AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 1998.
REGISTRATION NO. 333-41383
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 6
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PENTACON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 5085 76-0531585
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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9821 KATY FREEWAY, SUITE 500
HOUSTON, TEXAS 77024
(713) 464-7770
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MARK E. BALDWIN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
9821 KATY FREEWAY, SUITE 500
HOUSTON, TEXAS 77024
(713) 464-7770
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPY TO:
CHRISTOPHER S. COLLINS CHARLES SZALKOWSKI
MICHAEL C. BLANEY BAKER & BOTTS, L.L.P.
ANDREWS & KURTH L.L.P. ONE SHELL PLAZA
600 TRAVIS STREET, SUITE 4200 910 LOUISIANA STREET
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
(713) 220-4200 (713) 229-1234
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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EXPLANATORY NOTE
This Amendment No. 6 to Registration Statement on Form S-1, Registration
No. 333-41383, for Pentacon, Inc. is filed solely to complete Item 13 in Part II
and to file certain exhibits as indicated in Part II.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION(1)
SEC Registration Fee................. $ 17,923
NASD Filing Fee...................... 6,576
Listing Fee.......................... 118,725
Accounting Fees and Expenses......... 2,000,000
Legal Fees and Expenses.............. 590,000
Printing Expenses.................... 325,000
Transfer Agent's Fees................ 750
Miscellaneous........................ 200,000
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Total........................... $3,258,974
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(1) The amounts set forth above, except for the SEC and NASD fees, are in each
case estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
made to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification provided for by Section 145
shall not be deemed exclusive of any other rights to which the indemnified party
may be entitled; that indemnification provided for by Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of such person's heirs, executors and administrators; and empowers the
corporation to purchase and maintain insurance on behalf of a director or
officer of the
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corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such whether or not the
corporation would have the power to indemnify him against such liabilities under
Section 145.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
Article 7 of the Company's Amended and Restated Certificate of
Incorporation states that:
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article 7
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this Article
Eighth shall apply to, or have any effect on, the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of such director occurring prior to such amendment or repeal. If the DGCL is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended.
The Company intends to enter into indemnification agreements with each of
its executive officers and directors.
In November 1997, Messrs. Grossman and Pugh, each principals in MGCV,
became officers of Alatec in order to assist in, facilitate and expedite the
audit process in connection with the Offering. Alatec and Mr. List, its sole
stockholder, have agreed to indemnify Messrs. Grossman and Pugh against various
claims, damages, costs and expenses that might be incurred by them as officers
of Alatec, including their execution of representation letters to Alatec's
accountants.
Under Section 7(b) of the Underwriting Agreement filed as Exhibit 1.1 to
this Registration Statement, the Underwriters have agreed to indemnify, under
certain conditions, the Company, its officers and directors, and persons who
control the Company within the meaning of the Securities Act of 1933, as
amended, against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is certain information concerning all sales of securities
by the Company during the past three years that were not registered under the
Securities Act of 1933. (The number of shares have been adjusted to account for
a 2,380-for-1 split of the Common Stock effected after November 18, 1997.)
(a) On March 31, 1997, the Company issued 2,380,000 shares of its Common
Stock to MGCV for an aggregate price of $1,000.
(b) On March 31, 1997, the Company issued warrants to purchase 50,000
shares of its Common Stock with an exercise price equal to the lesser of $8.00
or 60% of the public offering price; the warrants were issued for an aggregate
price of $50 to two consultants providing services to the Company.
(c) On November 18, 1997, the Company issued 450,000 shares of its Common
Stock to certain executive officers for an aggregate price of $4,500.
(d) See "Certain Transactions" for a discussion of the issuance of
shares of Common Stock in connection with the Acquisitions.
These transactions were completed without registration under the Securities
Act of 1933 in reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
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1.1 -- Form of Underwriting Agreement.
3.1+ -- Amended and Restated Certificate of Incorporation.
3.2+ -- Bylaws.
4.1+ -- Specimen Common Stock Certificate.
5.1+ -- Opinion of Andrews & Kurth, L.L.P. as to the legality of the securities being registered.
10.1+ -- Agreement and Plan of Organization respecting Alatec Products, Inc. dated as of December
1, 1997.
10.2+ -- Agreement and Plan of Organization respecting AXS Solutions, Inc. dated as of December 1,
1997.
10.3+ -- Agreement and Plan or Organization respecting Capitol Bolt & Supply, Inc. dated as of
December 1, 1997.
10.4+ -- Agreement and Plan of Organization respecting Maumee Industries, Inc. dated as of December
1, 1997.
10.5+ -- Agreement and Plan of Organization respecting Sales Systems, Limited dated as of December
1, 1997.
10.6+ -- Employment Agreement with Mark Baldwin.
10.7+ -- Employment Agreement with Bruce Taten.
10.8+ -- Employment Agreement with Brian Fontana.
10.9 -- Form of Officer and Director Indemnification Agreement.
10.10+ -- Pentacon, Inc. 1998 Stock Plan.
10.11+ -- Form of Waiver of Termination Rights and Schedule of Signatories
10.12+ -- Form of Waiver and Schedule of Signatories
10.13+ -- Form of Recontribution Agreement and Schedule of Signatories
10.14 -- Employment Agreement with James Jackson.
21.1+ -- List of Subsidiaries
23.1+ -- Consent of Andrews & Kurth, L.L.P. (included in Exhibit 5.1).
23.2+ -- Consent of Ernst & Young LLP.
23.3+ -- Consent of McGladrey & Pullen, LLP.
23.4+ -- Consent of Donald B. List to be appointed director.
23.5+ -- Consent of Jack L. Fatica to be appointed director.
23.6+ -- Consent of Michael W. Peters to be appointed director.
23.7+ -- Consent of Benjamin E. Spence, Jr. to be appointed director.
23.8+ -- Consent of Mary E. McClure to be appointed director.
23.9+ -- Consent of Robert M. Chiste to be appointed director.
23.10+ -- Consent of Clayton K. Trier to be appointed director.
24.1+ -- Powers of Attorney (included in signature page set forth on page II-5).
27.1+ -- Financial Data Schedule.
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+ filed previously.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
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matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To provide to the Underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS,
ON MARCH 9, 1998.
PENTACON, INC.
By: /s/ BRUCE M. TATEN
Bruce M. Taten, Senior Vice
President, General Counsel
and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Mark E. Baldwin and Bruce M. Taten, and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any subsequent registration statements filed
by the Registrant pursuant to Rule 462(b) of the Securities Act of 1933, which
relate to this Registration Statement, and to file same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his or their substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
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SIGNATURE TITLE DATE
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* Chairman of the Board of March 9, 1998
MARK E. BALDWIN Directors, and Chief Executive
Officer (Principal Executive
Officer)
* Senior Vice President and March 9, 1998
BRIAN FONTANA Chief Financial Officer
(Principal Financial and
Accounting Officer)
* Director March 9, 1998
CARY M. GROSSMAN
* Director March 9, 1998
JEFFREY A. PUGH
/s/BRUCE M. TATEN
Bruce M. Taten, as attorney-in-fact
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EXHIBIT 1.1
5,200,000 Shares
PENTACON, INC.
Common Stock
UNDERWRITING AGREEMENT
March ___, 1998
BT ALEX. BROWN INCORPORATED
SCHRODER & CO. INC.
SANDERS MORRIS MUNDY INC.
As representatives of the
several Underwriters
named in Schedule I hereto
c/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Dear Sirs:
PENTACON, INC., a Delaware corporation (the "COMPANY"), proposes to
issue and sell 5,200,000 shares of its Common Stock, par value $.01 per share
(the "FIRM SHARES"), to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional 780,000 shares of its Common Stock, par
value $.01 per share (the "ADDITIONAL SHARES"), if requested by the Underwriters
as provided in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter referred to collectively as the "SHARES". The shares of common stock
of the Company to be outstanding after giving effect to the sales contemplated
hereby are hereinafter referred to as the "COMMON STOCK".
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the
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"REGISTRATION STATEMENT"; and the prospectus in the form first used to confirm
sales of Shares is hereinafter referred to as the "PROSPECTUS". If the Company
has filed or is required pursuant to the terms hereof to file a registration
statement pursuant to Rule 462(b) under the Act registering additional shares of
Common Stock (a "RULE 462(B) REGISTRATION STATEMENT"), then, unless otherwise
specified, any reference herein to the term "Registration Statement" shall be
deemed to include such Rule 462(b) Registration Statement.
SECTION 2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS. On
the basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $_______ (the "PURCHASE PRICE") the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to an aggregate of 780,000 Additional
Shares from the Company at the Purchase Price. Additional Shares may be
purchased solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. The Underwriters may exercise their right
to purchase Additional Shares in whole or in part from time to time by giving
written notice thereof to the Company within 30 days after the date of this
Agreement. You shall give any such notice on behalf of the Underwriters and such
notice shall specify the aggregate number of Additional Shares to be purchased
pursuant to such exercise and the date for payment and delivery thereof, which
date shall be a business day (i) no earlier than two business days after such
notice has been given (and, in any event, no earlier than the Closing Date (as
hereinafter defined)) and (ii) no later than ten business days after such notice
has been given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be purchased from the Company as the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement and to
stockholders of the Founding Companies (as hereinafter defined) pursuant to the
Acquisition Agreements (as hereinafter defined), for a period of 180 days after
the date of the Prospectus without the prior written consent of BT Alex. Brown
Incorporated. Notwithstanding the foregoing, during
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such period (i) the Company may issue shares of Common Stock in connection with
acquisitions after the thirtieth day following the date of the Prospectus, (ii)
the Company may grant stock options or other awards pursuant to the Company's
existing stock plan and (iii) the Company may issue shares of Common Stock upon
the exercise of an option or warrant or the conversion of a security outstanding
on the date hereof. The Company also agrees not to amend the provisions of
Section 15.1 of the Acquisition Agreements, or to waive or give its consent
thereunder, for a period of 180 days after the date of the Prospectus without
the prior written consent of BT Alex. Brown Incorporated. The Company also
agrees not to file any registration statement with respect to any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock for a period of 180 days after the date of the Prospectus
without the prior written consent of BT Alex. Brown Incorporated.
Notwithstanding the foregoing, during such period the Company may (i) file a
registration statement on Form S-8 with respect to shares issuable under the
Company's existing stock plan, and (ii) register 3,350,000 shares of Common
Stock under the Securities Act for use by the Company in future acquisitions.
The Company shall, prior to or concurrently with the execution of this
Agreement, deliver an agreement executed by (i) each of the directors and
officers of the Company and (ii) each stockholder listed on Annex I hereto to
the effect that such person will not, during the period commencing on the date
such person signs such agreement and ending 180 days after the date of the
Prospectus, without the prior written consent of BT Alex. Brown Incorporated,
engage in any of the transactions described in the first sentence of this
paragraph.
SECTION 3. TERMS OF PUBLIC OFFERING. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as BT Alex. Brown Incorporated shall request no later
than two business days prior to the Closing Date or the applicable Option
Closing Date (as defined below), as the case may be. The Company shall deliver
the Shares, with any transfer taxes thereon duly paid by the respective Sellers,
to BT Alex. Brown Incorporated through the facilities of The Depository Trust
Company ("DTC"), for the respective accounts of the several Underwriters,
against payment to the Company of the Purchase Price therefore by wire transfer
of Federal or other funds immediately available in New York City. The
certificates representing the Shares shall be made available for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date (as defined below), as the
case may be, at the office of DTC or its designated custodian (the "DESIGNATED
OFFICE"). The time and date of delivery and payment for the Firm Shares shall be
9:00 A.M., New York City time, on March ___, 1998 or such other time and date as
BT Alex. Brown Incorporated and the Company shall agree in writing (the "CLOSING
DATE"). The time and date of delivery and payment for any Additional Shares to
be purchased by the Underwriters shall be 9:00 A.M., New York City time, on the
date specified in the applicable exercise notice given by you
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pursuant to Section 2 or such other time and date as BT Alex. Brown Incorporated
and the Company shall agree in writing (an "OPTION CLOSING DATE").
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Baker & Botts, L.L.P., One Shell Plaza, 910
Louisiana, Houston, Texas and the Shares shall be delivered at the Designated
Office, all on the Closing Date or such Option Closing Date, as the case may be.
SECTION 5. AGREEMENTS OF THE COMPANY. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has been filed with the
Commission and (v) of the happening of any event during the period referred to
in Section 5(d) below which makes any statement of a material fact made in the
Registration Statement or the Prospectus untrue or which requires any additions
to or changes in the Registration Statement or the Prospectus in order to make
the statements therein not misleading. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement, the
Company will use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time.
(b) To furnish to you four signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the Commission
within the applicable period specified in Rule 424(b) under the Act; during the
period specified in Section 5(d) below, not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and, during such period, to
prepare and file with the Commission, promptly upon your reasonable request, any
amendment to the Registration Statement or amendment or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
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(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or a
dealer, to furnish in New York City to each Underwriter and any dealer as many
copies of the Prospectus (and of any amendment or supplement to the Prospectus)
as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; PROVIDED, HOWEVER, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any preliminary prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
(g) To mail or otherwise make generally available to its stockholders as
soon as practicable an earnings statement covering the twelve-month period
ending March 31, 1999 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and the Subsidiaries (as hereinafter defined)
as you may reasonably request.
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(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), any preliminary prospectus, the
Prospectus and all amendments and supplements to any of the foregoing, including
the mailing and delivering of copies thereof to the Underwriters and dealers in
the quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) all costs of printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Shares, (iv) all expenses in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees in connection with the review
and clearance of the offering of the Shares by the National Association of
Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to the
Common Stock and all costs and expenses incident to the listing of the Shares on
the New York Stock Exchange ("NYSE"), (vii) the cost of printing certificates
representing the Shares, (viii) the costs and charges of any transfer agent,
registrar and/or depositary, and (ix) all other costs and expenses incident to
the performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section.
(j) To use its best efforts to list, subject to notice of issuance, the
Shares on the NYSE and to maintain the listing of the Shares on the NYSE for a
period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(1) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
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(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 P.M.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and no proceedings
for such purpose are pending before or threatened by the Commission.
(b)(i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended, if
applicable, will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the Registration Statement (other than
any Rule 462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement) and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the Act,
(iii) if the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement and any amendments thereto, when they become effective (A) will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading and (B) will comply in all material respects with the Act and (iv)
the Prospectus does not contain and, as amended or supplemented, if applicable,
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Registration Statement or the Prospectus based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in any
preliminary prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein.
(d) Each of the Company and its subsidiaries (including each of the
entities identified as "FOUNDING COMPANIES" in SCHEDULE II), each of which
(together with any of its subsidiaries) will become a subsidiary of the Company
on the Closing Date pursuant to the acquisition to be consummated on the First
Closing Date (as herein defined) as described in the Registration Statement (the
"ACQUISITIONS")(collectively, the "SUBSIDIARIES") has been duly incorporated, is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to carry
on its business as described in the Prospectus and to own, lease and operate its
properties, and is duly qualified and is in good standing as a foreign
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corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and the Subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company or any of the Subsidiaries relating to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of the Company
or any of the Subsidiaries, except as otherwise disclosed in the Registration
Statement.
(f) After giving effect to the Acquisitions, all the outstanding shares
of capital stock of the Company will have been duly authorized and validly
issued and will be fully paid, non-assessable and not subject to any preemptive
or similar rights; and the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such shares of capital stock of the Company (including the Shares)
will not be subject to any preemptive or similar rights.
(g) After giving effect to the Acquisitions, all of the outstanding
shares of capital stock of each of the Company and the Subsidiaries will have
been duly authorized and validly issued and will be fully paid and
non-assessable, and will be owned by the Company, directly or indirectly through
one or more of the Subsidiaries, free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature except for the pledge by
Company of all of the stock of the Subsidiaries pledged to Nations Bank N.A.
pursuant to the Credit Agreement as hereinafter defined.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of the Subsidiaries is (i) in violation
of its respective charter or by-laws or (ii) in default in the performance of
any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries or their respective property is bound, except with respect to
item (ii) for such defaults that would not reasonably be expected to have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and the Subsidiaries, taken as a whole.
(j) The execution, delivery and performance of this Agreement by the
Company, each Agreement and Plan of Reorganization relating to the Acquisitions,
which have been included as exhibits to the Registration Statement, including
the waivers of termination rights, waiver agreements and recontribution
agreements relating to the Acquisitions (the "ACQUISITION
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AGREEMENTS"), by the Company and the Subsidiaries and the Credit Agreement to be
entered into between the Company and Nations Bank N.A. (the "CREDIT AGREEMENT")
by the Company, the compliance by the Company with all the provisions hereof and
thereof, and the consummation of the transactions contemplated hereby and
thereby, will not (i) require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or agency
(except for the filings of certificates of merger in connection with the
Acquisitions and except such as have been obtained under the Act or as may be
required under the securities or Blue Sky laws of the various states), (ii)
conflict with or constitute a breach of any of the terms or provisions of, or a
default under, (a) the charter or by-laws of the Company or any of the
Subsidiaries or (b) any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries or their respective
property is bound, (iii) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Company, any of the Subsidiaries or
their respective property or (iv) result in the suspension, termination or
revocation of any Authorization (as defined below) of the Company or any of the
Subsidiaries or any other impairment of the rights of the holder of any such
Authorization; except with respect to item (ii)(b) for such conflicts, breaches
or defaults which if existing would not reasonably be expected to have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and the Subsidiaries, taken as a whole.
(k) There are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of the
Subsidiaries is or could be a party or to which any of their respective property
is or could be subject that are required to be described in the Registration
Statement or the Prospectus and are not so described; nor are there any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not so described or filed as
required.
(1) Except as described in the Acquisition Agreements, neither the
Company nor any of the Subsidiaries has violated any foreign, federal, state or
local law or regulation relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS") or any provisions of the Employee Retirement
Income Security Act of 1974, as amended, or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, would not have a material adverse effect on the business, prospects,
financial condition or results of operation of the Company and the Subsidiaries,
taken as a whole.
(m) Each of the Company and the Subsidiaries has such permits, licenses,
consents, exemptions, franchises, authorizations and other approvals (each, an
Authorization) of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations and all
courts and other tribunals, including, without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the failure to
have any such Authorization or to make any such
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filing or notice would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company and the Subsidiaries, taken as a whole. Each such Authorization
is valid and in full force and effect and each of the Company and its
subsidiaries is in substantial compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and, to the knowledge of the
Company, no event has occurred (including, without limitation, the receipt of
any notice from any authority or governing body) which allows or, after notice
or lapse of time or both, would allow, revocation, suspension or termination of
any such Authorization or results or, after notice or lapse of time or both,
would result in any other material impairment of the rights of the holder of any
such Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of the Subsidiaries; except where such failure
to be valid and in full force and effect or to be in compliance, the occurrence
of any such event or the presence of any such restriction would not, singly or
in the aggregate, have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole.
(n) To the knowledge of the Company, there are no costs or liabilities
associated with Environmental Laws (including, without limitation, any capital
or operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any Authorization granted thereunder, any
related constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company and the Subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered by
the Company.
(p) At the Closing Date, the Credit Agreement will have been duly
authorized, executed and delivered by the Company and will be a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms,
except as that enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether that enforceability is considered in a proceeding in equity or at law).
(q) The execution and delivery of, and the performance by the Company,
the Founding Companies and the shareholders of each Founding Company of their
respective obligations under, the Acquisition Agreements to which they are
parties, respectively, have been duly and validly authorized by the Company, the
Founding Companies and the shareholders of each Founding Company and each
Acquisition Agreement has been duly executed and delivered by the Company and
each Founding Company and Founding Company shareholder which is a party to such
agreement, and constitutes the legal, valid and binding agreement of the Company
and each such Founding Company and Founding Company shareholder, enforceable in
accordance with its terms, except as that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
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equitable principles (regardless of whether that enforceability is considered in
a proceeding in equity or at law) except that no representation is made as to
the enforceability of the waiver agreements and recontribution agreements
relating to the Acquisitions.
(r) Ernst & Young L.L.P. are independent public accountants with respect
to the Company and the Subsidiaries as required by the Act.
(s) McGladrey & Pullen, LLP are independent public accountants with
respect to Alatec, Inc. as required by the Act.
(t) The historical financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), together
with related schedules and notes, present fairly the financial position, results
of operations and changes in financial position of each of the Company, Alatec
Products, Inc. and its subsidiaries, AXS Solutions, Inc. and its subsidiaries,
Maumee Industries, Inc. and its subsidiaries and Sales Systems, Limited and its
subsidiaries on the basis stated therein at the respective dates or for the
respective periods to which they apply; such statements and related schedules
and notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; the supporting schedules, if any, included in the
Registration Statement present fairly in accordance with generally accepted
accounting principles the information required to be stated therein; and the
other financial and statistical information and data set forth in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto) are, in all material respects, accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company. The PRO FORMA financial statements of the Company and the Subsidiaries
and the related notes thereto set forth in the Registration Statement and the
Prospectus (and any supplement or amendment thereto) have been prepared on a
basis consistent with the historical financial statements of the Company and the
Subsidiaries, give effect to the assumptions used in the preparation thereof on
a reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Registration Statement and the
Prospectus. Such PRO FORMA financial statements have been prepared in accordance
with the applicable requirements of Rule 11-02 of Regulation S-X promulgated by
the Commission. The other PRO FORMA financial and statistical information and
data set forth in the Registration Statement and the Prospectus (and any
supplement or amendment thereto) are, in all materials respects, accurately
presented and prepared on a basis consistent with the PRO FORMA financial
statements. No other financial statements or supporting schedules, other than
the Financial Data Schedule required by Item 601(c) of Regulation S-K under the
Securities Act, are required to be included in the Registration Statement. As of
the date of the Prospectus, neither the Company nor any of the Subsidiaries is
planning any probable acquisitions (other than the Acquisitions) for which
disclosure of pro forma financial information in the Prospectus is required by
the Act.
(u) The Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
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(v) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting such
person the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company or to require the Company
to include such securities with the Shares registered pursuant to the
Registration Statement.
(w) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company and the
Subsidiaries, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or any of the Subsidiaries
and (iii) neither the Company nor any of the Subsidiaries has incurred any
material liability or obligation, direct or contingent, except for trade
payables and other similar liabilities incurred in the ordinary course of
business.
(x) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 97-198, Laws of Florida).
(y) Each certificate signed by any officer of the Company and delivered
at the closing to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to the Underwriters as
to the matters covered thereby.
(z) Upon completion of the Acquisitions and filing of the releases as
contemplated in connection therewith, the Company and the Subsidiaries will have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and the Subsidiaries taken as a whole, in each case free
and clear of all liens, encumbrances and defects except such as are described in
the Prospectus or such as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries; and any real property and
buildings held under lease by the Company and the Subsidiaries and which are
material to the business of the Company and the Subsidiaries, taken as a whole,
are held by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and the
Subsidiaries, in each case except as described in the Prospectus.
(aa) The Company and each of the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and neither the Company nor any of the Subsidiaries (i) has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other material expenditures will have to be made in order to
continue such insurance or (ii) has any reason to believe that it will not be
able to renew its existing insurance
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coverage as and when such coverage expires or to obtain similar coverage from
similar insurers at a cost that would not have a material adverse effect on the
business, prospects, financial conditions or results of operations of the
Company and the Subsidiaries, taken as a whole.
(bb) No relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company of any of the Subsidiaries
on the other hand, which is required by the Act to be described in the
Registration Statement or the Prospectus which is not so described.
(cc) There is no (i) significant unfair labor practice complaint,
grievance or arbitration proceeding pending or threatened against the Company or
any of the Subsidiaries before the National Labor Relations Board or any state
or local labor relations board, (ii) strike, labor dispute, slowdown or stoppage
pending or threatened against the Company or any of the Subsidiaries or (iii)
union representation question existing with respect to the employees of the
Company and the Subsidiaries, except for such actions specified in clause (i),
(ii) or (iii) above, which, singly or in the aggregate, would not have material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and the Subsidiaries, taken as a whole. To the best of
the Company's knowledge, no collective bargaining organizing activities are
taking place with respect to the Company or any of the Subsidiaries.
(dd) The Company and each of the Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(ee) All material tax returns required to be filed by the Company and
each of the Subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of the Subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
Neither the Company nor any of the Subsidiaries will incur any federal or state
income tax liability by reason of any of the Acquisitions.
SECTION 7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Underwriter,
its directors, its officers and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the Exchange Act), from and against
any and all losses, claims, damages, liabilities and judgments (including,
without
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limitation, any legal or other expenses incurred in connection with
investigating or defending any matter, including any action, that could give
rise to any such losses, claims, damages, liabilities or judgments) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished in writing
to the Company by such Underwriter through you expressly for use therein;
PROVIDED, HOWEVER, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter who
failed to deliver a Prospectus (as then amended or supplemented, provided by the
Company to the several Underwriters in the requisite quantity and on a timely
basis to permit proper delivery on or prior to the Closing Date) to the person
asserting any losses, claims, damages and liabilities and judgments caused by
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, if such material misstatement or omission
or alleged material misstatement or omission was cured in such Prospectus and
such Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
as the foregoing indemnity from the Company to such Underwriter but only with
reference to information relating to such Underwriter furnished in writing to
the Company by such Underwriter through you expressly for use in the
Registration Statement (or any amendment thereto), the Prospectus (or any
amendment or supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any 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 employment of such counsel shall have been specifically
authorized
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in writing by the indemnifying party, (ii) the indemnifying party shall have
failed to assume the defense of such action or employ counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to any such
action (including any impleaded parties) include both the indemnified party and
the indemnifying party, and the indemnified party shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to assume the
defense of such action on behalf of the indemnified party). In any such case,
the indemnifying party shall not, in connection with any one action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by BT
Alex. Brown Incorporated, in the case of parties indemnified pursuant to Section
7(a), and by the Company, in the case of parties indemnified pursuant to Section
7(b). The indemnifying party shall indemnify and hold harmless the indemnified
party from and against any and all losses, claims, damages, liabilities and
judgments by reason of any settlement of any action (i) effected with its
written consent or (ii) effected without its written consent if the settlement
is entered into more than twenty business days after the indemnifying party
shall have received a request from the indemnified party for reimbursement for
the fees and expenses of counsel (in any case where such fees and expenses are
at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(d)(i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
hand in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds
15
<PAGE>
from the offering (after deducting underwriting discounts and commissions, but
before deducting expenses) received by the Company, and the total underwriting
discounts and commissions received by the Underwriters, bear to the total price
to the public of the Shares, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company on the one hand and
the Underwriters on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
Notwithstanding the foregoing, no Underwriter shall be entitled to
contribution under this Section 7(d) with respect to any losses, claims,
damages, liabilities or judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such Underwriter failed to deliver a Prospectus (as then amended or
supplemented, provided by the Company to the several Underwriters in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages and
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
such material misstatement or omission or alleged material misstatement or
omission was cured in such Prospectus and such Prospectus was required by law to
be delivered at or prior to the written confirmation of sale to such person.
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<PAGE>
(f) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions.
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York City
time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or to the knowledge of the Company contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Mark E. Baldwin and Brian Fontana, in their capacities
as the Chief Executive Officer and Senior Vice President and Chief Financial
Officer, respectively, of the Company, confirming the matters set forth in
Sections 6(w), 8(a) and 8(b) and that the Company has complied with all of the
agreements and satisfied all of the conditions herein contained and required to
be complied with or satisfied by the Company on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of the Subsidiaries and (iii) neither the Company nor any of the
Subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 8(d)(i),
8(d)(ii) or 8(d)(iii), in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion (in a form
reasonably satisfactory to you and counsel for the Underwriters), dated the
Closing Date, of Andrews & Kurth L.L.P., counsel for the Company, to the effect
that:
(i) the Company has been duly incorporated and the Company and
each of the Subsidiaries is validly existing as a corporation in good
standing under the laws of its
17
<PAGE>
jurisdiction of incorporation and has the corporate power and authority
to conduct its business as described in the Prospectus and to own, lease
and operate its properties;
(ii) each of the Company and the Subsidiaries is duly qualified
and is in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and the Subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock of the Company
have been duly authorized by all necessary corporate action on the part
of the Company and are validly issued and are fully paid, non-assessable
and to their knowledge not subject to any preemptive or similar rights;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not to their knowledge be subject
to any preemptive or similar rights;
(v) all of the outstanding shares of capital stock of each of the
Subsidiaries are owned by the Company, directly or indirectly through
one or more subsidiaries, to the knowledge of such counsel, free and
clear of any perfected security interest other than that granted
pursuant to the Credit Agreement;
(vi) this Agreement has been duly authorized by all necessary
corporate action on the part of the Company, executed and delivered by
the Company;
(vii) each of the Acquisition Agreements has been duly authorized
by all necessary corporate action on the part of the Company, executed
and delivered by the Company and is a legal, valid and binding agreement
of the Company, enforceable in accordance with its terms, except as that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles (regardless of
whether that enforceability is considered in a proceeding in equity or
at law);
(viii) the Credit Agreement has been duly authorized by all
necessary corporate action on the part of the Company, executed and
delivered by the Company and is a legal, valid and binding agreement of
the Company, enforceable in accordance with its terms, except as that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally or by general equitable principles (regardless of
whether that enforceability is considered in a proceeding in equity or
at law);
18
<PAGE>
(ix) the authorized capital stock of the Company conforms as to
legal matters in all material respects to the description thereof
contained in the Prospectus;
(x) the Registration Statement has become effective under the
Act; to the knowledge of such counsel, no stop order suspending its
effectiveness has been issued and no proceedings for that purpose have
been instituted or threatened by the Commission;
(xi) the statements under the captions "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Results
of Operations--Combined Combined Liquidity and Capital Resources,"
"Business--Government Regulation," "Management--Employment Agreements,"
"Management--Stock Plan," "Certain Transactions--Organization of the
Company," "Certain Transactions--Transactions Involving Certain
Officers, Directors and Stockholders," "Description of Capital Stock,"
"Shares Eligible for Future Sale" and "Underwriting" in the Prospectus
and Items 14 and 15 of Part II of the Registration Statement, insofar as
such statements constitute a summary of the legal matters or documents
referred to therein, fairly present the information set forth therein,
in each case in all material respects;
(xiii) the execution, delivery and performance of this Agreement
by the Company, the Acquisition Agreements by the Company and the Credit
Agreement by the Company, the compliance by the Company with all the
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (A) require any consent,
approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states), (B)
conflict with or constitute a breach of any of the terms or provisions
of, or a default under, the charter or by-laws of the Company or any of
the Subsidiaries or any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company and the
Subsidiaries, taken as a whole, to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries or their respective property is bound, (C) except as
described in the Prospectus, violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company, any of
the Subsidiaries or their respective property or (D) result in the
suspension, termination or revocation of any Authorization of the
Company or any of the Subsidiaries or any other impairment of the rights
of the holder of any such Authorization;
(xiv) to the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened against the Company or
any of the Subsidiaries or to which any of their respective property is
or could be subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or of
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement that are not so
described or filed as required;
19
<PAGE>
(xv) to the knowledge of such counsel, there are no legal or
governmental proceedings pending or threatened that (A) questions the
validity of any Acquisition Agreement or any action taken or to be taken
by any Founding Company or any stockholder of any Founding Company in
connection with the Acquisition Agreements, at law or in equity, and (B)
if adversely determined, would have a material adverse effect (1) on the
business, prospects, financial condition or results of operation of any
Founding Company, (2) on the ability of any Founding Company to perform
its obligations under the Acquisition Agreement to which it is a party
or (3) on the ability of any stockholder of any Founding Company to
perform his, her or its obligations under the Acquisition Agreement to
which he, she or it is a party.
(xvi) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended;
(xvii) to the knowledge of such counsel, except as described in
the Prospectus, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company or to require the Company to
include such securities with the Shares registered pursuant to the
Registration Statement;
(xviii) each of the mergers contemplated by the Acquisition
Agreements has been consummated pursuant to the terms of the Acquisition
Agreement related thereto, and each of the certificates or articles of
merger relating thereto comply with the applicable requirements of the
laws of the state of incorporation of the Founding Company party to the
applicable merger and of the State of Delaware; and
(xix) the Registration Statement and the Prospectus and any
supplement or amendment thereto, as of its effective date (except for
the financial statements and schedules (including the notes thereto and
the auditors' reports thereon) and other financial data included therein
as to which no opinion need be expressed) comply in all material
respects as to form with the Act.
Such opinion shall also include a statement to the effect
that although such counsel did not independently verify, are not passing
upon and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and the Prospectus (except to the extent stated in paragraphs
(f)(ix) and (f)(xi) above), they advise you that no facts have come to
their attention which lead them to believe that the Registration
Statement (other than (i) the financial statements (including the notes
thereto and the auditors' report thereon) included therein, and (ii) the
other financial and statistical information included therein, as to
which such counsel need express no opinion), as of its effective date,
contained any untrue statement of a material fact or omitted
20
<PAGE>
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus (other
than (i) the financial statements (including the notes thereto and the
auditors' report thereon) included therein and (ii) the other financial
and statistical information included therein), as of its date and as of
the Closing Date, contained or contains any untrue statement of a
material fact or omitted or omits to state any material fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
The opinion of Andrews & Kurth L.L.P. described in Section 8(e) above
shall be rendered to you at the request of the Company and shall so state
therein.
(f) You shall have received on the Closing Date a copy of the opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing Date,
of each of the local counsel for each of the Founding Companies delivered
pursuant to the Acquisition Agreement to which such Founding Company is a party,
in the form annexed thereto, accompanied by a letter dated the Closing Date and
addressed to you from such counsel stating that you are entitled to rely on such
opinion as if it were addressed to you; provided that references in such form to
the due authorization, execution and delivery of such Acquisition Agreement
shall be modified to include the waivers of termination rights, waiver
agreements and recontribution agreements relating to such Acquisition Agreement.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Baker & Botts, L.L.P., counsel for the Underwriters, as to the
matters referred to in Sections 8(e)(iv), 8(e)(vi), 8(e)(xi) (but only with
respect to the statements under the caption "Description of Capital Stock" and
"Underwriting") and the last paragraph in section 8(e).
In giving such opinions with respect to the matters covered by the last
paragraph in section 8(e), Andrews & Kurth L.L.P. and Baker & Botts, L.L.P. may
state that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto and review and discussion of the contents thereof, but are
without independent check or verification except as specified.
(h) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from Ernst & Young L.L.P., independent
public accountants, containing the information and statements of the type
ordinarily included in accountants "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(i) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from McGladrey & Pullen, LLP,
independent public accountants, containing the information
21
<PAGE>
and statements of the type ordinarily included in accountants "comfort letters"
to Underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus.
(j) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(k) On the First Closing Date the Acquisitions shall have been
consummated on the terms set forth in the Registration Statement and the
Acquisition Agreements, without waiver or modification of any material terms or
provisions of any Acquisition Agreement, except as may be approved by you.
(l) The Shares shall have been duly listed, subject to notice of
issuance, on the NYSE.
(m) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
(n) Each of Donald B. List, Mary E. McClure, Michael W. Peters and
Benjamin E. Spence, Jr. shall have entered into employment agreements (in form
and substance satisfactory to you) with their respective Founding Companies.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
SECTION 9. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or
22
<PAGE>
other governmental authority which in your opinion materially and adversely
affects, or will materially and adversely affect, the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not more
than one-tenth of the total number of Firm Shares or Additional Shares, as the
case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion which
the number of Firm Shares set forth opposite its name in Schedule I bears to the
total number of Firm Shares which all the non-defaulting Underwriters have
agreed to purchase, or in such other proportion as you may specify, to purchase
the Firm Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; PROVIDED that in no event shall the number of Firm Shares or Additional
Shares, as the case may be, which any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company for purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. If, on an Option Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased on such
date, the non-defaulting Underwriters shall have the option to (i) terminate
their obligation hereunder to purchase such Additional Shares or (ii) purchase
not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase on such date in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
SECTION 10. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to
Pentacon, Inc., 9821 Katy Freeway, Suite 500, Houston, Texas 77024, and (ii) if
to any Underwriter or to you, to you c/o BT Alex. Brown
23
<PAGE>
Incorporated, One South Street, Baltimore, Maryland 21202, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them in connection with the
proposed offering of the Shares. Notwithstanding any termination of this
Agreement, the Company shall be liable for all expenses which it has agreed to
pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
several Underwriters, their directors and officers and any persons controlling
any of the Underwriters for any and all fees and expenses (including, without
limitation, the fees disbursements of counsel) reasonably incurred by them in
connection with enforcing their rights hereunder (including, without limitation,
pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
24
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
PENTACON, INC.
By:__________________________
Title:
BT ALEX. BROWN INCORPORATED
SCHRODER & CO. INC.
SANDERS MORRIS MUNDY INC.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By BT ALEX. BROWN INCORPORATED
By_____________________________
25
<PAGE>
SCHEDULE I
NUMBER OF FIRM SHARES
UNDERWRITERS TO BE PURCHASED
- --------------------------------- ------------------------
BT Alex. Brown Incorporated
Schroder & Co. Inc.
Sanders Morris Mundy Inc.
------------
TOTAL
<PAGE>
SCHEDULE II
FOUNDING COMPANIES
Alatec Products, Inc.
AXS Solutions, Inc.
Capital Bolt & Supply, Inc.
Maumee Industries, Inc.
Sales Systems Limited
<PAGE>
Annex I
Mark E. Baldwin
Jack L. Fatica
Brian Fontana
Bruce M. Taten
Cary M. Grossman
Donald B. List
Mary E. McClure
Michael W. Peters
Benjamin E. Spence, Jr.
Jeffrey A. Pugh
Michael Black
Donald L. Luke
MGCV
1
[FORM OF]
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made as of March ___, 1998, and is
entered into by and between Pentacon, Inc., a Delaware corporation (the
"Company"), and [Director/Officer] ("Indemnitee").
R E C I T A L S:
WHEREAS, the certificate of incorporation and bylaws of the Company
provide for the indemnification of the Company's directors and executive
officers to the maximum extent permitted from time to time under applicable law
and, along with the Delaware General Corporation Law, contemplate that the
Company may enter into agreements with respect to such indemnification; and
WHEREAS, the Board of Directors of the Company has concluded that it is
reasonable, prudent and in the best interests of the Company's stockholders for
the Company to contractually obligate itself to indemnify certain of its
Authorized Representatives (defined below) so that they will serve or continue
to serve with greater certainty that they will be adequately protected.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires, the following terms
shall have the following respective meanings:
"Authorized Representative" means (i) a director, officer,
employee, agent or fiduciary of the Company or any Subsidiary and (ii) a
person serving at the request of the Company or any Subsidiary as a
director, officer, employee, fiduciary or other representative of
another Enterprise.
"Enterprise" means any corporation, partnership, limited
liability company, association, joint venture, trust, employee benefit
plan or other entity.
"Expenses" means all expenses, including (without limitation)
reasonable fees and expenses of counsel.
"Liabilities" means all liabilities, including (without
limitation) the amounts of any judgments, fines, penalties, excise taxes
and amounts paid in settlement.
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"Proceeding" means any threatened, pending or completed claim,
action (including any action by or in the right of the Company), suit or
proceeding (whether formal or informal, or civil, criminal,
administrative, legislative, arbitrative or investigative) in respect of
which Indemnitee is, was or at any time becomes, or is threatened to be
made, a party, witness, subject or target, by reason of the fact that
Indemnitee is or was an Authorized Representative or a prospective
Authorized Representative.
"Subsidiary" means, at any time, (i) any corporation of which at
least a majority of the outstanding voting stock is owned by the Company
at such time, directly or indirectly through subsidiaries, and (ii) any
other Enterprise in which the Company, directly or indirectly, owns more
than a 50% equity interest at such time.
2. INTERPRETATION. (a) In this Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and VICE
VERSA;
(ii) reference to any gender includes each other gender;
(iii) the words "HEREIN," "HEREOF" and "HEREUNDER" and other
words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision;
(iv) unless the context indicates otherwise, reference to any
Section means such Section hereof; and
(v) the words "INCLUDING" (and with correlative meaning
"INCLUDE") means including, without limiting the generality of any
description preceding such term.
(b) The Section headings herein are for convenience only and
shall not affect the construction hereof.
(c) No provision of this Agreement shall be interpreted or
construed against any party solely because that party or its legal
representative drafted such provision.
(d) In the event of any ambiguity, vagueness or other similar
matter involving the interpretation or meaning of this Agreement, this Agreement
shall be liberally construed so as to provide to Indemnitee the full benefits
contemplated hereby.
(e) If the indemnification to which Indemnitee is entitled as
respects any aspect of any claim varies between two or more provisions of this
Agreement, that provision providing the most comprehensive indemnification shall
apply.
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3. LIMITATION ON PERSONAL LIABILITY. To the fullest extent permitted by
applicable law, Indemnitee shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director of
the Company, PROVIDED that the foregoing shall not eliminate or limit the
liability of Indemnitee (i) for any breach of Indemnitee's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law relating to unlawful
dividend payments and unlawful stock purchases or redemptions or (iv) for any
transaction from which Indemnitee derived an improper personal benefit.
4. INDEMNITY. (a) Subject to the following provisions of this Agreement,
the Company shall hold harmless and indemnify Indemnitee to the fullest extent
permitted by applicable law existing (now/or hereafter adopted) against all
Expenses and Liabilities actually incurred by Indemnitee in connection with any
Proceeding; PROVIDED, HOWEVER, that no indemnity shall be paid by the Company
pursuant to this Agreement:
(i) for amounts actually paid to Indemnitee pursuant to one or
more policies of directors and officers liability insurance maintained
by the Company or pursuant to a trust fund, letter of credit or other
security or funding arrangement provided by the Company; PROVIDED,
HOWEVER, that if it should subsequently be determined that Indemnitee is
not entitled to retain any such amount, this clause (i) shall no longer
apply to such amount;
(ii) in respect of remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that payment
of such remuneration was in violation of applicable law;
(iii) on account of Indemnitee's conduct which is finally
adjudged to constitute willful misconduct or to have been knowingly
fraudulent, deliberately dishonest or from which the Indemnitee derives
an improper personal benefit; or
(iv) on account of any suit in which final judgment is rendered
against Indemnitee for an accounting of profits made from the sale or
purchase by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended.
(b) If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for only a portion (but not, however, for the
total amount) of any Expenses or Liabilities actually incurred by Indemnitee in
connection with any Proceeding, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses and Liabilities to which Indemnitee
is entitled. If the indemnification provided for herein in respect of any
Expenses or Liabilities actually incurred by Indemnitee in connection with any
Proceeding is finally determined by a court of competent jurisdiction to be
prohibited by applicable law, then the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount paid or payable by Indemnitee as a
result of such Expenses and Liabilities in such proportion as is appropriate to
reflect (i) the relative benefits
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received by the Company on the one hand and Indemnitee on the other hand from
the events, circumstances, conditions, happenings, actions or transactions from
which such Proceeding arose, (ii) the relative fault of the Company (including
its other Authorized Representatives) on the one hand and of Indemnitee on the
other hand in connection with the events, circumstances and happenings which
resulted in such Expenses and Liabilities, such relative fault to be determined
by reference to, among other things, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the events,
circumstances and/or happenings resulting in such Expenses and Liabilities, and
(iii) any other relevant equitable considerations, it being agreed that it would
not be just and equitable if such contribution were determined by pro rata or
other method of allocation which does not take into account the foregoing
equitable considerations.
(c) The indemnification provided herein shall be applicable only to
Proceedings commenced after the date hereof, regardless, however, of whether
they arise from acts, omissions, facts or circumstances occurring before or
after the date hereof.
(d) The indemnification provided herein shall be applicable whether or
not negligence of Indemnitee is alleged or proved, and regardless of whether
such negligence be contributory or sole.
(e) Amounts paid by the Company to Indemnitee under this Section 4 are
subject to refund by Indemnitee as provided in Section 8.
5. NOTIFICATION AND DEFENSE OF CLAIMS. (a) Promptly after the receipt by
Indemnitee of notice of the commencement of any Proceeding, Indemnitee will, if
a claim in respect thereof is to be made against the Company under this
Agreement, notify the Company of the commencement of such Proceeding; PROVIDED,
HOWEVER, that the omission to so notify the Company will not relieve the Company
(i) from any liability which it may have to Indemnitee under this Agreement
unless, and then only to the extent that, such omission results in insufficient
time being available to permit the Company or its counsel to effectively defend
against or make timely response to any loss, claim, damage, liability or expense
resulting from such Proceeding or otherwise has a material adverse effect on the
Company's ability to promptly deal with such loss, claim, damage, liability or
expense or (ii) from any liability which it may have to Indemnitee otherwise
than under this Agreement.
(b) The following provisions shall apply with respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:
(i) The Company shall be entitled to participate therein at its
own expense.
(ii) Except as otherwise provided below, to the extent it may
elect to do so, the Company (jointly with any other indemnifying party
similarly notified) will be entitled to assume the defense thereof, with
counsel of its own selection reasonably satisfactory to Indemnitee.
After notice from the Company to Indemnitee of its election so to assume
the defense thereof, the Company will not be liable to Indemnitee under
this Agreement for any
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Expenses subsequently incurred by Indemnitee in connection with the
defense of such Proceeding other than reasonable costs of investigation
or as otherwise provided below. Indemnitee shall have the right to
employ separate counsel in such Proceeding but the fees and expenses of
such counsel incurred after notice from the Company of its assumption of
the defense thereof shall be at the expense of Indemnitee unless (1) the
employment of separate counsel by Indemnitee has been authorized by the
Company; (2) Indemnitee shall have reasonably concluded that there may
be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such Proceeding; or (3) the Company shall not
in fact have employed counsel to assume the defense of such Proceeding,
in each of which cases the reasonable fees and expenses of Indemnitee's
counsel shall be borne by the Company. The Company shall not be entitled
to assume the defense of any Proceeding brought by or on behalf of the
Company or as to which Indemnitee shall have made the conclusion
provided for in (2) above. Nothing in this subparagraph (ii) shall
affect the obligation of the Company to indemnify Indemnitee against
Expenses and Liabilities paid in settlement for which it is otherwise
obligated hereunder.
(iii) The Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any
Proceedings or claims effected without its prior written consent. The
Company shall not settle any Proceeding or claim in any manner which
would impose any penalty or limitation on Indemnitee without
Indemnitee's prior written consent. Neither the Company nor Indemnitee
will unreasonably withhold or delay its consent to any proposed
settlement.
6. ADVANCEMENT OF EXPENSES, ETC. If requested to do so by Indemnitee
with respect to any Proceeding, the Company shall advance to or for the benefit
of Indemnitee, prior to the final disposition of such Proceeding, the Expenses
actually incurred by Indemnitee in investigating, defending or appealing such
Proceeding. Any judgments, fines or amounts to be paid in settlement of any
Proceeding shall also be advanced by the Company upon request by Indemnitee.
Advances made by the Company under this Section 6 are subject to refund by
Indemnitee as provided in Section 8.
7. RIGHT OF INDEMNITEE TO BRING SUIT. (a) If a claim for indemnification
or a claim for an advance under this Agreement is not paid in full by the
Company within 30 days after receipt by the Company from Indemnitee of a written
request or demand therefor, Indemnitee may bring suit against the Company to
recover the unpaid amount of the claim. If, in any such action, Indemnitee makes
a prima facie showing of entitlement to indemnification under this Agreement,
the Company shall have the burden of proving that indemnification is not
required under this Agreement. The only defense to any such action shall be that
indemnification is not required by this Agreement.
(b) In the event that any action is instituted by Indemnitee to enforce
Indemnitee's rights or to collect monies due to Indemnitee under this Agreement
and if Indemnitee is successful in such action, the Company shall reimburse
Indemnitee for all Expenses incurred by Indemnitee with respect to such action.
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8. REPAYMENT OBLIGATION OF INDEMNITEE. If the Company advances or pays
any amount to Indemnitee under Section 4, 6 or 7 and if it shall thereafter be
finally adjudicated that Indemnitee was not entitled to be indemnified hereunder
for all or any portion of such amount, Indemnitee shall promptly repay such
amount or such portion thereof, as the case may be, to the Company. If the
Company advances or pays any amount to Indemnitee under Section 4, 6 or 7 and if
Indemnitee shall thereafter receive all or a portion of such amount under one or
more policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company.
9. CHANGES IN LAW. If any change after the date of this Agreement in any
applicable law, statute or rule expands the power of the Company to indemnify
Authorized Representatives, such change shall be within the purview of
Indemnitee's rights and the Company's obligations under this Agreement. If any
change after the date of this Agreement in any applicable law, statute or rule
narrows the right of the Company to indemnify an Authorized Representative, such
change shall, to the fullest extent permitted by applicable law, leave this
Agreement and the parties' rights and obligations hereunder unaffected.
10. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Company hereunder shall continue during the period Indemnitee is an Authorized
Representative, and shall continue after Indemnitee has ceased to occupy such
position or have such relationship so long as Indemnitee shall be subject to any
possible Proceeding.
11. NONEXCLUSIVITY. The indemnification and other rights provided by any
provision of this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may be entitled under (i) any statutory or common law, (ii) the
Company's certificate of incorporation, (iii) the Company's bylaws, (iv) any
other agreement or (v) any vote of stockholders or disinterested directors or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while occupying any of the positions or having any of the
relationships referred to in this Agreement. Nothing in this Agreement shall in
any manner affect, impair or compromise any indemnification Indemnitee has or
may have by virtue of any agreement previously entered into between Indemnitee
and the Company.
12. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable (i) the validity, legality or enforceability
of the remaining provisions of this Agreement shall not be in any way affected
or impaired thereby and (ii) to the fullest extent possible, the provisions of
this Agreement shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable. Each provision of this
Agreement is a separate and independent portion of this Agreement.
13. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties. No waiver of any of
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the provisions of this Agreement shall be binding unless executed in writing by
the person making the waiver nor shall such waiver constitute a continuing
waiver.
14. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be addressed (i) if to the Company, at
its principal office address as shown on the signature page hereof or such other
address as it may have designated by written notice to Indemnitee for purposes
hereof, directed to the attention of the Secretary and (ii) if to Indemnitee, at
Indemnitee's address as shown on the signature page hereof or to such other
address as Indemnitee may have designated by written notice to the Company for
purposes hereof. Each such notice or other communication shall be deemed to have
been duly given if (a) delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, (b) transmitted by
facsimile transmission, at the time that receipt of such transmission is
confirmed, or (c) mailed by certified or registered mail with postage prepaid,
on the third business day after the date on which it is so mailed.
15. GOVERNING LAW. This Agreement shall be deemed to be a contract made
under, and shall be governed by and construed and enforced in accordance with,
the internal laws of the State of Texas without regard to principles of
conflicts of law.
16. HEIRS, SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding
upon, inure to the benefit of and be enforceable by (i) Indemnitee and
Indemnitee's personal or legal representatives, executors, administrators,
heirs, devisees and legatees and (ii) the Company and its successors and
assigns. This Agreement shall not inure to the benefit of any other person or
Enterprise.
(b) The Company agrees to require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
assumption and agreement provided for in this Section 16 or which otherwise
becomes bound by all terms and provisions of this Agreement by operation of law.
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ENTERED into on the day and year first above written.
THE COMPANY:
PENTACON, INC.
By:
Name:
Title:
Address:
Telecopier:
INDEMNITEE:
[Director/Officer]
Address:
Telecopier:
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Pentacon,
Inc., a Delaware corporation (the "Company"), and James C. Jackson ("Executive")
is hereby entered into and effective as of the th day of January, 1998. This
Agreement hereby supersedes any other employment agreements or understandings,
written or oral, between the Company and Executive.
RECITALS
The following statements are true and correct:
As of the date of this Agreement, the Company is engaged primarily in
the acquisition and operation of companies engaged in the distribution of
fasteners and provision of related inventory services.
Executive is employed hereunder by the Company in a confidential
relationship wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of confidential
and proprietary information as to the Company's customers and specific manner of
doing business, including the processes, techniques and trade secrets utilized
by the Company, and future plans with respect thereto, all of which has been and
will be established and maintained at great expense to the Company. This
confidential and proprietary information is a trade secret and constitutes the
valuable goodwill of the Company.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
AGREEMENTS
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Executive as Vice President-Corporate
Controller of the Company. As such, Executive shall have responsibilities,
duties and authority reasonably accorded to, expected of and consistent with
Executive's position as Vice President-Corporate Controller of the Company and
will report directly to the Chief Financial Officer of the Company (the "CFO").
Executive hereby accepts this employment upon the terms and conditions herein
contained and, subject to paragraph 1(c), agrees to devote substantially all of
his business-related time, attention and efforts to promote and further the
business and interests of the Company and its affiliates.
(b) Executive shall faithfully adhere to all lawful policies established
by the Company.
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(c) Executive shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes in any material respect with
Executive's duties and responsibilities hereunder. The foregoing limitations
shall not be construed as prohibiting Executive from (i) making personal
investments in such form or manner as will neither require his services in the
operation or affairs of the companies or enterprises in which such investments
are made nor violate the terms of paragraph 3 hereof; (ii) participating in
professional development activities; or (iii) acting as a director of not more
than one other corporation which does not compete with the Company provided such
representation does not adversely impact the Executive's duties hereunder.
(d) Executive cannot be required by the Company to relocate unless the
Executive consents to such relocation. The Executive's refusal to relocate shall
not be considered "cause" for termination. Furthermore, Executive shall not be
required to commute to another location or travel extensively in lieu of
relocation.
2. COMPENSATION. For all services rendered by Executive, the Company
shall compensate Executive beginning upon the consummation of the initial public
offering of the common stock of Pentacon (the "IPO") as follows:
(a) BASE SALARY. The base salary payable to Executive shall be $100,000
per year commencing upon the consummation of the IPO, and payable on a regular
basis in accordance with the Company's standard payroll procedures but not less
than monthly. Such base salary may be increased (but not decreased) from time to
time, at the discretion of the Board of Directors of Pentacon ("the Board"), in
light of Executive's annual review, position, responsibilities and performance.
(b) STOCK GRANT. The Company agrees to grant Executive 65,000 shares of
Restricted Common Stock of the Company upon the date of the IPO. Such shares
will vest over three years, one third on each of the first, second and third
anniversaries of the IPO date, respectively.
(c) STOCK OPTION GRANT. Executive shall receive 50,000 options to
purchase shares of stock of the Company, exercisable at the price the stock is
issued in the IPO. Such options shall vest as follows: 30% shall vest at the end
of the second anniversary hereof and 100% shall vest at the end of the third
anniversary hereof.
(d) BONUS. Executive shall receive an annual bonus to be determined by
the Board. Such bonus shall be targeted at 30% of Executive's base salary,
subject to yet to-be-determined performance criteria.
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(e) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Executive
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Executive and his
dependent family members under health, hospitalization, disability,
dental, life and other insurance plans that the Company may have in
effect from time to time (all in an amount not less than such benefits
provided to other Company executives).
(ii) Reimbursement for all business travel and other
out-of-pocket expenses and professional dues and fees reasonably
incurred by Executive in the performance of his services pursuant to
this Agreement. All reimbursable expenses shall be appropriately
documented in reasonable detail by Executive upon submission of any
request for reimbursement, and in a format and manner consistent with
the Company's expense reporting policy.
(iii) The Company shall provide Executive with other executive
perquisites as may be available to or deemed appropriate for Executive
by the Board and Executive shall be eligible for participation in all
other Company-wide employee benefits as are available from time to time.
(iv) The Executive shall be entitled to three (3) weeks paid
vacation per year.
3. NON-COMPETITION AGREEMENT.
(a) Executive recognizes that the Company's willingness to enter into
this Agreement is based in material part on Executive's agreement to the
provisions of this paragraph 3 and that Executive's breach of the provisions of
this paragraph 3 could materially damage the Company. Subject to and so long as
the Company is not in violation of its obligations under this Agreement,
Executive will not, during the period of his employment by or with the Company,
and for a period of one (1) year immediately following the termination of his
employment under this Agreement, for any reason whatsoever (other than a
termination by the Company without cause, or a termination by Executive with
Good Reason (as hereinafter defined)), directly or indirectly, for himself or on
behalf of or in conjunction with any other person, company, partnership,
corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business in direct competition with the Company
or its subsidiaries, within one hundred (100) miles of where the Company
or any of its
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subsidiaries conduct business, including any territory serviced by the
Company or any of its subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or its subsidiaries (including the
respective subsidiaries thereof) in a managerial capacity for the
purpose or with the intent of enticing such employee away from or out of
the employ of the Company or its subsidiaries;
(iii) call upon any person or entity which is, at that time, or
which has been, within one (1) year prior to that time, a customer of
the Company or its subsidiaries within the Territory for the purpose of
soliciting or selling products or services in direct competition with
the Company or its subsidiaries within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Executive's own behalf or on behalf of any competitor, which candidate
was, to Executive's knowledge after due inquiry, either called upon by
the Company or its subsidiaries or for which the Company or its
subsidiaries made an acquisition analysis, for the purpose of acquiring
such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Executive from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or on an over-the-counter or similar market.
(b) Because of the difficulty of measuring economic losses to the
Company and its subsidiaries as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be caused to the
Company and its subsidiaries for which they would have no other adequate remedy,
Executive agrees that the foregoing covenant may be enforced by the Company or
its subsidiaries, in the event of breach by him, by injunctions and restraining
orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Executive in light of the
activities and business of the Company or its subsidiaries, as the case may be,
on the date of the execution of this Agreement and the current plans of the
Company and its subsidiaries; but it is also the intent of the Company and
Executive that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Company and its subsidiaries,
as the case may be, throughout the term of this covenant, whether before or
after the date of termination of the employment of Executive. For example, if,
during the term of this Agreement, the Company or its subsidiaries, as the case
may be, engage in new and different activities, enter a new business or
establish new locations for their current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Executive will be precluded
from soliciting the customers or employees of such new activities or business or
from such new
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location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Executive shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or its
subsidiaries, or similar activities or business in locations the operation of
which, under such circumstances, does not violate clause (a) of this paragraph
3, and in any event such new business, activities or location are not in
violation of this paragraph 3 or of Executive's obligations under this paragraph
3, if any, Executive shall not be chargeable with a violation of this paragraph
3 if the Company or its subsidiaries shall thereafter enter the same, similar or
a competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
its subsidiaries, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or its subsidiaries of
such covenants. It is specifically agreed that the period of one (1) year
following termination of employment stated at the beginning of this paragraph 3,
during which the agreements and covenants of Executive made in this paragraph 3
shall be effective, shall be computed by excluding from such computation any
time during which Executive is in violation of any provision of this paragraph
3.
4. TERM; TERMINATION; RIGHTS ON TERMINATION. (a) The term of this
Agreement shall begin on the consummation of the IPO and continue for one (1)
year (the "Term"), and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal. This Agreement and
Executive's employment may be terminated in any one of the following ways:
(i) DEATH. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate.
(ii) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Executive shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of
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such four (4) month period), the Company may terminate Executive's employment
hereunder, provided that Executive is unable to resume his full-time duties at
the conclusion of such notice period. Also, Executive may terminate his
employment hereunder if his health should become impaired to an extent that
makes the continued performance of his duties hereunder hazardous to his
physical or mental health or his life, provided that Executive shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Executive shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Executive or Executive's doctor and such doctor shall have concurred in the
conclusion of Executive's doctor. In the event this Agreement is terminated as a
result of Executive's disability, Executive shall receive from the Company, in a
lump sum payment due within ten (10) days of the effective date of termination,
the base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement, or for nine (9) months, whichever is greater.
(iii) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Executive for good cause, which shall be: (i)
Executive's breach of any material provision of this Agreement (continuing for
ten (10) days after receipt of notice of need to cure); (ii) Executive's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Executive's
material duties and responsibilities hereunder which is harmful or injurious to
the Company; (iii) Executive's dishonesty, fraud or misconduct with respect to
the business or affairs of the Company or its subsidiaries which materially and
adversely affects the operations or reputation of the Company or its
subsidiaries; (iv) Executive's conviction of a felony crime; or (v) alcohol
abuse or a confirmed positive illegal drug test result. In the event of a
termination for good cause, as enumerated above, Executive shall have no right
to any severance compensation but shall receive all compensation due and payable
through the date of termination.
(iv) WITHOUT CAUSE. At any time after the commencement of employment,
Executive may, without cause, and without Good Reason terminate this Agreement
and Executive's employment, effective thirty (30) days after written notice is
provided to the Company. Should Executive be terminated without cause during the
Term, or should Executive terminate with Good Reason, Executive shall receive
from the Company, in a lump sum payment due on the effective date of
termination, the base salary at the rate then in effect equivalent to nine (9)
months salary. If Executive resigns or otherwise terminates his employment
without cause and without Good Reason, Executive shall receive no severance
compensation.
Executive shall have "Good Reason" to terminate this Agreement and his
employment hereunder upon the occurrence of any of the following events: (a)
Executive experiences a reduction in authority, responsibilities or duties to a
position of less stature or importance within the Company than the position
described in paragraph 1 hereof (b) a material breach of this Agreement by the
Company which continues for thirty (30) days after receipt of written notice of
breach is received
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by the Company from the Employee or (c) Executive is required to support (by
action or silence) conduct which constitutes dishonesty, fraud or willful
misconduct with respect to the business or affairs of the Company or its
subsidiaries.
Upon termination of this Agreement for any reason provided above,
Executive shall be entitled to receive all compensation earned and/or accrued
and all benefits and reimbursements due and/or accrued through the effective
date of termination. Additional compensation subsequent to termination, if any,
will be due and payable to Executive only to the extent and in the manner
expressly provided above. All other rights and obligations of the Company and
Executive under this Agreement shall cease as of the effective date of
termination, except that the Executive's obligations under paragraphs 3, 5, 6,
7, 8 and 9 herein and the Company's obligations with respect to stock grants,
stock options, and severance shall survive such termination in accordance with
their terms.
(b) TREATMENT OF STOCK OPTIONS AND STOCK GRANTS. Any unvested portion of
any awards of stock options or stock grants pursuant to this Agreement in
connection with Executive's employment shall be treated in the following manner
in the event of a termination of Executive's employment.
(i) If Executive's employment is terminated by the Company for
cause or if Executive resigns or terminates his employment other than
for Good Reason, then any unvested portion of any awards of stock
options or stock grants shall lapse or shall be forfeited.
(ii) If Executive's employment is terminated by the Company
without cause or if Executive terminates his employment for Good Reason,
then any unvested portion of any awards of stock options or stock grants
shall immediately vest to their fullest extent (notwithstanding any
vesting provisions to the contrary) and Executive shall be entitled to
all rights and privileges associated with such awards (subject to
applicable securities laws and regulations).
5. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive by or on behalf of the Company, its
subsidiaries or their representatives, vendors or customers which pertain to the
business of the Company or its subsidiaries shall be and remain the property of
the Company or its subsidiaries, as the case may be, and be subject at all times
to their discretion and control. Likewise, all correspondence, reports, records,
charts, advertising materials and other similar data pertaining to the business,
activities or future plans of the Company or its subsidiaries which is collected
by Executive shall be delivered promptly to the Company without request by it
upon termination of Executive's employment.
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6. INVENTIONS. Executive shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment, and
which are directly related to the business or activities of the Company and
which Executive conceives as a result of his employment by the Company.
Executive hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Executive
shall execute any and all applications, assignments or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
7. TRADE SECRETS. Executive agrees that he will not, during or after the
Term of this Agreement with the Company, disclose the specific terms of the
Company's or its subsidiaries' relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Company or its subsidiaries, whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or purpose
whatsoever, except in connection with (a) any legal proceeding of the Company in
which such disclosure is required to be made by the Company (b) obtaining the
advice of outside consultants engaged by the Company (c) discussions with the
Company's outside auditors (d) obtaining or maintenance of the Company's credit
facility or (e) otherwise with the consent of the Company's CEO or the Board of
Directors.
8. CONFIDENTIALITY.
(a) Executive acknowledges and agrees that all Confidential Information
(as defined below) of the Company is confidential and a valuable, special and
unique asset of the Company that gives the Company an advantage over its actual
and potential, current and future competitors. Executive further acknowledges
and agrees that Executive owes the Company a fiduciary duty to preserve and
protect all Confidential Information from unauthorized disclosure or
unauthorized use, that certain Confidential Information constitutes "trade
secrets" under applicable laws, and that unauthorized disclosure or unauthorized
use of the Company's Confidential Information would irreparably injure the
Company.
(b) Both during the term of Executive's employment and after the
termination of Executive's employment for any reason (including wrongful
termination), Executive shall hold all Confidential Information in strict
confidence, and shall not use any Confidential Information except for the
benefit of the Company, in accordance with the duties assigned to Executive.
Executive shall not, at any time (either during or after the term of Executive's
employment), disclose any Confidential Information to any person or entity
(except other employees of the Company who have a need to know the information
in connection with the performance of their employment duties), or copy,
reproduce, modify, decompile or reverse engineer any Confidential Information,
or remove any Confidential Information from the Company's premises, without the
prior consent of the CEO
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of the Company or the Board of Directors of the Company, or permit any other
person to do so. In the event Executive is requested or required (by oral
questions, interrogatories, requests for information or documents, subpoena,
civil investigative demand or other process) to disclose any Confidential
Information, Executive will provide the Company with immediate written notice of
any such request or requirement so that the Company may seek an appropriate
protective order and/or seek with Executive's cooperation to narrow the request
or demand or waive Executive's compliance with the provisions of this Agreement.
If, failing the entry of a protective order or the receipt of a waiver
hereunder, Executive is, in the opinion of his counsel, compelled to disclose
Confidential Information, Executive may disclose only that portion of the
Confidential Information which Executive's counsel advises Executive in writing
that Executive is compelled to disclose and Executive will exercise his best
efforts to obtain assurance that confidential treatment will be accorded such
Confidential Information. In any event, Executive will not oppose action by the
Company to obtain an appropriate protective order or other reliable assurance
that confidential treatment will be accorded the Confidential Information.
Executive shall take reasonable precautions to protect the physical security of
all documents and other material containing Confidential Information (regardless
of the medium on which the Confidential Information is stored). This Agreement
applies to all Confidential Information, whether now known or later to become
known to Executive.
(c) Upon the termination of Executive's employment with the Company for
any reason, and upon request of the Company at any other time, Executive shall
promptly surrender and deliver to the Company all documents and other written
material of any nature containing or pertaining to any Confidential Information
and shall not retain any such document or other material. Within five days of
any such request, Executive shall certify to the Company in writing that all
such materials have been returned.
(d) As used in this Agreement, the term "Confidential Information" shall
mean any information or material known to or used by or for the Company (whether
or not owned or developed by the Company and whether or not developed by
Executive) that is not generally known to the public. Confidential information
includes, but is not limited to, the following: all trade secrets of the
Company; all information that the Company has marked as confidential or has
otherwise described to Executive (either in writing or orally) as confidential;
all nonpublic information concerning the Company's products, services,
prospective products or services, research, product designs, prices, discounts,
costs, marketing plans, marketing techniques, market studies, test data,
customers, customer lists and records, suppliers and contracts; all Company
business records and plans; all Company personnel files; all financial
information of or concerning the Company; all information relating to operating
system software, application software, software and system methodology, hardware
platforms, technical information, inventions, computer programs and listings,
source codes, object codes, copyrights and other intellectual property; all
technical specifications; any proprietary information belonging to the Company;
all computer hardware or
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software manual; all training or instruction manuals; and all data and all
computer system passwords and user codes.
9. NO PRIOR AGREEMENTS. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Executive agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Executive and such third party
which was in existence as of the date of this Agreement.
10. ASSIGNMENT; BINDING EFFECT. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two (2) sentences and the express provisions of
paragraph 11 below, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
11. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to subsections
b, c or d below, Executive understands and acknowledges that the Company may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term or any extension or renewal thereof, then the provisions of
this paragraph 11 shall be applicable.
(b) In the event of a Change in Control wherein the Company and
Executive have not received written notice at least five (5) business days prior
to the date of the event giving rise to the Change in Control from the successor
to all or a substantial portion of the Company's business and/or assets that
such successor is willing as of the closing to assume and agrees to perform the
Company's obligations under this Agreement in the same manner and to the same
extent that the Company is hereby required to perform, then Executive may, at
Executive's sole discretion, elect to terminate Executive's employment on such
Change in Control by providing written notice to the Company prior to the
closing of the transaction giving rise to the Change in Control. In such case,
the applicable provisions of paragraph 4(a)(iv) will apply as though the Company
had terminated Executive without cause during the Term.
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<PAGE>
(c) In any Change in Control situation, Executive may, at Executive's
sole discretion, elect to terminate Executive's employment upon the effective
date of such Change in Control by providing written notice to the Company at
least ten (10) business days prior to the closing of the transaction (or ten
(10) business days after receipt of notice of such transaction, whichever is
later) giving rise to the Change in Control. In such case, the applicable
provisions of paragraph 4(a)(iv) will apply as though the Company had terminated
Executive without cause during the Term.
(d) If, on or within one year following the effective date of a Change
in Control the Company terminates Executive's employment other than for cause or
if Executive's employment with the Company is terminated by the Company within
three months before the effective date of a Change in Control other than for
cause and it is reasonably demonstrated that such termination (i) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change in Control, or (ii) otherwise arose in connection with or anticipation of
a Change in Control, then Executive shall receive from Company, in a lump sum
payment due on the effective date of termination, the same amount which
Executive would have received pursuant to a termination under paragraph 11(b)
above.
(e) Solely for purposes of applying paragraph 4 under the circumstances
described in (b) above, the effective date of termination will be the closing
date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Executive must be paid in
full by the Company at or prior to such closing.
(f) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than the Company or benefit plan of the
Company, acquires, directly or indirectly, the beneficial ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company and immediately after
such acquisition such person is, directly or indirectly, the beneficial
owner of voting securities representing thirty (30%) or more of the
total voting power of all of the then outstanding voting securities of
the Company;
(ii) the stockholders of the Company shall approve a merger,
consolidation, recapitalization or reorganization of the Company, or a
reverse stock split of outstanding voting securities, or consummation of
any such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least seventy-five (75%)
of the total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by at least seventy-five (75%) of the holders of
outstanding voting securities of the Company immediately prior to the
transactions with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
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(iii) the stockholders of the Company shall approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or a substantial portion of the
Company's assets (i.e., fifty (50%) or more of the total assets of the
Company).
(g) Executive shall be fully "grossed up" by the Company or its
successor for any excise taxes that Executive incurs under Section 4999 of the
Internal Revenue Code of 1986 (as well as for income tax on the "gross up"
amount, as a result of any Change in Control. Such amount will be due and
payable by the Company on the date of the Change of Control.
(h) Upon the occurrence of a Change of Control, any unvested portion of
any awards of stock options or stock grants pursuant to this Agreement or
otherwise shall immediately vest and become exercisable to their fullest extent
(notwithstanding any vesting periods specified elsewhere) and Executive shall be
entitled to all rights and privileges associated with such awards (subject to
applicable securities laws and regulations). With respect to option awards which
vest pursuant to this paragraph, Executive shall have a period of twelve (12)
months from the date of vesting in which to exercise such options.
12. COMPLETE AGREEMENT. This Agreement is not a promise of future
employment. Executive has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Executive and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Executive, and no term of this Agreement may be waived except by a writing
signed by the party waiving the benefit of such Term.
13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: c/o Pentacon, Inc.
9821 Katy Freeway, Suite 500
Houston, Texas 77024
Attention: General Counsel
To Executive: James C. Jackson
19511 Mills Meadow Lane
Houston, Texas 77094
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Notice shall be deemed given and effective on the earlier of three (3) days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this paragraph 12.
14. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
15. ARBITRATION. With the exception of paragraphs 3, 7 and 8, any
unresolved dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three (3) arbitrators in Houston, Texas, in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association ("AAA") then in effect, provided that the parties may agree to use
arbitrators other than those provided by the AAA. The arbitrators shall not have
the authority to add to, detract from or modify any provision hereof nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back pay, severance compensation, vesting of options and
grants (or cash compensation in lieu of vesting of options), reimbursement of
legal fees and costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Executive was
terminated without disability or good cause, as described in paragraphs 4(a)(ii)
and 4(a)(iii), respectively, or that the Company has otherwise materially
breached this Agreement. A decision by a majority of the arbitration panel shall
be final and binding. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The direct expense of any arbitration proceeding
shall be borne by the Company.
16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
17. COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"EXECUTIVE"
/s/ James C. Jackson
___________________________________________
James C. Jackson
"COMPANY:"
PENTACON, INC.
By:/s/ MARK E. BALDWIN
___________________________________________
Name: Mark E. Baldwin
Title: Chief Executive Officer
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