of any distribution to stockholders or
the last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date for determining the stockholders
having the right to notice of and to vote at such meeting and any adjournment
thereof or the right to receive such dividend or distribution or the right to
give such consent or dissent, and in such case only stockholders of record on
such record date shall have such right, notwithstanding any transfer of stock on
the books of the corporation after the record date; or without fixing such
record date the directors may for any of such purposes close the transfer books
for all or any part of such period.
If no record date is fixed and the transfer books are not closed:
a. The record date for determining stockholders
having the right to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next
preceding the day on which notice is given or, if notice is
waived, the close of business on the next day preceding the
day on which the meeting is held.
b. The record date for determining stockholders for
any other purpose shall be at the close of business on the day
on which the board of directors acts with respect thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the directors may, to the extent permitted by law, fix a
new record date for the adjourned meeting.
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<PAGE>
ARTICLE VIII.
CAPITAL STOCK
SECTION A. ISSUANCE OF STOCK. Any unissued capital stock from time to
time authorized under the articles of organization may be issued by vote of a
majority of the directors or the co- chairmen.
SECTION B. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED
SHARES. A majority of the directors or the co-chairmen may determine that some
or all of any or all classes and series of shares shall be uncertificated
shares. Unless the directors have so determined, a stockholder shall be entitled
to a certificate stating the number and the class and the designation of the
series, if any, of the shares held by him, in such form as shall, in conformity
to law, be prescribed from time to time by the directors. Such certificate shall
be signed by the chairman or co-chairmen of the board of directors, the
president or a vice president and by the treasurer or an assistant treasurer.
Such signatures may be facsimiles if the certificate is signed by a transfer
agent, or by a registrar, other than a director, officer or employee of the
corporation. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer at the time of its issue.
SECTION C. LOSS OF CERTIFICATES. In the case of the alleged loss or
destruction or the mutilation of a certificate of stock, a duplicate certificate
may be issued in place thereof, upon such conditions as a majority of the
directors or the co-chairmen may prescribe.
ARTICLE IX.
SEAL AND FISCAL YEAR
The seal shall be circular in form with the name of the corporation
around the periphery and words and figures "Incorporated 1991 Massachusetts"
within. The fiscal year shall be fixed from time to time by a majority of the
directors or the co-chairmen.
ARTICLE X.
EXECUTION OF DOCUMENTS
Except as a majority of the directors or the co-chairmen may generally
or in particular cases authorize the execution thereof in some manner, all
deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the corporation shall be signed by the
chairman or co-chairmen of the board, if any, the president, a vice president,
or the treasurer.
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<PAGE>
ARTICLE XI.
AMENDMENT OF BY-LAWS
These by-laws may be amended, altered or repealed in whole or in part,
and new by-laws may be adopted, by vote of the holders of a majority of the
shares of common stock outstanding and entitled to vote. A majority of the
directors may also make, amend or repeal these by-laws in whole or in part,
except with respect to any provision thereof which by law, the articles of
organization or these by-laws requires action by the stockholders.
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EXHIBIT 4.1
FORM OF SPECIMEN STOCK CERTIFICATE OF LABTEC INC.
Number [LOGO of Labtec Inc.] Shares
LA
------- ---------
LABTEC INC.
Incorporated under the laws of the Commonwealth of Massachusetts
Common Stock CUSIP 505450 10 6
THIS CERTIFIES that __________________________
is the owner of ______________________________
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE,
OF LABTEC INC. (the "Corporation"), transferable on the books of the Corporation
by the holder hereof in person or by duly authorized Attorney, upon surrender of
this Certificate, properly endorsed. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Marc J. Leder [Corporate Seal of Labtec Inc.] /s/ Robert G. Wick
- ---------------------- ----------------------
Treasurer President
LABTEC INC.
AMENDED AND RESTATED 1997 EMPLOYEE STOCK OPTION PLAN
(FORMERLY THE 1997 EMPLOYEE STOCK OPTION PLAN OF LABTEC CORPORATION, A
DELAWARE CORPORATION FORMERLY KNOWN AS LABTEC INC.)
1. PURPOSE
The purpose of this Amended and Restated 1997 Employee Stock Option
Plan (the "Plan") is to advance the interests of Labtec Inc., a Massachusetts
corporation (the "Company"), by enhancing the ability of the Company and its
Subsidiaries to attract and retain directors, employees, consultants or advisers
who are in a position to make significant contributions to the success of the
Company; to reward such individuals for their contributions; and to encourage
such individuals to take into account the long-term interests of the Company.
The Plan provides for the award of options to purchase shares of the Company's
Common Stock, par value $.01 per share (the "Stock").
2. ELIGIBILITY FOR AWARDS
Persons eligible to receive awards under the Plan shall be all
directors, including directors who are not employees of the Company and all
executive officers of the Company and its subsidiaries and other employees,
consultants and advisers who, in the opinion of the Board, are in a position to
make a significant contribution to the success of the Company and its
Subsidiaries. A Subsidiary for purposes of the Plan shall be a corporation in
which the Company owns, directly or indirectly, stock possessing 50% or more of
the total combined voting power of all classes of stock. Directors, including
directors who are not employees of the Company shall be eligible to receive
awards under the Plan to the extent that their eligibility would not disqualify
them as disinterested persons for purposes of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder. Persons selected for awards under the Plan are referred to herein as
"participants."
3. ADMINISTRATION
The Plan shall be administered by the Board of Directors (the "Board")
of the Company or, if applicable, its successors. The Board shall have
discretionary authority, not inconsistent with the express provisions of the
Plan, (a) to grant awards consisting of options to such participants as the
Board may select; (b) to determine the time or times when awards shall be
granted and the number of shares of Stock subject to each award; (c) to
determine which options are, and which options are not, incentive options; (d)
to determine the terms and conditions of each award; (e) to prescribe the form
or forms of any instruments evidencing awards and any other instruments required
under the Plan and to change such forms from time to time; (f) to adopt, amend
and rescind rules and regulations for the administration of the Plan; and (g) to
<PAGE>
interpret the Plan and any award granted hereunder and to decide any questions
and settle all controversies and disputes that may arise in connection with the
Plan or any award granted hereunder. Such determinations of the Board shall be
conclusive and shall bind all parties. Subject to Section 8, the Board shall
also have the authority, both generally and in particular instances, to waive
compliance by a participant with any obligations to be performed by him or her
under an award, to waive any condition or provision of an award, and to amend or
cancel any award, which amendment or cancellation must have a neutral or
beneficial effect on the rights of a participant as determined by the Board (and
if an award is canceled, to grant a new award on such terms as the Board shall
specify); provided, however, that except as expressly provided in the Plan or in
an award granted hereunder, the Board may not take any action with respect to an
outstanding award that would adversely affect the rights of the participant
under such award without such participant's consent. Nothing in the preceding
sentence shall be construed as limiting the power of the Board to make
adjustments required by Section 5(c) and Section 6(i).
The Board may, in its discretion, delegate some or all of its power
with respect to the Plan to a committee (the "Committee"), in which event all
references in this Plan (as appropriate) to the Board shall be deemed to refer
to the Committee. The Committee, if one is appointed, shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority of
the Committee members.
4. EFFECTIVE DATE AND TERM OF PLAN
The Plan became effective on October 8, 1997, the date on which it was
approved by the shareholders of Labtec Corporation, a Delaware corporation
("Labtec Delaware"). Grants of awards under the Plan may have been made prior to
that date (but after adoption of the Plan by the Board of Directors of Labtec
Delaware), subject to approval of the Plan by such shareholders.
No awards shall be granted under the Plan after October 7, 2007, but
awards previously granted may extend beyond that date.
5. SHARES SUBJECT TO THE PLAN
(a) NUMBER OF SHARES. The aggregate number of shares of Stock that may
be the subject of awards granted under the Plan shall be determined by the Board
and shall be subject to adjustment as provided in Section 5(c). If any award
granted under the Plan terminates without having been exercised in full, or upon
exercise is satisfied other than by delivery of Stock, the number of shares of
Stock as to which such award was not exercised shall be available for future
grants within the limits set forth in this Section 5(a).
(b) STOCK TO BE DELIVERED. Stock delivered under the Plan shall be
authorized but unissued Stock or, if the Board so decides in its sole
discretion, previously issued Stock acquired
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by the Company and held in its treasury. No fractional shares of Stock shall be
delivered under the Plan.
(c) CHANGES IN STOCK. In the event the Company (i) pays a dividend on
the Stock in shares of Stock or makes a distribution on the Stock in shares of
Stock, (ii) subdivides its outstanding shares of Stock into a greater number of
shares, (iii) combines its outstanding shares of Stock into a smaller number of
shares, (iv) makes a distribution on the Stock in shares of its capital stock
other than Stock, (v) issues by reclassification of its Stock any shares of its
capital stock, or (vi) changes its capital stock, then the number and kind of
shares of Stock of the Company subject to awards then outstanding or
subsequently granted under the Plan, the exercise price of such awards, the
maximum number of shares of Stock that may be delivered under the Plan, and
other relevant provisions shall be appropriately adjusted by the Board, whose
determination shall be binding on all Persons.
The Board, in its sole discretion, may also, but shall be under no
obligation to, adjust the number of shares subject to outstanding awards and the
exercise price and other terms of outstanding awards to take into consideration
material changes in accounting practices or principles of the Company or its
Subsidiaries, extraordinary dividends, consolidations or mergers (except those
described in Section 6(i)), acquisitions or dispositions of stock or property or
any other event if it is determined by the Board, in its sole discretion, that
such adjustment is necessary, advisable or appropriate so that the options
granted hereunder constitute a continuing incentive or so as to avoid distortion
in the operation of the Plan.
6. TERMS AND CONDITIONS OF OPTIONS
(a) EXERCISE PRICE OF OPTIONS. The exercise price of each option shall
be determined by the Board.
(b) DURATION OF OPTIONS. An option shall be exercisable during such
period or periods as the Board may specify. The latest date on which an option
may be exercised (the "Expiration Date") shall be the date which is ten years
from the date the option was granted or such earlier date as the Board may
specify at the time the option is granted. At the time an option is granted, the
Board may specify conditions or events the occurrence of which would permit the
Company to terminate options granted to a participant, whether or not such
options are exercisable at the time of such occurrence.
(c) EXERCISE OF OPTIONS.
(1) An option shall become exercisable at such time or
times and upon such conditions as the Board shall
specify. In the case of an option not immediately
exercisable in full, the Board may at any time
accelerate the time at which all or any part of the
option may be exercised.
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<PAGE>
(2) Any Person entitled to exercise an option in
accordance with the terms hereof and desiring to do
so shall exercise an option by delivering a written
notice to the Company signed by such Person and shall
be accompanied by (i) such documents as may be
required by the Board and (ii) payment in full in
good funds by any means acceptable to the Board in
its sole discretion for the number of shares for
which the option is exercised. Such notice shall
state the number of shares in respect to which such
option is being exercised.
(3) The Board shall have the right to require that the
participant exercising the option remit to the
Company an amount sufficient to satisfy any federal,
state, or local withholding tax requirements (or make
other arrangements satisfactory to the Company with
regard to such taxes) prior to the delivery of any
certificates representing Stock pursuant to the
exercise of the option. If permitted by the Board,
either at the time of the grant of the option or the
time of exercise, the participant may elect, at such
time and in such manner as the Board may prescribe,
to satisfy such withholding obligation by (i)
delivering to the Company Stock (which, in the case
of Stock acquired from the Company shall have been
owned by the participant for at least six months
prior to the delivery date) having a fair market
value equal to such withholding obligation, or (ii)
requesting that the Company withhold from the Stock
to be delivered upon the exercise a number of shares
of Stock having a fair market value equal to such
withholding obligation.
(4) If any option is exercised by the executor or
administrator of a deceased participant, or by the
Person or Persons to whom the option has been
transferred by the participant's will or the
applicable laws of descent and distribution, the
Company shall be under no obligation to deliver Stock
pursuant to such exercise until the Company is
satisfied as to the authority of the Person or
Persons exercising the option.
(d) [Intentionally omitted.]
(e) RIGHTS AS STOCKHOLDER; DELIVERY OF STOCK. A participant shall not
have the rights of a shareholder with regard to awards under the Plan unless and
until a certificate or certificates representing the purchase shares of Stock
are duly issued and delivered to the participant. No adjustment shall be made
for dividends or other rights for which the record date is prior to the date
upon which such stock certificate is issued.
Upon exercise of an option, the Company shall not be obligated to
deliver any certificates representing the Stock (i) until, in the opinion of the
Company's counsel, the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Act") and all other
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<PAGE>
applicable federal, state and foreign laws and regulations have been complied
with, (ii) if the outstanding Stock is at the time listed on any stock exchange,
until the shares to be delivered have been listed or authorized to be listed on
such exchange upon official notice of issuance and (iii) until all other legal
matters in connection with the issuance and delivery of such Stock have been
approved by the Company's counsel. If the sale of Stock has not been registered
under the Act, the Company may require, as a condition to exercise of the
option, (A) such representations, warranties or agreements as the Company may
deem necessary or desirable in order to assure compliance with the Act and all
other applicable federal, state and foreign laws and regulations or as may
otherwise be reasonably requested by the Company and (B) that the certificates
evidencing such Stock bear an appropriate legend restricting transfer. Nothing
in this paragraph shall modify or otherwise effect the provisions applicable to
the Shares under, or the obligations of the participant to, the Stockholders
Agreement.
(f) NONTRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine, no award may be transferred other than by will or by the laws of
descent and distribution and during a participant's lifetime, an award may be
exercised only by the participant.
(g) DEATH. Except as set forth in a stock option award, if a
participant dies, each award held by the participant immediately prior to death
may be exercised, to the extent it was exercisable immediately prior to death,
by his executor or administrator, or by the Person or Persons to whom the award
is transferred by will or the applicable laws of descent and distribution, at
any time within the period ending 180 days (or such longer or shorter period as
the Board may determine) after the participant's death but in no event beyond
the Expiration Date. All awards held by a participant immediately prior to death
that are not then exercisable shall terminate on the date of death.
(h) OTHER TERMINATION OF SERVICE. Except as set forth in a stock option
award, if a participant's employment or other service relationship with the
Company and its Subsidiaries terminates prior to the Expiration Date for any
reason, other than death, the following shall apply:
(1) Options that are not exercisable immediately prior to
the termination of employment shall terminate, except
that the Board, in its sole discretion, may, but
shall not be obligated to, provide that the
participant or beneficiary receive in cash, with
respect to each share of Stock to which an option
relates, the excess of (i) the share's fair market
value on the date of the participant's termination,
over (ii) the option exercise price.
(2) To the extent exercisable immediately prior to
termination of employment or other service, the
option shall continue to be exercisable thereafter
during the period prior to the Expiration Date and
within 90 days following the termination (or such
longer period as the Board may determine but in no
event beyond the Expiration Date), unless the
participant's employment or other service is
terminated "for cause" as defined in (3) below, in
which
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case all awards shall terminate immediately. Except
as otherwise provided in an award, after completion
of the 90-day period, such awards shall terminate to
the extent not previously exercised, expired, or
terminated.
(3) The following, as determined by the Board in its
reasonable judgment, shall constitute termination for
"cause": (i) failure or refusal to carry out the
lawful duties of the participant set forth in any
employment agreement between the participant and the
Company or any of its subsidiaries or any directions
of the Board or senior management of the Company,
which directions are reasonably consistent with the
duties performed or to be performed by the
participant, for a period of 15 days following
written notice of such refusal or failure, unless, in
the reasonable judgment of the Board, no cure is
possible or such 15-day period would subject the
Company or any of its subsidiaries to unreasonable
risk; (ii) violation by the participant of a state or
federal criminal law involving the commission of a
crime against the Company or any of its subsidiaries
or a felony which is determined by the Board to be
harmful to the business or reputation of the Company
or any of its subsidiaries; or (iii) abuse by the
participant of alcohol or controlled substances;
deception, fraud, material misrepresentation or
dishonesty by the participant; any incident
materially compromising the participant's reputation
or ability to represent the Company with the public;
any act or omission of the participant which
substantially impairs the business, good will or
reputation of the Company or any of its subsidiaries;
provided, however, that, if the participant and the
Company are parties to an employment agreement
relating to the employment of such participant by the
Company and such employment agreement contains a
definition of "Cause" (or other similar term) similar
in intent to the immediately preceding definition and
relating to the termination by the Company of such
employment, the definition of "Cause" for purposes of
this Plan shall further include any other actions or
circumstances constituting "Cause" for purposes of
such employment agreement, but only with respect to
such participant.
In the case of a participant who is not an employee, provisions
relating to the exercisability of options following termination of service shall
be specified in the award. If not so specified, all options held by such
participant that are not then exercisable shall terminate upon termination of
service. No option shall be exercised or surrendered in exchange for a cash
payment after the Expiration Date.
In the case of any award, the Board may provide for post-termination
exercise provisions different from those expressly set forth in this Section
6(h), including without limitation terms allowing a later exercise by a former
employee, consultant or advisor (or, in the case of a former employee,
consultant or advisor who is deceased, the person or person to whom the award is
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transferred by will or the laws of descent and distribution) as to all or any
portion of the award not exercisable immediately prior to termination of
employment or other service, but in no case may an award be exercised after the
Expiration Date.
(i) ACQUISITION EVENT. Except as set forth in a stock option award
(including an option certificate and agreement evidencing such award), in
connection with an Acquisition Event (as defined below), at least 10 days prior
to the effective date of any such Acquisition Event, the Board shall, at the
option of the participant, either (i) make all outstanding awards fully vested
and exercisable immediately prior to the consummation of such Acquisition Event
and the participant shall be permitted to exercise any or all such exercisable
options in connection with such Acquisition Event, or (ii) if there is a
surviving or acquiring corporation, convert any or all options to replacement
options in the surviving or acquiring corporation such that if such replacement
options were fully exercisable and actually exercised immediately after
consummation of the Acquisition Event, the shares issuable upon such exercise
would represent the percentage of the common stock of the surviving or acquiring
corporation that such participant would have held immediately after the
consummation of the Acquisition Event if such participant had exercised the
options granted to him or her pursuant to this Plan (assuming such options had
become fully exercisable) and held the shares of Stock issuable upon such
exercise immediately prior to such Acquisition Event. An "Acquisition Event"
shall mean (A) any consolidation or merger in which the Company is not the
surviving corporation or which results in the acquisition of substantially all
the Company's outstanding capital stock by a single Person or entity or by a
group of Persons and/or entities acting in concert, or (B) any sale or transfer
of substantially all the Company's assets. The Company will use commercially
reasonable efforts to send notice of an Acquisition Event to all participants 20
days prior to the occurrence of such Acquisition Event.
The Board may grant awards under the Plan in substitution for awards
held by directors, employees, consultants or advisers of another corporation who
concurrently become directors, employees, consultants or advisers of the Company
or a Subsidiary of the Company as a result of a merger or consolidation of that
corporation with the Company or a Subsidiary of the Company, or as the result of
the acquisition by the Company or a Subsidiary of the Company of property or
stock of that corporation. The Company may direct that substitute awards be
granted on such terms and conditions as the Board considers appropriate in the
circumstances.
7. EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the grant of awards shall confer
upon any participant any right to continue as a director of, an employee of, or
consultant or adviser to, the Company or any parent or Subsidiary or affect in
any way the right of the Company or parent or Subsidiary to terminate such
participant's relationship at any time. Except as specifically provided by the
Board in any particular case, the loss of existing or potential profit in awards
granted under this Plan shall not constitute an element of damages in the event
of termination of the relationship of a participant even if the termination is
in violation of an obligation of the Company to the participant by contract or
otherwise, it being understood that the preceding clause shall in no way
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<PAGE>
affect those options which have become exercisable and which have been exercised
by the participant in accordance with this Plan or the option certificate issued
pursuant to this Plan.
8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of awards to a participant
shall affect the Company's right to make awards to such participant that are not
subject to the Plan, to issue to such participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued.
The Board may at any time discontinue granting awards under the Plan.
With the consent of the participant, the Board may at any time cancel an
existing award in whole or in part and grant another award for such number of
shares as the Board specifies. The Board may at any time or times amend the Plan
or any outstanding award for the purpose of satisfying the requirements of any
changes in applicable laws or regulations or for any other purpose that may at
the time be permitted by law, which amendments must have a neutral or beneficial
effect on the rights of participants as determined by the Board, or may at any
time terminate the Plan as to any further grants of awards; provided, however,
that except as expressly provided in the Plan or in an award granted hereunder,
no such amendment shall adversely affect the rights of any participant (without
his or her consent) under such award.
9. GOVERNING LAW
The Plan shall in all respects, including all matters of construction,
be governed by, and construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts, without regard to any laws or rules governing
conflicts of laws.
10. DEFINITIONS
When used in the Plan, the following terms shall have the meanings
specified:
"Affiliate" shall mean, with respect to any specified Person, any other
Person which directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, such specified Person (for
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise).
"Person" shall mean any individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization or entity, or any
government, governmental department or agency or political subdivision thereof.
-8-
EXHIBIT 10.2
Note: These pages are provided solely for purposes of content, setting forth the
language on the back of the Option Grant(s). The following does not evidence the
Option Grant(s), that is accomplished solely by the Stock Option Grant
Certificate.
THE SECURITIES EVIDENCED HEREBY (OR ISSUABLE UPON EXERCISE HEREOF) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE
UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
PROVIDED BY THE SECURITIES ACT, REGULATION D AND/OR RULE 701, PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES EVIDENCED HEREBY (AND THE
SHARES ISSUABLE UPON EXERCISE HEREOF) ARE OR WILL BE SUBJECT TO RESTRICTIONS ON
TRANSFER AND RESALE UNDER A STOCKHOLDERS AGREEMENT AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS
PURSUANT TO REGISTRATION OR EXEMPTION FROM REGISTRATION REQUIREMENTS THEREUNDER.
LABTEC, INC.
1997 EMPLOYEE STOCK OPTION
Option Certificate and Agreement
This stock option is granted by Labtec, Inc., a Delaware corporation
(the "Company"), to the Optionee noted on the facing page (the "Optionee"),
pursuant to the Company's 1997 Employee Stock Option Plan (the "Plan"). All
initially capitalized terms not otherwise defined herein shall have the meaning
provided in the Plan.
1. Grant of Option
---------------
This certificate evidences the grant by the Company on the date shown
on the facing page (the "Grant Date") to the Optionee of an option to purchase,
in whole or in part, on the terms provided herein and in the Plan, a total of
the shares indicated on the facing page of Common Stock, par value $.01 per
share, of the Company (the "Shares") at the Option Exercise Price per share
indicated on the facing page.
The latest date on which this option may be exercised (the "Expiration
Date") is the earliest of (a) October 7, 2007, or (b) the termination hereof in
accordance with this Agreement, the Stockholders Agreement dated as of October
7, 1997 among the Company and certain other parties thereto as amended and in
effect from time to time (the "Stockholders Agreement") or the Plan.
The option evidenced by this certificate is not intended to qualify as
an incentive stock option under Section 422 of the Internal Revenue Code (the
"Code").
<PAGE>
Subject to the following sentence, this option shall become exercisable
in annual installments over four years beginning on the date indicated on the
facing page (the "Initial Vesting Date") (i.e., it shall become exercisable as
to 25% of the total number of Shares on the Initial Vesting Date and on each
anniversary thereof, except as accelerated by the Board pursuant to the Plan.).
Notwithstanding the foregoing, in the event of any Change in Control (as defined
in the Stockholders Agreement), this option shall be exercisable for 100% of the
number of Shares set forth on the facing page (but in no event shall this option
be exercisable for more than the number of shares set forth on the facing page);
provided, however, that any transaction after which the Company (or any other
entity owning substantially all of the consolidated assets of the Company)
becomes the direct or indirect subsidiary of an entity (but not including
another direct or indirect subsidiary) of which more than 50% of the voting
stock is not owned by a Person (or group of Persons acting in concert) other
than Bain Capital, Inc., Sun Capital Partners, Inc. or any of their Affiliates
(a "Related Transaction") shall not be a Change in Control for Purposes hereof.
In connection with any Related Transaction, clause (ii) of Section 6(i) of the
Plan shall apply and no consent of the Optionee shall be required.
2. Exercise of Option
------------------
Each election to exercise this option shall be in writing, signed by
the Optionee or by his or her executor or administrator or by the person or
persons to whom this option is transferred by will or the applicable laws of
descent and distribution (the "Legal Representative"), and received by the
Company at its principal office, accompanied by payment in full of the
applicable exercise price and by such additional documentation evidencing the
right to exercise (or, in the case of a Legal Representative, of the authority
of such person) as the Company may require. The exercise price may be paid (i)
in cash, bank cashier's check acceptable to the Company, or money order payable
to the order of the Company or (ii) by any other means acceptable to the Board
in its sole discretion.
3. Stockholders Agreement
----------------------
This option and any Shares received upon the exercise of this option
shall be subject to the Stockholders Agreement, and no Shares shall be issued
upon the exercise of this option unless and until the Optionee shall have
executed the Stockholders Agreement or a Joinder to Stockholders Agreement
satisfactory to the Company. The Shares received upon exercise of this option
shall be subject to the rights, restrictions and obligations applicable to
"Management Shares" as provided from time to time in such Stockholders Agreement
and (if applicable) Joinder to Stockholders Agreement. Without limiting the
generality of the foregoing provisions, in the event any Shares are issuable and
issued upon exercise of this option after termination of employment as
contemplated by Section 6 below, then such shares shall be subject to the
provisions of the Stockholders Agreement (including but not limited to the call
provisions of Section 7 of the Stockholders Agreement) to the same extent as if
such Shares were issued prior to such termination of employment.
4. Restrictions on Transfer
------------------------
In addition to the provisions of Section 3 above, if at the time this
option is exercised the Company is a party to any other agreement restricting
the transfer of any outstanding shares of its Common Stock, this option may be
exercised only if the Shares so acquired are made subject to the transfer
restrictions set forth in that agreement (or if more than one such agreement is
then in effect,
-2-
<PAGE>
the agreement or agreements specified by the Board); provided that such Shares
may be appropriately legended to reflect the foregoing restrictions or any other
restrictions to which such Shares may be subject.
5. Withholding
-----------
No Shares will be transferred pursuant to the exercise of this option
unless and until the person exercising this option shall have remitted to the
Company an amount sufficient to satisfy any federal, state or local withholding
tax requirements, or shall have made other arrangements satisfactory to the
Company with respect to such taxes.
6. Status Change
-------------
Upon the termination of the Optionee's employment, this option shall
terminate as to any Shares not vested immediately prior to termination;
provided, that the Board in its sole discretion may, but shall not be obligated
to, provide (either prior to or following termination) that any or all of such
portion of this option not otherwise vested prior to termination shall be
treated as having become vested immediately prior to termination. As to that
number of Shares for which the option was vested, or deem vested by action of
the Board, immediately prior to termination, it shall become and remain
exercisable as follows:
(i) if termination occurs for any reason other than death, for a period
of 90 days following such date of termination, but in no event beyond the
Expiration Date, or (ii) if termination occurs because of death, for a period of
180 days following such date of termination, but in no event beyond the
Expiration Date. Notwithstanding the foregoing, if the Optionee is terminated
"for cause" (as defined in Section 6(h) of the Plan), this option shall
immediately terminate as to all Shares subject hereto, whether or not vested
immediately prior to such termination for cause.
7. Effect on Employment
--------------------
Neither the grant of this option, nor the issuance of Shares upon
exercise of this option, shall give the Optionee any right to be retained in the
employ of the Company, affect the right of the Company to discharge or
discipline such Optionee at any time, or affect any right of such Optionee to
terminate his or her employment at any time.
8. Provisions of the Plan
----------------------
This option is subject in its entirety to the provisions of the Plan, a
copy of which is furnished to the Optionee with this option.
9. Termination of Option on Certain Events
---------------------------------------
The Optionee has entered into a certain agreement with the Company (the
"[Employment] [Letter] Agreement") containing, among other things, provisions
regarding noncompetition and nonsolicitation, protection of confidential
information and documents and intellectual property rights. Notwithstanding
anything herein, in the Plan or in any other document to the contrary, in the
event that the Optionee breaches such covenants made by the Optionee in the
Employment Agreement, this option shall terminate immediately as to all Shares
subject hereto, whether or not vested.
-3-
<PAGE>
10. Miscellaneous
-------------
This Option Certificate and Agreement in all respects, including all
matters of construction, shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to any laws or
rules governing conflicts of laws. By execution hereof, the Optionee agrees that
any controversy, dispute or claim arising out of or relating to this Agreement
which cannot be settled by mutual agreement 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 binding arbitration in the State of Washington 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. In any dispute arising from or
in connection with this Agreement, the non-prevailing party shall pay its own
and the prevailing party's fees and expenses (including reasonable attorneys'
fees).
-4-
<PAGE>
[BACK]
THE SECURITIES EVIDENCED HEREBY (OR ISSUABLE UPON EXERCISE HEREOF) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE
UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
PROVIDED BY THE SECURITIES ACT, REGULATION D AND/OR RULE 701, PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES EVIDENCED HEREBY (AND THE
SHARES ISSUABLE UPON EXERCISE HEREOF) ARE OR WILL BE SUBJECT TO RESTRICTIONS ON
TRANSFER AND RESALE UNDER A STOCKHOLDERS AGREEMENT AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS
PURSUANT TO REGISTRATION OR EXEMPTION FROM REGISTRATION REQUIREMENTS THEREUNDER.
LABTEC, INC.
1997 EMPLOYEE STOCK OPTION
Option Certificate and Agreement
- --------------------------------
This stock option is granted by Labtec, Inc., a Delaware corporation (the
"Company"), to the Optionee noted on the facing page (the "Optionee"), pursuant
to the Company's 1997 Employee Stock Option Plan (the "Plan"). All initially
capitalized terms not otherwise defined herein shall have the meaning provided
in the Plan.
1. Grant of Option
---------------
This certificate evidences the grant by the Company on the date shown on the
facing page (the "Grant Date") to the Optionee of an option to purchase, in
whole or in part, on the terms provided herein and in the Plan, a total of the
shares indicated on the facing page of Common Stock, par value $.01 per share,
of the Company (the "Shares") at the Option Exercise Price per share indicated
on the facing page.
The latest date on which this option may be exercised (the "Expiration Date") is
the earliest of (a) October 7, 2007, or (b) the termination hereof in accordance
with this Agreement, the Stockholders Agreement dated as of October 7, 1997
among the Company and certain other parties thereto as amended and in effect
from time to time (the "Stockholders Agreement") or the Plan.
The option evidenced by this certificate is not intended to qualify as an
incentive stock option under Section 422 of the Internal Revenue Code (the
"Code").
Subject to the following sentence, this option shall become exercisable in
annual installments over four years beginning on the date indicated on the
facing page (the "Initial Vesting Date") (i.e., it shall become exercisable as
to 25% of the total number of Shares on the Initial Vesting Date and on each
anniversary thereof, except as accelerated by the Board pursuant to the Plan.).
Notwithstanding the foregoing, in the event of any Change in Control (as defined
in the Stockholders Agreement), this option shall be exercisable for 100% of the
number of Shares set forth on the facing page (but in no event shall this option
be exercisable for more than the number of shares set forth on the facing page);
provided, however, that any transaction after which the Company (or any other
entity owning substantially all of the consolidated assets of the Company)
becomes the direct or indirect subsidiary of an entity (but not including
another direct or indirect subsidiary) of which more than 50% of the voting
stock is not owned by a Person (or group of Persons acting in concert) other
than Bain Capital, Inc., Sun Capital Partners, Inc. or any of their Affiliates
(a "Related Transaction") shall not be a Change in Control for Purposes hereof.
In connection with any Related Transaction, clause (ii) of Section 6(i) of the
Plan shall apply and no consent of the Optionee shall be required.
2. Exercise of Option
------------------
-5-
<PAGE>
Each election to exercise this option shall be in writing, signed by the
Optionee or by his or her executor or administrator or by the person or persons
to whom this option is transferred by will or the applicable laws of descent and
distribution (the "Legal Representative"), and received by the Company at its
principal office, accompanied by payment in full of the applicable exercise
price and by such additional documentation evidencing the right to exercise (or,
in the case of a Legal Representative, of the authority of such person) as the
Company may require. The exercise price may be paid (i) in cash, bank cashier's
check acceptable to the Company, or money order payable to the order of the
Company or (ii) by any other means acceptable to the Board in its sole
discretion.
3. Stockholders Agreement
----------------------
This option and any Shares received upon the exercise of this option shall be
subject to the Stockholders Agreement, and no Shares shall be issued upon the
exercise of this option unless and until the Optionee shall have executed the
Stockholders Agreement or a Joinder to Stockholders Agreement satisfactory to
the Company. The Shares received upon exercise of this option shall be subject
to the rights, restrictions and obligations applicable to "Management Shares" as
provided from time to time in such Stockholders Agreement and (if applicable)
Joinder to Stockholders Agreement. Without limiting the generality of the
foregoing provisions, in the event any Shares are issuable and issued upon
exercise of this option after termination of employment as contemplated by
Section 6 below, then such shares shall be subject to the provisions of the
Stockholders Agreement (including but not limited to the call provisions of
Section 7 of the Stockholders Agreement) to the same extent as if such Shares
were issued prior to such termination of employment.
4. Restrictions on Transfer
------------------------
In addition to the provisions of Section 3 above, if at the time this option is
exercised the Company is a party to any other agreement restricting the transfer
of any outstanding shares of its Common Stock, this option may be exercised only
if the Shares so acquired are made subject to the transfer restrictions set
forth in that agreement (or if more than one such agreement is then in effect,
the agreement or agreements specified by the Board); provided that such Shares
may be appropriately legended to reflect the foregoing restrictions or any other
restrictions to which such Shares may be subject.
5. Withholding
-----------
No Shares will be transferred pursuant to the exercise of this option unless and
until the person exercising this option shall have remitted to the Company an
amount sufficient to satisfy any federal, state or local withholding tax
requirements, or shall have made other arrangements satisfactory to the Company
with respect to such taxes.
6. Status Change
-------------
Upon the termination of the Optionee's employment, this option shall terminate
as to any Shares not vested immediately prior to termination; provided, that the
Board in its sole discretion may, but shall not be obligated to, provide (either
prior to or following termination) that any or all of such portion of this
option not otherwise vested prior to termination shall be treated as having
become vested immediately prior to termination. As to that number of Shares for
which the option was vested, or deem vested by action of the Board, immediately
prior to termination, it shall become and remain exercisable as follows:
(i) if termination occurs for any reason other than death, for a period of 90
days following such date of termination, but in no event beyond the Expiration
Date, or (ii) if termination occurs because of death, for a period of 180 days
following such date of termination, but in no event beyond the Expiration Date.
Notwithstanding the foregoing, if the Optionee is terminated "for cause" (as
defined in Section 6(h) of the Plan), this option shall immediately terminate as
to all Shares subject hereto, whether or not vested immediately prior to such
termination for cause.
7. Effect on Employment
--------------------
Neither the grant of this option, nor the issuance of Shares upon exercise of
this option, shall give the Optionee any right to be retained in the employ of
the Company, affect the right of the Company to discharge or discipline such
Optionee at any time, or affect any right of such Optionee to terminate his or
her employment at any time.
8. Provisions of the Plan
----------------------
-6-
<PAGE>
This option is subject in its entirety to the provisions of the Plan, a copy of
which is furnished to the Optionee with this option.
9. Termination of Option on Certain Events
---------------------------------------
The Optionee has entered into a certain agreement with the Company (the
"[Employment] [Letter] Agreement") containing, among other things, provisions
regarding noncompetition and nonsolicitation, protection of confidential
information and documents and intellectual property rights. Notwithstanding
anything herein, in the Plan or in any other document to the contrary, in the
event that the Optionee breaches such covenants made by the Optionee in the
Employment Agreement, this option shall terminate immediately as to all Shares
subject hereto, whether or not vested.
10. Miscellaneous
-------------
This Option Certificate and Agreement in all respects, including all matters of
construction, shall be governed by and construed and enforced in accordance with
the laws of the State of Delaware, without regard to any laws or rules governing
conflicts of laws. By execution hereof, the Optionee agrees that any
controversy, dispute or claim arising out of or relating to this Agreement which
cannot be settled by mutual agreement 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 binding
arbitration in the State of Washington 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. In any dispute arising from or in connection with
this Agreement, the non-prevailing party shall pay its own and the prevailing
party's fees and expenses (including reasonable attorneys' fees).
-7-
THE SECURITIES EVIDENCED HEREBY (OR ISSUABLE UPON EXERCISE HEREOF) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE
UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
PROVIDED BY THE SECURITIES ACT, REGULATION D AND/OR RULE 701, PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES EVIDENCED HEREBY (AND THE
SHARES ISSUABLE UPON EXERCISE HEREOF) MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS PURSUANT TO
REGISTRATION OR EXEMPTION FROM REGISTRATION REQUIREMENTS THEREUNDER.
LABTEC INC.
AMENDED AND RESTATED 1997 EMPLOYEE STOCK OPTION PLAN
(FORMERLY THE 1997 EMPLOYEE STOCK OPTION PLAN OF LABTEC CORPORATION, A
DELAWARE CORPORATION FORMERLY KNOWN AS LABTEC INC.)
Option Certificate and Agreement
This stock option is granted by Labtec Inc., a Massachusetts
corporation (the "Company"), to ________________ (the "Optionee"), pursuant to
the Company's Amended and Restated 1997 Employee Stock Option Plan (the "Plan").
All initially capitalized terms not otherwise defined herein shall have the
meaning provided in the Plan.
1. Grant of Option
This certificate evidences the grant by the Company on _______ ___,
1999 (the "Grant Date") to the Optionee of an option to purchase, in whole or in
part, on the terms provided herein and in the Plan, a total of ____ shares of
Common Stock, par value $.01 per share, of the Company (the "Shares") at $_____
per share.
The latest date on which this option may be exercised (the "Expiration
Date") is the earliest of (a) the tenth anniversary of the Grant Date, or (b)
the termination hereof in accordance with this Agreement or the Plan.
The option evidenced by this certificate is not intended to qualify as
an incentive stock option under Section 422 of the Internal Revenue Code (the
"Code").
Subject to the following sentence, this option shall become exercisable
in annual installments over four years beginning on the first anniversary of the
Grant Date (the "Initial Vesting Date") (i.e., it shall become exercisable as to
25% of the total number of Shares on the Initial Vesting Date and on each
anniversary thereof, except as accelerated by the Board pursuant to the Plan).
Notwithstanding the foregoing, in the event of any Change in Control (as defined
below), this option shall be exercisable for 100% of the number of Shares set
forth in the first paragraph of this Section 1 (but in no event shall this
option be exercisable for more than the number of shares set forth in the first
paragraph of this Section 1). For purposes of this
-1-
<PAGE>
Agreement, "Change in Control" shall mean any transaction (including, without
limitation, a merger, consolidation, sale of stock or sale of assets, but
excluding any assignment as security for indebtedness) after which any Person
(or group of Persons acting in concert) other than Bain Capital, Inc., Sun
Capital Partners, Inc. or any of their Affiliates shall own in excess of 50% of
the voting stock of the Company (or the Person into which the Company shall have
been merged or consolidated) and have the right to elect a majority of the
members of the Board or shall have acquired all or substantially all of the
consolidated assets of the Company and its subsidiaries; provided, however, that
any transaction after which the Company (or any other entity owning
substantially all of the consolidated assets of the Company) becomes the direct
or indirect subsidiary of an entity (but not including another direct or
indirect subsidiary) of which more than 50% of the voting stock is not owned by
a Person (or group of Persons acting in concert) other than Bain Capital, Inc.,
Sun Capital Partners, Inc. or any of their Affiliates (a "Related Transaction")
shall not be a Change in Control for purposes hereof. In connection with any
Related Transaction, clause (ii) of Section 6(i) of the Plan shall apply and no
consent of the Optionee shall be required.
2. Exercise of Option
Each election to exercise this option shall be in writing, signed by
the Optionee or by his or her executor or administrator or by the person or
persons to whom this option is transferred by will or the applicable laws of
descent and distribution (the "Legal Representative"), and received by the
Company at its principal office, accompanied by payment in full of the
applicable exercise price and by such additional documentation evidencing the
right to exercise (or, in the case of a Legal Representative, of the authority
of such person) as the Company may require. The exercise price may be paid (i)
in cash, bank cashier's check acceptable to the Company, or money order payable
to the order of the Company or (ii) by any other means acceptable to the Board
in its sole discretion.
3. Restrictions on Transfer
If at the time this option is exercised the Company is a party to any
other agreement restricting the transfer of any outstanding shares of its Common
Stock, this option may be exercised only if the Shares so acquired are made
subject to the transfer restrictions set forth in that agreement (or if more
than one such agreement is then in effect, the agreement or agreements specified
by the Board); provided that such Shares may be appropriately legended to
reflect the foregoing restrictions or any other restrictions to which such
Shares may be subject.
4. Withholding
No Shares will be transferred pursuant to the exercise of this option
unless and until the person exercising this option shall have remitted to the
Company an amount sufficient to satisfy any federal, state or local withholding
tax requirements, or shall have made other arrangements satisfactory to the
Company with respect to such taxes.
-2-
<PAGE>
5. Status Change
Upon the termination of the Optionee's employment, this option shall
terminate as to any Shares not vested immediately prior to termination;
provided, that the Board in its sole discretion may, but shall not be obligated
to, provide (either prior to or following termination) that any or all of such
portion of this option not otherwise vested prior to termination shall be
treated as having become vested immediately prior to termination. As to that
number of Shares for which the option was vested, or deemed vested by action of
the Board, immediately prior to termination, it shall become and remain
exercisable as follows:
(i) if termination occurs for any reason other than death, for a
period of 90 days following such date of termination, but in
no event beyond the Expiration Date, or
(ii) if termination occurs because of death, for a period of 180
days following such date of termination, but in no event
beyond the Expiration Date.
Notwithstanding the foregoing, if the Optionee is terminated "for cause" (as
defined in Section 6(h) of the Plan), this option shall immediately terminate as
to all Shares subject hereto, whether or not vested immediately prior to such
termination for cause.
6. Effect on Employment
Neither the grant of this option, nor the issuance of Shares upon
exercise of this option, shall give the Optionee any right to be retained in the
employ of the Company, affect the right of the Company to discharge or
discipline such Optionee at any time, or affect any right of such Optionee to
terminate his or her employment at any time.
7. Provisions of the Plan
This option is subject in its entirety to the provisions of the Plan, a
copy of which is furnished to the Optionee with this option.
8. Confidential Information; Non-Compete; and Non-Solicitation
The Optionee hereby agrees to hold and maintain as confidential and
private all proprietary information belonging to or with respect to the Company
or any Affiliate of the Company of which he may have knowledge or acquire
knowledge, and further agrees not to disclose or divulge at any time any such
information to any Person, other than to the Company's officers and employees
when required in the ordinary course of business of the Company; provided,
however, that he may disclose any such information (a) as has become generally
available to the public, (b) as may be required in any report, statement or
testimony submitted to any municipal, state or Federal regulatory body having or
claiming to have jurisdiction over him,
-3-
<PAGE>
(c) as may be required in response to any summons or subpoena, or (d) in order
to comply with any law, order, regulation or ruling applicable to him.
At any time during which the Optionee is employed by the Company,
engaged as a consultant or advisor to the Company, or serving as a director of
the Company and for a period of twenty-four (24) months thereafter (the
"Restrictive Period") the Optionee agrees that he will not, either directly or
indirectly, engage in any business in which the Company or any of its
subsidiaries shall then be engaged in (the "Competing Business"), anywhere
within North America, whether in such Optionee's individual capacity, or as an
Affiliate, stockholder, director, consultant or advisor with any entity which is
engaged in the Competing Business or for any entity that is formed in whole or
in part for the purpose of engaging in the Competing Business or which provides
consulting services to any entity engaged in the Competing Business.
During the Restrictive Period, the Optionee agrees that he will not,
either directly or indirectly, employ or solicit, entice or encourage to leave
the employment of the Company or any of the Company's Affiliates, any person
who, at any time during such period, is or was employed by the Company or any of
the Company's Affiliates.
9. Specific Performance on Default; Termination of Option on Certain Events
The parties acknowledge that the Company will be irreparably damaged if
the covenants contained in Section 8 hereof are not specifically enforced.
Should any controversy arise concerning a breach by the Optionee of any
provision of Section 8 hereof, an order or injunction may be issued restraining
any such breach pending the determination of such controversy, and the
resolution thereof shall be enforceable in a court of equity by a decree of
specific performance. Such remedy shall, however, be cumulative and not
exclusive, and shall be in addition to any other remedies which the parties may
have.
Notwithstanding anything herein, in the Plan or in any other document
to the contrary, in the event that the Optionee breaches any such covenants made
by the Optionee in Section 8 hereof, this option shall terminate immediately as
to all Shares subject hereto, whether or not vested.
10. Miscellaneous
This Option Certificate and Agreement in all respects, including all
matters of construction, shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts, without regard to
any laws or rules governing conflicts of laws. By execution hereof, the Optionee
agrees that any controversy, dispute or claim arising out of or relating to this
Agreement which cannot be settled by mutual agreement 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 binding arbitration in the
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<PAGE>
State of Washington 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.
In any dispute arising from or in connection with this Agreement, the
non-prevailing party shall pay its own and the prevailing party's fees and
expenses (including reasonable attorneys' fees).
IN WITNESS WHEREOF, the Company has caused this option to be executed
under its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
LABTEC INC.
By:________________________________
Title:
Dated: _______ ___, 1999
Accepted and Agreed as of
________ ___, 1999:
- --------------------------------
Name:
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RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
between
SPEAKER ACQUISITION CORP.
and
LEI HOLDINGS, INC.
Dated as of August 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
(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 Bain 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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<PAGE>
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
- 6 -
<PAGE>
(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
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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
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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;
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(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 mark, 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
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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
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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
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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
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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
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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.
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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 mark, 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
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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.
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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
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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 Stephens 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
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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,
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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
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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 Stephens 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,
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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
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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.
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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
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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 Perkins Coie and Morris,
Nichols, Arsht & Tunnell, 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.
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6.5 OPINION OF COUNSEL FOR TRANSCO
The Company shall have received a legal opinion of Ropes & Gray,
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
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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
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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 Stephens 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.
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<PAGE>
(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
- 55 -
<PAGE>
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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<PAGE>
TO TRANSCO:
Speaker Acquisition Corp.
c/o Sun Capital Partners, Inc.
777 South Flagler Drive
West Tower, Eighth Floor
West Palm Beach, FL 33401
Fax: (561) 820-1314
Attention: President
with copies to:
Bain Capital Sun Capital
Two Copley Place 777 South Flagler Drive
7th Floor West Tower, Eighth Floor
Boston, MA 02116 West Palm Beach, FL 33401
Fax: (617) 572-3274 Fax: (561) 820-1314
Attention: Geoffrey S. Rehnert and Attention: Marc J. Leder and Rodger
Joseph A. Pretlow R. Krouse
Ropes & Gray
One International Place
Boston, MA 02116
Fax: (617) 951-7050
Attention: Patrick Diaz and
Peter H. Dodson
TO THE SHAREHOLDER REPRESENTATIVES OR, PRIOR TO THE
CLOSING, THE COMPANY:
LEI Holdings, Inc.
c/o Labtec Enterprises, Inc.
Suite J
3801 N.E. 109th Avenue
Vancouver, WA 98682
Fax: (360) 896-2020
Attention: President
- 57 -
<PAGE>
with copies to:
The Northern Group, Inc. Stephens Group, Inc.
Suite 3140 Suite 2400
900 Fourth Avenue 111 Center Street
Seattle, WA 98164 Little Rock, AR 72201
Fax: (206) 622-3319 Fax: (501) 377-2666
Attention: Michael F.O. Harris Attention: Kevin M. Wilcox
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Fax: (206) 583-8500
Attention: Stewart M. Landefeld and David C. Clarke
TO THE SURVIVING CORPORATION:
LEI Holdings, Inc.
c/o Labtec Enterprises, Inc.
Suite J
3801 N.E. 109th Avenue
Vancouver, WA 98682
Fax: (360) 896-2020
Attention: President
with copies to:
Bain Capital Sun Capital
Two Copley Place 777 South Flagler Drive
7th Floor West Tower, Eighth Floor
Boston, MA 02116 West Palm Beach, FL 33401
Fax: (617) 572-3274 Fax: (561) 820-1314
Attention: Geoffrey S. Rehnert and Attention: Marc J. Leder and Rodger
Joseph A. Pretlow R. Krouse
Ropes & Gray
One International Place
Boston, MA 02116
Fax: (617) 951-7050
Attention: Patrick Diaz and
Peter H. Dodson
- 58 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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.
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<PAGE>
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
Michael Shaver).
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<PAGE>
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/ Rodger Krouse
LEI HOLDINGS, INC.
By: /s/ Michael F.O. Harris
Title: Vice President, Treasurer and Secretary
- 63 -
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
LABTEC ENTERPRISES, INC.,
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
AS AGENT
--------------------------------
Dated as of October 7, 1997
--------------------------------
$40,000,000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION 1. Amount and Terms of Credit.........................................1
1.01 Commitments................................................1
1.02 Minimum Borrowing Amounts, etc.............................3
1.03 Notice of Borrowing........................................3
1.04 Disbursement of Funds......................................4
1.05 Notes......................................................5
1.06 Conversions................................................6
1.07 Pro Rata Borrowings........................................6
1.08 Interest...................................................6
1.09 Interest Periods...........................................7
1.10 Increased Costs, Illegality, etc...........................8
1.11 Compensation..............................................10
1.12 Change of Lending Office..................................11
1.13 Replacement of Banks......................................11
SECTION 2. Letters of Credit.........................................12
2.01 Letters of Credit.........................................12
2.02 Letter of Credit Requests; Notices of Issuance............13
2.03 Agreement to Repay Letter of Credit Drawings..............14
2.04 Letter of Credit Participations...........................14
2.05 Increased Costs...........................................16
SECTION 3. Fees; Commitments.........................................17
3.01 Fees......................................................17
3.02 Voluntary Termination or Reduction of Commitments.........18
3.03 Mandatory Adjustments of Commitments, etc.................19
SECTION 4. Payments..................................................19
4.01 Voluntary Prepayments.....................................19
4.02 Mandatory Prepayments.....................................20
4.03 Method and Place of Payment...............................24
4.04 Net Payments..............................................24
SECTION 5. Conditions Precedent......................................26
5.01 Execution of Agreement; Notes.............................26
5.02 No Default; Representations and Warranties................26
5.03 Officer's Certificate.....................................26
5.04 Opinions of Counsel.......................................27
5.05 Corporate Proceedings.....................................27
5.06 Adverse Change, etc. .....................................27
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<PAGE>
TABLE OF CONTENTS (cont'd)
5.07 Litigation................................................28
5.08 Approvals.................................................28
5.09 Consummation of the Equity Financing and the Mergers......28
5.10 Subordinated Financing....................................29
5.11 Refinancing...............................................29
5.12 Documents.................................................30
5.13 Financing Proceeds........................................30
5.14 Pledge Agreement..........................................30
5.15 Security Agreement........................................31
5.16 Mortgages; Title Insurance; Surveys, etc..................31
5.17 Plans; Collective Bargaining Agreements; Existing
Indebtedness Agreements; Shareholders' Agreements;
Management Agreements; Employment Agreements;
Non-Compete Agreements; Tax Allocation Agreements;
Material Contracts...................................32
5.18 Solvency Opinion; Evidence of Insurance...................33
5.19 Pro Forma Balance Sheets..................................34
5.20 Projections...............................................34
5.21 Existing Indebtedness.....................................34
5.22 Payment of Fees...........................................34
5.23 Notice of Borrowing; Letter of Credit Request.............34
SECTION 6. Representations, Warranties and Agreements................35
6.01 Corporate Status..........................................35
6.02 Corporate Power and Authority.............................35
6.03 No Violation..............................................35
6.04 Litigation................................................36
6.05 Use of Proceeds; Margin Regulations.......................36
6.06 Governmental Approvals....................................36
6.07 Investment Company Act....................................36
6.08 Public Utility Holding Company Act........................37
6.09 True and Complete Disclosure..............................37
6.10 Financial Condition; Financial Statements.................37
6.11 Security Interests........................................38
6.12 Representations and Warranties in Other Documents.........39
6.13 Transaction...............................................39
6.14 Compliance with ERISA.....................................39
6.15 Capitalization............................................40
6.16 Subsidiaries..............................................41
6.17 Intellectual Property.....................................41
6.18 Compliance with Statutes, etc.............................41
6.19 Environmental Matters.....................................41
6.20 Properties................................................42
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<PAGE>
TABLE OF CONTENTS (cont'd)
6.21 Labor Relations...........................................42
6.22 Tax Returns and Payments..................................42
6.23 Existing Indebtedness.....................................43
6.24 Subordination.............................................43
SECTION 7. Affirmative Covenants.....................................43
7.01 Information Covenants.....................................43
7.02 Books, Records and Inspections............................46
7.03 Insurance.................................................46
7.04 Payment of Taxes..........................................47
7.05 Corporate Franchises......................................47
7.06 Compliance with Statutes, etc.............................47
7.07 Compliance with Environmental Laws........................47
7.08 ERISA.....................................................48
7.09 Good Repair...............................................49
7.10 End of Fiscal Years; Fiscal Quarters......................49
7.11 Additional Security; Further Assurances...................49
7.12 Register..................................................50
7.13 Foreign Subsidiaries Security.............................51
7.14 Interest Rate Protection..................................51
SECTION 8. Negative Covenants........................................52
8.01 Changes in Business.......................................52
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc....52
8.03 Liens.....................................................56
8.04 Indebtedness..............................................58
8.05 Advances, Investments and Loans...........................59
8.06 Dividends, etc............................................63
8.07 Transactions with Affiliates..............................63
8.08 Capital Expenditures......................................64
8.09 Minimum Consolidated EBITDA...............................65
8.10 Interest Coverage Ratio...................................66
8.11 Leverage Ratio............................................67
8.12 Limitation on Voluntary Payments and Modifications
of Indebtedness; Modifications of Certificate
of Incorporation, By-Laws and Certain
Other Agreements; etc................................68
8.13 Limitation on Certain Restrictions on Subsidiaries........68
8.14 Limitation on the Creation of Subsidiaries................69
SECTION 9. Events of Default.........................................69
9.01 Payments..................................................69
9.02 Representations, etc. ....................................69
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<PAGE>
TABLE OF CONTENTS (cont'd)
9.03 Covenants.................................................69
9.04 Default Under Other Agreements............................70
9.05 Bankruptcy, etc...........................................70
9.06 ERISA.....................................................70
9.07 Security Documents........................................71
9.08 Subsidiary Guaranties.....................................71
9.09 Judgments.................................................71
9.10 Ownership.................................................72
SECTION 10. Definitions...............................................72
SECTION 11. The Agent........................................................95
11.01 Appointment...............................................95
11.02 Delegation of Duties......................................96
11.03 Exculpatory Provisions....................................96
11.04 Reliance by Agent.........................................96
11.05 Notice of Default.........................................97
11.06 Non-Reliance on Agent and Other Banks.....................97
11.07 Indemnification...........................................98
11.08 Agent in its Individual Capacity..........................98
11.09 Holders...................................................98
11.10 Resignation of the Agent; Successor Agent.................98
SECTION 12. Miscellaneous....................................................99
12.01 Payment of Expenses, etc..................................99
12.02 Right of Setoff..........................................100
12.03 Notices..................................................100
12.04 Benefit of Agreement.....................................100
12.05 No Waiver; Remedies Cumulative...........................102
12.06 Payments Pro Rata........................................102
12.07 Calculations; Computations...............................103
12.08 Governing Law; Submission to Jurisdiction; Venue.........103
12.09 Counterparts.............................................104
12.10 Effectiveness............................................104
12.11 Headings Descriptive.....................................104
12.12 Amendment or Waiver; etc.................................104
12.13 Survival.................................................105
12.14 Domicile of Loans........................................105
12.15 Confidentiality..........................................105
12.16 Waiver of Jury Trial.....................................106
12.17 Post-Closing Actions.....................................106
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<PAGE>
CREDIT AGREEMENT, dated as of October 7, 1997, among LABTEC
ENTERPRISES, INC., a Delaware corporation , as the surviving corporation of the
Speaker Merger (the "Borrower"), the lenders from time to time party hereto
(each, a "Bank" and, collectively, the "Banks"), and BANKERS TRUST COMPANY, as
Agent (in such capacity, the "Agent"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 10 are used herein as so
defined.
W I T N E S S E T H:
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Banks are willing to make available the credit facilities
provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. (A) Subject to and upon the terms and
conditions herein set forth, each Bank severally agrees to make a loan or loans
to the Borrower, which loans shall be drawn, to the extent such Bank has a
commitment under such Facility, under the Term Loan Facility and the Revolving
Loan Facility, as set forth below:
(a) Each loan under the Term Loan Facility (each, a "Term
Loan" and, collectively, the "Term Loans"), (i) shall be incurred by
the Borrower pursuant to a single drawing, which shall be on the
Initial Borrowing Date, (ii) shall be denominated in U.S. Dollars,
(iii) except as hereinafter provided, may, at the option of the
Borrower, be incurred and maintained as and/or converted into Base Rate
Loans or Eurodollar Loans, provided, that (x) all Term Loans made by
all Banks pursuant to the same Borrowing shall, unless otherwise
specifically provided herein, consist entirely of Term Loans of the
same Type and (y) no incurrences of, or conversions into, Term Loans
maintained as Eurodollar Loans may be effected prior to the earlier of
(1) the 60th day after the Initial Borrowing Date and (2) that date
(the "Syndication Date ") upon which the Agent determines in its sole
discretion (and notifies the Borrower) that the primary syndication
(and resultant additions of institutions as Banks pursuant to Section
12.04) has been completed, and (iv) shall not exceed for any Bank at
the time of incurrence thereof on the Initial Borrowing Date that
aggregate principal amount which equals the Term Loan Commitment, if
any, of such Bank at such time. Once repaid, Term Loans may not be
reborrowed.
(b) Each loan under the Revolving Loan Facility (each, a
"Revolving Loan" and, collectively, the "Revolving Loans"), (i) may be
incurred by the Borrower at any time and from time to time on and after
the Initial Borrowing Date and prior to the Revolving Loan Maturity
Date, (ii) shall be denominated in U.S. Dollars, (iii)except as
hereinafter provided, may, at the option of the Borrower, be incurred
and maintained as and/or converted into Base Rate Loans or Eurodollar
Loans, provided, that (x) all Revolving Loans made as part of the
<PAGE>
same Borrowing shall, unless otherwise specifically provided herein,
consist of Revolving Loans of the same Type and (y) no incurrences of,
or conversions into, Revolving Loans maintained as Eurodollar Loans may
be effected prior to the earlier of (1) the 60th day after the Initial
Borrowing Date and (2) the Syndication Date, (iv) may be repaid and
reborrowed in accordance with the provisions hereof and (v) shall not
exceed for any Bank at any time outstanding that aggregate principal
amount which, when combined with (I) the aggregate principal amount of
all other then outstanding Revolving Loans made by such Bank and (II)
such Bank's RL Percentage, if any, of the Swingline Loans then
outstanding and the Letter of Credit Outstandings (exclusive of Unpaid
Drawings relating to Letters of Credit which are repaid with the
proceeds of, and simultaneously with the incurrence of, Revolving Loans
or Swingline Loans) at such time, equals the Revolving Loan Commitment,
if any, of such Bank at such time. Notwithstanding anything to the
contrary contained herein, the aggregate amount of Revolving Loans
incurred on the Initial Borrowing Date may not exceed $1,500,000.
(B) Subject to and upon the terms and conditions herein set
forth, BTCo in its individual capacity agrees to make at any time and from time
to time after the Initial Borrowing Date and prior to the Swingline Expiry Date,
a loan or loans to the Borrower (each, a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans (i) shall be made and maintained as
Base Rate Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid
and reborrowed in accordance with the provisions hereof, (iv) shall not exceed
in aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans then outstanding and the
Letter of Credit Outstandings (exclusive of Unpaid Drawings relating to Letters
of Credit which are repaid with the proceeds of, and simultaneously with the
incurrence of, Revolving Loans or Swingline Loans) at such time, an amount equal
to the Total Revolving Loan Commitment then in effect and (v) shall not exceed
in aggregate principal amount at any time outstanding the Maximum Swingline
Amount. BTCo shall not be obligated to make any Swingline Loans at a time when a
Bank Default exists unless BTCo has entered into arrangements satisfactory to it
and the Borrower to eliminate BTCo's risk with respect to the Defaulting Bank's
or Banks' participation in such Swingline Loans, including by cash
collateralizing such Defaulting Bank's or Banks' RL Percentage of the
outstanding Swingline Loans. BTCo will not make a Swingline Loan after it has
received written notice from the Borrower or the Required Banks stating that a
Default or an Event of Default exists until such time as BTCo shall have
received a written notice of (i) rescission of such notice from the party or
parties originally delivering the same or (ii) a waiver of such Default or Event
of Default from the Required Banks (or all the Banks to the extent required by
Section 12.12).
(C) On any Business Day, BTCo may, in its sole discretion,
give notice to the RL Banks that its outstanding Swingline Loans shall be funded
with a Borrowing of Revolving Loans (provided that each such notice shall be
deemed to have been automatically given upon the occurrence of a Default or an
Event of Default under Section 9.05 or upon the exercise of any of the remedies
provided in the last paragraph of Section 9), in which case a Borrowing of
Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all RL
Banks pro rata based on each RL Bank's RL
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Percentage, and the proceeds thereof shall be applied directly to repay BTCo for
such outstanding Swingline Loans. Each RL Bank hereby irrevocably agrees to make
Base Rate Loans upon one Business Day's notice pursuant to each Mandatory
Borrowing in the amount and in the manner specified in the preceding sentence
and on the date specified in writing by BTCo notwithstanding (i) that the amount
of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount
otherwise required hereunder, (ii) whether any conditions specified in Section 5
are then satisfied, (iii) whether a Default or an Event of Default has occurred
and is continuing, (iv) the date of such Mandatory Borrowing and (v) any
reduction in the Total Revolving Loan Commitment after any such Swingline Loans
were made. In the event that any Mandatory Borrowing cannot for any reason be
made on the date otherwise required above (including, without limitation, as a
result of the commencement of a proceeding under the Bankruptcy Code in respect
of the Borrower), each RL Bank (other than BTCo) hereby agrees that it shall
forthwith purchase from BTCo (without recourse or warranty) such assignment of
the outstanding Swingline Loans as shall be necessary to cause the RL Banks to
share in such Swingline Loans ratably based upon their respective RL
Percentages, provided that all interest payable on the Swingline Loans shall be
for the account of BTCo until the date the respective assignment is purchased
and, to the extent attributable to the purchased assignment, shall be payable to
the RL Bank purchasing same from and after such date of purchase.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing under a Facility shall not be less than the Minimum
Borrowing Amount for such Facility. More than one Borrowing may be incurred on
any day; provided, that at no time shall there be outstanding more than six
Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to
incur Loans under any Facility (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to
1:00 P.M. (New York time), at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each, a "Notice of Borrowing")
shall, except as provided in Section 1.10, be irrevocable, and, in the case of
each written notice and each confirmation of telephonic notice, shall be in the
form of Exhibit -1, appropriately completed to specify (i) the Facility pursuant
to which such Borrowing is to be made, (ii) the aggregate principal amount of
the Loans to be made pursuant to such Borrowing, (iii) the date of such
Borrowing (which shall be a Business Day) and (iv) whether the respective
Borrowing shall consist of Base Rate Loans or, to the extent permitted
hereunder, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Agent shall promptly give each Bank written
notice (or telephonic notice promptly confirmed in writing) of each proposed
Borrowing, of such Bank's proportionate share thereof, if any, and of the other
matters covered by the Notice of Borrowing.
(b)(i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give BTCo not later than 2:00 P.M. (New York
time) on the day such Swingline Loan is to be made, written notice (or
telephonic notice promptly confirmed in writing) of each
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Swingline Loan to be made hereunder. Each such notice shall be irrevocable and
shall specify in each case (x) the date of such Borrowing (which shall be a
Business Day) and (y) the aggregate principal amount of the Swingline Loan to be
made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice
specified in Section (C), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set
forth in such Section.
(c) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the respective
Letter of Credit Issuer (in the case of Letters of Credit), as the case may be,
may prior to receipt of written confirmation act without liability upon the
basis of such telephonic notice, believed by the Agent, BTCo or such Letter of
Credit Issuer, as the case may be, in good faith to be from an Authorized
Officer of the Borrower. In each such case, the Borrower hereby waives the right
to dispute the Agent's, BTCo's or such Letter of Credit Issuer's record of the
terms of such telephonic notice (except in the case of gross negligence or bad
faith).
1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New
York time) on the date specified in each Notice of Borrowing (or (x) in the case
of Swingline Loans, not later than 4:00 P.M. (New York time) on the date
specified in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not
later than 1:00 P.M. (New York time) on the date specified in Section 1.01(C)),
each Bank with a Commitment under the respective Facility will make available
its pro rata share, if any, of each Borrowing requested to be made on such date
(or in the case of Swingline Loans, BTCo shall make available the full amount
thereof) in the manner provided below. All amounts shall be made available to
the Agent in U.S. Dollars and immediately available funds at the Payment Office
and the Agent promptly will make available to the Borrower by depositing to its
account at the Payment Office the aggregate of the amounts so made available in
the type of funds received. Unless the Agent shall have been notified by any
Bank prior to the date of Borrowing that such Bank does not intend to make
available to the Agent its portion of the Borrowing or Borrowings to be made on
such date, the Agent may assume that such Bank has made such amount available to
the Agent on such date of Borrowing, and the Agent, in reliance upon such
assumption, may (in its sole discretion and without any obligation to do so)
make available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Agent by such Bank and the Agent has
made available same to the Borrower, the Agent shall be entitled to recover such
corresponding amount from such Bank. If such Bank does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent shall
promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to recover
from the Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to (x)
if paid by such Bank, the overnight Federal Funds rate or (y) if paid by the
Borrower, the then applicable rate of interest, calculated in accordance with
Section 1.08, for the respective Loans.
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(b) Nothing herein shall be deemed to relieve any Bank from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by such
Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, all the Loans made to it by each Bank shall be evidenced
(i) if Term Loans, by a promissory note substantially in the form of Exhibit B-1
with blanks appropriately completed in conformity herewith (each, a "Term Note"
and, collectively, the "Term Notes"), (ii) if Revolving Loans, by a promissory
note substantially in the form of Exhibit B-2 with blanks appropriately
completed in conformity herewith (each, a "Revolving Note" and, collectively,
the "Revolving Notes") and (iii) if Swingline Loans, by a promissory note
substantially in the form of Exhibit B-3 with blanks appropriately completed in
conformity herewith (the "Swingline Note").
(b) The Term Note issued to each Bank shall (i)be executed by
the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Initial Borrowing Date, (iii)be in a stated principal
amount equal to the Term Loans made by such Bank, (iv) mature on the Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01 and mandatory repayment as provided in Section 4.02, and (vii)
be entitled to the benefits of this Agreement and the other Credit Documents.
(c) The Revolving Note issued to each Bank shall (i) be
executed by the Borrower, (ii) be payable to the order of such Bank or its
registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the Revolving Loan Commitment of such Bank and be
payable in the principal amount of the Revolving Loans evidenced thereby, (iv)
mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 4.01 and mandatory repayment as
provided in Section 4.02, and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(d) The Swingline Note issued to BTCo shall (i) be executed by
the Borrower, (ii) be payable to the order of BTCo or its registered assigns and
be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal
to the Maximum Swingline Amount and be payable in the principal amount of the
Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v)
bear interest as provided in Section 1.08 in respect of the Base Rate Loans
evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01 and mandatory repayment as provided in Section 4.02, and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(e) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on
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the reverse side thereof the outstanding principal amount of Loans evidenced
thereby. Failure to make any such notation shall not affect the Borrower's
obligations in respect of such Loans.
1.06 Conversions. The Borrower shall have the option to
convert on any Business Day occurring on or after the earlier of (x) the 60th
day after the Initial Borrowing Date and (y) the Syndication Date, all or a
portion at least equal to the applicable Minimum Borrowing Amount of the
outstanding principal amount of the Loans (other than Swingline Loans which at
all times shall be maintained as Base Rate Loans) owing by the Borrower pursuant
to a single Facility into a Borrowing or Borrowings of another Type of Loan
under such Facility; provided, that (i) except as otherwise provided in Section
1.10(b), Eurodollar Loans may be converted into Base Rate Loans only on the last
day of an Interest Period applicable thereto and no partial conversion of a
Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of
the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum
Borrowing Amount applicable thereto, (ii) Base Rate Loans may only be converted
into Eurodollar Loans if no Default or Event of Default is in existence on the
date of the conversion and (iii) Borrowings of Eurodollar Loans resulting from
this Section 1.06 shall be limited in number as provided in Section 1.02. Each
such conversion shall be effected by the Borrower by giving the Agent at its
Notice Office, prior to 1:00 P.M. (New York time), at least three Business Days'
(or one Business Day's in the case of a conversion into Base Rate Loans) prior
written notice (or telephonic notice promptly confirmed in writing) (each a
"Notice of Conversion") specifying the Loans to be so converted, the Type of
Loans to be converted into and, if to be converted into a Borrowing of
Eurodollar Loans, the Interest Period to be initially applicable thereto. The
Agent shall give each Bank prompt notice of any such proposed conversion
affecting any of its Loans.
1.07 Pro Rata Borrowings. All Borrowings of Loans (other than
Swingline Loans) under this Agreement shall be made by the Banks pro rata on the
basis of their Term Loan Commitments or Revolving Loan Commitments, as the case
may be. It is understood that no Bank shall be responsible for any default by
any other Bank of its obligation to make Loans hereunder and that each Bank
shall be obligated to make the Loans to be made by it hereunder, regardless of
the failure of any other Bank to fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
Applicable Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and
(ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to
Section 1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at
all times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
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(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan shall bear interest at a rate per annum
equal to the rate which is 2% in excess of the rate otherwise applicable to Base
Rate Loans of such Facility from time to time; provided that principal in
respect of Eurodollar Loans shall bear interest after the same becomes due
(whether by acceleration or otherwise) until the end of the applicable Interest
Period for such Eurodollar Loan at a per annum rate equal to 2% in excess of the
rate of interest applicable on the due date therefor. Interest which accrues
under this Section 1.08(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date
of any prepayment or repayment thereof (on the amount prepaid or repaid), (y)
the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09
or 1.10(b), as applicable (on the amount converted) and (z) the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Agent, upon determining the interest rate for any
Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the
Borrower and the Banks thereof.
1.09 Interest Periods. At the time the Borrower gives a Notice
of Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 1:00 P.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Agent written notice (or telephonic notice promptly confirmed in writing) of the
Interest Period applicable to such Borrowing, which Interest Period shall, at
the option of the Borrower, be a one, two, three or six month period.
Notwithstanding anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall have the
same Interest Period;
(ii) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate
Loans) and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding
Interest Period expires;
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(iii) if any Interest Period begins on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iv) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided, that if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding Business
Day;
(v) no Interest Period for a Borrowing under a Facility may be
elected if it would extend beyond the respective Maturity Date for such
Facility;
(vi) no Interest Period may be elected at any time when a
Default or an Event of Default is then in existence unless the Required
Banks otherwise agree; and
(vii) no Interest Period with respect to any Borrowing of Term
Loans shall extend beyond any date upon which a mandatory prepayment of
such Term Loans is required to be made under Section 4.02(A)(b) if,
after giving effect to the selection of such Interest Period, the
aggregate principal amount of such Term Loans maintained as Eurodollar
Loans with Interest Periods ending after such date of mandatory
repayment would exceed the aggregate principal amount of such Term
Loans permitted to be outstanding after such mandatory prepayment.
If upon the expiration of any Interest Period, the Borrower
has failed to elect, or is not permitted to elect by virtue of the application
of clause (vi) above, a new Interest Period to be applicable to the respective
Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to
have elected to convert such Borrowing into a Borrowing of Base Rate Loans
effective as of the expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that
(x) in the case of clause (i) below, the Agent or (y) in the case of clauses
(ii) and (iii) below, any Bank, shall have determined (which determination
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period, that, by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate
and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans (other than any increased cost or
reduction in the amount received or receivable resulting from the
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imposition of or a change in the rate of net income taxes or similar
charges) because of (x) any change since the date of this Agreement in
any applicable law, governmental rule, regulation, guideline, order or
request (whether or not having the force of law), or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline, order or
request (such as, for example, but not limited to a change in official
reserve requirements, but, in all events, excluding reserves required
under Regulation D to the extent included in the computation of the
Eurodollar Rate) and/or (y) other circumstances affecting such Bank,
the interbank Eurodollar market or the position of such Bank in such
market; or
(iii) at any time since the date of this Agreement, that the
making or continuance of any Eurodollar Loan has become unlawful by
compliance by such Bank in good faith with any law, governmental rule,
regulation, guideline or order (or would conflict with any such
governmental rule, regulation, guideline or order not having the force
of law but with which such Bank customarily complies even though the
failure to comply therewith would not be unlawful), or has become
impracticable as a result of a contingency occurring after the date of
this Agreement which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, such Bank (or the Agent in the case of clause (i)
above) shall (x) on such date and (y) within five Business Days of the date on
which such event no longer exists give notice (by telephone confirmed in
writing) to the Borrower and (except in the case of clause (i)) to the Agent of
such determination (which notice the Agent shall promptly transmit to each of
the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar
Loans shall no longer be available until such time as the Agent notifies the
Borrower and the Banks that the circumstances giving rise to such notice by the
Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given
by the Borrower with respect to Eurodollar Loans which have not yet been
incurred shall be deemed rescinded by the Borrower, (y) in the case of clause
(ii) above, the Borrower agrees to pay to such Bank, upon written demand
therefor (accompanied by the written notice referred to below), such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank in its sole discretion shall
determine) as shall be required to compensate such Bank for such increased costs
or reductions in amounts received or receivable hereunder (a written notice as
to the additional amounts owed to such Bank, showing the basis for the
calculation thereof, submitted to the Borrower by such Bank shall, absent
manifest error, be final and conclusive and binding upon all parties hereto) and
(z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and,
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or
(ii) if the affected Eurodollar Loan is then
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outstanding, upon at least three Business Days' notice to the Agent, require the
affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which
conversion, in the case of the circumstances described in Section 1.10(a)(iii),
shall occur no later than the last day of the Interest Period then applicable to
such Eurodollar Loan (or such earlier date as shall be required by applicable
law)); provided, that if more than one Bank is affected at any time, then all
affected Banks must be treated the same pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date
hereof, the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Bank's capital or assets as a consequence of its
commitments or obligations hereunder to a level below that which such Bank could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration such Bank's policies with respect to capital adequacy), then
from time to time, upon written demand by such Bank (with a copy to the Agent),
accompanied by the notice referred to in the last sentence of this clause (c),
the Borrower agrees to pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction. Each Bank, upon determining in
good faith that any additional amounts will be payable pursuant to this Section
1.10(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth the basis of the calculation of such additional amounts,
although the failure to give any such notice shall not release or diminish the
Borrower's obligations to pay additional amounts pursuant to this Section
1.10(c) upon the subsequent receipt of such notice.
1.11 Compensation. The Borrower agrees to compensate each
Bank, upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Bank to fund its Eurodollar Loans but excluding loss of
anticipated profit with respect to any Loans) which such Bank may sustain: (i)
if for any reason (other than a default by such Bank or the Agent) a Borrowing
of Eurodollar Loans does not occur on a date specified therefor in a Notice of
Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or
deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including
any repayment made pursuant to Section 4.01 or 4.02 or as a result of an
acceleration of the Loans pursuant to Section 9) or conversion of any Eurodollar
Loans occurs on a date which is not the last day of an Interest Period
applicable thereto; (iii) if any prepayment of any Eurodollar Loans is not made
on any date specified in a notice of prepayment given by the Borrower; or (iv)
as a consequence of (x) any other default by the Borrower to repay its
Eurodollar Loans when required by the terms of this Agreement or (y) an election
made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank
under this Section 1.11 shall be made as though that Bank had actually funded
its relevant Eurodollar Loan through the purchase of a Eurodollar deposit
bearing interest at the Eurodollar Rate in an amount equal to the amount of that
Loan, having a maturity comparable to the relevant Interest
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Period and through the transfer of such Eurodollar deposit from an offshore
office of that Bank to a domestic office of that Bank in the United States of
America; provided, however, that each Bank may fund each of its Eurodollar Loans
in any manner it sees fit and the foregoing assumption shall be utilized only
for the calculation of amounts payable under this Section 1.11. It is further
understood and agreed that if any repayment of Eurodollar Loans pursuant to
Section 4.01 or any conversion of Eurodollar Loans pursuant to Section 1.06 in
either case occurs on a date which is not the last day of an Interest Period
applicable thereto, such repayment or conversion shall be accompanied by any
amounts owing to any Bank pursuant to this Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; provided, that such designation is made on such
terms that, in the sole judgment of such Bank, such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a
Defaulting Bank, (y) upon the occurrence of any event giving rise to the
operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or
Section 4.04 with respect to any Bank which results in such Bank charging to the
Borrower increased costs in excess of those being generally charged by the other
Banks or (z) in the case of a refusal by a Bank to consent to a proposed change,
waiver, discharge or termination with respect to this Agreement which has been
approved by the Required Banks as provided in Section 12.12(b), the Borrower
shall have the right, if no Default or Event of Default then exists or, in the
case of clause (z) above, would exist after giving effect to such replacement,
to replace such Bank (the "Replaced Bank") with one or more other Eligible
Transferee or Transferees, none of whom shall constitute a Defaulting Bank at
the time of such replacement (collectively, the "Replacement Bank") reasonably
acceptable to the Agent and, to the extent such Replacement Bank shall be
assuming any portion of the Total Revolving Loan Commitment, each Letter of
Credit Issuer, provided that (i) at the time of any replacement pursuant to this
Section 1.13, the Replacement Bank shall enter into one or more Assignment and
Assumption Agreements pursuant to Section 12.04(b) (and with all fees payable
pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant
to which the Replacement Bank shall acquire all of the Commitments and
outstanding Loans of, and in each case participations in Letters of Credit by,
the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced
Bank in respect thereof an amount equal to the sum of (A) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Bank, (B) an amount equal to all Unpaid Drawings that have been funded by (and
not reimbursed to) such Replaced Bank, together with all then unpaid interest
with respect thereto at such time and (C) an amount equal to all accrued, but
theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01,
(y) the respective Letter of Credit Issuer an amount equal to such Replaced
Bank's RL Percentage of any Unpaid Drawing (which at such time remains an Unpaid
Drawing) with respect to
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a Letter of Credit issued by it to the extent such amount was not theretofore
funded by such Replaced Bank and (z) BTCo an amount equal to such Replaced
Bank's RL Percentage of any Mandatory Borrowing to the extent such amount was
not theretofore funded by such Replaced Bank, and (ii) all obligations
(including, without limitation, all such amounts, if any, owing under Section
1.11) of the Borrower owing to the Replaced Bank (other than those specifically
described in clause (i) above in respect of which the assignment purchase price
has been, or is concurrently being, paid) shall be paid in full to such Replaced
Bank concurrently with such replacement. Upon the execution of the respective
Assignment and Assumption Agreements, the payment of amounts referred to in
clauses (i) and (ii) above, recordation of the assignment on the Register by the
Agent pursuant to Section 7.12 and, if so requested by the Replacement Bank,
delivery to the Replacement Bank of the appropriate Note or Notes executed by
the Borrower, the Replacement Bank shall become a Bank hereunder and the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement, which shall survive as to such
Replaced Bank.
SECTION 2. Letters of Credit.
2.01 Letters of Credit. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time after the Initial Borrowing Date and prior to
the Business Day (or the 30th day in the case of trade Letters of Credit)
preceding the Revolving Loan Maturity Date to issue, for the account of the
Borrower and in support of (A) trade obligations of the Borrower or any of its
Subsidiaries that arise in the ordinary course of business and are in respect of
general corporate purposes of the Borrower or its Subsidiaries, as the case may
be, and/or (B) on a standby basis, L/C Supportable Indebtedness, and subject to
and upon the terms and conditions herein set forth each Letter of Credit Issuer
agrees to issue from time to time, irrevocable sight letters of credit in such
form as may be approved by such Letter of Credit Issuer (each such letter of
credit, a "Letter of Credit" and, collectively, the "Letters of Credit").
Notwithstanding the foregoing, no Letter of Credit Issuer shall be under any
obligation to issue any Letter of Credit if at the time of such issuance:
(i) any order, judgment or decree of any governmental
authority or arbitrator shall purport by its terms to enjoin or
restrain such Letter of Credit Issuer from issuing such Letter of
Credit or any requirement of law applicable to such Letter of Credit
Issuer or any request or directive (whether or not having the force of
law) from any governmental authority with jurisdiction over such Letter
of Credit Issuer shall prohibit, or request that such Letter of Credit
Issuer refrain from, the issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon such Letter of
Credit Issuer with respect to such Letter of Credit any restriction or
reserve or capital requirement (for which such Letter of Credit Issuer
is not otherwise compensated) not in effect on the date hereof, or any
unreimbursed loss, cost or expense which was not applicable, in effect
or known to such Letter of Credit Issuer as of the date hereof and
which such Letter of Credit Issuer in good faith deems material to it;
or
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(ii) such Letter of Credit Issuer shall have received notice
from the Required Banks prior to the issuance of such Letter of Credit
of the type described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings relating to Letters of Credit which
are repaid on the date of, and prior to the issuance of, the respective Letter
of Credit) at such time, would exceed either (x) $3,000,000 or (y) when added to
the aggregate principal amount of all Revolving Loans and Swingline Loans then
outstanding, the Total Revolving Loan Commitment at such time; (ii) (x) each
standby Letter of Credit shall have an expiry date occurring not later than one
year after such standby Letter of Credit's date of issuance, provided, that any
standby Letter of Credit may be automatically extended for periods of up to one
year so long as such standby Letter of Credit provides that the respective
Letter of Credit Issuer retains an option, satisfactory to such Letter of Credit
Issuer, to terminate such standby Letter of Credit within a specified period of
time prior to each scheduled extension date and (y) each trade Letter of Credit
shall have an expiry date occurring not later than 180 days after such trade
Letter of Credit's date of issuance; (iii) (x) no standby Letter of Credit shall
have an expiry date occurring later than the Business Day next preceding the
Revolving Loan Maturity Date and (y) no trade Letter of Credit shall have an
expiry date occurring later than 30 days prior to the Revolving Loan Maturity
Date; (iv) each Letter of Credit shall be denominated in U.S. Dollars and will
be issued on a sight basis only; (v) the Stated Amount of each Letter of Credit
shall not be less than $100,000 or such lesser amount as is acceptable to the
Letter of Credit Issuer; and (vi) no Letter of Credit Issuer will issue any
Letter of Credit after it has received written notice from the Borrower or the
Required Banks stating that a Default or an Event of Default exists until such
time as such Letter of Credit Issuer shall have received a written notice of (i)
rescission of such notice from the party or parties originally delivering the
same or (ii) a waiver of such Default or Event of Default by the Required Banks
(or all the Banks to the extent required by Section 12.12).
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Banks, including by cash collateralizing such Defaulting
Bank's or Banks' RL Percentage of the applicable Letter of Credit Outstandings.
2.02 Letter of Credit Requests; Notices of Issuance. (a)
Whenever it desires that a Letter of Credit be issued, the Borrower shall give
the Agent and the respective Letter of Credit Issuer written notice thereof
prior to 12:00 Noon (New York time) at least five Business Days (or such shorter
period as may be acceptable to such Letter of Credit Issuer) prior to the
proposed date of issuance (which shall be a Business Day) which written notice
shall be in the form of Exhibit A-2 (each, a "Letter of Credit Request"). Each
Letter of Credit Request shall include any other documents as the respective
Letter of Credit Issuer customarily requires in connection therewith. The Agent
shall promptly transmit copies of each Letter of Credit Request to each Bank.
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(b) Each Letter of Credit Issuer shall, on the date of each
issuance of or amendment or modification to a Letter of Credit by it, give the
Agent, each Bank and the Borrower written notice of the issuance of or amendment
or modification to such Letter of Credit, accompanied by a copy to the Agent of
the Letter of Credit or Letters of Credit issued by it and each such amendment
or modification thereto. In the event that any Letter of Credit Issuer other
then BTCo shall issue trade Letters of Credit, such Letter of Credit Issuer
shall notify the Agent on the first Business Day of each calendar week, of the
daily average Stated Amount of its trade Letters of Credit for previous week.
2.03 Agreement to Repay Letter of Credit Drawings. (a) The
Borrower hereby agrees to reimburse each respective Letter of Credit Issuer, by
making payment to the Agent in immediately available funds at the Payment
Office, for any payment or disbursement made by such Letter of Credit Issuer
under any Letter of Credit issued by it (each such amount so paid or disbursed
until reimbursed, an "Unpaid Drawing") no later than two Business Days following
the date of such payment or disbursement, with interest on the amount so paid or
disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to
1:00 P.M. (New York time) on the date of such payment or disbursement, from and
including the date paid or disbursed to but not including the date such Letter
of Credit Issuer is reimbursed therefor at a rate per annum which shall be the
Applicable Base Rate Margin plus the Base Rate as in effect from time to time
for Revolving Loans (plus an additional 2% per annum if not reimbursed by the
third Business Day after the date of such payment or disbursement), such
interest also to be payable on demand. Each Letter of Credit Issuer shall
provide the Borrower prompt notice of any payment or disbursement made by it
under any Letter of Credit issued by it, although the failure of, or delay in,
giving any such notice shall not release or diminish the obligations of the
Borrower under this Section 2.03(a) or under any other Section of this
Agreement.
(b) The Borrower's obligation under this Section 2.03 to
reimburse the respective Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against such Letter
of Credit Issuer, the Agent or any Bank, including, without limitation, any
defense based upon the failure of any drawing under a Letter of Credit issued by
it to conform to the terms of the Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such drawing; provided,
however, that the Borrower shall not be obligated to reimburse such Letter of
Credit Issuer for any wrongful payment made by such Letter of Credit Issuer
under a Letter of Credit issued by it as a result of acts or omissions
constituting willful misconduct or gross negligence as determined by a court of
competent jurisdiction on the part of such Letter of Credit Issuer.
2.04 Letter of Credit Participations. (a) Immediately upon the
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each RL Bank, and
each such RL Bank (each, a "L/C Participant") shall be deemed irrevocably and
unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such RL Bank's
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RL Percentage, in such Letter of Credit, each substitute letter of credit, each
drawing made thereunder and the obligations of the Borrower under this Agreement
with respect thereto (although Letter of Credit Fees shall be payable directly
to the Agent for the account of the RL Banks as provided in Section 3.01(b) and
the L/C Participants shall have no right to receive any portion of any Facing
Fees) and any security therefor or guaranty pertaining thereto. Upon any change
in the Revolving Loan Commitments of the RL Banks pursuant to Section 1.13 or
12.04(b), it is hereby agreed that, with respect to all outstanding Letters of
Credit and Unpaid Drawings relating to Letters of Credit, there shall be an
automatic adjustment to the participations pursuant to this Section 2.04(a) to
reflect the new RL Percentages of the assigning and assignee Banks.
(b) In determining whether to pay under any Letter of Credit,
the respective Letter of Credit Issuer shall not have any obligation relative to
the L/C Participants other than to determine that any documents required to be
delivered under such Letter of Credit have been delivered and that they appear
to substantially comply on their face with the requirements of such Letter of
Credit. Any action taken or omitted to be taken by any Letter of Credit Issuer
under or in connection with any Letter of Credit issued by it if taken or
omitted in the absence of gross negligence or willful misconduct as determined
by a court of competent jurisdiction, shall not create for such Letter of Credit
Issuer any resulting liability.
(c) In the event that any Letter of Credit Issuer makes any
payment under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to such Letter of Credit Issuer pursuant to
Section 2.03(a), such Letter of Credit Issuer shall promptly notify the Agent,
and the Agent shall promptly notify each L/C Participant of such failure, and
each such L/C Participant shall promptly and unconditionally pay to the Agent
for the account of such Letter of Credit Issuer, the amount of such L/C
Participant's RL Percentage of such payment in U.S. Dollars and in same day
funds; provided, however, that no L/C Participant shall be obligated to pay to
the Agent its RL Percentage of such unreimbursed amount for any wrongful payment
made by such Letter of Credit Issuer under a Letter of Credit issued by it as a
result of acts or omissions constituting willful misconduct or gross negligence
as determined by a court of competent jurisdiction on the part of such Letter of
Credit Issuer. If the Agent so notifies any L/C Participant required to fund a
payment under a Letter of Credit prior to 11:00 A.M. (New York time) on any
Business Day, such L/C Participant shall make available to the Agent for the
account of the respective Letter of Credit Issuer such L/C Participant's RL
Percentage of the amount of such payment on such Business Day in same day funds.
If and to the extent such L/C Participant shall not have so made its RL
Percentage of the amount of such payment available to the Agent for the account
of the respective Letter of Credit Issuer, such L/C Participant agrees to pay to
the Agent for the account of such Letter of Credit Issuer, forthwith on demand
such amount, together with interest thereon, for each day from such date until
the date such amount is paid to the Agent for the account of such Letter of
Credit Issuer at the overnight Federal Funds rate. The failure of any L/C
Participant to make available to the Agent for the account of the respective
Letter of Credit Issuer its RL Percentage of any payment under any Letter of
Credit issued by it shall not relieve any other L/C Participant of its
obligation hereunder to make available to the Agent for the account of such
Letter of Credit Issuer its RL Percentage of any payment under any such Letter
of Credit on the date required, as specified above,
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but no L/C Participant shall be responsible for the failure of any other L/C
Participant to make available to the Agent for the account of such Letter of
Credit Issuer such other L/C Participant's RL Percentage of any such payment.
(d) Whenever any Letter of Credit Issuer receives a payment of
a reimbursement obligation as to which the Agent has received for the account of
such Letter of Credit Issuer any payments from the L/C Participants pursuant to
clause (c) above, such Letter of Credit Issuer shall pay to the Agent and the
Agent shall promptly pay to each applicable L/C Participant which has paid its
RL Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to
such L/C Participant's RL Percentage of the principal amount thereof and
interest thereon accruing after the purchase of the respective participations.
(e) The obligations of each respective L/C Participant to make
payments to the Agent for the account of each respective Letter of Credit Issuer
with respect to Letters of Credit issued by it which such L/C Participant has a
participation in shall be irrevocable and not subject to counterclaim, set-off
or other defense or any other qualification or exception whatsoever and shall be
made in accordance with the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit (or
any Person for whom any such transferee may be acting), the Agent, any
Letter of Credit Issuer, any Bank, any L/C Participant or other Person,
whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein (including the Transaction) or any
unrelated transactions (including any underlying transaction between
the Borrower or any of its Subsidiaries and the beneficiary named in
any such Letter of Credit);
(iii) any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
2.05 Increased Costs. If after the date hereof, the adoption
or effectiveness of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Letter of Credit
Issuer or any
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L/C Participant with any request or directive (whether or not having the force
of law) by any such authority, central bank or comparable agency shall either
(i) impose, modify or make applicable any reserve, deposit, capital adequacy or
similar requirement against Letters of Credit issued by such Letter of Credit
Issuer or such L/C Participant's participation therein, or (ii) impose on any
Letter of Credit Issuer or any L/C Participant any other conditions affecting
this Agreement, any Letter of Credit or such L/C Participant's participation
therein; and the result of any of the foregoing is to increase the cost to such
Letter of Credit Issuer or such L/C Participant of issuing, maintaining or
participating in any Letter of Credit, or to reduce the amount of any sum
received or receivable by such Letter of Credit Issuer or such L/C Participant
hereunder, then, upon written demand to the Borrower by such Letter of Credit
Issuer or such L/C Participant (a copy of which notice shall be sent by such
Letter of Credit Issuer or such L/C Participant to the Agent), accompanied by
the certificate described in the last sentence of this Section 2.05, the
Borrower shall pay to such Letter of Credit Issuer or such L/C Participant such
additional amount or amounts as will compensate such Letter of Credit Issuer or
such L/C Participant for such increased cost or reduction. A certificate
submitted to the Borrower by such Letter of Credit Issuer or such L/C
Participant, as the case may be (a copy of which certificate shall be sent by
such Letter of Credit Issuer or such L/C Participant to the Agent), setting
forth the basis for the determination of such additional amount or amounts
necessary to compensate such Letter of Credit Issuer or such L/C Participant as
aforesaid shall be final and conclusive and binding on the Borrower absent
manifest error, although the failure to deliver any such certificate shall not
release or diminish the Borrower's obligations to pay additional amounts
pursuant to this Section 2.05 upon subsequent receipt of such certificate.
SECTION 3. Fees; Commitments.
3.01 Fees. (a) The Borrower shall pay to the Agent for
distribution to each Bank a commitment fee (the "Commitment Fee") for the period
from the Effective Date to and including the date the Total Commitment has been
terminated, computed at the rate of 1/2 of 1% per annum on the daily Aggregate
Unutilized Commitment of such Bank. Accrued Commitment Fees shall be due and
payable in arrears on the Initial Borrowing Date and thereafter, in arrears on
each Quarterly Payment Date and the date upon which the Total Revolving Loan
Commitment is terminated.
(b) The Borrower shall pay to the Agent for the account of the
RL Banks pro rata on the basis of their RL Percentages, a fee in respect of each
Letter of Credit (the "Letter of Credit Fee") computed at a rate per annum equal
to the Applicable Eurodollar Margin then in effect with respect to Revolving
Loans on the daily Stated Amount of such Letter of Credit. Accrued Letter of
Credit Fees shall be due and payable quarterly in arrears on each Quarterly
Payment Date and upon the first day after the termination of the Total Revolving
Loan Commitment upon which no Letters of Credit remain outstanding.
(c) The Borrower shall directly pay to the respective Letter
of Credit Issuer a fee in respect of each Letter of Credit issued by such Letter
of Credit Issuer (the "Facing Fee") computed at the rate of 1/4 of 1% per annum
on the daily Stated Amount of such Letter of Credit; provided, that in no event
shall the annual Facing Fee with respect to each Letter of Credit be less than
$500;
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it being agreed that, on the date of issuance of any Letter of Credit and on
each anniversary thereof prior to the termination of such Letter of Credit, if
$500 will exceed the amount of Facing Fees that will accrue with respect to such
Letter of Credit for the immediately succeeding 12-month period, the full $500
shall be payable on the date of issuance of such Letter of Credit and on each
such anniversary thereof prior to the termination of such Letter of Credit.
Except as provided in the immediately preceding sentence, accrued Facing Fees
shall be due and payable quarterly in arrears on each Quarterly Payment Date and
upon the first day after the termination of the Total Revolving Loan Commitment
upon which no Letters of Credit remain outstanding.
(d) The Borrower hereby agrees to pay directly to the
respective Letter of Credit Issuer upon each issuance of, payment under, and/or
amendment of, a Letter of Credit issued by it such amount as shall at the time
of such issuance, payment or amendment be the administrative charge which such
Letter of Credit Issuer is customarily charging for issuances of, payments under
or amendments of, letters of credit issued by it.
(e) The Borrower shall pay to the Agent, for its own account,
such fees as may be agreed to from time to time between the Borrower and the
Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 Voluntary Termination or Reduction of Commitments. (a)
Upon at least two Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) to the Agent at its Notice Office (which notice
the Agent shall promptly transmit to each of the Banks), the Borrower shall have
the right, without premium or penalty, to terminate or partially reduce (i) the
unutilized portion of the Total Unutilized Revolving Loan Commitment; provided
that (x) any such termination or partial reduction shall apply to
proportionately and permanently reduce the Revolving Loan Commitment of each
Bank with a Revolving Loan Commitment and (y) any partial reduction pursuant to
this Section 3.02 shall be in the amount of at least $500,000.
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 12.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Agent at its Notice Office (which notice the Agent
shall promptly transmit to each of the Banks), to terminate the entire Revolving
Loan Commitment of such Bank, so long as all Loans, together with accrued and
unpaid interest, Fees and all other amounts, owing to such Bank are repaid
concurrently with the effectiveness of such termination pursuant to Section
4.01(b), and the Borrower shall pay to the Agent at such time an amount in cash
and/or Cash Equivalents equal to such Bank's RL Percentage of the outstanding
Letters of Credit (which cash and/or Cash Equivalents shall be held by the Agent
as security for the obligations of the Borrower hereunder in respect of such
outstanding Letters of Credit pursuant to a cash collateral agreement to be
entered into in form and substance reasonably satisfactory to the Agent, which
shall permit certain investments in Cash Equivalents reasonably satisfactory to
the Agent until the proceeds are applied to the secured obligations) (at which
time Annex I shall be
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deemed modified to reflect such changed amounts), and at such time, such Bank
shall no longer constitute a "Bank" for purposes of this Agreement, except with
respect to indemnifications under this Agreement (including, without limitation,
Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall survive as to
such repaid Bank.
3.03 Mandatory Adjustments of Commitments, etc. (a) The Total
Commitment (and the Term Loan Commitment and Revolving Loan Commitment of each
Bank with such a Commitment) shall terminate on October 31, 1997 unless the
Initial Borrowing Date has occurred on or before such date.
(b) The Total Term Loan Commitment shall terminate on the
Initial Borrowing Date, after giving effect to the making of such Term Loans on
such date.
(c) The Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each Bank with such a Commitment) shall terminate on the
earlier of (i) the date on which a Change of Control Event occurs and (ii) the
Revolving Loan Maturity Date.
(d) On each date upon which a mandatory repayment of Term
Loans pursuant to Section 4.02(A)(c), (d), (e), (f), (g) or (h) is required (and
exceeds in amount the aggregate principal amount of Term Loans then outstanding)
or would be required if an unlimited amount of Term Loans were then outstanding,
the Total Revolving Loan Commitment shall be permanently reduced by the amount,
if any, by which the amount required to be applied pursuant to said Sections
(determined as if an unlimited amount of Term Loans were actually outstanding)
exceeds the aggregate principal amount of Term Loans then outstanding.
(e) Each reduction or adjustment of the Total Term Loan
Commitment or the Total Revolving Loan Commitment pursuant to this Section 3.03
(or pursuant to Section 4.02) shall apply proportionately to the Term Loan
Commitment or the Revolving Loan Commitment, as the case may be, of each Bank
with such a Commitment.
SECTION 4. Payments.
4.01 Voluntary Prepayments. (a) The Borrower shall have the
right to prepay the Loans made to it, in whole or in part, without premium or
penalty except as otherwise provided in this Agreement, from time to time on the
following terms and conditions: (i) the Borrower shall give the Agent at its
Notice Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay such Loans, whether such Loans are Term Loans,
Revolving Loans or Swingline Loans, the amount of such prepayment and (in the
case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made,
which notice shall be given by the Borrower prior to 1:00 P.M. (New York time)
(x) at least one Business Day prior to the date of such prepayment in the case
of Term Loans or Revolving Loans maintained as Base Rate Loans, (y) on the date
of such prepayment in the case of Swingline Loans and (z) at least three
Business Days prior to the date of such prepayment in the case of Eurodollar
Loans, which notice shall, except in the case of Swingline
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Loans, promptly be transmitted by the Agent to each of the Banks; (ii) each
prepayment shall be in an aggregate principal amount of at least $500,000 (or
$100,000 in the case of Swingline Loans); provided, that no partial prepayment
of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate
principal amount of the Loans outstanding pursuant to such Borrowing to an
amount less than the Minimum Borrowing Amount applicable thereto; (iii)
Eurodollar Loans may only be prepaid pursuant to this Section 4.01(a) on the
last day of an Interest Period applicable thereto; (iv) each prepayment in
respect of any Loans made pursuant to a Borrowing shall be applied pro rata
among such Loans; provided, that at the Borrower's election in connection with
any prepayment of Revolving Loans pursuant to this Section 4.01(a), such
prepayment shall not be applied to any Revolving Loans of a Defaulting Bank at
any time when the aggregate amount of Revolving Loans of any Non-Defaulting Bank
exceeds such Non-Defaulting Bank's RL Percentage of all Revolving Loans then
outstanding; and (v) each prepayment of Term Loans pursuant to this Section
4.01(a) shall reduce the then remaining Scheduled Repayments on a pro rata basis
(based upon the then remaining principal amount of each such Scheduled
Repayment).
(b) In the event of certain refusals by a Bank to consent to
certain proposed changes, waivers, discharges or terminations with respect to
this Agreement which have been approved by the Required Banks as provided in
Section 12.12(b), the Borrower shall have the right, upon five Business Days'
prior written notice to the Agent at its Notice Office (which notice the Agent
shall promptly transmit to each of the Banks) to repay all Loans, together with
accrued and unpaid interest, Fees and all other amounts owing to such Bank in
accordance with said Section 12.12(b) so long as (A) in the case of the
repayment of Revolving Loans of any RL Bank pursuant to this clause(b) the
Revolving Loan Commitment of such RL Bank is terminated concurrently with such
repayment pursuant to Section 3.02(b) (at which time Annex I shall be deemed
modified to reflect the changed Revolving Loan Commitments) and (B) in the case
of the repayment of Loans of any Bank, the consents required by Section 12.12(b)
in connection with the repayment pursuant to this clause (b) shall have been
obtained.
4.02 Mandatory Prepayments.
(A) Requirements:
(a) If on any date the sum of (i) the aggregate outstanding
principal amount of Revolving Loans and Swingline Loans (after giving effect to
all other repayments thereof on such date) plus (ii) the Letter of Credit
Outstandings on such date exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower shall repay on such date the principal of Swingline Loans,
and if no Swingline Loans are or remain outstanding, Revolving Loans, in an
aggregate amount equal to such excess. If, after giving effect to the prepayment
of all outstanding Swingline Loans and Revolving Loans, the aggregate amount of
Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as
then in effect, the Borrower agrees to pay to the Agent an amount in cash and/or
Cash Equivalents equal to such excess (up to the aggregate amount of Letter of
Credit Outstandings at such time) and the Agent shall hold such payment as
security for the obligations of the Borrower hereunder pursuant to a cash
collateral agreement to be entered into in form and
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substance satisfactory to the Agent (which shall permit certain investments in
Cash Equivalents satisfactory to the Agent until the proceeds are applied to the
secured obligations or are released to the Borrower at such time as the
aggregate amount of Letter of Credit Outstandings shall no longer be in excess
of the Total Revolving Loan Commitment then in effect).
(b) The Borrower shall be required to repay the principal
amount of Term Loans on each date set forth below in the amount set forth
opposite such date below (each such repayment, as the same may be reduced as
provided in Sections 4.01 and 4.02(B), a "Scheduled Repayment"):
Scheduled Repayment Date Amount
------------------------- ------
the last Business Day in December, 1997 $ 62,500
the last Business Day in March, 1998 $ 62,500
the last Business Day in June, 1998 $ 62,500
the last Business Day in September, 1998 $ 62,500
the last Business Day in December, 1998 $ 250,000
the last Business Day in March, 1999 $ 250,000
the last Business Day in June, 1999 $ 250,000
the last Business Day in September, 1999 $ 250,000
the last Business Day in December, 1999 $ 437,500
the last Business Day in March, 2000 $ 437,500
the last Business Day in June, 2000 $ 437,500
the last Business Day in September, 2000 $ 437,500
the last Business Day in December, 2000 $ 500,000
the last Business Day in March, 2001 $ 500,000
the last Business Day in June, 2001 $ 500,000
the last Business Day in September, 2001 $ 500,000
the last Business Day in December, 2001 $ 625,000
the last Business Day in March, 2002 $ 625,000
the last Business Day in June, 2002 $ 625,000
the last Business Day in September, 2002 $ 625,000
the last Business Day in December, 2002 $ 1,125,000
the last Business Day in March 2003 $ 1,125,000
the last Business Day in June 2003 $ 1,125,000
the last Business Day in September 2003 $ 1,125,000
the last Business Day in December 2003 $ 3,750,000
the last Business Day in March 2004 $ 3,750,000
the last Business Day in June 2004 $ 3,750,000
Term Loan Maturity Date $ 3,750,000
(c) On the Business Day after the date of receipt thereof by
the Borrower and/or any of its Subsidiaries of Proceeds from any Asset Sale, an
amount equal to 100% of the Net Proceeds from such Asset Sale shall be applied
as a mandatory repayment of principal of the Term Loans, provided that with
respect to no more than $500,000 in the aggregate of such Proceeds in any
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Measurement Period of the Borrower, the Net Proceeds therefrom shall not be
required to be so applied on such date to the extent that no Default or Event of
Default then exists and the Borrower delivers a certificate to the Agent on or
prior to such date stating that such Net Proceeds shall be used to purchase
assets used or to be used in the businesses referred to in Section 8.01(a)
(including, without limitation (but only to the extent permitted by Section
8.02), capital stock of a corporation engaged in any such business) within 360
days following the date of such Asset Sale (which certificate shall set forth
the estimates of the proceeds to be so expended), provided, that (1) if all or
any portion of such Net Proceeds not so applied to the repayment of Term Loans
are not so used (or contractually committed to be used) within such 360 day
period, such remaining portion shall be applied on the last day of such period
as a mandatory repayment of principal of outstanding Term Loans as provided
above in this Section 4.02(A)(c) and (2) if all or any portion of such Net
Proceeds are not required to be applied on the 360th day referred to in clause
(1) above because such amount is contractually committed to be used and
subsequent to such date such contract is terminated or expires without such
portion being so used, then such remaining portion shall be applied on the date
of such termination or expiration as a mandatory repayment of principal of
outstanding Term Loans as provided in this Section 4.02(A)(c).
(d) On the date of the receipt thereof by the Borrower and/or
any of its Subsidiaries, an amount equal to 100% of the cash proceeds (net of
underwriting discounts and commissions and other reasonable costs associated
therewith) of the sale or issuance of preferred or common equity of (or cash
capital contributions to) the Borrower or any of its Subsidiaries (other than
proceeds of (w) the Equity Financing, (x) issuances of Common Stock (including
as a result of the exercise of any options with regard thereto) to management of
the Borrower and its Subsidiaries, (y) Common Stock issued in connection with a
Permitted Acquisition to the extent permitted by this Agreement and (z) equity
contributions to any Subsidiary of the Borrower made by the Borrower or any
other Subsidiary of the Borrower and otherwise permitted by this Agreement)
shall be applied as a mandatory repayment of principal of the Term Loans.
(e) On the date of the receipt thereof by the Borrower and/or
any of its Subsidiaries, an amount equal to 100% of the proceeds (net of
underwriting discounts and commissions and other reasonable costs associated
therewith) of the incurrence of Indebtedness by the Borrower and/or any of its
Subsidiaries (other than Indebtedness permitted to be incurred by Section 8.04
as in effect on the Effective Date) shall be applied as a mandatory repayment of
principal of the Term Loans.
(f) On each Excess Cash Payment Date, an amount equal to 75%
of Excess Cash Flow of the Borrower and its Subsidiaries for the most recent
Excess Cash Flow Period ending prior to such Excess Cash Payment Date shall be
applied as a mandatory repayment of principal of the Term Loans.
(g) Within 10 days following each date on which the Borrower
or any of its Subsidiaries receives any proceeds from any Recovery Event, an
amount equal to 100% of the proceeds of such Recovery Event (net of reasonable
costs and taxes incurred in connection with such
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Recovery Event) shall be applied as a mandatory repayment of principal of the
Term Loans, provided that so long as no Default or Event of Default then exists
and such proceeds do not exceed $1,000,000, such proceeds shall not be required
to be so applied on such date to the extent that the Borrower has delivered a
certificate to the Agent on or prior to such date stating that such proceeds
shall be used to replace or restore any properties or assets in respect of which
such proceeds were paid within 360 days following the date of the receipt of
such proceeds (which certificate shall set forth the estimates of the proceeds
to be so expended), and provided further, that (i) if the amount of such
proceeds exceeds $1,000,000, then the portion in excess of $1,000,000 shall be
applied as a mandatory repayment of Term Loans as provided above in this Section
4.02(A)(g), (ii) if all or any portion of such proceeds not required to be
applied to the repayment of Term Loans pursuant to the preceding proviso are not
so used (or contractually committed to be used) within 360 days after the date
of the receipt of such proceeds, such remaining portion shall be applied on the
last day of such period as a mandatory repayment of principal of the Term Loans
as provided in this Section 4.02(A)(g) and (iii) if all or any portion of such
proceeds are not required to be applied on the 360th day referred to in clause
(ii) above because such amount is contractually committed to be used and
subsequent to such date such contract is terminated or expires without such
portion being so used, then such remaining portion shall be applied on the date
of such termination or expiration as a mandatory repayment of principal of
outstanding Term Loans as provided in this Section 4.02(A)(g).
(h) On the date of the receipt thereof by the Borrower and/or
any of its Subsidiaries of a Pension Plan Refund, an amount equal to 100% of
such Pension Plan Refund shall be applied as a mandatory repayment of principal
of Term Loans.
(i) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, (i) all then outstanding Swingline Loans shall be
repaid in full on the Swingline Expiry Date and (ii) all other then outstanding
Loans of the respective Facility shall be repaid in full on the Maturity Date
for such Facility.
(B) Application:
(a) All repayments of Term Loans pursuant to Section 4.02(A)
shall be applied to reduce the then remaining Scheduled Repayments pro rata
based on the then remaining Scheduled Repayments.
(b) With respect to each repayment of Loans required by this
Section 4.02, the Borrower may designate the Types of Loans which are to be
repaid and the specific Borrowing(s) under the affected Facility pursuant to
which made; provided, that (i) Eurodollar Loans made pursuant to a specific
Facility may be designated for repayment pursuant to this Section 4.02 only on
the last day of an Interest Period applicable thereto unless all Eurodollar
Loans made pursuant to such Facility with Interest Periods ending on such date
of required prepayment and all Base Rate Loans made pursuant to such Facility
have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant
to a single Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount, such Borrowing
shall be immediately
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converted into Base Rate Loans; and (iii) each repayment of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans; provided,
that no repayment pursuant to Section 4.02(A) (a) shall be applied to any
Revolving Loans of a Defaulting Bank at any time when the aggregate amount of
the Revolving Loans of any Non-Defaulting Bank exceeds such Non- Defaulting
Bank's RL Percentage of Revolving Loans then outstanding. In the absence of a
designation by the Borrower as described in the preceding sentence, the Agent
shall, subject to the above, make such designation in its sole discretion with a
view, but no obligation, to minimize breakage costs owing under Section 1.11.
Notwithstanding the foregoing provisions of this Section 4.02(B)(b), if at any
time the mandatory prepayment of Loans pursuant to Section 4.02(A)(c), (d), (e),
(g) or (h) would result, after giving effect to the procedures set forth above
in this clause (b), in the Borrower incurring breakage costs under Section 1.11
as a result of Eurodollar Loans being repaid other than on the last day of an
Interest Period applicable thereto (the "Affected Eurodollar Loans"), then the
Borrower may in its sole discretion initially deposit a portion (up to 100%) of
the amounts that otherwise would have been paid in respect of the Affected
Eurodollar Loans with the Agent to be held as security for the obligations of
the Borrower hereunder pursuant to a cash collateral agreement to be entered
into in form and substance satisfactory to the Agent, with such cash collateral
to be released from such cash collateral account upon the first occurrence (or
occurrences) thereafter of the last day of an Interest Period applicable to the
relevant Loans that are Eurodollar Loans (or such earlier date or dates as shall
be requested by the Borrower), to repay an aggregate principal amount of such
Loans equal to the Affected Eurodollar Loans not initially repaid pursuant to
this sentence.
4.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Agent for the ratable account of the Banks entitled thereto, not later than
1:00 P.M. (New York time) on the date when due and shall be made in immediately
available funds and in U.S. Dollars at the Payment Office, it being understood
that written, telex or facsimile transmission notice by the Borrower to the
Agent to make a payment from the funds in the Borrower's account at the Payment
Office shall constitute the making of such payment to the extent of such funds
held in such account. Any payments under this Agreement which are made later
than 1:00 P.M. (New York time) shall be deemed to have been made on the next
succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day which is not a Business Day, the due date thereof
shall be extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension at the
applicable rate in effect immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 4.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of a Bank pursuant to
the laws of the jurisdiction in which it is organized or the jurisdiction in
which the
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principal office or applicable lending office of such Bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the
full amount of such Taxes, and such additional amounts as may be necessary so
that every payment of all amounts due under this Agreement or under any Note,
after withholding or deduction for or on account of any Taxes, will not be less
than the amount provided for herein or in such Note. If any amounts are payable
in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income or net profits of such Bank pursuant to the laws
of the jurisdiction in which the principal office or applicable lending office
of such Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located and for any withholding of taxes as such
Bank shall determine are payable by, or withheld from, such Bank in respect of
such amounts so paid to or on behalf of such Bank pursuant to the preceding
sentence and in respect of any amounts paid to or on behalf of such Bank
pursuant to this sentence. The Borrower will furnish to the Agent within 45 days
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by the Borrower. The
Borrower agrees to indemnify and hold harmless each Bank, and reimburse such
Bank upon its written request, for the amount of any Taxes so levied or imposed
and paid by such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower
and the Agent on or prior to the Initial Borrowing Date, or in the case of a
Bank that is an assignee or transferee of an interest under this Agreement
pursuant to Section 1.13 or 12.04 (unless the respective Bank was already a Bank
hereunder immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Bank, (i) two accurate and complete original
signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x)a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
4.04(b)(ii) Certificate") and (y)two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement and
under any Note. In addition, each Bank agrees that from time to time after the
Initial Borrowing Date, when a lapse in time or change in circumstances renders
the previous certification obsolete or inaccurate in any material respect, it
will deliver to the Borrower and the Agent two new accurate and complete
original signed copies of Internal Revenue Service Form 4224 or 1001, or Form
W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such other
forms as may be required in order to confirm or establish the entitlement of
such Bank to a continued exemption from or reduction in United States
withholding tax with respect to payments under this Agreement and any Note, or
it shall immediately notify the Borrower and the
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Agent of its inability to deliver any such Form or Certificate. Notwithstanding
anything to the contrary contained in Section 4.04(a), but subject to Section
12.04(b) and the immediately succeeding sentence, (x)the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
income or similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, fees or other
amounts payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes to the extent that such Bank has not provided
to the Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y)the Borrower shall not be
obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to
a Bank in respect of income or similar taxes imposed by the United States if (I)
such Bank has not provided to the Borrower the Internal Revenue Service Forms
required to be provided to the Borrower pursuant to this Section 4.04(b) or (II)
in the case of a payment, other than interest, to a Bank described in clause
(ii) above, to the extent that such Forms do not establish a complete exemption
from withholding of such taxes. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 4.04 and except
as set forth in Section 12.04(b), the Borrower agrees to pay additional amounts
and to indemnify each Bank in the manner set forth in Section 4.04(a) (without
regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any amounts deducted or withheld by it as described
in the immediately preceding sentence as a result of any changes after the
Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of income or similar Taxes.
SECTION 5. Conditions Precedent. The obligation of each Bank
to make each Loan to the Borrower hereunder, and the obligation of any Letter of
Credit Issuer to issue each Letter of Credit hereunder, is subject, at the time
of each such Credit Event (except as otherwise hereinafter indicated), to the
satisfaction of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each Bank the appropriate
Term Note and Revolving Note, if any, and to BTCo the Swingline Note, in each
case executed by the Borrower and in the amount, maturity and as otherwise
provided herein.
5.02 No Default; Representations and Warranties. At the time
of each Credit Event and also after giving effect thereto (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Credit Event, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
5.03 Officer's Certificate. On the Initial Borrowing Date, the
Agent shall have received a certificate dated such date signed by an appropriate
officer of the Borrower stating that
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all of the applicable conditions set forth in Sections 5.02, 5.07, 5.08, 5.09,
5.10, 5.11, 5.13 and 5.21 exist as of such date.
5.04 Opinions of Counsel. On the Initial Borrowing Date, the
Agent shall have received opinions, addressed to the Agent and each of the Banks
and dated the Initial Borrowing Date, from (i) counsel to the Credit Parties,
which opinion(s) shall cover the matters contained in Exhibit D and such other
matters incident to the transactions contemplated herein as the Agent may
reasonably request and (ii) local counsel to the Credit Parties reasonably
satisfactory to the Agent, which opinions shall cover such matters incident to
the transactions contemplated herein and in the other Credit Documents as the
Agent may reasonably request and shall be in form and substance reasonably
satisfactory to the Agent.
5.05 Corporate Proceedings. (a) On the Initial Borrowing Date,
the Agent shall have received from the Borrower and each of its Subsidiaries a
certificate, dated the Initial Borrowing Date, signed by the chairman, a vice
chairman, the president or any vice-president of such corporation, and attested
to by the secretary or any assistant secretary thereof, in the form of Exhibit E
with appropriate insertions, together with copies of the Certificate of
Incorporation and By-Laws of such corporation and the resolutions (if any) of
such corporation referred to in such certificate and all of the foregoing
(including each such Certificate of Incorporation and By-Laws) shall be
satisfactory to the Agent.
(b) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
reasonably satisfactory in form and substance to the Agent, and the Agent shall
have received all information and copies of all certificates, documents and
papers, including good standing certificates, bring-down certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Agent reasonably may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
(c) On the Initial Borrowing Date, the ownership and capital
structure (including, without limitation, the terms of any capital stock,
options, warrants or other securities issued by the Borrower or any of its
Subsidiaries) and management of the Borrower and its Subsidiaries shall be in
form and substance reasonably satisfactory to the Agent and the Required Banks.
5.06 Adverse Change, etc. On or prior to the Initial Borrowing
Date, nothing shall have occurred since March 31, 1997 (and neither the Banks
nor the Agent shall have become aware of any facts or conditions not previously
known) which the Required Banks or the Agent shall reasonably determine (a) has,
or could have, a material adverse effect on the rights or remedies of the Banks
or the Agent, or on the ability of any Credit Party to perform its obligations
to them hereunder or under any other Credit Document or (b) has, or could have,
a Material Adverse Effect.
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5.07 Litigation. On the Initial Borrowing Date, there shall be
no actions, suits or proceedings pending or threatened (a) with respect to this
Agreement or any other Document or (b) which the Agent or the Required Banks
shall determine could reasonably be expected to (i) have a Material Adverse
Effect or (ii) have a material adverse effect on the Transaction, the rights or
remedies of the Banks or the Agent hereunder or under any other Credit Document
or on the ability of any Credit Party to perform its respective obligations to
the Banks or the Agent hereunder or under any other Credit Document.
5.08 Approvals. On or prior to the Initial Borrowing Date, all
necessary governmental (domestic and foreign) and third party approvals in
connection with the Transaction, the transactions contemplated by the Documents
and otherwise referred to herein or therein shall have been obtained and remain
in effect, and all applicable waiting periods shall have expired without any
action being taken by any competent authority which restrains, prevents or
imposes materially adverse conditions upon the consummation of the Transaction,
the transactions contemplated by the Documents and otherwise referred to herein
or therein. Additionally, there shall not exist any judgment, order, injunction
or other restraint issued or filed or a hearing seeking injunctive relief or
other restraint pending or notified prohibiting or imposing materially adverse
conditions upon the consummation of the Transaction or the making of Loans or
the issuance of Letters of Credit.
5.09 Consummation of the Equity Financing and the Mergers. (a)
On or prior to the Initial Borrowing Date, the Initial Merger, including all
terms and conditions thereof, shall be reasonably satisfactory in form and
substance to the Agent and the Required Banks, and shall have been duly approved
by the board of directors and (if required by law) the shareholders of all the
parties thereto. Each of the conditions precedent to the obligations of the
parties to the Initial Merger to consummate such Initial Merger as set forth in
the Initial Merger Documents shall have been satisfied in all material respects
to the satisfaction of the Agent and the Required Banks or waived with the
consent of the Agent and the Required Banks, and the Initial Merger shall have
been consummated in accordance with all applicable laws and the Initial Merger
Documents.
(b) On or prior to the Initial Borrowing Date, Speaker and the
Borrower shall have received gross cash proceeds of at least $4,800,000 from the
Equity Financing. The Equity Financing, including all terms and conditions
thereof, shall be reasonably satisfactory in form and substance to the Agent and
the Required Banks, and shall have been duly approved by the board of directors
and (if required by applicable law) the shareholders of Speaker. Each of the
conditions precedent to the obligations of Speaker and of the purchasers of
equity in the Equity Financing to consummate the Equity Financing as set forth
in the Equity Financing Documents shall have been satisfied in all material
respects to the satisfaction of the Agent and the Required Banks or waived with
the consent of the Agent and the Required Banks, and the Equity Financing shall
have been consummated in accordance with all applicable laws and the Equity
Financing Documents.
(c) On or prior to the Initial Borrowing Date, the Speaker
Merger, including all terms and conditions thereof, shall be reasonably
satisfactory in form and substance to the Agent and the Required Banks, and
shall have been duly approved by the board of directors and (if required by
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applicable law) the shareholders of all the parties thereto. Each of the
conditions precedent to the obligations of the parties to the Speaker Merger to
consummate such Merger as set forth in the Speaker Merger Documents shall have
been satisfied in all material respects to the satisfaction of the Agent and the
Required Banks or waived with the consent of the Agent and the Required Banks,
and the Speaker Merger shall have been consummated in accordance with all
applicable laws and the Speaker Merger Documents.
(d) On the Initial Borrowing Date and immediately after giving
effect to the Equity Financing and the Mergers, (i) Bain Capital, Sun Capital or
their respective Affiliates shall own, directly or indirectly, at least 65% of
the issued and outstanding Common Stock, (ii) the Existing Shareholders shall
own no more than 25% of the issued and outstanding Common Stock and (iii) the
Borrower shall have no capital stock (or warrants with respect thereto)
outstanding other than the Common Stock.
5.10 Subordinated Financing. The Borrower shall have received
gross cash proceeds of at least $6,000,000 from the issuance of the Subordinated
Debt pursuant to the Subordinated Financing. The Subordinated Financing,
including all terms and conditions thereof, shall be satisfactory in form and
substance to the Agent and the Required Banks, and shall have been duly approved
by the board of directors and (if required by applicable law) the shareholders
of the Borrower. Each of the conditions precedent to the obligations of the
Borrower and the purchasers in the Subordinated Financing to consummate the
Subordinated Financing as set forth in the Subordinated Financing Documents
shall have been satisfied, to the satisfaction of the Agent and the Required
Banks or waived with the consent of the Agent and the Subordinated Financing
shall have been consummated in accordance with all applicable laws and the
Subordinated Financing Documents.
5.11 Refinancing. (a) On or prior to the Initial Borrowing
Date, the total commitments in respect of the Existing Credit Agreement shall
have been terminated, and all loans and notes with respect thereto shall have
been repaid in full, together with interest thereon, all letters of credit
issued thereunder and foreign currency contracts contemplated thereunder shall
have been terminated and all other amounts (including premiums) owing pursuant
to the Existing Credit Agreement shall have been repaid in full and all
documents in respect of the Existing Credit Agreement and all guarantees with
respect thereto shall have been terminated and be of no further force and
effect.
(b) On or prior to the Initial Borrowing Date, the Borrower
shall have repurchased, retired or redeemed all of the outstanding Existing
Subordinated Notes for cash, in accordance with their terms, or on such other
terms and conditions as may be satisfactory to the Agent and the Required Banks,
and all securities and note purchase agreements, purchase or sale agreements or
other agreements pursuant to which the Existing Subordinated Notes were issued
and all guaranties and security documents with respect thereto shall have been
terminated and be of no further force or effect.
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(c) On the Initial Borrowing Date, the creditors in respect of
the Indebtedness to be Refinanced shall have terminated and released all
security interests and Liens on the assets owned by the Borrower and its
Subsidiaries. The Agent shall have received such releases of security interests
in and Liens on the assets owned by the Borrower and its Subsidiaries as may
have been requested by the Agent, which releases shall be in form and substance
reasonably satisfactory to the Agent. Without limiting the foregoing, there
shall have been delivered (i) proper termination statements (Form UCC-3 or the
appropriate equivalent) for filing under the UCC of each jurisdiction where a
financing statement (Form UCC-1 or the appropriate equivalent) was filed with
respect to the Borrower or any of its Subsidiaries in connection with the
security interests created with respect to the Indebtedness to be Refinanced and
the documentation related thereto, (ii) termination or reassignment of any
security interest in, or Lien on, any patents, trademarks, copyrights, or
similar interests of the Borrower or any of its Subsidiaries on which filings
have been made, (iii) terminations of all mortgages, leasehold mortgages, deeds
of trust and leasehold deeds of trust created with respect to property of the
Borrower or any of its Subsidiaries, in each case, to secure the obligations in
respect of the Indebtedness to be Refinanced, all of which shall be in form and
substance reasonably satisfactory to the Agent, (iv) termination notices and
agreements with respect to all lockbox, warehousing, bailee and similar
agreements, duly acknowledged by all counterparties thereto, all of which shall
be in form and substance reasonably satisfactory to the Agent, and (v) all
collateral owned by the Borrower or any of its Subsidiaries in the possession of
any of the creditors in respect of the Indebtedness to be Refinanced or any
collateral agent or trustee under any related security document shall have been
returned to the Borrower or such Subsidiary.
5.12 Documents. On or prior to the Initial Borrowing Date,
there shall have been delivered to the Banks true and correct copies of all
Documents entered into in connection with the Transaction (including, without
limitation, the Equity Financing Documents, the Merger Documents, the
Subordinated Financing Documents, and the Refinancing Documents), and all of the
terms and conditions of such Documents (without limitation, with respect to the
Subordinated Debt, amortization, maturities, interest rates, limitations on cash
interest payable, covenants, defaults, remedies, sinking fund provisions, and
subordination provisions), as well as the structure of the Transaction and the
ownership interests in the Borrower after giving effect to the Transaction,
shall be in form and substance reasonably satisfactory to the Agent and the
Required Banks.
5.13 Financing Proceeds. On the Initial Borrowing Date and
immediately prior to the incurrence of Loans hereunder, the Borrower shall have
used the net cash proceeds from the Equity Financing and the Subordinated
Financing to pay amounts owing in respect of the Transaction.
5.14 Pledge Agreement. On the Initial Borrowing Date, each
Credit Party shall have duly authorized, executed and delivered a Pledge
Agreement in the form of Exhibit F, together with such changes (or with such
other documents) as may be requested by the Collateral Agent in connection with
local law (as modified, amended or supplemented from time to time in accordance
with the terms thereof and hereof, the "Pledge Agreement") and shall have
delivered to the Collateral Agent, as pledgee thereunder, all of the Pledged
Securities referred to therein, endorsed in blank in
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the case of promissory notes or accompanied by executed and undated stock powers
in the case of capital stock, and the Pledge Agreement and such other documents
shall be in full force and effect.
5.15 Security Agreement. On the Initial Borrowing Date, each
Credit Party shall have duly authorized, executed and delivered a Security
Agreement in the form of Exhibit G, together with such changes (or with such
other documents) as may be requested by the Collateral Agent in connection with
local law (as modified, amended or supplemented from time to time in accordance
with the terms thereof and hereof, the "Security Agreement") covering all of the
Security Agreement Collateral, together with:
(A) executed copies of Financing Statements (Form UCC-1 and/or
UCC-3) or appropriate local equivalent in appropriate form for filing
under the UCC or appropriate local equivalent of each jurisdiction as
may be necessary to perfect the security interests purported to be
created by the Security Agreement;
(B) certified copies of Requests for Information or Copies
(Form UCC-11), or equivalent reports, each of a recent date listing all
effective financing statements that name the Borrower or any of its
Subsidiaries or a division or operating unit of any such Person, as
debtor, and that are filed in the jurisdictions referred to in clause
(A) above, together with copies of such financing statements (none of
which shall cover the Collateral except (x) those with respect to which
appropriate termination statements executed by the secured lender
thereunder have been delivered to the Agent and (y) to the extent
evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and
filings of, or with respect to, the Security Agreement as may be
necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created by the Security
Agreement; and
(D) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect the
security interests purported to be created by the Security Agreement
have been taken; and the Security Agreement and such other documents
shall be in full force and effect.
5.16 Mortgages; Title Insurance; Surveys, etc. (a) On the
Initial Borrowing Date, the Collateral Agent shall have received fully executed
counterparts of deeds of trust, mortgages and similar documents in each case in
form and substance satisfactory to the Collateral Agent (as amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof,
each a "Mortgage" and collectively, the "Mortgages") with respect to each of the
Mortgaged Properties, and arrangements reasonably satisfactory to the Collateral
Agent shall be in place to provide that counterparts of such Mortgages shall be
recorded on the Initial Borrowing Date in all places to the extent necessary or
desirable, in the judgment of the Collateral Agent, effectively to create a
valid and enforceable first priority Lien, subject only to Permitted
Encumbrances, on each
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such Mortgaged Property in favor of the Collateral Agent (or such other trustee
as may be required or desired under local law) for the benefit of the Secured
Creditors.
(b) On the Initial Borrowing Date, the Collateral Agent shall
have received mortgagee title insurance policies (or binding commitments to
issue such title insurance policies) issued by title insurers reasonably
satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts
reasonably satisfactory to the Collateral Agent and assuring the Collateral
Agent that the Mortgages are valid and enforceable first priority mortgage Liens
on the respective Mortgaged Properties, free and clear of all defects and
encumbrances except Permitted Encumbrances. Such Mortgage Policies shall be in
form and substance reasonably satisfactory to the Collateral Agent and (i) shall
include an endorsement for future advances under this Agreement, the Notes and
the Mortgages and for any other matter that the Collateral Agent in its
discretion may reasonably request (to the extent available in the respective
jurisdiction of each Mortgaged Property), (ii) shall not include an exception
for mechanics' liens, and (iii) shall provide for affirmative insurance and such
reinsurance (including direct access agreements) as the Collateral Agent in its
discretion may reasonably request.
(c) On the Initial Borrowing Date, the Collateral Agent shall
have also received surveys in form and substance reasonably satisfactory to the
Collateral Agent of each Mortgaged Property designated as "owned" on Annex III
hereto, dated a recent date reasonably acceptable to the Collateral Agent,
certified in a manner reasonably satisfactory to the Collateral Agent by a
licensed professional surveyor reasonably satisfactory to the Collateral Agent.
5.17 Plans; Collective Bargaining Agreements; Existing
Indebtedness Agreements; Shareholders' Agreements; Management Agreements;
Employment Agreements; Non-Compete Agreements; Tax Allocation Agreements;
Material Contracts. On or prior to the Initial Borrowing Date, there shall have
been delivered to the Agent and made available to the Banks copies, certified as
true and correct by an appropriate officer of the Borrower, of:
(a) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of
the most recent such report (including, to the extent required, the
related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information), and
for each Plan that is a "single-employer plan", as defined in Section
4001(a)(15) of ERISA, the most recently prepared actuarial valuation
therefor) and any other "employee benefit plans", as defined in Section
3(3) of ERISA, and any other material agreements, plans or
arrangements, with or for the benefit of current or former employees of
the Borrower or any of its Subsidiaries or any ERISA Affiliate
(provided that the foregoing shall apply in the case of any
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, only to
the extent that any document described therein is in the possession of
the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate or
reasonably available thereto from the sponsor or trustees of such
plan);
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(b) any collective bargaining agreements or any other similar
agreement or arrangement covering the employees of the Borrower or any
of its Subsidiaries (collectively, the "Collective Bargaining
Agreements");
(c) all agreements evidencing or relating to the Existing
Indebtedness that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Existing
Indebtedness Agreements");
(d)(A) the Stockholders Agreement and (B) all other agreements
entered into by the Borrower or any of its Subsidiaries governing the
terms and relative rights of its capital stock, and any agreements
entered into by shareholders relating to any such entity with respect
to their capital stock, in each case that are to remain in effect after
giving effect to the consummation of the Transaction (collectively, the
"Shareholders' Agreements");
(e) any material agreements (or the forms thereof) with
members of, or with respect to, the management of the Borrower or any
of its Subsidiaries that are to remain in effect after giving effect to
the consummation of the Transaction, (collectively, the "Management
Agreements");
(f) any employment agreements entered into by the Borrower or
any of its Subsidiaries (collectively, the "Employment Agreements");
(g) any non-compete agreement entered into by the Borrower or
any of its Subsidiaries (collectively, the "Non-Compete Agreements");
(h) any tax sharing or tax allocation agreements entered into
by the Borrower or any of its Subsidiaries (collectively, the "Tax
Allocation Agreements"); and
(i) all material contracts and licenses of the Borrower or any
of its Subsidiaries that are to remain in effect after giving effect to
the consummation of the Transaction (collectively, the "Material
Contracts"); all of which Employee Benefit Plans, Collective Bargaining
Agreements, Existing Indebtedness Agreements, Shareholders' Agreements,
Management Agreements, Employment Agreements, Non-Compete Agreements,
Tax Allocation Agreements and Material Contracts shall be in form and
substance reasonably satisfactory to the Agent and shall be in full
force and effect on the Initial Borrowing Date.
5.18 Solvency Opinion; Evidence of Insurance. On the
Initial Borrowing Date, the Agent shall have received:
(a) a solvency opinion from Valuation Research, addressed to
the Agent and each of the Banks and dated the Initial Borrowing Date
and supporting the conclusions, that, after giving effect to the
Transaction and the incurrence of all financings contemplated herein,
the Borrower (on a stand-alone basis) and the Borrower and its
Subsidiaries (on a consolidated
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basis) are not insolvent and will not be rendered insolvent by the
indebtedness incurred in connection herewith, will not be left with
unreasonably small capital with which to engage in their respective
businesses and will not have incurred debts beyond their ability to pay
such debts as they mature and become due;
(b) evidence of insurance complying with the requirements of
Section 7.03 for the business and properties of the Borrower and its
Subsidiaries, in scope, form and substance reasonably satisfactory to
the Agent and the Required Banks and naming the Collateral Agent as an
additional insured, mortgagee and/or loss payee, as appropriate, and
stating that such insurance shall not be cancelled or revised without
30 days prior written notice by the insurer to the Collateral Agent.
5.19 Pro Forma Balance Sheets. On or prior to the Initial
Borrowing Date, there shall have been delivered to the Agent, an unaudited pro
forma consolidated balance sheet of each of the Borrower and its Subsidiaries
after giving effect to the Transaction and prepared in accordance with GAAP,
together with a related funds flow statement, which pro forma balance sheets and
funds flow statement shall be reasonably satisfactory in form and substance to
the Agent and the Required Banks.
5.20 Projections. On or prior to the Initial Borrowing Date,
the Banks shall have received the financial projections (the "Projections") set
forth on Annex IV hereto, for the period through March 31, 2004.
5.21 Existing Indebtedness. On the Initial Borrowing Date and
after giving effect to the Transaction, neither the Borrower nor any of its
Subsidiaries shall have any preferred stock or Indebtedness outstanding except
for the Loans, the Subordinated Debt, and the Existing Indebtedness. On and as
of the Initial Borrowing Date, all of the Existing Indebtedness shall remain
outstanding after giving effect to the Transaction and the other transactions
contemplated hereby without any default or events of default existing thereunder
or arising as a result of the Transaction and the other transactions
contemplated hereby, and there shall not be any amendments or modifications to
the Existing Indebtedness Agreements other than as requested or approved by the
Agent or the Required Banks. On and as of the Initial Borrowing Date, the Agent
and the Required Banks shall be satisfied with the amount of and the terms and
conditions of all Existing Indebtedness.
5.22 Payment of Fees. On the Initial Borrowing Date, all
costs, fees and expenses, and all other compensation contemplated by this
Agreement, due to the Agent or the Banks (including, without limitation, legal
fees and expenses) shall have been paid to the extent due.
5.23 Notice of Borrowing; Letter of Credit Request. The Agent
shall have received a Notice of Borrowing satisfying the requirements of Section
1.03 with respect to each incurrence of Loans, and the Agent and the respective
Letter of Credit Issuer shall have received a Letter of Credit Request
satisfying the requirements of Section 2.02 with respect to each issuance of a
Letter of Credit.
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The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by each Credit Party to each of the
Banks that all of the applicable conditions specified above exist as of the date
of such Credit Event. All of the certificates, legal opinions and other
documents and papers referred to in this Section 5, unless otherwise specified,
shall be delivered to the Agent at its Notice Office for the account of each of
the Banks and, except for the Notes, in sufficient counterparts for each of the
Banks and shall be satisfactory in form and substance to the Agent and the
Required Banks.
SECTION 6. Representations, Warranties and Agreements. In
order to induce the Banks to enter into this Agreement and to make the Loans and
issue and/or participate in the Letters of Credit provided for herein, the
Borrower makes the following representations, warranties and agreements with the
Banks in each case after giving effect to the Transaction, all of which shall
survive the execution and delivery of this Agreement, the making of the Loans
and the issuance of the Letters of Credit (with the occurrence of each Credit
Event being deemed to constitute a representation and warranty that the matters
specified in this Section 6 are true and correct in all material respects on and
as of the date of each such Credit Event, unless stated to relate to a specific
earlier date in which case all such representations and warranties shall be true
and correct in all material respects as of such earlier date):
6.01 Corporate Status. The Borrower and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization, (ii) has the
corporate power and authority to own its property and assets and to transact the
business in which it is engaged and presently proposes to engage and (iii) is
duly qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified would have a Material Adverse Effect.
6.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
6.03 No Violation. Neither the execution, delivery or
performance by any Credit Party of the Documents to which it is a party nor
compliance by them with the terms and provisions thereof, nor the consummation
of the transactions contemplated herein or therein, (i) will contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
except as set forth on Annex XII, will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the
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creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of the Borrower or any of its Subsidiaries
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
credit agreement or any other material agreement or instrument to which the
Borrower or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject or (iii) will violate
any provision of the Certificate of Incorporation or By-Laws of the Borrower or
any of its Subsidiaries.
6.04 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower or any of its Subsidiaries,
threatened, with respect to the Borrower or any of its Subsidiaries (i) that are
likely to have a Material Adverse Effect or (ii) that could reasonably be
expected to have a material adverse effect on the rights or remedies of the
Banks or on the ability of any Credit Party to perform its respective
obligations to the Banks hereunder and under the other Credit Documents to which
it is, or will be, a party. Additionally, there does not exist any judgment,
order or injunction prohibiting or imposing material adverse conditions upon the
occurrence of any Credit Event.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Term Loans and Revolving Loans incurred on the Initial Borrowing Date shall
be utilized to finance the Transaction; provided that, no more than $1,500,000
in aggregate principal amount of Revolving Loans may be incurred on the Initial
Borrowing Date.
(b) The proceeds of Revolving Loans and Swingline Loans
incurred after the Initial Borrowing Date shall be utilized for the general
corporate and working capital purposes of the Borrower and its Subsidiaries;
provided that the proceeds of Revolving Loans incurred after the Initial
Borrowing Date and Swingline Loans may be used to finance the Transaction only
to the extent that the aggregate amount of proceeds so used, when added to the
aggregate principal amount of Revolving Loans incurred on the Initial Borrowing
Date, shall not exceed $5,600,000.
(c) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System and no part of the proceeds
of any Loan will be used to purchase or carry any Margin Stock or to extend
credit for the purpose of purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any foreign or domestic governmental or public body or
authority, or any subdivision thereof, is required to authorize or is required
in connection with (i) the execution, delivery and performance of any Document
or (ii) the legality, validity, binding effect or enforceability of any
Document.
6.07 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
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6.08 Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower or any of its Subsidiaries in writing to the Agent or any Bank
(including, without limitation, all information contained in the Documents) for
purposes of or in connection with this Agreement or any transaction contemplated
herein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any such Persons in writing to the Agent or any
Bank will be, true and accurate in all material respects on the date as of which
such information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
6.10 Financial Condition; Financial Statements. (a) On and as
of the Initial Borrowing Date, on a pro forma basis after giving effect to the
Transaction and to all Indebtedness incurred, and to be incurred (including,
without limitation, the Loans and the Subordinated Debt), and Liens created, and
to be created, by each Credit Party in connection therewith, with respect to the
Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis), (x) the sum of the assets, at a fair valuation, of the
Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis), will exceed its debts, (y) it has not incurred nor intended
to, nor believes that it will, incur debts beyond its ability to pay such debts
as such debts mature and (z) it will have sufficient capital with which to
conduct its business. For purposes of this Section 6.10, "debt" means any
liability on a claim, and "claim" means (i) right to payment whether or not such
a right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (ii) right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(b)(i) The pro forma (both immediately before and after giving
effect to the Transaction, the related financing thereof (including the Loans
and the Subordinated Debt) and the other transactions contemplated hereby and
thereby) consolidated balance sheets of the Borrower and its Subsidiaries taken
as a whole as at August 30, 1997 prepared on a basis consistent with the
Projections and copies of which have heretofore been delivered to each Bank, and
(ii) the audited consolidated balance sheet of Holdings for the fiscal year
ended March 31, 1997, and the unaudited consolidated balance sheet of Holdings
at June 30, 1997 and the related combined statements of operations and cash flow
of the Borrower for the fiscal year or three-month period, as the case may be,
ended as of said dates, which annual financial statements have been examined by
Price Waterhouse LLP, certified public accountants, who delivered an unqualified
opinion with respect thereto and copies of which have heretofore been delivered
to each Bank, each of which financial statements referred to in the preceding
clauses (i)-(ii) present fairly in all material respects the
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financial position of Holdings and its Subsidiaries on a consolidated basis or
the Borrower and its Subsidiaries on a consolidated basis, as the case may be,
at the dates of said statements and the results of operations for the periods
covered thereby (or, in the case of the pro forma balance sheets, present a good
faith estimate of the pro forma financial condition of the Borrower and its
Subsidiaries on a consolidated basis both immediately before and after giving
effect to the Transaction, and the related financing thereof (including the
Loans and the Subordinated Debt) at the date thereof)). All such financial
statements referred to in the preceding clause (ii) have been prepared in
accordance with GAAP consistently applied except to the extent provided in the
notes to said financial statements and subject, in the case of the June 30, 1997
statements (which were prepared substantially in accordance with GAAP), to
normal year-end audit adjustments and the absence of footnotes.
(c) Since March 31, 1997, nothing has occurred that has had or
could reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements
described in Section 6.10(b) and the Indebtedness incurred under this Agreement,
there were as of the Initial Borrowing Date (and after giving effect to any
Loans made on such date and the issuance of the Subordinated Debt), no
liabilities or obligations (excluding current obligations incurred in the
ordinary course of business) with respect to the Borrower or any of its
Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether or not due), and the Borrower does not know of any basis
for the assertion against it or any of its Subsidiaries of any such liability or
obligation which, either individually or in the aggregate, are or would be
reasonably likely to have, a Material Adverse Effect.
(e) The Projections are based on good faith estimates and
assumptions made by the management of the Borrower, and on the Initial Borrowing
Date such management believed that the Projections were reasonable and
attainable, it being recognized by the Banks, however, that projections as to
future events are not to be viewed as facts and that the actual results during
the period or periods covered by the Projections probably will differ from the
projected results and that the differences may be material.
6.11 Security Interests. On and after the Initial Borrowing
Date, each of the Security Documents creates (or after the execution and
delivery thereof will create), as security for the Obligations, a valid and
enforceable perfected security interest in and Lien on all of the Collateral
subject thereto, superior to and prior to the rights of all third Persons and
subject to no other Liens (except that the Security Agreement Collateral, the
Mortgaged Properties and the collateral covered by the Additional Security
Documents may be subject to Permitted Liens relating thereto), in favor of the
Collateral Agent. No filings or recordings are required in order to perfect the
security interests created under any Security Document except for filings or
recordings required in connection with any such Security Document which shall
have been made as contemplated by Section 5.14 or on or prior to the execution
and delivery thereof as contemplated by Sections 7.11, 7.13 and 8.14.
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6.12 Representations and Warranties in Other Documents. All
representations and warranties set forth in the other Documents were true and
correct in all respects as of the time such representations and warranties were
made and shall be true and correct in all respects as of the Initial Borrowing
Date as if such representations and warranties were made on and as of such date,
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all respects as of
such earlier date, in each case except to the extent that the failure of any
such representation and warranty to be true and correct in all respects, either
individually or in the aggregate with other such representations and warranties,
is not reasonably likely to have a Material Adverse Effect.
6.13 Transaction. At the time of consummation thereof, the
Transaction shall have been consummated in all material respects in accordance
with the terms of the respective Documents and in accordance with all applicable
laws. At the time of consummation thereof, all consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required in order to
make or consummate the Transaction have been obtained, given, filed or taken or
waived and are or will be in full force and effect (or effective judicial relief
with respect thereto has been obtained) except where the failure to obtain,
give, file, or take would not reasonably be expected to have a Material Adverse
Effect. All applicable waiting periods with respect thereto have or, prior to
the time when required, will have, expired without, in all such cases, any
action being taken by any competent authority which restrains, prevents, or
imposes material adverse conditions upon the Transaction. Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Transaction, or the performance by the
Borrower and its Subsidiaries of their obligations under the Documents and all
applicable laws.
6.14 Compliance with ERISA. (a) Annex V sets forth each Plan;
each Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and related trust, if any) which is
intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; no Plan which is subject to Section 412 of the Code or
Section 302 of ERISA has an accumulated funding deficiency, within the meaning
of such sections of the Code or ERISA, or has applied for or received a waiver
of an accumulated funding deficiency or an extension of any amortization period,
within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA;
all contributions required to be made with respect to a Plan have been timely
made; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA
Affiliate has incurred any material liability (including any material indirect,
contingent or secondary liability) to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any
such liability under any of the foregoing sections with respect to any Plan; no
proceedings have been instituted to terminate, or to appoint a trustee to
administer, any Plan which is subject to Title IV of ERISA; no condition exists
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which presents a material risk to the Borrower or any Subsidiary of the Borrower
or any ERISA Affiliate of incurring a liability to or on account of a Plan
pursuant to the foregoing provisions of ERISA and the Code; no action, suit,
proceeding, hearing, audit or investigation with respect to the administration,
operation or the investment of assets of any Plan (other than routine claims for
benefits) is pending, expected or threatened; using actuarial assumptions and
computation methods consistent with Part 1 of subtitle E of Title IV of ERISA,
the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA
Affiliates to all Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan ended prior to the date
of the most recent Credit Event, would not exceed $500,000; each group health
plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code
which covers or has covered employees or former employees of the Borrower, any
subsidiary of the Borrower or any ERISA Affiliate has at all times been operated
in compliance with the provisions of Part 6 of subtitle B of Title I of ERISA
and Section 4980B of the Code; no lien imposed under the Code or ERISA on the
assets of the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
exists or is likely to arise on account of any Plan; and the Borrower and its
Subsidiaries may cease contributions to or terminate any employee benefit plan
maintained by any of them without incurring any material liability.
(b) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities. All contributions required to be made with respect to a Foreign
Pension Plan have been timely made. Neither the Borrower nor any of its
Subsidiaries has incurred any obligation in connection with the termination of
or withdrawal from any Foreign Pension Plan. The present value of the accrued
benefit liabilities (whether or not vested) under each Foreign Pension Plan,
determined as of the end of the most recently ended fiscal year of the Borrower
on the basis of actuarial assumptions, each of which is reasonable, did not
exceed the current value of the assets of such Foreign Pension Plan allocable to
such benefit liabilities.
6.15 Capitalization. On the Initial Borrowing Date and after
giving effect to the Transaction and the other transactions contemplated hereby,
the authorized capital stock of the Borrower shall consist of (i) 2,500,000
shares of common stock, $0.01 par value per share (such authorized shares of
common stock, together with any subsequently authorized shares of common stock
of the Borrower, the "Common Stock"), of which 1,258,236 shares shall be issued
and outstanding and (ii) 3,000 shares of preferred stock, $0.01 par value per
share, none of which shall be issued and outstanding. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable and
are owned of record by those Persons set forth on Annex VI hereto. Except as set
forth on Annex VI, the Borrower does not have outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreement providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock.
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6.16 Subsidiaries. On and as of the Initial Borrowing Date and
after giving effect to the consummation of the Transaction, the Borrower has no
Subsidiaries other than those Subsidiaries listed on Annex VII. Annex VII
correctly sets forth, as of the Initial Borrowing Date and after giving effect
to the Transaction, the percentage ownership (direct and indirect) of the
Borrower in each class of capital stock of each of its Subsidiaries and also
identifies the direct owner thereof.
6.17 Intellectual Property. The Borrower and each of its
Subsidiaries owns or holds a valid license to use all the material patents,
trademarks, permits, service marks, trade names, technology, know-how and
formulas or other rights with respect to the foregoing, free from restrictions
that are materially adverse to the use thereof, that are used in the operation
of the business of the Borrower and each of its Subsidiaries as presently
conducted.
6.18 Compliance with Statutes, etc. The Borrower and each of
its Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including compliance with all applicable Environmental Laws
with respect to any Real Property or governing its business and the requirements
of any permits issued under such Environmental Laws with respect to any such
Real Property or the operations of the Borrower or any of its Subsidiaries),
except such non-compliance as is not likely to, individually or in the
aggregate, have a Material Adverse Effect.
6.19 Environmental Matters. (a) The Borrower, each of its
Subsidiaries and each Predecessor Corporation has complied with, and on the date
of each Credit Event, the Borrower and each of its Subsidiaries is in compliance
with, all applicable Environmental Laws and the requirements of any permits
issued under such Environmental Laws. There are no pending or, to the best
knowledge of the Borrower, past or threatened Environmental Claims against the
Borrower or any of its Subsidiaries or any Real Property owned or operated by
the Borrower or any of its Subsidiaries. There are no facts, circumstances,
conditions or occurrences on any Real Property owned or operated by the Borrower
or any of its Subsidiaries or, to the best knowledge of the Borrower, on any
property adjoining or in the vicinity of any such Real Property that would
reasonably be expected (i) to form the basis of an Environmental Claim against
the Borrower or any of its Subsidiaries or any such Real Property or (ii) to
cause any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by Borrower or any of
its Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated,
used, treated or stored on, or transported to or from, any Real Property owned
or operated by the Borrower or any of its Subsidiaries or any Predecessor
Corporation where such generation, use, treatment or storage has violated or
would reasonably be expected to violate any Environmental Law. Hazardous
Materials have not at any time been Released on or from any Real Property owned
or operated by the Borrower or any of its Subsidiaries or any Predecessor
Corporation. There are not now any
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underground storage tanks located on any Real Property owned or operated by the
Borrower or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section
6.19, the representations made in this Section 6.19 shall only be untrue if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, could reasonably be expected to have a Material Adverse
Effect.
6.20 Properties. All Real Property owned by the Borrower or
any of its Subsidiaries and all material Leaseholds leased by the Borrower or
any of its Subsidiaries, in each case as of the Initial Borrowing Date and after
giving effect to the Transaction, and the nature of the interest therein, is
correctly set forth in Annex III. The Borrower and each of its Subsidiaries has
good and marketable title to, or a validly subsisting leasehold interest in, all
material properties owned or leased by it, including all Real Property reflected
in Annex III or in the financial statements referred to in Section 6.10(b), free
and clear of all Liens, other than Permitted Liens.
6.21 Labor Relations. Neither the Borrower nor any of its
Subsidiaries nor any Predecessor Corporation is engaged in any unfair labor
practice that could reasonably be expected to have a Material Adverse Effect.
There is (i) no unfair labor practice complaint pending against the Borrower or
any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against any of them, before the National Labor Relations Board, and no grievance
or arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Subsidiaries or, to
the best knowledge of the Borrower, threatened against any of them, (ii) no
strike, labor dispute, slowdown or stoppage pending against the Borrower or any
of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries and (iii) to the best knowledge
of the Borrower, no union representation question existing with respect to the
employees of the Borrower or any of its Subsidiaries and, to the best knowledge
of the Borrower, no union organizing activities are taking place, except (with
respect to any matter specified in clause (i), (ii) or (iii) above, either
individually or in the aggregate) such as could not be reasonably likely to have
a Material Adverse Effect.
6.22 Tax Returns and Payments. All Federal, material state and
other material returns, statements, forms and reports for taxes (the "Returns")
required to be filed by or with respect to the income, properties or operations
of the Borrower and/or any of its Subsidiaries and/or any Predecessor
Corporation have been timely filed with the appropriate taxing authority. The
Returns accurately reflect all liability for taxes of the Borrower and its
Subsidiaries and/or such Predecessor Corporation, as the case may be, for the
periods covered thereby. The Borrower and each of its Subsidiaries and each
Predecessor Corporation has paid all taxes payable by it other than immaterial
taxes and other taxes which are not yet due and payable, and other than those
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP. Except as disclosed in
the financial statements referred to in Section 6.10(b), there is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of
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the Borrower, threatened by any authority regarding any taxes relating to the
Borrower or any of its Subsidiaries or any Predecessor Corporation. As of the
Initial Borrowing Date, neither the Borrower nor any of its Subsidiaries has
entered into an agreement or waiver or been requested to enter into an agreement
or waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of
the Borrower or any of its Subsidiaries or any Predecessor Corporation not to be
subject to the normally applicable statute of limitations. Neither the Borrower
nor any of its Subsidiaries nor any Predecessor Corporation has provided, with
respect to themselves or property held by them, any consent under Section 341 of
the Code. Neither the Borrower nor any of its Subsidiaries nor any Predecessor
Corporation has incurred, or will incur, any material tax liability in
connection with the Transaction and the other transactions contemplated hereby.
6.23 Existing Indebtedness. Annex IX sets forth a true and
complete list of all Indebtedness of the Borrower and its Subsidiaries (other
than Indebtedness that in the aggregate does not exceed $100,000) as of the
Initial Borrowing Date and which is to remain outstanding after giving effect to
the Transaction and the incurrence of Loans on such date (excluding the Loans,
the Letters of Credit, and the Subordinated Debt, the "Existing Indebtedness"),
in each case showing the aggregate principal amount thereof and the name of the
respective borrower, any security therefor, and any other entity which directly
or indirectly guaranteed such debt.
6.24 Subordination. The subordination provisions contained in
the Subordinated Financing Documents are enforceable against the Borrower and
the holders thereof, and all Obligations are within the definition of "Senior
Debt" included in such subordination provisions.
SECTION 7. Affirmative Covenants. The Borrower hereby
covenants and agrees that on the Initial Borrowing Date and thereafter for so
long as this Agreement is in effect and until the Commitments have terminated,
no Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings,
together with interest, Fees and all other Obligations (other than any
indemnities described in Section 12.13 hereof which are not then due and
payable) incurred hereunder, are paid in full:
7.01 Information Covenants. The Borrower will furnish to each
Bank:
(a) Monthly Reports. Within 30 days after the end of each
fiscal month of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such month and the
related consolidated statements of income and retained earnings and of
cash flows for such month and for the elapsed portion of the fiscal
year ended with the last day of such month, in each case setting forth
comparative figures for the corresponding month in the prior fiscal
year, all of which shall be certified by the chief financial officer or
other Authorized Officer of the Borrower, subject to normal year-end
audit adjustments and the absence of footnotes.
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(b) Quarterly Financial Statements. Within 45 days after the
close of each quarterly accounting period in each fiscal year of the
Borrower, the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly accounting period and the
related consolidated statements of income and retained earnings and of
cash flows for such quarterly accounting period and for the elapsed
portion of the fiscal year ended with the last day of such quarterly
accounting period; all of which shall be in reasonable detail and
certified by the chief financial officer or other Authorized Officer of
the Borrower that they fairly present the financial condition of the
Borrower and its Subsidiaries as of the dates indicated and the results
of their operations and changes in their cash flows for the periods
indicated, subject to normal year-end audit adjustments and the absence
of footnotes.
(c) Annual Financial Statements. Within 90 days after the
close of each fiscal year of the Borrower, the consolidated balance
sheets of the Borrower and its Subsidiaries as at the end of such
fiscal year and the related consolidated statements of income and
retained earnings and of cash flows for such fiscal year and setting
forth comparative consolidated figures for the preceding fiscal year
and certified by Price Waterhouse LLP or such other independent
certified public accountants of recognized national standing as shall
be reasonably acceptable to the Agent, in each case to the effect that
such statements fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries as of the dates
indicated and the results of their operations and changes, together
with a certificate of such accounting firm stating that in the course
of its regular audit of the business of the Borrower and its
Subsidiaries, which audit was conducted in accordance with generally
accepted auditing standards, no Default or Event of Default with
respect to financial or accounting related covenants which has occurred
and is continuing has come to their attention or, if such a Default or
Event of Default has come to their attention a statement as to the
nature thereof.
(d) Budgets, etc. Not more than 60 days after the commencement
of each fiscal year of the Borrower, budgets of the Borrower and its
Subsidiaries in reasonable detail for each of the four fiscal quarters
of such fiscal year as customarily prepared by management for its
internal use setting forth, with appropriate discussion, the principal
assumptions upon which such budgets are based. Together with each
delivery of financial statements pursuant to Section 7.01(b) and (c), a
comparison of the current year to date financial results (other than in
respect of the balance sheets included therein) against the budgets
required to be submitted pursuant to this clause (d) shall be
presented.
(e) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 7.01(b) and (c), a
certificate of the chief financial officer or other Authorized Officer
of the Borrower to the effect that no Default or Event of Default
exists or, if any Default or Event of Default does exist, specifying
the nature and extent thereof, which certificate shall set forth the
calculations required to establish whether the Borrower and its
Subsidiaries were in compliance with the provisions of Sections
8.02(r), 8.04(d), (l) and (m), 8.06 and 8.08 through and including
8.11, as at the end of such fiscal quarter or year, as the case may be.
In addition, at the time of the delivery of the financial statements
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provided for in Section 7.01(c), a certificate of the chief financial
officer or other Authorized Officer of the Borrower setting forth (i)
the amount of, and calculations required to establish the amount of,
Excess Cash Flow for the Excess Cash Flow Period ending on the last day
of the respective Measurement Period and (ii) the calculations required
to establish whether the Borrower was in compliance with Section
4.02(A)(c) for the respective Measurement Period.
(f) Notice of Default or Litigation. Promptly, and in any
event within three Business Days (or 10 Business Days in the case of
clause (y) below) after any officer of the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of (x) the occurrence of
any event which constitutes a Default or an Event of Default, which
notice shall specify the nature thereof, the period of existence
thereof and what action the Borrower proposes to take with respect
thereto and (y) the commencement of, or threat of, or any significant
development in, any litigation or governmental proceeding pending
against the Borrower or any of its Subsidiaries which is likely to have
a Material Adverse Effect, or a material adverse effect on the ability
of any Credit Party to perform its respective obligations hereunder or
under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy
of each report or "management letter" submitted to the Borrower or any
of its Subsidiaries by its independent accountants in connection with
any annual, interim or special audit made by them of the books of the
Borrower or any of its Subsidiaries.
(h) Environmental Matters. Promptly after obtaining knowledge
of any of the following, written notice of any of the following
environmental matters which could reasonably be expected to result in a
remedial cost to the Borrower or any of its Subsidiaries in excess of
$100,000:
(i) any pending or threatened material Environmental Claim
against the Borrower or any of its Subsidiaries or any Real Property
owned or operated by the Borrower or any of its Subsidiaries;
(ii) any condition or occurrence on any Real Property owned or
operated by the Borrower or any of its Subsidiaries that (x) results in
material noncompliance by the Borrower or any of its Subsidiaries with
any applicable Environmental Law or (y) could reasonably be anticipated
to form the basis of a material Environmental Claim against the
Borrower or any of its Subsidiaries or any such Real Property;
(iii) any condition or occurrence on any Real Property owned
or operated by the Borrower or any of its Subsidiaries that could
reasonably be anticipated to cause such Real Property to be subject to
any material restrictions on the ownership, occupancy, use or
transferability by the Borrower or its Subsidiary, as the case may be,
of its interest in such Real Property under any Environmental Law; and
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(iv) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material on
any Real Property owned or operated by the Borrower or any of its
Subsidiaries.
All such notices shall describe in reasonable detail the
nature of the claim, investigation, condition, occurrence or removal or
remedial action and the Borrower's response thereto. In addition, the
Borrower agrees to provide the Banks with copies of all material
written communications by the Borrower or any of its Subsidiaries with
any Person, government or governmental agency relating to any of the
matters set forth in clauses (i)-(iv) above, and such detailed reports
relating to any of the matters set forth in clauses (i)-(iv) above as
may reasonably be requested by the Agent or the Required Banks.
(i) Other Information. Promptly upon transmission thereof,
copies of any filings and registrations with, and reports to, the SEC
by the Borrower or any of its Subsidiaries and copies of all financial
statements, proxy statements, notices and reports as the Borrower or
any of its Subsidiaries shall generally send to analysts or the holders
of their capital stock or of the Subordinated Debt in their capacity as
such holders (in each case to the extent not theretofore delivered to
the Banks pursuant to this Agreement) and, with reasonable promptness,
such other information or documents (financial or otherwise) as the
Agent on its own behalf or on behalf of any Bank may reasonably request
from time to time.
7.02 Books, Records and Inspections. The Borrower will, and
will cause each of its Subsidiaries to, permit, upon reasonable notice to the
chief financial officer or other Authorized Officer of the Borrower, (x)
officers and designated representatives of the Agent or any Bank to visit and
inspect any of the properties or assets of the Borrower and any of its
Subsidiaries in whomsoever's possession, and to examine the books of account of
the Borrower and any of its Subsidiaries and discuss the affairs, finances and
accounts of the Borrower and of any of its Subsidiaries with, and be advised as
to the same by, their officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as the Agent or any
Bank may desire and (y) the Agent, at the request of the Required Banks, to
conduct, at the Borrower's expense, an audit of the accounts receivable and/or
inventories of the Borrower and its Subsidiaries at such times (but no more
frequently than once a year unless an Event of Default has occurred and is
continuing) as the Required Banks shall reasonably require.
7.03 Insurance. The Borrower will, and will maintain on behalf
of or will cause each of its Subsidiaries to, at all times from and after the
Effective Date maintain in full force and effect insurance with reputable and
solvent insurance carriers in such amounts, covering such risks and liabilities
and with such deductibles or self-insured retentions as are consistent with the
Borrower's past practices, or if different, adequate in the management of the
Borrower's prudent judgment and consistent with the practices of similarly
situated companies. At any time that insurance at the levels described in Annex
VIII is not being maintained by the Borrower and its Subsidiaries, the Borrower
will notify the Banks in writing thereof and, if thereafter notified by the
Agent to do so, the Borrower will obtain insurance at such levels to the extent
then generally available (but in any
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event within the deductible or self-insured retention limitations set forth in
the preceding sentence) or otherwise as are reasonably acceptable to the Agent.
The Borrower will furnish to the Agent on the Initial Borrowing Date and on each
date on which financial statements are delivered pursuant to Section 7.01(c) a
summary of the insurance carried in respect of the Borrower and its Subsidiaries
and the assets of the Borrower and its Subsidiaries together with certificates
of insurance and other evidence of such insurance, if any, naming the Collateral
Agent as mortgagee with respect to any mortgaged real property, lenders loss
payee with respect to personal property, additional insured with respect to
general liability and umbrella liability coverage and certificate holder with
respect to workers' compensation insurance.
7.04 Payment of Taxes. The Borrower will pay and discharge,
and will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and all lawful claims for sums that
have become due and payable which, if unpaid, might become a Lien not otherwise
permitted under Section 8.03(a) or charge upon any properties of the Borrower or
any of its Subsidiaries; provided, that neither the Borrower nor any of its
Subsidiaries shall be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings if it has
maintained adequate reserves with respect thereto in accordance with GAAP.
7.05 Corporate Franchises. The Borrower will do, and will
cause each of its Subsidiaries to do, or cause to be done, all things necessary
to preserve and keep in full force and effect its existence and its material
rights, franchises and authority to do business; provided, however, that any
transaction permitted by Section 8.02 will not constitute a breach of this
Section 7.05.
7.06 Compliance with Statutes, etc. The Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property (including applicable statutes,
regulations, orders and restrictions relating to environmental standards and
controls) except for such non-compliance as would not have a Material Adverse
Effect or a material adverse effect on the ability of any Credit Party to
perform its obligations under any Credit Document to which it is a party.
7.07 Compliance with Environmental Laws. (a) The Borrower will
pay, and will cause each of its Subsidiaries to pay, all costs and expenses
incurred by it in keeping in compliance with all Environmental Laws, and will
keep or cause to be kept all Real Properties owned or operated by the Borrower
or any of its Subsidiaries free and clear of any Liens imposed pursuant to such
Environmental Laws; and (b) neither the Borrower nor any of its Subsidiaries
will generate, use, treat, store, release or dispose of, or permit the
generation, use, treatment, storage, release or disposal of, Hazardous Materials
on any Real Property owned or operated by the Borrower or any of its
Subsidiaries, or transport or permit the transportation of Hazardous Materials
to or from any such Real Property, unless the failure to comply with the
requirements specified in clause (a) or (b) above, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
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Effect. If the Borrower or any of its Subsidiaries, or any tenant or occupant of
any Real Property owned or operated by the Borrower or any of its Subsidiaries,
cause or permit any intentional or unintentional act or omission resulting in
the presence or Release of any Hazardous Material (except in compliance with
applicable Environmental Laws), the Borrower agrees to undertake, and/or to
cause any of its Subsidiaries, tenants or occupants to undertake, at their sole
expense, any clean up, removal, remedial or other action required pursuant to
Environmental Laws to remove and clean up any Hazardous Materials from any Real
Property, except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect; provided, that neither the Borrower nor any of
its Subsidiaries shall be required to comply with any such order or directive
which is being contested in good faith and by proper proceedings so long as it
has maintained adequate reserves with respect to such compliance to the extent
required in accordance with GAAP.
7.08 ERISA. As soon as possible and, in any event, within 10
days after the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following events to
the extent that one or more of such events is reasonably likely to result in a
material liability to the Borrower or any Subsidiary of the Borrower, the
Borrower will deliver to each of the Banks a certificate of the chief financial
officer or other Authorized Officer of the Borrower setting forth details as to
such occurrence and the action, if any, which the Borrower, such Subsidiary or
such ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Borrower, such
Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred (except
to the extent that the Borrower has previously delivered to the Banks a
certificate and notices (if any) concerning such event pursuant to the next
clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13)
of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance
reporting requirement of PBGC Regulation Section 4043.61 (without regard to
subparagraph (b)(1) thereof), and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur with respect to such Plan within the following 30 days; that an
accumulated funding deficiency, within the meaning of Section 412 of the Code or
Section 302 of ERISA has been incurred or an application may be or has been made
for a waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan;
that a contribution required to be made to a Plan or Foreign Pension Plan has
not been timely made; that a Plan has been or may e terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability giving rise to a lien under ERISA or the Code; that
proceedings may be or have been instituted to terminate or appoint a trustee to
administer a Plan which is subject to Title IV of ERISA; that a proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that the Borrower, any Subsidiary of the Borrower or any
ERISA Affiliate will or may incur any liability (including any indirect,
contingent or secondary liability) to or on account of the termination of or
withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980
of the Code or Section 409, 502(i) or 502(l) of ERISA or with respect to a group
health plan (as defined in Section 607(1) of ERISA or Section
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4908B(g)(2) of the Code) under Section 4980B of the Code; or that the Borrower
or any Subsidiary of the Borrower has or may incur any liability under any
employee welfare benefit plan (within the meaning of Section 3(1) of ERISA) that
provides benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan. At
the request of any Bank, the Borrower will deliver to such Bank (a) a complete
copy of the annual report (Form 5500) (including, to the extent requested, the
related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) of each Plan required to
be filed with the Internal Revenue Service and (b) copies of any records,
documents or other information that must be furnished to the PBGC with respect
to any Plan pursuant to Section 4010 of ERISA. In addition to any certificates
or notices delivered to the Banks pursuant to the first sentence hereof, copies
of annual reports and any records, documents or other information required t be
furnished to the PBGC, and any material notices received by the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan or
Foreign Pension Plan shall be delivered to the Banks no later than 10 days after
the date such annual report has been filed with the Internal Revenue Service or
such records, documents and/or information has been furnished to the PBGC or
such notice has been received by the Borrower, the Subsidiary or the ERISA
Affiliate, as applicable.
7.09 Good Repair. The Borrower will, and will cause each of
its Subsidiaries to, ensure that its material properties and equipment used in
its business are kept in good repair, working order and condition, normal wear
and tear excepted, and, subject to Section 8.08, that from time to time there
are made in such properties and equipment all needful and proper repairs,
renewals, replacements, extensions, additions, betterments and improvements
thereto, to the extent and in the manner useful or customary for companies in
similar businesses.
7.10 End of Fiscal Years; Fiscal Quarters. The Borrower will,
for financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on March 31 of each year, and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to end on June 30, September
30, December 31 and March 31 of each year; provided that the Borrower may, after
the Initial Borrowing Date, change its, and each of its Subsidiaries', fiscal
years to end on any of June 30, September 30 or December 31 of each year
(promptly following which change the Borrower shall give notice thereof to each
of the Banks).
7.11 Additional Security; Further Assurances. (a) The Borrower
will, and will cause each of its Domestic Subsidiaries (and subject to Section
7.13, each of its Foreign Subsidiaries) to, grant to the Collateral Agent
security interests and mortgages in such assets and properties of the Borrower
and its Domestic Subsidiaries (and, subject to Section 7.13, its Foreign
Subsidiaries) as are not covered by the original Security Documents, and as may
be requested from time to time by the Agent (collectively, the "Additional
Security Documents"). All such security interests and mortgages shall be granted
pursuant to documentation reasonably satisfactory in form and substance to the
Agent and shall constitute valid and enforceable perfected security interests
and mortgages superior to and prior to the rights of all third Persons and
subject to no other Liens except for Permitted Liens. The Additional Security
Documents or instruments related thereto shall have been duly recorded or
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filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Collateral Agent
required to be granted pursuant to the Additional Security Documents and all
taxes, fees and other charges payable in connection therewith shall have been
paid in full.
(b) The Borrower will, and will cause each of its applicable
Subsidiaries party to any Security Document to, at the expense of the Borrower,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, real property surveys, reports and other assurances or instruments
and take such further steps relating to the collateral covered by any of the
Security Documents as the Collateral Agent may reasonably require. Furthermore,
the Borrower shall cause to be delivered to the Collateral Agent such opinions
of counsel, title insurance and other related documents as may be reasonably
requested by the Agent to assure it that this Section 7.11 has been complied
with.
(c) If the Agent or the Required Banks determine that they are
required by law or regulation to have appraisals prepared in respect of the Real
Property of the Borrower and its Subsidiaries constituting Collateral, the
Borrower shall provide to the Agent appraisals which satisfy the applicable
requirements of the Real Estate Appraisal Reform Amendments of the Financial
Institution Reform, Recovery and Enforcement Act of 1989, as amended, and which
shall be in form and substance reasonably satisfactory to the Agent.
(d) The Borrower agrees that each action required above by
this Section 7.11 shall be completed as soon as possible, but in no event later
than 90 days after such action is either requested to be taken by the Agent or
the Required Banks or required to be taken by the Borrower and its Subsidiaries
pursuant to the terms of this Section 7.11; provided that in no event shall the
Borrower be required to take any action, other than using its reasonable
efforts, to obtain consents from third parties with respect to its compliance
with this Section 7.11.
7.12 Register. The Borrower hereby designates the Agent to
serve as the Borrower's agent, solely for purposes of this Section 7.12, to
maintain a register (the "Register") on which it will record the Commitments
from time to time of each of the Banks, the Loans made by each of the Banks and
each repayment in respect of the principal amount of the Loans of each Bank.
Failure to make any such recordation, or any error in such recordation shall not
affect the Borrower's obligations in respect of such Loans. With respect to any
Bank, the transfer of the Commitments of such Bank and the rights to the
principal of, and interest on, any Loan made pursuant to such Commitments shall
not be effective until such transfer is recorded on the Register maintained by
the Agent with respect to ownership of such Commitments and Loans and prior to
such recordation all amounts owing to the transferor with respect to such
Commitments and Loans shall remain owing to the transferor. The registration of
assignment or transfer of all or part of any Commitments and Loans shall be
recorded by the Agent on the Register only upon the acceptance by the Agent of a
properly executed and delivered Assignment and Assumption Agreement pursuant to
Section 12.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the
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Agent for acceptance and registration of assignment or transfer of all or part
of a Loan, or as soon thereafter as practicable, the assigning or transferor
Bank shall surrender the Note evidencing such Loan, and thereupon one or more
new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Agent in performing its duties under this Section 7.12 (except
when caused by the gross negligence or willful misconduct of the Agent).
7.13 Foreign Subsidiaries Security. If following a change in
the relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower acceptable to the Agent and the Required Banks does not within 30 days
after a request from the Agent or the Required Banks deliver evidence, in form
and substance mutually satisfactory to the Agent and the Borrower, with respect
to any Foreign Subsidiary which has not already had all of its stock pledged
pursuant to the Pledge Agreement that (i) a pledge (x) of 66-2/3% or more of the
total combined voting power of all classes of capital stock of such Foreign
Subsidiary entitled to vote, and (y) of any promissory note issued by such
Foreign Subsidiary to the Borrower or any of its Domestic Subsidiaries, (ii) the
entering into by such Foreign Subsidiary of a security agreement in
substantially the form of the Security Agreement and (iii) the entering into by
such Foreign Subsidiary of a guaranty in substantially the form of the
Subsidiary Guaranty, in any such case would cause the undistributed earnings of
such Foreign Subsidiary as determined for Federal income tax purposes to be
reasonably likely to be treated as a deemed dividend to such Foreign
Subsidiary's United States parent for Federal income tax purposes, then in the
case of a failure to deliver the evidence described in clause (i) above, that
portion of such Foreign Subsidiary's outstanding capital stock or any promissory
notes so issued by such Foreign Subsidiary, in each case not theretofore pledged
pursuant to the Pledge Agreement shall be pledged to the Collateral Agent for
the benefit of the Secured Creditors pursuant to the Pledge Agreement (or
another pledge agreement in substantially similar form, if needed), and in the
case of a failure to deliver the evidence described in clause (ii) above, such
Foreign Subsidiary shall execute and deliver the Security Agreement (or another
security agreement in substantially similar form, if needed), granting the
Secured Creditors a security interest in all of such Foreign Subsidiary's assets
and securing the Obligations of the Borrower under the Credit Documents and
under any Interest Rate Protection Agreement or Other Hedging Agreement and, in
the event the Subsidiary Guaranty shall have been executed by such Foreign
Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the
case of a failure to deliver the evidence described in clause (iii) above, such
Foreign Subsidiary shall execute and deliver the Subsidiary Guaranty (or another
guaranty in substantially similar form, if needed), guaranteeing the Obligations
of the Borrower under the Credit Documents and under any Interest Rate
Protection Agreement or Other Hedging Agreement, in each case to the extent that
the entering into such Security Agreement or Subsidiary Guaranty is permitted by
the laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 7.13 to be in form and substance reasonably
satisfactory to the Agent.
7.14 Interest Rate Protection. The Borrower shall no later
than 60 days following the Initial Borrowing Date enter into Interest Rate
Protection Agreements, reasonably satisfactory
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to the Agent, with a term of at least three years, establishing a fixed or
maximum interest rate acceptable to the Agent in respect of at least 50% of the
then outstanding Term Loans.
SECTION 8. Negative Covenants. The Borrower hereby covenants
and agrees that as of the Initial Borrowing Date and thereafter for so long as
this Agreement is in effect and until the Commitments have terminated, no
Letters of Credit (other than Letters of Credit, together with all Fees that
have accrued and will accrue thereon through the stated termination date of such
Letters of Credit, which have been supported in a manner satisfactory to the
respective Letter of Credit Issuer in its sole and absolute discretion) or Notes
are outstanding and the Loans and Unpaid Drawings, together with interest, Fees
and all other Obligations (other than any indemnities described in Section 12.13
hereof which are not then due and payable) incurred hereunder, are paid in full:
8.01 Changes in Business. The Borrower and its Subsidiaries
will not engage in any business other than the business engaged in by Old Labtec
and its Subsidiaries as of the Effective Date and activities directly related
thereto, and similar or related businesses.
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
The Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its property or
assets (other than inventory and product displays in the ordinary course of
business), or enter into any partnerships, joint ventures or sale-leaseback
transactions, or purchase or otherwise acquire (in one or a series of related
transactions) any part of the property or assets (other than purchases or other
acquisitions of inventory, materials and equipment in the ordinary course of
business) of any Person, except that the following shall be permitted:
(a) the Transaction;
(b) the Borrower and its Subsidiaries may (i) lease as lessee
or license as licensee real or personal property in the ordinary course
of business and otherwise in compliance with this Agreement and (ii)
sublease as lessor real or personal property located at a place of
business where it has ceased to continue its operations until the
expiration of the principal lease with respect to such property;
(c) Capital Expenditures by the Borrower and its
Subsidiaries to the extent not in violation of Section 8.08;
(d) the advances, investments and loans permitted pursuant to
Section 8.05;
(e) each of the Borrower and its Subsidiaries may sell assets,
provided that (w) each such sale shall be for an amount at least equal
to the fair market value thereof (as determined in good faith by senior
management of the Borrower), (x) each such sale results in
consideration at least 80% of which (taking the amount of cash, the
principal amount of
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any promissory notes and the fair market value, as determined in good
faith by senior management of the Borrower, of any other consideration)
shall be in the form of cash, (y) the aggregate sale proceeds from all
assets subject to such sales pursuant to this clause (e) shall not
exceed $500,000 in any Measurement Period of the Borrower and (z) the
Net Proceeds therefrom are either applied to repay Term Loans as
provided in Section 4.02(A)(c) or reinvested in replacement assets to
the extent permitted by Section 4.02(A)(c);
(f) each of the Borrower and its Subsidiaries may sell assets,
provided that (w) each such sale shall be for an amount at least equal
to the fair market value thereof (as determined in good faith by senior
management of the Borrower), (x) each such sale results in
consideration at least 80% of which (taking the amount of cash, the
principal amount of any promissory notes and the fair market value, as
determined in good faith by senior management of the Borrower, of any
other consideration) shall be in the form of cash, and (y) the
aggregate sale proceeds from all assets subject to such sales pursuant
to this clause (f) shall not exceed $100,000 in any Measurement Period
of the Borrower;
(g) the Borrower and its Subsidiaries may sell or discount, in
each case without recourse, accounts receivables arising in the
ordinary course of business, but only in connection with the compromise
or collection thereof;
(h) the Borrower and its Subsidiaries may sell for cash or
exchange specific items of equipment, so long as the purpose of each
such sale or exchange is to acquire (and results within 360 days of
such sale or exchange in the acquisition of) replacement items of
equipment which are the functional equivalent of the item of equipment
so sold or exchanged;
(i) the Borrower and its Subsidiaries may, in the ordinary
course of business, license patents, trademarks, copyrights and
know-how to third Persons and to one another, so long as each such
license is permitted to be assigned pursuant to the Security Agreement
(to the extent that a security interest in such patents, trademarks,
copyrights and know-how is granted thereunder) and does not otherwise
prohibit the granting of a Lien by the Borrower or any of its
Subsidiaries pursuant to the Security Agreement in the intellectual
property covered by such license;
(j) any Foreign Subsidiary of the Borrower may be merged with
and into, or be voluntarily dissolved or liquidated into, or transfer
any of its assets to, any Wholly-Owned Foreign Subsidiary of the
Borrower so long as in each case at least 65% of the total combined
voting power of all classes of capital stock of all first-tier Foreign
Subsidiaries of the Borrower are pledged pursuant to the Pledge
Agreement;
(k) the assets of any Foreign Subsidiary of the Borrower may
be transferred to the Borrower or any of its Wholly-Owned Domestic
Subsidiaries, and any Foreign Subsidiary of the Borrower may be merged
with and into, or be voluntarily dissolved or liquidated into, the
Borrower or any of its Wholly-Owned Domestic Subsidiaries so long as
the Borrower or such
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Wholly-Owned Domestic Subsidiary is the surviving corporation of any
such merger, dissolution or liquidation;
(l) the Borrower or any of its Wholly-Owned Domestic
Subsidiaries may (x) transfer to one or more Wholly-Owned Foreign
Subsidiaries of the Borrower those assets theretofore transferred to
the Borrower or such Wholly-Owned Domestic Subsidiary by a Foreign
Subsidiary (whether by merger, liquidation, dissolution or otherwise)
pursuant to clause (k) of this Section 8.02, and (y) in lieu of selling
inventory outside the United States directly to third Persons, the
Borrower and its Wholly-Owned Domestic Subsidiaries may sell such
inventory in the ordinary course of business to Foreign Subsidiaries
for resale by such Foreign Subsidiaries;
(m) the Borrower and its Wholly-Owned Domestic Subsidiaries
may sell or otherwise transfer inventory between or among themselves in
the ordinary course of business for resale by the Borrower or such
Wholly-Owned Domestic Subsidiaries, as the case may be, so long as the
security interest granted to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Security Agreement in the
inventory so transferred shall remain in full force and effect and
perfected (to at least the same extent as in effect immediately prior
to such transfer);
(n) the Borrower may lease as lessor equipment, machinery or
its Real Property to one or more Wholly-Owned Domestic Subsidiaries of
the Borrower so long as (x) such lease is for fair market value
(determined in good faith by the Board of Directors or senior
management of the Borrower) and (y) the security interests granted to
the Collateral Agent for the benefit of the Secured Creditors pursuant
to the Security Documents in the assets so leased shall remain in full
force and effect and perfected (to at least the same extent as in
effect immediately prior to such transfer);
(o) any Domestic Subsidiary of the Borrower may transfer
assets to the Borrower or to any other Wholly-Owned Domestic Subsidiary
of the Borrower so long as the security interests granted to the
Collateral Agent for the benefit of the Secured Creditors pursuant to
the Security Documents in the assets so transferred shall remain in
full force and effect and perfected (to at least the same extent as in
effect immediately prior to such transfer);
(p) any Domestic Subsidiary of the Borrower may merge with and
into, or be voluntarily dissolved or liquidated into, the Borrower so
long as (i) the Borrower is the surviving corporation of such merger,
dissolution or liquidation and (ii) the security interests granted to
the Collateral Agent for the benefit of the Secured Creditors pursuant
to the Security Documents in the assets of such Domestic Subsidiary so
merged, dissolved or liquidated shall remain in full force and effect
and perfected (to at least the same extent as in effect immediately
prior to such merger, dissolution or liquidation);
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(q) any Domestic Subsidiary of the Borrower may merge with and
into, or be voluntarily dissolved or liquidated into, any other
Wholly-Owned Domestic Subsidiary of the Borrower so long as (i) such
Wholly-Owned Domestic Subsidiary of the Borrower is the surviving
corporation of such merger, dissolution or liquidation and (ii) the
security interests granted to the Collateral Agent for the benefit of
the Secured Creditors pursuant to the Security Documents in the assets
of such Domestic Subsidiary so merged, dissolved or liquidated shall
remain in full force and effect and perfected (to at least the same
extent as in effect immediately prior to such merger, dissolution or
liquidation); and
(r) so long as no Default or Event of Default then exists or
would result therefrom, the Borrower may acquire assets constituting
all or substantially all of a business, business unit, division or
product line of any Person not already a Subsidiary of the Borrower or
the capital stock of any such Person (any such acquisition permitted by
this clause (r), a "Permitted Acquisition"), provided, that (i) such
Person (or the assets so acquired) was, immediately prior to such
acquisition, engaged (or used) primarily in the business permitted
pursuant to Section 8.01, (ii) if such acquisition is structured as a
stock acquisition, then either (A) the Person so acquired becomes a
Domestic Subsidiary of the Borrower or (B) such Person is merged with
and into a Domestic Subsidiary of the Borrower (with such Domestic
Subsidiary being the surviving corporation of such merger), and in any
case, all of the provisions of Section 8.15 have been complied with in
respect of such Person, (iii) any Liens or Indebtedness assumed or
issued in connection with such acquisition are otherwise permitted
under Section 8.03 or 8.04, as the case may be, (iv) the only
consideration paid by the Borrower in respect of any such Permitted
Acquisition consists of cash, the Common Stock permitted to be issued
under Section 8.13 and/or Indebtedness to the extent permitted by
Section 8.04, (v) all representations and warranties contained herein
and in the other Credit Documents shall be true and correct in all
material respects with the same effect as though such representations
and warranties had been made on and as of the date of such Permitted
Acquisition (both before and after giving effect thereto), unless
stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date, and (vi) after giving effect
to any Permitted Acquisition, the aggregate amount paid (including for
this purpose all cash consideration paid, the face amount of all
Indebtedness incurred in connection with such Permitted Acquisition,
and the fair market value (determined as of the proposed date of
consummation of such Permitted Acquisition in good faith by senior
management of the Borrower) of any Common Stock, if any, issued as
consideration in connection with such Permitted Acquisition), in
connection with such Permitted Acquisition when added to the aggregate
amount paid (including for this purpose all cash consideration paid,
the face amount of all Indebtedness incurred in connection with each
such Permitted Acquisition and the fair market value (determined as of
the date of consummation of each such Permitted Acquisition in good
faith by senior management of the Borrower) of any Common Stock, if
any, issued as consideration in connection with each such Permitted
Acquisition) in connection with all other Permitted Acquisitions
consummated prior to such proposed Permitted Acquisition, shall not
exceed (A) $1,000,000 or (B) $5,000,000 at any time that (I) the Pro
Forma Leverage Ratio
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on the date of such Permitted Acquisition is equal to or less than 3:1,
and (II) the Total Unutilized Revolving Loan Commitment after giving
effect to such Permitted Acquisition is equal to or greater than
$3,000,000.
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 8.02, such Collateral
in each case shall be sold or otherwise disposed of free and clear of the Liens
created by the Security Documents and the Agent shall take such actions
(including, without limitation, directing the Collateral Agent to take such
actions) as are appropriate in connection therewith.
8.03 Liens. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets of any kind (real or personal, tangible
or intangible) of the Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income,
except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental
charges or levies not yet due or Liens for taxes, assessments or
governmental charges or levies being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or
any of its Subsidiaries imposed by law which were incurred in the
ordinary course of business and which have not arisen to secure
Indebtedness for borrowed money, such as carriers', warehousemen's and
mechanics' Liens, statutory landlord's Liens, and other similar Liens
arising in the ordinary course of business, and which either (x) do not
in the aggregate materially detract from the value of such property or
assets or materially impair the use thereof in the operation of the
business of the Borrower or any of its Subsidiaries or (y) are being
contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing the forfeiture or sale of the property or
asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the
Security Documents;
(d) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Annex X, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09;
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(f) Liens incurred or deposits made (x) in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, government contracts, performance and return-of-money bonds and
other similar obligations incurred in the ordinary course of business
(exclusive of obligations in respect of the payment for borrowed
money); and (y) to secure the performance of leases of Real Property,
to the extent incurred or made in the ordinary course of business
consistent with past practices;
(g) licenses, leases or subleases granted to third Persons not
interfering in any material respect with the business of the Borrower
or any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) any interest or title of a licensor, lessor or sublessor
under any lease permitted by this Agreement;
(k) Liens created pursuant to Capital Leases permitted
pursuant to Section 8.04(d);
(l) Permitted Encumbrances;
(m) Liens arising pursuant to purchase money mortgages or
security interests securing Indebtedness representing the purchase
price (or financing of the purchase price within 90 days after the
respective purchase) of assets acquired after the Initial Borrowing
Date, provided that (i) any such Liens attach only to the assets so
purchased, (ii) the Indebtedness secured by any such Lien does not
exceed 100%, nor is less than 80% of the lesser of the fair market
value or the purchase price of the property being purchased at the time
of the incurrence of such Indebtedness and (iii) the Indebtedness
secured thereby is permitted to be incurred pursuant to Section
8.04(d);
(n) Liens on property or assets acquired pursuant to a
Permitted Acquisition, or on property or assets of a Subsidiary of the
Borrower in existence at the time such Subsidiary is acquired pursuant
to a Permitted Acquisition, provided that (i) any Indebtedness that is
secured by such Liens is permitted to exist under Section 8.04(k), and
(ii) such Liens are not incurred in connection with, or in
contemplation or anticipation of, such Permitted Acquisition and do not
attach to any other asset of the Borrower or any of its Subsidiaries;
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(o) Liens on assets of Foreign Subsidiaries of the Borrower to
the extent securing Indebtedness of such Foreign Subsidiaries permitted
pursuant to Section 8.04(l); and
(p) additional Liens incurred by the Borrower and its
Subsidiaries so long as the value of the property subject to such
Liens, and the Indebtedness and other obligations secured thereby, do
not exceed $500,000.
8.04 Indebtedness. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Existing Indebtedness outstanding on the Initial Borrowing
Date and listed on Annex IX, without giving effect to any subsequent
extension, renewal or refinancing thereof;
(c) Indebtedness under Interest Rate Protection Agreements
entered into to protect the Borrower against fluctuations in interest
rates in respect of the Obligations and the Subordinated Debt;
(d) Capitalized Lease Obligations and Indebtedness of the
Borrower and its Subsidiaries incurred pursuant to purchase money Liens
permitted under Section 8.03(m); provided, that (x) all such
Capitalized Lease Obligations are permitted under Section 8.08 and (y)
the sum of (i) the aggregate Capitalized Lease Obligations plus (ii)
the aggregate principal amount of such purchase money Indebtedness
incurred during any Measurement Period of the Borrower shall not exceed
$1,000,000;
(e) Indebtedness of the Borrower under the Shareholder
Subordinated Notes;
(f) Indebtedness of the Borrower constituting Subordinated
Debt incurred under the respective Subordinated Debt Documents in an
aggregate principal amount not to exceed $6,000,000;
(g) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.05(g);
(h) Indebtedness under Other Hedging Agreements providing
protection against fluctuations in currency values in connection with
the Borrower's or any of its Subsidiaries' operations so long as
management of the Borrower or such Subsidiary, as the case may be, has
determined that the entering into of such Other Hedging Agreements are
bona fide hedging activities;
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(i) Indebtedness of Foreign Subsidiaries to the Borrower or
any of its Domestic Subsidiaries as a result of any investment made
pursuant to Section 8.05(m);
(j) Indebtedness consisting of guaranties (w) by the Borrower
of Indebtedness and leases permitted to be incurred by Wholly-Owned
Domestic Subsidiaries of the Borrower, (x) by Domestic Subsidiaries of
the Borrower of Indebtedness (other than the Subordinated Debt) and
leases permitted to be incurred by the Borrower or other Wholly-Owned
Domestic Subsidiaries of the Borrower, (y) by Foreign Subsidiaries of
Indebtedness and leases permitted to be incurred by other Wholly-Owned
Foreign Subsidiaries of the Borrower and (z) by the Borrower and its
Subsidiaries of Indebtedness of any Foreign Subsidiaries permitted
under Section 8.04(l) below;
(k) Indebtedness of a Subsidiary acquired pursuant to a
Permitted Acquisition (or Indebtedness assumed at the time of a
Permitted Acquisition of an asset securing such Indebtedness), provided
that (i) such Indebtedness was not incurred in connection with, or in
anticipation or contemplation of, such Permitted Acquisition, (ii) such
Indebtedness does not constitute debt for borrowed money, it being
understood and agreed that Capitalized Lease Obligations and purchase
money Indebtedness shall not constitute debt for borrowed money for
purposes of this clause (k), and (iii) at the time of such Permitted
Acquisition such Indebtedness does not exceed 10% of the total value of
the assets of the Subsidiary so acquired, or of the assets so acquired,
as the case may be;
(l) Indebtedness of Foreign Subsidiaries not otherwise
permitted hereunder; provided that (x) the aggregate amount of
Indebtedness permitted under this clause (l) shall not exceed
$1,000,000 at any time outstanding and (y) the aggregate amount of such
Indebtedness, when added to (i) the aggregate outstanding principal
amount of all Intercompany Loans made pursuant to Section 8.05(g) and
(ii) the amount of contributions, capitalizations and forgiveness
theretofore made pursuant to Section 8.05(l), shall not exceed
$2,000,000 at any time (determined without regard to any write-offs or
write-downs of such loans and advances); and
(m) additional Indebtedness of the Borrower and its Domestic
Subsidiaries not otherwise permitted hereunder not exceeding $500,000
in aggregate principal amount at any time outstanding.
8.05 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, or purchase or own a futures contract or otherwise become liable for
the purchase or sale of currency or other commodities at a future date in the
nature of a futures contract, or hold any cash, Cash Equivalents or Foreign Cash
Equivalents, except:
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(a) at any time when no Revolving Loans or Swingline Loans are
then outstanding, the Borrower and its Subsidiaries may invest in cash
and Cash Equivalents; provided that the Borrower and its Subsidiaries
may hold and invest in Cash and Cash Equivalents in an aggregate amount
not to exceed $2,000,000 at any time when Revolving Loans and/or
Swingline Loans are outstanding;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course
of business and payable or dischargeable in accordance with customary
trade terms of the Borrower or such Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own
investments (including debt obligations) received in connection with
the bankruptcy or reorganization of suppliers and customers and in good
faith settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(d) Interest Rate Protection Agreements entered into in
compliance with Section 8.04(c) shall be permitted;
(e) The Borrower may acquire and hold obligations of one or
more officers or other employees of the Borrower or its Subsidiaries in
connection with such officers' or employees' acquisition of shares of
Common Stock so long as no cash is paid by the Borrower or any of its
Subsidiaries in connection with the acquisition of any such
obligations;
(f) deposits made in the ordinary course of business
consistent with past practices to secure the performance of leases
shall be permitted;
(g) the Borrower may make (x) advances to its Foreign
Subsidiaries in the ordinary course of business and consistent with
past practices based on and in connection with the payment by such
Foreign Subsidiaries of operating expenses and, to the extent permitted
by Section 8.08 hereof, Capital Expenditures, in each case of such
Foreign Subsidiaries and (y) intercompany loans and advances to any of
its Subsidiaries, any Subsidiary of the Borrower may make intercompany
loans and advances to the Borrower, and any Subsidiary of the Borrower
may make intercompany loans and advances to any other Subsidiary of the
Borrower (all such loans and advances described in this clause (g)(y),
collectively, "Intercompany Loans"), provided, that (w) at no time
shall the aggregate outstanding principal amount of all Intercompany
Loans made pursuant to this clause (g) by the Borrower and its
Wholly-Owned Domestic Subsidiaries to non-Wholly-Owned Domestic
Subsidiaries and Foreign Subsidiaries, when added to (I) the amount of
contributions, capitalizations and forgiveness theretofore made
pursuant to Section 8.05(l) and (II) the aggregate amount of
Indebtedness of Foreign Subsidiaries permitted under Section 8.04(l)
then outstanding, exceed $2,000,000 (determined without regard to any
write-downs or write-offs of such loans and advances), (x) each
Intercompany Loan made by a Foreign Subsidiary or a non-Wholly- Owned
Domestic Subsidiary to the Borrower or a Wholly-Owned Domestic
Subsidiary of the
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Borrower shall contain the subordination provisions set forth on
Exhibit I, (y) each Intercompany Loan shall be evidenced by an
Intercompany Note and (z) each such Intercompany Note (other than (1)
Intercompany Notes issued by Foreign Subsidiaries of the Borrower to
the Borrower or any of its Domestic Subsidiaries and (2) Intercompany
Notes held by Foreign Subsidiaries of the Borrower, in each case except
to the extent provided in Section 7.13) shall be pledged to the
Collateral Agent pursuant to the Pledge Agreement;
(h) loans and advances by the Borrower and its Subsidiaries to
employees of the Borrower and its Subsidiaries (x) for moving and
travel expenses and other similar expenses, in each case incurred in
the ordinary course of business, in an aggregate outstanding principal
amount not to exceed $250,000 at any time and (y) to finance the
purchase by such employees of Common Stock of the Borrower in the
ordinary course of business in an aggregate outstanding principal
amount not to exceed $60,000 at any time, in each case determined
without regard to any write-downs or write-offs of such loans and
advances, shall be permitted;
(i) Foreign Subsidiaries of the Borrower may invest in Foreign
Cash Equivalents;
(j) Other Hedging Agreements may be entered into in compliance
with Section 8.04(h);
(k) advances, loans and investments in existence on the
Initial Borrowing Date (other than any such loans, advances or
investments described in clause (t) hereof) and listed on Annex XI
shall be permitted, without giving effect to any additions thereto or
replacements thereof;
(l) the Borrower and its Wholly-Owned Domestic Subsidiaries
may make cash capital contributions to non-Wholly-Owned Domestic
Subsidiaries and Foreign Subsidiaries of the Borrower, and may
capitalize or forgive any Indebtedness owed to them by a non-
Wholly-Owned Domestic Subsidiary or Foreign Subsidiary of the Borrower
and outstanding under clause (g)(y) of this Section 8.05, provided that
the aggregate amount of such contributions, capitalizations and
forgiveness, when added to (I) the aggregate outstanding principal
amount of Intercompany Loans made to non-Wholly-Owned Domestic
Subsidiaries and Foreign Subsidiaries under such clause (g) (determined
without regard to any write-downs or write-offs thereof) and (II) the
aggregate amount of Indebtedness of Foreign Subsidiaries permitted
under Section 8.04(l) then outstanding, shall not exceed an amount
equal to $2,000,000;
(m) the Borrower and its Subsidiaries may make investments in
their respective Subsidiaries in connection with the transfers of those
assets permitted to be transferred pursuant to Sections 8.02(j), (k)
and (l), it being understood that the Borrower and its Subsidiaries may
convert any investment initially made as an equity investment to
intercompany Indebtedness held by the Borrower or such Subsidiary;
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(n) the Borrower and its Domestic Subsidiaries may make and
hold investments in their respective Foreign Subsidiaries to the extent
that such investments arise from the sale of inventory in the ordinary
course of business by the Borrower or such Domestic Subsidiary to such
Foreign Subsidiaries for resale by such Foreign Subsidiaries (including
any such investments resulting from the extension of the payment terms
with respect to such sales);
(o) the Borrower and its Subsidiaries may hold additional
investments in their respective Subsidiaries to the extent that such
investments reflect an increase in the value of such Subsidiaries;
(p) the Borrower and its Subsidiaries may make transfers of
assets to their respective Subsidiaries in accordance with Section
8.02(m) and (o);
(q) the Borrower may contribute cash to one or more of its
Wholly-Owned Domestic Subsidiaries formed after the Initial Borrowing
Date in accordance with Section 8.14 so long as the aggregate amount of
such cash so contributed to all such Wholly-Owned Domestic Subsidiaries
does not exceed $2,000,000;
(r) Permitted Acquisitions shall be permitted in accordance
with Section 8.02(r);
(s) the Borrower and its Subsidiaries may acquire and hold
debt securities as partial consideration for a sale of assets pursuant
to Section 8.02(e) or (f) to the extent permitted by any such Section;
(t) so long as no Default or Event of Default then exists or
would result therefrom, the Borrower may make Joint Venture Investments
in Permitted Joint Ventures, provided that the aggregate amount of all
Joint Venture Investments in Permitted Joint Ventures made after the
Initial Borrowing Date pursuant to this clause (t) shall not exceed
$100,000; and
(u) in addition to investments permitted by clauses (a)
through (t) above, the Borrower and its Subsidiaries may make
additional loans, advances and investments to or in a Person (other
than loans, advances or investments, (x) in or to any Permitted Joint
Venture or (y) of the type constituting a permitted existing investment
pursuant to clause (k) of this Section 8.05), so long as the amount of
any such loan, advance or investment (at the time of the making
thereof) does not exceed an amount equal to $200,000 less the aggregate
amount of such $200,000 previously used to make loans, advances and
investments pursuant to this clause (u) to the extent same are then
still outstanding (determined without regard to any write-downs or
write-offs thereof and net of cash repayments of principal in the case
of loans and cash equity returns (whether as a dividend or redemption)
in the case of equity investments) provided, that (1) no single loan,
advance or investment (or series of related loans, advances or
investments) in excess of $100,000 may be made, and (2) neither the
Borrower nor any of its Subsidiaries may make or own any investment in
Margin Stock.
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8.06 Dividends, etc. The Borrower will not, and will not
permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in common stock of the Borrower or any such Subsidiary,
as the case may be) or return any capital to, its stockholders or authorize or
make any other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of its capital
stock, now or hereafter outstanding (or any warrants for or options or stock
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, and the Borrower will not permit any of its
Subsidiaries to purchase or otherwise acquire for consideration any shares of
any class of the capital stock of the Borrower or any other Subsidiary, as the
case may be, now or hereafter outstanding (or any options or warrants or stock
appreciation rights issued by such Person with respect to its capital stock)
(all of the foregoing "Dividends"), except that:
(i) any Subsidiary of the Borrower may pay Dividends to its
stockholders, provided that with respect to Dividends paid by
non-Wholly-Owned Subsidiaries, the Borrower and its Subsidiaries must
receive at least their proportionate share of any Dividends paid by any
such Subsidiary;
(ii) The Borrower may redeem or purchase shares of the Common
Stock or options to purchase Common Stock, respectively, held by former
employees of the Borrower or any of its Subsidiaries following the
termination of their employment, provided that (w) the only
consideration paid by the Borrower in respect of such redemptions
and/or purchases shall be cash and Shareholder Subordinated Notes, (x)
the sum of (A) the aggregate amount paid by the Borrower in cash in
respect of all such redemptions and/or purchases plus (B) the aggregate
amount of all principal and interest payments made on Shareholder
Subordinated Notes, shall not exceed $200,000 in any Measurement Period
of the Borrower, provided that such amount shall be increased by an
amount (not to exceed $500,000 for purposes of this clause (ii)) equal
to the proceeds received by the Borrower after the Initial Borrowing
Date from the sale or issuance of Common Stock to management of the
Borrower or any of its Subsidiaries and (y) at the time of any cash
payment permitted to be made pursuant to this Section 8.06(ii),
including any cash payment under a Shareholder Subordinated Note, no
Default or Event of Default shall then exist or result therefrom;
8.07 Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any transaction or series
of transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to the Borrower or such
Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time
in a comparable arm's-length transaction with a Person other than an Affiliate;
provided, that the following shall in any event be permitted: (i) the
Transaction; (ii) the payment on the Initial Borrowing Date of the reasonable
out-of-pocket expenses incurred by Bain Capital, Sun Capital and/or their
respective Affiliates in providing services to the Borrower in connection with
the Transaction; (iii) so long as no Default or an Event of Default then exists,
the payment, on a quarterly basis, of management fees (each, a "Management Fee")
to Bain Capital, the Bain Affiliates and/or Sun
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Capital and the Sun Affiliates in an aggregate amount (for all such Persons
taken together) not to exceed $125,000 in any fiscal quarter of the Borrower
unless such amount was not paid in any prior fiscal quarter in which case such
amount can be paid, together with accrued interest thereon in a subsequent
fiscal quarter so long as no Default or Event of Default exists or would result
therefrom; provided that (x) on any date on which any such Management Fee is
paid, the Adjusted Leverage Ratio on such date shall be equal to or less than
4:1 and (y) no such management fees shall be paid prior to the fiscal quarter
beginning April 1, 1998 (although prior to that time such fees may accrue,
together with interest thereon, and such accrued fees may be paid after March
31, 1998 if the foregoing conditions are satisfied at the time of payment); (iv)
the reimbursement of Bain Capital, the Bain Affiliates and/or Sun Capital and
the Sun Affiliates for their reasonable out-of-pocket expenses incurred by them
in connection with performing management services to the Borrower and its
Subsidiaries under the Consulting Agreement; and (v) transactions permitted
under Section 8.05.
8.08 Capital Expenditures. (a) The Borrower will not, and will
not permit any of its Subsidiaries to, make any Capital Expenditures, except
that (x) during the period (taken as one accounting period) commencing on the
Initial Borrowing Date and ending on March 31, 1998, the Borrower and its
Subsidiaries may make Capital Expenditures so long as the amount thereof does
not exceed $1,900,000 during such period, and (y) subject to clause (b) below,
during any Measurement Period thereafter set forth below, the Borrower and its
Subsidiaries may make Capital Expenditures so long as the aggregate amount of
such Capital Expenditures does not exceed the amount set forth opposite such
Measurement Period below:
Measurement Period Ending Amount
- ------------------------- ------
March 31, 1999 $2,200,000
March 31, 2000 $2,200,000
March 31, 2001 $2,200,000
March 31, 2002 $2,200,000
March 31, 2003 $2,200,000
March 31, 2004 $2,200,000
Term Loan Maturity Date $2,200,000
(b) Notwithstanding the foregoing, in the event that the
amount of Capital Expenditures permitted to be made by the Borrower and its
Subsidiaries pursuant to clause (a) above in any Measurement Period (before
giving effect to any increase in such permitted expenditure amount pursuant to
this clause (b)) is greater than the amount of such Capital Expenditures made by
the Borrower and its Subsidiaries during such Measurement Period, such excess
(the "Rollover Amount") may be carried forward and utilized to make Capital
Expenditures in succeeding Measurement Periods, provided that in no event shall
the aggregate amount of Capital Expenditures made by the Borrower and its
Subsidiaries during any Measurement Period pursuant to Section 8.08(a) exceed
125% of the amount set forth in such Section 8.08(a).
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(c) Notwithstanding the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures (which Capital Expenditures will not
be included in any determination under the foregoing clause (a)) with the
insurance proceeds received by the Borrower or any of its Subsidiaries from any
Recovery Event so long as such Capital Expenditures are to replace or restore
any properties or assets in respect of which such proceeds were paid within 360
days following the date of the receipt of such insurance proceeds to the extent
such insurance proceeds are not required to be applied to repay Term Loans
pursuant to Section 4.02(A)(g) and are not used by the Borrower to effect
Permitted Acquisitions.
(d) Notwithstanding the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures (which Capital Expenditures will not
be included in any determination under the foregoing clause (a)) with the Net
Proceeds of Asset Sales, to the extent such Net Proceeds are not required to be
applied to repay Term Loans pursuant to Section 4.02(A)(c).
(e) Notwithstanding the foregoing, the Borrower may make
Capital Expenditures (which Capital Expenditures will not be included in any
determination under the foregoing clause (a)) constituting Permitted
Acquisitions.
(f) Notwithstanding the foregoing, the Borrower and its
Subsidiaries may make Capital Expenditures at any time in an aggregate amount
equal to the Excess Proceeds Amount at such time (which Capital Expenditures
will not be included in any determination under the foregoing clause (a)).
8.09 Minimum Consolidated EBITDA. The Borrower will not permit
Consolidated EBITDA for the fiscal quarter of the Borrower ending December 31,
1997 (taken as one accounting period), to be less than $1,700,000, (x) for the
two fiscal quarters of the Borrower ending March 31, 1998 (taken as one
accounting period), to be less than $3,400,000, (y) for the three fiscal
quarters of the Borrower ending June 30, 1998 (taken as one accounting period),
to be less than $4,800,000, and (z) thereafter, for any period of four fiscal
quarters (taken as one accounting period) ending on a date set forth below to be
less than the amount set forth opposite such date:
Minimum Consolidated
Date EBITDA
- ---- -----------------
September 30, 1998 $ 6,900,000
December 31, 1998 $ 7,300,000
March 31, 1999 $ 6,900,000
June 30, 1999 $ 7,200,000
September 30, 1999 $ 7,700,000
December 31, 1999 $ 8,200,000
March 31, 2000 $ 8,500,000
June 30, 2000 $ 8,800,000
September 30, 2000 $ 9,200,000
December 31, 2000 $ 9,600,000
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Minimum Consolidated
Date EBITDA
- ---- -----------------
March 31, 2001 $ 9,900,000
June 30, 2001 $10,300,000
September 30, 2001 $10,700,000
December 31, 2001 $11,200,000
March 31, 2002 $11,600,000
June 30, 2002 $11,900,000
September 30, 2002 $12,500,000
December 31, 2002 $13,100,000
March 31, 2003 $13,500,000
June 30, 2003 $13,900,000
September 30, 2003 $14,600,000
December 31, 2003 $15,300,000
March 31, 2004 $15,800,000
June 30, 2004 $16,300,000
September 30, 2004 $17,000,000
8.10 Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio for any Test Period ending on a date set forth below to
be less than the amount set forth opposite such date:
Date Interest Coverage Ratio
- ---- -----------------------
December 31, 1997 2.1:1.0
March 31, 1998 2.1:1.0
June 30, 1998 2.0:1.0
September 30, 1998 2.1:1.0
December 31, 1998 2.2:1.0
March 31, 1999 2.1:1.0
June 30, 1999 2.1:1.0
September 30, 1999 2.3:1.0
December 31, 1999 2.4:1.0
March 31, 2000 2.5:1.0
June 30, 2000 2.6:1.0
September 30, 2000 2.7:1.0
December 31, 2000 2.8:1.0
March 31, 2001 2.9:1.0
June 30, 2001 3.0:1.0
September 30, 2001 3.1:1.0
December 31, 2001 3.2:1.0
March 31, 2002 3.3:1.0
June 30, 2002 3.4:1.0
September 30, 2002 3.6:1.0
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Date Interest Coverage Ratio
- ---- -----------------------
December 31, 2002 3.8:1.0
March 31, 2003 3.9:1.0
June 30, 2003 4.0:1.0
September 30, 2003 4.2:1.0
December 31, 2003 4.4:1.0
March 31, 2004 4.6:1.0
June 30, 2004 4.8:1.0
September 30, 2004 5.0:1.0
8.11 Leverage Ratio. The Borrower will not permit the Leverage
Ratio at any time during a fiscal quarter set forth below to be more than the
ratio set forth opposite such fiscal quarter:
Fiscal Quarter Ending Ratio
- --------------------- ------
March 31, 1998 5.7:1.0
June 30, 1998 5.6:1.0
September 30, 1998 5.9:1.0
December 31, 1998 5.5:1.0
March 31, 1999 5.2:1.0
June 30, 1999 5.5:1.0
September 30, 1999 5.2:1.0
December 31, 1999 4.9:1.0
March 31, 2000 4.6:1.0
June 30, 2000 4.4:1.0
September 30, 2000 4.3:1.0
December 31, 2000 4.1:1.0
March 31, 2001 3.9:1.0
June 30, 2001 3.9:1.0
September 30, 2001 3.7:1.0
December 31, 2001 3.6:1.0
March 31, 2002 3.4:1.0
June 30, 2002 3.3:1.0
September 30, 2002 3.2:1.0
December 31, 2002 3.1:1.0
March 31, 2003 3.0:1.0
June 30, 2003 2.9:1.0
September 30, 2003 2.8:1.0
December 31, 2003 2.6:1.0
March 31, 2004 2.5:1.0
June 30, 2004 2.5:1.0
Term Loan Maturity Date 2.5:1.0
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8.12 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
Other Agreements; etc. The Borrower will not, and will not permit any of its
Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption or acquisition for
value of (including, without limitation, by way of depositing with the
trustee with respect thereto or any other Person money or securities
before due for the purpose of paying when due) any Existing
Indebtedness or any Subordinated Debt.
(ii) make (or give any notice in respect of) any principal or
interest payment on, or any redemption or acquisition for value of, any
Shareholder Subordinated Note, except to the extent permitted by
Section 8.06(ii);
(iii) amend or modify, or permit the amendment or modification
of, any provision of any Existing Indebtedness, any Existing
Indebtedness Agreement, any Subordinated Debt Document, or any
Shareholder Subordinated Note;
(iv) amend, modify or change in any way adverse to the
interests of the Banks, any Management Agreement (including, without
limitation, the Consulting Agreement), its Certificate of Incorporation
(including, without limitation, by filing or modification of any
certificate of designation or By-Laws, or any agreement entered into by
it, with respect to its capital stock (including any Shareholders'
Agreement (including, without limitation, the Stockholders Agreement)),
or enter into any new agreement with respect to its capital stock which
in any way could be adverse to the interests of the Banks or enter into
any Tax Allocation Agreement;
(v) issue any class of capital stock other than issuances of
the Common Stock where, after giving effect to such issuance, no Event
of Default will exist under Section 9.10 and to the extent the proceeds
thereof are applied in accordance with, and to the extent required by,
Sections 4.02(A)(d).
8.13 Limitation on Certain Restrictions on Subsidiaries. The
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by the Borrower or any Subsidiary
of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of
the Borrower other then a requirement pursuant to the Subordinated Loan
Agreement providing that all dividends or other distributions in respect of the
capital stock of any Subsidiary of the Borrower be paid on a pro rata basis to
all holders of such capital stock, (b) make loans or advances to the Borrower or
any of the Borrower's Subsidiaries or (c) transfer any of its properties or
assets to the Borrower or any of the Borrower's Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) applicable law,
(ii) this
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Agreement and the other Credit Documents, (iii) customary provisions restricting
subletting or assignment of any lease governing a leasehold interest of the
Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting
assignment of any licensing agreement entered into by the Borrower or a
Subsidiary of the Borrower in the ordinary course of business, (v) customary
provisions restricting the transfer of assets subject to Liens permitted under
Sections 8.03(k) and (m) and (vi) the Subordinated Debt Documents.
8.14 Limitation on the Creation of Subsidiaries.
Notwithstanding anything to the contrary contained in this Agreement, the
Borrower will not, and will not permit any of its Subsidiaries to, establish,
create or acquire after the Initial Borrowing Date any Subsidiary; provided
that, the Borrower and its Wholly-Owned Subsidiaries shall be permitted to
establish or create (x) Subsidiaries as a result of investments made pursuant to
Section 8.05(u); (y) Subsidiaries in connection with, or pursuant to, a
Permitted Acquisition as set forth in Section 8.02(r), and (z) other
Wholly-Owned Subsidiaries, in each case, so long as (i) at least 30 days' prior
written notice thereof is given to the Agent, (ii) the capital stock of such new
Subsidiary is pledged pursuant to, and to the extent required by, the Pledge
Agreement and the certificates representing such stock, together with stock
powers duly executed in blank, are delivered to the Collateral Agent, (iii) such
new Subsidiary (other than a Foreign Subsidiary except to the extent otherwise
required pursuant to Section 7.13) executes a counterpart of the Subsidiary
Guaranty, the Pledge Agreement and the Security Agreement, and (iv) to the
extent requested by the Agent or the Required Banks, takes all actions required
pursuant to Section 7.11. In addition, each new Subsidiary shall execute and
deliver, or cause to be executed and delivered, all other relevant documentation
of the type described in Section 5 as such new Subsidiary would have had to
deliver if such new Subsidiary were a Subsidiary of the Borrower on the Initial
Borrowing Date.
SECTION 9. Events of Default. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii)default, and such default shall
continue for three or more days, in the payment when due of any Unpaid Drawing,
any interest on the Loans or any Fees or any other amounts owing hereunder or
under any other Credit Document;
9.02 Representations, etc. Any representation, warranty or
statement made by the Borrower or any other Credit Party herein or in any other
Credit Document or in any statement or certificate delivered pursuant hereto or
thereto shall prove to be untrue in any material respect on the date as of which
made or deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Sections 7.10, 7.11 or 8, or (b) default in the due performance or observance by
it of any term, covenant or agreement (other than those referred to in Section
9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement
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and such default shall continue unremedied for a period of at least 30 days
after notice to the defaulting party by the Agent or the Required Banks; or
9.04 Default Under Other Agreements. (a)The Borrower or any of
its Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the Obligations) beyond the period of grace, if any,
provided in the instrument or agreement under which Indebtedness was created or
(ii) default in the observance or performance of any agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause any such Indebtedness to
become due prior to its stated maturity; or (b) any Indebtedness (other than the
Obligations) of the Borrower or any of its Subsidiaries shall be declared to be
due and payable, or shall be required to be prepaid other than by a regularly
scheduled required prepayment or as a mandatory prepayment (unless such required
prepayment or mandatory prepayment results from a default thereunder or an event
of the type that constitutes an Event of Default), prior to the stated maturity
thereof; provided, that it shall not constitute an Event of Default pursuant to
clause (a) or (b) of this Section 9.04 unless the principal amount of any one
issue of such Indebtedness, or the aggregate amount of all such Indebtedness
referred to in clauses (a) and (b) above, exceeds $1,000,000 at any one time; or
9.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy," as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Borrower or any of its Subsidiaries and the petition is not
controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower or any of its Subsidiaries; or the Borrower or any of its
Subsidiaries commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to the Borrower or any of its Subsidiaries; or there is
commenced against the Borrower or any of its Subsidiaries any such proceeding
which remains undismissed for a period of 60 days; or the Borrower or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or the Borrower or
any of its Subsidiaries suffers any appointment of any custodian or the like for
it or any substantial part of its property to continue undischarged or unstayed
for a period of 60 days; or the Borrower or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by the Borrower or any of its Subsidiaries for the purpose of effecting
any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension of
any amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred,
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a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) or a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph
(b)(1) thereof) and any event described in subsection .62, .63, .64, .65, .66,
.67 and .68 of PBGC Regulation Section 4043 shall be reasonably expected to
occur with respect to such Plan within the following 30 days, any Plan which is
subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan which is subject to Title IV of
ERISA is, shall have been or is likely to be terminated or the subject of
termination proceedings under ERISA, any Plan shall have an Unfunded Current
Liability, a contribution required to be made to a Plan or a Foreign Pension
Plan has not been timely made, the Borrower or any Subsidiary of the Borrower or
any ERISA Affiliate has incurred or is likely to incur a liability to or on
account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the
Code or on account of a group health plan (as defined in Section 607(1) of ERISA
or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or the
Borrower or any Subsidiary of the Borrower has incurred or is likely to incur
liabilities pursuant to one or more employee welfare benefit plans (as defined
in Section 3(1) of ERISA) that provide benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or Plans or
Foreign Pension Plans; (b) there shall result from any such event or events te
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) which lien, security interest or
liability, individually, and/or in the aggregate, has had or is reasonably
likely to have, a Material Adverse Effect; or
9.07 Security Documents. (a)Except in each case to the extent
resulting from the failure of the Collateral Agent to retain possession of the
applicable Pledged Securities, any Security Document shall cease to be in full
force and effect, or shall cease to give the Collateral Agent the Liens, rights,
powers and privileges purported to be created thereby in favor of the Collateral
Agent, or (b)any Credit Party shall default in the due performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to any such Security Document and such default shall continue beyond
any cure or grace period specifically applicable thereto pursuant to the terms
of such Security Document, provided that, it shall not constitute an Event of
Default under this Section 9.07 to the extent that all such events and defaults
shall relate only to Security Agreement Collateral having an aggregate value not
exceeding $100,000; or
9.08 Subsidiary Guaranties. At any time after execution
thereof, any Subsidiary Guaranty entered into pursuant to this Agreement or any
provision thereof shall cease to be in full force and effect, or any Subsidiary
Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor
shall deny or disaffirm such Subsidiary Guarantor's obligations under any
Subsidiary Guaranty or any Subsidiary Guarantor shall default in the due
performance or observance of any material term, covenant or agreement on its
part to be performed or observed pursuant to any Subsidiary Guaranty;
9.09 Judgments. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving a liability
(not paid or not fully covered by insurance) in excess of $1,000,000 for all
such judgments and decrees and all such judgments or decrees shall
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not have been vacated, discharged or stayed or bonded pending appeal within 60
days from the entry thereof; or
9.10 Ownership. A Change of Control Event shall have occurred;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent shall, upon the written request of the
Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Subsidiary Guarantor or the Borrower, except as
otherwise specifically provided for in this Agreement (provided, that if an
Event of Default specified in Section 9.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by the
Agent as specified in clauses (i) and (ii) below shall occur automatically
without the giving of any such notice): (i) declare the Total Commitment (or the
unutilized portion thereof) terminated, whereupon the Commitment of each Bank
(or the unutilized portion thereof) shall forthwith terminate immediately and
any Commitment Fees shall forthwith become due and payable without any other
notice of any kind; (ii) declare the principal of and any accrued interest in
respect of all Loans and all Obligations owing hereunder (including Unpaid
Drawings) to be, whereupon the same shall become, forthwith due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct
the Collateral Agent to enforce), any or all of the Liens and security interests
created pursuant to the Security Documents; (iv) terminate any Letter of Credit
which may be terminated in accordance with its terms; and (v) direct the
Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or
upon the occurrence of any Event of Default specified in Section 9.05, to pay)
to the Collateral Agent at the Payment Office such additional amounts of cash,
to be held as security for the Borrower's reimbursement obligations in respect
of Letters of Credit then outstanding, equal to the aggregate Stated Amount of
all Letters of Credit then outstanding.
SECTION 10. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Acquired Entity or Business" shall have the meaning provided
in the definition of Consolidated Net Income.
"Additional Security Documents" shall have the meaning
provided in Section 7.11.
"Adjusted Leverage Ratio" shall mean, at each time when a
determination is made as to whether a Management Fee may be paid pursuant to
Section 8.07(iii), the ratio of (x) Consolidated Debt at such time less the
aggregate amount of Subordinated Debt at such time to (y) Consolidated EBITDA
for the four consecutive fiscal quarters of the Borrower then last ended.
"Affected Eurodollar Loans" shall have the meaning provided in
Section 4.02(B)(b).
"Affiliate" shall mean, with respect to any Person, any other
Person directly or
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indirectly controlling (including but not limited to all directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person. A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power (i) to vote 10% or more of the
securities having ordinary voting power for the election of directors of such
corporation or (ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph
of this Agreement and shall include any successor to the Agent appointed
pursuant to Section 11.10.
"Aggregate Unutilized Commitment" with respect to any Bank at
any time shall mean the sum of (i) such Bank's Term Loan Commitment at such
time, if any, and (ii) such Bank's Revolving Loan Commitment at such time less
the sum of (x) the aggregate outstanding principal amount of all Revolving Loans
made by such Bank and (y) such Bank's RL Percentage of the Letter of Credit
Outstandings at such time.
"Agreement" shall mean this Credit Agreement, as the same may
be from time to time modified, amended and/or supplemented.
"Applicable Base Rate Margin" shall mean (i) in the case of
Term Loans, 2.00% and (ii) in the case of Revolving Loans, 1.50%.
"Applicable Eurodollar Margin" shall mean (i) in the case of
Term Loans, 3% and (ii) in the case of Revolving Loans, 2.50%.
"Asset Sale" shall mean any sale, transfer or other
disposition by the Borrower or any of its Subsidiaries to any Person other than
any Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person) of the
Borrower or such Subsidiary other than (i) sales, transfers or other
dispositions of inventory made in the ordinary course of business and (ii) sales
of assets pursuant to Section 8.02(f), (g), (h) and (i).
"Assignment and Assumption Agreement" shall mean the
Assignment and Assumption Agreement substantially in the form of Exhibit J
(appropriately completed).
"Authorized Officer" shall mean any senior officer of the
Borrower designated as such in writing to the Agent the Borrower, in each case
to the extent reasonably acceptable to the Agent.
"Bain Affiliates" shall mean any Affiliate (including any
employee) of Bain Capital, provided that for purposes of the definition of
"Change of Control Event", the term Bain Affiliate shall not include (x) any
portfolio company of either Bain Capital or any Affiliate of Bain Capital or (y)
any officer or director of the Borrower or any of its Subsidiaries that is not
also a partner, stockholder, employee or officer of Bain Capital.
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"Bain Capital" shall mean Bain Capital, Inc., a Delaware
corporation.
"Bank" shall have the meaning provided in the first paragraph
of this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.04(b) or (ii) a Bank having notified the Agent and/or the
Borrower that it does not intend to comply with the obligations under Section
1.01(A), 1.01(C) or 2.04(b), in the case of either clause (i) or (ii) above as a
result of the appointment of a receiver or conservator with respect to such Bank
at the direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section
9.05.
"Base Rate" at any time shall mean the higher of (x) the Prime
Lending Rate and (y) 1/2 of 1% in excess of the overnight Federal Funds rate.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Borrower" shall have the meaning provided in the first
paragraph hereof.
"Borrowing" shall mean the incurrence of one Type of Loan
pursuant to a single Facility by the Borrower from all of the Banks having
Commitments with respect to such Facility on a pro rata basis on a given date
(or resulting from conversions on a given date), having in the case of
Eurodollar Loans the same Interest Period; provided, that Base Rate Loans
incurred pursuant to Section 1.10(b) shall be considered part of any related
Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual
capacity, and any successor corporation thereto by merger, consolidation or
otherwise.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Expenditures" shall mean, with respect to any Person,
all expenditures by such Person which should be capitalized as property, plant
and equipment or leasehold improvements in accordance with GAAP, including,
without duplication, all such expenditures with respect to fixed or capital
assets (including, without limitation, expenditures for maintenance and repairs
which should
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be capitalized and/or depreciated or amortized in accordance with GAAP) and all
amounts related to "Deferred Charges" as set forth in the Borrower's audited
financial statements and the amount of all Capitalized Lease Obligations
incurred by such Person, provided that, in the event that any amounts which
would have been capitalized as "Deferred Charges" as accounted for by the
Borrower as of the Effective Date are retroactively or prospectively expensed
due to an accounting change or mandated by a change in GAAP, such expensed
amounts shall nevertheless constitute Capital Expenditures for all purposes of
this Agreement.
"Capital Lease," as applied to any Person, shall mean any
lease of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligations" shall mean all obligations
under Capital Leases of the Borrower or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided, that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers acceptances of
(x) any Bank or (y) any bank whose short-term commercial paper rating from S&P
is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case
with maturities of not more than six months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P or
Moody's, as the case may be, and in each case maturing within six months after
the date of acquisition, (iv) marketable direct obligations issued by any state
of the United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within six months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's and (v) investments in
money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Change of Control Event" shall mean (a) prior to the date of
a Qualified IPO, Bain Capital and/or the Bain Affiliates and Sun Capital and/or
Sun Affiliates shall cease to have the right, directly or indirectly to elect a
majority of the Board of Directors through stock ownership, voting agreement or
otherwise or (b) on or after the date of a Qualified IPO, any other Person or
"group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as in effect on the Initial Borrowing Date) shall own at
least 30% of the Voting Stock and Bain Capital, the Bain
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Affiliates, Sun Capital and/or the Sun Affiliates shall, directly or indirectly
control less Voting Stock than such Person or "group".
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in
each of the Security Documents.
"Collateral Agent" shall mean the Agent acting as collateral
agent for the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning
provided in Section 5.17.
"Commitment" shall mean, with respect to each Bank, such
Bank's Term Loan Commitment and Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section
3.01(a).
"Common Stock" shall have the meaning provided in Section
6.15.
"Consolidated Current Assets" shall mean, at any time, the
current assets of the Borrower and its Subsidiaries at such time determined on a
consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time,
the current liabilities of the Borrower and its Subsidiaries determined on a
consolidated basis, but excluding deferred income taxes and the current portion
of and accrued but unpaid interest on any Indebtedness under this Agreement and
any other long-term Indebtedness which would otherwise be included therein.
"Consolidated Debt" shall mean, at any time, all Indebtedness
of Borrower and its Subsidiaries determined on a consolidated basis, provided
that for purposes of this definition, the amount of Indebtedness in respect of
Interest Rate Protection Agreements shall be at any time the unrealized net loss
portion, if any, of the Borrower and/or its Subsidiaries thereunder on a
marked-to- market basis determined no more than one month prior to such time.
"Consolidated EBIT" shall mean, for any period, Consolidated
Net Income, before total interest expense (inclusive of amortization of deferred
financing fees, premiums on Interest Rate Protection Agreements and any original
issue discount) and interest income of the Borrower and its Subsidiaries
determined on a consolidated basis, and provisions for taxes based on income and
foreign withholding taxes, and determined (i) without giving effect to any
extraordinary gains or losses but with giving effect to gains or losses from
sales of assets sold in the ordinary course of business, (ii)
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without giving effect to any gains, income, losses or charges otherwise included
in Consolidated Net Income for such period and related to a Joint Venture
Investment made by the Borrower or any of its Subsidiaries, (iii) without giving
effect to any non-cash compensation expense with respect to management
restricted stock and stock option arrangements, and (iv) to the extent any
amounts which would have been capitalized as "Deferred Charges" as accounted for
by the Borrower as of the Effective Date are retroactively or prospectively
expensed due to any accounting change or mandated by a change in GAAP, without
giving effect to deduction for such expenses.
"Consolidated EBITDA" shall mean, for any period, Consolidated
EBIT, adjusted by adding thereto the amount of all depreciation expense and
amortization expense that were deducted in determining Consolidated EBIT for
such period; provided that for purposes of the definition of Leverage Ratio
only, (x) for the Test Period ending December 31, 1997, Consolidated EBITDA
shall be the actual Consolidation EBITDA for such Test Period multiplied by 4,
(y) for the Test Period ending March 31, 1998, Consolidated EBITDA shall be the
actual Consolidated EBITDA for such Test Period multiplied by 2, and (z) for the
Test Period ending June 30, 1998, Consolidated EBITDA shall be the actual
Consolidated EBITDA for such Test Period multiplied by 4/3.
"Consolidated Interest Expense" shall mean, for any period,
total interest expense (including that attributable to Capital Leases in
accordance with GAAP) of the Borrower and its Subsidiaries determined on a
consolidated basis with respect to all outstanding Indebtedness of the Borrower
and its Subsidiaries, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and net costs or benefits under Interest Rate Protection
Agreements, but excluding, however, amortization of deferred financing costs,
original issue discount attributable to the Subordinated Debt and any interest
expense on deferred compensation arrangements to the extent included in total
interest expense.
"Consolidated Net Income" shall mean, for any period, the net
income (or loss), after provision for taxes, of the Borrower and its
Subsidiaries on a consolidated basis for such period taken as a single
accounting period but excluding any unrealized losses and gains for such period
resulting from mark-to-market of Other Hedging Agreements; provided, however,
that (A) there shall be excluded (without duplication) (i) income (or loss) of
any Person (other than a consolidated Subsidiary of such Person) in which any
other Person (other than such Person or any of its consolidated Subsidiaries)
has a joint interest, except to the extent of the amount of dividends or other
distributions actually paid to such Person or (subject to subclause (iii) below)
any of its consolidated Subsidiaries by such other Person during such period,
(ii) the income (or loss) of any Person during such period accrued prior to the
date it becomes a consolidated Subsidiary of such Person or is merged into or
consolidated with such Person or any of its consolidated Subsidiaries, (iii) the
income of any consolidated Subsidiary of the Borrower to the extent attributable
to minority interests held therein by Persons other than the Borrower and its
Wholly-Owned Subsidiaries, and (iv) the income of any consolidated Subsidiary of
the Borrower during such period to the extent that the declaration or payment of
dividends or similar distributions by that consolidated Subsidiary of such
income is not at the time permitted by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that
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Subsidiary or the Borrower or any of its other Subsidiaries, (B) for all
purposes other than the calculation of Adjusted Leverage Ratio, Management Fees
shall be deducted in determining Consolidated Net Income in any period only to
the extent that such Management Fees were actually paid in such period, (C)
there shall be included (to the extent not already included) in determining
Consolidated Net Income for any period the net income (or loss) of any Person,
business, property or asset acquired during such period pursuant to a Permitted
Acquisition and not subsequently sold or otherwise disposed of by the Borrower
or one of its Subsidiaries during such period (each Person, business, property
or asset acquired and not subsequently disposed of during such period, an
"Acquired Entity or Business") based on the actual net income (or loss) of such
Acquired Entity or Business for the entire period (including the portion thereof
occurring prior to such acquisition) and (D) for purposes of calculating
Consolidated Net Income for any period, Consolidated Net Income shall be
adjusted for factually supportable and identifiable pro forma cost savings for
such period that are directly attributable to the acquisition of an Acquired
Entity or Business (it being understood that in order for the Borrower to adjust
Consolidated Net Income pursuant to this clause (D), the Borrower shall deliver
to the Agent and the Banks a certificate of an Authorized Officer demonstrating
in reasonable detail such factually supportable and identifiable cost savings).
"Consulting Agreement" shall mean the Management Services
Agreement, dated as of the Initial Borrowing Date by and between the Borrower
and Sun Multimedia Advisors Inc., as amended, modified or supplemented from time
to time, in accordance with the terms hereof and thereof.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection or standard contractual
indemnities entered into, in each case in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the
Borrower on the Initial Borrowing Date and each other director if such
director's nomination for the election to the Board of Directors of the Borrower
is recommended by a majority of the then Continuing Directors.
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"Credit Documents" shall mean this Agreement, the Notes, the
Subsidiary Guaranties and each Security Document.
"Credit Event" shall mean the making of a Loan (other than a
Revolving Loan made pursuant to a Mandatory Borrowing) or the issuance of a
Letter of Credit.
"Credit Party" shall mean the Borrower and each Subsidiary
Guarantor.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Dividends" shall have the meaning provided in Section 8.06.
"Documents" shall mean the Credit Documents, the Equity
Financing Documents, the Merger Documents, the Subordinated Financing Documents
and the Refinancing Documents.
"Domestic Subsidiary" shall mean each Subsidiary of the
Borrower which is not a Foreign Subsidiary.
"Effective Date" shall have the meaning provided in Section
12.10.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other "accredited investor" (as defined in
Regulation D of the Securities Act).
"Employee Benefit Plans" shall have the meaning provided in
Section 5.17.
"Employment Agreements" shall have the meaning provided in
Section 5.17.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any violation (or alleged violation) by the Borrower or any of its
Subsidiaries under any Environmental Law (hereafter "Claims") or any permit
issued to the Borrower or any of its subsidiaries under any such law, including,
without limitation, (a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
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"Environmental Law" shall mean any federal, state or local
statute, law, rule, regulation, ordinance, code, policy or rule of common law
now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment (for purposes of this definition
(collectively, "Laws")), relating to the environment or Hazardous Materials or
health and safety to the extent such health and safety issues arise under the
Occupational Safety and Health Act of 1970, as amended, or any such similar
Laws.
"Equinox" shall mean Equinox Investment Partners, L.L.C. a
Delaware limited liability company.
"Equity Financing" shall mean the issuance by Speaker, for an
aggregate cash amount of at least $4,450,000, of certificates representing 3,000
shares of its common stock, par value $0.01, to Bain Capital, Sun Capital,
Equinox and/or their respective Affiliates and certain other investors
reasonably acceptable to the Agent and the receipt of at least $350,000 in
respect of the issuance of shares of Common Stock to management of the Borrower
which receipt shall occur on the Initial Borrowing Date or within 90 days
thereafter.
"Equity Financing Documents" shall mean Stock Subscription
Agreement between Speaker and Sun Multimedia Partners, L.P. and each other
agreement, document and instrument entered into in connection with the Equity
Financing.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder. Section references to ERISA are to ERISA as in effect
at the date of this Agreement and any subsequent provisions of ERISA amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or any Subsidiary of the
Borrower would be deemed to be a "single employer" (i) within the meaning of
Section 414(b), (c), (m) or (o) of the Code or (ii) as a result of the Borrower
or a Subsidiary of the Borrower being or having been a general partner of such
person.
"Eurodollar Loans" shall mean each Loan bearing interest at
the rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest
Period for a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest
1/100 of 1%) of the offered quotation to first-class banks in the interbank
Eurodollar market by the Agent for U.S. dollar deposits of amounts in same day
funds comparable to the outstanding principal amount of the Eurodollar Loan of
the Agent for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Eurodollar Loan,
determined as of 10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to
100% minus
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the then stated maximum rate of all reserve requirements (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency liabilities as defined in Regulation D (or any successor category
of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section
9.
"Excess Cash Flow" shall mean, for any period (i) the sum of
(A) Consolidated Net Income for such period, plus (B) the amount of all non-cash
charges (including, without limitation or duplication, depreciation,
amortization and non-cash interest expense, but excluding those non-cash charges
that had the effect of decreasing or increasing Working Capital for such period)
included in determining Consolidated Net Income for such period plus (C) the
decrease, if any, in Working Capital from the first day to the last day of such
period, minus (ii) the sum (without duplication) of (A) any non-cash credits
(including from sales of assets) included in determining Consolidated Net Income
for such period, (B) gains from sales of assets (other than sales of inventory
in the ordinary course of business) included in determining Consolidated Net
Income for such period, (C) an amount equal to (1) all Capital Expenditures
(excluding Capital Expenditures made pursuant to Section 8.08(c), (d), (e) or
(f)) made during such period that are not financed by Indebtedness (including
Capitalized Lease Obligations but excluding Loans hereunder) plus (or minus, if
negative) (2) the Rollover Amount for such period to be carried forward to the
next period less the Rollover Amount (if any) for the preceding period carried
forward to the current period, (D) the amount expended in respect of Permitted
Acquisitions during such period, except to the extent constituting Capital
Expenditures or financed with Indebtedness, (E) the aggregate principal amount
of permanent principal payments of Indebtedness for borrowed money of the
Borrower and its Subsidiaries (other than (1) repayments in respect of the
Indebtedness to be Refinanced, (2) repayments of Indebtedness with proceeds of
the issuance of other Indebtedness or equity or with proceeds of assets sales,
Recovery Events or Pension Plan Refunds and (3) repayments of Loans or other
Obligations, provided that repayments of Loans shall be deducted in determining
Excess Cash Flow if such repayments were (x) required as a result of a Scheduled
Repayment under Section 4.02(A)(b) or (y) made as a voluntary prepayment with
internally generated funds (but in the case of a voluntary prepayment of
Revolving Loans or Swingline Loans, only to the extent accompanied by a
voluntary reduction to the Total Revolving Loan Commitment)) during such period,
(F) non-cash charges added back in a previous period pursuant to clause (i)(B)
above to the extent any such charge has become a cash item in the current
period, (G) the increase, if any, in Working Capital from the first day to the
last day of such period, (H) any cash disbursements made against non-current
liabilities to the extent included in determining Consolidated Net Income for
such period or, to the extent added back in determining Excess Cash Flow in such
prior period pursuant to clause (i)(B) above, any prior period and (I) to the
extent not already deducted in the determination of Consolidated Net Income or
Excess Cash Flow, the aggregate amount of cash payments in respect of Joint
Venture Investments made during such period, except to the extent financed with
Indebtedness.
"Excess Cash Flow Period" shall mean with respect to the
repayment required on each Excess Cash Payment Date, the immediately preceding
Measurement Period of the Borrower.
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"Excess Cash Payment Date" shall mean the date occurring 90
days after the last day of a Measurement Period of the Borrower (beginning with
its Measurement Period ending on March 31, 1998).
"Excess Proceeds Amount" shall initially be zero, which amount
shall be (A) increased on each Excess Cash Payment Date (commencing with the
Excess Cash Payment Date occurring 90 days after the Measurement Period ending
March 31, 1998) so long as any repayment required pursuant to Section 4.02(A)(f)
has been made, by an amount equal to 25% of Excess Cash Flow of the Borrower and
its Subsidiaries for the immediately preceding Excess Cash Flow Period, and (B)
reduced (i) on each Excess Cash Payment Date (commencing with the Excess Cash
Payment Date occurring 90 days after the Measurement Period ending March 31,
1998) where Excess Cash Flow for the immediately preceding Excess Cash Flow
Period is a negative number, by such amount, and (ii) at the time any Capital
Expenditure is made pursuant to Section 8.08(f), by the amount thereof (it being
understood that the Excess Proceeds Amount may be reduced to an amount below
zero after giving effect to the reductions enumerated in clause (B) above).
"Existing Credit Agreement" shall mean the Loan and Security
Agreement, dated as of June 27, 1996, between Old Labtec and Fleet Capital
Corporation, together with all other agreements, instruments and documents
executed or delivered pursuant thereto or in connection therewith (including,
without limitation, any promissory notes, guarantees and security documents), in
each case as amended to the Initial Borrowing Date.
"Existing Indebtedness" shall have the meaning provided in
Section 6.23.
"Existing Indebtedness Agreements" shall have the meaning
provided in Section 5.17.
"Existing Shareholders" shall mean each individual or entity
designated as such in Annex VI attached hereto.
"Existing Subordinated Notes" shall mean the subordinated
notes issued by Holdings pursuant to the Subordinate Loan and Warrant Purchase
Agreement, dated September 16, 1994, among Banc One Capital Partners
Corporation, Banc One Capital Partners II, Limited Partnership and Holdings.
"Facility" shall mean any of the credit facilities established
under this Agreement, i.e., the Term Loan Facility or the Revolving Loan
Facility.
"Facing Fee" shall have the meaning provided in Section
3.01(c).
"Fees" shall mean all amounts payable pursuant to, or referred
to in, Section 3.01.
"Foreign Cash Equivalents" shall mean certificates of deposit
or bankers acceptances of any bank organized under the laws of Hong Kong or any
country that is a member of the European
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Economic Community whose short-term commercial paper rating from S&P is at least
A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof, in each case with maturities of not more than six months from the date
of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including,
without limitation, any superannuation fund) or other similar program
established or maintained outside the United States of America by the Borrower
or any one or more of its Subsidiaries primarily for the benefit of employees of
the Borrower or such Subsidiaries residing outside the United States of America,
which plan, fund or other similar program provides, or results in, retirement
income, a deferral of income in contemplation of retirement or payments to be
made upon termination of employment, and which plan is not subject to ERISA or
the Code.
"Foreign Subsidiary" shall mean each Subsidiary of the
Borrower that is incorporated under the laws of any jurisdiction other than the
United States of America, any State thereof, or any territory thereof.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time; it being understood
and agreed that determinations in accordance with GAAP for purposes of Section
8, including defined terms as used therein, are subject (to the extent provided
therein) to Section 12.07(a).
"Hazardous Materials" shall mean (a) any petrochemical or
petroleum products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; and (b) any chemicals, materials or substances defined
as or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "restricted hazardous materials," "extremely hazardous
wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect.
"Holdings" shall mean LEI Holdings, Inc., a Delaware
corporation.
"Indebtedness" of any Person shall mean without duplication
(i) all indebtedness of such Person for borrowed money, (ii) the deferred
purchase price of assets or services payable to the sellers thereof or any of
such seller's assignees which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person but excluding deferred rent
as determined in accordance with GAAP, (iii) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any
Lien on any property owned by such first Person, whether or not such
Indebtedness has been assumed, (v) all Capitalized Lease Obligations of such
Person, (vi) all obligations of such Person to pay a specified purchase price
for goods or services whether or not delivered or accepted, i.e., take-or-pay
and similar obligations, (vii) all obligations under Interest Rate Protection
Agreements and Other Hedging Agreements and (viii) all Contingent Obligations of
such Person,
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provided, that Indebtedness shall not include trade payables and accrued
expenses, in each case arising in the ordinary course of business.
"Indebtedness to be Refinanced" shall mean, collectively, the
indebtedness arising pursuant to (i) the Existing Credit Agreement, and (ii) the
Existing Subordinated Notes.
"Initial Borrowing Date" shall mean the date upon which the
Term Loans are initially incurred hereunder.
"Initial Merger" shall mean the merger of Old Labtec with and
into Holdings, with Holdings as the surviving corporation of such merger, in
accordance with the Initial Merger Documents.
"Initial Merger Documents" shall mean the Certificate of
Ownership and Merger, filed with the Delaware Secretary of State, the Articles
of Merger and Plan of Merger, filed with the Washington Secretary of State, and
each other agreement, document or instrument entered into, or filed, in
connection with the Initial Merger.
"Intercompany Loan" shall have the meaning provided in Section
8.05(g).
"Intercompany Notes" shall mean promissory notes, in the form
of Exhibit K, evidencing Intercompany Loans.
"Interest Coverage Ratio" shall mean, for any period, the
ratio of Consolidated EBITDA to Consolidated Interest Expense for such period.
"Interest Period," with respect to any Eurodollar Loan, shall
mean the interest period applicable thereto, as determined pursuant to Section
1.09.
"Interest Rate Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedging agreement or other similar agreement or
arrangement.
"Joint Venture Investments" shall mean any investment, capital
contribution, advance, loan, or guaranty, or any other investment by the
Borrower or any of its Subsidiaries in a joint venture related to any business
permitted by Section 8.01.
"L/C Participant" shall have the meaning provided in Section
2.04(a).
"L/C Supportable Indebtedness" shall mean (i) obligations of
the Borrower or its Subsidiaries incurred in the ordinary course of business
with respect to insurance obligations and workers' compensation, surety bonds
and other similar statutory obligations and (iii) such other obligations of the
Borrower or any of its Subsidiaries as are reasonably acceptable to the Agent
and
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the respective Letter of Credit Issuer and otherwise permitted to exist pursuant
to the terms of this Agreement.
"Leasehold" of any Person shall mean all of the right, title
and interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Outstandings" shall mean, at any time, the
sum of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Issuer" shall mean BTCo and any Bank which
at the request of the Borrower and with the consent of the Agent agrees, in such
Bank's sole discretion, to become a Letter of Credit Issuer for the purpose of
issuing Letters of Credit pursuant to Section 2.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any time, the ratio of
Consolidated Debt at such time to Consolidated EBITDA for the Test Period then
last ended.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each and every Loan made by any Bank
hereunder, including Term Loans, Revolving Loans or Swingline Loans.
"Management Agreements" shall have the meaning provided in
Section 5.17.
"Management Fee" shall have the meaning provided in Section
8.07(iii).
"Mandatory Borrowing" shall have the meaning provided in
Section 1.01(C).
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Adverse Effect" shall mean a material adverse effect
on the business, properties, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower, or the Borrower and its Subsidiaries
taken as a whole.
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"Material Contracts" shall have the meaning provided in
Section 5.17.
"Maturity Date" with respect to any Facility shall mean either
the Term Loan Maturity Date or the Revolving Loan Maturity Date, as the case may
be.
"Maximum Swingline Amount" shall mean $2,500,000.
"Measurement Period" shall mean the four consecutive fiscal
quarters of the Borrower ending on March 31 of each year (taken as one
accounting period).
"Merger Documents" shall mean and include each of the Initial
Merger Documents and each of the Speaker Merger Documents.
"Mergers" shall mean and include the Initial Merger and the
Speaker Merger.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans
(other than Swingline Loans), $500,000; (ii) for Eurodollar Loans, $1,000,000
and (iii) for Swingline Loans, $250,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall have the meaning provided in Section 5.16(a).
"Mortgage Policies" shall have the meaning provided in Section
5.16(b).
"Mortgaged Properties" shall mean and include (i) all Real
Properties owned or leased by the Borrower and its Domestic Subsidiaries to the
extent designated as such on Annex III and (ii) each Real Property subjected to
a mortgage in favor of the Collateral Agent for the benefit of the Secured
Creditors pursuant to Section 7.11.
"Net Proceeds" shall mean, with respect to any Asset Sale, the
Proceeds resulting therefrom net of (a) cash expenses of sale (including
brokerage fees, if any, transfer taxes and payment of principal, premium and
interest of Indebtedness other than the Loans required to be repaid as a result
of such Asset Sale) and (b)incremental income taxes paid or payable as a result
thereof.
"Non-Compete Agreements" shall have the meaning provided in
Section 5.17.
"Non-Defaulting Bank" shall mean each Bank other than a
Defaulting Bank.
"Note" shall mean each Term Note, each Revolving Note and the
Swingline Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
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"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Agent located at
One Bankers Trust Plaza, New York, New York 10006 or such other office as the
Agent may designate to the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Agent, the Collateral Agent or any Bank pursuant to the terms of
this Agreement or any other Credit Document.
"Old Labtec" shall mean Labtec Enterprises, Inc. a Washington
corporation.
"Other Hedging Agreements" shall mean any foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against fluctuations in currency values.
"Payment Office" shall mean the office of the Agent located at
One Bankers Trust Plaza, New York, New York 10006 or such other office as the
Agent may designate to the Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan Refund" shall mean any cash payments (net of
reasonable costs associated therewith, including income, excise and other taxes
payable thereon) received by the Borrower and/or of its Subsidiaries from any
return of any surplus assets from any single Plan or Foreign Pension Plan.
"Permitted Acquisition" shall have the meaning provided in
Section 8.02(r).
"Permitted Encumbrances" shall mean (i) those liens,
encumbrances and other matters affecting title to any Mortgaged Property listed
in the Mortgage Policies in respect thereof and found, on the date of delivery
of such Mortgage Policies to the Agent in accordance with the terms hereof,
reasonably acceptable by the Agent, (ii) as to any particular Mortgaged Property
at any time, such easements, encroachments, covenants, rights of way, minor
defects, irregularities or encumbrances on title which do not, in the reasonable
opinion of the Agent, materially impair such Mortgaged Property for the purpose
for which it is held by the mortgagor thereof, or the lien held by the
Collateral Agent, (iii) zoning and other municipal ordinances, which are not
violated in any material respect by the existing improvements and the present
use made by the mortgagor thereof of the Premises (as defined in the respective
Mortgage), (iv) general real estate taxes and assessments not yet delinquent,
and (v) such other items as the Agent may consent to (such consent not to be
unreasonably withheld).
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"Permitted Joint Venture" shall mean any Person engaged in
business of the type described in Section 8.01 of which the Borrower shall own,
directly or indirectly, 25% or more but less than or equal to 50% of the equity
and voting interests and another Person (or group of Persons which acts together
in relation to such Permitted Joint Venture) owns the remaining equity and
voting interests.
"Permitted Liens" shall have the meaning provided in Section
8.03.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower, any of its Subsidiaries or any ERISA
Affiliate and each such plan for the five year period immediately following the
latest date on which the Borrower, any of its Subsidiaries or any ERISA
Affiliate maintained, contributed to or had an obligation to contribute to such
plan.
"Pledge Agreement" shall have the meaning provided in Section
5.14.
"Pledged Securities" shall mean all the Pledged Securities as
defined in the Pledge Agreement.
"Predecessor Corporation" shall mean and include each of
Holdings and Old Labtec.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"Proceeds" shall mean with respect to any Asset Sale, the
aggregate cash payments (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, but only as and
when so received) received by the Borrower and/or any of its Subsidiaries from
such Asset Sale.
"Pro Forma Leverage Ratio" shall mean, at any time for the
determination thereof, the ratio of (x) Consolidated Debt at such time to (y)
Consolidated EBITDA for the Test Period then last ended, with such Pro Forma
Leverage Ratio to be determined on a pro forma basis as if such Permitted
Acquisition (and the incurrence, assumption and/or repayment of any Indebtedness
in connection with such Permitted Acquisition) had occurred on the first day of
such Test Period (and such Indebtedness, if any, had remained outstanding (or
had not been outstanding, as the case may
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be) throughout such period). On the date of any Permitted Acquisition pursuant
to which the Pro Forma Leverage Ratio is to be calculated, the Borrower shall
deliver to the Agent a certificate of the Borrower's chief financial officer
setting forth in reasonable detail the pro forma calculations required to
establish the Pro Forma Leverage Ratio (with such pro forma calculations (x) to
be made on a basis reasonably satisfactory to the Agent and to assume that the
interest expense attributable to any Indebtedness (whether existing or being
incurred) bearing a floating interest rate shall be computed as if the rate in
effect on the date of such Permitted Acquisition (taking into account any
Interest Rate Protection Agreement applicable to such Indebtedness if such
Interest Rate Protection Agreement has a remaining term in excess of 12 months)
had been the applicable rate for the entire period and (y) to set forth any
factually supportable and identifiable cost savings resulting in an adjustment
to Consolidated EBITDA as described below), it being understood that in
calculating the Pro Forma Leverage Ratio in connection with any Permitted
Acquisition, Consolidated EBITDA for the relevant Test Period shall include the
results of operations of the Person or assets acquired pursuant to such
Permitted Acquisition on a pro forma basis as well as the effects of factually
supportable and identifiable pro forma cost savings for such Test Period to the
extent directly attributable to such Permitted Acquisition, in each case, as if
such acquisition had occurred on the first day of the respective period of four
consecutive fiscal quarters.
"Projections" shall have the meaning provided in Section 5.20.
"Qualified IPO" shall mean the first public offering pursuant
to an effective registration statement under the Securities Act covering the
primary offering and sale of Common Stock for the account of the Borrower in
which the aggregate gross cash proceeds received by the Borrower at the public
offering price are at least $15,000,000, which proceeds are applied in
accordance with Section 4.02(A)(d).
"Quarterly Payment Date" shall mean the last Business Day of
each January, April, July and October.
"Real Property" of any Person shall mean all of the right,
title and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Recovery Event" shall mean the receipt by the Borrower or any
of its Subsidiaries of any insurance or condemnation proceeds payable (i) by
reason of any theft, physical destruction or damage or any other similar event
with respect to any properties or assets of the Borrower or any of its
Subsidiaries, (ii) by reason any condemnation, taking, seizing or similar event
with respect to any properties or assets of the Borrower or any of its
Subsidiaries and (iii) under any policy of insurance required to be maintained
under Section 7.03.
"Refinancing" shall mean the refinancing and repayment in full
of all amounts outstanding under, and the termination in full of all commitments
and letters of credit in respect of, the Indebtedness to be Refinanced.
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"Refinancing Documents" shall mean each of the agreements,
documents and instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 7.12.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Release" means disposing, discharging, injecting, spilling,
pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing, pouring and the like, into or upon any land or water or air, or
otherwise entering into the environment.
"Replaced Bank" shall have the meaning provided in Section
1.13.
"Replacement Bank" shall have the meaning provided in Section
1.13.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA
other than those events as to which the 30-day notice period is waived under
subsection .22, .23, .25, .27, or .28 of PBGC Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks the sum of
whose outstanding Term Loans and Revolving Loan Commitments (or, if after the
Total Revolving Loan Commitment has been terminated, outstanding Revolving Loans
and RL Percentages of outstanding Swingline Loans and Letter of Credit
Outstandings) constitute greater than 50% of the sum of (i) the total
outstanding Term Loans of Non-Defaulting Banks and (ii) the Total Revolving Loan
Commitment less the aggregate Revolving Loan Commitments of Defaulting Banks
(or, if after the Total Revolving Loan Commitment has been terminated, the total
outstanding Revolving Loans of Non-Defaulting Banks and the aggregate RL
Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans
and Letter of Credit Outstandings at such time).
"Returns" shall have the meaning provided in Section 6.22.
"Revolving Loan" shall have the meaning provided in Section
1.01(A)(b).
"Revolving Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Annex I directly below
the column entitled "Revolving Loan Commitment," as the same may be reduced from
time to time pursuant to Section 3.02, 3.03 and/or 9.
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"Revolving Loan Facility" shall mean the Facility evidenced by
the Total Revolving Loan Commitment.
"Revolving Loan Maturity Date" shall mean October 7, 2002.
"Revolving Note" shall have the meaning provided in Section
1.05(a).
"RL Bank" shall mean at any time each Bank with a Revolving
Loan Commitment or with outstanding Revolving Loans.
"RL Percentage" shall mean at any time for each Bank, the
percentage obtained by dividing such Bank's Revolving Loan Commitment by the
Total Revolving Loan Commitment; provided, that if the Total Revolving Loan
Commitment has been terminated, the RL Percentage of each Bank shall be
determined by dividing such Bank's Revolving Loan Commitment immediately prior
to such termination by the Total Revolving Loan Commitment immediately prior to
such termination.
"Rollover Amount" shall have the meaning provided in Section
8.08(b).
"S&P" shall mean Standard & Poor's Corporation, a division of
the McGraw-Hill Companies.
"Scheduled Repayment" shall have the meaning provided in
Section 4.02(A)(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the
Security Documents.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Agreement" shall have the meaning provided in
Section 5.15.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean and include the Security
Agreement, the Pledge Agreement, each Mortgage, each Additional Security
Document, if any and each other document or instrument entered into pursuant to
Sections 5.14, 5.15 and 7.13, if any, in each case as and when executed and
delivered in accordance with the terms of this Agreement.
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"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by the Borrower (and not guaranteed or supported in any
way by the Borrower or any of its Subsidiaries) in the form of Exhibit L.
"Shareholders' Agreements" shall have the meaning set forth in
Section 5.17(d).
"Speaker" shall mean the Speaker Acquisition Corp., a Delaware
corporation. "Speaker Merger" shall mean the merger of Speaker with and into
Holdings, with Holdings as the surviving corporation of such merger and the
changing of the name of Holdings to Labtec Enterprises, Inc., all in accordance
with the Speaker Merger Documents.
"Speaker Merger Documents" shall mean the Recapitalization
Agreement and Plan of Merger dated as of August 26, 1997 between Speaker and
Holdings, and each other agreement, document and instrument entered into or
filed in connection with the Speaker Merger.
"Stated Amount" of each Letter of Credit shall mean at any
time the maximum amount available to be drawn thereunder (regardless of whether
any conditions for drawing could then be met).
"Stockholders Agreement" shall mean the Stockholders
Agreement, dated as of the Initial Borrowing Date, among the Borrower, Sun
Multimedia Partners, L.P., The KB Mezzanine Fund II, L.P., the Existing
Shareholders and the other stockholders of the Borrower party thereto, as
amended, modified or supplemented from time to time, in accordance with the
terms hereof and thereof.
"Subordinated Debt" shall mean general unsecured and
unguaranteed subordinated Indebtedness of the Borrower incurred under the
Subordinated Loan Agreement, in an aggregate principal amount not to exceed
$6,000,000.
"Subordinated Financing" shall mean the issuance of the
Subordinated Debt and of 50,000 shares of Common Stock of the Borrower, in each
case, to Equinox and/or its Affiliates.
"Subordinated Financing Documents" shall mean and include each
of the documents and other agreements entered into (including, without
limitation, the Subordinated Loan Agreement) relating to the consummation by the
Borrower of the Subordinated Financing.
"Subordinated Loan Agreement" shall mean the Purchase
Agreement, dated as of the Initial Borrowing Date, among the Borrower and an
Affiliate of Equinox as in effect on the Initial Borrowing Date and as the same
may be modified, amended or supplemented from time to time in accordance with
the terms hereof and thereof.
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"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries, has more than a 50% voting equity interest at the time.
"Subsidiary Guarantor" shall mean each Subsidiary of the
Borrower (other than a Foreign Subsidiary except to the extent otherwise
provided in Section 7.13) that is or becomes a party to the Subsidiary Guaranty.
"Subsidiary Guaranty" shall mean, after the execution and
delivery thereof, the Subsidiary Guaranty, entered into by each Subsidiary of
the Borrower pursuant to Section 7.13 or Section 8.14, in the form of Exhibit H,
as the same may be amended, modified or supplemented form time to time and shall
include after the execution and delivery thereof any similar guaranty required
to be delivered pursuant to Sections 7.11, 7.13 and/or 8.14.
"Sun Affiliates" shall mean any Affiliate (including any
employee) of Sun Capital, provided that for purposes of the definition of
"Change of Control Event", the term Sun Affiliate shall not include (x) any
portfolio company of either Sun Capital or any Affiliate of Sun Capital or (y)
any officer or director of the Borrower or any of its Subsidiaries that is not
also a partner, stockholder, employee or director of Sun Capital.
"Sun Capital" shall mean Sun Capital Partners, Inc., a Florida
corporation.
"Swingline Expiry Date" shall mean the date which is five
Business Days prior to the Revolving Loan Maturity Date.
"Swingline Loan" shall have the meaning provided in Section
1.01(B).
"Swingline Note" shall have the meaning provided in Section
1.05(a).
"Syndication Date" shall have the meaning provided in Section
1.01(A)(a).
"Tax Allocation Agreements" shall have the meaning provided in
Section 5.17(h).
"Taxes" shall have the meaning provided in Section 4.04.
"Term Loans" shall have the meaning provided in Section
1.01(A)(a).
"Term Note" shall have the meaning provided in Section
1.05(a).
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"Term Loan Facility" shall mean the Facility evidenced by the
Total Term Loan Commitment.
"Term Loan Maturity Date" shall mean October 7, 2004.
"Test Period" shall mean, at the time of any determination
thereof, (i) the fiscal quarter of the Borrower ended December 31, 1997 (taken
as one accounting period), (ii) the two consecutive fiscal quarters of the
Borrower ended March 31, 1998 (taken as one accounting period), (iii) the three
consecutive fiscal quarters of the Borrower ended June 30, 1998 (taken as one
accounting period), (iv) the four consecutive fiscal quarters of the Borrower
ended September 30, 1998 (taken as one accounting period) and (v) each period of
four consecutive fiscal quarters of the Borrower ending thereafter (taken as one
accounting period).
"Total Term Loan Commitment" shall mean the sum of the Term
Loan Commitments of each of the Banks.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean the sum of the
Revolving Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at
any time, (i) the Total Revolving Loan Commitment at such time less (ii) the sum
of the aggregate principal amount of all Revolving Loans and Swingline Loans at
such time plus the Letter of Credit Outstandings at such time.
"Transaction" shall mean, collectively, (i) the Equity
Financing, (ii) the Mergers, (iii) the Refinancing, (iv) the Subordinated
Financing, (v) the incurrence of the Loans hereunder on the Initial Borrowing
Date and (vi) the payment of fees and expenses in connection with the foregoing.
"Type" shall mean any type of Loan determined with respect to
the interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar
Loan.
"UCC" shall mean the Uniform Commercial Code as in effect from
time to time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year exceeds the
fair market value of the assets allocable thereto, each determined in accordance
with Statement of Financial Accounting Standards No. 87, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
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"Unpaid Drawing" shall have the meaning provided in Section
2.03(a).
"U.S. Dollars" and the sign "$" shall each mean freely
transferable lawful money of the United States of America.
"Voting Stock" shall mean, with respect to any corporation,
the outstanding stock of all classes (or equivalent interest) which ordinarily,
in the absence of contingencies, entitles holders thereof to vote for the
election of directors (or Persons performing similar functions) of such
corporation, even though the right so to vote has been suspended by the
happening of such a contingency.
"Wholly-Owned Domestic Subsidiary" shall mean a corporation
which is both a Wholly-Owned Subsidiary and a Domestic Subsidiary of another
Person.
"Wholly-Owned Foreign Subsidiary" shall mean a corporation
which is both a Wholly- Owned Subsidiary and a Foreign Subsidiary of another
Person.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i)
any corporation 100% of whose capital stock (other than director's qualifying
shares and/or other nominal amounts of shares required to be held other than by
such Person under applicable law) is at the time owned by such Person and/or one
or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership,
association, joint venture or other entity in which such Person and/or one or
more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such
time.
"Working Capital" shall mean the excess of Consolidated
Current Assets (but excluding therefrom all cash, Cash Equivalents and deferred
income taxes to the extent included in current assets) over Consolidated Current
Liabilities.
"Written," "written" or "in writing" shall mean any form of
written communication or a communication by means of telex, facsimile device,
telegraph or cable.
SECTION 11. The Agent.
11.01 Appointment. Each Bank hereby irrevocably designates and
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 11, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such upon the express
conditions contained in this Section 11. Notwithstanding any provision to the
contrary elsewhere in this Agreement or in any other Credit Document, the Agent
shall not have any duties or responsibilities, except those expressly set forth
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herein or in the other Credit Documents, or any fiduciary relationship with any
Bank, and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or otherwise exist against the
Agent. The provisions of this Section 11 are solely for the benefit of the Agent
and the Banks, and neither the Borrower nor any of its Subsidiaries shall have
any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and the Agent does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for the Borrower or any of its Subsidiaries.
11.02 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care except to the extent otherwise required by Section 11.03.
11.03 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or the other Credit Documents
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by the Borrower, any of its Subsidiaries or
any of their respective officers contained in this Agreement or the other Credit
Documents, any other Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Document or for any failure of the
Borrower or any of its Subsidiaries or any of their respective officers to
perform its obligations hereunder or thereunder. The Agent shall not be under
any obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or the other Documents, or to inspect the properties, books or records
of the Borrower or any of its Subsidiaries. The Agent shall not be responsible
to any Bank for the effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any other Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by the Agent to the Banks or by or on behalf of
the Borrower or any of its Subsidiaries to the Agent or any Bank or be required
to ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or of the existence or possible
existence of any Default or Event of Default.
11.04 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without
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limitation, counsel to the Borrower or any of its Subsidiaries), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Credit Document unless it shall first receive such advice or concurrence
of the Required Banks as it deems appropriate or it shall first be indemnified
to its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the other Credit Documents in accordance with a
request of the Required Banks, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Banks.
11.05 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has actually received notice from a Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." In the event that
the Agent receives such a notice, the Agent shall give prompt notice thereof to
the Banks. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Banks;
provided, that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Banks.
11.06 Non-Reliance on Agent and Other Banks. Each Bank
expressly acknowledges that neither the Agent nor any of its respective
officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Borrower or any of
its Subsidiaries, shall be deemed to constitute any representation or warranty
by the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of the Borrower
and its Subsidiaries and made its own decision to make its Loans hereunder and
enter into this Agreement. Each Bank also represents that it will, independently
and without reliance upon the Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, assets, operations, property,
financial and other condition, prospects and creditworthiness of the Borrower
and its Subsidiaries. The Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of the Borrower or any of its Subsidiaries which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
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11.07 Indemnification. The Banks agree to indemnify the Agent
in its capacity as such ratably according to their respective "percentages" as
used in determining the Required Banks at such time (determined as if there are
no Defaulting Banks), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, reasonable
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Agent in its
capacity as such in any way relating to or arising out of this Agreement or any
other Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be taken
by the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by the Borrower or any of its
Subsidiaries; provided, that no Bank shall be liable to the Agent for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
primarily from the gross negligence or willful misconduct of the Agent. To the
extent any Bank would be required to indemnify the Agent pursuant to the
immediately preceding sentence but for the fact that it is a Defaulting Bank,
such Defaulting Bank shall not be entitled to receive any portion of any payment
or other distribution hereunder until each other Bank shall have been reimbursed
for the excess, if any, of the aggregate amount paid by such Bank under this
Section 11.07 over the aggregate amount such Bank would have been obligated to
pay had such first Bank not been a Defaulting Bank. If any indemnity furnished
to the Agent for any purpose shall, in the opinion of the Agent be insufficient
or become impaired, the Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against until such additional indemnity
is furnished. The agreements in this Section 11.07 shall survive the payment of
all Obligations.
11.08 Agent in its Individual Capacity. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower and its Subsidiaries as though the Agent were
not the Agent hereunder. With respect to the Loans made by it and all
Obligations owing to it, the Agent shall have the same rights and powers under
this Agreement as any Bank and may exercise the same as though it were not the
Agent and the terms "Bank" and "Banks" shall include the Agent in its individual
capacity.
11.09 Holders. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Agent. Any request, authority or consent of any
Person or entity who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, assignee or indorsee, as the case may be,
of such Note or of any Note or Notes issued in exchange therefor.
11.10 Resignation of the Agent; Successor Agent. The Agent may
resign as the Agent upon 20 days' notice to the Banks. Upon the resignation of
the Agent, the Required Banks shall appoint from among the Banks a successor
Agent which is a bank or a trust company for the Banks subject, to the extent
that no payment Default or Event of Default has occurred and is then
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continuing, to prior approval by the Borrower (such approval not to be
unreasonably withheld or delayed), whereupon such successor agent shall succeed
to the rights, powers and duties of the Agent, and the term "Agent" shall
include such successor agent effective upon its appointment, and the resigning
Agent's rights, powers and duties as the Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement. If a successor Agent shall not have been so appointed
within such 20 day period after the date such notice of resignation was given by
the Agent, the Agent's resignation shall become effective and the Banks shall
thereafter perform all duties of the Agent hereunder and/or under any other
Credit Documents until such time, if any, as the Required Banks appoint a
successor Agent as provided above. After the resignation of the Agent hereunder,
the provisions of this Section 11 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
SECTION 12. Miscellaneous.
12.01 Payment of Expenses, etc. The Borrower hereby agrees to:
(i) whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case and local
counsel) in connection with the negotiation, preparation, execution and delivery
of the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto and in connection with the
Agent's syndication efforts with respect to this Agreement; (ii) pay all
reasonable out-of-pocket costs and expenses of the Agent and each of the Banks
in connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein and, after an Event of Default shall have
occurred and be continuing, the protection of the rights of the Agent and each
of the Banks thereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) for the Agent and for each
of the Banks); (iii) pay and hold each of the Banks harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Agent, the Collateral Agent and each Bank, its officers,
directors, employees, representatives and agents from and hold each of them
harmless against any and all losses, liabilities, claims, damages or expenses
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, (a) any investigation, litigation or other proceeding
(whether or not the Agent, the Collateral Agent or any Bank is a party thereto)
related to the entering into and/or performance of this Agreement or any other
Document or the use of the proceeds of any Loans hereunder or the Transaction or
the consummation of any other transactions contemplated in any Document (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified), or (b) the actual or alleged presence of Hazardous
Materials in the air, surface water or groundwater or on the surface or
subsurface of any Real Property or any Environmental Claim, in each case,
including, without limitation, the reasonable fees and disbursements of counsel
and independent consultants incurred in connection with any such investigation,
litigation or other proceeding.
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12.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, each
Bank is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to the Borrower or any of its
Subsidiaries or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by such Bank
(including, without limitation, by branches and agencies of such Bank wherever
located) to or for the credit or the account of the Borrower or any of its
Subsidiaries against and on account of the Obligations and liabilities of the
Borrower or any of its Subsidiaries to such Bank under this Agreement or under
any of the other Credit Documents, including, without limitation, all interests
in Obligations of the Borrower or any of its Subsidiaries purchased by such Bank
pursuant to Section 12.06(b), and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not such Bank shall have made any demand hereunder
and although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
12.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Annex II; or, at such other address as shall be designated by
any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied or cabled or
sent by overnight courier, and shall be effective when received.
12.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, no Credit Party
may assign or transfer any of its rights, obligations or interest hereunder or
under any other Credit Document without the prior written consent of all of the
Banks and, provided further, that, although any Bank may transfer, assign or
grant participations in its rights hereunder, such Bank shall remain a "Bank"
for all purposes hereunder (and may not transfer or assign all or any portion of
its Commitments hereunder except as provided in Section 12.04(b)) and the
transferee, assignee or participant, as the case may be, shall not constitute a
"Bank" hereunder and, provided further, that no Bank shall transfer or grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is
not extended beyond the Revolving Loan Maturity Date) in which such participant
is participating, or reduce the rate or extend the time of payment of interest
or Fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount thereof,
or increase the amount of the participant's participation over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment shall not
constitute a change in the terms of such participation, and that an increase in
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any Commitment or Loan shall be permitted without the consent of any participant
if the participant's participation is not increased as a result thereof), (ii)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or (iii) release all or substantially all of
the Collateral under all of the Security Documents (except as expressly provided
in the Credit Documents) supporting the Loans hereunder in which such
participant is participating. In the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by such Bank in
favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank
together with one or more other Banks) may (x) assign all or a portion of its
Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or
its outstanding Term Loans to (i) its parent company and/or any affiliate of
such Bank which is at least 50% owned by such Bank or its parent company or to
one or more Banks or (ii) in the case of any Bank that is a fund that invests in
bank loans, any other fund that invests in bank loans and is managed by the same
investment advisor of such Bank or by an Affiliate of such investment advisor or
(y) assign all, or if less than all, a portion equal to at least $5,000,000 in
the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan
Commitments and/or outstanding principal amount of Term Loans hereunder to one
or more Eligible Transferees (treating any fund that invests in bank loans and
any other fund that invests in bank loans and is managed by the same investment
advisor of such fund or by an Affiliate of such investment advisor as a single
Eligible Transferee), each of which assignees shall become a party to this
Agreement as a Bank by execution of an Assignment and Assumption Agreement,
provided that (i) at such time Annex I shall be deemed modified to reflect the
Revolving Loan Commitments (and/or outstanding Term Loans, as the case may be)
of such new Bank and of the existing Banks, (ii) upon surrender of the old
Notes, new Notes will be issued, at the Borrower's expense, to such new Bank and
to the assigning Bank, such new Notes to be in conformity with the requirements
of Section 1.05 (with appropriate modifications) to the extent needed to reflect
the revised Revolving Loan Commitments (and/or outstanding Term Loans, as the
case may be), (iii) the consent of the Agent shall be required in connection
with any such assignment pursuant to clause (y) of this Section 12.04(b) (which
consent shall not be unreasonably withheld or delayed), (iv) the consent of each
Letter of Credit Issuer shall be required in connection with any such assignment
of Revolving Loan Commitments pursuant to clause (y) of this Section 12.04(b)
(which consent shall not be unreasonably withheld), and (v) the Agent shall
receive at the time of each such assignment, from the assigning or assignee
Bank, the payment of a non-refundable assignment fee of $3,500 and, provided
further, that such transfer or assignment will not be effective until recorded
by the Agent on the Register pursuant to Section 7.12 hereof. To the extent of
any assignment pursuant to this Section 12.04(b), the assigning Bank shall be
relieved of its obligations hereunder with respect to its assigned Revolving
Loan Commitments. At the time of each assignment pursuant to this Section
12.04(b) to a Person which is not already a Bank hereunder and which is not a
United States person (as such term is defined in Section 7701(a)(30) of the
Code) for Federal income tax purposes, the respective assignee Bank shall
provide to the Borrower and the Agent the appropriate Internal Revenue Service
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Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described in
Section 4.04(b). To the extent that an assignment of all or any portion of a
Bank's Commitments and related outstanding Obligations pursuant to Section 1.13
or this Section 12.04(b) would, at the time of such assignment, result in
increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged
by the respective assigning Bank prior to such assignment, then the Borrower
shall not be obligated to pay such increased costs (although the Borrower shall
be obligated to pay any other increased costs of the type described above
resulting from changes after the date of the respective assignment).
(c) Nothing in this Agreement shall prevent or prohibit any
Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in
support of borrowings made by such Bank from such Federal Reserve Bank and, with
the consent of the Agent, any Bank which is fund may pledge all or any portion
of its Loans and Notes to its trustee in support of its obligations to its
trustee. No pledge pursuant to this clause (c) shall release the transferor Bank
from any of its obligations hereunder.
12.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and the Agent or any Bank shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Credit Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent or any
Bank would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the Agent
or the Banks to any other or further action in any circumstances without notice
or demand.
12.06 Payments Pro Rata. (a) The Agent agrees that promptly
after its receipt of each payment from or on behalf of any Credit Party in
respect of any Obligations of such Credit Party, it shall, except as otherwise
provided in this Agreement, distribute such payment to the Banks (other than any
Bank that has consented in writing to waive its pro rata share of such payment)
pro rata based upon their respective shares, if any, of the Obligations with
respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the
related sum or sums received by other Banks is in a greater proportion than the
total of such Obligation then owed and due to such Bank bears to the total of
such Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the Obligations
of the respective Credit
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<PAGE>
Party to such Banks in such amount as shall result in a proportional
participation by all of the Banks in such amount; provided, that if all or any
portion of such excess amount is thereafter recovered from such Bank, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
12.07 Calculations; Computations. (a) The financial statements
to be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Banks); provided, that except as otherwise specifically
provided herein, all computations determining compliance with Sections 4.02 and
8, including definitions used therein, shall utilize accounting principles and
policies in effect at the time of the preparation of, and in conformity with
those used to prepare, the March 31, 1997 financial statements delivered to the
Banks pursuant to Section 6.10(b), but shall not give effect to purchase
accounting adjustments required or permitted by APB 16 and its interpretations
(including non-cash write-ups and non-cash charges relating to inventory, fixed
assets and in-process research and development), in each case arising in
connection with any Permitted Acquisition..
(b) All computations of interest and Fees hereunder shall be
made on the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue. (a)
THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement and the
other Credit Documents, each Credit Party hereby irrevocably accepts for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. Each Credit Party hereby further irrevocably waives any
claim that any such courts lack jurisdiction over such Credit Party, and agrees
not to plead or claim, in any legal action or proceeding with respect to this
Agreement or any other Credit Document brought in any of the aforesaid courts,
that any such court lacks jurisdiction over such Credit Party. Each Credit Party
irrevocably consents to the service of process in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such Credit Party, at its address for notices pursuant to Section
12.03, such service to become effective 30 days after such mailing. Each Credit
Party hereby irrevocably waives any objection to such service of process and
further irrevocably waives and agrees not to plead or claim in any action or
proceeding commenced hereunder or under any other Credit Document that service
of process was in any way invalid or ineffective. Nothing herein shall affect
the right of the Agent, any Bank or the holder of any Note to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against any Credit Party in any other jurisdiction.
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(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
12.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A
complete set of counterparts executed by all the parties hereto shall be lodged
with the Borrower and the Agent.
12.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which the Borrower and each of the Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered the same to the Agent at the Notice
Office or, in the case of the Banks, shall have given to the Agent telephonic
(confirmed in writing), written, telex or facsimile notice (actually received)
at such office that the same has been signed and mailed to it. The Agent will
give the Borrower and each Bank prompt written notice of the occurrence of the
Effective Date.
12.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties party thereto
and the Required Banks, provided that no such change, waiver, discharge or
termination shall, without the consent of each Bank (other than a Defaulting
Bank) (with Obligations being directly affected thereby in the case of following
clause (i)), (i) extend the final scheduled maturity of any Loan or Note or
extend the stated maturity of any Letter of Credit beyond the Revolving Loan
Maturity Date, or reduce the rate or extend the time of payment of interest or
Fees thereon, or reduce the principal amount thereof, (ii) release all or
substantially all of the Collateral (except as expressly provided in the
Security Documents) under all the Security Documents, (iii) amend, modify or
waive any provision of this Section 12.12, (iv) reduce the percentage specified
in the definition of Required Banks (it being understood that, with the consent
of the Required Banks, additional extensions of credit pursuant to this
Agreement may be included in the determination of the Required Banks on
substantially the same basis as the extensions of Term Loans and Revolving Loan
Commitments are included on the Effective Date) or (v) consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement; provided further, that no such change, waiver, discharge or
termination shall (1) increase the Commitments of any Bank over the amount
thereof then in effect without the consent of such Bank (it being understood
that waivers or modifications
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<PAGE>
of conditions precedent, covenants, Defaults or Events of Default or of a
mandatory reduction in the Total Commitment shall not constitute an increase of
the Commitment of any Bank, and that an increase in the available portion of any
Commitment of any Bank shall not constitute an increase in the Commitment of
such Bank), (2) without the consent of BTCo, alter its rights or obligations
with respect to Swingline Loans, and without the consent of BTCo or any other
Letter of Credit Issuer, amend, modify or waive any provision of Section 2 or
alter its rights or obligations with respect to Letters of Credit, (3) without
the consent of the Agent, amend, modify or waive any provision of Section 11 as
same applies to the Agent or any other provision as same relates to the rights
or obligations of the Agent, or (4) without the consent of the Collateral Agent,
amend, modify or waive any provision relating to the rights or obligations of
the Collateral Agent.
(b) If, in connection with any proposed change, waiver,
discharge or termination to any of the provisions of this Agreement as
contemplated by clause (a)(i) through (v), inclusive, of the first proviso to
Section 12.12(a), the consent of the Required Banks is obtained but the consent
of one or more of such other Banks whose consent is required is not obtained,
then the Borrower shall have the right, so long as all non-consenting Banks
whose individual consent is required are treated as described in either clause
(A) or (B) below, to either (A) replace each such non-consenting Bank or Banks
with one or more Replacement Banks pursuant to Section 1.13 so long as at the
time of such replacement, each such Replacement Bank consents to the proposed
change, waiver, discharge or termination or (B) terminate all of such
non-consenting Bank's Commitments and repay in full its outstanding Loans, in
accordance with Sections 3.02(b) and/or 4.01(b), provided that, unless the
Commitments terminated and Loans repaid pursuant to preceding clause(B) are
immediately replaced in full at such time through the addition of new Banks or
the increase of the Commitments and/or outstanding Loans of existing Banks (who
in each case must specifically consent thereto), then in the case of any action
pursuant to preceding clause(B), the Required Banks (determined before giving
effect to the proposed action) shall specifically consent thereto, provided
further, that the Borrower shall not have the right to replace a Bank solely as
a result of the exercise of such Bank's rights (and the withholding of any
required consent by such Bank) pursuant to the second proviso to Section
12.12(a).
12.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall
survive the execution and delivery of this Agreement and the making and
repayment of the Loans.
12.14 Domicile of Loans. Each Bank may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or affiliate of
such Bank; provided, that the Borrower shall not be responsible for costs
arising under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer
(other than a transfer pursuant to Section 1.12) to the extent such costs would
not otherwise be applicable to such Bank in the absence of such transfer.
12.15 Confidentiality. (a) Each of the Banks agrees that it
will use its best efforts not to disclose without the prior consent of the
Borrower (other than to its employees, auditors, counsel or other professional
advisors, to affiliates or to another Bank if the Bank or such Bank's
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<PAGE>
holding or parent company in its sole discretion determines that any such party
should have access to such information) any information with respect to the
Borrower or any of its Subsidiaries which is furnished pursuant to this
Agreement; provided, that any Bank may disclose any such information (a) as has
become generally available to the public or has become available to such Bank on
a non- confidential basis, (b) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have jurisdiction over such Bank or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their successors,
(c) as may be required or appropriate in response to any summons or subpoena or
in connection with any litigation, (d) in order to comply with any law, order,
regulation or ruling applicable to such Bank, and (e) to any prospective
transferee in connection with any contemplated transfer of any of the Notes or
any interest therein by such Bank; provided, that such prospective transferee
agrees, for the benefit of such Bank and the Borrower, to provisions
substantially identical to those contained in this Section.
(b) The Borrower hereby acknowledges and agrees that each Bank
may share with any of its affiliates any information related to the Borrower or
any of its Subsidiaries (including, without limitation, any nonpublic customer
information regarding the creditworthiness of the Borrower and its Subsidiaries,
provided that such Persons shall be subject to the provisions of this Section
12.15 to the same extent as such Bank).
12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.17 Post-Closing Actions. Notwithstanding anything to the
contrary contained in this Agreement, no later than 30 days following the
Initial Borrowing Date, the Borrower shall deliver to the Agent (u) replacement
share certificates with respect to the outstanding stock of each of its Foreign
Subsidiaries to enable the possession by the Collateral Agent of 65% of the
outstanding stock of each such Foreign Subsidiary, (v) UCC-11 lien searches (or
other appropriate searches) reflecting all filings, judgments and/or tax liens
filed against the Borrower (or against any name used by the Borrower in the past
as set forth on Annex C to the Security Agreement) for all relevant state and
local filing offices in the states of Washington and Oregon, together with
appropriate releases with respect to all filings appearing thereon, (w) an
appropriately revised landlord consent and subordination agreement with respect
to the real property lease described in paragraph 2 of Annex III hereto, (x)
original and appropriately completed Officer's Certificates of each Subsidiary
if the Borrower, together with evidence of the amendment of the Articles of
Association or other relevant charter document of Labtec Electronics (HK),
Limited as notified to the Borrower by the Agent prior to the Initial Borrowing
Date together with a certificate of such Subsidiary certifying as to such
amendment and such other matters as shall be reasonably requested by the Agent,
(y) certificates of insurance with respect to each insurance policy of the
Borrower reflecting the addition of the Collateral Agent as additional insured
with respect to each liability policy and as loss payee with
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respect to all property, cargo and similar insurance policies, and (z) evidence
of the termination of each security agreement or other document entered into in
respect of the Existing Credit Agreement (including a written acknowledgment of
such termination from each counterparty thereto), and all of the foregoing shall
be in form and substance satisfactory to the Agent.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
Address:
1499 SE Tech Center Drive LABTEC ENTERPRISES, INC.
Suite 350
Vancouver, Washington 98683
Attention: James Hillman
Telephone: (360) 896-2000 By /s/ Rodger Krouse
Telecopy:(360) 896-2020 Title: Vice-President
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Mary Kay Coyle
Title: Managing Director
-108-
EXHIBIT 10.10
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of December 15,
1998, among Labtec, Inc. (formerly known as Labtec Enterprises, Inc.) (the
"Borrower"), the lending institutions party to the Credit Agreement referred to
below (each a "Bank" and, collectively, the "Banks"), and Bankers Trust Company,
as Agent (the "Agent"). All capitalized terms used herein and not otherwise
defined herein shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Agent are party to a
Credit Agreement, dated as of October 7, 1997 (as amended, modified and
supplemented prior to the date hereof, the "Credit Agreement"); and
WHEREAS, the Borrower and the Banks have agreed to amend the
Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, it is agreed:
1. In order to induce the Banks to enter into this Amendment,
the Borrower hereby agrees that at all times from and after the Amendment
Effective Date (as hereinafter defined), unless an increase is otherwise
consented to in writing by the Required Banks, the sum of (i) the aggregate
outstanding principal amount of Revolving Loans and Swingline Loans and (ii) the
Letter of Credit Outstandings shall not exceed the lesser of the Total Revolving
Loan Commitment and $7,500,000.
2. Section 8.08(a) of the Credit Agreement is hereby amended
by deleting the reference to "$2,200,000" appearing opposite the date March 31,
1999 in the table set forth therein and by inserting in lieu thereof a reference
to "2,900,000."
3. Section 8.09 of the Credit Agreement is hereby amended by
deleting the portion of the table set forth in such Section from September 30,
1998 through March 31, 1999 and inserting in lieu thereof the following:
"September 30, 1998 $5,800,000
December 31, 1998 $5,600,000
March 31, 1999 $5,500,000"
4. Section 8.10 of the Credit Agreement is hereby amended by
deleting the portion of the table set forth in such Section from September 30,
1998 through March 31, 1999 and inserting in lieu thereof the following:
"September 30, 1998 1.7:1.0
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<PAGE>
December 31, 1998 1.7:1.0
March 31, 1999 1.7:1.0"
5. Each of the Banks hereby waives compliance by the Borrower
with Section 8.10 of the Credit Agreement solely for the Test Period ending June
30, 1998, and further waives any Default or Event of Default that may exist as a
result of the Borrower's failure to comply with such Section 8.10 for such Test
Period.
6. Section 8.11 of the Credit Agreement is hereby amended by
deleting the portion of the table set forth in such Section from December 31,
1998 through March 31, 1999 and inserting in lieu thereof the following:
"December 31, 1998 5.8:1.0
March 31, 1999 5.9:1.0"
7. Each of the parties hereto hereby agree that for all
purposes of the Credit Agreement, Consolidated EBIT referred to therein shall be
determined without giving effect to the charges for additions to reserves
identified on Schedule 1 hereto, provided that if such reserves are used in
periods following the time when such reserves are taken, then in such subsequent
periods consolidated EBIT shall be reduced by the amount of the reserves so
used.
8. In order to induce the Banks to enter into this Amendment,
the Borrower hereby agrees to pay, on the Amendment Effective Date, to the Agent
for the account of each Bank an amount equal to 1/4 of 1% of the sum of such
Bank's outstanding Term Loans and the Total Revolving Loan Commitment.
9. In order to induce the Banks to enter into this Amendment,
the Borrower hereby represents and warrants that (i) no Default or Event of
Default exists as of the Amendment Effective Date (as defined below) after
giving effect to this Amendment and (ii) on the Amendment Effective Date, both
before and after giving effect to this Amendment, all representations and
warranties contained in the Credit Agreement or in the other Credit Documents
are true and correct in all material respects.
10. This Amendment shall become effective on the date (the
"Amendment Effective Date") when the Required Banks and the Borrower shall have
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by way of facsimile transmission) the same to
the Agent at its Notice Office.
11. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
12. This Amendment may be executed in any number of
counterparts and by the
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<PAGE>
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument. A complete set of counterparts
shall be lodged with the Borrower and the Agent.
13. All references in the Credit Agreement and each of the
Credit Documents to the Credit Agreement shall be deemed to be references to the
Credit Agreement after giving effect to this Amendment.
14. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
* * *
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
hereof.
LABTEC ENTERPRISES, INC.
By: /s/ Rodger R. Krouse
-------------------------------
Name: Rodger R. Krouse
Title:
BANKERS TRUST COMPANY, individually
and as Agent
By: /s/ Mary Kay Coyle
-------------------------------
Name: Mary Kay Coyle
Title: Managing Director
LASALLE NATIONAL BANK
By:
-------------------------------
Name:
Title:
ARCHIMEDES FUNDING L.L.C
By: ING CAPITAL ADVISORS INC.,
as Collateral Manager
By: /s/ Michael D. Hatley
-------------------------------
Name: Michael D. Hatley
Title: Senior Vice President
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President
& Director
<PAGE>
SCHEDULE I
----------
Charges to be excluded in computing Consolidated EBIT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Amount/Description | Period in which taken |
------------------ | ---------------------- |
<S> | <C> <C> |
$210,000 - Addition to Bad Debt Reserve | 3rd and/or 4th Quarter of 1998 |
$500,000 - Addition to Inventory Reserve | 3rd and/or 4th Quarter of 1998 |
$290,000 - Addition to Reserve for Credits and Allowances | 3rd and/or 4th Quarter of 1998 |
- -------------------------------------------------------------------------------------------------------|
</TABLE>
EXHIBIT 10.11
SECOND AMENDMENT AND AGREEMENT TO AMEND AND RESTATE
SECOND AMENDMENT AND AGREEMENT TO AMEND AND RESTATE (this
"Agreement"), dated as of February 17, 1999, among Labtec Inc. (formerly known
as Labtec Enterprises, Inc.) (the "Borrower"), the lending institutions party to
the Credit Agreement referred to below (each a "Bank" and, collectively, the
"Banks"), and Bankers Trust Company, as Agent (the "Agent"). All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings provided such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Agent are party to a
Credit Agreement, dated as of October 7, 1997 (as amended, modified and
supplemented prior to the date hereof, the "Credit Agreement");
WHEREAS, the Borrower and the Banks have agreed to certain
amendments and consents in connection with the Credit Agreement, the terms and
conditions of which are provided herein; and
WHEREAS, the Borrower and the Banks have agreed that if and
when the Merger referred to below is consummated, the Credit Agreement will be
amended and restated as provided herein;
NOW, THEREFORE, it is agreed:
I. Consent to Merger; Agreement to Amend and Restate.
1. Notwithstanding anything to the contrary contained in the
Credit Agreement, the Banks hereby agree that the Borrower may merge (the
"Merger") with SIMC Acquisition Corporation ("SIMC"), a newly-formed, direct
Wholly-Owned Subsidiary of Spacetec IMC Corporation ("Spacetec"), on the
following terms and conditions:
(a) the Borrower is the surviving corporation of the Merger,
and at all times after the Merger the Borrower is a direct Wholly-Owned
Subsidiary of Spacetec;
(b) the Merger is consummated substantially in accordance with
the Amended and Restated Agreement and Plan of Merger, dated as of
October 21, 1998 and amended and restated as of November 13, 1998,
among Spacetec, SIMC and the Borrower, and in accordance with all
applicable laws;
(c) prior to the consummation of the Merger, the Banks shall
have received (i) an unaudited pro forma balance sheet of each of
Spacetec and of the Borrower, in each case as of the fiscal quarter
ended September 30, 1998 (but giving effect to the Merger), and (ii)
financial projections for Spacetec and the Borrower and their
respective Subsidiaries after giving effect to the Merger, which pro
forma balance sheets and financial projections shall be
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<PAGE>
satisfactory to the Agent and the Required Banks (it being understood
and agreed that the pro forma balance sheets and financial projections
delivered to the Banks prior to the Agreement Effective Date are
satisfactory);
(d) the Merger is permitted under the terms of the
Subordinated Financing Documents; and
(e) immediately following the consummation of the Merger:
(i) Spacetec shall transfer all of its assets (other
than cash, Cash Equivalents and capital stock of its
Subsidiaries) and all of its liabilities (other than pursuant
to the Merger Notes) to a newly-formed, direct Wholly-Owned
Subsidiary of Spacetec other than SIMC (such direct
Wholly-Owned Subsidiary, "Spacetec Sub");
(ii) Spacetec shall execute and deliver to the Agent an
Acknowledgment in the form of Annex A attached hereto;
(iii) Spacetec Sub shall execute and deliver to the Agent
a Subsidiary Guaranty in the form of Exhibit H to the Credit
Agreement;
(iv) Spacetec and Spacetec Sub shall execute and deliver
to the Agent counterparts of the Pledge Agreement and Security
Agreement in the form of Exhibits F and G, respectively, to
the Credit Agreement;
(v) all actions shall be taken, to the satisfaction of
the Agent, to perfect the security interests in the assets of
Spacetec and Spacetec Sub created under the Pledge Agreement
and the Security Agreement;
(vi) the Agent shall receive an opinion from counsel to
Spacetec and Spacetec Sub in form and substance satisfactory
to the Agent;
(vii) Spacetec and Spacetec Sub shall deliver to the Agent
Officers' Certificates in the form of Exhibit E to the Credit
Agreement, with appropriate insertions and attachments,
together with any other documents of the type referred to in
Section 5.05(b) of the Credit Agreement requested by the
Agent; and
(viii)the Borrower shall make a prepayment of the
principal of the Term Loans of at least $7,000,000.
2. Effective concurrently with the consummation of the Merger,
the Borrower, the Banks and the Agent hereby agree that the Credit Agreement
will be amended and restated to appear in its entirety as set forth in Annex B
hereto as shall be deemed to be so amended and restated
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<PAGE>
without any further action by the parties hereto.
3. Effective concurrently with the consummation of the Merger,
Exhibits F, G and H to the Credit Agreement are hereby amended and restated to
appear in their entirety as set forth in Exhibits F, G and H hereto.
4. Effective concurrently with the consummation of the Merger,
the Credit Agreement is hereby further amended by adding a new Annex XIII
thereto in the form of Annex XIII hereto.
5. Notwithstanding anything to the contrary contained in the
Credit Agreement, the Banks hereby agree that monthly financial statements
required to be delivered to the Banks pursuant to Section 7.01(a) of the Credit
Agreement for the month of December, 1998, and the quarterly financial
statements required to be delivered to the Banks pursuant to Section 7.01(b) of
the Credit Agreement for the quarter ended December 31, 1998, shall not be
required to be delivered until February 26, 1999.
II. Miscellaneous.
1. In order to induce the Banks to enter into this Agreement,
the Borrower hereby represents and warrants that (i) no Default or Event of
Default exists as of the Agreement Effective Date (as defined below) after
giving effect to this Agreement and (ii) on the Agreement Effective Date, both
before and after giving effect to this Agreement, all representations and
warranties contained in the Credit Agreement or in the other Credit Documents
are true and correct in all material respects, unless stated to relate to a
specific earlier date, in which case such representations and warranties shall
be true and correct in all material respects as of such earlier date.
2. This Agreement shall become effective on the date (the
"Agreement Effective Date") when the Borrower, the Agent and the Required Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at its Notice Office.
3. This Agreement is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
4. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Agent.
5. All references in the Credit Agreement and each of the
Credit Documents to the Credit Agreement shall be deemed to be references to the
Credit Agreement after giving effect
-3-
<PAGE>
to this Agreement.
6. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
* * *
-4-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
hereof.
LABTEC INC.
By: /s/ Robert Wick
-----------------------------------------
Name: Robert Wick
Title: President
BANKERS TRUST COMPANY, individually
and as Agent
By: /s/ Mary Kay Coyle
-----------------------------------------
Name: Mary Kay Coyle
Title: Managing Director
LASALLE NATIONAL BANK
By: /s/ F. Ward Nixon
-----------------------------------------
Name: F. Ward Nixon
Title: Senior Vice President
ARCHIMEDES FUNDING L.L.C
By: ING CAPITAL ADVISORS INC.,
as Collateral Manager
By: /s/ Helen Y. Rhee
-----------------------------------------
Name: Helen Y. Rhee
Title: Vice President & Portfolio Manager
<PAGE>
VAN KAMPEN
PRIME RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
-----------------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
<PAGE>
ANNEX XIII
----------
Charges to be excluded in computing Consolidated EBIT
<TABLE>
<CAPTION>
- ----------------------------------------------------------|-------------------------------------------|
| |
Amount/Description | Period in which taken |
------------------ | --------------------- |
<S> <C> | <C> |
1. $210,000 - Addition to Bad Debt Reserve | Quarters ending 12/31/98 and/or |
| 3/31/99 |
2. $500,000 - Addition to Inventory Reserve | Quarters ending 12/31/98 and/or |
| 3/31/99 |
3. $290,000 - Addition to Reserve for Credits and | Quarters ending 12/31/98 and/or |
Allowances | 3/31/99 |
| |
4. $1,000,000 - Restructuring Reserves in connection | Quarters ending 12/31/98, 3/31/99, |
with the SIMC Merger | 6/30/99, 9/30/99 and/or 12/31/99 |
- ----------------------------------------------------------|-------------------------------------------|
</TABLE>
<PAGE>
ANNEX A
-------
ACKNOWLEDGMENT
ACKNOWLEDGMENT (the "Acknowledgment"), dated as of February
17, 1999 between Spacetec IMC Corporation ("Spacetec"), a Massachusetts
corporation, and Bankers Trust Company, as Agent for the Banks. Unless otherwise
defined herein, all capitalized terms used herein and defined in the Amended and
Restated Credit Agreement referred to below are used herein as so defined.
W I T N E S S E T H:
WHEREAS, Labtec Inc. (formerly known as Labtec Enterprises,
Inc.), a Delaware corporation (the "Borrower"), the lending institutions from
time to time party thereto (the "Banks"), and Bankers Trust Company, as Agent
(the "Agent") have entered into a Credit Agreement, dated as of October 7, 1997
(as amended, modified or supplemented from time to time, the "Credit Agreement")
providing for the making of Loans to the Borrower and the issuance of, and
participation in, Letters of Credit for the account of the Borrower, all as
contemplated therein;
WHEREAS, on the date hereof, (i) the Borrower is merging with
a Wholly-Owned Subsidiary of Spacetec and (ii) the Credit Agreement is being
amended and restated to, among other things, include Spacetec as a party thereto
(the Credit Agreement, as so amended and restated, the "Amended and Restated
Credit Agreement");
WHEREAS, subject to the terms and conditions set forth below,
the parties hereto desire that Spacetec become a party to the Amended and
Restated Credit Agreement as "Holdings" referred to therein;
NOW, THEREFORE, it is agreed:
1. Holdings hereby expressly assumes all rights, obligations,
duties and liabilities of Holdings under the Credit Agreement.
2. Upon the effectiveness of this Acknowledgment, all
references in the Credit Agreement to "Holdings" shall be deemed to be
references to Spacetec.
3. To induce the Agent to enter into this Acknowledgment,
Spacetec hereby represents, warrants and agrees as follows:
(a) on the date hereof and after giving effect to Spacetec's
execution and delivery of this Acknowledgment, all representations and
warranties contained in each of the Credit Documents are true and
correct in all material respects and no Default or Event of Default is
in existence; and
<PAGE>
ANNEX A
Page 2
(b) on and after the date hereof, Spacetec will fully and
faithfully perform all obligations (including payment obligations and
compliance with all covenants) of "Holdings" under the Credit
Agreement.
4. This Acknowledgment shall become effective as of the date
first above written, when each of the parties hereto shall have executed a copy
hereof and shall have delivered the same to the Agent.
5. This Acknowledgment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. A complete set of counterparts
shall be lodged with Spacetec and the Agent.
6. THIS ACKNOWLEDGMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
* * *
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Acknowledgment to be duly executed and delivered as of the
date first above written.
SPACETEC IMC CORPORATION
By: /s/ George R. Rea
-------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Agent
By: /s/ Mary Kay Coyle
-------------------------------
Name: Mary Kay Coyle
Title: Managing Director
OFFICE LEASE
DATED: APRIL 24, 1997
BETWEEN: PACIFIC REALTY ASSOCIATES, L.P.
a Delaware limited partnership LANDLORD
AND: LABTEC ENTERPRISES, INC.
a Washington corporation TENANT
Tenant wishes to lease from Landlord the following described
property, hereinafter referred to as "the Premises":
Approximately 14,335 rentable square feet of office space
located in Building No. 8, Columbia Tech Center, 1499 S.E. Tech Center Drive,
Suite 350, Vancouver, Washington 98683 and as further described on the attached
Exhibit A, B and C.
If the Premises consist of a portion but not all of a
building, the building housing the Premises is hereinafter referred to as "the
Building."
1. TERM.
The Lease shall be for a term of 84 calendar months plus the
partial month, if any, in which this Lease commences. The parties anticipate
that the term shall commence on August 1, 1997 and continue through July 31,
2004; however, the term shall actually commence upon such earlier date that
Landlord delivers possession. If the term commences on a date different than the
date set forth above, Landlord and Tenant shall execute a supplemental agreement
setting forth the commencement date and termination date.
2. DELIVERY OF POSSESSION.
Delivery of possession shall occur when Tenant actually
occupies the Premises or when the Premises are available for occupancy by Tenant
with all work to be performed by Landlord substantially completed. Landlord
shall have no liability for delays in delivery of possession caused by labor
disputes, shortages of materials, acts of God, or other causes beyond Landlord's
reasonable control. If Landlord consents, Tenant may occupy the Premises prior
to such commencement date on a rent free basis and compliance with all terms of
this Lease. Tenant may cancel this Lease without liability if possession of the
Premises is not delivered on or before October 1, 1997.
<PAGE>
3. RENT.
3.1. Tenant shall pay, on the first day of each month, base
rent for the Premises according to the following schedule:
Base Rent
Period Per Month
- -------------------------------------------------------------
August 1, 1997 through July 31, 2002 $22,697.00
August 1, 2002 through July 31, 2004 $25,086.00
3.2. Rent for any partial month during the lease term shall be
prorated to reflect the number of days during the partial month that Tenant
occupied the Premises. Rent for the first month of the lease term shall be paid
on August 1, 1997.
3.3. In addition to base rent, Tenant shall pay, as additional
rent, escalation payments computed according to Paragraph 19 hereof.
3.4. On or before August 1, 1997, Tenant shall pay the base
rent for the first full month of the lease term and in addition has paid the sum
of Twenty-five Thousand Eighty-six and No/100 Dollars ($25,086.00) as a security
deposit. The deposit shall be held by Landlord to secure all payments and
performances due from Tenant under this Lease. Landlord may commingle the
deposit with its funds and shall owe no interest on the deposit. Landlord may
apply the deposit to the cost of performing any obligation which Tenant fails to
perform within the time required by this Lease, but such application by Landlord
shall not be the exclusive remedy for Tenant's default. If the deposit is
applied by Landlord, Tenant shall on demand pay the sum necessary to replenish
the deposit to its original amount. To the extent not applied by Landlord, the
deposit shall be refunded to Tenant within thirty (30) days after expiration of
the lease term or, at Landlord's option, applied against the base rent for the
last month of the term.
4. USE OF THE PREMISES.
4.1. Tenant shall use the Premises as business offices for the
following business and for no other purpose without first obtaining Landlord's
prior written consent, which consent shall not be unreasonably withheld or
delayed:
General office and a sound room for testing of
Tenant's products.
4.2. In connection with its use, Tenant shall comply with all
applicable laws, ordinances, and regulations of any public authority and shall
not annoy, obstruct, or interfere with the rights of other tenants of the
Building. Tenant shall create no nuisance nor allow any objectionable liquid or
noise to be emitted from the Premises. Tenant shall store no materials nor
conduct any activities that will increase Landlord's fire insurance rates for
the Premises.
-2-
<PAGE>
4.3. Tenant shall install in the Premises only such machinery
as is customary for general office use and shall not overload the floors or
electrical circuits of the Premises. Landlord has approved in advance the
installation of any power-driven machinery such as electronic data processing
equipment or other machinery not customary for normal office use. Landlord may
select a qualified electrician whose opinion will control regarding electrical
circuits and a qualified engineer or architect whose opinion will control
regarding floor loads. If machinery installed by Tenant generates heat, any
additional air conditioning desired by Tenant shall be at Tenant's expense.
4.4. No signs, awnings, antennas, or other apparatus shall be
painted on or attached to the Building or on any glass or woodwork of the
Premises without Landlord's written approval as to design, size, location, and
color. All signs installed by Tenant shall be removed upon termination of this
Lease with the sign location restored to its former state. Landlord shall, at
its sole cost and expense, provide interior directory and suite identity signs
in a design and format of Landlord's choosing.
5. UTILITIES AND SERVICES.
5.1. As used in this Paragraph 5, "Normal Business Hours"
shall mean 7 a.m. through 6 p.m., Monday through Friday and 8 a.m. through 12
p.m. on Saturdays.
5.2. Landlord shall, at its expense, furnish Tenant with the
following services and utilities of quality and quantity customary in comparable
office buildings in the City of Vancouver, Washington:
5.2.1. Elevator service during Normal Business
Hours of the Building.
5.2.2. Heating and air conditioning to maintain a
temperature condition which in Landlord's judgment provides for comfortable
occupancy of the Premises during Normal Business Hours, provided Tenant complies
with Landlord's instructions regarding use of drapes and thermostats and Tenant
does not utilize heat generating machines or equipment which affect the
temperature otherwise maintained by the air conditioning system. Tenant may
request heating and air conditioning during other than Normal Business Hours or
on Sundays, or holidays. The cost of such additional service shall be borne by
Tenant at reasonable rates established by Landlord, which reasonable rates will
be provided upon request by Tenant.
5.2.3. Water for drinking, lavatory, and toilet
purposes.
5.2.4. Electrical current for lighting and operation
of customary office machines.
5.2.5. Janitorial service after 5:30 p.m., five days
a week.
-3-
<PAGE>
5.3. Tenant shall comply with all government laws or
regulations regarding the use or reduction of use of utilities on the Premises.
If Tenant's future use of the Premises results in a material increase in the
amount of electricity required over the amount required at the commencement of
the lease term, or beyond that required for Normal Business Hours, then Tenant
shall pay a reasonable charge for such increase in electricity requirements when
requested to do so by Landlord.
5.4. Landlord does not warrant that any of the services and
utilities referred to above will be free from interruption. Interruption of
services and utilities shall not be deemed an eviction or disturbance of
Tenant's use and possession of the Premises or render Landlord liable to Tenant
for damages, or relieve Tenant from performance of Tenant's obligations under
this Lease, but Landlord shall take all reasonable steps to correct any
interruptions in service. If such interruption of services and utilities is due
to Landlord's negligent or intentional act or omission, then rent shall be
reduced during the period of said interruption to the extent the Premises are
not reasonably usable for the use permitted by this Lease because of such
interruption of services and utilities.
6. MAINTENANCE BY LANDLORD.
6.1. Landlord shall repair and maintain the Building
structure, foundation, roof, gutters, exterior walls, halls, stairways and
entryway, and common passageways in sound, clean, and serviceable condition.
Landlord shall also repair, maintain and replace, as necessary, the elevators,
heating and air-conditioning machinery, door and window hardware, plumbing,
switches, light fixtures, and wiring and shall replace exterior glass breakage.
Repair or replacement due to damage caused by Tenant's negligent or intentional
acts or acts in breach of this Lease shall be at Tenant's expense.
6.2. Landlord shall have the right to erect scaffolding and
other apparatus necessary for the purpose of making required repairs. Landlord
shall have no liability for failure to perform required maintenance and repair
unless notice of the needed maintenance or repair is given by Tenant and
Landlord fails to remedy the problem within a reasonable time. Landlord shall
have no liability for interference with Tenant's use by needed repairs and
installations provided these are performed in a manner so as to cause a
reasonable minimum of interference to Tenant. Tenant shall have no claim against
Landlord for any interruption or reduction of services or interference with
Tenant's occupancy caused by circumstances beyond Landlord's reasonable control,
and no such interruption or reduction shall be construed as a constructive or
other eviction of Tenant.
7. MAINTENANCE AND ALTERATIONS BY TENANT.
7.1. Tenant shall maintain the interior of the Premises in
neat, clean, and good condition at all times and shall repair all damages to the
Premises caused by Tenant's use, but Tenant shall not be required to repair
normal wear resulting from the ordinary use for which the Premises were leased.
Tenant shall replace all interior broken glass in the Premises with glass of the
same quality.
-4-
<PAGE>
7.2. Tenant shall not make any alterations, additions, or
improvements to the Premises, change the color of the interior, or install any
wall or floor covering without Landlord's prior written consent, which consent
shall not be unreasonably withheld or delayed. Any such additions, alterations,
or improvements, except for unattached movable trade fixtures, shall at once
become part of the realty and belong to Landlord unless the terms of the
applicable consent provide otherwise. Notwithstanding the foregoing, if during
the term of the Lease or any extensions thereof Tenant should install any trade
fixtures within the Premises, Tenant may, at its sole cost and expense, remove
such fixtures, and if Tenant removes such fixtures, Tenant shall, at its sole
cost and expense, restore the Premises to its original condition.
8. TENANT'S INDEMNIFICATION; LIABILITY INSURANCE.
8.1. Tenant shall not allow any liens to attach to the
Premises as a result of its activities. Tenant shall indemnify and defend
Landlord from any claim, liability, damage, or loss arising out of any activity
on the Premises by Tenant, its agents, or invitees or resulting from Tenant's
failure to comply with any term of this Lease.
8.2. Tenant shall carry general liability insurance on an
occurrence basis with combined single limits of not less than $1,000,000. Such
insurance shall be provided by an insurance carrier reasonably acceptable to
Landlord and shall be evidenced by a certificate delivered to Landlord stating
that the coverage will not be canceled or materially altered without ten (10)
days' advance written notice to Landlord. Landlord shall be named as an
additional insured on such policy.
9. PROPERTY DAMAGE; SUBROGATION WAIVER.
9.1. If fire or other casualty causes damage to the Building
or the premises in an amount exceeding thirty (30%) percent of the full
construction-replacement cost of the Building or Premises, respectively,
Landlord may elect to terminate this Lease as of the date of the damage by
notice in writing to Tenant within thirty (30) days after such date. Otherwise,
Landlord shall promptly repair the damage and restore the Premises to their
former condition as soon as practicable. Rent shall be reduced during the period
to the extent the Premises are not reasonably usable for the use permitted by
this Lease because of such damage and required repairs.
9.2. Landlord shall be responsible for insuring the Building,
and Tenant shall be responsible for insuring its personal property and trade
fixtures located on the Premises.
9.3. Neither party shall be liable to the other for any loss
or damage caused by water damage, sprinkler leakage, or any of the risks covered
by a standard fire insurance policy with extended coverage and sprinkler leakage
endorsements, and there shall be no subrogated claim by one party's insurance
carrier against the other party arising out of any such loss.
-5-
<PAGE>
10. CONDEMNATION.
If a condemning authority takes the entire Building or a
portion sufficient to render the Premises unsuitable for Tenant's use, then
either party may elect to terminate this Lease effective on the date that
possession is taken by the condemning authority. Otherwise, Landlord shall
proceed as soon as practicable following the taking to restore the remainder of
the Building. Rent shall be reduced during the period of restoration to the
extent the Premises are not reasonably usable by Tenant. Rent shall be reduced
for the remainder of the term in an amount proportionate to the reduction in
area of the Premises caused by the taking. All condemnation proceeds shall
belong to Landlord, except for any sums specifically awarded to Tenant for
relocation expenses.
11. ASSIGNMENT AND SUBLETTING.
11.1. Tenant shall not assign its interest under this Lease or
sublet the Premises without first obtaining Landlord's consent in writing, which
consent shall not be unreasonably withheld or delayed. No consent in one
instance shall prevent this provision from applying to each subsequent instance.
This provision shall apply to all transfers by operation of law including, but
not limited to, mergers and transfers of 51% or more of the voting stock of
Tenant. No assignment shall relieve Tenant of its obligation to pay rent or
perform other obligations required by this Lease and no consent to one
assignment or subletting shall be a consent to any further assignment or
subletting. If Tenant assigns this Lease or sublets the Premises for an amount
in excess of the rent called for by this Lease, one-half of such excess shall be
paid to Landlord promptly as it is received by Tenant.
11.2. Subject to the above limitations on transfer of Tenant's
interest, this Lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns.
11.3. Landlord shall not unreasonably withhold its consent to
assignment or subletting to a financially solvent party for the use permitted
herein, provided that any consideration paid for the assignment or one-half of
any rentals received from any subtenant in excess of the rental specified in
this Lease shall be paid to Landlord within five (5) days after it is received
by Tenant.
12. DEFAULT.
12.1. Any of the following shall constitute a default by
Tenant under this Lease:
12.1.1. Tenant's failure to pay rent or any other
charge under this Lease within five (5) business days after it is due, or
failure to comply with any other term or condition within twenty (20) business
days following written notice from Landlord specifying the noncompliance. If
such noncompliance cannot be cured within the twenty (20) business day period,
this provision shall be satisfied if Tenant commences correction within such
period and thereafter proceeds in good faith and with reasonable diligence to
effect compliance as soon as possible. Time is of the essence.
-6-
<PAGE>
12.1.2. Tenant's assignment for the benefit of its
creditors; Tenant's commencement of proceedings under any provision of any
bankruptcy or insolvency law or failure to obtain dismissal of any petition
filed against it under such laws within the time required to answer; or the
appointment of a receiver for Tenant's properties.
12.2. Landlord's failure to give notice as to any failure of
compliance by Tenant shall not be a continuing waiver by Landlord as to the
default.
13. REMEDIES FOR DEFAULT.
In case of default as described in Paragraph 12 above,
Landlord shall have the right to the following remedies which are intended to be
cumulative and in addition to any other remedies provided under applicable law:
13.1. Terminate this Lease without relieving Tenant from its
obligation to pay damages.
13.2. Retake possession of the Premises by summary proceedings
or otherwise, in which case Tenant's liability to Landlord for damages shall
survive the tenancy. Landlord may, after such retaking of possession, relet the
Premises upon any reasonable terms. No such reletting shall be construed as an
acceptance of a surrender of Tenant's leasehold interest.
13.3. Recover damages caused by Tenant's default which shall
include reasonable attorneys' fees at trial and on any appeal therefrom.
Landlord may sue periodically to recover damages as they occur throughout the
lease term, and no action for accrued damages shall bar a later action for
damages subsequently accruing. Landlord may elect in any one action to recover
accrued damages plus damages attributable to the remaining term of the Lease
equal to the difference between the rent under this Lease and the reasonable
rental value of the Premises for the remainder of the term, discounted to the
time of judgment at the rate of six (6%) percent per annum.
13.4. Make any payment or perform any obligation required of
Tenant so as to cure Tenant's default, in which case Landlord shall be entitled
to recover all amounts so expended from Tenant, plus interest at the rate of ten
(10%) percent per annum from the date of the expenditure.
14. SURRENDER ON TERMINATION.
14.1. On expiration or early termination of this lease, Tenant
shall deliver all keys to Landlord and surrender the Premises broom clean and in
the same condition as at the commencement of the term subject only to
depreciation and wear from ordinary use. Tenant may remove all of its
furnishings and trade fixtures that remain its property and restore all damage
resulting from such removal. Failure to remove shall be an abandonment of the
property, and Landlord may dispose of it in any manner without liability.
-7-
<PAGE>
14.2. If Tenant fails to vacate the Premises when required,
including failure to remove all its personal property, Landlord may elect
either: (i) to treat Tenant as a tenant from month to month, subject to all
provisions of this Lease except the provision for term and at a base rental of
one-hundred twenty (120%) percent of that specified in this Lease; or (ii) to
eject Tenant from the Premises and recover damages caused by wrongful holdover.
15. REGULATIONS.
Landlord shall have the right to make and enforce reasonable
regulations consistent with this Lease for the purpose of promoting safety,
order, cleanliness, and good service to all tenants of the Building. Copies of
all such reasonable regulations shall be furnished to Tenant and shall be
complied with as if part of this Lease.
16. ACCESS.
16.1. Landlord does not undertake to provide security for the
Building. However, during times other than 7 a.m. through 6 p.m., Monday through
Friday Tenant's officers and employees or those having business with Tenant may
be required to identify themselves or show passes in order to gain access to the
Building. Landlord shall have no liability for refusing to permit access by
anyone.
16.2. Landlord shall have the right to enter upon the Premises
by passkey or otherwise after giving Tenant twenty-four (24) hour verbal notice,
excepting that Landlord shall not be required to give such notice in times of
emergency, to determine Tenant's compliance with this Lease, to perform
necessary maintenance and repairs to the Building or the Premises, or to show
the Premises to any prospective tenant or purchasers. Such entry shall be at
such times and in such manner as not to interfere with the reasonable business
use of the Premises by Tenant.
16.3. Tenant shall move bulky articles in and out of the
Building or make independent use of the elevators only at times approved by
Landlord following at least 24 hours' written notice to Landlord of the intended
move. Landlord will not unreasonably withhold its consent under this paragraph.
17. NOTICES.
Notices between the parties relating to this Lease shall be in
writing, effective when delivered, or if mailed, effective on the second day
following mailing, postage prepaid, to the address for the party stated in this
Lease or to such other address as either party may specify by notice to the
other. Rent shall be payable to Landlord in the same manner at the address for
the party stated in this Lease, but shall be considered paid only when received.
-8-
<PAGE>
18. MORTGAGE OR SALE BY LANDLORD; ESTOPPEL CERTIFICATES.
18.1. This Lease is and shall be prior to any mortgage or deed
of trust ("Encumbrance") recorded after the date of this Lease and affecting the
Building and the land upon which the Building is located. However, if any lender
holding an Encumbrance secured by the Building and the land underlying the
Building requires that this Lease be subordinate to the Encumbrance, then Tenant
agrees that this Lease shall be subordinate to the Encumbrance if the holder
thereof agrees in writing with Tenant that so long as Tenant performs its
obligations under this Lease no foreclosure, deed given in lieu of the
foreclosure, or sale pursuant to the terms of the Encumbrance, or other steps or
procedures taken under the Encumbrance shall affect Tenant's rights under this
Lease. If the foregoing condition is met, Tenant shall execute the written
agreement and any other documents required by the holder of the Encumbrance to
accomplish the purposes of this paragraph.
18.2. If the Building is sold as a result of foreclosure of
any Encumbrance thereon or otherwise transferred by Landlord or any successor,
Tenant shall attorn to the purchaser or transferee, and, after completion of the
sale as a result foreclosure proceedings, the transferor shall have no further
liability hereunder. Landlord shall remain obligated to Tenant for all
obligations arising under this Lease that are not transferred to the purchaser
or transferee as part of the sale as a result of foreclosure.
18.3. Either party shall within twenty (20) days after notice
from the other execute and deliver to the other party a certificate stating
whether or not this Lease has been modified and is in full force and effect and
specifying any modifications or alleged breaches by the other party. The
certificate shall also state the amount of monthly base rent, the dates to which
rent has been paid in advance, and the amount of any security deposit or prepaid
rent. Failure to deliver the certificate within the specified time shall be
conclusive upon the party of whom the certificate was requested that the Lease
is in full force and effect and has not been modified except as may be
represented by the party requesting the certificate.
19. ANNUAL RENT ESCALATION.
19.1. As used in this Paragraph 19, the following terms are
defined as follows:
19.1.1. "Base Year" shall mean the January 1 -
December 31, 1998.
19.1.2. "Tenant's Proportionate Share" shall mean a
fraction, the numerator of which is the number of useable square feet of office
space covered by this Lease and the denominator of which is the total number of
useable square feet of office space in the Building, whether or not such space
is actually rented. Tenant's Proportionate Share of Operating Expenses and of
Real Property Taxes relating to common facilities serving all of Columbia Tech
Center, shall be calculated on the portion of such expenses attributable to the
Building. As of the commencement date of the Lease, Tenant's proportionate share
is 20.08%, which is the ratio of 14,335 rentable
-9-
<PAGE>
square feet of the Premises divided by the 71,369 current rentable square feet
of space in the Building.
19.1.3. "Operating Expenses" shall mean all direct
costs of operation and maintenance of the Building as determined by generally
accepted accounting principles and shall include, but not be limited to, the
following costs: fees for permits and licenses relating to the Building, water
and sewer charges, insurance premiums, utilities, janitorial services, labor of
Building attendants, Building management fees (if any), maintenance of elevators
and mechanical systems, supplies, materials, equipment, and tools used in
Building maintenance, and upkeep of landscaping, common areas and common
facilities. Operating Expenses shall not include depreciation on the Building,
leasing commissions, or expenditures for capital improvements.
19.1.4. "Real Property Taxes" shall mean all taxes
and assessments, special or otherwise, levied upon the Building and the land
upon which the Building is located as well as on common areas serving all of
Columbia Tech Center, use or occupancy or similar taxes, taxes based on rent or
other income from the Building (computed as if Landlord's income from the
Building is Landlord's sole income) or any other tax, fee or excise of any kind
imposed on Landlord in lieu of existing or additional real property taxes and
assessments. Real Property Taxes shall include the cost of contesting the amount
or validity of any of the aforementioned Real Property Taxes.
19.2. If the Operating Expenses or the Real Property Taxes for
any fiscal year after the Base Year, as defined in Paragraph 19.1.1, exceed
those paid or incurred for the Base Year, then Tenant shall pay its
Proportionate Share of the increase in Operating Expenses or the increase in
Real Property Taxes prorated with respect to years in which this Lease is in
effect for less than the entire fiscal year, provided however, that the base
year amount for real property taxes shall be the amount payable in the real
estate tax year during which the term of this Lease commences, or in the first
year in which the Building is fully assessed. Commencing January 1 of the first
January 1 - December 31 fiscal year following the Base Year and for each year
thereafter, Landlord shall estimate in a reasonable manner the amount by which
Operating Expenses or Real Property Taxes are anticipated to increase for that
year over the Base Year amounts. Landlord shall compute Tenant's Proportionate
Share of such estimated increases, and one-twelfth of Tenant's Proportionate
Share of Operating Expenses increases and of Real Property Taxes increases shall
be paid by Tenant as additional rernt in connection with each monthly rent
payment. At the conclusion of each fiscal year after the Base Year Landlord
shall compute the actual Operating Expenses increases and Real Property Taxes
increases. If the estimated payments collected from Tenant are insufficient to
cover Tenant's Proportionate Share of the actual Operating Expenses increases or
Real Property Taxes increases, Tenant shall within twenty (20) days after
receipt of a billing from Landlord pay the difference. If Landlord's estimates
exceeded the amount of actual Operating Expenses increases or Real Property
Taxes increases, Landlord shall, at Tenant's option, either refund the excess to
Tenant or apply the excess towards reducing Tenant's Proportionate Share of
Operating Expenses increases or Real Property Taxes increases for the next
fiscal year in which the Lease is in effect.
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<PAGE>
19.3. Notwithstanding the above, the increase in Tenant's
proportionate share of operating expenses shall not exceed four percent (4%)
annually, on a cumulative basis, for the term of this Lease, exclusive of real
estate taxes.
19.4. Landlord shall use its best efforts to complete its
computation of actual Operating Expenses increases and Real Property Taxes
increases by August following the fiscal year for which the computation is to be
made. Tenant shall pay any additional amounts or be entitled to refund of any
excess payments even if the lease term has expired and Tenant has vacated the
Premises at the time that Landlord's computation of actual Operating Expenses
and Real Property Taxes is made.
19.5. In no event shall Tenant be entitled to a refund for an
Operating Expenses or Real Property Taxes decrease below the Base Year amount.
20. INTEREST AND LATE CHARGES.
Rent not paid when due shall bear interest at the rate of ten
(10%) percent per annum until paid. Landlord may at its option impose a late
charge of $.05 for each $1.00 of rent for rent payments made more than ten (10)
days late in addition to interest and other remedies available for default.
21. DISPUTES - ATTORNEYS' FEES.
In the event of any litigation out of this Lease, the
prevailing party shall be entitled to recover from the other party, in addition
to all other relief provided by law or judgement, its reasonable costs and
attorneys' fees incurred both at and in preparation for trial and any appeal or
review, such amount to be as determined by the court(s) before which the matter
is heard. Disputes between the parties which are to be litigated shall be tried
before a judge without a jury.
22. SEVERABILITY.
If any provision of this Lease is held to be invalid,
unenforceable or illegal the remaining provisions shall not be affected and
shall be enforced to the fullest extent permitted by law.
23. LANDLORD'S LIABILITY.
23.1. Landlord warrants that so long as Tenant complies with
all terms of this Lease it shall be entitled to peaceable and undisturbed
possession of the Premises free from any eviction or disturbance by Landlord or
persons claiming through Landlord.
23.2. Landlord shall indemnify and defend Tenant from any
claim, liability, damage, or loss arising out of any activity on the Premises by
Landlord or its agents or resulting from Landlord's failure to comply with any
term of this Lease.
-11-
<PAGE>
23.3. All persons dealing with Pacific Realty Associates, L.P.
("Partnership") must look solely to the property and assets of Partnership for
the payment of any claim against Partnership or for the performance of any
obligation of Partnership as neither the general partner, limited partners,
employees, nor agents of Partnership assume any personal liability for
obligations entered into on behalf of Partnership (or its predecessors in
interest) and their respective properties shall not be subject to the claims of
any person in respect of any such liability or obligation. As used herein, the
words "property and assets of partnership" exclude any rights of Partnership for
the payment of capital contributions or other obligations to it by the general
partner or any limited partner in such capacity.
23.4. Landlord shall have no liability to Tenant for loss or
damages arising out of acts of other tenants.
24. FIRST RIGHT OF NOTICE.
24.1. Tenant shall have the First Right of Notice for the
adjacent 4,567 rentable square feet of space, Suite 300. Landlord shall notify
Tenant of the availability of such space, and Tenant shall have five (5)
business days to enter into good faith negotiations for the First Right of
Notice space in the event Landlord begins negotiations with a third party for
the First Right of Notice space. Landlord agrees to negotiate in good faith with
Tenant for the lease of such First Right of Notice space. Should Tenant choose
not to lease the First Right of Notice space, the First Right of Notice shall
remain in effect for any future availability of the First Right of Notice space.
25. PARKING.
Landlord, at no additional expense to Tenant, shall make
available for the non-exclusive use of Tenant, its officers, directors, visitors
and employees, automobile parking spaces at the rate of approximately four (4)
spaces for each one thousand (1,000) rentable square feet included within the
Premises.
26. AMERICANS WITH DISABILITIES ACT ("ADA").
Tenant shall, at its expense, comply with all applicable
provisions of Title I of the Americans with Disabilities Act of 1990 ("the Act")
related to its specific use of the Premises, and Landlord shall have no
responsibility for compliance with the provisions of Title I of the Act.
Landlord shall, at its expense, cause the Building to comply with, during the
term of this Lease and any extensions thereof, applicable provisions of Title
III of the Americans with Disabilities Act of 1990 which relate to architectural
barriers and communication barriers which are structural in nature so long as
such compliance is readily achievable, as the term readily achievable is defined
in the Act.
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<PAGE>
27. LANDLORD'S WARRANTIES AND REPRESENTATIONS.
Landlord represents and warrants that, as of the commencement
of the lease term, to the best of Landlord's knowledge, without specific
inquiry: (i) the Premises are free from all latent and patent defects, and all
mechanical systems servicing the Premises (including, but not limited to,
electrical, plumbing, and heating, ventilating and air-conditioning) are in good
working order, condition and repair; and (ii) the Premises are in compliance
with all applicable federal, state and local laws, rules and regulations, and
ordinances including, but not limited to, all building codes and Title III of
the Americans with Disabilities Act of 1990.
28. BROKERAGE
Landlord and Tenant each warrants to the other that it has not
incurred any obligation for finders' fees or brokers' commissions in connection
with this transaction, except for the employment by Landlord of Mr. Kirk D.
Robertson of Norris, Beggs & Simpson as broker. Landlord shall be responsible
for the commission due the broker. Landlord and Tenant shall each indemnify the
other against any claim arising out of any breach of the warranty contained in
this paragraph.
29. TENANT IMPROVEMENTS.
Landlord shall, at its expense, construct improvements
generally as shown on the attached Exhibit C. The improvements shall be done in
a workmanlike manner and shall be to Columbia Tech Center tenant finish
standards.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the respective dates set opposite their signatures below, but this Agreement on
behalf of such party shall be deemed to have been dated as of the date first
above written.
LANDLORD:
PACIFIC REALTY ASSOCIATES, L.P.,
a Delaware limited partnership
By: PacTrust Realty, Inc.,
a Delaware corporation,
its General Partner
Date: 5-7 , 1997 By: /s/ David G. Hicks
----------------------- --------------------------------------
David G. Hicks
Vice President
Address for Notices/Rent Payments
to Landlord:
15350 S.W. Sequoia Parkway, #300-WMPC
Portland, OR 97224
TENANT:
LABTEC ENTERPRISES, INC.,
a Washington corporation
Date: April 30 , 1997 By: /s/ Richard E. James
-------------------- ---------------------------------
Name: Richard E. James
---------------------------------
Title: CEO
---------------------------------
Date: April 30 , 1997 By:
-------------------- ---------------------------------
Name:
---------------------------------
Title:
------------------------------
Address for Legal Notices to Tenant:
Columbia Tech Center
1499 SE Tech Center Drive Suite 350
Vancouver, WA 97683
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<PAGE>
Address for Invoices to Tenant:
Columbia Tech Center
1499 SE Tech Centre Drive Suite 350
Vancouver WA 97683
Tenant Employer Identification Number:
93-0830403
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<PAGE>
CORPORATE ACKNOWLEDGMENT On this the 30 day of April 19 97,
------- ------ ---
State of Washington before me,
County of Clark { SS.
M. Annette McRay
---------------------------------------
the undersigned Notary Public,
personally appeared
Richard E. James
---------------------------------------
__ personally known to me
__ proved to me on the basis of
satisfactory evidence
to be the person(s) who executed the
within instrument as CEO or on behalf
of the corporation therein named,
and acknowledged to me that the
corporation executed it.
WITNESS my hand and official seal.
/s/ M. Annette McRay
---------------------------------------
Notary's Signature
CORPORATE ACKNOWLEDGMENT On this the 2 day of May 19 97,
------ ----- ---
State of Oregon before me,
County of Washington { SS.
Cindy A. Carden
-----------------------------------------
the undersigned Notary Public,
personally appeared
David G. Hicks
-----------------------------------------
X personally known to me
___ proved to me on the basis of
satisfactory evidence to be the person(s)
who executed the within instrument as
Vice President or on behalf of the
corporation therein named, and
acknowledged to me that the corporation
executed it.
WITNESS my hand and official seal.
/s/ Cindy A. Carden
---------------------------------------
Notary's Signature
-16-
<PAGE>
LABTEC ENTERPRISES, INCORPORATED
EXHIBIT "A"
[MAP OF COLUMBIA TECH CENTER]
-17-
<PAGE>
LABTEC ENTERPRISES, INCORPORATED
EXHIBIT "B"
[MAP OF THE PREMISES AT COLUMBIA TECH CENTER]
-18-
<PAGE>
EXHIBIT "C"
LABTEC ENTERPRISES, INCORPORATED
TENANT IMPROVEMENT OUTLINE SPECIFICATIONS
BUILDING NO. 8, COLUMBIA TECH CENTER
April 24, 1997
GENERAL - Items noted as "excluded" are items which Landlord will consider for
inclusion but are not included in a typical improvement and do not generally fit
within a building standard tenant improvement allowance.
CONCRETE: Existing concrete slab on grade shall be sawcut, removed, and
poured back for underslab utilities as necessary. Existing upper floor
slabs shall be core drilled for utilities as necessary; new
penetrations in upper floor slabs shall be sealed tight.
DEMISING WALLS: The cost of demising walls shall be split 50% to each
tenant which abuts such walls. Demising walls shall extend from floor
level to the underside of the ceiling grid. Demising walls shall be
constructed using 3-5/8" metal studs, sound attenuation batts, and 5/8"
smooth finished gypsum board on the occupied side. Black "Raco" top
track shall be used at connection of walls to ceiling. 4' wide, batt
insulation shall be provided above ceiling, centered over demising
walls.
EXTERIOR WALLS: Exterior walls shall receive 5/8" smooth finished
gypsum board over existing framing and thermal insulation. Black
"Half-Raco" top track to be used at connections of walls to ceilings.
CORRIDOR AND COMMON AREA WALLS: Corridor and other common area
walls (rest rooms, stairs, utility rooms, etc.) shall be constructed
using 2-1/2" metal studs, sound insulation, and 5/8" smooth finished
gypsum board each side. Shell construction includes framing,
insulation, and finished gypsum board on the corridor side of corridor
walls. Tenant improvement construction includes furnishing and
installation of smooth finished gypsum board on the tenant side of
corridor and common area walls.
BUILDING COLUMNS: Building structural columns shall be furred with
metal stud framing and 5/8" smooth finished gypsum board. Building
"wet" columns located at grids F-2 and P-11 to be furred, insulated
with high density sound insulation, and covered with 5/8" smooth
finished gypsum board. Black "Half-Raco" top track to be used at
connections of columns to ceilings.
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<PAGE>
INTERIOR PARTITIONS: Interior partitions shall extend from floor level
to the underside of ceiling grid. Interior partitions shall be
constructed using 3-5/8" metal studs and 5/8" smooth finished gypsum
board each side. Black "Raco" top track, shall be used at connection of
walls to ceiling.
INSULATION: Sound insulation shall be provided in walls surrounding
conference and lunch rooms. Sound insulation includes ceiling and walls
for the lab and test room spaces. Sound insulation around private
offices is excluded. A 4' wide band of fiberglass batt insulation shall
be provided above ceiling, centered above walls receiving insulation.
INTERIOR DOORS: Interior doors shall be nominal 3'-0" by 9'-0" solid
core birch (maple, or ribbon sappellie), stained to a dark cherry wood
finish ("Building Standard Finish") in Timely II door frames, factory
painted to approximate door color ("Building Standard Frame"). Door
hardware to include 2 pair butts, Schlage "AL" series (or similar)
lever latch, and wall stop for each door. Door hardware finish to be
polished brass.
RELITES: Thirteen (13) 3'-0" by 9'-0" relites shall be provided per
tenant improvement plan. Relites shall include 1/4" tempered glass in
Timely II frames, factory painted to match door frames.
SUITE ENTRY: An allowance of $2,000.00 has been provided for the suite
entry. Suite entry is subject to approval by the City of Vancouver.
Suite entry shall include a nominal 3'-0" by 9'-0" solid core birch
(maple, or ribbon sappellie) door, stained to Building Standard Finish
in Building Standard Frame. Door hardware to include closer, butts,
Schlage "D" series (or similar) lever lock, and stop. Door hardware
finish to be polished brass/polished chrome. Glass door, card entry
systems, and special access systems are excluded.
FOLDING PARTITIONS AND OPERABLE WALLS: Folding partitions and
operable walls are excluded.
CEILINGS: The acoustical ceiling suspension system shall be installed
in a 4' by 4' grid, and ceiling tile and remaining tee's supplied under
building shell construction. Typical tenant area construction includes
installation of 2' by 2' tegular edge ceiling tile (Armstrong Minatone
#705 Fissured) and necessary tee's in the building shell ceiling grid.
Ceiling construction for the lab and test rooms consist of 5/8" gypsum
board fastened to 3-5/8" metal studs.
PAINTING: All interior walls shall receive primer and two coats of
finish paint. Paint color is to match approved draw downs.
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<PAGE>
WALL COVERING: Vinyl, fabric, tile and other wall coverings are
excluded.
FLOOR COVERINGS: Floor covering colors shall be selected by Tenant from
Landlord's standard finish options. Carpet shall be cut pile or loop.
Cut pile carpet shall be installed on carpet pad. VCT shall be
installed in lunch rooms, copy rooms, storage rooms and other
appropriate locations. Sheet vinyl flooring is excluded. Rubber base to
be 4" in continuous lengths. Coved base to be used in areas with
resilient flooring; flat base to be used in carpeted areas. Quarry or
ceramic tiles, wood flooring, raised computer floors, and other special
floor finishes are excluded.
WINDOW COVERINGS: Building Standard window covering (off-white, non-
perforated, vertical louver blinds) shall be provided at exterior
windows. Window coverings are excluded for interior relites.
CABINETS AND MILLWORK: A $3500.00 allowance for a reception desk has
been provided. Approximately 30' of base cabinets and 8' of upper
cabinets shall provided for the lunch room, kitchenette and coffee bar
areas. Cabinets to be constructed to A.W.I. standards with plastic
laminate tops, fronts, and sides, color as selected by Tenant. Cabinet
interiors shall be constructed of melamine or standard low pressure
laminate. Concealed hinges, heavy-duty drawer hardware, and wire pulls
shall be included for all drawers or doors. One (1) 4' x 4' plywood
phone board is included. Wall paneling, wood base, shelving, and other
special millwork items are excluded.
APPLIANCES: One (1) dishwasher is included in the lunch room per tenant
plans and specifications. Refrigerators, microwave ovens, and vending
machines, coffee makers or other similar equipment are excluded.
FURNITURE AND ACCESSORIES: Furniture, coat hooks, desk partitions, tack
boards, projection screens, fire extinguishers and cabinets, and other
miscellaneous accessories are excluded.
SIGNAGE: Interior and exterior signage are excluded.
PLUMBING: Plumbing within tenant space is included for the lunch room,
kitchenette and coffee bar. Plumbing shall be connected to existing
plumbing services. All waste and vent piping to be cast iron. When
used, typical lunch room sink to be Elkay CR2522 with Delta 100 faucet.
FIRE PROTECTION: Fire protection system shall be modified as required
for tenant improvement layout. Building shell fire protection system
includes service to the building and overhead sprinkler piping. Tenant
improvement fire protection work
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<PAGE>
includes the addition of "drops" to ceilings and chrome, semi-recessed
sprinkler heads. Special fire suppression systems such as intergen or
preaction systems are excluded.
H.V.A.C.: Heating, ventilation, and air conditioning systems shall be
extended to serve the tenant improvement layout. The building includes
a closed loop, water- source heat pump system with high efficiency
cooling tower and boiler. System includes DDC automated control with
central panel operation of energy management functions. Modulating
outside air supply and exhaust is managed by the DDC controller and
ducted to and from each zone. Supply and return air main trunk ducts
and main water loop piping shall be provided under the building shell
HVAC work. Heat pumps, thermostats, duct extensions, connections to the
water loop, and supply and return air diffusers shall be added under
tenant improvement construction. Tenant spaces to be connected to
dedicated channel of the DDC control system with programmable override
for after hour use. Tenant HVAC zones to be provided 1 each per
approximate 1000 square feet. Each zone to be thermostatically
controlled. Special computer room, conference room, and lunch room
cooling and ventilation are excluded.
ELECTRICAL: Building shell electrical work includes the main building
electrical service with wires in conduit to electrical distribution
panels on each floor. Tenant improvement electrical work includes
breakers in shell electrical panels, extension of power from the
electrical room to the tenant space, the addition of any tenant
subpanels within the space, and furnishing and installation of lighting
and power outlets.
Lighting shall be provided using 2' by 4' fluorescent light
fixtures with 18-cell parabolic lenses. Wattage available for
lighting for each tenant space is governed by the State of
Washington Energy Code. Special architectural lighting (track
lighting, spot lighting, down lights, wall sconces, etc.) is
excluded. Dual level light switching is excluded. Lighting
lamps, ballasts, and controls shall meet electrical energy
consumption code requirements. Duplex outlets shall be
provided 1 each per 120 square feet of Tenant area.
Power connections to Tenant desk partitions to be provided at
wall, floor, or power pole locations only; wiring within desk
partitions is excluded. Mud rings with pull strings to the
area above ceiling shall be provided 1 each per 240 square
feet of Tenant area for Tenant installed telephone and data
wiring. Cover plates and receptacles for telephone and data
wiring shall be provided by the Tenant. Generators,
uninterruptable power supplies, and special electrical work
for computer and phone systems are excluded.
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<PAGE>
FIRE ALARM: Fire alarm and smoke detection systems shall be provided if
required by the local governing jurisdictions.
SECURITY SYSTEMS: A building entry security system is provided by
Landlord as part of the Building Shell. Tenant-specific security
systems are excluded.
TELEPHONE AND COMPUTER SYSTEMS: Telephone, data, and computer system
equipment and wiring are excluded. Tenant phone board and equipment to
be located within the tenant area.
-23-
<PAGE>
LEASE AMENDMENT
DATED: FEBRUARY 4, 1998
BETWEEN: COLUMBIA TECH CENTER, L.L.C.,
a Washington limited liability company LANDLORD
AND: LABTEC, INC.,
a Delaware corporation TENANT
By written lease dated April 24, 1997, Tenant leased from
Landlord approximately 14,335 rentable square feet of office space located in
Building No. 8, Columbia Tech Center, 1499 S.E. Tech Center Place, Suite 350,
Vancouver Washington 98683 (hereinafter referred to as the "Premises"). The
Lease was executed by Pacific Realty Associates, L.P., a Delaware limited
partnership. The Landlord in the Lease should have been Columbia Tech Center,
L.L.C., a Washington limited liability company. Such document is hereinafter
referred to as the "Lease." The Lease expires July 31, 2004.
Tenant now wishes to extend the term of the Lease.
NOW, THEREFORE, the parties agree as follows:
1. The name of the Landlord in the Lease is changed to Columbia Tech
Center, L.L.C., a Washington limited liability company.
2. The Lease shall be extended for an additional 21 months commencing
August 1, 2004 and continuing through April 30, 2006.
3. Base rent shall remain the same at $25,086.00 per month commencing
August 1, 2004 and continuing through the extended term.
4. Except as expressly modified hereby, all terms of the Lease shall
remain in full force and effect and shall continue through the extended term.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the respective dates set opposite their signatures below, but this
Agreement on behalf of such party shall be deemed to have been dated as of the
date first above written.
LANDLORD:
COLUMBIA TECH CENTER, L.L.C.,
a Washington limited liability company
By: Pacific Realty Associates, L.P.,
a Delaware limited partnership
its Member
By: PacTrust Realty, Inc.,
a Delaware corporation,
its General Partner
Date: 2-10 , 1998 By: /s/ David G. Hicks
--------------- -----------------------------------
David G. Hicks
Vice President
TENANT:
LABTEC, INC.,
a Delaware corporation
Date: 2-6 , 1998 By: /s/ J. E. Hillman
---------------- --------------------------------
Name: J. E. Hillman
-------------------------------
Title: CFO
-------------------------------
-23-
EXHIBIT 10.13
LEASE
DATED: February 4, 1998
BETWEEN: COLUMBIA TECH CENTER, L.L.C.,
a Washington limited liability company LANDLORD
AND: LABTEC, INC.,
a Delaware corporation TENANT
Tenant wishes to lease from Landlord the following described
property, hereinafter referred to as "the Premises":
Approximately 60,000 square feet of warehouse and office space
located in Building No. 28, Columbia Tech Center, and generally as located on
the attached Exhibit A.
If the Premises consist of a portion but not all of a
building, the building housing the Premises is hereinafter referred to as "the
Building."
Landlord leases the Premises to Tenant for a term of 84 months
commencing May 1, 1999 and continuing through April 30, 2006. Base rent shall be
according to the following schedule:
Base Rent
Period Per Month*
May 1, 1999 through April 30, 2002 $20,760.00
May 1, 2002 through April 30, 2005 $22,006.00
May 1, 2005 through April 30, 2006 $23,326.00
*Based upon 60,000 total square feet of space and 600 square
feet of office space within the Premises. Base rent amounts may be modified
after all tenant improvements are completed if the final office space square
footage is other than 600 square feet. In the event that the final office square
footage feet is greater than 600 square feet, then the base rent shall be
increased by a sum equal to the difference between 600 square feet and the final
office square footage, multiplied by $7.20 per year.
Rent for the first month of the Lease term shall be paid upon
Landlord delivery of possession of the Premises to Tenant. All rent, including
base rent together with the charges, taxes and expenses to be paid to Landlord
specified in Paragraphs 3 and 4 of this Lease, is payable in advance on the
first day of each calendar month. If Landlord consents, Tenant may occupy the
Premises prior to such commencement date upon payment of rent on a prorated
basis and compliance with all terms of this Lease.
-1-
<PAGE>
Delivery of possession shall occur when the Premises are
occupied by Tenant or are ready to be occupied by Tenant with all work to be
performed by Landlord substantially completed. No notice shall be required from
Landlord if the Premises are ready on the date set for commencement of the term
or on the first business day thereafter. If Landlord is unable to deliver
possession of the Premises to Tenant because of strikes, acts of God, or any
other cause beyond Landlord's control, then Tenant may take possession when
Landlord notifies Tenant that the Premises are ready for possession, and the
term of this Lease shall commence on the first day of the first month following
such date and continue for the specified number of months thereafter,
notwithstanding the commencement and termination dates stated above. Tenant
shall owe no rent until the Premises are ready for possession. Landlord shall
have no liability for such delays in delivery of possession, and neither party
shall have the right to terminate except that Landlord may cancel this Lease
without liability if permission to construct, use, or furnish necessary
utilities to the Premises is denied or revoked by any governmental agency or
public utility with such authority. Notwithstanding the foregoing, if Landlord
has not delivered possession of the Premises on or before July 1, 1999, Tenant
may rescind this Lease by notice in writing to Landlord given at any time
thereafter prior to the date on which possession is tendered by Landlord.
This Lease is subject to the following additional terms to
which the parties agree:
1. Use of the Premises.
1.1 Tenant shall use the Premises for the purpose of
conducting the following business and for no other purpose without first
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed:
General warehouse, office, shipping and receiving for
Tenant's products.
If such use is prevented by any law or government
regulation, Tenant may use the Premises for other reasonable uses.
1.2 In connection with its use, Tenant shall at its expense
comply with all applicable laws, ordinances, and regulations of any public
authority, including those requiring alteration of the Premises because of
Tenant's specific use; shall create no nuisance nor allow any objectionable
liquid, odor, or noise to be emitted from the Premises; shall store no gasoline
or other highly combustible materials on the Premises which would violate any
applicable fire code or regulation nor conduct any operation that will increase
Landlord's fire insurance rates for the Premises; and shall not overload the
floors or electrical circuits of the Premises. Landlord shall have the right to
approve the installation of any power-driven machinery by Tenant and may select
a qualified electrician whose opinion will control regarding electrical circuits
and a qualified engineer or architect whose opinion will control regarding floor
loads. Allowable ground floor load shall be 500 pounds per square foot. Landlord
agrees that, as of the commencement of this Lease, the Premises are acceptable
for Tenant's use as shown in Paragraph 1.
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<PAGE>
1.3 Tenant may erect a sign stating its name, business, and
product after first securing Landlord's written approval, which approval shall
not be unreasonably withheld or delayed of the size, color, design, wording, and
location, and all necessary governmental approvals. No signs shall be painted on
the Building or exceed the height of the Building. All signs installed by Tenant
shall be removed upon termination of this Lease with the sign location restored
to its former state.
1.4 Tenant shall make no alterations, additions, or
improvements to the Premises exceeding a cost of $1,000.00 or change the color
of the exterior without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed and without a valid building permit
issued by the appropriate governmental agency. Upon termination of this Lease,
any such alterations, additions, or improvements (including without limitation
all electrical, lighting, plumbing, heating and air-conditioning equipment,
doors, windows, partitions, drapery, carpeting, shelving, counters, and
physically attached fixtures) shall at once become part of the realty and belong
to Landlord unless the terms of the applicable consent provide otherwise, or
Landlord requests that part or all of the additions, alterations, or
improvements be removed. In such case, Tenant shall at its sole cost and expense
promptly remove the specified additions, alterations, or improvements and repair
and restore the Premises to its original condition. Notwithstanding the
foregoing, if during the term of this Lease or any extensions thereof Tenant
should install any trade fixtures within the Premises, Tenant may, at its sole
cost and expense, remove such fixtures, and if Tenant removes such fixtures,
Tenant shall, at its sole cost and expense, restore the Premises to its original
condition.
2. Security Deposit.
Upon execution of this Lease, Tenant shall deposit with
Landlord the sum of $23,326.00, hereinafter referred to as "the Security
Deposit," to secure the faithful performance by Tenant of each term, covenant,
and condition of this Lease. If Tenant shall at any time fail to make any
payment or fail to keep or perform any term, covenant, and condition on its part
to be made or performed or kept under this Lease, Landlord may, but shall not be
obligated to and without waiving or releasing Tenant from any obligation under
this Lease, use, apply or retain the whole or any part of the Security Deposit
(i) to the extent of any sum due to Landlord; or (ii) to make any required
payment on Tenant's behalf; or (iii) to compensate Landlord for any loss,
damage, attorneys' fees, or expense sustained by Landlord due to Tenant's
default. In such event, Tenant shall, within five (5) days of written demand by
Landlord, remit to Landlord sufficient funds to restore the Security Deposit to
its original sum; Tenant's failure to do so shall be a material breach of this
Lease. Landlord shall not be required to keep the Security Deposit separate from
its general funds, and Tenant shall not be entitled to interest on such deposit.
Should Tenant comply with all of the terms, covenants, and conditions of this
Lease and at the end of the term of this Lease leave the Premises in the
condition required by this Lease, then the Security Deposit, less any sums owing
to Landlord, shall be returned to Tenant (or, at Landlord's option, to the last
assignee of Tenant's interests hereunder) within thirty (30) days after the
termination of this Lease and vacancy of the Premises by Tenant.
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3. Utility Charges; Maintenance.
3.1 Tenant shall pay when due all charges for electricity,
natural gas, water, garbage collection, janitorial service, sewer, and all other
utilities of any kind furnished to the Premises during the lease term. If
charges are not separately metered or stated, Landlord shall apportion the
utility charges on an equitable basis. Landlord shall have no liability
resulting from any interruption of utility services caused by fire or other
casualty, strike, riot, vandalism, the making of necessary repairs or
improvements, or any other cause beyond Landlord's reasonable control. If such
interruption of services and utilities is due to Landlord's negligent or
intentional act or omission, then rent shall be reduced during the period of
said interruption to the extent the Premises are not reasonably usable for the
use permitted by this Lease because of such interruption of services and
utilities. Tenant shall control the temperature in the Premises to prevent
freezing of any sprinkler system.
3.2 Landlord shall repair and maintain the roof, gutter,
downspouts, exterior walls, building structure, foundation, exterior paved
areas, and curbs of the Premises in good condition. Except for such obligations
of Landlord, Tenant shall keep the Premises neatly maintained and in good order
and repair. Tenant's responsibility shall include maintenance and repair of the
electrical system, plumbing, drainpipes to sewers, air-conditioning and heating
systems, overhead and personnel doors, and the replacement of all broken or
cracked glass with glass of the same quality. Tenant shall refrain from any
discharge that will damage the septic tank or sewers serving the Premises.
Landlord shall grant Tenant a two (2) year warranty for the heating,
ventilating, and air conditioning system, provided that Tenant contracts with a
reputable space contractor to provide proper maintenance for the system. Such
warranty shall be in effect for two (2) years from occupancy.
3.3 If the Premises have a separate entrance, Tenant shall
keep the sidewalks abutting the Premises or the separate entrance free and clear
of snow, ice, debris, and obstructions of every kind.
4. Taxes, Assessments, and Operating Expenses.
4.1 In conjunction with monthly rent payments, Tenant shall
each month pay a sum representing Tenant's proportionate share of real property
taxes and operating expenses for the Premises. Such amount shall annually be
estimated by Landlord in good faith to reflect actual or anticipated costs. Upon
termination of this Lease or annually during the term hereof, Landlord shall
compute its actual costs for such expenses during such period. Any overpayment
by Tenant shall be credited to Tenant, and any deficiency shall be paid by
Tenant within fifteen (15) days after receipt of Landlord's statement.
Landlord's records of expenses for taxes and operating expenses may be inspected
by Tenant at reasonable times and intervals.
4.2 Tenant's proportionate share of real property taxes shall
mean that percentage of the total assessment affecting the Premises which is the
same as the percentage which the rentable area of the Premises bears to the
total rentable area of all buildings covered by the tax statement.
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Tenant's proportionate share of operating expenses for the Building shall be
computed by dividing the rentable area of the Premises by the total rentable
area of the Building. If in Landlord's reasonable judgment either of these
methods of allocation results in an inappropriate allocation to Tenant, Landlord
shall select some other reasonable method of determining Tenant's proportionate
share. Landlord and Tenant agree that, for the first year of the term of this
Lease, Tenant's proportionate share of operating expenses and real property
taxes shall be no more than $.08 per square foot space within the Premises per
month. Notwithstanding the above, the increase in Tenant's proportionate share
of operating expenses shall not exceed three percent (3%) annually, on a
cumulative basis, for the term of this Lease and any extensions thereof,
exclusive of real estate taxes.
4.3 Real property taxes charged to Tenant hereunder shall
include all general real property taxes assessed against the Premises or payable
during the lease term, and any rent tax, tax on Landlord's interest under this
Lease, or any tax in lieu of the foregoing, whether or not any such tax is now
in effect. Tenant shall not, however, be obligated to pay any tax based upon
Landlord's net income.
4.4 Operating expenses charged to Tenant hereunder shall
include all usual and necessary costs of operating and maintaining the Premises,
Building, and any surrounding common areas including, but not limited to, the
cost of all utilities or services not paid directly by Tenant, property
insurance, property management, maintenance and repair of landscaping, parking
areas, and any other common facilities. Operating expenses shall not include
roof replacement or correction of structural deficiencies of the Building.
5. Parking and Storage Areas.
5.1 Tenant, its employees, and customers shall have the
exclusive right to use any private parking spaces immediately adjacent to the
Premises. Tenant shall control the use of such parking spaces so that there will
be no unreasonable interference with the normal traffic flow, and shall permit
no parking on any landscaped or unpaved surface. Under no circumstances shall
trucks serving the Premises be permitted to block streets.
5.2 Tenant shall not store any materials, supplies, or
equipment outside in any unapproved or unscreened area. If Tenant erects any
visual barriers for storage areas, Landlord shall have the right to approve the
design and location. Trash and garbage receptacles shall be kept covered at all
times.
6. Liability Insurance.
6.1 Tenant shall not allow any liens to attach to the Premises
as a result of its activities. Tenant shall indemnify and defend Landlord from
any claim, liability, damage or loss arising out of any activity on the Premises
or within the Building or the common areas serving the Building, by Tenant, its
agents, or invitees or resulting from Tenant's failure to comply with any term
of this Lease.
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6.2 Tenant shall carry general liability insurance on an
occurrence basis with combined single limits of not less than $1,000,000. Such
insurance shall be provided by an insurance carrier reasonably acceptable to
Landlord and shall be evidenced by a certificate delivered to Landlord stating
that the coverage will not be canceled or materially altered without ten (10)
days' advance written notice to Landlord. Landlord shall be named as an
additional insured on such policy.
6.3 Landlord shall indemnify and defend Tenant from any claim,
liability, damage, or loss arising out of the negligence or intentional
misconduct on the Premises or within the common areas serving the Premises by
Landlord or its agents.
7. Property Damage; Subrogation Waiver.
7.1 If fire or other casualty causes damage to the Building or
the Premises in an amount exceeding thirty percent (30%) of the full
construction-replacement cost of the Building or Premises, respectively,
Landlord may elect to terminate this Lease as of the date of the damage by
notice in writing to Tenant within thirty (30) days after such date. Otherwise,
Landlord shall promptly repair the damage and restore the Premises to their
former condition as soon as practicable. Rent shall be reduced during the period
to the extent the Premises are not reasonably usable for the use permitted by
this Lease because of such damage and required repairs.
7.2 Landlord shall be responsible for insuring the Building,
and Tenant shall be responsible for insuring its personal property and trade
fixtures located on the Premises.
7.3 Landlord and Tenant each hereby releases the other, and
the other's partners, officers, directors, agents and employees, from any and
all liability and responsibility to the releasing party and to anyone claiming
by or through it or under it, by way of subrogation or otherwise, for all
claims, or demands whatsoever which arise out of damage or destruction of
property occasioned by perils which can be insured by an All Risk Property
Insurance Coverage Form. Landlord and Tenant grant this release on behalf of
themselves and their respective insurance companies and each represents and
warrants to the other that it is authorized by its respective insurance company
to grant the waiver of subrogation contained in this Paragraph 7.3. This release
and waiver shall be binding upon the parties whether or not insurance coverage
is in force at the time of the loss or destruction of property referred to in
this Paragraph 7.3.
8. Condemnation.
If a condemning authority takes the entire Premises or a
portion sufficient to render the remainder unsuitable for Tenant's use, then
either party may elect to terminate this Lease effective on the date that title
passes to the condemning authority. Otherwise, Landlord shall proceed as soon as
practicable to restore the remaining Premises to a condition comparable to that
existing at the time of the taking. Rent shall be abated during the period of
restoration to the extent the Premises are not reasonably usable by Tenant, and
rent shall be reduced for the remainder of the term in an amount
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equal to the reduction in rental value of the Premises caused by the taking. All
condemnation proceeds shall belong to Landlord.
9. Assignment and Subletting.
9.1 Tenant shall not assign its interest under this Lease nor
sublet the Premises without first obtaining Landlord's consent in writing, which
consent shall not be unreasonably withheld or delayed. This provision shall
apply to all transfers by operation of law or through mergers and transfers of
51% or more of the voting stock of Tenant. No assignment shall relieve Tenant of
its obligation to pay rent or perform other obligations required by this Lease
and no one assignment or subletting shall be a consent to any further assignment
or subletting. If Tenant assigns this Lease or sublets the Premises for an
amount in excess of the rent called for by this Lease, one-half of such excess
shall be paid to Landlord promptly as it is received by Tenant.
9.2 Subject to the above limitations on transfer of Tenant's
interest, this Lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns.
10. Default.
Any of the following shall constitute a default by Tenant
under this Lease:
10.1 Tenant's failure to pay rent or any other charge under
this Lease within ten (10) business days after it is due, or failure to comply
with any other term or condition within twenty (20) business days following
written notice from Landlord specifying the noncompliance. If such noncompliance
cannot be cured within the twenty (20) business day period, this provision shall
be satisfied if Tenant commences correction within such period and thereafter
proceeds in good faith and with reasonable diligence to effect compliance as
soon as possible. Time is of the essence.
10.2 Tenant's assignment for the benefit of its creditors;
Tenant's commencement of proceedings under any provision of any bankruptcy or
insolvency law or failure to obtain dismissal of any petition filed against it
under such laws within the time required to answer; or the appointment of a
receiver for Tenant's properties.
11. Remedies for Default.
In case of default as described in Paragraph 10 above,
Landlord shall have the right to the following remedies which are intended to be
cumulative and in addition to any other remedies provided under applicable law:
11.1 Terminate this Lease without relieving Tenant from its
obligation to pay damages.
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11.2 Retake possession of the Premises by summary proceedings,
in which case Tenant's liability to Landlord for damages shall survive the
tenancy. Landlord may, after such retaking of possession, relet the Premises
upon any reasonable terms. No such reletting shall be construed as an acceptance
of a surrender of Tenant's leasehold interest.
11.3 Recover damages caused by Tenant's default which shall
include reasonable attorneys' fees at trial and on any appeal therefrom.
Landlord may sue periodically to recover damages as they occur throughout the
lease term, and no action for accrued damages shall bar a later action for
damages subsequently accruing. Landlord may elect in any one action to recover
accrued damages plus damages attributable to the remaining term of the Lease
equal to the difference between the rent under this Lease and the reasonable
rental value of the Premises for the remainder of the term, discounted to the
time of judgment at the rate of six (6%) percent per annum.
11.4 Make any payment or perform any obligation required of
Tenant so as to cure Tenant's default, in which case Landlord shall be entitled
to recover all amounts so expended from Tenant, plus interest at the rate of ten
percent (10%) per annum from the date of the expenditure.
12. Surrender on Termination.
12.1 On expiration or early termination of this Lease, Tenant
shall deliver all keys to Landlord, have final utility readings made on the date
of move out, and surrender the Premises clean and free of debris inside and out,
with all mechanical, electrical, and plumbing systems in good operating
condition, all signing removed and defacement corrected, and all repairs called
for under this Lease completed. The Premises shall be delivered in the same
condition as at the commencement of the term, subject only to depreciation and
wear from ordinary use. Tenant shall remove all of its furnishings and trade
fixtures that remain its property and all damage resulting from such removal.
Failure to remove said property shall be an abandonment of same, and Landlord
may dispose of it.
12.2 If Tenant fails to vacate the Premises when required,
Landlord may elect either to treat Tenant as a tenant from month to month,
subject to all provisions of this Lease except the provision for term, or to
eject Tenant from the Premises and recover damages caused by wrongful holdover.
13. Landlord's Liability.
13.1 Landlord warrants that so long as Tenant complies with
all terms of this Lease it shall be entitled to peaceable and undisturbed
possession of the Premises free from any eviction or disturbance by Landlord or
persons claiming through Landlord.
13.2 All persons dealing with Columbia Tech Center, L.L.C.
(the "Limited Liability Company") must look solely to the property and assets of
the Limited Liability Company for the payment of any claim against the Limited
Liability Company or for the performance of any obligation of the Limited
Liability Company as neither the officers, directors, employees, nor agents of
the
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Limited Liability Company assume any personal liability for obligations entered
into on behalf of the Limited Liability Company (or its predecessors in
interest) and their respective properties shall not be subject to the claims of
any person in respect of any such liability or obligation.
14. Mortgage or Sale by Landlord; Estoppel Certificates.
14.1 This Lease is and shall be prior to any mortgage or deed
of trust ("Encumbrance") recorded after the date of this Lease and affecting the
Building and the land upon which the Building is located. However, if any lender
holding an Encumbrance secured by the Building and the land underlying the
Building requires that this Lease be subordinate to the Encumbrance, then Tenant
agrees that this Lease shall be subordinate to the Encumbrance if the holder
thereof agrees in writing with Tenant that so long as Tenant performs its
obligations under this Lease no foreclosure, deed given in lieu of the
foreclosure or sale pursuant to the terms of the Encumbrance, or other steps or
procedures taken under the Encumbrance shall affect Tenant's rights under this
Lease. If the foregoing condition is met, Tenant shall execute the written
agreement and any other documents required by the holder of the Encumbrance to
accomplish the purposes of this paragraph.
14.2 If the Building is sold as a result of foreclosure of any
Encumbrance thereon or otherwise transferred by Landlord or any successor,
Tenant shall attorn to the purchaser or transferee, after completion of the sale
as a result foreclosure proceedings, the transferor shall have no further
liability hereunder. Landlord shall remain obligated to Tenant for all
obligations arising under this Lease that are not transferred to the purchaser
or transferee as part of the sale as a result of foreclosure.
14.3 This Lease shall not be recorded without the consent of
Landlord and Tenant. However, either party may request that a memorandum of this
Lease be recorded in a form reasonably acceptable to both. The requesting party
shall pay all costs of recording.
14.4 Either party shall within twenty (20) days after notice
from the other execute and deliver to the other party a certificate stating
whether or not this Lease has been modified and is in full force and effect and
specifying any modifications or alleged breaches by the other party. The
certificate shall also state the amount of monthly base rent, the dates to which
rent has been paid in advance, and the amount of any security deposit or prepaid
rent. Failure to deliver the certificate within the specified time shall be
conclusive upon the party of whom the certificate was requested that the Lease
is in full force and effect and has not been modified except as may be
represented by the party requesting the certificate.
15. Disputes - Attorneys' Fees.
In the event of any litigation arising out of this Lease, the
prevailing party shall be entitled to recover from the other party, in addition
to all other relief provided by law or judgement, its reasonable costs and
attorneys' fees incurred both at and in preparation for trial and any appeal or
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review, such amount to be as determined by the court(s) before which the matter
is heard. Disputes between the parties which are to be litigated shall be tried
before a judge without a jury.
16. Severability.
If any provision of this Lease is held to be invalid,
unenforceable or illegal the remaining provisions shall not be affected and
shall be enforced to the fullest extent permitted by law.
17. Late Charges.
Landlord may at its option impose a late charge of $.05 for
each $1.00 of rent for rent payments made more than ten (10) days late in
addition to other remedies available for default.
18. General Provisions.
18.1 Waiver by either party of strict performance of any
provision of this Lease shall not be a waiver of nor prejudice the party's right
otherwise to require performance of the same provision or any other provision.
18.2 Subject to the limitations on transfer of Tenant's
interest, this Lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns.
18.3 Landlord shall have the right to enter upon the Premises
after giving Tenant twenty-four (24) hour verbal notice, excepting that Landlord
shall not be required to give such notice in times of emergency, to determine
Tenant's compliance with this Lease, to make necessary repairs to the Building
or the Premises, or to show the Premises to any prospective tenant or
purchasers. During the last two months of the term, Landlord may place and
maintain upon the Premises notices for leasing or sale of the Premises.
18.4 If this Lease commences or terminates at a time other
than the beginning or end of one of the specified rental periods, then the rent
(including Tenant's share of real property taxes, if any) shall be prorated as
of such date, and in the event of termination for reasons other than default all
prepaid rent shall be refunded to Tenant or paid on its account.
18.5 Tenant shall within ten (10) days following Landlord's
written request deliver to Landlord a written statement specifying the dates to
which the rent and other charges have been paid, whether the Lease is unmodified
and in full force and effect, and any other matters that may reasonably be
requested by Landlord.
18.6 Notices between the parties relating to this Lease shall
be in writing, effective when delivered, or if mailed, effective on the second
day following mailing, postage prepaid, to the address for the party stated in
this Lease or to such other address as either party may specify by notice to the
other. Rent shall be payable to Landlord at the same address and in the same
manner.
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18.7 This Lease constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes any and
all prior representations, understandings and agreements, whether written or
oral. No supplement, modification or waiver of any provision of this Lease shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Lease shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless expressly provided.
19. Environmental.
19.1 Definitions. The term "Environmental Law" shall mean any
federal, state or local statute, regulation or ordinance or any judicial or
other governmental order pertaining to the protection of health, safety or the
environment. The term "Hazardous Substance" shall mean any hazardous, toxic,
infectious or radioactive substance, waste and material as defined or listed by
any Environmental Law and shall include, without limitation, petroleum oil and
its fractions.
19.2 Use of Hazardous Substances. Tenant shall not cause or
permit any Hazardous Substance to be spilled, leaked, disposed of or otherwise
released on or under the Premises. Tenant may use and sell on the Premises only
time Hazardous Substances typically used and sold in the prudent and safe
operation of the business permitted by Paragraph 1 of this Lease. Tenant may
store such Hazardous Substances on the Premises, but only in quantities
necessary to satisfy Tenant's reasonably anticipated needs. Tenant shall comply
with all Environmental Laws and exercise the highest degree of care in the use,
handling and storage of Hazardous Substances and shall take all practicable
measures to minimize the quantity and toxicity of Hazardous Substances used,
handled or stored on the Premises.
19.3 Notices. Tenant shall immediately notify Landlord upon
becoming aware of the following: (a) any spill, leak, disposal or other release
of a Hazardous Substance on, under or adjacent to the Premises; (b) any notice
or communication from a governmental agency or any other person relating to any
Hazardous Substance on, under or adjacent to the Premises; or (c) any violation
of any Environmental Law with respect to the Premises or Tenant's activities on
or in connection with the Premises.
19.4 Spills and Releases. In the event of a spill, leak,
disposal or other release of a Hazardous Substance on or under the Premises
caused by Tenant or any of its contractors, agents or employees or invitees, or
the suspicion or threat of the same, Tenant shall (i) immediately undertake all
emergency response necessary to contain, cleanup and remove the released
Hazardous Substance, (ii) promptly undertake all investigatory, remedial,
removal and other response action necessary or appropriate to ensure that any
Hazardous Substances contamination is eliminated to Landlord's reasonable
satisfaction, and (iii) provide Landlord copies of all correspondence with any
governmental agency regarding the release (or threatened or suspected release)
or the response action, a detailed report documenting all such response action,
and a certification that any
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contamination has been eliminated. All such response action shall be performed,
all such reports shall be prepared and all such certifications shall be made by
an environmental consultant reasonably acceptable to Landlord.
19.5 Condition Upon Termination. Upon expiration of this Lease
or sooner termination of this Lease for any reason, Tenant shall remove all
Hazardous Substances and facilities used for the storage or handling of
Hazardous Substances from the Premises and restore the affected areas by
repairing any damage caused by the installation or removal of the facilities.
Following such removal, Tenant shall certify in writing to Landlord that all
such removal is complete.
19.6 Assignment and Subletting. Notwithstanding the provisions
of Paragraph 9 of this Lease, it shall not be unreasonable for Landlord to
withhold its consent to any assignment, sublease or other transfer of the
Tenant's interest in this Lease if a proposed transferee's anticipated use of
the Premises involves the generation, storage, use, sale, treatment, release or
disposal of any Hazardous Substance.
19.7 Indemnity.
19.7.1 By Tenant. Tenant shall indemnify, defend
and hold harmless Landlord, its employees and agents, any persons holding a
security interest in the Premises, and the respective successors and assigns of
each of them from and against any and all claims, demands, liabilities, damages,
fines, losses, costs (including without limitation the cost of any
investigation, remedial, removal or other response action required by
Environmental Law) and expenses (including without limitation attorneys' fees
and expert fees in connection with any trial, appeal, petition for review or
administrative proceeding) arising out of or in any way relating to the use,
treatment, storage, generation, transport, release, leak, spill, disposal or
other handling of Hazardous Substances on the Premises by Tenant or any of its
contractors, agents or employees or invitees. Tenant's obligations under this
paragraph shall survive the expiration or termination of this Lease for any
reason. Landlord's rights under this paragraph are in addition to and not in
lieu of any other rights or remedies to which Landlord may be entitled under
this agreement or otherwise.
19.7.2 By Landlord. Landlord shall indemnify, defend
and hold harmless Tenant and its officers, directors, employees, invitees and
agents and the respective successors and assigns of each of them from and
against any and all claims, demands, liabilities, damages, fines, losses, costs
(including without limitation the cost of any investigation, remedial, removal
or other response action required by Environmental Law) and expenses (including
without limitation attorneys' fees and expert fees in connection with any trial,
appeal, petition for review or administrative proceeding) arising out of or in
any way relating to the actual or alleged use, treatment, storage, generation,
transport, release, leak, spill, disposal or other handling of Hazardous
Substances on the Premises by Landlord, or any of its contractors, agents or
employees or by Landlord's previous tenants of the Premises. Landlord's
obligations under this paragraph shall survive the expiration or termination of
this Lease for any reason. Tenant's rights under this paragraph are in addition
to and
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not in lieu of any other rights or remedies to which Tenant may be entitled
under this Agreement or otherwise.
20. Americans with Disabilities Act ("ADA").
Tenant shall, at its expense, comply with all applicable
provisions of Title I of the Americans with Disabilities Act of 1990 ("the Act")
related to its specific use of the Premises, and Landlord shall have no
responsibility for compliance with the provisions of Title I of the Act.
Landlord shall, at its expense, cause the Building to comply with, during the
term of this Lease and any extensions thereof, applicable provisions of Title
III of the Americans with Disabilities Act of 1990 which relate to architectural
barriers and communication barriers which are structural in nature so long as
such compliance is readily achievable, as the term readily achievable is defined
in the Act.
21. Landlord's Warranties and Representations.
Landlord represents and warrants that, as of the commencement
of the lease term, to the best of Landlord's knowledge: (i) the Premises are
free from all latent and patent defects, and all mechanical systems servicing
the Premises (including, but not limited to, electrical, plumbing, and heating,
ventilating and air-conditioning) are in good working order, condition and
repair; and (ii) the Premises are in compliance with all applicable federal,
state and local laws, rules and regulations and ordinances including, but not
limited to, all building codes and Title III of the Americans with Disabilities
Act of 1990.
22. Brokerage.
Landlord and Tenant each warrants to the other that it has not
incurred any obligation for finders' fees or brokers' commissions in connection
with this transaction, except for the employment by Landlord of Mr. Kirk D.
Robertson and Mr. Bill Connelly of Norris, Beggs & Simpson as broker. Landlord
shall be responsible for the commission due the broker. Landlord and Tenant
shall each indemnify the other against any claim arising out of any breach of
the warranty contained in this paragraph.
23. Building Location.
Landlord reserves the right to change the location of the
Building within Columbia Tech Center.
24. First Right of Notice.
24.1 Up to ninety (90) days prior to Tenant's taking
possession of the Premises, Tenant shall have the exclusive right to lease the
approximately 20,000 square feet of warehouse and office space adjacent to the
Premises. Landlord agrees to negotiate in good faith with Tenant for the lease
of such adjacent space.
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24.2 After ninety (90) days prior to Tenants taking possession
of the Premises, Tenant shall have the First Right of Notice for the
approximately 20,000 square feet of warehouse and office space adjacent to the
Premises. Landlord shall notify Tenant of the availability of such space, and
Tenant shall have seven (7) business days to enter into good faith negotiations
for the First Right of Notice space in the event Landlord begins negotiations
with a third party for the First Right of Notice space. Landlord agrees to
negotiate in good faith with Tenant for the lease of such First Right of Notice
space.
25. Option to Renew.
If not then in default, Tenant shall have the option to renew
this Lease for one additional 5-year term by giving Landlord written notice of
intent to extend at least 180 days prior to expiration of the preceding term.
All provisions of this Lease shall apply during the extended term, except that
rent for the renewal period shall be an amount agreed upon by parties at least
90 days prior to commencement of the renewal period, but in no case less than
that of the preceding term.
26. Tenant Improvements.
Landlord shall, at its expense, cause construction of tenant
improvements within the Premises in accordance with the approved Plans and
Specifications called for in this paragraph. All improvements shall be
constructed using Columbia Tech Center tenant finish standards as outlined on
the attached Exhibit B. Tenant improvements shall be installed using industry
standard materials installed in a good and workmanlike manner by qualified
craftsmen. Said improvements shall be constructed from Plans and Specifications
prepared by Landlord's architect subject to applicable building codes as
interpreted by the governing jurisdiction. Said improvements shall include, but
not be limited to, the following:
26.1 The construction of approximately 600 square feet of air
conditioned and heated office space within the Premises to a mutually acceptable
space plan;
26.2 The installation of all plumbing, electrical, mechanical
and sprinkler systems;
26.3 The installation of all doors, including shipping and
receiving doors, which are to be in proper working order;
26.4 The installation of lighting and gas space heaters in the
warehouse portion of the Premises;
26.5 The construction of two (2) ADA compliant Restrooms with
the Premises;
26.6 The installation of two (2) dock levelers in the
warehouse portion of the Premises; and
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26.7 The construction of a demising wall between the Premises
and the adjacent space.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the respective dates set opposite their signatures below, but this
Agreement on behalf of such party shall be deemed to have been dated as of the
date first above written.
LANDLORD:
COLUMBIA TECH CENTER, L.L.C.,
a Washington limited liability company
By: Pacific Realty Associates, L.P.,
a Delaware limited partnership
its Member
By: PacTrust Realty, Inc.,
a Delaware corporation,
its General Partner
Date: 2-10 , 1998 By: /s/ David G. Hicks
----------------- ---------------------
David G. Hicks
Vice President
Address for Notices/Rent Payments to Landlord:
15350 S.W. Sequoia Parkway, #300-WPMC
Portland, OR 97224
TENANT:
LABTEC, INC.,
a Delaware corporation
Date: 2-6 , 1998 By: /s/ J.E. Hillman
------------ ---------------------------------------------
Name: J.E. Hillman
---------------------------------------------
Title: CFO
---------------------------------------------
Date: , 1998 By:
------------ ---------------------------------------------
Name:
---------------------------------------------
Title:
---------------------------------------------
Address for Legal Notices to Tenant:
1499 S.E. Tech Center Place
Suite 350
Vancouver WA 98683
Address for Invoices to Tenant:
1499 S.E. Tech Center Place
Suite 350
<PAGE>
Vancouver WA 98683
Tenant Employer Identification Number
91-1644386
<PAGE>
(Acknowledgment by Individual)
STATE OF )
---------------------------------
) ss.
County of
---------------------------------)
On this _____ day of _____, 199__, before me, personally appeared
___________ to me known to be the individual described in and who executed the
foregoing instrument, and acknowledged to me that he signed the said instrument
as __________ free and voluntary act and deed for the uses and voluntary act and
deed for the uses and purposes therein mentioned.
------------------------------------------
Notary Public for ________________________
My Commission Expires:____________________
(Acknowledgment by Corporation)
STATE OF Washington )
) ss.
County of Clark )
On this 6th day of Feb., 1998, before me, personally appeared J.E.
Hillman and --- to me known to be the C.F.O. and -----, respectively, of Labtec,
Inc., the corporation that executed the foregoing instrument, and acknowledged
the said instrument to be free and voluntary act and deed of said corporation,
for the uses and purposes therein mentioned, and on oath stated that he
authorized to execute the said instrument.
/s/ Lyn Glover
Notary Public for Washington
My Commission Expires: May 29, 1999
<PAGE>
(Acknowledgment by Pacific Realty Associates, L.P.)
STATE OF OREGON )
) ss.
County of WASHINGTON )
On this 10th day of February, 1998, before me, personally appeared
David G. Hicks, who, being first duly sworn, did say that he is the Vice
President of PacTrust Realty, Inc., General Partner of Pacific Realty
Associates, L.P., member of Columbia Tech Center, L.L.C.
WITNESS my hand and official seal.
/s/ Gaylee Kim Taylor
Notary Public for Oregon
My Commission Expires: 05-29-01
<PAGE>
LABTEC ENTERPRISES, INCORPORATED
EXHIBIT "A"
[MAP OF COLUMBIA TECH CENTER]
<PAGE>
EXHIBIT "B"
LABTEC ENTERPRISES, INC.
BUILDING NO. 28, COLUMBIA TECH CENTER
TENANT IMPROVEMENT STANDARDS
LIGHT INDUSTRIAL BUILDINGS
February 4,1998
GENERAL -
The cost of standard tenant improvement work described below shall be covered
under the tenant improvement allowance.
ARCHITECTURE AND ENGINEERING: Architecture and engineering required to
obtain a building permit are included for standard office and warehouse
occupancy classifications.
PERMITS/FEES: Building permits, plan check fees, fire and life safety
review charges, sewer connection fees and SDC's are included for
standard office and warehouse occupancy classifications.
EXCLUSIONS: Items noted as "excluded" are items which Landlord will
consider for inclusion but are not included in a typical improvement
and do not generally fit within a "building standard" tenant
improvement allowance.
EXTERIOR AND BUILDING SHELL -
EXTERIOR: Modifications to sitework and exterior building shell to
accommodate unusual tenant needs are excluded. This would include
patios; equipment pads; noise or special visual screening;
modifications to exterior building walls, windows, or doors; and
upgrading of electrical, storm sewer or sanitary sewer systems.
Exterior fencing is excluded.
TENANT ENTRIES AND MAN-DOORS: Tenant entry shall include a single
storefront door in the aluminum storefront system. Exterior man-doors
into warehouse areas shall be 3' x 7' hollow metal with Schlage "D"
series lever locks. Special access systems, card lock entries, and
unusual door hardware items are excluded.
OVERHEAD DOORS: Exterior overhead doors shall be steel sectional type,
manually operated, vertical or high lift configuration.
-1-
<PAGE>
ELECTRICAL: Building shell electrical system includes the main
electrical service (1200 Amp, 277/480 Volt, 3-phase) to be shared by
building tenants and "house" panels for exterior lighting and common
area power requirements. Tenant improvement electrical service includes
distribution of power from the main building service to tenant
subpanels and the addition of any tenant subpanels within the tenant
space. Generators and UPS systems are excluded.
WAREHOUSE AREAS -
DEMISING WALLS:
Demising walls shall extend from floor level to the underside
of the building roof structure. Demising walls in buildings
with clear height 18 feet and less shall be constructed using
metal studs with 5/8" sheetrock each side. Fiberglass batt
insulation shall be provided in metal stud demising walls from
floor to 9 feet high.
Demising walls in 18' to 24' clear height buildings shall be
constructed using wood studs spaced approximately 4 feet on
center and a single layer of 5/8" plywood connected to studs
with wood "stops". Wood demising walls are uninsulated.
EXTERIOR WALLS: Exterior walls within warehouse areas shall remain
unpainted, exposed concrete. Insulation for exterior walls within
warehouse arm is excluded.
CEILINGS/ROOF STRUCTURE: Minimum of 24' clear height to structure.
Finished ceilings within warehouse areas are excluded. Roof structure
is insulated with R-19 insulation and shall remain exposed. Painting of
roof structure and supporting elements is excluded.
FLOORING: Warehouse floor shall be exposed, sealed concrete.
PLUMBING: Special plumbing such as process water and waste systems are
excluded under standard tenant improvements.
FIRE PROTECTION: Building shell fire protection system includes service
to the building and overhead sprinkler piping and heads. The warehouse
fire protection system shall be designed with roof level density of up
to a 0.495 gpm/2000 s.f. (ESFR system not included), with up to four
(4) small hose stations included. Modifications to the overhead system
shall be provided if required to accommodate demising wall layout.
H.V.A.C.: Gas fired unit heaters shall provide heating in warehouse
areas for freeze protection of overhead water piping only. Special
production area H.V.A.C. and special structural supports for mechanical
equipment are excluded.
-2-
<PAGE>
ELECTRICAL: Warehouse lighting shall be provided using fluorescent
fixtures to approximately 10-15 foot-candles measured 30" above floor;
warehouse lights to be switched from a location near the office. Except
for unit heater connections and a single duplex outlet near tenant's
phone board, power connections and outlets within warehouse areas are
excluded.
IMPROVED OFFICE AREAS -
CONCRETE: Existing concrete slab on grade shall be sawcut, removed, and
poured back for underslab utilities as necessary.
EXTERIOR WALLS: Exterior concrete walls within improved office areas
shall receive metal stud furring, insulation, and 5/8" smooth finished
sheetrock. Exterior framed walls within improved office areas shall
receive thermal insulation and 5/8" smooth finished sheetrock from
floor to 9 feet high.
OFFICE/WAREHOUSE SEPARATION WALLS: Walls separating improved office
areas and warehouse areas shall extend from floor level to 12 feet
above floor. Such walls shall be constructed using metal studs,
fiberglass batt insulation from floor to 9 feet high, and 5/8"
sheetrock each side. Sheetrock shall extend from floor to top of
framing on the warehouse side of the wall and from floor to ceiling
level on the office side of the wall.
INTERIOR PARTITIONS: Interior partitions shall extend from floor level
to the underside of ceiling grid. Interior partitions shall be
constructed using 3-1/2" metal studs at 24" on center and 5/8" smooth
finished sheetrock each side. Batt insulation shall be provided in
walls surrounding toilet and conference rooms.
INTERIOR DOORS: Interior doors shall be nominal 3'-0" by 7'-0" solid
core oak with light Watco finish ("Building Standard Finish") in Timely
door frames, factory pre-painted in standard off-white color ("Building
Standard Frame"). Door hardware to include 1-1/2 pair butts, Schlage
"AL" series lever latch, and wall stop for each door. Door hardware
finish to be polished chrome.
RELITES: Relites are excluded for standard tenant improvements. When
used, relites shall include 1/4" tempered glass in Building Standard
Frame.
CABINETS AND MILLWORK: Plastic laminate covered countertops shall be
provided with counter-mounted lavatories in each toilet room. Cabinets
to be constructed to A.W.I. standards with plastic laminate covered
tops, fronts, and sides. Cabinet interiors shall be constructed of
melamine or standard low pressure laminate on particle board substrate.
Concealed hinges, heavy-duty drawer hardware, and wire pulls shall be
included for all drawers or doors. One 4' by 4' plywood mounting board
is included for
-3-
<PAGE>
tenant's phone equipment. Wall paneling, wood base, shelving, and other
special millwork
items are excluded.
ACOUSTICAL CEILINGS: Acoustical ceiling to be 2' by 2' tegular edge
ceiling tile (Armstrong Minatone #705 Fissured) in standard suspended
grid. Ceiling height to be approximately 9 feet.
FLOOR COVERINGS: Floor covering colors shall be selected by Tenant from
Landlord's standard finish options. Carpet shall be cut pile or loop as
selected by Tenant. Cut pile carpet shall be installed on carpet pad.
VCT shall be installed in lunch rooms, copy rooms, storage rooms, and
other appropriate locations. Sheet vinyl flooring shall be provided in
toilet rooms. Rubber base shall be 4" high in continuous lengths. 6"
high rubber base shall be used in toilet rooms. Coved base to be used
in areas with resilient flooring; flat base to be used in carpeted
areas. Quarry or ceramic tiles, wood flooring, raised computer floors,
and other special floor finishes are excluded.
PAINTING AND WALL COVERING: All interior walls in improved office areas
shall receive primer and two coats of fresh paint. Paint color is to be
selected from Landlord's standard color options. Plastic laminate
wainscot shall be provided on "wet" walls within toilet rooms. Vinyl,
fabric, and other special wall coverings are excluded.
WINDOW COVERINGS: Exterior windows shall be covered with vertical
blinds (solid plastic slats), in building standard color. Window
coverings are excluded on doors and interior glass systems.
APPLIANCES: Appliances such as dishwashers, refrigerators, garbage
disposers, and microwave ovens; and vending machines, coffee makers or
other similar equipment are excluded.
FURNITURE AND ACCESSORIES: Toilet room accessories include one toilet
paper holder and one seat cover dispenser for each water closet, one
paper towel dispenser for each toilet room, and grab bars where
required by code. All toilet accessories shall be surface mounted
units. One counter mounted soap dispenser shall be provided for each
toilet room lavatory. Furniture, coat hooks, desk partitions, tack
boards, white boards, projection screens, fire extinguishers and
cabinets, lockers, and other miscellaneous accessories are excluded.
PLUMBING: Plumbing shall be provided within the tenant area to serve
necessary toilet facilities, a Lunch Room sink, and drinking fountain
if required by code. Special plumbing work such as showers and vending
machine connections are excluded.
-4-
<PAGE>
FIRE PROTECTION: Existing overhead fire protection system shall be
modified as required for tenant improvement ceiling and wall layout.
Fire protection work includes the addition of "drops" to ceilings and
chrome, semi-recessed sprinkler heads.
H.V.A.C.: Roof-top gas/electric packaged HVAC units shall provide
heating and cooling to finished office areas. Typical office cooling to
be approximately 400 square feet per ton. Maximum roof top unit size to
be 7.5 ton. Each zone to be thermostatically controlled. Special
production or clean room H.V.A.C., special computer room mechanical
work, and special structural support of mechanical equipment are
excluded. Ceiling mounted or roof-top mounted (Landlord's option)
exhaust fans shall be provided for toilet room locations.
ELECTRICAL:
Office area electrical work includes furnishing and
installation of lighting, power outlets, mud rings with pull
strings for phone/data locations, and power connections to
HVAC equipment. Electrical deeds to be intermediate grade with
wiring systems to meet code. Generators and UPS systems are
excluded.
Office lighting shall be provided using 2' by 4' fluorescent
light fixtures with standard acrylic lenses. Wattage available
for lighting for each tenant space is governed by the
Washington Energy Code.
Special architectural lighting (track lighting, spot lighting,
down lights, wall sconces, etc.) is excluded. Dual level light
switching is excluded. Lighting lamps, ballasts, and controls
shall meet electrical energy consumption code requirements.
Duplex outlets shall be provided 2 each per 120 square feet of
improved office area. Power supply for Tenant desk partitions
to be provided at wall, floor, or power pole locations only;
connection to tenant's partition system and wiring within desk
partitions are excluded. Mud rings with pull strings to the
area above ceiling shall be provided 2 each per 240 square
feet of improved office area for Tenant installed telephone
and data wiring. Cover plates and receptacles for telephone
and data wiring and unused mud rings shall be provided by the
Tenant's phone or data wiring vendor.
FIRE ALARM: Fire alarm and smoke detection systems shall be provided if
required by the local governing jurisdictions.
SECURITY SYSTEMS: Security systems are excluded.
-5-
<PAGE>
TELEPHONE AND COMPUTER SYSTEMS: Telephone, data, and computer system
equipment and wiring are excluded. Tenant phone equipment shall be
provided by tenant and located within the tenant area.
-6-
-----------------------------------------------------------------------
LABTEC ENTERPRISES, INC.
$6,000,000 Principal Amount
of
Senior Subordinated Notes Due October 1, 2005
50,000 Shares of Common Stock
PURCHASE AGREEMENT
-----------------------------------------------------------------------
Dated October 7, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. PURCHASE AND SALE OF SECURITIES.......................... 1
1.1 Issue of Securities...................................... 1
1.2 Sale and Purchase of the Securities; the Closing......... 1
1.3 Purchaser's Representations; Source of Funds; Brokers.... 2
1.4 Failure to Close; Postponement........................... 4
1.5 Expenses................................................. 4
1.6 Indemnification.......................................... 5
1.7 Contribution............................................. 6
1.8 Registration and Transfer of Securities.................. 6
SECTION 2. CLOSING CONDITIONS....................................... 7
2.1 Opinion of Counsel....................................... 7
2.2 Representations and Warranties True; No Event of Default. 7
2.3 Compliance with this Agreement........................... 7
2.4 Officers' Certificate.................................... 7
2.5 Purchase Permitted by Applicable Laws; Legal Investment.. 7
2.6 Completion of Other Transactions......................... 8
2.7 Consents and Permits..................................... 8
2.8 Stockholders Agreement................................... 8
2.9 Financial Condition; Sources and Uses of Funds........... 8
SECTION 3. HOLDER'S SPECIAL RIGHTS.................................. 8
3.1 Delivery Expenses........................................ 8
3.2 Issue Taxes.............................................. 9
3.3 Direct Payment........................................... 9
3.4 Lost, Destroyed, Stolen, etc. Securities................. 9
SECTION 4. REPRESENTATIONS AND WARRANTIES........................... 9
4.1 Organization, Standing and Qualification................. 10
4.2 Capitalization........................................... 10
4.3 Authorization of Agreement and Other Documents........... 11
4.4 No Violation............................................. 11
4.5 Use of Proceeds.......................................... 12
4.6 No Default............................................... 12
4.7 Outstanding Indebtedness; Senior Debt; Liens............. 12
4.8 Financial Statements..................................... 12
4.9 No Material Adverse Change............................... 13
4.10 Full Disclosure.......................................... 13
4.11 Litigation............................................... 13
4.12 Title to Properties...................................... 13
4.13 Taxes.................................................... 13
4.14 ERISA.................................................... 14
4.15 Compliance with Laws..................................... 15
4.16 No Violation of Regulations of Board of Governors
of Federal Reserve System.............................. 15
4.17 Private Offering......................................... 15
- i -
<PAGE>
PAGE
4.18 Governmental Regulations..................................15
4.19 SEC Reports...............................................15
4.20 Brokers...................................................15
4.21 Environmental Compliance..................................16
4.22 Intellectual Property.....................................16
4.23 Solvency..................................................17
4.24 Labor Relations...........................................17
4.25 Material Contracts........................................17
4.26 Survival of Representations and Warranties................17
SECTION 5. COVENANTS.................................................17
5.1 Payment of Notes..........................................17
5.2 Delivery of Financial Statements and Reports; SEC Reports.18
5.3 Compliance Certificate....................................19
5.4 Stay, Extension and Usury Laws............................19
5.5 Limitation on Restricted Payments.........................19
5.6 Corporate Existence.......................................20
5.7 Same Business.............................................20
5.8 Taxes.....................................................20
5.9 Investment Company Act; United States Real Property
Holding Corporation.....................................20
5.10 No Merger, etc............................................20
5.11 Limitation on Additional Indebtedness.....................21
5.12 Limitation on Transactions With Affiliates................21
5.13 Restrictions on Liens.....................................22
5.14 Sale of Assets............................................22
5.15 Ownership of Subsidiaries.................................23
5.16 Insurance.................................................23
5.17 Issuances of Capital Stock................................23
5.18 ERISA Notices.............................................23
5.19 Inconsistent Agreements...................................23
5.20 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries..................................23
5.21 Limitation on Acquisitions................................24
5.22 Compliance with Laws......................................24
SECTION 6. DEFAULTS AND REMEDIES.....................................24
6.1 Events of Default.........................................24
6.2 Acceleration of Notes.....................................26
6.3 Other Remedies............................................26
6.4 Waiver of Past Defaults...................................26
6.5 Rights of Holders to Receive Payment......................26
6.6 Undertaking for Costs.....................................27
SECTION 7. SUBORDINATION.............................................27
7.1 Notes Subordinated to Senior Debt.........................27
7.2 No Payment on Notes in Certain Circumstances..............27
7.3 Payment Over Proceeds upon Dissolution, Etc...............28
7.4 Payments May Be Paid Prior to Dissolution.................29
7.5 Subrogation...............................................29
- ii -
<PAGE>
PAGE
7.6 Obligations of the Company Unconditional.................. 29
7.7 Reliance on Judicial Order or Certificate of
Liquidating Agent....................................... 30
7.8 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Debt...... 30
7.9 This Section 7 Not To Prevent Events of Default........... 30
SECTION 8. DEFINITIONS............................................... 30
SECTION 9. MISCELLANEOUS............................................. 40
9.1 Notices................................................... 40
9.2 Successors and Assigns.................................... 40
9.3 Amendment and Waiver...................................... 40
9.4 Counterparts.............................................. 41
9.5 Headings.................................................. 41
9.6 Governing Law............................................. 41
9.7 Entire Agreement.......................................... 41
9.8 Severability.............................................. 41
9.9 Confidentiality........................................... 41
- iii -
<PAGE>
SCHEDULE 1.2 Company Bank Account
SCHEDULE 4.1 Organization, Standing and Qualification
SCHEDULE 4.2 Capitalization
SCHEDULE 4.4 No Violation
SCHEDULE 4.7 Indebtedness
SCHEDULE 4.9 Material Adverse Change
SCHEDULE 4.11 Litigation
SCHEDULE 4.13 Taxes
SCHEDULE 4.14 Employee Benefit Plans
SCHEDULE 4.21 Environmental Compliance
SCHEDULE 4.22 Intellectual Property
SCHEDULE 4.25 Material Contracts
SCHEDULE 5.11 Existing Indebtedness
SCHEDULE 5.20 Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries
SCHEDULE 8.01 Permitted Investments
SCHEDULE 8.02 Permitted Liens
ANNEX A NOTES
ANNEX B OPINION OF COUNSEL TO COMPANY
ANNEX C STOCKHOLDERS AGREEMENT
ANNEX D FINANCIAL STATEMENTS
- iv -
<PAGE>
LABTEC ENTERPRISES, INC.
3801 NE 109th Avenue
Vancouver, Washington 98682
October 7, 1997
The KB Mezzanine Fund II, L.P.
c/o Equinox Investment Partners, L.L.C.
405 Lexington Avenue, 21st Floor
New York, New York 10174
Attention: Michael H. Khougaz
Ladies and Gentlemen:
Labtec Enterprises, Inc., a Delaware corporation, f/k/a LEI Holdings,
Inc. (the "Company") hereby agrees with you as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
1.1 Issue of Securities
On or before the Closing (as hereinafter defined), the Company
will have authorized the issuance of its Senior Subordinated Notes due October
1, 2005 (the "Notes"), in the aggregate principal amount of $6,000,000 to be
issued in the form attached hereto as Annex A.
On or before the Closing, the Company will have authorized the
issuance to you of 50,000 shares (the "Shares") of its Common Stock, $0.01 par
value.
Capitalized terms used herein without definition shall have
the meanings specified in Section 8 hereof. The Notes and the Shares are
collectively referred to herein as the "Securities."
Each Note will be in the principal amount of $100,000 or
integral multiples of $50,000 in excess thereof; and will be dated as provided
in Section 1.2 hereof. Each Share will be dated as provided in Section 1.2
hereof.
1.2 Sale and Purchase of the Securities; the Closing
In reliance upon your representations made in Section 1.3
hereof and subject to the terms and conditions set forth herein, the Company
hereby agrees to sell to you the Securities at a purchase price of $953.065 per
$1,000 principal amount of Notes and $5.6322 per Share. In reliance upon the
representations and warranties of the Company contained herein and subject to
the terms and conditions set forth herein, you hereby agree to purchase the
Securities from the Company.
You and the Company agree that, for purposes of Section
1273(b) and pursuant to Section 1273(c)(2) of the Code, the "issue price" of
each Note of $100,000 principal amount is equal to its purchase price as
specified above.
<PAGE>
The sale and purchase of the Securities shall take place at a
closing (the "Closing") at the offices of Ropes & Gray, 885 Third Avenue, New
York, New York at 10:00 a.m., New York time, on October 7, 1997, or such other
business day on or prior to October 31, 1997, as may be agreed upon by you and
the Company (the "Closing Date"). At the Closing, the Company will deliver to
you the Securities (in such permitted denomination or denominations and
registered in your name or the name of such nominee or nominees as you may
request), dated the Closing Date, against payment of the purchase price therefor
(net of the aggregate closing fee of $120,000 to be paid to the Purchaser by the
Company at Closing) by intra-bank or federal funds bank wire transfer of same
day funds to such bank account as the Company shall designate at least two
Business Days prior to the Closing and which is identified on Schedule 1.2
hereto. The Company shall have delivered to you or to such other persons as you
shall direct, prior to Closing, a check dated the Closing Date in the amount of
any out-of-pocket expenses for which you or your investment advisor are entitled
to reimbursement pursuant to Section 1.5 hereof, including, without limitation,
the reasonable fees and expenses of your counsel, or at your election shall
authorize you to deduct such amount from the purchase price for the Securities,
provided that you agree to provide the Company with a statement describing any
amounts to be so paid at least one Business Day prior to the Closing.
1.3 Purchaser's Representations; Source of Funds; Brokers
(a) You represent that you are purchasing the Securities
solely for your own account and not as nominee or agent for any other person and
not with a view to, or for offer or sale in connection with, any distribution
thereof (within the meaning of the Securities Act) that would be in violation of
the securities laws of the United States of America or any state thereof,
without prejudice, however, to your right at all times to sell or otherwise
dispose of all or any part of said Securities pursuant to a registration
statement under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act, and subject, nevertheless, to
the disposition of your property being at all times within your control.
You further represent that you are knowledgeable,
sophisticated and experienced in business and financial matters; that you have
previously invested in securities similar to the Securities and fully understand
the limitations on transfer described in Section 1.3(b) hereof and the
restrictions on sales and other dispositions in this Agreement and the
Stockholders Agreement; that you are able to bear the economic risk of your
investment in the Securities and are presently able to afford the complete loss
of such investment; that you are an "accredited investor" as defined in
Regulation D promulgated under the Securities Act; and that you have been
afforded access to information about the Company and the Company's financial
condition, results of operations, business, property, management and prospects
sufficient to enable you to evaluate your investment in the Securities. You
acknowledge that you have conducted your own analysis of the Company's financial
condition and other foregoing factors in determining to make an investment in
the Securities.
(b) If you intend to sell or otherwise dispose of all or any
part of the Securities (other than pursuant to an effective registration
statement under the Securities Act), you will deliver to the Company a legal
opinion from counsel, and in form and substance, reasonably satisfactory to the
Company, that an exemption from registration under the Securities Act is
available; provided that if Shares are being sold pursuant to Rule 144, such
opinion will be required only if required by the Company's transfer agent or
otherwise reasonably requested by the Company. The Company will reimburse you
for the reasonable fees and expenses incurred by you in obtaining any such
opinion of counsel. Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Notes (and all securities issued in exchange therefor or substitution
thereof) shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED,
- 2 -
<PAGE>
PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF, AN EFFECTIVE
REGISTRATION UNDER THE ACT COVERING THE TRANSFER OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE ISSUER, THAT REGISTRATION UNDER THE ACT IS
NOT REQUIRED."
In addition, all Notes shall bear the following legend until such time as the
same is no longer required under the applicable provisions of this Agreement:
"THE TRANSFER OF THIS NOTE ADDITIONALLY IS SUBJECT TO THE
PROVISIONS OF SECTION 1.8 OF THE PURCHASE AGREEMENT DATED AS OF OCTOBER
7, 1997 BETWEEN THE ISSUER AND THE PURCHASER OF THE NOTES."
In addition, all Shares will bear any other legend required by the Stockholders
Agreement; provided that the Company agrees, for the benefit of Purchaser, that
notwithstanding the requirement of any legend required by the Stockholders
Agreement, if Shares are being sold pursuant to Rule 144, an opinion of counsel
relating to the availability of an exemption from registration will be required
only if required by the Company's transfer agent or otherwise reasonably
requested by the Company.
(c) You represent that no part of the funds to be used to
purchase the Securities constitutes assets allocated to any trust which contains
the assets of any employee pension benefit plan listed on Schedule 4.14 (being
pension benefit plans with respect to which the Company or any corporation
considered an affiliate of the Company within the meaning of Section 407(d)(7)
of ERISA is a party in interest or disqualified person). The representation made
by you in the preceding sentence is made in reliance upon your review of the
list of employee pension benefit plans set forth on Schedule 4.14. As used in
this Section 1.3(c), the terms "employee pension benefit plan," "separate
account" and "party in interest" shall have the meanings assigned to such terms
in Section 3 of ERISA and the terms "disqualified person" and "prohibited
transaction" shall have the meanings assigned to such terms in Section 4975 of
the Code.
(d) The Purchaser has not dealt with any broker, finder,
commission agent or other Person in connection with the sale of the Securities
and the transactions contemplated by this Agreement and the Purchaser is not
under any obligation to pay any broker's or finder's fee or commission or
similar payment in connection with such transactions. The Purchaser hereby
agrees to indemnify and hold the Company harmless from and against any and all
actions, suits, claims, costs, expenses, losses, liabilities and/or obligations
in connection with or relating to any broker's or finder's fees or commission or
similar payment in connection with such transactions, except with respect to
such fees or commissions incurred by action of the Company, Sun Capital, Bain
Capital or their respective Affiliates (other than the Purchaser), so long as
the Purchaser receives notice of any such action, suit, claim, etc., reasonably
promptly after the Company become aware thereof; provided that the failure to
give such notice as provided in this sentence shall not relieve the Purchaser of
its obligations under this sentence except to the extent, and only to the
extent, that the Purchaser is actually prejudiced by such failure to give
notice.
1.4 Failure to Close; Postponement
If at the Closing any of the conditions to the Closing
specified in this Agreement shall not have been fulfilled to your reasonable
satisfaction or if the Closing fails to occur on or before October 31, 1997 (for
any reason other than your default or failure to fund the purchase of the
Securities), you shall, at your election and notwithstanding anything to the
contrary in this Agreement, be relieved of all further obligations under this
Agreement without thereby waiving any rights you may have by reason of such
nonfulfillment or failure. Nothing in this Section 1.4 shall operate to relieve
the Company from any of its obligations hereunder.
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1.5 Expenses
(a) The Company agrees to pay or reimburse all reasonable
expenses relating to this Agreement, including but not limited to:
(1) the cost of preparing and reproducing this Agreement, the
Securities and any other documents contemplated hereby or thereby;
(2) all reasonable out-of-pocket expenses incurred by you or
your investment advisor in connection with the transactions contemplated by this
Agreement and the other documents referred to in clause (1) above, including,
without limitation, travel and lodging expenses and all other reasonable
out-of-pocket costs incurred in connection with your review of the Company's
business and operations;
(3) to the extent not specifically included in subparagraph
(2) immediately above, the reasonable fees and expenses of your counsel, Latham
& Watkins, in connection herewith;
(4) the cost of delivering to your home office or the office
of your designee, insured to your satisfaction, this Agreement, the Securities
and any other documents contemplated hereby or thereby;
(5) all reasonable out-of-pocket expenses incurred by you or
your investment advisor or your affiliates, including without limitation,
Equinox Investment Partners, L.L.C., in monitoring the Company and your
investment in the Securities, for so long as you hold any Securities; and
(6) all your reasonable out-of-pocket expenses (including the
reasonable fees and expenses of counsel) relating to any amendment,
modification, waiver, consent or preservation or enforcement of rights under
this Agreement or the Notes.
(b) In addition, the Company agrees to reimburse the Purchaser
for all reasonable out-of-pocket expenses (including the reasonable fees and
expenses of counsel) relating to any amendment, modification, waiver, consent or
preservation or enforcement of rights under the Stockholders Agreement or the
Agreement of Limited Partnership of Sun Multimedia Partners, L.P. (the
"Partnership Agreement"), without duplication of any reimbursement of expenses
available to you under the terms of the Stockholders Agreement or the
Partnership Agreement, and the Company agrees to reimburse the Purchaser for the
following costs and expenses (including those costs and expenses that by the
terms of the Stockholders Agreement are not reimbursable to other holders of the
Company's equity securities): (i) the reasonable fees and expenses of not more
than one counsel for the Purchaser in connection with a registration under
Section 9.1 or 9.2 of the Stockholders Agreement; (ii) the reasonable
out-of-pocket expenses incurred by the Purchaser in complying with the
requirements imposed by this Agreement or the Stockholders Agreement on the
transfer of any Securities, including counsel fees and expenses in connection
with the delivery of opinions or supplemental agreements required by the Company
in connection with such transfers and (iii) reasonable out-of-pocket expenses
incurred in connection with your service as a board member..
1.6 Indemnification
The Company (the "Indemnifying Party") hereby agrees, without
limitation as to time, to indemnify you and your Agents, Affiliates and partners
(collectively, the "Indemnified Parties") against, and hold you and them
harmless from, all losses, claims, damages, liabilities and costs (including the
costs of preparation and reasonable attorneys' fees and expenses) (collectively,
"Losses") incurred by you or them and arising out of or as a result of any
investigation, litigation or other proceeding (whether or not you or they are a
party thereto) related to the entering into and/or performance of this
Agreement, the Notes, the Partnership
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Agreement and the Stockholders Agreement or the use of the proceeds from the
sale of the Securities hereunder or the consummation of any other transactions
contemplated in this Agreement, the Notes, the Partnership Agreement and the
Stockholders Agreement (but excluding any such Losses, to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). The Indemnifying Party agrees to reimburse any Indemnified Party
promptly for all such indemnifiable Losses as they are incurred by such
Indemnified Party. The obligations of the Indemnifying Party to each Indemnified
Party hereunder shall be separate obligations and the Indemnifying Party's
liability to any such Indemnified Party hereunder shall not be extinguished
solely because any other Indemnified Party is not entitled to indemnity
hereunder. The obligations of the Indemnifying Party under this Section 1.6
shall survive the payment or prepayment of the Notes, at maturity, upon
acceleration, redemption or otherwise, any transfer of the Securities by you and
the termination of this Agreement.
In case any action shall be brought against any Indemnified
Party with respect to which indemnity may be sought against the Indemnifying
Party hereunder, such Indemnified Party shall promptly notify the Indemnifying
Party in writing and it shall, if it so desires, assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party and payment of all reasonable fees and expenses. The failure to so notify
such Indemnifying Party shall not affect any obligation it may have to any
Indemnified Party under this letter or otherwise except to the extent it is
adversely affected by such failure. Each Indemnified Party shall have the right
to employ separate counsel in such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party unless: (i) the Indemnifying Party has agreed in writing
to pay such expenses; or (ii) the Indemnifying Party has failed to assume the
defense and employ counsel or (iii) the named parties to any such action
(including any impleaded parties) include any Indemnified Party and such
Indemnifying Party, and such Indemnified Party shall have been advised by
outside counsel that there may be one or more legal defenses available to it
which are inconsistent with or additional to those available to the Indemnifying
Party, and that such differing or additional defenses would present such counsel
with a conflict or interest disabling it from pursuing a joint defense of the
Company and such Indemnified Party, provided that, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate
counsel in the circumstances described in clauses (i), (ii) or (iii) above, the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding; provided, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be responsible hereunder for
the fees and expenses of more than one such firm of separate counsel (in
addition to any necessary local counsel) for all Indemnified Parties, which
counsel shall be designated by such Indemnified Parties. The Indemnifying Party
shall not be liable for any settlement of any such action effected without its
written consent (which shall not be unreasonably withheld). The Indemnifying
Party agrees that it will not, without the Indemnified Party's prior consent,
which shall not be unreasonably withheld, settle or compromise any pending or
threatened claim, action or suit in respect of which indemnification or
contribution may be sought hereunder unless the foregoing contains an
unconditional release of such Indemnified Party from all liability and
obligation arising therefrom.
1.7 Contribution
If the indemnification provided for in Section 1.6 is
unavailable to any Indemnified Party in respect of any Losses which, by the
terms of Section 1.6, would otherwise be indemnifiable thereunder, then the
Indemnifying Party, in lieu of indemnifying such Persons, shall have an
obligation to contribute to the amount paid or payable by such Persons as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party, its subsidiaries and/or any other
Person or Persons (other than you and the other Indemnified Parties) and you and
the other Indemnified Parties in connection with the actions which resulted in
such Losses as well as any other relevant equitable considerations. The amount
paid
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or payable by any such Person as a result of the Losses referred to above shall
be deemed to include, subject to the limitations set forth in Section 1.6, any
legal or other fees or expenses reasonably incurred by such Person in connection
with any investigation, lawsuit or legal or administrative action or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 1.7 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
1.8 Registration and Transfer of Securities
(a) The Company shall maintain a register for the Securities
in which it shall provide for the registration and transfer of the Securities.
Transfers of Shares will be subject to the restrictions and conditions set forth
in the Stockholders Agreement. In addition to the limitations prescribed by
Section 1.3(b), and except as otherwise consented to by the Company, transfers
of Notes may be made only as follows: (i) Notes may be transferred to any Fund
Investor or Affiliate of any Fund Investor; (ii) with the approval of the
Company's Board of Directors, Notes may be transferred to the Company or any
Subsidiary of the Company; and (iii) Notes may be transferred by any Holder in a
liquidating distribution of such Holder to its general and limited partners. In
no event will Notes be transferred to any holder who is not an "accredited
investor" as defined in Regulation D under the Securities Act or to any Person
or Persons if as a result of such transfer there would be at any time more than
twenty-five (25) holders of Notes.
(b) Subject to the transferee's compliance with any transfer
restrictions imposed by this Agreement or the Stockholders Agreement, upon
surrender for registration of transfer of any Note or Share, the Company, at its
expense, shall execute and deliver, in the name of the designated transferee or
transferees, one or more new Notes or Share certificates of the same type, and
of a like aggregate principal amount or number of shares.
(c) Notes or Share certificates may be exchanged at the option
of any Holder thereof for Notes or Share certificates of a like aggregate
principal amount or number of shares, but in different denominations. Whenever
any Notes or Share certificates are so surrendered for exchange, the Company, at
its expense, shall execute and deliver the Notes or Share certificates which the
holder making the exchange is entitled to receive.
(d) All Notes or Share certificates issued upon any such
registration of transfer or exchange of such Notes or Share certificates shall
be the legal and valid obligations of the Company, evidencing the same
interests, and entitled to the same benefits, as Notes or Share surrendered upon
such registration of transfer or exchange.
(e) Every Note or Share certificate presented or surrendered
for registration of transfer or exchange shall (if so required by the Company)
be duly endorsed or shall be accompanied by a written instrument of transfer in
form satisfactory to the Company duly executed by the Holder thereof or its
attorney duly authorized in writing.
SECTION 2. CLOSING CONDITIONS
Your obligation to purchase and pay for the Securities to be
delivered to you at the Closing shall be subject to the satisfaction of the
following conditions on or before the Closing Date:
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2.1 Opinion of Counsel
You shall have received a favorable opinion, dated the Closing
Date and addressed to you, from Ropes & Gray, counsel for the Company, in form
and substance satisfactory to you, as to the matters set forth on Annex B to
this Agreement. In rendering such opinion, such counsel may rely as to factual
matters upon certificates or other documents furnished by officers and directors
of the Company (copies of which shall be delivered to you) and by government
officials, and upon such other documents as such counsel deem appropriate as a
basis for its opinions. Such counsel may specify the jurisdictions in which they
are admitted to practice and that they are not admitted to practice in any other
jurisdiction and are not experts in the law of any other jurisdiction.
2.2 Representations and Warranties True; No Event of Default
The representations and warranties of the Company contained in
Section 4 hereof shall be true at and as of the Closing Date, after giving
effect to the transactions contemplated by this Agreement. There shall exist at
and as of the Closing Date (after giving effect to the transactions contemplated
by this Agreement) no Default or Event of Default.
2.3 Compliance with this Agreement
The Company shall have performed and complied with all
agreements, covenants and conditions contained herein and any other document
contemplated hereby which are required to be performed or complied with by the
Company on or before the Closing Date.
2.4 Officers' Certificate
You shall have received a certificate or certificates, dated
the Closing Date and signed by each of the Chief Executive Officer and the Chief
Financial Officer of the Company, certifying that the conditions set forth in
Sections 2.2, 2.3, 2.6, 2.7 and 2.8 hereof are satisfied on and as of such date
and further certifying as to such other matters as you may request in the
exercise of your reasonable discretion.
2.5 Purchase Permitted by Applicable Laws; Legal Investment
Your purchase of and payment for the Securities (a) shall not
be prohibited by any applicable law or governmental regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System), (b) shall not subject you to any penalty or, in your
reasonable judgment, other onerous condition under or pursuant to any applicable
law or governmental regulation, and (c) shall be permitted by the laws and
regulations of the jurisdictions to which you are subject.
2.6 Completion of Other Transactions
Prior to the sale to you of the Securities at the Closing, (a)
the Merger shall be consummated in accordance with its terms; (b) Speaker
Acquisition Corp. shall have issued and sold to Sun Multimedia Partners, L.P.
967,647 shares of its common stock for a net purchase price of $5.6322 per
share, pursuant to the terms of that certain Stock Subscription Agreement, dated
as of October 7, 1997, by and between Speaker Acquisition Corp. and Sun
Multimedia Partners, L.P.; and (c) Sun Multimedia Partners, L.P. shall have
issued or sold to you the Class B Interests reflected on a schedule to the
Partnership Agreement for an aggregate investment of $1,430,000 pursuant to the
terms of the Partnership Agreement.
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Counterparts, conformed as executed, of all other documents
delivered at the Closing, shall be delivered to you.
2.7 Consents and Permits
The Company shall have received all consents, approvals, and
authorizations necessary to permit the issuance and sale of the Securities and
the consummation of the other transactions contemplated hereby.
2.8 Stockholders Agreement
The Stockholders Agreement shall have been entered into by the
parties thereto in the form attached hereto as Annex C, and you shall have
received an original, duly executed by the parties thereto, of the Stockholders
Agreement.
2.9 Financial Condition; Sources and Uses of Funds
You shall have received from James Hillman, Chief Financial
Officer of the Company, (a) certificates of financial condition for the Company
after giving effect to the issuance of the Securities, the application of the
proceeds therefrom, and the other transactions contemplated hereby, which
certificates shall be satisfactory to you and your counsel, and (b) a detailed
statement, dated the Closing Date, of sources and uses of funds from your
investment in the Securities and the other transactions being undertaken by the
Company concurrently herewith.
SECTION 3. HOLDER'S SPECIAL RIGHTS
The provisions of this Section 3 (other than Section 3.3(b))
shall apply, notwithstanding anything to the contrary in this Agreement, with
respect to Transfer Restricted Securities only.
3.1 Delivery Expenses
If a Holder surrenders any Security to the Company for
substitution or replacement, the Company shall pay the cost of delivering to
such Holder's home office or to the office of such Holder's designee from the
Company, as the case may be, insured to such Holder's satisfaction, each
Security issued in substitution or replacement for the surrendered Security.
3.2 Issue Taxes
The Company agrees to pay all transfer, stamp and other
similar taxes in connection with the issuance, sale, delivery or transfer by the
Company to the Purchaser of the Securities and the execution and delivery of
this Agreement and any other agreements and instruments contemplated thereby and
any modification of any of such Securities, Agreement or such other agreements
and instruments and will save you harmless without limitation as to time against
any and all liabilities with respect to all such taxes. The obligations of the
Company under this Section 3.2 shall survive the payment or prepayment of the
Notes, the cancellation of the Shares and the termination of this Agreement.
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3.3 Direct Payment
(a) The Company will pay or cause to be paid all amounts
payable with respect to any Note (without any presentment of such Note and
without any notation of such payment being made thereon) by crediting (before
1:00 p.m., New York time), by federal funds bank wire transfer to each Holder's
account in any bank in the United States as may be designated and specified in
writing by such Holder at least two Business Days prior thereto. The Purchaser's
initial bank account for this purpose is on the signature page hereof.
(b) Notwithstanding anything to the contrary contained in the
Notes, if any principal amount payable with respect to a Note is payable on a
Legal Holiday, then the Company shall pay such amount on the next succeeding
Business Day, and interest shall accrue on such amount until the date on which
such amount is paid and payment of such accrued interest shall be made
concurrently with the payment of such amount, provided that the Company may
elect to pay in full (but not in part) any such amount on the last Business Day
prior to the date such payment otherwise would be due, and no such additional
interest shall accrue on such amount. Notwithstanding anything to the contrary
contained in the Notes, if any interest payable with respect to a Note is
payable on a Legal Holiday, then the Company shall pay such interest on the next
succeeding Business Day, and such extension of time shall be included in the
computation of the interest payment, provided that the Company may elect to pay
in full (but not in part) any such interest on the last Business Day prior to
the date such payment otherwise would be due, and such diminution in time shall
be included in the computation of the interest payment.
3.4 Lost, Destroyed, Stolen, etc. Securities
Notwithstanding any provision to the contrary, if any Security
of which the Purchaser or any other institutional Holder (or nominee thereof)
which is a transferee is the owner is mutilated, destroyed, lost or stolen, then
the affidavit of the Purchaser's or such Holder's treasurer or assistant
treasurer (or other authorized officer), briefly setting forth the circumstances
with respect to such mutilation, destruction, loss or theft, shall be accepted
as satisfactory evidence thereof, and no indemnity, security or payment of
charges or expenses shall be required as a condition to the execution and
delivery by the Company or the transfer agent, as the case may be, with respect
to such Security, of new Securities for a like aggregate principal amount or
number of shares, as applicable, in substitution therefor, other than the
Purchaser's or such Holder's unsecured written agreement reasonably satisfactory
to indemnify the Company or the transfer agent, as the case may be.
SECTION 4. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants that, as of the
date hereof after giving effect to the Merger:
4.1 Organization, Standing and Qualification
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; has all requisite power and authority to own or lease and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted; and is duly qualified or licensed to do business as a foreign
corporation in good standing in all jurisdictions in which it owns or leases
property or in which the conduct of its business requires it so to qualify or be
licensed, in each case, except where the absence of such power or authority or
the failure to be so qualified or licensed would not have a Material Adverse
Effect. The Company has heretofore delivered to your counsel complete and
correct copies of its Charter Documents as presently in effect.
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(b) The Company has all requisite power and authority to enter
into and perform all of its obligations under this Agreement and the
Stockholders Agreement, to issue and perform all of its obligations under the
Securities and to carry out the transactions contemplated hereby and thereby.
(c) The Company has identified on Schedule 4.1(c) (i) the name
and jurisdiction of incorporation or organization of each of its Subsidiaries
and (ii) the percentage of the issued and the outstanding capital stock and
other equity securities (including rights, warrants and options to acquire, and
all securities convertible into or exchangeable for, such capital stock) of each
such Subsidiary owned directly or indirectly by the Company. All such shares of
capital stock and other equity securities have been duly authorized and validly
issued and are fully paid and nonassessable and are owned by the Company and its
Subsidiaries beneficially and of record, free and clear of any Lien, except for
Permitted Liens and such other Liens as set forth on Schedule 4.1(c).
4.2 Capitalization
The authorized capital stock of the Company consists solely of
2,500,000 shares of Common Stock, $.01 par value, of which 1,258,236 shares are
issued and outstanding (after giving effect to the issuance of the Shares), and
3,000 shares of preferred stock, $.01 par value, of which no shares are issued
and outstanding.
Except as otherwise set forth above, all such outstanding
shares (including the Shares) have been duly authorized and validly issued and
are fully paid and nonassessable.
Except as set forth in Schedule 4.2 hereto or as provided in
the Stockholders Agreement, (a) there are no outstanding subscriptions,
warrants, options, calls or commitments of any character relating to or
entitling any Person to purchase or otherwise acquire any Capital Stock of the
Company; (b) there are no obligations or securities convertible into or
exchangeable or exercisable for shares of Capital Stock of the Company or any
commitments of any character relating to or entitling any Person to purchase or
otherwise acquire any such obligations or securities; and (c) there are no
preemptive or similar rights to subscribe for or to purchase any Capital Stock
of the Company.
Except for the exceptions noted in the immediately preceding
paragraph, Schedule 4.2 identifies (i) all holders of Capital Stock of the
Company as of the date hereof after giving effect to the Merger, and all holders
of outstanding rights, warrants and options to acquire Capital Stock of the
Company as of the date hereof after giving effect to the Merger, (ii) the title
of the class and series, and amount, of securities held by each of such holders
and (iii) the number of shares of Common Stock of the Company into which the
securities held by each of such holders may be exercised or converted. Schedule
4.2 additionally sets forth the pro forma fully diluted share capitalization of
the Company, subject to the foregoing exceptions.
The Company has not entered into any agreement to register its
equity or debt securities under the Securities Act, except for the Stockholders
Agreement or as identified on Schedule 4.2 hereto.
4.3 Authorization of Agreement and Other Documents
(a) The Recapitalization has been consummated substantially in
accordance with the terms of the Recapitalization Agreement and in accordance
with applicable laws.
(b) The Company has taken all actions necessary to authorize
it to enter into and perform all of its obligations under this Agreement and the
Stockholders Agreement, to issue and perform all of its
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obligations under the Securities and to consummate the transactions contemplated
hereby and thereby. This Agreement, the Notes and the Stockholders Agreement are
legal, valid and binding obligations of the Company, enforceable against it in
accordance with their respective terms, except for (a) the effect thereon of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally and (b) limitations
imposed by federal or state law or equitable principles upon the specific
enforceability of any of the remedies, covenants or other provisions thereof and
upon the availability of injunctive relief or other equitable remedies.
4.4 No Violation
Except as set forth in Schedule 4.4, neither the execution or
delivery of this Agreement or the Stockholders Agreement, nor the issuance, sale
or delivery of the Securities, nor the performance by the Company of its
obligations under this Agreement, the Notes or the Stockholders Agreement nor
the consummation of the transactions contemplated hereby or thereby, will:
(a) violate any provision of the Charter Documents of the
Company;
(b) violate any statute, law, rule or regulation or any
judgment, decree, order, regulation or rule of any court or
governmental authority to which the Company or any of its properties
may be subject;
(c) permit or cause the acceleration of the maturity of any
debt or obligation of the Company the acceleration of which would
result in a Material Adverse Effect; or
(d) violate, or be in conflict with, or constitute a default
under, or permit the termination of, or require the consent of any
Person under, or result in the creation of any Lien upon any property
of the Company under, any mortgage, indenture, loan agreement, note,
debenture or other agreement for borrowed money or any other material
agreement to which the Company is a party or by which the Company (or
its properties) may be bound, other than such violations, conflicts,
defaults, terminations and Liens, or such failures to obtain consents,
which could not reasonably be expected to result in a Material Adverse
Effect.
The Company is not in default (without giving effect to any
grace or cure period or notice requirement) under any agreement for borrowed
money or under any agreement pursuant to which any of its securities were sold,
except for such defaults as could not reasonably be expected to result in a
Material Adverse Effect.
4.5 Use of Proceeds
The net proceeds from the sale of the Securities hereunder
will be used solely for the refinancing of existing debt, for the payment of the
cash consideration provided for in the Recapitalization Agreement and for
general corporate purposes, including working capital and the payment of fees
and expenses incurred in connection with the transactions contemplated by this
Agreement and the Recapitalization Agreement. Immediately upon Closing and the
effectiveness of the Merger, the Credit Agreement shall be in full force and
effect, under which the Company will have (i) up to $13.0 million in available
revolving credit borrowings, subject to customary conditions precedent as
specified in such credit facility, of which up to $1.5 million will be drawn as
of the Closing Date, and (ii) $27.0 million in term loans, all of which will be
outstanding as of the Closing Date.
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4.6 No Default
No event has occurred, the occurrence of which (and no event
has failed to occur, the non-occurrence of which) constitutes a Default or Event
of Default.
4.7 Outstanding Indebtedness; Senior Debt; Liens
The capitalization table on Schedule 4.7 sets forth and
identifies in reasonable detail all outstanding short-term and long-term
Indebtedness of the Company (other than Indebtedness that in the aggregate does
not exceed $100,000), after giving effect to the Merger and the transactions
contemplated by Sections 2.6 and 4.5 hereof (excluding the Notes). Except for
Indebtedness under the Credit Agreement, Schedule 4.7 includes the names of the
holders, principal amounts, required interest payments, maturity dates, any
security therefor and any other entity which directly or indirectly guaranteed
all such Indebtedness.
There are no Liens outstanding on the date hereof on any
material property or asset of the Company, other than Permitted Liens.
4.8 Financial Statements
Attached hereto as Annex D are (i) the audited consolidated
balance sheet and consolidated statement of income and cash flows of the Company
as of and for the fiscal year ended March 31, 1997, (ii) the unaudited
consolidated balance sheet and consolidated statement of income of the Company
as of and for the five months ended August 31, 1997, and (iii) the pro forma
consolidated balance sheet of the Company and its Subsidiaries as of August 31,
1997.
Except as otherwise stated in the notes thereto, and for such
matters as would be reflected in notes or for normal year-end audit adjustments
for the statements for the period ended August 31, 1997, such balance sheets and
statements of income and cash flows referred to in clauses (i) and (ii) (which
reflect all adjustments, consisting only of normally recurring accruals which,
in the opinion of the Company, are necessary for fair presentation) have been
prepared in conformity with GAAP (or, for the statements for the five-month
period ended August 31, 1997, substantially in conformity with GAAP) applied on
a consistent basis through all the periods involved and fairly present the
consolidated financial position and results of operations of the Company as of
the dates and for the periods indicated.
Except for liabilities incurred in connection with the
transactions contemplated hereby, and as reflected in such balance sheets and
any notes thereto (subject to the foregoing qualifications), the Company has no
liabilities, absolute or contingent, other than current ordinary course
liabilities incurred in connection with the conduct, consistent with past
practices, of the business of the Company, and other than such liabilities or
obligations which, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect.
4.9 No Material Adverse Change
Except as set forth on Schedule 4.9, since August 31, 1997,
the Company has not suffered any material adverse change in its properties,
business, operations, earnings, assets, liabilities or condition (financial or
otherwise), except for liabilities incurred in connection with the transactions
contemplated hereby.
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4.10 Full Disclosure
All factual information (taken as a whole) heretofore or
contemporaneously furnished to the Purchaser in connection with the negotiation
and sale of the Securities by or on behalf of the Company (including information
contained in Schedules and Annexes to this Agreement) is true and correct in all
material respects as of the date when made and is not incomplete by failing to
state material facts necessary to make such information (taken as a whole) not
misleading in light of the circumstances under which such information was
provided.
4.11 Litigation
Except as set forth on Schedule 4.11, there is no action,
proceeding or investigation pending, or to the knowledge of the management of
the Company after due inquiry, threatened, against or affecting the Company in
any court or before any governmental authority or arbitration board or tribunal,
foreign or domestic, except for such actions which, if adversely determined,
singly and in the aggregate, would not have a Material Adverse Effect, and there
is no such action seeking to restrain, enjoin, prevent the consummation of or
otherwise challenge, this Agreement, the Recapitalization Agreement, the
Stockholders Agreement or the issuance of the Securities or the other
transactions contemplated hereby or thereby.
The Company is not subject to any judgment, order, decree,
rule or regulation of any court, governmental authority or arbitration board or
tribunal which has or which can reasonably be expected to have a Material
Adverse Effect.
4.12 Title to Properties
Except for such defects of title or Liens as could not
reasonably be expected to have a Material Adverse Effect and except for
Permitted Liens, the Company has good and marketable title to, or a validly
subsisting leasehold interest in, all material properties (tangible or
intangible) it purports to own or lease, free and clear of all Liens.
4.13 Taxes
Except as could not reasonably be expected to have a Material
Adverse Effect, all tax returns required to be filed by the Company in any
jurisdiction (including foreign jurisdictions) have been so filed, and all
taxes, assessments, fees and other charges due or claimed to be due from the
Company which are due and payable have been paid, other than those being
contested in good faith or those currently payable without penalty or interest.
The Company knows of no actual or proposed material additional tax assessments
for any fiscal period against the Company or of any basis therefor. Except as
stated in Schedule 4.13, none of the Company's tax returns are under audit, and
no waivers of the statute of limitations or extensions of time with respect to
any tax returns have been granted by the Company. The Company is not a United
States real property holding corporation as defined in Section 897(c)(2) of the
Internal Revenue Code.
4.14 ERISA
(a) The execution and delivery of this Agreement and the sale
of the Securities to be purchased by you will not involve any material
prohibited transaction within the meaning of ERISA or Section 4975 of the Code.
The representation made in the preceding sentence is made in reliance upon and
subject to the accuracy of your representation in Section 1.3 hereof as to the
source of the funds to be used by you to purchase said Securities.
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(b) Schedule 4.14 sets forth each Plan; each Plan (and each
related trust, insurance contract or fund) is in substantial compliance with its
terms and with all applicable laws, including without limitation ERISA and the
Code; each Plan (and related trust, if any) which is intended to be qualified
under Section 401(a) of the Code has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of
Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no
Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA)
is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no
Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an
accumulated funding deficiency, within the meaning of such sections of the Code
or ERISA, or has applied for or received a waiver of an accumulated funding
deficiency or an extension of any amortization period, within the meaning of
Section 412 of the Code or Section 303 or 304 of ERISA; all contributions
required to be made with respect to a Plan have been timely made; neither the
Company nor any Subsidiary of the Company nor any ERISA Affiliate has incurred
any material liability (including any material indirect, contingent or secondary
liability) to or on account of a Plan pursuant to Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29),
4971 or 4975 of the Code or expects to incur any such liability under any of the
foregoing sections with respect to any Plan; no proceedings have been instituted
to terminate, or to appoint a trustee to administer, any Plan which is subject
to Title IV of ERISA; no condition exists which presents a material risk to the
Company or any Subsidiary of the Company or any ERISA Affiliate of incurring a
liability to or on account of a Plan pursuant to the foregoing provisions of
ERISA and the Code; no action, suit, proceeding, hearing, audit or investigation
with respect to the administration, operation or the investment of assets of any
Plan (other than routine claims for benefits) is pending, expected or
threatened; using actuarial assumptions and computation methods consistent with
Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the
Company and its Subsidiaries and its ERISA Affiliates to all Plans which are
multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of
a complete withdrawal therefrom, as of the close of the most recent fiscal year
of each such Plan ended prior to the date hereof would not exceed $500,000; each
group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2)
of the Code) which covers or has covered employees or former employees of the
Company any subsidiary of the Company or any ERISA Affiliate has at all times
been operated in compliance with the provisions of Part 6 of subtitle B of Title
I of ERISA and Section 4980B of the Code; no lien imposed under the Code or
ERISA on the assets of the Company or any Subsidiary of the Company or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and the Company
and its Subsidiaries may cease contributions to or terminate any employee
benefit plan maintained by any of them without incurring any material liability.
4.15 Compliance with Laws
The Company is not in violation of any statutes, laws,
ordinances, or governmental rules or regulations or any judgment, order or
decree (federal, state, local or foreign) to which it is subject or has failed
to obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership or operation of its properties or the conduct of its
businesses except, in each case, where such violation or failure could not be
reasonably expected to have a Material Adverse Effect.
4.16 No Violation of Regulations of Board of Governors of Federal Reserve
System
None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of the
Securities) will violate or result in a violation of Section 7 of the Exchange
Act or any regulation issued pursuant thereto, including, without limitation,
Regulations G, T, U and X of the Board of Governors of the Federal Reserve
System.
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4.17 Private Offering
Assuming the accuracy of your representations contained in
Section 1.3(a) hereof, the sale of the Securities hereunder is exempt from the
registration and prospectus delivery requirements of the Securities Act. In
offering and selling the Securities, the Company has used no form of general
solicitation or general advertising that would cause such offer or sale to be
deemed a public offering under Section 4(2) of the Securities Act.
You are the sole purchaser of the Securities. Neither the
Company nor anyone acting on its behalf, will offer or sell the Securities, or
any portion of them, if such offer or sale might bring the issuance and sale of
the Securities to you hereunder within the provisions of Section 5 of the
Securities Act, or offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with, anyone if the sale of the Securities and
any such securities could be integrated as a single offering for the purposes of
the Securities Act.
4.18 Governmental Regulations
The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and is not a "holding company" or a
"subsidiary" or "affiliate" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended. The Company is not
subject to regulation under any federal or state statute or regulation limiting
its ability to incur indebtedness for borrowed money (other than Regulation X of
the Board of Governors of the Federal Reserve System).
4.19 SEC Reports
The Company is not currently required to file any reports with
the SEC under Section 13 or 15(d) of the Exchange Act.
4.20 Brokers
The Company has not dealt with any broker, finder, commission
agent or other Person in connection with the sale of the Securities and the
transactions contemplated by this Agreement (other than the Purchaser) and the
Company is not under any obligation to pay any broker's or finder's fee or
commission or similar payment in connection with such transactions (other than
the closing fee payable by the Company to the Purchaser or its designees as set
forth in Section 1.2). The Company hereby agrees to indemnify and hold the
Holders harmless from and against any and all actions, suits, claims, costs,
expenses, losses, liabilities and/or obligations in connection with or relating
to any broker's or finder's fees or commission or similar payment in connection
with such transactions, except with respect to such fees or commissions incurred
by the Purchaser for its account, so long as the Company receives notice of any
such action, suit, claim, etc., reasonably promptly after the Holders become
aware thereof; provided that the failure to give such notice as provided in this
sentence shall not relieve the Company of its obligations under this sentence
except to the extent, and only to the extent, that the Company is actually
prejudiced by such failure to give notice.
4.21 Environmental Compliance
(a) The Company each of its Subsidiaries and each Predecessor
Corporation has complied with all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws. There are no
pending or, to the best knowledge of the Company, past or threatened
Environmental Claims against the Company or any of its Subsidiaries or any Real
Property owned or operated by the
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Company or any of its Subsidiaries. There are no facts, circumstances,
conditions or occurrences on any Real Property owned or operated by the Company
or any of its Subsidiaries or, to the best knowledge of the Company, on any
property adjoining or in the vicinity of any such Real Property that would
reasonably be expected (i) to form the basis of an Environmental Claim against
the Company or any of its Subsidiaries or any such Real Property or (ii) to
cause any such Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability of such Real Property by Company or any of its
Subsidiaries under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated,
used, treated or stored on, or transported to or from, any Real Property owned
or operated by the Company or any of its Subsidiaries or any Predecessor
Corporation where such generation, use, treatment or storage has violated or
would reasonably be expected to violate any Environmental Law. Hazardous
Materials have not at any time been Released on or from any Real Property owned
or operated by the Company or any of its Subsidiaries or any Predecessor
Corporation. There are not now any underground storage tanks located on any Real
Property owned or operated by the Company or any of its Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section
4.21 the representations made in this Section 4.21 shall only be untrue if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, could reasonably be expected to have a Material Adverse
Effect.
4.22 Intellectual Property
Except as disclosed on Schedule 4.22 or as could not
reasonably be expected to have a Material Adverse Effect, the Company owns, or
is licensed under, and has the rights to use, all patents, inventions,
trademarks and trade names (collectively, "Intellectual Property") used in, or
necessary for the conduct of, its business as currently conducted, and the
consummation of the transactions contemplated by this Agreement or the
Recapitalization Agreement will not alter or impair any such rights.
4.23 Solvency
After giving effect to the issuance of the Securities, the
consummation of the Merger and the execution, delivery and performance of this
Agreement and any instrument governing Indebtedness of the Company incurred as
of the Closing Date, the Company is not (x) insolvent or (y) left with
unreasonably small capital with which to engage in its anticipated business, and
the Company has not, as of the Closing Date, incurred debts beyond its ability
to pay such debts as they mature.
4.24 Labor Relations
The Company is not engaged in any unfair labor practice that
could reasonably be expected to have a Material Adverse Effect. Except as could
not reasonably be expected to have a Material Adverse Effect, there is (a) no
unfair labor practice complaint pending or to the best knowledge of the Company,
threatened against the Company before the National Labor Relations Board and no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is so pending or known to be threatened, (b) no strike,
labor dispute, slowdown or stoppage pending or to the best knowledge of the
Company, threatened, against the Company, and (c) no union representation
question existing with respect to the employees of the Company and no union
organizing activities are taking place.
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4.25 Material Contracts
The Purchaser has heretofore been provided with all material
contracts and licenses to which the Company is a party or is bound, and all such
contracts and licenses the breach or termination of which would have a Material
Adverse Effect (collectively, the "Material Contracts"). Except as set forth on
Schedule 4.25 or as could not reasonably be expected to have a Material Adverse
Effect, all such Material Contracts are in full force and effect.
4.26 Survival of Representations and Warranties
All statements contained in any certificate delivered to you
by or on behalf of the Company pursuant to this Agreement shall be deemed to
constitute representations and warranties under this Agreement with the same
force and effect as the representations and warranties expressly set forth
herein. All of the Company's representations and warranties thereunder and
hereunder shall survive the execution and delivery of the same, any
investigation by you and the issuance of the Securities.
SECTION 5. COVENANTS
So long as any of the Notes remain unpaid and outstanding, the
Company covenants to the Holders of outstanding Notes as follows:
5.1 Payment of Notes; Satisfaction of Obligations
The Company shall pay the principal of and interest on the
Notes on the dates and in the manner provided in the Notes.
If there has occurred and is continuing any Event of Default
under Sections 6.1(1) or 6.1(2) hereof, then to the extent lawful, the Company
shall pay interest (including interest accruing after the commencement of any
proceeding under any Bankruptcy Law) on all unpaid amounts outstanding under the
Notes (including overdue installments of principal or interest) at the Default
Rate.
5.2 Delivery of Financial Statements and Reports; SEC Reports
(a) The Company will deliver to each Holder of Securities
the following:
(1) within 30 days after the last day of each fiscal
month of the Company (or within 45 days in the case of fiscal
quarter-end or within 90 days in the case of fiscal year end), a
consolidated balance sheet of the Company and its Subsidiaries as of
the end of such month and related consolidated statements of income and
retained earnings and of cash flow of the Company and its Subsidiaries
for such month and for the portion of the fiscal year through the end
of such month, all in reasonable detail and prepared in accordance with
GAAP consistently applied (subject to normal year-end audit adjustments
and the absence of footnotes), and accompanied by a comparison of
current month results and year-to-date results as reported in such
consolidated statements to results for the corresponding periods of the
prior fiscal year;
(2) within 90 days after the close of each fiscal
year of the Company, an audited consolidated balance sheet of the
Company and its Subsidiaries as of the close of such fiscal year, and
related audited consolidated statements of income and retained earnings
and of cash flow of the Company and its Subsidiaries for such fiscal
year, reported on (without any material qualification arising from the
scope of the audit) by Price Waterhouse LLP or another nationally
recognized firm
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of independent certified public accountants and prepared in accordance
with GAAP consistently applied;
(3) within 60 days after the first day of each fiscal
year beginning on or after April 1, 1998, reasonably detailed quarterly
budget plans for the Company for such fiscal year;
(4) as soon as available to the Company, copies of
any financial statements and other reports prepared with respect to
nonconsolidated subsidiaries or joint ventures in which the Company has
made any Investment or otherwise has any ownership interest, in the
form received or prepared by the Company;
(5) copies of all auditors' reports delivered to
holders of Senior Debt under Section 7.01(g) of the Credit Agreement or
any successor provision; and
(6) copies of any compliance certificates or notice
of default or litigation delivered to holders of Senior Debt under
Sections 7.01(e) or (f) of the Credit Agreement or any successor
provision.
(b) Each financial statement delivered pursuant to paragraph
(a) (1) and (2) of this Section 5.2 shall be in a form reasonably acceptable to
the Purchaser (or, if the Purchaser is no longer a holder of Transfer Restricted
Securities, a Holder Representative). Financial statements that are either in
the form delivered under Section 7.01 of the Credit Agreement or in a form
substantially consistent with or providing the information included in the
financial statements delivered to the Purchaser as of the Closing Date shall be
deemed to comply with the foregoing requirements.
(c) The requirements of paragraphs (a) and (b) of this Section
5.2 shall not apply to the Company in the event that the Company is required to
deliver and does deliver reports to the Holders pursuant to Section 5.2(e).
(d) Nothing in this Section shall be deemed to require the
Company to consolidate the results of operations of any person in its financial
statements, if such consolidation is not otherwise required pursuant to GAAP.
(e) The Company shall deliver to the Holders within 15 days
after it files them with the SEC copies of any annual reports and any
information, documents and other reports which the Company becomes required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
5.3 Compliance Certificate
(a) The Company shall deliver to the Holders, within 45 days
after the end of each fiscal quarter and within 90 days after the end of each
fiscal year of the Company an Officers' Certificate stating that to such
officer's knowledge no Default or Event of Default has occurred (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge). The Officers'
Certificate shall set forth all financial calculations for such fiscal quarter
or fiscal year necessary to demonstrate the Company's compliance with Sections
5.11 hereof.
(b) The Company will deliver to the Holders, forthwith upon
becoming aware of any Default or Event of Default, a notice specifying in
reasonable detail such Default or Event of Default and the nature of any
remedial or corrective action the Company proposes to take with respect thereto.
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5.4 Stay, Extension and Usury Laws
The Company covenants and agrees (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of its obligations under this Agreement
or the Securities; and the Company (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Holders, but will suffer and permit the
execution of every such power as though no such law has been enacted.
5.5 Limitation on Restricted Payments
The Company shall not, directly or indirectly:
(a) declare or pay any dividend on, or make any distribution
to the holders (as such) in respect of, any shares of its Capital Stock (other
than pro-rata dividends payable solely in shares of Capital Stock or other
Equity Interests);
(b) repurchase, redeem or otherwise retire for value any
Equity Interests of the Company or any Subsidiary (other than any such Equity
Interest of a directly or indirectly wholly-owned Subsidiary of the Company and,
with respect to any non-wholly owned Subsidiary, other than on a pro-rata basis
from all holders of such Equity Interests) or other Affiliate of the Company;
(c) permit any Subsidiary to declare or pay any dividend on,
or make any distribution to the holders (as such) in respect of, any shares of
its Capital Stock, except on a pro-rata basis to all of its stockholders;
(d) permit any Subsidiary to repurchase, redeem or otherwise
retire for value any Equity Interests of it, the Company or any Affiliate of
either of them (other than any such Equity Interests owned by the Company or any
other directly or indirectly wholly owned Subsidiary of the Company and, with
respect to any non-wholly owned Subsidiary, other than the repurchase,
redemption or retirement of Equity Interests of such Subsidiary on a pro-rata
basis from all holders of such Equity Interests); or
(e) make, or permit any Subsidiary to make, any Investment
(other than a Permitted Investment) or Restricted Debt Prepayment;
provided that, notwithstanding anything to the contrary in this Section 5.5, the
Company may redeem or purchase shares of Common Stock or options to purchase
Common Stock held by former employees in connection with or following their
termination of employment.
5.6 Corporate Existence
The Company will do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence and the
corporate existence of each of its Subsidiaries in accordance with the
respective organizational documents of each of them and the corporate rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or corporate existence, if the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the
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business of the Company and its Subsidiaries taken as a whole. The Company shall
give prompt written notice to the Holder Representative of any dissolution,
winding-up, liquidation or reorganization of the Company.
5.7 Same Business
The Company and its Subsidiaries will not engage in businesses
which are not of the same general type as conducted by the Company and its
Subsidiaries on the date hereof or which do not have a substantial connection
thereto.
5.8 Taxes
The Company shall, and shall cause its Subsidiaries to, pay
prior to delinquency all material taxes, assessments and governmental levies
except as contested in good faith and by appropriate proceedings.
5.9 Investment Company Act; United States Real Property Holding Corporation
Neither the Company nor any of its Subsidiaries shall become
an investment company subject to registration under the Investment Company Act
of 1940, as amended. Neither the Company nor any of its Subsidiaries shall
become a United States real property holding corporation as defined in Section
897(c)(2) of the Internal Revenue Code.
5.10 No Merger, etc.
Neither the Company nor any of its Subsidiaries shall
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of their respective assets to, any Person; provided,
however, that (a) any Subsidiary of the Company may consolidate or merge with or
into the Company or any of its other wholly owned Subsidiaries if such
consolidation or merger is otherwise permissible under Section 5.6, (b) the
Company or any Subsidiary may enter into any merger in which it is the surviving
corporation and in connection with any Permitted Investment so long as the
Company or such Subsidiary is the surviving entity of such merger and (c) the
Company may engage in any merger which does not effect a Change of Control. This
Section 5.10 shall not be construed so as to prohibit the Merger.
5.11 Limitation on Additional Indebtedness
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to (collectively,
"incur") any Indebtedness other than: (a) the Indebtedness represented by the
Notes; (b) Senior Debt; (c) Indebtedness outstanding on the Closing Date and
listed on Schedule 5.11, including any subsequent extension, renewal or
refinancing thereof which does not increase the principal amount or shorten the
final maturity date thereof; (d) Capitalized Lease Obligations and purchase
money Indebtedness secured by Liens on assets the acquisition or development of
which was financed with the proceeds of such Indebtedness, or extensions or
refinancings of such purchase money Indebtedness, so long as the aggregate
principal amount of the Indebtedness does not exceed 100% (nor upon initial
incurrence is less than 80%) of the lesser of the fair market value or the
purchase price or cost of development of the property subject to such Lien; (e)
Indebtedness consisting of intercompany loans between Subsidiaries of the
Company or between the Company and a Subsidiary of the Company; (f) Indebtedness
of a Subsidiary acquired in an acquisition authorized under Section 5.21 (or
assumed at the time of such an acquisition of assets securing such
Indebtedness), provided that (i) such Indebtedness was not incurred in
connection with, or in anticipation or contemplation of, such acquisition and
(ii) such Indebtedness is not Indebtedness for borrowed money (it being
understood that, for purposes of this clause (f), Capitalized Lease Obligations
and purchase money Indebtedness shall not constitute
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debt for borrowed money); (g) Indebtedness of Foreign Subsidiaries not otherwise
permitted hereunder; provided that the aggregate amount of Indebtedness
permitted under this clause (g) shall not exceed $2,000,000 at any one time
outstanding; (h) additional Indebtedness of the Company and its Domestic
Subsidiaries not otherwise permitted hereunder not exceeding $3,000,000 in
aggregate principal amount at any one time outstanding; and (i) Indebtedness
permitted under Sections 8.04(c), (e), (h) and (j) of the Credit Agreement.
5.12 Limitation on Transactions With Affiliates
Neither the Company nor any of its Subsidiaries shall sell,
lease, transfer or otherwise dispose of any of its properties or assets to or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, an
Affiliate (an "Affiliate Transaction"), except on terms that are no less
favorable to the Company or the relevant Subsidiary than those that could have
been obtained in a comparable transaction by the Company or such Subsidiary from
an unrelated person; provided, however, that the Company and its wholly-owned
Subsidiaries may engage in any sale, lease, transfer, or other disposition of
property among themselves and may enter into any contract, agreement,
understanding, loan, advance or guarantee among themselves; and provided further
that the following in any event shall be permitted: (i) the transactions
contemplated under the Recapitalization Agreement; (ii) so long as no Default or
Event of Default exists, the payment, on a quarterly basis, of management fees
to Bain Capital and/or the Bain Affiliates and Sun Capital and/or the Sun
Affiliates in an aggregate amount (for all such Persons taken together) not to
exceed, in any fiscal quarter of the Company, the sum of (x) $125,000 and (y)
any amounts permitted to be paid in any prior fiscal quarter under clause (x)
which were not previously paid (plus interest thereon at a rate not to exceed
12% per annum); (iii) the reimbursement of Bain Capital and/or the Bain
Affiliates and Sun Capital and/or the Sun Affiliates for their reasonable
out-of-pocket expenses incurred by them in connection with performing management
services to the Company and its Subsidiaries under the Management Agreement by
and between the Company and Sun Multimedia Advisors, Inc.; and (iv) the payment
of one time fees to Bain Capital and/or the Bain Affiliates and Sun Capital
and/or the Sun Affiliates in connection with each acquisition of a company or
line of business by the Company or its Subsidiaries, provided that such fees are
permitted by the Partnership Agreement.
5.13 Restrictions on Liens
The Company will not itself, and will not permit any
Subsidiary, to create or suffer to exist any Liens upon any assets of the
Company or any Subsidiary or any shares of capital stock of any Subsidiary, in
either case now owned or hereafter acquired, provided, however, that this
Section 5.13 shall not prohibit the creation or continuing existence of (i) any
Permitted Liens or (ii) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 6.1(6).
5.14 Sale of Assets
(a) Neither the Company nor any of its Subsidiaries shall
sell, lease, convey or otherwise dispose (whether in one transaction or a series
of transactions) of any assets (including capital stock of any Subsidiaries),
other than sales of inventory, product displays or other assets in the ordinary
course of business (an "Asset Sale"), if the aggregate Net Proceeds of all Asset
Sales during any fiscal year exceed $10,000,000; provided that the foregoing
shall not preclude the Company or any Subsidiary from engaging in a sale of all
or substantially all of its assets in a transaction that complies with Section
5.10.
(b) Without the consent of the Holders of at least a majority
in principal amount of the Notes, (i) the consideration received in any Asset
Sale may not be less than the fair market value of such asset (as determined in
good faith by senior management of the Company) and (ii) except for assets with
a fair market value of not greater than $1,000,000 in the aggregate that may be
sold during any fiscal year, the
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consideration received for such assets shall be applied, within 360 days of the
Asset Sale, to the purchase of assets to be used in the business of the Company
and/or its Subsidiaries or to the repayment of Senior Debt.
(c) At least 80% of the consideration for each such Asset Sale
received by the Company or such Subsidiary shall be in the form of cash;
provided, however, that the amount of (i) any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet or in the notes
thereto) of the Company or any Subsidiary that are assumed by the transferee of
any such assets or stock sold, leased, conveyed or disposed of and (ii) any
notes or other obligations received by the Company or any Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash, shall be deemed to be cash for purposes of this Section 5.14(c).
(d) Notwithstanding the foregoing limitations, the Company and
its Subsidiaries may (i) sell or discount, in each case without recourse,
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof, (ii) sell for cash or
exchange specific items of equipment, so long as the purpose of each such sale
or exchange is to acquire (and results within 360 days of such sale or exchange
in the acquisition of) replacement items of equipment which are the functional
equivalent of the item of equipment so sold or exchanged, (iii) sublease as
lessor real or personal property located at a place of business where it has
ceased to continue its operations until the expiration of the principal lease
with respect to such property; (iv) in the ordinary course of business, license
patents, trademarks, copyrights and know-how to third Persons and to one
another; and (v) lease as lessor equipment, machinery or real property to one or
more wholly-owned domestic Subsidiaries so long as such lease is for fair market
value (determined in good faith by the Company's board of directors or senior
management).
5.15 Ownership of Subsidiaries
Except as permitted by Sections 5.6, 5.10 and 5.14 above, the
Company shall maintain (along with one or more Subsidiaries in the case of an
indirect Subsidiary) good and valid title to those Equity Interests of each of
its Subsidiaries owned by it, free and clear of any Lien other than Permitted
Liens.
5.16 Insurance
The Company shall maintain liability, casualty and other
insurance with a reputable insurer or insurers in such amounts and against such
risks as is carried by responsible companies engaged in similar businesses and
owning similar assets.
5.17 Issuances of Capital Stock
Neither the Company nor any of its Subsidiaries shall issue
any shares of Capital Stock, or rights, warrants, options or other securities
exercisable or exchangeable for or convertible into Capital Stock, at any time
after the date hereof, to employees, officers or directors of the Company or its
Subsidiaries, unless (i) the purchase or exercise price per share is no less
than fair market value as of the grant date (as determined in good faith by the
Board of Directors of the Company) or (ii) the Purchaser has preemptive rights
with respect to such issuance pursuant to the terms of Section 8.1 of the
Stockholders Agreement.
5.18 ERISA Notices
Promptly, but in any event within 15 days, the Company shall
deliver to the Purchaser (or, if the Purchaser is no longer a Holder, a Holder
Representative), any notices, records or documents required to be provided to
the Banks (as defined in the Credit Agreement) under Section 7.08 of the Credit
Agreement, as in effect on the date hereof.
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5.19 Inconsistent Agreements
The Company shall not, and shall not permit its Subsidiaries
to supplement, amend or otherwise modify the terms of its Articles or
Certificate of Incorporation or Bylaws, if the effect thereof would be
materially adverse to the Holders.
5.20 Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
on its Capital Stock or any other interest or participation in, or measured by,
its profits owned by, or pay any Indebtedness owed to, the Company or a
Subsidiary of the Company, (b) make loans or advances to the Company or a
Subsidiary of the Company or (c) transfer any of its properties or assets to the
Company or to any Subsidiary of the Company, except for such encumbrances or
restrictions existing under or by reasons of (i) any restrictions existing under
or contemplated by the Credit Agreement or by any other agreements in effect on
the date hereof and identified on Schedule 5.20; (ii) any restrictions, with
respect to a Subsidiary of the Company that is not a Subsidiary of the Company
on the date hereof, in existence at the time such Person becomes a Subsidiary of
the Company; or (iii) any restrictions existing under any agreement that
refinances or replaces the agreements containing the restrictions in clause (i);
provided that the terms and conditions of any such restrictions are no less
favorable to the Holders than those under or pursuant to the agreement
evidencing the Indebtedness refinanced. Nothing contained in this Section 5.20
shall prevent the Company or any of its Subsidiaries from entering into any
agreement (i) permitting or providing for the incurrence of Liens otherwise
permitted by Section 5.13 or (ii) restricting the sale or other disposition of
property securing Indebtedness.
5.21 Limitation on Acquisitions
The Company shall not, directly or indirectly, and shall not
permit any Subsidiary to, acquire, in one transaction or a series of
transactions, any stock or assets of any Person (an "Acquisition") involving or
having an aggregate value in excess of $10,000,000, unless such Acquisition has
been approved in writing by the Purchaser (or, if the Purchaser is no longer a
Holder of any Notes, by the Holders of a majority in principal amount of the
then outstanding Notes).
5.22 Compliance with Laws
The Company will, and will cause its Subsidiaries to, comply
with all statutes, ordinances, governmental rules and regulations, judgments,
orders and decrees (including all Environmental Laws) to which any of them is
subject, and obtain and keep in effect all licenses, permits, franchises and
other governmental authorizations necessary to the ownership or operation of
their respective properties or the conduct of their respective businesses,
except to the extent that the failure to so comply or obtain and keep in effect
would not have a Material Adverse Effect.
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SECTION 6. DEFAULTS AND REMEDIES
6.1 Events of Default
An "Event of Default" occurs if:
(1) the Company defaults in the payment of the principal of
any Note when the same becomes due and payable at maturity, upon redemption or
otherwise;
(2) the Company defaults in the payment of interest on any
Note when the same becomes due and payable and the Default continues for a
period of five days;
(3) the Company fails to comply in any material respect with
any of the agreements, covenants, or provisions of this Agreement (other than
Section 1.5(b)) or the Notes and the Default continues for the period and after
the notice specified below;
(4) any of the representations or warranties of the Company
made in or in connection with this Agreement are, taken as a whole, untrue in
any material respect as of the date when made in a manner adverse to the Company
and its Material Subsidiaries;
(5) an event of default occurs and is continuing under any
Indebtedness of the Company or any of its Material Subsidiaries, which default
has resulted in the acceleration of such Indebtedness prior to its expressed
maturity and the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness the maturity of which has been
so accelerated and has not been paid, aggregates $2,000,000 or more;
(6) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction against the
Company or any Material Subsidiary of the Company and such remains unpaid or
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days and is not insured against (after giving effect to customary
deductibles), provided that the aggregate of all such judgments exceeds
$2,000,000;
(7) the Company or any Material Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors,
(E) admits in writing that it is generally unable to
pay its debts as the same become due; or
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(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any of its
Material Subsidiaries in an involuntary case,
(B) appoints a Custodian of the Company or any of its
Material Subsidiaries or for all or substantially all of its property,
or
(C) orders the liquidation of the Company or any of
its Material Subsidiaries, and the order or decree remains unstayed and
in effect for 60 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
A Default under clause (3) is not an Event of Default until
the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes notify the Company of the Default and the Company does not
cure the Default within 30 days after receipt of the notice. The notice must
specify the Default, demand that it be remedied and state that the notice is a
"Notice of Default."
6.2 Acceleration of Notes
Subject to the provisions of Section 7, if an Event of Default
(other than an Event of Default specified in clauses (7) or (8) of Section 6.1
with respect to the Company) occurs and is continuing, the Holders of at least
25% in aggregate principal amount of the then outstanding Notes, by notice to
the Company, may declare the unpaid principal of and any accrued interest on all
the Notes to be due and payable. Subject to the provisions of Section 7,
immediately upon such declaration, the principal and interest shall be due and
payable; provided, however, that so long as the Credit Agreement shall be in
effect, if an Event of Default shall have occurred and be continuing (other than
an Event of Default specified in clauses (7) or (8) above with respect to the
Company), any such acceleration shall not be effective until the earlier of (x)
five Business Days following delivery of a notice of acceleration specifying the
respective Event of Default and stating that it is a "notice of acceleration" to
the agent bank under the Credit Agreement (but only if such Event of Default is
then continuing) and (y) the acceleration of any Indebtedness under the Credit
Agreement. Subject to the provisions of Section 7, if an Event of Default
specified in clause (7) or (8) of Section 6.1 occurs with respect to the
Company, such an amount shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of any Holder. The
Holders of at least a majority in principal amount of the then outstanding Notes
by notice to the Company may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except nonpayment of principal or
interest that has become due solely because of the acceleration.
6.3 Other Remedies
Subject to the provisions of Section 7, if an Event of Default
occurs and is continuing, Holders of the Notes may pursue any available remedy
to collect the payment of principal or interest on the Notes or to enforce the
performance of any provision of the Notes or this Agreement.
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A delay or omission by any Holder of any Notes in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
6.4 Waiver of Past Defaults
The Holders of at least a majority in principal amount of the
then outstanding Notes by notice to the Company may waive an existing Default or
Event of Default and its consequences except a continuing Default or Event of
Default in the payment of the principal of or interest on any Notes.
6.5 Rights of Holders to Receive Payment
Notwithstanding any other provision of this Agreement (other
than the provisions of Section 7), the right of any Holder of a Note to receive
payment of principal and interest on the Note, on or after the respective due
dates expressed in the Note, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
6.6 Undertaking for Costs
In any suit for the enforcement of any right or remedy under
this Agreement, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
SECTION 7. SUBORDINATION
For purposes of this Section 7 only, the term "Holder" shall
refer only to any holder of the Notes.
7.1 Notes Subordinated to Senior Debt
The Company, for itself and its successors, including the
Company, covenants and agrees, and each Holder, by its acceptance thereof,
likewise covenants and agrees, that all Notes shall be issued subject to the
provisions of this Section 7 and each Person holding any Note, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that the payment of all Obligations on the Notes by the Company shall, to
the extent and in the manner herein set forth, be subordinated and junior in
right of payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on the Senior Debt; that the subordination is for the benefit of,
and shall be enforceable directly by, the holders of Senior Debt, and that each
holder of Senior Debt whether now outstanding or hereafter created, incurred,
assumed or guaranteed shall be deemed to have acquired Senior Debt in reliance
upon the covenants and provisions contained in this Agreement and the Notes.
7.2 No Payment on Notes in Certain Circumstances
(a) If any default occurs and is continuing in the payment
when due, whether at maturity, upon any redemption, by declaration or otherwise,
of any principal of, interest on, unpaid drawings for letters of credit issued
in respect of or regularly accruing fees with respect to any Senior Debt, no
payment of any kind or character shall be made by or on behalf of the Company or
any other Person on its or their behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise. In
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addition, if any other event of default occurs and is continuing with respect to
any Senior Debt, as such event of default is defined in the instrument creating
or evidencing such Senior Debt, permitting the holders of such Senior Debt then
outstanding to accelerate the maturity thereof and the Representative for the
respective issue of Senior Debt gives written notice of the event of default to
the Company and the Holder Representative which notice shall specify that it is
intended to serve as a blockage notice under this Section 7.2(a) (a "Blockage
Notice"), then, unless and until all events of default have been cured or waived
or have ceased to exist or the Company and the Holder Representative receive
notice from the Representative for the respective issue of Senior Debt
terminating the Blockage Period (as defined below), during the 179 days after
the delivery of such Blockage Notice (the "Blockage Period"), neither the
Company nor any other Person on its behalf shall (x) make any payment of any
kind or character with respect to any Obligations on the Notes or (y) acquire
any of the Notes for cash or property or otherwise. Notwithstanding anything
herein to the contrary, in no event will a Blockage Period extend beyond 179
days from the date the payment on the Notes was due and only one such Blockage
Period may be commenced with respect to any and all Senior Debt within any 360
consecutive days. No event of default which existed or was continuing on the
date of the commencement of any Blockage Period with respect to the Senior Debt
shall be, or be made, the basis for commencement of a second Blockage Period by
the Representative of such Senior Debt whether or not within a period of 360
consecutive days unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an event of default pursuant to any provisions
under which an event of default previously existed or was continuing shall
constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Holders when such payment is prohibited by
Section 7.2(a), such payment shall be held in trust for the benefit of, and
shall be paid or delivered to, the holders of Senior Debt (pro rata to such
holders on the basis of the respective amount of Senior Debt held by such
holders) or their respective Representative, as their respective interests may
appear. The Holder Representative shall be entitled to rely on information
regarding amounts then due and owing on the Senior Debt, if any, received from
the holders of Senior Debt (or their Representatives) or, if such information is
not received from such holders or their Representatives, from the Company and
only amounts included in the information provided to the Holder Representative
shall be paid to the holders of Senior Debt.
Nothing contained in this Section 7 shall limit the right of
the Holders to take any action to accelerate the maturity of the Notes pursuant
to Section 6.2 or to pursue any rights or remedies hereunder; provided that all
Senior Debt thereafter due or declared to be due shall first be paid in full in
cash or Cash Equivalents before the Holders are entitled to receive any payment
of any kind or character with respect to Obligations on the Notes.
7.3 Payment Over Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any total or partial liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshalling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise (except that Holders may receive securities of the Company that are
unsecured and subordinated at least to the same extent as the Notes to Senior
Debt as provided in the Agreement, that do not have a maturity any shorter than
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the security being replaced and that will not cause the Notes to be treated in
any case or proceeding as part of the same class of claims as the Senior Debt or
any class of claims pari passu with, or senior to, the Senior Debt for any
payment or distribution). Upon any such dissolution, winding-up, liquidation,
reorganization, receivership or similar proceeding, any payment or distribution
of assets of the Company of any kind or character, whether in cash, property or
securities, to which the Holders under this Agreement would be entitled, except
for the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders under this Agreement if received by
them, directly to the holders of Senior Debt (pro rata to such holders on the
basis of the respective amounts of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on
behalf of the Company, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then, if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 7.3(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution or
provision thereof to or for the holders of such Senior Debt.
7.4 Payments May Be Paid Prior to Dissolution
Nothing contained in this Section 7 or elsewhere in this
Agreement shall prevent the Company, except under the conditions described in
Sections 7.2 and 7.3, from making payments at any time for the purpose of making
payments of principal of and interest on the Notes. The Company shall give
prompt written notice to the Holder Representative of any dissolution,
winding-up, liquidation or reorganization of the Company.
7.5 Subrogation
Subject to the payment in full in cash or Cash Equivalents of
all Senior Debt, the Holders shall be subrogated to the rights of the holders of
Senior Debt to receive payments or distributions of cash, property or securities
of the Company applicable to the Senior Debt until the Notes shall be paid in
full; and, for the purposes of such subrogation, no such payments or
distribution to the holders of the Senior Debt by or on behalf of the Company or
by or on behalf of the Holders by virtue of this Section 7 which otherwise would
have been made to the Holders shall, as between the Company and the Holders, be
deemed to be a payment by the Company to or on account of the Senior Debt, it
being understood that the provisions of this Section
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7 are and are intended solely for the purpose of defining the relative rights of
the Holders, on the one hand, and the holders of the Senior Debt, on the other
hand.
7.6 Obligations of the Company Unconditional
Nothing contained in this Section 7 or elsewhere in this
Agreement or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Debt, and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and any interest on the Notes as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent any Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Agreement, subject to the rights, if any,
in respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
7.7 Reliance on Judicial Order or Certificate of Liquidating Agent
Upon any payment or distribution of assets of the Company
referred to in this Section 7, the Holders shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon a certificate of the receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, delivered to
the Holder Representative, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Senior Debt and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Section 7.
7.8 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Debt
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Agreement, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to any Holder, without incurring responsibility
to any Holder and, without impairing or releasing the subordination provided in
this Section 7 or the obligations hereunder of the Holders of the Notes to the
holders of the Senior Debt, do any one or more of the following: (i) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt,
or any instrument evidencing the same or any agreement under which Senior Debt
is outstanding; (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person
liable in any manner for the payment or collection of Senior Debt; and (iv)
exercise or refrain from exercising any rights against the Company and any other
Person.
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7.9 This Section 7 Not To Prevent Events of Default
The failure to make a payment on account of principal of or
interest on the Notes by reason of any provision of this Section 7 will not be
construed as preventing the occurrence of an Event of Default.
SECTION 8. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Acquisition: See Section 5.21.
Affiliate: With respect to any specified Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person) or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether in the capacity of officer or director of such Person, through the
ownership of voting securities, by agreement or otherwise.
Affiliate Transaction: See Section 5.12.
Agent: Any Person authorized to act and who acts on behalf of
the Purchaser with respect to the transactions contemplated by this Agreement.
Asset Sales: See Section 5.14.
Bain Affiliates: Any Affiliate (including any employee) of
Bain Capital, provided that for purposes of this Agreement, the term "Bain
Affiliate" shall not include (x) any portfolio company of either Bain Capital or
any Affiliate of Bain Capital or (y) any officer or director of the Company or
any of its Subsidiaries who is not also a partner, stockholder, employee or
officer of Bain Capital.
Bain Capital: Bain Capital, Inc., a Delaware corporation.
Bankruptcy Law: See Section 6.1.
Blockage Notice: See Section 7.2(a).
Blockage Period: See Section 7.2(a).
Business Day: Any day which is not a Legal Holiday.
Capital Lease: Any lease of any property which would in
accordance with GAAP be required to be classified and accounted for on the
balance sheet of the lessee as a capital lease.
Capitalized Lease Obligation: With respect to any Person for
any period, any obligation of such Person to pay rent or other amounts under a
Capital Lease; the amount of such obligation shall be the capitalized amount
thereof determined in accordance with such principles.
Capital Stock: Any and all shares, interests, participation or
other equivalents (however designated) of corporate stock, including without
limitation all common stock and preferred stock.
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Cash Equivalents: (i) marketable direct obligations issued or
unconditionally guaranteed or insured by the United States Government or issued
by any agency or instrumentality thereof and backed by the full faith and credit
of the United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from Standard & Poor's Corporation, Moody's Investors
Service, Inc. or another nationally recognized rating agency; (iii) commercial
paper maturing no more than one year from the date of issuance thereof and, at
the time of issuance, having one of the two highest ratings obtainable from
Standard & Poor's Corporation, Moody's Investors Service, Inc. or other
nationally recognized rating agency; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof issued
by any commercial bank organized under the laws of the United States of America
or any state thereof or the District of Columbia having combined capital and
surplus of not less than $250,000,000; (v) Eurodollar time deposits having a
maturity of less than one year purchased from any such commercial bank directly;
(vi) repurchase agreements and reverse repurchase agreements with any such
commercial bank relating to marketable direct obligations described in clauses
(i) and (ii) above, in each case maturing within one year from the date of
acquisition thereof; and (vii) investments in money market funds substantially
all of the assets of which are comprised of securities described in clauses (i)
through (vi) above.
Change of Control: (a) prior to the date of an initial
registered public offering by the Company of its Common Stock, Bain Capital
and/or the Bain Affiliates and Sun Capital and/or the Sun Affiliates shall cease
to have the right, directly or indirectly, to elect a majority of the members of
the Board of Directors of the Company, whether through stock ownership, voting
agreement or otherwise, or (b) on or after the date of an initial registered
public offering by the Company of its Common Stock, any other Person or "group"
within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, as amended, as then in effect) shall own at least 30% of the Company's
voting stock and Bain Capital, the Bain Affiliates, Sun Capital and/or the Sun
Affiliates shall control, directly or indirectly, less voting stock than such
other Person or "group".
Charter Documents: The Articles of Organization, Articles of
Incorporation or Certificate of Incorporation and Bylaws, as amended or restated
(or both) to date, of the Company or any Subsidiary of the Company.
Closing: See Section 1.2.
Closing Date: See Section 1.2.
Code: The Internal Revenue Code of 1986, as amended from time
to time, and any successor statute or law thereto.
Common Stock: The Common Stock, $0.01 par value, of the
Company.
Company: Labtec Enterprises, Inc., a Delaware corporation,
f/k/a LEI Holdings, Inc., the renamed surviving corporation of the merger of LEI
Holdings, Inc. a Delaware corporation, and Speaker Acquisition Corp., a Delaware
corporation.
Consolidated EBITDA: As defined in the Credit Agreement, as in
effect as of the date hereof.
Consolidated Interest Expense: As defined in the Credit
Agreement, as in effect as of the date hereof.
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Credit Agreement: That certain Credit Agreement dated as of
October 7, 1997, among the Company, the lenders party thereto from time to time
in their capacities as lenders thereunder and Bankers Trust Company, as agent
(and any successor agent thereunder), together with the documents related
thereto (including, without limitation, any guarantee agreements and security
documents), in each case, as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing, refunding or otherwise restructuring (including, without limitation,
increasing the amount of available borrowings thereunder or adding Subsidiaries
of the Company as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or replacement
agreement and whether by the same or any other agent, lender or group of
lenders.
Custodian: See Section 6.1.
Default: Any event which is, or after notice or passage of
time would be, an Event of Default.
Default Rate: 15% per annum.
Domestic Subsidiary: As defined in the Credit Agreement, as in
effect on the date hereof.
Environmental Claim: As defined in the Credit Agreement, as in
effect on the date hereof.
Environmental Laws: As defined in the Credit Agreement, as in
effect on the date hereof.
Equity Interest: Capital Stock or warrants, options or other
rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
ERISA: The Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute or law thereto.
ERISA Affiliate: As defined in the Credit Agreement, as in
effect on the date hereof.
Event of Default: See Section 6.1.
Exchange Act: The Securities Exchange Act of 1934, as amended,
from time to time, and any successor statute or law thereto.
Foreign Subsidiary: As defined in the Credit Agreement, as in
effect on the date hereof.
Fund Investor: As defined in the Stockholders Agreement.
GAAP: Those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its boards or committees thereof and which are
consistently applied for all periods after the date hereof so as to properly
reflect the financial conditions, and the results of operations and cash flows,
of the Company and its consolidated Subsidiaries, except that any accounting
principle or practice required to be changed by the Accounting Principles Board
or Financial Accounting Standards Board (or other appropriate board or committee
of such boards) in order to continue as a generally accepted accounting
principle or practice may so be changed. In the event of a change in GAAP, this
Agreement, to the extent GAAP applies, shall continue to be construed in
accordance with GAAP as used in the preparation of the Company's financial
statements for its fiscal year
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<PAGE>
ended March 31, 1997; provided, however, the Purchaser and the Company will
thereafter negotiate in good faith to revise any affected covenants to make such
covenants consistent with GAAP as then in effect, and, after any such revision,
this Agreement will be in accordance with GAAP as then in effect.
guaranty: With respect to any Person, any contract, agreement
or understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including without limitation:
(a) agreements to purchase such Indebtedness or any
property constituting security therefor;
(b) agreements to advance or supply funds (i) for the
purchase or payment of such Indebtedness, or (ii) to maintain working
capital, equity capital or other balance sheet conditions;
(c) agreements to purchase property, securities or
services primarily for the purpose of assuring the holder of such
Indebtedness of the ability of the primary obligor to make payment of
the Indebtedness;
(d) letters or agreements commonly known as "comfort"
or "keepwell" letters or agreements; or
(e) any other agreements to assure the holder of the
Indebtedness of the primary obligor against loss in respect thereof;
except that "guaranty" shall not include (i) the endorsement by a Person in the
ordinary course of business of negotiable instruments or documents for deposit
or collection or (ii) indemnities given by the Company or its Subsidiaries in
brokerage, management and other agreements in the ordinary course of business
substantially consistent with past practices.
Hazardous Material: As defined in the Credit Agreement, as in
effect on the date hereof.
Holder or Holders: The Purchaser (so long as it holds any
Securities) and any other holder of any of the Securities.
Holder Representative: The Purchaser or, if the Purchaser is
no longer a holder of the Notes, the Representative of the Holders as designated
by the holders of a majority in principal amount of the Notes.
Indebtedness: With respect to any Person, the aggregate amount
of, without duplication, the following:
(a) all obligations for borrowed money;
(b) all obligations evidenced by bonds, debentures,
notes or other similar instruments;
(c) all obligations to pay the deferred purchase
price of property or services, except Trade Payables, accrued
commissions and other similar accrued current liabilities in respect of
such obligations, if such liabilities arise in the ordinary course of
business;
(d) all Capitalized Lease Obligations;
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<PAGE>
(e) all obligations or liabilities of others secured
by a Lien on any asset owned by such Person or Persons whether or not
such obligation or liability is assumed;
(f) all obligations of such Person or Persons,
contingent or otherwise, in respect of any letters of credit or
bankers' acceptances; and
(g) all guaranties.
Indemnified Parties: See Section 1.6.
Indemnifying Party: See Section 1.6.
Initial Public Offering: As defined in the Stockholders
Agreement.
Investment: With respect to any Person, any direct, indirect
or beneficial investment by such Person, whether by means of share purchase,
loan, advance, extension of credit (other than loans to employees in an
aggregate amount not in excess of $500,000 at any time, accounts receivable,
trade credits arising in the ordinary course of business and investments,
including debt obligations, received in connection with the bankruptcy or
reorganization of suppliers and customers and in good faith settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business), capital contribution or otherwise,
in or to any other Person, the guaranty by such Person of any Indebtedness of
any other Person or the subordination of any claim against any other Person to
other Indebtedness of such other Person. Amounts expended by the Company or its
Subsidiaries for Acquisitions in compliance with the provisions of Section 5.21
shall not constitute Investments for purposes of Section 5.5 hereof.
Intellectual Property: See Section 4.22.
Legal Holiday: A Saturday, Sunday or day on which banks and
trust companies in the principal place of business of the Company or in New York
are not required to be open. If a payment date is a Legal Holiday, payment may
be made on the next succeeding day that is not a Legal Holiday, and interest
shall accrue for the intervening period.
Lien: Any material mortgage, pledge, lien, encumbrance,
security interest or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
Losses: See Section 1.6.
Material Adverse Effect: (i) Any material adverse effect upon
the validity or enforceability of this Agreement or the Notes, (ii) any material
adverse effect on the results of operations, financial condition, properties,
assets or business of the Company, or (iii) any material adverse effect on the
ability of the Company to fulfill its obligations under this Agreement, the
Securities and any instrument governing Indebtedness of the Company incurred as
of the Closing Date.
Material Contracts: See Section 4.25.
Material Subsidiary: Any Subsidiary of the Company whose
assets or revenues, respectively, or any Subsidiaries whose aggregate assets or
revenues taken together, constitute 10% or more of the aggregate assets or
revenues of the Company and its Subsidiaries on a consolidated basis, taken as a
whole;
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<PAGE>
provided that the assets and revenues of any Subsidiary which is not a
wholly-owned Subsidiary shall only be considered to the extent of the direct and
indirect interest of the Company in such Subsidiary.
Merger: As defined in the Recapitalization Agreement.
Net Proceeds: With respect to any sale or other disposition of
any assets or stock, (i) cash (freely convertible into U.S. dollars) received by
the Company or any Subsidiary from such sale or other disposition, after (a)
provision for all income or other taxes measured by or resulting from such sale
or other disposition, (b) payment of all brokerage commissions and other fees
and expenses related to such sale or other disposition, and (c) deduction of
appropriate amounts as a reserve, in accordance with GAAP, against any
liabilities associated with such assets or stock and retained by the Company or
any Subsidiary after such sale or other disposition thereof, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the sale or other disposition of such assets or
stock and (ii) promissory notes received by the Company or any Subsidiary from
such sale or other disposition upon the liquidation or conversion of such notes
into cash.
Notes: See Section 1.1.
Obligations: All obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
Officers' Certificate: A certificate signed by any two
officers, one of whom must be the President, the Treasurer or a Vice President
of the Company.
Operating Lease: Any lease other than a Capital Lease.
Partner: Any limited partner of the Purchaser.
Partnership Agreement: See Section 1.5.
Permitted Investment: (i) Investments in Cash Equivalents,
(ii) Investments existing on the date hereof and identified on Schedule 8.01,
(iii) Investments made by the Company or by any direct or indirect Subsidiary of
the Company in the Company or any other direct or indirect Subsidiary of the
Company (including guarantees of indebtedness of the Company by Subsidiaries of
the Company or of Subsidiaries of the Company by the Company or its
Subsidiaries), (iv) Investments taken as partial consideration for Asset Sales
made in compliance with Section 5.14, (v) Investments in Permitted Joint
Ventures; provided that the aggregate amount of Investments under this clause
(v) after the Closing Date shall not exceed $300,000 in the aggregate, (vi)
Investments permitted under any of Sections 8.05(d), (e), (f), (i), (j), (p) or
(r) of the Credit Agreement, as in effect on the date hereof, and (vii)
additional Investments (other than those permitted under clauses (i) through
(vi) above), of the type permitted under Section 8.05(u) of the Credit Agreement
as in effect on the date hereof so long as the amount of such Investments
pursuant to this clause (vii) at any one time outstanding (determined without
regard to write-downs or write offs and net of cash repayments of principal in
the case of loans and equity redemptions in the case of equity Investments) do
not exceed $400,000 in the aggregate.
Permitted Joint Venture: Any Person engaged in business of the
type described in Section 5.7 of which the Company shall own, directly or
indirectly, 25% or more but less than or equal to 50% of the equity and voting
interests and of which another Person (or group of Persons which acts together
in relation to such Permitted Joint Venture) owns the remaining equity and
voting interests.
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<PAGE>
Permitted Liens: With respect to any Person: (i) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States Government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent; (ii)
Liens imposed by law, such as carriers, warehousemen's and mechanics' Liens or
Liens arising out of judgments or awards against such Person with respect to
which such Person shall then be prosecuting appeal or other proceedings for
review or which do not materially detract from the value of the property or
assets or materially impair the use thereof; (iii) Liens securing the payment of
taxes, assessments and governmental charges or levies which are not yet subject
to penalties for non-payment or which are being contested in good faith and by
appropriate proceedings; (iv) Liens in favor of issuers of surety bonds or
letters of credit issued pursuant to the request of and for the account of such
Person in the ordinary course of its business; (v) survey exceptions,
encumbrances, easements or reservations of, or rights of others for, rights of
way, sewers, electric lines, telegraph and telephone lines and other similar
purposes, or zoning of other restrictions as to the use of real properties or
Liens incidental to the conduct of the business of such Person or to the
ownership of its properties which were not incurred in connection with
Indebtedness or other extensions of credit and which do not in the aggregate
materially impair their use in the operation of the business of such Person;
(vi) Liens listed on Schedule 8.02 hereto; (vii) Liens on assets owned by the
Company or its Subsidiaries in favor of any holder of Senior Debt securing
Senior Debt permitted hereunder; (viii) purchase money Liens upon or in any real
or personal property (including fixtures and other equipment) acquired or held
by the Company or any Subsidiary in the ordinary course of business to secure
the purchase price of such property or to secure Indebtedness incurred solely
for the purpose of financing the acquisition or improvement of such property, or
Liens existing on such property at the time of its acquisition (other than any
such Lien created in contemplation of such acquisition) provided that (X) no
such Lien shall extend to or cover any property other than the property being
acquired or improved and (Y) any such Indebtedness would be permitted to be
incurred pursuant to Section 5.11 hereof; (ix) Liens securing Capital Leases or
Operating Leases; (x) licenses, leases or subleases granted to third parties not
interfering in any material respect with the business of the Company and its
Subsidiaries or otherwise permitted hereunder; (xi) Liens on assets of Foreign
Subsidiaries of the Company to the extent securing Indebtedness of such Foreign
Subsidiaries which is permitted pursuant to Section 5.11(g); and (xii)
additional Liens so long as the value of the property subject to such Liens and
the Indebtedness and other obligations secured thereby does not exceed
$1,000,000 in the aggregate.
Person: An individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
Plan: Any pension plan as defined in Section 3(2) of ERISA,
which is maintained or contributed to by (or to which there is an obligation to
contribute of) the Company, any of its Subsidiaries or any ERISA Affiliate and
each such plan for the five-year period immediately following the latest date on
which the Company, any of its Subsidiaries or any ERISA Affiliate maintained,
contributed to or had an obligation to contribute to such plan.
Post-Petition Interest: Any interest accruing subsequent to
the filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law.
Predecesor Corporation: As defined in the Credit Agreement, as
in effect on the date hereof.
Purchaser: The KB Mezzanine Fund II, L.P., a Delaware limited
partnership.
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<PAGE>
Real Property: As defined in the Credit Agreement, as in
effect on the date hereof.
Recapitalization: As defined in the Recapitalization
Agreement.
Recapitalization Agreement: That certain Recapitalization
Agreement, dated as of August 26, 1997, by and between the Company and Speaker
Acquisition Corp.
Release: As defined in the Credit Agreement, as in effect on
the date hereof.
Rental Obligations: The maximum aggregate fixed rentals paid
or payable by a lessee under any Operating Lease during a specified period
(excluding amounts paid or payable on account of maintenance, ordinary repairs,
insurance, taxes, assessments and other similar charges, whether or not
designated as rental or additional rental), regardless of any amounts received
by such lessee as sublessor under any Operating Lease.
Reportable Event: As defined in the Credit Agreement, as in
effect on the date hereof.
Representative: Any officer, director, principal, attorney,
agent, employee or other representative.
Restricted Debt Prepayment: Any purchase, redemption,
defeasance (including, but not limited to, in substance or legal defeasance) or
other acquisition or retirement for value, directly or indirectly, by the
Company or a Subsidiary, prior to the scheduled maturity or prior to any
scheduled repayment of principal or sinking fund payment, as the case may be, in
respect of indebtedness of the Company that is expressly subordinated in right
of payment to the Notes.
Rule 144: Rule 144 as promulgated by the Securities Exchange
Commission under the Securities Act, as amended from time to time, and any
successor rule or regulation thereto.
SEC: The Securities and Exchange Commission.
Securities: See Section 1.1.
Securities Act: The Securities Act of 1933, as amended from
time to time, and any successor statute or law thereto.
Senior Debt: (i) all Obligations arising under the Credit
Agreement (including, without limitation, Post-Petition Interest with respect
thereto), provided that the aggregate principal amount of Senior Debt
outstanding under this clause (i) at any time shall not exceed $50,000,000; (ii)
Obligations arising under any other instrument evidencing Indebtedness which by
its terms is secured on a substantially ratable basis with the Indebtedness
outstanding under the Credit Agreement (including, without limitation,
Post-Petition Interest with respect thereto), provided that the aggregate
principal amount of Senior Debt outstanding under this clause (ii) at any time
shall not exceed $4,000,000; (iii) Obligations arising under the Credit
Agreement or any other instrument evidencing Indebtedness which is incurred in
connection with or following any Acquisition, and which by its terms is secured
on a substantially ratable basis with the Indebtedness outstanding under the
Credit Agreement (including, without limitation, Post-Petition Interest with
respect thereto), provided that, on a pro forma basis, after giving effect to
such Acquisition and the incurrence of such Indebtedness, the pro forma
Consolidated EBITDA of the Company for the last full 12 fiscal months preceding
incurrence of such Indebtedness (such pro forma Consolidated EBITDA calculated
as if such Acquisition had been consummated at the beginning of such prior
12-month period) is not less than 2.8 times the Company's pro forma
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<PAGE>
Consolidated Interest Expense for the same period (such pro forma Consolidated
Interest Expense calculated as if such Indebtedness and all other Indebtedness
outstanding or assumed at the time of measurement had been incurred at the
beginning of such prior 12-month period); and provided further that all Senior
Debt outstanding will be considered to have been incurred under clause (i) or
(ii) above, as applicable, before additional Senior Debt may be incurred under
this clause (iii); and (iv) Obligations with respect to Indebtedness permitted
under Section 5.11(h) (including, without limitation, Post-Petition Interest
with respect thereto).
Shares: See Section 1.1.
Stockholders Agreement: That certain Stockholders Agreement of
even date herewith by and among the Company, the Purchaser, and the other
parties identified therein, in the form attached hereto as Annex C.
Subsidiary: With respect to any Person (the "parent"), any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power are,
at the time as of which any determination is being made, owned or controlled by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
Sun Affiliates: Any Affiliate (including any employee) of Sun
Capital, provided that for purposes of this Agreement, the term "Sun Affiliate"
shall not include (x) any portfolio company of either Sun Capital or any
Affiliate of Sun Capital or (y) any officer or director of the Company or any of
its Subsidiaries which is not also a partner, officer, employee or stockholder
of Sun Capital.
Sun Capital: Sun Capital Partners, Inc., a Florida
corporation.
Trade Payables: With respect to any Person, accounts payable
and other similar accrued current liabilities in respect of obligations or
indebtedness to trade creditors created, assumed or guaranteed by such Person or
any of its Subsidiaries in the ordinary course of business in connection with
the obtaining of property or services.
Transfer Restricted Securities: Securities acquired by the
Purchaser directly from the Company or acquired by the holder thereof (i) in
compliance with the transfer restrictions provided in this Agreement and (ii)
other than pursuant to an effective registration under Section 5 of the
Securities Act or pursuant to Rule 144; provided that a Security that has ceased
to be a Transfer Restricted Security cannot thereafter become a Transfer
Restricted Security.
Unfunded Current Liability: As defined in the Credit
Agreement, as in effect on the date hereof.
SECTION 9. MISCELLANEOUS
9.1 Notices
All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, first-class mail, telecopier, or
overnight air courier guaranteeing next day delivery:
(a) if to you, at your address set forth on the signature page
hereof, with a copy to Latham & Watkins, 633 W. Fifth Street, Suite 4000, Los
Angeles, California 90071, Attention: Robert A. Koenig, Esq., Fax: (213)
891-8763; and
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<PAGE>
(b) if to the Company, 3801 NE 109th Avenue, Vancouver,
Washington 98682, Attention: Richard James, President, and James Hillman, Chief
Financial Officer, with copies to Sun Capital Partners, Inc., 777 South Flagler
Drive, West Tower, Eighth Floor, West Palm Beach, Florida 33401, Attention: Marc
J. Leder and Rodger R. Krouse, Fax: (561) 820-1314; Bain Capital, Two Copley
Place, 7th Floor, Boston, Massachusetts 02116, Attention: Geoffrey S. Rehnert
and Joseph A. Pretlow, Fax: (617) 572- 3274; and Ropes & Gray, One International
Place, Boston, Massachusetts 02116, Attention: Patrick Diaz and Peter H. Dodson,
Fax: (617) 951-7050.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back if telexed; when receipt acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the addresses to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
9.2 Successors and Assigns
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties, including, without
limitation and without the need for an express assignment, subsequent holders of
Transfer Restricted Securities.
9.3 Amendment and Waiver
Prior to the Closing Date, this Agreement and the Notes may be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may be given, provided that the same are in writing and
signed by you and the Company. Thereafter, except as heretofore expressly
provided otherwise, this Agreement may be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may be given,
provided that the same are in writing and signed by the Company and the Holders
of at least a majority in principal amount of the Notes then outstanding;
provided, however, that any amendment, modification or supplement that (i)
affects or proposes to affect the rate or time for payment of interest on any
Note (including default interest) or the amount of principal or the principal
maturity date of any Note or the redemption or prepayment provisions with
respect thereto, (ii) makes or proposes to make any Note payable in money or
property other than that stated in the Note or (iii) makes or proposes to make
any change in Section 6.4 or 6.5 hereof or this Section 9.3 shall not be binding
upon any Holder of any outstanding Note that has not consented thereto in
writing.
9.4 Counterparts
This Agreement may be executed in any number of counterparts
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
9.5 Headings
The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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<PAGE>
9.6 Governing Law
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
9.7 Entire Agreement
This Agreement, together with the Securities, is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, together with
the Securities, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
9.8 Severability
In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of your rights and privileges shall be enforceable to
the fullest extent permitted by law.
9.9 Confidentiality
You agree that you will not, and will not permit your
officers, directors, employees or agents to, disclose to any other Person any
information furnished to you by the Company or any Subsidiary, except (i) as
required by law or legal process or by any governmental authority, (ii) such
information as becomes or is generally available to the public other than as a
result of a disclosure prohibited hereby, (iii) such information that is or
becomes available to you on a nonconfidential basis from a source not bound by
this or another confidentiality agreement with the Company or any Subsidiary,
(iv) such information that you disclose to a Person who is a prospective
assignee or transferee of some or all Securities, provided that such Person has
first signed a confidentiality agreement substantially identical to that set
forth in this Section.
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<PAGE>
If this Agreement is satisfactory to you, please so indicate
by signing the acceptance at the foot of a counterpart of this Agreement and
deliver such counterpart to the Company whereupon this Agreement will become
binding between us in accordance with its terms.
Very truly yours,
LABTEC ENTERPRISES, INC.
By: /s/ Marc J. Leder
------------------------------
Name: Marc J. Leder
Title: Vice President
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EXHIBIT 10.8
SPACETEC IMC CORPORATION
Payment of this Note is subject to the terms and conditions of subordination
set forth herein.
UNSECURED SUBORDINATED PROMISSORY NOTE
$1,065,000 February 17, 1999
FOR VALUE RECEIVED, Spacetec IMC Corporation, a Massachusetts
corporation (the "Company"), hereby promises to pay to the order of Sun Capital
Partners, Inc. (or the then current endorsee and holder of this Note, the
"Collection Agent" or "Subordinated Lender") on February 17, 2005, unless sooner
payable as provided herein, and thereafter on demand, the principal amount of
One Million Sixty-Five Thousand Dollars ($1,065,000), plus interest on the
unpaid principal balance thereof outstanding from time to time, from and
including the date hereof until such principal balance is repaid in full, at a
rate equal to ten percent (10%) per annum. Interest hereunder shall be payable
by the Company in arrears on June 1st, September 1st, December 1st and March 1st
of each year, commencing June 1, 1999, at maturity (whether by acceleration or
otherwise) and upon the making of any prepayment, as hereinafter provided. This
Note may be prepaid in whole or in part, at any time or from time to time,
without premium or penalty. Any prepayment of this Note shall be accompanied by
payment in full of all accrued but unpaid interest on the amount prepaid to the
date of prepayment. Interest shall be calculated on the basis of actual number
of days elapsed over a year of 360 days. Notwithstanding any other provision of
this Note, the Subordinated Lender does not intend to charge and the Company
shall not be required to pay any interest or other fees or charges in excess of
the maximum permitted by applicable law; any payments in excess of such maximum
shall be refunded to the Company. All payments received by the Collection Agent
hereunder will be applied first to costs of collection, if any, then to interest
and the balance to principal. The payment of principal and interest will be made
by check in immediately available United States funds sent to the Collection
Agent at the address in paragraph 6 or any other address provided by the
Collection Agent for such purpose. Notwithstanding the foregoing, to the extent
at any time then required pursuant to the terms of any Institutional
Indebtedness (as defined below), the payment of interest by the Company shall be
made through the issuance to the Collection Agent of an additional promissory
note containing substantially the same terms and conditions of this Note in a
principal amount equal to the amount of interest then required to be so paid.
1. Subordination of Principal and Interest. The Subordinated Lender
agrees that the payment of principal, interest and all other charges with
respect to the Note is expressly subordinated, in the manner hereinafter set
forth, in right of payment to the prior payment and satisfaction in full of the
Institutional Indebtedness at any time outstanding.
(a) Payment of Institutional Indebtedness. In the event of any
insolvency or bankruptcy proceedings, or any receivership, liquidation,
reorganization or other similar
<PAGE>
proceedings in connection therewith, relative to the Company or to its property,
or, in the event of any proceedings for voluntary liquidation, dissolution or
other winding up of the Company or distribution or marshaling of its assets or
any composition with creditors of the Company, whether or not involving
insolvency or bankruptcy, then and in any such event all Institutional
Indebtedness shall be paid in full in cash or cash equivalents before any
payment or distribution of any character, whether in cash, securities or other
property, shall be made on account of this Note; and any such payment or
distribution, except securities which are unsecured and subordinated and junior
in right of payment to the same extent as this Note to the payment of all
Institutional Indebtedness then outstanding, which would, but for the provisions
hereof, be payable or deliverable in respect of this Note shall be paid or
delivered directly to the holders of Institutional Indebtedness (or their duly
authorized representatives), in the proportions in which they hold the same,
until all Institutional Indebtedness shall have been paid in full, and every
holder of this Note by becoming a holder thereof shall have designated and
appointed the holder or holders of Institutional Indebtedness (and their duly
authorized representatives) as his or its agents and attorney-in-fact to demand,
sue for, collect and receive such Institutional Indebtedness holder's ratable
share of all such payments and distributions and to file any necessary proof of
claim therefor and to take all such other action (including the right to vote
such Institutional Indebtedness holder's ratable share of this Note), in the
name of the holder of this Note or otherwise, as such Institutional Indebtedness
holders (or their authorized representatives) may determine to be necessary or
appropriate for the enforcement of this Section 1. The Collection Agent, and
each successor holder of this Note by its or his acceptance thereof, agrees to
execute, at the request of the Company, a separate agreement with any holder of
Institutional Indebtedness on the terms set forth in this Section 1, and to take
all such other action as such holder or such holder's representative may request
in order to enable such holder to enforce all claims upon or in respect of such
holder's ratable share of this Note.
(b) No Payment on Note Under Certain Conditions. In the event that any
default occurs in the payment of the principal of or interest on any
Institutional Indebtedness (whether as a result of acceleration thereof by the
holders of such Institutional Indebtedness or otherwise) and during the
continuance of such default until such default has been cured or waived in
writing by such holder of Institutional Indebtedness, no payment of principal or
interest on this Note shall be made by the Company or accepted by any holder of
this Note who has received notice from the Company or from a holder of
Institutional Indebtedness of such event. In the event that any other default
occurs under any Institutional Indebtedness (whether as a result of acceleration
thereof by the holders of such Institutional Indebtedness or otherwise) for a
period (a "Blockage Period") of 180 days thereafter (or for such shorter period
until such default has been cured or waived in writing by such holders of
Institutional Indebtedness), no payment of principal or interest on this Note
shall be made by the Company or accepted by any holder of this Note who has
received notice from the Company or from a holder of Institutional Indebtedness
of such default; provided, however, that a Blockage Period may only be imposed
on the Company once during any twelve-month period.
(c) Payments Held in Trust. In case any payment or distribution
shall be paid or
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delivered to the Collection Agent before all Institutional Indebtedness shall
have been paid in full, despite or in violation or contravention of the terms of
this subordination, such payment or distribution shall be held in trust for and
paid and delivered ratably to the holders of Institutional indebtedness (or
their duly authorized representatives), until all Institutional Indebtedness
shall have been paid in full.
(d) Subrogation. Subject to the payment in full of all Institutional
Indebtedness and until this Note shall be paid in full, the Collection Agent
shall be subrogated to the rights of the holders of Institutional Indebtedness
(to the extent of payments or distributions previously made to such holders of
Institutional Indebtedness pursuant to the provisions of subsections (a) and (c)
of this Section 1) to receive payments or distributions of assets of the Company
applicable to the Institutional Indebtedness. No such payments or distributions
applicable to the Institutional Indebtedness shall, as between the Company and
its creditors, other than the holders of Institutional Indebtedness and the
Collection Agent, be deemed to be a payment by the Company to or on account of
this Note; and for the purposes of such subrogation, no payments or
distributions to the holders of Institutional Indebtedness to which the holder
of this Note would be entitled except for the provisions of this Section 1
shall, as between the Company and its creditors, other than the holders of
Institutional Indebtedness and the Collection Agent, be deemed to be a payment
by the Company to or on account of the Institutional Indebtedness.
(e) Scope of Section. The provisions of this Section 1 are intended
solely for the purpose of defining the relative rights of the Collection Agent,
on the one hand, and the holders of the Institutional Indebtedness, on the other
hand. Nothing contained in this Section 1 or elsewhere in this Note is intended
to or shall impair, as between the Company, its creditors other than the holders
of Institutional Indebtedness, and the Collection Agent, the obligation of the
Company, which is unconditional and absolute, to pay to the Collection Agent the
principal of and interest on the Note as and when the same shall become due and
payable in accordance with the terms thereof, or to affect the relative rights
of the holder of this Note and creditors of the Company other than the holders
of the Institutional Indebtedness, or to benefit any other creditors of the
Company other than the holders of the Institutional Indebtedness, nor shall
anything herein or therein prevent the Collection Agent from accepting any
payment with respect to this Note or exercising all remedies otherwise permitted
by applicable law upon default under this Note, subject to the rights, if any,
under this Section 1 of the holders of Institutional Indebtedness in respect of
cash, property or securities of the Company received by the holder of this Note.
(f) Survival of Rights. The right of any present or future holder of
Institutional Indebtedness to enforce subordination of this Note pursuant to the
provisions of this Section 1 shall not at any time be prejudiced or impaired by
any act or failure to act on the part of the Company or any such holder of
Institutional Indebtedness, including, without limitation, any forbearance,
waiver, consent, compromise, amendment, extension, renewal, or taking or release
of security of or in respect of any Institutional Indebtedness or by
noncompliance by the Company with the terms of such subordination regardless of
any knowledge thereof the holder may have or otherwise be charged with.
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(g) Amendment or Waiver. The provisions of this Section 1 may not be
amended or waived in any manner which is detrimental to any Institutional
Indebtedness without the consent of the holders of a majority of the then
existing Institutional Indebtedness.
(h) Institutional Indebtedness Defined. The term "Institutional
Indebtedness" shall mean all indebtedness of the Company for money borrowed
(including interest thereon after commencement of any bankruptcy, insolvency or
similar proceeding relating to the Company, whether or not such interest would
accrue in such proceeding) from banks or other institutional Lenders, including
any extension or renewals thereof, whether outstanding on the date hereof or
thereafter created or incurred, which is not by its terms expressly subordinate
and junior to or on a parity with this Note.
2. Events of Default. The outstanding principal and accrued interest on
this Note shall, at the option of the Collection Agent, become due and payable
without notice or demand, upon the happening of any one of the following
specified events:
(a) any default (whether in whole or in part) shall occur in the
payment of any amount payable under this Note which shall continue for a period
of ten (10) days;
(b) the making by the Company of a general assignment for the benefit
of creditors;
(c) the filing of any petition or the commencement of any proceeding by
the Company for any relief under any bankruptcy or insolvency laws, or any laws
relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions, or extensions;
(d) the filing of any petition or the commencement of any proceeding
against the Company for any relief under any bankruptcy or insolvency laws, or
any laws relating to the relief of debtors, readjustment of indebtedness,
reorganizations, compositions, or extensions, which proceeding is not dismissed
within sixty (60) days;
(e) a receiver, liquidator, assignee, trustee or custodian is appointed
to administer the affairs of the Company;
(f) except for the Company's transfer of its assets to a wholly-owned
subsidiary as contemplated in the Agreement, the Company dissolves, liquidates,
winds-up, or sells or otherwise disposes of all or substantially all of its
business or assets;
(g) a Change in Control of the Company;
(h) the Company sells or otherwise disposes of any of its assets not in
the ordinary course of business, pursuant to which sale the Company receives net
cash proceeds of at least $10,000,000; or
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(i) the Company issues and sells any securities of the Company,
pursuant to which sale the Company receives net cash proceeds of at least
$10,000,000.
Notwithstanding the foregoing, the Collection Agent shall not have the option to
have the outstanding principal and accrued interest on this Note become due and
payable upon the happening of any of the events specified in clauses (h) or (i)
above unless the holders of the Institutional Indebtedness shall have consented
thereto in writing. For purposes hereof, a "Change in Control" shall be deemed
to have occurred if: (i) any "person" or "group" (as such terms are used in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Act")), except for Sun Capital Partners, Inc., Bain Capital, Inc. and
their respective affiliates (the "Sun/Bain Group"), becomes a "beneficial owner"
(as such term is used in Rule l3d-3 promulgated under the Act), after the date
hereof, directly or indirectly, of securities of the Company representing more
than 25% of the combined voting power of the Company's then outstanding
securities; (ii) the members of the Company's Board of Directors who are
nominated by the Sun/Bain Group shall constitute fewer than a majority of all
members of the Company's Board of Directors; or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other company,
other than a merger or consolidation which would result in the combined voting
power of the Company's voting securities outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) 75% or more of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation.
3. Collection Agent; Distribution.
This Note is issued pursuant to and is entitled to the benefits of a
certain Agreement and Plan of Merger dated as of October 21, 1998, and as
amended and restated as of November 13, 1998, among Labtec Inc., a Delaware
corporation ("Labtec"), the Company and SIMC Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of the Company (as the same may be
amended from time to time, referred to herein as the "Agreement"). The
Collection Agent hereby acknowledges that it is holding the Note on behalf of
and for the benefit of the holders of shares of common stock of Labtec at the
time of the Merger (as defined in the Agreement) (each, a "Labtec Stockholder").
The Collection Agent hereby further acknowledges that it shall be solely
responsible for distributing any payments received from the Company in respect
of this Note to the Labtec Stockholders on a pro rata basis and hereby agrees to
make such distributions.
4. Expenses of Collection. The Company shall pay or reimburse, upon
demand, any and all reasonable costs and expenses incurred by the Collection
Agent, whether directly or indirectly, in connection with the enforcement and
collection of this Note, including (without limitation) the reasonable
disbursements, expenses and fees of counsel to the Collection Agent.
5. Waiver. No waiver of any obligation of the Company under this Note
shall be
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effective unless it is in a writing signed by the Collection Agent. A waiver by
the Collection Agent of any right or remedy under this Note on any occasion
shall not be a bar to exercise of the same right or remedy on any subsequent
occasion or of any other right or remedy at any time.
6. Notice. Any notice required or permitted under this Note shall be in
writing and shall be deemed to have been given on the date of delivery, if
personally delivered or sent by electronic facsimile transmission to the party
to whom notice is to be given, or on the next business day, if sent by overnight
courier service, or on the third business day after mailing, if mailed to the
party to whom notice is to be given, or on the next business, if sent by
overnight courier service, by first-class mail, postage prepaid, and addressed
as follows:
if to the Company, at
The Boott Mills
100 Foot of John Street
Lowell, Massachusetts 01852-1126
if to the Collection Agent, at
or, in each case, to the most recent address, specified by written notice, given
to the sender pursuant to this paragraph.
7. Waiver by Company. The Company hereby expressly waives presentment,
demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof, and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the holder hereof with respect to the time of payment
or any other provision hereof.
8. Severability. In the event any one or more of the provisions of this
Note shall for any reason be held to be invalid, illegal or unenforceable, in
whole or in part or in any respect, or in the event that any one or more of the
provisions of this Note operate or would prospectively operate to invalidate
this Note, then and in any such event, such provision(s) only shall be deemed
null and void and shall not affect any other provision of this Note and the
remaining provisions of this Note shall remain operative and in full force and
effect and in no way shall be affected, prejudiced, or disturbed thereby.
9. Governing Law. This Note shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
10. Successors and Assignment. This Note shall not be negotiable,
transferable or assignable by the Company, whether by operation of law or
otherwise, except with the written
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consent of the Collection Agent. The Collection Agent may negotiate, transfer or
assign this Note, or any or all of its rights, interests, duties or obligations
hereunder, in its sole and absolute discretion. Subject to the foregoing,
whenever reference is made to any party, such reference shall be deemed to
include the successors, assigns and legal representatives of such party.
SPACETEC IMC
CORPORATION
By: /s/ George R. Rea
--------------------------------------
Acting Chief Executive Officer
ATTEST:
/s/ Bryan P. Lord
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ACKNOWLEDGED AND AGREED:
Sun Capital Partners, Inc.
By: /s/ Marc J. Leder
---------------------------
Title:
-------------------------
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), effective as of June 1,
1998, is entered into between Labtec, Inc., a Delaware corporation ("Employer"
or the "Company"), and Gregory Jones ("Employee").
RECITAL
Employer desires to continue to retain the services of Employee upon
the terms and conditions set forth herein, and Employee is willing to provide
services to Employer upon the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the foregoing premises and
for other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, Employer and Employee hereby agree as follows:
1. Employment
Employer will employ Employee and Employee will accept employment by
Employer as its Senior Vice President - North American Retail Sales on the terms
set forth herein. Employee will perform such management duties as are customary
for such position and consistent with Employer's Bylaws and such other duties as
may be assigned from time to time by the President and Chief Executive Officer
of Employer (consistent with the duties of an officer of Employer), which relate
to the business of Employer, its subsidiaries, any parent corporation, or any
business ventures in which Employer or its subsidiaries may participate.
2. Attention and Effort
Employee will devote all his ability, attention and effort to
Employer's business and will use his best efforts to skillfully serve its
interests during the term of this Agreement. This paragraph is not meant to
preclude Employee from pursuing any other non-conflicting and non-competing
business activities which are primarily passive in nature, or from serving on
other boards of directors so long as such directorships are disclosed fully to
Employer's President and Chief Executive Officer.
3. Term
Unless otherwise terminated pursuant to paragraph 6 of this Agreement,
the stated term of employment under this Agreement shall expire three (3) years
from the effective date of this Agreement.
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4. Compensation
During the term of this Agreement, Employer agrees to pay or cause to
be paid to Employee, and Employee agrees to accept in exchange for the services
rendered hereunder by him, the following compensation:
4.1 Base Salary
Employee's compensation shall consist, in part, of an annual base
salary (the "Base Salary") of $150,000, before all customary payroll deductions,
payable in substantially equal installments and at the same intervals as other
officers of Employer are paid. Such annual Base Salary may be increased from
time to time in the discretion of the Company's President. The Company's
President will review Employee's performance and salary within 30 days after May
31 in each year during the effectiveness of this Agreement.
4.2 Bonus Plan
Employee will be entitled to receive, in addition to the Base Salary,
an annual bonus in amounts up to 70% of the Base Salary for such year based upon
goals to be agreed upon by the Employee and the Company's President. Operation
of the bonus plan will be as mutually agreed upon by Employee and the Company's
President and Chief Executive Officer and confirmed by the Board of Directors.
4.3 Stock
The Employer shall establish and adopt a Senior Management Stock
Purchase Plan shortly after the effective date hereof pursuant to which the
Employee may purchase from the Company such number of shares of the Company's
Common Stock as shall be agreed upon by the Employee and the Company at the
Investor Per Share Value (as defined in the Recapitalization Agreement and Plan
of Merger dated August 26, 1997 between the Company and Speaker Acquisition
Corp. as amended (the "Recapitalization Agreement")), subject to the Employee's
compliance with applicable laws and execution of a Senior Management Stock
Subscription Agreement substantially in the form attached hereto as Exhibit A
(the "Senior Management Subscription Agreement").
4.4 Options
The Employer shall establish and adopt a Senior Management Stock Option
Plan (the "Option Plan") shortly after the effective date hereof pursuant to
which the Employer shall grant to the Employee options to purchase 525,000
shares of the Company's Common Stock under the terms specified in such Option
Plan (it being understood that such number assumes completion of a 20:1 split of
the Company's Common Stock).
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5. Benefits
During the term of this Agreement, Employee will be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in fringe benefit programs as may be provided from time to time by
Employer.
6. Termination
Employment of Employee pursuant to this Agreement may be terminated as
follows, but in any case, the provisions of paragraph 8 hereof shall survive the
termination of this Agreement and the termination of Employee's employment:
6.1 By Employer
With or without Cause (as defined below), Employer may terminate the
employment of Employee at any time during the term of employment upon giving
Notice of Termination (as defined below).
6.2 By Employee
Employee may terminate his employment at any time, for any reason, upon
giving Notice of Termination.
6.3 By Death or Disability
This Agreement and Employee's employment hereunder shall terminate
automatically upon the death, and may be terminated in the discretion of the
President and Chief Executive Officer of Employer in the event of total
disability, of Employee. The term "total disability" as used herein shall mean
Employee's inability to perform the duties set forth in paragraph 1 hereof for a
period or periods aggregating 120 calendar days in any 12-month period as a
result of physical or mental illness, loss of legal capacity or any other cause
beyond Employee's control, unless Employee is granted a leave of absence by the
President and Chief Executive Officer of Employer. Employee and Employer hereby
acknowledge that Employee's ability to perform the duties specified in paragraph
1 hereof is of the essence of this Agreement. Termination hereunder shall be
deemed to be effective (a) at the end of the calendar week in which Employee's
death occurs or (b) immediately upon a determination of Employee's total
disability, as defined herein.
6.4 Notice
The term "Notice of Termination" shall mean at least 90 days' written
notice of termination of Employee's employment approved by Employer's President
and Chief Executive Officer, during which period Employee's employment and
performance of services will continue;
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provided, however, that Employer may, upon notice to Employee approved by
Employer's President and Chief Executive Officer, and without reducing
Employee's compensation during such period, excuse Employee from any or all of
his duties during such period. The effective date of the termination of
Employee's employment hereunder shall be the date on which such 90-day period
expires.
7. Termination Payments
In the event of termination of the employment of Employee, all
compensation and benefits set forth in this Agreement shall terminate except as
specifically provided in this paragraph 7:
7.1 Termination by Employer
If Employer terminates Employee's employment without Cause prior to the
end of the term of this Agreement, Employee shall be entitled to receive,
commencing the effective date of such termination (a) payments of the Base
Salary then in effect for nine (9) months and (b) any unpaid annual Base Salary
which has accrued for services performed as of the date termination of
Employee's employment becomes effective. In addition, so long as payments are
being made as provided for in subparagraph 7.1(a), Employee shall continue to
receive the benefits provided in paragraph 5 of this Agreement. If Employee is
terminated by Employer for Cause, Employee shall not be entitled to receive any
of the foregoing payments, other than those set forth in clause (b) above.
7.2 Termination by Employee
In the case of voluntary termination by Employee of Employee's
employment, Employee shall not be entitled to any payments hereunder, other than
those set forth in clause (b) of subparagraph 7.1 hereof.
7.3 Termination by Death or Disability
In the case of termination of Employee's employment by reason of death
or total disability as provided in subparagraph 6.3, Employee or his estate
shall be entitled to receive from Employer (a) payments of the Base Salary then
in effect for three (3) months; and (b) any unpaid annual Base Salary which has
accrued for services already performed as of the date termination of Employee's
employment becomes effective. In addition, during the period of the payments
provided for in subparagraph 7.3(a), Employee shall continue to receive the
benefits provided in paragraph 5 of this Agreement.
7.4 Termination Payment Schedule
All payments under this paragraph 7 shall be made to Employee at the
same intervals as payments were made to Employee immediately prior to
termination.
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7.5 Cause
Wherever reference is made in this Agreement to termination being with
or without Cause, "Cause" means cause given by Employee to Employer and shall
include, without limitation, the occurrence of one or more of the following
events:
(a) Failure or refusal to carry out the lawful duties of Employee
described in paragraph 1 hereof or any directions of the Board of
Directors or President and Chief Executive Officer of Employer,
which directions are reasonably consistent with the duties herein
set forth to be performed by Employee for a period of 60 days
following written notice of such refusal or failure, unless, in
the reasonable judgment of the Board of Directors no cure is
possible or such 60-day period would subject the Employer to
unreasonable risk;
(b) Violation by Employee of a state or federal criminal law
involving the commission of a crime against Employer or a felony
which is determined by the Board of Directors of Employer to be
harmful to the business or reputation of Employer;
(c) Abuse by Employee of alcohol or controlled substances; deception,
fraud, material misrepresentation or dishonesty by Employee; any
incident materially compromising Employee's reputation or ability
to represent Employer with the Public; any act or omission by
Employee which substantially impairs Employer's business, good
will or reputation; or
(d) Any other material violation by the Employee of any provision of
this Agreement.
8. Noncompetition and Nonsolicitation
8.1 Applicability
This paragraph 8 shall survive the termination of Employee's employment
with Employer or the expiration of the term of this Agreement.
8.2 Noncompetition
Employee agrees that he will not directly or indirectly, during his
employment and for a period (the "Noncompetition Period") of 18 months from the
date on which his employment with Employer terminates for any reason, be
employed by, consult with or otherwise perform services for, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of or be connected with, in any manner, any Competitor. A "Competitor"
shall include
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any entity which, directly or indirectly, produces, markets, distributes or
otherwise derives benefit from the production, marketing or distribution of
products or services which have the same use or provide the same benefit to the
user thereof or which otherwise compete with products or services produced or
marketed by Employer at the time of termination of employment, or which Employer
is then developing or preparing to develop, produce or market, or which are
extensions of or closely related to or substitutes for the products or services
then produced or marketed by Employer, any place where Employer is then doing
business or where Employer's business plan contemplates doing business in the
ensuing twelve months, unless released from such obligation in writing by
Employer's Board of Directors. Without limiting the generality of the foregoing,
Employee shall be deemed to be related to or connected with a Person which
competes with Employer if, among other things, such Person is (a) a partnership
in which Employee is a general or limited partner, (b) a corporation or
association of which Employee is a stockholder, officer, employee or director or
(c) a partnership, corporation or association for which Employee is a consultant
or agent; provided, however, that nothing herein shall prevent the purchase or
ownership by Employee of securities which constitute less than five percent of
the outstanding equity securities of a publicly held corporation, if Employee
has no other relationship with such corporation.
8.3 Nonsolicitation
Employee shall not directly or indirectly solicit, influence or entice,
or attempt to solicit, influence or entice, any employee or consultant of
Employer to cease his, her or its relationship with Employer or solicit,
influence, entice or in any way divert any customer, distributor, partner, joint
venturer or supplier of Employer to do business or in any way become associated
with any Competitor. This subparagraph 8.3 shall apply during the time period
and geographical area described in subparagraph 8.2 hereof.
8.4 Affiliates
During the Noncompetition Period, Employee shall not knowingly (a)
cause or permit any "Affiliate" (as defined below) of Employee to, in any way,
directly or indirectly, for itself or on behalf of any other person or entity,
conduct, participate in or engage in any activity or enter into any contract or
agreement of any kind whatsoever with respect to any activity that Employee is
prohibited from engaging in by subparagraphs 8.2 and 8.3 or (b) fail to take any
action needed to prevent any Affiliate of Employee from, in any way, directly or
indirectly, for itself or on behalf of any other person or entity, conducting,
participating in or engaging in any activities or entering into any contract or
agreement of any kind whatsoever with respect to any activity that Employee is
prohibited from engaging in by subparagraphs 8.2 and 8.3. An "Affiliate" of
Employee shall mean any other person or entity within the reasonable control of
Employee and, without limiting the generality of the foregoing, shall in any
event include (a) any person or entity of which Employee beneficially owns or
holds five percent or more of any class of voting securities or five percent or
more of the legal or beneficial interest, (b) any director or officer of any
corporation or other entity which is an Affiliate (as described above) of
Employee, (c) any partner, joint venturer
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or business associate of Employee and (d) any member of the "immediate family"
(as defined for purposes of Section 16 of the Securities Exchange Act of 1934)
of Employee.
8.5 Assignment of Intellectual Property
All concepts, designs, machines, devices, uses, processes, technology,
trade secrets, works of authorship, customer lists, plans, embodiments,
inventions, improvements or related work product (collectively "Intellectual
Property") which Employee develops, conceives or first reduces to practice
during the term of his employment hereunder or within one year after the
termination of his employment hereunder or the expiration of this Agreement,
whether working alone or with others, which is related in any way to the
business of Employer, shall be the sole and exclusive property of Employer,
together with any and all Intellectual Property rights, including, without
limitation, patent or copyright rights, related thereto, and Employee hereby
assigns to Employer all of such Intellectual Property. "Intellectual Property"
shall include only such concepts, designs, machines, devices, uses, processes,
technology, trade secrets, customer lists, plans, embodiments, inventions,
improvements and work product which (a) relate to Employee's performance of
services under this Agreement, to Employer's field of business or to Employer's
actual or demonstrably anticipated research or development, whether or not
developed, conceived or first reduced to practice during normal business hours
or with the use of any equipment, supplies, facilities or trade secret
information or other resource of Employer or (b) are developed in whole or in
part on Employer's time or developed using Employer's equipment, supplies,
facilities or trade secret information, or other resources of Employer, whether
or not the work product relates to Employer's field of business or Employer's
actual or demonstrably anticipated research.
8.6 Disclosure and Protection of Inventions
Employee shall disclose in writing all concepts, designs, processes,
technology, plans, embodiments, inventions or improvements constituting
Intellectual Property to Employer promptly after the development thereof by
Employee. At Employer's request and at Employer's expense, Employee will assist
Employer or its designee in efforts to protect all rights relating to such
Intellectual Property. Such assistance may include, without limitation, the
following: (a) making application in the United States and in foreign countries
for a patent or copyright on any work products specified by Employer; (b)
executing documents of assignment to Employer or its designee of all of
Employee's right, title and interest in and to any work product and related
intellectual property rights; and (c) taking such additional action (including,
without limitation, the execution and delivery of documents) to perfect,
evidence or vest in Employer or its designee all right, title and interest in
and to any Intellectual Property and any rights related thereto.
8.7 Nondisclosure; Return of Materials
During the term of his employment by Employer and following termination
of such employment, Employee will not disclose (except as required by his duties
to Employer or by law) any concept, design, process, technology, trade secret,
customer list, plan, embodiment or
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invention, any other Intellectual Property or any other confidential
information, whether patentable or not, of Employer of which Employee becomes
informed or aware during his employment whether or not developed by Employee. In
the event of the termination of his employment with Employer or the expiration
of this Agreement, Employee will return all documents, data and other materials
of whatever nature, including, without limitation, drawings, specifications,
research, reports, embodiments, software and manuals to Employer which pertain
to his employment with Employer or to any Intellectual Property and shall not
retain or cause or knowingly allow any third party to retain photocopies or
other reproductions of the foregoing.
8.8 Equitable Relief
Employee acknowledges that the provisions of this paragraph 8 are
essential to Employer, that Employer would not enter into this Agreement if it
did not include this paragraph 8 and that damages sustained by Employer as a
result of a breach of this paragraph 8 cannot be adequately remedied by damages,
and Employee agrees that Employer, notwithstanding any other provision of this
Agreement, including, without limitation, paragraph 11 hereof, and in addition
to any other remedy it may have under this Agreement or at law, shall be
entitled to injunctive and other equitable relief, including, without
limitation, specific performance, to prevent or curtail any breach of any
provision of this Agreement, including, without limitation, this paragraph 8.
8.9 Effect of Violation
Employee and Employer acknowledge and agree that additional
consideration has been given for Employee entering into this paragraph 8, such
additional consideration including, without limitation, the bonus agreements
detailed above and certain equity agreements being entered into by the parties
in connection herewith and certain provisions for termination payments pursuant
to paragraph 7 of this Agreement. Violation by Employee of this paragraph 8
shall relieve Employer of any obligation it may have to make such bonus and
termination payments, but shall not relieve Employee of his obligations, as
required hereunder, not to compete.
8.10 Definition of Employer
For purposes of subparagraph 8.2 and subparagraph 8.3 hereof,
'Employer" shall include all subsidiaries of Employer, Employer's parent
corporation (if any) and any business ventures in which Employer, its
subsidiaries or its parent corporation may participate.
8.11 Understanding of Employee
In connection with the foregoing provisions of this paragraph 8,
Employee represents that his experience, capabilities and circumstances are such
that such provisions will not prevent him from earning a livelihood. Employee
further agrees that the limitations set forth in this paragraph 8, including,
without limitation, any time or territorial limitations, are reasonable and
properly required for the adequate protection of the business of Employer.
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9. Representations and Warranties
In order to induce Employer to enter into this Agreement, Employee
represents and warrants to Employer as follows:
9.1 Health
Employee is in good health and knows of no physical or mental
disability which would prevent him from fulfilling his obligations hereunder.
Employee agrees, if Employer requests, to submit to annual medical examinations
to be paid for by Employer.
9.2 No Violation of Other Agreements
Neither the execution nor the performance of this Agreement by Employee
will violate or conflict in any way with any other agreement by which Employee
may be bound, or with any other duties imposed upon Employee by corporate or
other statutory or common law.
9.3 Patents, Etc.
Employee has been given the opportunity to prepare and attach hereto as
Schedule 1 a list of all inventions, patent applications and patents made or
conceived by Employee prior to the date hereof, which are subject to prior
agreement or which Employee desires to exclude from this Agreement. If no such
list is attached, Employee hereby represents and warrants to Employer that there
are no such inventions, patent applications or patents.
10. Notice and Cure of Breach
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than pursuant to the definition of "Cause" set forth in
subparagraph 7.5 hereof, before such action is taken, the party asserting the
breach of this Agreement shall give the other party at least 30 days' prior
written notice of the existence and the nature of such breach before taking
further action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the 30-day period.
11. Arbitration
Any controversies or claims arising out of or relating to this
Agreement shall be fully and finally settled by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect (the "AAA Rules"), conducted in the State of
Washington by one arbitrator either mutually agreed upon by Employee and
Employer or chosen in accordance with the AAA Rules, except that the parties
thereto shall have any right to discovery as would be permitted by the Federal
Rules of Civil Procedure for a period of 90 days
9
<PAGE>
following the commencement of such arbitration and the arbitrator thereof shall
resolve any dispute which arises in connection with such discovery. Each party
shall bear his or its own costs and expenses of any such proceeding and judgment
upon the award rendered by the arbitrator may be entered in any court of
competent jurisdiction.
12. Form of Notice
All notices given hereunder shall be given in writing, shall
specifically refer to this Agreement and shall be personally delivered or sent
by telecopy or other electronic facsimile transmission or by registered or
certified mail, return receipt requested, at the address set forth below or at
such other address as may hereafter be designated by notice given in compliance
with the terms hereof:
If to Employee: Gregory Jones
Address:
2710 NE 136th Street
Vancouver, WA 98686
Facsimile:
Phone:
If to Employer: Labtec, Inc.
Suite 350
1499 S.E. Tech Center Drive
Vancouver, WA 98683
Attn: President
Facsimile: 360/896-2100
Phone: 360/896-2000
Copies to: Sun Capital Partners, Inc.
777 South Flagler Drive
West Tower, Eighth Floor
West Palm Beach, FL 33401
Attn: Marc J. Leder and Rodger R. Krouse
Facsimile: 561/835-1314
Phone: 561/820-9442
Ropes & Gray
One International Place
Boston, MA 02110-2624
Attn: Patrick Diaz
Facsimile: 617/951-7050
Phone: 617/951-7000
10
<PAGE>
If notice is mailed, such notice shall be effective upon mailing, or if notice
is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
13. Assignment
This Agreement is personal to Employee and shall not be assignable by
Employee. Employer may assign its rights hereunder to (a) any corporation
resulting from any merger, consolidation or other reorganization to which
Employer is a party or (b) any corporation, partnership, association or other
person to which Employer may transfer all or substantially all of the assets and
business of Employer existing at such time. All of the terms and provisions of
this Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
14. Waivers
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
15. Amendments in Writing
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, nor consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by Employer
and Employee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by Employer and Employee.
16. Applicable Law
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the State of Washington, without regard
to any rules governing conflicts of laws.
17. Severability
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any
11
<PAGE>
jurisdiction, for any reason, including, without limitation, the duration of
such provision, its geographical scope or the extent of the activities
prohibited or required by it, then, to the full extent permitted by law (a) all
other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the intent
of the parties hereto as nearly as may be possible, (b) such invalidity,
illegality or unenforceability shall not affect the validity, legality or
enforceability of any other provision hereof, and (c) any court or arbitrator
having jurisdiction thereover shall have the power to reform such provision to
the extent necessary for such provision to be enforceable under applicable law.
18. Headings
All headings used herein are for convenience only and shall not in any
way affect the construction of, or be taken into consideration in interpreting,
this Agreement.
19. Counterparts
This Agreement and any amendment or modification entered into pursuant
to paragraph 15 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
20. Entire Agreement
This Agreement on and as of the effective date hereof constitutes the
entire agreement between Employer and Employee with respect to Employee's
employment with Employer and all prior or contemporaneous oral or written
communications, understandings or agreements between Employer and Employee with
respect to such subject matter are hereby superseded and nullified in their
entireties.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement as of the effective date set forth above.
LABTEC, INC.
By: /s/ Marc J. Leder
Its: Vice President
EMPLOYEE:
/s/ Gregory Jones
Gregory Jones
13
EXHIBIT 21.1
LIST OF SUBSIDIARIES
Subsidiaries of Labtec Inc.
Name Jurisdiction of Organization
---- ----------------------------
Labtec Corporation Delaware
Spacetec Corporation Delaware
Spacetec IMC International Corporation U.S. Virgin Islands
Spacetec IMC GmbH Germany
Spacetec IMC Limited England and Wales
Spacetec IMC SARL Corp. France
Spacetec IMC Securities Corporation Massachusetts
Subsidiaries of Labtec Corporation
Name Jurisdiction of Organization
---- ----------------------------
Labtec Enterprises U.K., Limited England
Labtec Electronics (HK) Limited Hong Kong
EXHIBIT 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-04991) of Labtec, Inc. of our report dated May
21, 1999 relating to the financial statements and financial statement schedule,
which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Portland, Oregon
June 28, 1999
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