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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JUNE 13, 1997
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RICHEY ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-9788 33-0594451
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(State of (Commission file (IRS Employer
incorporation) Number) Identification Number)
7441 LINCOLN WAY, GARDEN GROVE, CALIFORNIA 92641
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 898-8288
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ITEM 2. ACQUISITION
On June 13, 1997, Richey Electronics, Inc. (the "Company") acquired
Simmonds Technologies Inc. ("STI"), pursuant to a Share Purchase Agreement dated
as of June 13, 1997 (the "Purchase Agreement") among the Company, STI, SCL
Electronics Ltd. ("SCLE") and Simmonds Capital Limited ("Simmonds"). STI is a
distributor of interconnect, electromechanical and passive electronic
components, headquartered in Toronto, with additional branch locations in the
Montreal, Ottawa, Winnipeg, Saskatoon, Calgary, Edmonton and Vancouver regions.
Pursuant to the Purchase Agreement, the Company acquired all of the
outstanding capital stock of STI from SCLE, a wholly-owned subsidiary of
Simmonds. In consideration for the acquisition, the Company refinanced STI's
bank indebtedness of approximately C$7.8 million.
On June 13, 1997, in events related to the acquisition, the Company
issued to Simmonds a warrant to purchase 197,044 shares of common stock of
the Company at an exercise price of $10.15 per share. In addition, the
Company caused STI to contribute C$1.5 million toward the settlement of
certain long-term liabilities of STI to be retained by Simmonds and SCLE and
to transfer C$4.7 million of STI non-core inventory to Simmonds and SCLE.
Simmonds also received the right to a future payment from STI based upon
STI's operating earnings in 2001.
The Company funded the STI bank debt refinancing and the contribution
toward such settlement of long-term liabilities by drawing upon the Company's
$45 million revolving line of credit with Wells Fargo Bank, N.A.
The consideration received by Simmonds and SCLE pursuant to the
acquisition and the events related to the acquisition was based upon arms-length
negotiations between the Company and Simmonds. Prior to the acquisition, there
was no material relationship between STI, SCLE or Simmonds and the Company, any
affiliates of the Company, any director or officer of the Company or any
associate of any such director or officer.
The Company acquired sales offices and warehouse facilities, used in
the distribution of electronic components, all of which facilities were leased
or subleased by STI prior to the acquisition. The Company is engaged in the
same business as STI and intends to use STI's assets in the same manner as used
by STI prior to the acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
The required financial statements of STI will be filed by the Company,
under cover of Form 8-K/A, as soon as practicable, but not later than August 27,
1997.
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(b) Pro forma financial information
The required pro forma financial information will be filed by the
Company, under cover of Form 8-K/A, as soon as practicable, but not later than
August 27, 1997.
(c) Exhibits
2.1 Share Purchase Agreement dated June 13, 1997, among Richey
Electronics, Inc., SCL Electronics Ltd., Simmonds Technologies
Inc. and Simmonds Capital Limited (without schedules disclosing
exceptions to the representations concerning Simmonds
Technologies Inc.**).
2.2 Intercompany Debt Repayment Agreement dated June 13, 1997, among
Simmonds Capital Limited, SCL Electronics Ltd. and Simmonds
Technologies Inc. (without schedule disclosing formula for
determination of future payment to Simmonds Capital Limited**).
4.1 Warrant dated June 13, 1997, to purchase common stock of Richey
Electronics, Inc., expiring March 31, 2002.
99.1 Press release dated June 13, 1997 of Richey Electronics, Inc.
** The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities and Exchange Commission upon
request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RICHEY ELECTRONICS, INC.
(Registrant)
By /s/ Richard N. Berger
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Richard N. Berger
Vice President,
Chief Financial Officer
and Secretary
June 26, 1997
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EXHIBIT INDEX
Number Subject Matter
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2.1 Share Purchase Agreement dated June 13, 1997, among Richey
Electronics, Inc., SCL Electronics Ltd., Simmonds Technologies Inc.
and Simmonds Capital Limited.
2.2 Intercompany Debt Repayment Agreement dated June 13, 1997, among
Simmonds Capital Limited, SCL Electronics Ltd. and Simmonds
Technologies Inc.
4.1 Warrant dated June 13, 1997, to purchase common stock of Richey
Electronics, Inc., expiring March 31, 2002.
99.1 Press release dated June 13, 1997 of Richey Electronics, Inc.
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Exhibit 2.1
SHARE PURCHASE AGREEMENT
AMONG
RICHEY ELECTRONICS, INC.
SCL ELECTRONICS LTD.
SIMMONDS TECHNOLOGIES INC.
AND
SIMMONDS CAPITAL LIMITED
dated as of June 13, 1997
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TABLE OF CONTENTS
Page
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Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II SALE AND PURCHASE OF SHARES. . . . . . . . . . . . . . . . 7
Section 2.1. Sale of Shares . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.2. Purchase Price . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.1. The Closing. . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.2. Further Assurances . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES RE:
THE SELLER AND SCL . . . . . . . . . . . . . . . . . . . . 8
Section 4.1. Organization of the Seller and SCL . . . . . . . . . . . . 8
Section 4.2. Authorization and Validity of Agreement. . . . . . . . . . 8
Section 4.3. No Conflict with Other Agreements or Laws. . . . . . . . . 8
Section 4.4. Ownership of Shares. . . . . . . . . . . . . . . . . . . . 9
Section 4.5. Residency. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.6. Intercompany Debt. . . . . . . . . . . . . . . . . . . . . 9
Section 4.7. No Brokers . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V REPRESENTATIONS AND WARRANTIES RE: THE COMPANY . . . . . . 9
Section 5.1. Organization, Standing and Authority of the Company. . . .10
Section 5.2. Qualification of the Company . . . . . . . . . . . . . . .10
Section 5.3. Capitalization and Ownership . . . . . . . . . . . . . . .10
Section 5.4. Authorization of Agreement . . . . . . . . . . . . . . . .10
Section 5.5. Investments. . . . . . . . . . . . . . . . . . . . . . . .11
Section 5.6. Corporate Records. . . . . . . . . . . . . . . . . . . . .11
Section 5.7. Consents of Third Parties. . . . . . . . . . . . . . . . .11
Section 5.8. Financial Statements; Liabilities. . . . . . . . . . . . .12
Section 5.9. Certain Transactions . . . . . . . . . . . . . . . . . . .12
Section 5.10. Litigation . . . . . . . . . . . . . . . . . . . . . . . .13
Section 5.11. Lists of Certain Items . . . . . . . . . . . . . . . . . .13
Section 5.12. Contracts. . . . . . . . . . . . . . . . . . . . . . . . .14
Section 5.13. Non-Arm's Length Transactions. . . . . . . . . . . . . . .16
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Section 5.14. Title to Assets. . . . . . . . . . . . . . . . . . . . . .16
Section 5.15. Real Property. . . . . . . . . . . . . . . . . . . . . . .16
Section 5.16. Intellectual Property Rights . . . . . . . . . . . . . . .17
Section 5.17. Insurance. . . . . . . . . . . . . . . . . . . . . . . . .17
Section 5.18. Condition of Assets. . . . . . . . . . . . . . . . . . . .18
Section 5.19. Accounts Receivable and Accounts Payable . . . . . . . . .18
Section 5.20. Permits. . . . . . . . . . . . . . . . . . . . . . . . . .19
Section 5.21. Compliance with Laws . . . . . . . . . . . . . . . . . . .19
Section 5.22. Compliance with Environmental Laws . . . . . . . . . . . .19
Section 5.23. Employee Plans . . . . . . . . . . . . . . . . . . . . . .20
Section 5.24. Employees. . . . . . . . . . . . . . . . . . . . . . . . .21
Section 5.25. Customers. . . . . . . . . . . . . . . . . . . . . . . . .23
Section 5.26. Suppliers. . . . . . . . . . . . . . . . . . . . . . . . .23
Section 5.27. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .23
Section 5.28. Directors and Officers . . . . . . . . . . . . . . . . . .25
Section 5.29. Prior Acquisition Agreements . . . . . . . . . . . . . . .25
Section 5.30. No Brokers . . . . . . . . . . . . . . . . . . . . . . . .26
Section 5.31. Completeness . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER. . . . . . . . . . . . . . . . . . . . . . .26
Section 6.1. Organization and Good Standing . . . . . . . . . . . . . .26
Section 6.2. Authorization and Validity of Agreement. . . . . . . . . .26
Section 6.3. Consents of Third Parties. . . . . . . . . . . . . . . . .26
Section 6.4. Litigation . . . . . . . . . . . . . . . . . . . . . . . .27
Section 6.5. Investment Representations . . . . . . . . . . . . . . . .27
Section 6.6. No Brokers . . . . . . . . . . . . . . . . . . . . . . . .27
ARTICLE VII TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . .27
Section 7.1. Tax Indemnification. . . . . . . . . . . . . . . . . . . .27
Section 7.2. Purchaser Tax Indemnification. . . . . . . . . . . . . . .28
Section 7.3. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . .28
Section 7.4. Loss Carryforwards . . . . . . . . . . . . . . . . . . . .28
ARTICLE VIII SURVIVAL OF REPRESENTATIONS;
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . .29
Section 8.1. Survival of Representations. . . . . . . . . . . . . . . .29
Section 8.2. Indemnification. . . . . . . . . . . . . . . . . . . . . .29
Section 8.3. Procedures for Indemnification . . . . . . . . . . . . . .31
Section 8.4. Third Party Claims . . . . . . . . . . . . . . . . . . . .32
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ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . .33
Section 9.1. Governing Law. . . . . . . . . . . . . . . . . . . . . . .33
Section 9.2. Captions . . . . . . . . . . . . . . . . . . . . . . . . .33
Section 9.3. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 9.4. Parties in Interest. . . . . . . . . . . . . . . . . . . .35
Section 9.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.6. Amendments . . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.7. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.8. Severability . . . . . . . . . . . . . . . . . . . . . . .35
Section 9.9. Third Party Beneficiaries. . . . . . . . . . . . . . . . .35
Section 9.10. Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . .35
Section 9.11. Construction . . . . . . . . . . . . . . . . . . . . . . .36
Section 9.12. Publicity. . . . . . . . . . . . . . . . . . . . . . . . .36
Section 9.13. Debit Memos. . . . . . . . . . . . . . . . . . . . . . . .36
Section 9.14. Use of Simmonds Name . . . . . . . . . . . . . . . . . . .36
Section 9.15. Entire Agreement . . . . . . . . . . . . . . . . . . . . .36
iii
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT, dated June 13, 1997, is by and among
RICHEY ELECTRONICS, INC., a corporation incorporated under the laws of the State
of Delaware (the "Purchaser"), SCL ELECTRONICS LTD., a corporation incorporated
under the laws of Canada (the "Seller"), SIMMONDS TECHNOLOGIES INC., a
corporation amalgamated under the laws of the Province of Ontario (the
"Company"), and SIMMONDS CAPITAL LIMITED, a corporation incorporated under the
laws of the Province of Ontario ("SCL").
WHEREAS, the Company is engaged in the business of distributing
electronic components (the "Business");
WHEREAS, the Seller owns all of the issued and outstanding Common
Shares of the Company;
WHEREAS, the Seller desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Seller, all of the issued and outstanding
Common Shares of the Company; and
WHEREAS, the Seller is a wholly-owned subsidiary of SCL and SCL, in
order to induce the Purchaser to enter into this Agreement, desires to join in
the representations and warranties of the Seller and to indemnify the Purchaser
to the extent herein provided.
NOW, THEREFORE, in consideration of the respective covenants,
agreements, representations, warranties and indemnities herein contained and for
other good and valuable consideration (the receipt and sufficiency of which are
acknowledged by each party), the parties covenant and agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
indicated meanings, which meanings shall be applicable both to the singular and
plural forms of such terms.
ACTION: Any action, suit, arbitration or legal, administrative or
other proceeding (public or private) or investigation by any Governmental
Authority.
AFFILIATE: As to any Person, any other Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person. The term control means the possession, directly or indirectly, of the
power to direct or cause the direction of the management
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and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
AGREEMENT: This Share Purchase Agreement (including the Disclosure
Schedule) and all amendments of this Share Purchase Agreement.
AUDITED FINANCIAL STATEMENTS: Collectively, the following audited
financial statements of the Company: (a) balance sheet as at December 31, 1995
and statements of operations, retained earnings and changes in financial
position for the year ended December 31, 1995 (including the related notes
thereto and the auditors' reports thereon prepared by Pannell Kerr Forster,
Chartered Accountants) and (b) balance sheet as at December 31, 1996 and
statements of operations, retained earnings (deficit) and changes in financial
position for the year ended December 31, 1996 (including the related notes
thereto and the auditors' reports thereon prepared by Hill and Company,
Chartered Accountants).
BALANCE SHEET DATE: December 31, 1996.
BASKET AMOUNT: As defined in Section 8.2(c).
BUSINESS: As defined in the recitals to this Agreement.
BUSINESS DAY: Any day other than a Saturday, a Sunday, or a day on
which banking institutions in the City of Los Angeles, California are authorized
or obligated by Law to be closed.
CHARTER DOCUMENTS: With respect to any corporate entity,
collectively, (a) its certificate and articles of incorporation, as amended or
restated, and (b) its bylaws, as amended or restated.
CIRCUMSTANCE: As defined in Section 8.4(a).
CLOSING: As defined in Section 3.1.
CLOSING DATE: As defined in Section 3.1.
CLOSING DATE ESTIMATED BALANCE SHEET: As defined in Section 5.8(d)
and a copy of which is attached as an exhibit to Section 5.8 of the Disclosure
Schedule.
CLOSING TIME: 12:01 a.m. on the Closing Date.
COMMON SHARES: The common shares in the capital of the Company.
COMPANY: As defined in the first paragraph of this Agreement.
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CONFIDENTIALITY AGREEMENT: That certain confidentiality agreement
dated as of January 2, 1997 between the Purchaser and Everen Securities, Inc. on
behalf of SCL.
DEFICIENT RECORDS: As defined in Section 5.6(c).
DISCLOSURE SCHEDULE: As defined in the first paragraph of Article V.
EMPLOYEE PLANS: Collectively,(a) bonus, stock option, stock purchase,
restricted stock, incentive, profit-sharing, pension or retirement, deferred
compensation, medical, hospital, dental, vision care, drug, life, disability,
accident, accrued leave, vacation, sick pay, sick leave, automobile, computer,
cellular telephone, supplemental retirement and unemployment benefit and legal
benefit plans, programs, arrangements, commitments or practices (whether or not
insured) and (b) employment, consulting, termination or severance contracts or
agreements, in each case for any Personnel that have been established,
maintained or contributed to (or with respect to which an obligation to
contribute has been undertaken) by the Company, the Seller or SCL or with
respect to which any potential liability is borne by the Company or any of the
Predecessors.
ENVIRONMENTAL LAWS: Any Laws pertaining to the environment, human
(including occupational) health or safety or Hazardous Materials.
ETA: The Excise Tax Act (Canada), as amended from time to time.
FINANCIAL STATEMENTS: Collectively, the Audited Financial Statements
and the Interim Financial Statements, copies of which are attached as an exhibit
to Section 5.8 of the Disclosure Schedule.
GAAP: Generally accepted accounting principles as approved from time
to time by the Canadian Institute of Chartered Accountants or any successor
institute.
GOVERNMENTAL APPROVALS: Any authorization, consent, approval, license
or exemption of, registration or filing with or report or notice to, any
Governmental Authority.
GOVERNMENTAL AUTHORITY: Any nation or government, any state, province
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
GST: Any and all Taxes payable under Part IX of the ETA or under any
provincial legislation similar to Part IX of the ETA.
HAZARDOUS MATERIALS: Any pollutants, wastes, contaminants, chemicals,
deleterious substances or industrial, toxic or hazardous wastes or substances.
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INDEMNIFICATION CLAIM: As defined in Section 8.3(a).
INDEMNITEE: As defined in the first paragraph of Section 8.3.
INDEMNITOR: As defined in the first paragraph of Section 8.3.
INTELLECTUAL PROPERTY RIGHTS: Patents, patent applications, patent
disclosures, trademarks, trademark applications, trademark registrations, trade
names, business names, service marks and copyrights.
INTERIM FINANCIAL STATEMENTS: The Company's unaudited balance sheet
as at the Interim Balance Sheet Date and its unaudited income statement for the
4 month period then ended.
INTERIM BALANCE SHEET DATE: April 30, 1997.
KNOWLEDGE: When used in the context of "to the Knowledge of a
particular party," the actual knowledge of that party after due inquiry
(including, where appropriate, consultation with responsible employees of the
Company) into the subject matter, PROVIDED FURTHER, that each Person which is
not a natural person shall be charged with the actual knowledge of its directors
and officers.
LAW: Any federal, provincial, state, municipal or local statute, law,
rule, regulation, ordinance, by-law, order, code, policy, directive,
instruction, guideline or rule of common law, in each case as amended, and any
judicial or administrative interpretation thereof by a Governmental Authority,
including any judicial or administrative order, consent decree, decision or
judgment.
LETTER OF INTENT: The letter of intent, dated April 30, 1997, between
the Purchaser and SCL.
LIABILITY CAP: As defined in Section 8.2(c).
LIEN: Any mortgage, pledge, security interest, hypothecation,
assignment, deposit or storage arrangement, encumbrance, claim, restriction,
lien (statutory or other), exception, reservation, easement, right of
occupation, any matter capable of registration against title, option, right of
pre-emption or privilege or any preference, priority, or other security
agreement or preferential arrangement, charge, or encumbrance of any kind or
nature whatsoever (including, without limitation, any bailment, conditional sale
or other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any document
under the Laws of any jurisdiction to evidence any of the foregoing).
LOSSES: As defined in Section 8.2(a).
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MATERIAL ADVERSE EFFECT: A material adverse effect on the Business,
assets, liabilities. operations or condition (financial or otherwise) or
prospects of the Company.
MISSING RECORDS: As defined in Section 5.6(c).
PERMITS: Licenses, certificates, permits, orders, consents,
approvals, registrations and other authorizations, qualifications and filings
under any Laws or with any Governmental Authorities.
PERSON: Individual, general partnership, limited partnership, limited
liability partnership, corporation, business trust, joint stock company, limited
liability company, trust, unincorporated association, joint venture,
Governmental Authority, or other entity of whatever nature.
PERSONNEL: Any present or former officers, employees or directors of
or consultants to the Company.
PREDECESSORS: Collectively, (a) Cardinal Industrial Electronics
(1992) Ltd., (b) Carsten Electronics Limited, (c) W.E.S. Electronics Limited,
(d) Produits Electroniques en Gros Ltee/Electronic Wholesalers Co. Ltd., (e) E W
Electronic Wholesalers Ltd., (f) Cite Electronique Inc. (formerly known as
Gestion Gaston Tougas Inc.), (g) 1161908 Ontario Limited (formerly known as
581095 Saskatchewan Ltd.) and (h) 1161907 Ontario Limited (formerly known as
Radio Supply and Services (1977) Ltd.), including their respective predecessors.
PRIOR ACQUISITION AGREEMENTS: Collectively, (a) the Share Purchase
Agreement dated December 22, 1994 between SCL and the vendors named therein
pertaining to the acquisition of Cardinal Industrial Electronics (1992) Ltd.,
(b) the Share Purchase Agreement dated December 22, 1994 between SCL and the
vendor named therein pertaining to the acquisition of Carsten Electronics
Limited, (c) Share Purchase Agreement dated December 24, 1994 between SCL and
the vendors named therein pertaining to the acquisition of W.E.S. Electronics
Limited, (d) the Share Purchase Agreement dated April 10, 1995 between SCL and
the vendors named therein pertaining to the acquisition of Produits
Electroniques en Gros Ltee/Electronic Wholesalers Co. Ltd., (e) the Share
Purchase Agreement dated April 10, 1995 between SCL and the vendors named
therein pertaining to the acquisition of E W Electronic Wholesalers Ltd., (f)
the Share Purchase Agreement dated May 24, 1995 between the Company and the
vendors named therein pertaining to the acquisition of Cite Electronique Inc.
and (g) the Share Purchase Agreement dated December 31, 1995 between SCL and the
shareholders named therein pertaining to the acquisition of Radio Supply.
PURCHASE PRICE: As defined in Section 2.2.
PURCHASED SHARES: As defined in Section 2.1(a).
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PURCHASER: As defined in the first paragraph of this Agreement.
PURCHASER PERSONS: As defined in Section 8.2(a).
REAL PROPERTY: As defined in Section 5.11(a).
SALTMARSH CONTRACT: As defined in Section 8.2(f).
SCHEDULED CONTRACTS: As defined in Section 5.12.
SCL: As defined in the first paragraph of this Agreement and whose
name was changed, effective September 26, 1995, from Simmonds Communications
Ltd. to Simmonds Capital Limited.
SELLER: As defined in the first paragraph of this Agreement.
TAX ACT: The Income Tax Act (Canada), as amended from time to time.
TAXES: All income, profits, gains, gross receipts, capital, net
worth, premium, value added, ad valorem, sales, use, excise, stamp, transfer,
franchise, withholding, payroll, employment, occupation, social security,
property, environmental, and all other taxes, levies, duties, assessments,
reassessments or other charges of any kind whatsoever, together with any
interest, penalties, and additions thereto imposed by any Governmental
Authority, including all amounts imposed as a result of being a member of a
consolidated, affiliated, or combined group.
TAXABLE PERIOD: Any taxation year or any other period that is
relevant for computing Tax liability or with respect to which any Tax may be
imposed under any applicable Law or by any Governmental Authority.
TAX RESERVE: As defined in Section 5.27(j).
TAX RETURN: All returns, reports, elections, estimates, declarations,
information statements, and other forms and documents (including all schedules,
exhibits, and other attachments thereto) relating to, and required to be filed
in connection with, any Taxes (including estimated Taxes).
THIRD PARTY CLAIM: As defined in Section 8.4(a).
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ARTICLE II
SALE AND PURCHASE OF SHARES
Section 2.1. SALE OF SHARES.
(a) Subject to the terms and conditions of this Agreement, the Seller
agrees to sell, assign, transfer and deliver to the Purchaser on the Closing
Date, and the Purchaser agrees to Purchase from the Seller on the Closing Date,
all of the issued and outstanding Common Shares of the Company (the "Purchased
Shares"). Notwithstanding anything to the contrary contained in this Agreement,
the Purchaser shall have no obligation to purchase less than all of the
Purchased Shares.
(b) Subject to the terms and conditions of this Agreement, at the
Closing, the Seller shall deliver to the Purchaser the certificates representing
all of the Purchased Shares, duly endorsed in blank for transfer with all
exigible security transfer taxes paid, all in suitable form for transfer of
title to all of the Purchased Shares to the Purchaser, free and clear of all
Liens.
Section 2.2. PURCHASE PRICE. The aggregate purchase price for all
of the Purchased Shares shall be One Dollar in United States funds (the
"Purchase Price"). Subject to the terms and conditions of this Agreement, the
Purchase Price shall be delivered at the Closing, in cash.
ARTICLE III
CLOSING
Section 3.1. THE CLOSING. Subject to the terms and conditions of
this Agreement, the closing of the purchase and sale of the Purchased Shares
(the "Closing") shall take place at 10:00 a.m. (local time), at the offices of
Davies, Ward & Beck in Toronto, Ontario on the date hereof (the "Closing Date"),
the Closing to be effective as of the Closing Time.
Section 3.2. FURTHER ASSURANCES. On or after the Closing Date, the
Seller shall, at the Purchaser's request and without further consideration, from
time to time execute and deliver such further instruments of conveyance,
assignment and transfer as the Purchaser may reasonably request, in addition to
those specified in this Agreement, and the Seller shall take, or cause to be
taken, such other actions as the Purchaser may reasonably request for more
effective conveyance, assignment and transfer of the Purchased Shares to the
Purchaser. Notwithstanding the foregoing, the Purchaser shall reimburse the
Seller for the reasonable out-of-pocket costs and expenses incurred by the
Seller in responding to any such requests which are not customary for
transactions of the kind contemplated by this Agreement; provided, however, that
in no event shall the Purchaser be obligated to reimburse the Seller for costs
and expenses incurred by Seller in discharging Liens or executions or related
<PAGE>
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filings or obtaining contractual consents or consents related to the transfer of
the real property leases and the termination of the IBM lease in connection with
this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES RE: THE SELLER AND SCL
The Seller and SCL jointly and severally represent and warrant as
follows and acknowledge that the Purchaser is relying on such representations
and warranties in connection with its purchase of the Purchased Shares:
Section 4.1. ORGANIZATION OF THE SELLER AND SCL.
(a) The Seller is a corporation duly organized, validly existing and
in good standing under the laws of Canada and has full corporate power and
authority to own or lease its property, to own the Purchased Shares and to enter
into this Agreement and to perform its obligations hereunder.
(b) SCL is a corporation duly organized, validly existing and in good
standing under the laws of the Province of Ontario and has full corporate power
and authority to own or lease its property and to enter into this Agreement and
to perform its obligations hereunder.
Section 4.2. AUTHORIZATION AND VALIDITY OF AGREEMENT. The
execution, delivery and performance of this Agreement by the Seller and SCL have
been duly authorized and approved by their respective boards of directors and no
other corporate action on their part is necessary to authorize their execution,
delivery and performance of this Agreement. This Agreement has been duly
executed and delivered by the Seller and SCL. Assuming the due authorization,
execution and delivery of this Agreement by the Purchaser, this Agreement
constitutes the legal, valid and binding obligations of the Seller and SCL,
enforceable against each of them in accordance with the terms hereof.
Section 4.3. NO CONFLICT WITH OTHER AGREEMENTS OR LAWS. The
execution, delivery and performance of this Agreement by each of the Seller and
SCL will not (a) violate any provision of its Charter Documents, (b) violate any
Laws applicable to it or any of its properties or assets, (c) require any
Governmental Approvals, (d) require filing with, or permission, consent or
approval of, or the giving of notice to, any other Person (other than
Governmental Authorities), except Canadian Imperial Bank of Commerce and Mees
Pierson ICS Limited whose consents have been obtained, (e) violate the terms of
any agreement or instrument to which it is a party or by which it or any of its
properties are bound and (f) be in conflict with, or result in a breach of or
constitute (with giving of notice or lapse of time or both) a default under any
such agreement or instrument.
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Section 4.4. OWNERSHIP OF SHARES. The Seller is the lawful,
beneficial and record owner of all of the Purchased Shares, being all of the
issued and outstanding Common Shares of the Company. The Seller owns the
Purchased Shares, free and clear of all Liens. Without limiting the generality
of the foregoing, none of the Purchased Shares is subject to any voting trust,
shareholder agreement or voting agreement. Except for this Agreement, neither
the Seller nor SCL has any legal obligation, absolute or contingent, to any
Person to sell any of the Common Shares. Prior to the execution of this
Agreement, the Seller has provided the Purchaser with a true and correct copy of
the certificate(s) representing the Purchased Shares. The sale, transfer,
assignment and delivery of the Purchased Shares to the Purchaser as provided in
this Agreement will convey to the Purchaser good and marketable title to the
Purchased Shares, free and clear of all Liens.
Section 4.5. RESIDENCY. The Seller is a resident of Canada for
purposes of the Tax Act.
Section 4.6. INTERCOMPANY DEBT. As of the Closing Date, STI is
indebted to SCL and its Affiliates (other than the Seller) and to the Seller for
borrowed money and for payables net of receivables in the following amounts:
$8,313,247 to SCL and its Affiliates (other than the Seller) and $3,833,275 to
the Seller.
Section 4.7. NO BROKERS. No broker, finder or similar agent has
been employed by or on behalf of the Seller or SCL and no Person with which the
Seller or SCL has had any dealings or communications of any kind is entitled to
any brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby, except that SCL has
retained Everen Securities, Inc. and TriCapital Management Limited in connection
herewith and shall be solely responsible for their respective fees.
ARTICLE V
REPRESENTATIONS AND WARRANTIES RE:
THE COMPANY
The Company, the Seller and SCL jointly and severally represent and
warrant as follows, in all cases except as set forth in the disclosure schedule
of even date herewith signed by each of them and identified therein as the
disclosure schedule referred to herein (such disclosure schedule together with
the exhibits thereto is referred to herein as the "Disclosure Schedule" and is
incorporated herein by this reference). The Disclosure Schedule makes explicit
reference to the particular Section of this Article V as to which exception is
taken, which in each case shall constitute the sole Section as to which such
exception shall apply. The Company, the Seller and SCL acknowledge that the
Purchaser is relying on the following representations and warranties in
connection with its purchase of the Purchased Shares.
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Section 5.1. ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY.
The Company is a corporation duly amalgamated, organized, validly existing and
in good standing under the laws of the Province of Ontario and has full
corporate power and authority to own, lease and operate its properties and to
carry on the Business as now being conducted.
Section 5.2. QUALIFICATION OF THE COMPANY. The Company is qualified
to do business and is in good standing in each jurisdiction in which the nature
of the Business or the properties owned or leased by it requires qualification,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect. The jurisdictions in which the Company is so qualified
are set forth in Section 5.2 of the Disclosure Schedule.
Section 5.3. CAPITALIZATION AND OWNERSHIP.
(a) The Company has an authorized capitalization consisting of an
unlimited number of Common Shares of which 600,100 shares are issued and
outstanding, and an unlimited number of Class A preference shares, issuable in
series, of which no shares are issued and outstanding.
(b) The Seller is the beneficial and registered owner of 600,100
Common Shares, which constitute all of the issued and outstanding Common Shares
of the Company. All of such shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(c) There are no outstanding subscriptions, options, warrants,
rights, calls, commitments, conversion rights, rights of exchange, plans or
other agreements of any character providing for the purchase, issuance or sale
by the Company of any shares of the capital stock or other securities of the
Company.
(d) The Company does not have any legal obligation, absolute or
contingent, to any Person to sell the Business or any part thereof or to enter
into any agreement with respect to a sale thereof, except for sales of inventory
in the ordinary course of business.
Section 5.4. AUTHORIZATION OF AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company have been duly authorized and
approved by the board of directors of the Company and no other corporate action
on the part of the Company is necessary to authorize the execution, delivery and
performance by the Company of this Agreement. This Agreement has been duly
executed and delivered by the Company. Assuming the due authorization, execution
and delivery of this Agreement by the Purchaser, this Agreement constitutes the
legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with the terms hereof.
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Section 5.5. INVESTMENTS. Except as set forth in Section 5.5 of the
Disclosure Schedule, the Company does not own and does not have any agreements
to acquire, directly or indirectly, any capital stock or other equity or
ownership or proprietary interest in any Person, and the Company does not have
any agreements to acquire or lease any other business operations.
Section 5.6. CORPORATE RECORDS.
(a) The Company has heretofore delivered to the Purchaser true and
complete copies of its Charter Documents.
(b) Subject to paragraph (c) of this Section 5.6, the minute books of
the Company (including the Predecessors), as previously made available to the
Purchaser and its representatives, contain materially accurate records of all
meetings of, and corporate actions taken by (including actions taken by written
consent), the shareholders and the board of directors (including committees of
the board of directors) of the Company.
(c) Certain of the minute books and corporate records of certain of
the Predecessors are missing (the "Missing Records") and certain of such minute
books and corporate records contain certain deficiencies (the "Deficient
Records"). None of the Missing Records contains any material facts or
information, including without limitation any facts or information that would be
reasonably expected to influence the Purchaser's decision to purchase the
Purchased Shares, or contains any facts or information evidencing or creating
any right or claim in favour of any third party to any issued or unissued
securities of the Company or any Predecessor (including, without limitation, the
Purchased Shares) or any other right against the Company or any Predecessor.
None of the Deficient Records constitutes, represents or creates any liability
or obligation in favour of any third party on the part of the Company or the
Purchaser or contains or creates in favour of any third party any right or claim
to any issued or unissued securities of the Company or any Predecessor
(including, without limitation, the Purchased Shares) or any other right against
the Company or any Predecessor.
(d) Except as set forth in Section 5.6 of the Disclosure Schedule, at
the Closing Time, all of the books and records of the Company will be in the
possession of the Company at its corporate headquarters in Pickering, Ontario.
Section 5.7. CONSENTS OF THIRD PARTIES. Except as set forth in
Section 5.7 of the Disclosure Schedule, the execution and delivery by the
Company of this Agreement and the consummation by the Seller of the transactions
contemplated hereby will not (a) violate any provision of the Charter Documents
of the Company; (b) violate any Laws applicable to the Company or any of its
properties or assets, (c) require any Governmental Approvals, (d) require filing
with, or permission, consent or approval of, or the giving of notice to, any
other Person (other than Governmental Authorities), and (e) with or without the
giving of notice and/or the passage of time, result in a violation or breach of,
conflict with, constitute a default (or give rise to any right of
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termination, cancellation, payment or acceleration) under, or result in the
creation of any Lien upon any of the properties or assets of the Company under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, Permit, distributor or franchise agreement, lease or any other
instrument or obligation to which the Company is a party or by which it or any
of its properties or assets may be bound.
Section 5.8. FINANCIAL STATEMENTS; LIABILITIES.
(a) The Financial Statements have been prepared in accordance with
GAAP consistently applied throughout the periods indicated therein and fairly
present in all material respects the financial condition of the Company as at
the respective dates thereof and the results of its operations and changes in
financial position for the respective periods indicated therein.
(b) Except as set forth in Section 5.8 of the Disclosure Schedule,
since the Interim Balance Sheet Date, there has been no material adverse change
in the business, operations, financial condition or results of operations of the
Company.
(c) The Company has no liabilities or financial obligations, whether
accrued, absolute, contingent or otherwise, except (1) as set forth in the
balance sheet included in the Interim Financial Statements,(2) liabilities
incurred in the ordinary course of business and not involving borrowing by the
Company that were incurred subsequent to the Interim Balance Sheet Date and, in
the aggregate, are not materially adverse to the Business or the Company, and
(3)as set forth in Section 5.8 of the Disclosure Schedule arising out of the
matters described in such Section 5.8.
(d) The Company has delivered to the Purchaser an estimated unaudited
balance sheet as at June 6, 1997 (the "Closing Date Estimated Balance Sheet").
Such balance sheet was prepared by the Company in accordance with GAAP applied
on a basis consistent with those used in the preparation of the Audited
Financial Statements and fairly presents in all material respects the financial
condition of the Company as at the date thereof, except that it is based on the
Company's best estimates of changes since the Interim Balance Sheet Date.
Section 5.9. CERTAIN TRANSACTIONS. Except as disclosed in Section
5.9 of the Disclosure Schedule, since the Balance Sheet Date, the Company has
not (a) mortgaged, pledged or subjected to any Liens any of its properties or
assets;(b) sold, assigned, transferred, leased or otherwise disposed of, or
agreed to sell, assign, transfer, lease or otherwise dispose of, any of its
properties or assets, other than sales of inventory in the ordinary course of
business;(c) cancelled or compromised, or agreed to cancel or compromise, any
debts or claims or waived or released any claims other than in the ordinary
course of business;(d) effected any change in the accounting methods and
principles used in connection with its books, records and financial
statements;(e) suffered any change which has been, either in any case or in the
aggregate, materially adverse to the financial condition or results of
operations of the Company;(f) suffered any casualty losses or damages with
respect to any of its properties or assets;(g) failed promptly to pay and
discharge
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current liabilities, the non-payment of which or the failure to discharge which
is reasonably likely to have a Material Adverse Effect,(h) conducted the
Business other than in the ordinary and regular course consistent with the past
practices of the Company,(i) paid any dividends or made any other distributions
in respect of its capital stock or redeemed, purchased or otherwise acquired any
of its capital stock or (j) made any distributions of cash or other property to
its shareholders, officers or directors (including, without limitation, payments
with respect to any intercompany debt), other than normal salary, bonus and
related compensation payments in amounts not in excess of those disclosed to the
Purchaser in the compensation list referred to below.
Section 5.10. LITIGATION.
(a) There are no Actions pending or threatened that question the
validity of this Agreement or any action taken or to be taken by the Company,
the Seller and SCL, or any of them, in connection with this Agreement.
(b) Except as set forth in Section 5.10 of the Disclosure Schedule,
there are no Actions pending or threatened against or affecting the Company, the
Real Property or any of the Company's properties or assets or involving any of
the Predecessors. To the Knowledge of the Company, the Seller and SCL or any of
them, there is no valid basis for any Action, which, if adversely determined,
would, individually or in the aggregate, have a Material Adverse Effect.
(c) There are no outstanding orders, writs, judgments, injunctions,
awards or decrees of any court, other Governmental Authority or arbitrator
against or affecting the Company or the Real Property or involving any of the
Predecessors.
Section 5.11. LISTS OF CERTAIN ITEMS. Section 5.11 of the Disclosure
Schedule contains accurate and complete lists of the following with respect to
the Company:
(a) All real property occupied by the Company, or which it has the
right to occupy, under rental arrangements (the "Real Property"), including the
addresses thereof;
(b) Owned or leased machinery, equipment, computer hardware, office
furniture, fixtures, vehicles and similar personal property (including the
current depreciated book value of owned items and the lease payments for leased
items);
(c) All proprietary computer software (including, without limitation,
all computer programs, data bases and documentation) owned by the Company or
used in the Business (including the applicable licenses for such software which
is not owned by the Company);
(d) All Intellectual Property Rights owned by the Company or used in
the Business (including the applicable licenses for Intellectual Property which
is not owned by the Company);
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(e) All insurance policies and binders (including the policy numbers,
names and addresses of insurers, expiration dates, descriptions and amounts of
coverage, annual premiums and pending claims thereunder);
(f) All Employee Plans;
(g) All Permits held or used by the Company (including for each such
Permit, the Governmental Authority which issued it, the applicable expiration or
renewal date, and whether notice to or consent by such Governmental Authority is
required for the transactions contemplated by this Agreement);
(h) The name and address of each bank or other financial institution
at which the Company has an account or safe deposit box, the number of any such
account or box, and the names of all Personnel authorized to draw thereon or to
have access thereto;
(i) The name of each Person holding a general or special power of
attorney from the Company and a summary of the terms thereof;
(j) All inventory at locations other than the Real Property; and
(k) The inventory of the Company as reflected on its perpetual
inventory list.
The Company has previously provided to the Purchaser an accurate and
complete list of the names and current rates of compensation of all Personnel
(including date of hire, title or classification and a summary of existing
bonuses, additional compensation (whether current or deferred) and other like
benefits, if any, paid or payable to such persons in the fiscal year ended on
December 31, 1996 or subsequent thereto), which list is not included in the
Disclosure Schedule in order to maintain the confidentiality of such
information. Such list includes Personnel who are on lay-off and who have been
continuously absent from work for a period in excess of one month, as well as
the reason for their absence. Such list also includes Personnel in respect of
whom the Company has been advised by the applicable workers' compensation board
that they are in receipt of benefits under applicable workers' compensation
laws.
Section 5.12. CONTRACTS.
(a) Except as set forth in Section 5.12 of the Disclosure Schedule,
the Company (including the Predecessors) is not a party to or bound by any of
the following: (1) any agreement, contract or commitment not in the ordinary
course of business,(2) any distributor, dealer, manufacturer's representative,
sales agency or franchise agreement,(3) any agreement, indenture or other
instrument which contains restrictions with respect to payment of dividends or
any other distribution in respect of its capital stock or equity,(4) any
agreement, contract or commitment relating to capital expenditures or the
purchase by it of materials, supplies, equipment, services or
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advertising involving payments in excess of $10,000 for any such agreement,
contract or commitment,(5) any agreement, indenture or instrument relating to
indebtedness incurred by the Company, liability for borrowed money or the
deferred purchase price of property (excluding trade payables in the ordinary
course of business) or any leasing transaction of the type required to be
capitalized in accordance with GAAP,(6) any loan or advance to, or investment
in, any Person, any agreement, contract or commitment relating to the making of
any such loan, advance or investment or any agreement, contract or commitment
involving a sharing of profits, in each case, other than customary travel and
other expense advances made to Personnel in the ordinary course of business,(7)
any guarantee or other contingent liability incurred by the Company in respect
of any indebtedness or obligation of any Person, excluding endorsements made for
purposes of collection in the ordinary course of business,(8) any brokerage,
management, services, consulting or any other similar type contract providing
for annual payments in excess of $5,000,(9) any warranty or other similar
undertaking with respect to contractual performance extended by the Company
other than in the ordinary course of business,(10) any confidentiality, secrecy
or nondisclosure agreement or contract or any agreement, contract or commitment
limiting its ability to engage in any line of business or to compete with any
Person,(11) any lease, sublease or other arrangement under which it is the
lessor or lessee,(12) any collective bargaining agreement or any other agreement
with any labor union or association representing any Personnel or any contract
for the employment of any officer or employee,(13) any contract or agreement
with any of its Affiliates,(14) any contract or agreement under which it agrees
to indemnify any Person,(15) any powers of attorney granted by it to any
Person,(16) any contract for the production or supply by it of goods or services
having unexpired terms (including any periods covered by options to renew
exercisable by other Persons) of more than 30 days and involving payments in
excess of $1,000 for any such contract, (17)any contract or agreement providing
for any payments to any Person or for any other consequences upon any direct or
indirect change of control of the Company including, without limitation, the
change of control resulting from the sale of the Purchased Shares hereunder,(18)
any other contract involving payments by the Company of more than $10,000 for
any such contract or (19) any amendment, modification or supplement in respect
of any of the foregoing. The contracts, agreements and commitments disclosed in
Section 5.12 of the Disclosure Schedule are referred to herein collectively as
the "Scheduled Contracts."
(b) The Company has heretofore delivered to the Purchaser or its
representatives true and complete copies of the Scheduled Contracts. Except as
set forth in Section 5.12 of the Disclosure Schedule,(1) each Scheduled Contract
(including each Scheduled Contract assigned to the Company by a Predecessor or
to which the Company has succeeded by operation of law) is in full force and
effect,(2) the Company (including the Predecessors) is not in breach of any of
its obligations under any Scheduled Contract and (3) to the Knowledge of the
Company, the Seller and SCL or any of them, no other party is in breach of any
of its obligations under any Scheduled Contract.
(c) Except as disclosed in Section 5.12 of the Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement does not
require any consent of
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or notice to any Person under any Scheduled Contract or give rise to any penalty
or other right in favor of a third party under any Scheduled Contract and no
Scheduled Contract is subject to termination or modification by reason of the
consummation of the transactions contemplated by this Agreement.
Section 5.13. NON-ARM'S LENGTH TRANSACTIONS. The Company has not
since the Balance Sheet Date made any payment or loan to, or borrowed any moneys
from or otherwise become indebted to, any officer, director, employee,
shareholder or any other Person not dealing at arm's length with the Company
(within the meaning of the Tax Act), except as disclosed in the Audited
Financial Statements or in Section 5.13 of the Disclosure Schedule and except
for usual employee reimbursements and compensation paid in the ordinary and
normal course of the Business. Except as set forth in Section 5.13 of the
Disclosure Schedule, the Company is not a party to any agreement with any
officer, director, employee, shareholder or any other Person not dealing at
arm's length with the Company (within the meaning of the Tax Act). No officer,
director or shareholder of the Company and, to the Knowledge of the Company, the
Seller and SCL or any of them, no Person which is an Affiliate of one or more of
such Persons: (a) owns, directly or indirectly, any interest in (except for
shares representing less than one per cent of the outstanding shares of any
class or series of any publicly traded company), or is an officer, director,
employee or consultant of, any Person which is, or is engaged in business as, a
competitor of the Business or the Company or a lessor, lessee, supplier,
distributor, sales agent or customer of the Business or the Company; (b) owns,
directly or indirectly, in whole or in part, any property that the Company uses
in the operation of the Business; or (c) has any cause of action or other claim
whatsoever against, or owes any amount to, the Company in connection with the
Business, except for any liabilities reflected in the Audited Financial
Statements and claims in the ordinary and normal course of business such as for
accrued vacation pay and accrued benefits under the Employee Plans.
Section 5.14. TITLE TO ASSETS. The properties and assets of the
Company are owned by the Company as the beneficial owner thereof with good and
marketable title thereto, free and clear of all Liens other than the Liens set
forth in Section 5.14 of the Disclosure Schedule.
Section 5.15. REAL PROPERTY.
(a) The Company does not own, and has not agreed to own or acquire
any interest in any real property.
(b) The Company does not lease, and has not agreed to lease, any real
property other than the Real Property.
(c) The Real Property (including those portions of all buildings,
structures, improvements and appurtenances comprising such property) and the
current uses thereof comply with all applicable Laws (including, without
limitation, all zoning and land use ordinances, all building and safety codes
and all Environmental Laws).
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(d) All accounts for work and services performed and materials placed
or furnished upon or in respect of the Real Property at the request of the
Company or any Predecessor have been fully paid and satisfied and no person is
entitled to claim a Lien under the Construction Lien Act (Ontario) or similar
legislation in other provinces of Canada against the Real Property or any part
thereof, other than current accounts in respect of which the payment due date
has not yet passed.
(e) There is nothing owing in respect of the Real Property by the
Company to any municipal corporation or to any other corporation or commission
owning or operating a public utility for water, gas, electrical power or energy,
steam or hot water, or for the use thereof, other than current accounts in
respect of which the payment due date has not yet passed.
(f) Each property comprising the Real Property is fully serviced and
has suitable access to public roads, and there are no outstanding levies,
charges or fees assessed against any of the Real Property by any Governmental
Authority (including development or improvement levies, charges or fees).
(g) There is no pending condemnation, expropriation, eminent domain
or similar proceeding affecting all or any portion of any of the Real Property
and, to the Knowledge of the Company, the Seller and SCL or any of them, no such
proceeding is contemplated.
Section 5.16. INTELLECTUAL PROPERTY RIGHTS. Section 5.11 of the
Disclosure Schedule contains an accurate and complete list of all Intellectual
Property Rights which are owned by the Company or used in the Business. Except
as disclosed in Section 5.11 of the Disclosure Schedule, all of such
Intellectual Property Rights are owned outright by the Company on an exclusive,
irrevocable basis for the term of the registration, free and clear of all Liens.
No Action is pending or threatened against the Company which involves any such
Intellectual Property Rights and no other Person is infringing the Company's
Intellectual Property Rights. The Company has all requisite Intellectual
Property Rights to conduct the Business as presently conducted. The Company
(including the Predecessors) has not infringed, and is not now infringing, on
any Intellectual Property Rights of any Person.
Section 5.17. INSURANCE.
(a) Section 5.11 of the Disclosure Schedule contains an accurate and
complete list of all insurance policies and binders owned or held by the
Company. The Company has not received (1) any notice of cancellation of any of
such policies or binders or refusal of coverage thereunder,(2) any notice that
any issuer of any of such policies or binders has filed for protection or
otherwise sought relief under applicable bankruptcy or creditor relief laws or
is otherwise in the process of liquidating or has been liquidated or (3) any
other indication that any of such policies or binders is no longer in full force
and effect or that the issuer of any of such policies or binders is no longer
willing or able to perform its obligations thereunder. The Company is not in
default with
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respect to any of the provisions contained in any of such policies and binders
and has not failed to give any notice or present any claim under any such policy
or binder in a due and timely fashion. Such policies and binders, with respect
to their amounts and types of coverage, are adequate to insure fully against
risks to which the Company and its properties and assets are normally exposed in
the operation of the Business.
(b) There are no outstanding requirements or recommendations by any
current insurer or underwriter with respect to any of the Real Property or any
of the Company's other properties or assets or otherwise which require or
recommend changes in the conduct of the Business or require any repairs or other
work to be done with respect to any of the Real Property or any of such
properties or assets.
Section 5.18. CONDITION OF ASSETS.
(a) Except as set forth in Section 5.18 of the Disclosure Schedule,
the Real Property and the properties and assets (other than inventory) owned,
operated or leased by the Company and used in the Business are in a good state
of repair and operating condition, except for normal wear and tear, and are
suitable for the purposes for which they are presently being used. Section 5.11
of the Disclosure Schedule includes accurate and complete lists of all
properties and assets which are leased by the Company.
(b) The Company acquired its inventory in the ordinary course of
business, in bona fide transactions. The perpetual inventory listing provided
pursuant to Section 5.11 of the Disclosure Schedule accurately states the
quantities of the inventory items listed therein. The general ledger entries as
of June 6, 1997 for the category of inventory identified therein as
demonstration inventory accurately state the value of such inventory as of such
date.
Section 5.19. ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE.
(a) The Company's accounts and notes receivable arose from the sale
of inventory, other assets or services, in the ordinary course of business,
reflect extensions of credit consistent with the past practices of the Company
and are recorded in accordance with GAAP. The information which the Company has
provided to the Purchaser concerning the ages of the Company's accounts and
notes receivable is accurate in all material respects. Except as set forth in
Section 5.19 of the Disclosure Schedule, the accounts and notes receivable of
the Company are collectible in the ordinary course of business.
(b) The Company's accounts payable and outstanding check list are the
result of bona fide transactions in the ordinary course of business and are
recorded in accordance with GAAP. The information which the Company has
provided to the Purchaser concerning the ages of the Company's payables is
accurate in all material respects. All recorded debit memos from ship and
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debit activity represent appropriate vendor charges and will be realized within
150 days after the Closing Date.
Section 5.20. PERMITS. Section 5.11 of the Disclosure Schedule
contains an accurate and complete list of all Permits which are held or used by
the Company. Such Permits constitute all of the Permits which are required by
applicable Laws. The Company is in compliance with the terms and conditions of
such Permits. Such Permits are in full force and effect, and no action for the
suspension, cancellation, revocation or limitation of any of such Permits is
pending or threatened. The Company has not received any notice to the effect
that it is not or may not be in compliance with any of such Permits.
Section 5.21. COMPLIANCE WITH LAWS. The Company and each of the
Predecessors have complied with all applicable Laws (including, without
limitation, all international trade control regulations and all Laws respecting
employment practices, terms and conditions of employment, wages and hours,
environmental matters, zoning and land use and occupational health and safety).
The Company has not received any notice to the effect that it is not or may not
be in compliance with any of such Laws.
Section 5.22. COMPLIANCE WITH ENVIRONMENTAL LAWS. The
representations and warranties contained in this Section 5.22 are intended to be
supplemental to the more general representations and warranties made by the
Company, the Seller and SCL in this Agreement and shall not in any way limit or
detract from or be limited by such other more general representations or
warranties.
(a) The Company has obtained all Permits that are required under all
applicable Environmental Laws. The Company is in compliance with the terms and
conditions of such Permits. Such Permits are in full force and effect, and no
action for the suspension, cancellation, revocation or limitation of any of such
Permits is pending or threatened. The Company has not received any notice to
the effect that it is not or may not be in compliance with any of such Permits.
(b) The Company is operating, and the Company and each of the
Predecessors at all times have operated, and the Real Property is and at all
times has been, in full compliance with all applicable Environmental Laws.
(c) There is no Action pending or threatened relating to or affecting
the Company, the Real Property or any of the Company's properties or assets and
relating in any way to any Environmental Laws.
(d) There are no past or present events, conditions, circumstances,
activities, practices, incidents or actions in respect of or relating to the
Company, any of the Predecessors, the Real Property, the Company's properties or
assets or any property that the Company or any of the Predecessors previously
owned or leased or any other property which may give rise to any liability
<PAGE>
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of the Company or the Purchaser (whether under statutory or common law) or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation against the Company or the
Purchaser, based on or related to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, packaging, transport, handling,
containment or remediation or the emission, discharge, spill, release or
threatened release into the workplace, the community or the environment of any
Hazardous Materials. Without in any way limiting the foregoing, no spill,
release, emission, deposit or discharge into the environment of any Hazardous
Materials has occurred or is currently occurring in connection with the Real
Property or the conduct of the Business which is in violation of any
Environmental Laws.
(e) The Company has delivered to the Purchaser true and complete
copies of all environmental or occupational health and safety audits,
evaluations, assessments, studies, tests, reports and minutes of meetings
relating to the Company, any of the Predecessors, the Real Property or any
property that the Company or the Predecessors previously owned or leased or the
uses thereof which are or with reasonable efforts could be within the possession
or control of the Company, the Seller or SCL.
(f) None of the Company or any of the Predecessors has disposed of,
transported or arranged for the transportation of any Hazardous Materials at or
to any place or location outside of Canada.
(g) Except as set forth in Section 5.22 of the Disclosure Schedule,
no underground storage tanks are or have been located on the Real Property.
(h) Except as set forth in Section 5.22 of the Disclosure Schedule,
no building, structure or improvement located on the Real Property contains
asbestos or PCBs.
Section 5.23. EMPLOYEE PLANS.
(a) Section 5.11(f) of the Disclosure Schedule contains an accurate
and complete list of all of the Employee Plans.
(b) With respect to each Employee Plan, the Company has made
available to the Purchaser true and complete copies of the following documents,
to the extent in each case that such documents exist: (1) current plan
documents, plan amendments and any other documents that establish the existence
of the plan or arrangement, including any funding instruments;(2) current
summary plan descriptions and summaries of material modifications, if any;(3)
the most recent letters confirming registered status for tax purposes, if any,
received from applicable Governmental Authorities;(4) the most recent reports
required to be filed with applicable Governmental Authorities; and (5) the most
recent actuarial valuations, if any.
(c) Except as set forth in Section 5.23 of the Disclosure Schedule,
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(1) Each Employee Plan has at all times been operated and
administered in compliance with its terms and with the requirements of all
applicable Laws;
(2) All contributions or premium payments to, and payments from,
each Employee Plan required to be made in accordance with its terms, the
recommendation of the actuary for such Employee Plan or applicable Laws have
been made in accordance with such requirements;
(3) All reports, returns and similar documents (including
applications for approval of contributions) with respect to any Employee Plan
required to be filed with any Governmental Authority or distributed to any
Employee Plan participant have been duly filed or distributed in accordance with
such requirements;
(4) There are no pending investigations by any Governmental
Authority involving or relating to any Employee Plan, and no pending or
threatened claims (except for claims for benefits payable in the normal
operation of the Employee Plans) or Actions against any Employee Plan or
asserting any rights or claims to benefits under any Employee Plan which could
give rise to a liability nor, to the Knowledge of the Company, the Seller and
SCL or any of them, are there any facts that could give rise to any liability in
the event of such investigation, claim or Action;
(5) No notice has been received by the Company of any complaints
or other proceedings of any kind involving the Company or any of the Personnel
before any pension board or committee relating to any Employee Plan or to the
Company; and
(6) The assets of each Employee Plan are at least equal to the
liabilities, contingent or otherwise, of such Employee Plan on a plan
termination basis, and each Employee Plan is fully funded on a going concern and
solvency basis in accordance with its terms, applicable actuarial
recommendations and applicable law, and neither the Purchaser nor any of its
Affiliates (including for this purpose, the Company) will incur any liability
with respect to any Employee Plan as a result of the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, the
execution of this Agreement and the consummation of the transactions
contemplated hereby do not constitute a triggering event under any Employee Plan
which (either alone or upon the occurrence of any additional or subsequent
event) will or may reasonably be expected to result in any payment (whether of
severance pay or otherwise), acceleration, vesting or increase in benefits to
any Personnel.
Section 5.24. EMPLOYEES.
(a) No labor union or employee association represents or purports to
represent any employees of the Company, and during the past three (3) years, the
Company has not been the subject of any organizational activity by any labor
union or employee association or any labor disputes.
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(b) The Company is not a party to or bound by any collective
bargaining or similar agreement with any labor organization.
(c) There is no labor strike, dispute, slow down, work stoppage,
unresolved material grievance or arbitration proceeding pending or threatened
against the Company.
(d) There are no material controversies pending between the Company
and any of its Personnel, nor are any such material controversies threatened.
(e) The Company has complied with all Laws relating to employment,
including, without limitation, all reporting requirements and other provisions
thereof relating to pay, labor relations, human rights, occupational health and
safety, employment standards, pension benefits, workers compensation,
unemployment insurance, collective bargaining, employment or pay equity and
discrimination in employment.
(f) The Company has not been affected by any transaction or engaged
in any layoffs or employment terminations sufficient to trigger application of
subsection 57(2) of the Employment Standards Act (Ontario) or of the regulations
made in connection therewith or any similar Canadian federal, provincial or
local Law.
(g) The Company is not a party to any express agreement (written or
oral) with any of its employees regarding the length or conditions of
employment.
(h) The Company has no policy or past practice and is not a party to
any agreement relating to payment of any severance upon termination of
employment in excess of amounts required by law.
(i) The Company has paid all severance which is required by law to be
paid to Personnel who were terminated at any time prior to the Closing Time,
except that certain of such Personnel have agreed to accept deferred payment of
such required severance and SCL has agreed to be responsible for such deferred
payment.
(j) Except as disclosed in Section 5.24 of the Disclosure Schedule,
there are no pending or threatened claims against the Company (whether under
applicable Laws, employment agreements or otherwise) asserted by any Personnel
on account of or for (1) overtime pay, other than overtime pay for work done
during the current payroll period;(2) wages or salary for any period other than
the current payroll period;(3) any amount of vacation or sabbatical pay or pay
in lieu of vacation or time off;(4) workers' compensation or (5) any violation
of applicable Laws. To the Knowledge of the Company, the Seller and SCL or any
of them, there are no such claims which have not been so asserted.
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(k) Except as disclosed in Section 5.24 of the Disclosure Schedule,
all accruals for unpaid vacation pay, premiums for unemployment insurance,
health premiums, Canada Pension Plan premiums, accrued wages, salaries and
commissions and Employee Plan payments have been reflected in the books and
records of the Company.
(l) To the Knowledge of the Company, the Seller and SCL or any of
them, no audit or investigation of the Company is currently being performed by
applicable workers' compensation boards, occupational health and safety boards,
human rights boards or labor relations boards.
Section 5.25. CUSTOMERS. The Company has made available to the
Purchaser a list of all of the Company's customers for the twelve-month period
ended March 31, 1997. To the Knowledge of the Company, the Seller and SCL or
any of them (without any inquiry of such customers), none of such customers
intends to reduce or has threatened to reduce materially its purchases from or
business dealings with the Company (a) by reason of the consummation of this
Agreement or (b) except as disclosed in Section 5.25 of the Disclosure Schedule,
for other reasons.
Section 5.26. SUPPLIERS.
(a) The Company has made available to the Purchaser a list of all of
the suppliers of products distributed or converted and sold by the Company. To
the Knowledge of the Company, the Seller and SCL or any of them (after inquiry
only of the suppliers listed in Section 5.26 of the Disclosure Schedule), none
of such suppliers intends to alter or has threatened to alter materially the
terms of supply to the Company whether by reason of the consummation of this
Agreement or otherwise.
(b) Except as set forth in Section 5.26 of the Disclosure Schedule,
all consents, waivers, approvals and authorizations required from the Company's
suppliers and vendors in connection with the transactions contemplated by this
Agreement have been obtained and provided to the Purchaser.
Section 5.27. TAXES.
(a) The Company is a registrant for purposes of the ETA and its ETA
registration number is as set forth in Section 5.11(g) of the Disclosure
Schedule.
(b) The Company and each Predecessor have timely filed with the
appropriate Governmental Authority in all applicable jurisdictions all Tax
Returns required to be filed on or before the Closing Date. All such Tax
Returns are true, correct and complete in all material respects and do not in
any respect understate the liability for Taxes of the Company or any of the
Predecessors. The Company has paid all Taxes shown to be due on such Tax
Returns.
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(c) All Taxes that are or were due and payable by the Company on or
before the Closing Date have been timely paid, and the Company has not received
any notification from any Governmental Authority of any Tax deficiency or
proposal for the assessment or reassessment of any Tax.
(d) Except as disclosed in Section 5.27 of the Disclosure Schedule,
none of the Company's Tax Returns has been audited by any Governmental
Authority, and no Governmental Authority has notified the Company, the Seller or
SCL, either orally or in writing, that the Company's Tax Returns may or will be
audited by such authority.
(e) For Canadian federal income tax purposes, the Company is not a
partner (or treated as a partner) in any partnership or other entity treated as
a partnership.
(f) The Company has complied with all requirements of all applicable
Laws relating to the collection, payment and withholding of Taxes, and the
Company has, within the time and in the manner prescribed by applicable Law,
paid over to the proper taxing authorities all amounts required to be so
collected, withheld and paid over. Without limiting the generality of the
foregoing, the Company has remitted to the appropriate Governmental Authority
when required by Law to do so all amounts collected by it on account of GST.
(g) The Canadian federal and provincial income tax liability of the
Company has not been assessed by Revenue Canada for any taxation year. The
Company has not waived any statute of limitations in respect of Taxes and has
not agreed to any extension of time with respect to a Tax assessment or
deficiency.
(h) No Liens for Taxes (other than for current Taxes not yet due and
payable) encumber any property owned by the Company.
(i) The Company files its Canadian federal and provincial income Tax
Returns on a fiscal year basis with a taxable year ending December 31.
(j) Set forth in Section 5.27 of the Disclosure Schedule is a
schedule of all Taxes that had accrued and were unpaid as of May 31, 1997 (the
"Tax Reserve"), determined in accordance with GAAP, and for which the Company is
or may become liable for all Taxable Periods ending on or prior to such date.
The Company has incurred no Taxes since the Interim Balance Sheet Date, other
than Taxes in immaterial amounts incurred in the ordinary course of its
business.
(k) Set forth in Section 5.27 of the Disclosure Schedule is a
schedule of all Company Tax Returns for Taxable Periods ending on or before the
Closing Date that are required to be filed by the Company on or after the
Closing Date.
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(l) The Company has made available to the Purchaser and its
representatives (1) true and complete copies of all Company Tax Returns and all
schedules thereto filed on or before the Closing Date and (2) all written
communications, records and other documents, if any, relating to all Company Tax
Returns described in this Section 5.27 (including revenue agent's reports,
settlement agreements, compromise agreements, and the like).
(m) The Company has not, either directly or indirectly, transferred
property to or acquired property from a person with whom the Company was not
dealing at arm's length (as that term is understood for purposes of the Tax Act)
for consideration other than consideration equal to the fair market value of the
property at the time of the disposition or acquisition thereof.
(n) No amount in respect of any outlay or expense that is deductible
for the purpose of computing the Company's income for purposes of the Tax Act
has been owing by the Company for longer than two years to a person with whom
the Company was not dealing at arm's length (as that term is understood for
purposes of the Tax Act) at the time the outlay or expense was incurred.
(o) All amounts payable by the Company in respect of salary, wages or
other remuneration (other than reasonable vacation or holiday pay) have been
paid within 180 days of the end of the year in which the expense was incurred.
(p) There are no actions, suits or other proceedings, audits,
investigations or claims initiated or in progress or pending or threatened
against the Company with respect to Taxes and, in particular, there are no
currently outstanding assessments or reassessments or inquiries which have been
issued or raised by any Governmental Authority relating to any such Taxes.
Section 5.28. DIRECTORS AND OFFICERS. Section 5.28 of the Disclosure
Schedule sets forth the names and titles of all of the directors and officers of
the Company immediately prior to the Closing. Each of such directors and
officers has submitted his or her resignation as such, which resignation shall
be effective upon the Closing.
Section 5.29. PRIOR ACQUISITION AGREEMENTS.
(a) To the Knowledge of the Company, the Seller and SCL or any of
them, the representations and warranties made by the vendors and shareholders in
the Prior Acquisition Agreements were true and correct when made.
(b) None of the Company, the Seller and SCL (1) has asserted any
claim for indemnification or exercised any right of set-off under any of the
provisions of any of the Prior Acquisition Agreements or (2) has given any of
the shareholders or vendors under any of the Prior Acquisition Agreements notice
of any matter which is or may be subject to any of the provisions thereof
pertaining to indemnification or set-off.
<PAGE>
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Section 5.30. NO BROKERS. No broker, finder or similar agent has
been employed by or on behalf of the Company and no Person with which the
Company has had any dealings or communications of any kind is entitled to any
brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
Section 5.31. COMPLETENESS. No statement, representation or warranty
made in Article V of this Agreement or in the Disclosure Schedule contains any
untrue statement of a material fact or fails to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants as follows and acknowledges that
the Seller and SCL are relying on such representations and warranties in
connection with the transactions contemplated by this Agreement:
Section 6.1. ORGANIZATION AND GOOD STANDING. The Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement.
Section 6.2. AUTHORIZATION AND VALIDITY OF AGREEMENT. The
execution, delivery and performance by the Purchaser of this Agreement have been
duly authorized and approved by the board of directors of the Purchaser and no
other corporate action on the part of the Purchaser is necessary to authorize
the execution, delivery and performance by the Purchaser of this Agreement.
This Agreement has been duly executed and delivered by the Purchaser. Assuming
the due authorization, execution and delivery of this Agreement by the Company,
the Seller and SCL, this Agreement constitutes the legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in accordance
with the terms hereof.
Section 6.3. CONSENTS OF THIRD PARTIES. The execution and delivery
by the Purchaser of this Agreement and the consummation by the Purchaser of the
transactions contemplated hereby will not (a) violate any provision of the
Charter Documents of the Purchaser; (b) violate any Laws applicable to the
Purchaser; (c) require any Governmental Approvals except notice under the
Investment Canada Act or (d) except for the consent of Purchaser's senior
lender, which has been obtained, require filing with, or permission, consent or
approval of, or the giving of notice to, any other Person (other than
Governmental Authorities).
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Section 6.4. LITIGATION. There are no Actions pending or threatened
that question the validity of this Agreement or any action taken or to be taken
by the Purchaser in connection with this Agreement.
Section 6.5. INVESTMENT REPRESENTATIONS. For purposes of Laws
applicable in the United States, the Purchaser is not acquiring the Purchased
Shares with a view to, or in connection with, any distribution thereof in
violation of the Securities Act of 1933, as amended. The Purchaser acknowledges
that the Shares have not been registered under the Securities Act of 1933, as
amended, or any state securities or "Blue Sky" laws, and understands that the
Purchased Shares must be held indefinitely until they are subsequently
registered under such laws or such sale is permitted pursuant to an exemption
from such registration requirements.
Section 6.6. NO BROKERS. No broker, finder or similar agent has
been employed by or on behalf of the Purchaser and no Person with which the
Purchaser has had any dealings or communications of any kind is entitled to any
brokerage commission, finder's fee or any similar compensation in connection
with this Agreement or the transactions contemplated hereby.
ARTICLE VII
TAX MATTERS
Section 7.1. TAX INDEMNIFICATION. The Seller and SCL jointly and
severally agree to indemnify, defend and hold harmless the Company, the
Purchaser and Affiliates of the Purchaser from and against the following Taxes,
together with any loss, damage, liability, or expense, including reasonable fees
for attorneys, accountants and other consultants, incurred in contesting or
otherwise in connection with such Taxes:
(a) Taxes imposed on the Company, any of the Predecessors, the
Purchaser or Affiliates of the Purchaser with respect to Taxable Periods
(or portions thereof) of the Company or any of the Predecessors ending on
or before the Closing Date other than (1) Taxes included in the Tax Reserve
and (2) Taxes incurred by the Company after the Interim Balance Sheet Date
in the ordinary course of its business; and
(b) Taxes imposed on the Company, the Purchaser or Affiliates of the
Purchaser by reason of the failure of any representation or warranty made
by the Company, the Seller and SCL in Section 5.27 to be true and correct
as of the Closing Date.
Any claim by a Governmental Authority for additional Tax for which the Seller
and SCL are liable under this Section 7.1 shall be governed by the provisions of
Section 8.4 (concerning Third Party Claims), PROVIDED HOWEVER, that the Seller
and SCL shall not take a position in any Action and shall not compromise or
settle such Action, if such position, compromise, or settlement could have the
<PAGE>
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effect of increasing a Tax imposed on the Company, the Purchaser or Affiliates
of the Purchaser for any Taxable Period (or portion thereof) beginning after the
Closing Date without the prior written consent of the Purchaser, which consent
shall not be unreasonably withheld. If the parties cannot resolve the
reasonableness of any such position, compromise or settlement, then the parties
shall submit the dispute to a mutually acceptable arbiter whose resolution of
such matter shall be binding on all parties.
Section 7.2. PURCHASER TAX INDEMNIFICATION. The Purchaser agrees to
indemnify, defend and hold harmless the Seller and SCL from and against any Tax
imposed on the Company with respect to its Taxable Periods (or portions thereof)
beginning on or after the Closing Date, together with any loss, damage,
liability, or expense, including reasonable fees for attorneys, accountants and
consultants, incurred in contesting or otherwise in connection with any such
Tax. Any claim by a Governmental Authority for additional Tax for which the
Purchaser is liable under this Section 7.2 shall be governed by the provisions
of Section 8.4 (concerning Third Party Claims), PROVIDED HOWEVER, that the
Purchaser shall not take a position in any Action and shall not compromise or
settle such Action, if such position, compromise, or settlement could have the
effect of increasing a Tax imposed on the Company for any Taxable Period (or
portion thereof) beginning prior to the Closing Date without the prior written
consent of the Seller and SCL, which consent shall not be unreasonably withheld.
If the parties cannot resolve the reasonableness of any such position,
compromise or settlement, then the parties shall submit the dispute to a
mutually acceptable arbiter whose resolution of such matter shall be binding on
all parties.
Section 7.3. TRANSFER TAXES. All transfer, sales, use, recordation,
stamp, or similar Taxes required to be paid in connection with the transactions
contemplated herein, including the sale of the Purchased Shares, shall be paid
by the party upon whom such Taxes are primarily imposed by Law.
Section 7.4. LOSS CARRYFORWARDS. It is understood that none of the
Company, the Seller and SCL has made any representation or warranty as to the
effect of the transactions entered into in connection with this Agreement on the
availability of the non-capital loss carryforwards of the Company or any of the
Predecessors after the Closing. No amount shall be payable pursuant to the
indemnity contained in Section 7.1 with respect to any breach of the
representation and warranty contained in the second sentence of Section 5.27(b)
as it relates to Canadian federal income taxes unless and until the non-capital
loss carryforwards are $1 million less than the amounts reflected on the Tax
Returns referred to therein.
<PAGE>
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ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 8.1. SURVIVAL OF REPRESENTATIONS. All representations and
warranties contained in this Agreement shall survive the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
regardless of any investigations made by the parties hereto or their
representatives, only for a period ending on December 31, 1998; PROVIDED that
(a) the representations and warranties set forth in Section 5.27 with respect to
Taxes shall survive until 30 days after the expiration of the period, if any,
during which an assessment, reassessment or other form of recognized document
assessing liability for Taxes under applicable Laws in respect of any taxation
year to which such representations and warranties extend could be issued under
applicable Laws to the Company, (b) the representations and warranties set forth
in Section 4.4 (Ownership of Shares) and Section 5.14 (Title to Assets) shall
survive indefinitely, (c) the representations and warranties set forth in
Section 5.22 (Compliance with Environmental Laws) shall survive for a period of
four years following the Closing Date, and (d) the representations and
warranties set forth in Section 5.24(i) pertaining to severance shall survive
until 30 days after the expiration of the applicable statute of limitations for
severance claims (in each case, the applicable "Survival Period"); PROVIDED,
HOWEVER, that no claim for breach of a representation or warranty may be brought
under this Agreement by any person unless written notice of such claim (stating
the date of discovery thereof and basis therefor) shall have been given on or
prior to the last day of the applicable Survival Period (in which event each
such representation and warranty shall survive (with respect to such asserted
claims only) until such claim is finally resolved and all obligations with
respect thereto are fully satisfied). Notwithstanding anything to the contrary
contained herein, a claim for any breach of the representations and warranties
contained in this Agreement involving fraud or fraudulent misrepresentation may
be made at any time following the Closing Date, subject only to applicable
limitation periods imposed by applicable Laws.
Section 8.2. INDEMNIFICATION. Subject to Sections 8.3 and 8.4, and
subject in the case of paragraph (a) of this Section 8.2 to Section 8.1 and to
paragraphs (b) and (c) of this Section 8.2:
(a) The Seller and SCL jointly and severally agree to indemnify,
defend and hold harmless the Purchaser and its officers, directors, employees,
agents, stockholders and Affiliates (including, without limitation, the
Company), and any successors thereto (collectively, the "Purchaser Persons"),
from and against any and all demands, claims, actions, assessments, losses,
liabilities, obligations, damages, recoveries, deficiencies, interest,
penalties, costs and expenses (including, without limitation, reasonable legal
fees and disbursements incurred in connection therewith and in seeking
indemnification therefor, and any amounts or expenses required to be paid or
incurred in connection with any action, suit, proceeding, claim, appeal, demand,
assessment or judgment) (collectively, "Losses") resulting from, arising out of,
or imposed upon or incurred by any such Purchaser Person by reason of or in
connection with,(1) the failure of any representation and
<PAGE>
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warranty made by the Seller and SCL in Article IV of this Agreement to be true
and correct as of the Closing Date or (2) the failure of any representation and
warranty made by the Seller, SCL and the Company in Article V of this Agreement
to be true and correct as of the Closing Date.
(b) Subject to paragraph (c) of this Section 8.2,
(1) No indemnity shall be payable to any of the Purchaser
Persons pursuant to paragraph (a) of this Section 8.2 unless the aggregate
amount of Losses shall exceed $87,500 (the "Basket Amount"), whereupon all
amounts then or thereafter due with respect to such Losses in excess of the
Basket Amount shall be payable; and
(2) The joint liability of the Seller and SCL under paragraph
(a) of this Section 8.2 shall not exceed, in the aggregate, an amount equal
to $4 million (the "Liability Cap").
(c) Notwithstanding the foregoing, the Basket Amount and the
Liability Cap shall not apply to any of the following and Losses resulting from
any of the following shall not be credited towards the Basket Amount or the
Liability Cap:
(1) Any breach of any representation or warranty contained in
Section 5.27 (Taxes);
(2) Any breach of any representation or warranty contained in
Section 4.4 (Ownership of Shares);
(3) Any breach of any representations or warranty contained in
Section 5.14 (Title to Assets);
(4) Any breach of any representation or warranty contained in
Section 5.24(i) (pertaining to severance);
(5) Any breach of any representation or warranty involving fraud
or fraudulent misrepresentation.
(d) The Purchaser agrees to indemnify, defend and hold harmless the
Seller and SCL and any successors thereto from and against any and all Losses
resulting from, arising out of, or imposed upon or incurred by any such
indemnified person by reason of or in connection with, the failure of any
representation and warranty made by the Purchaser in Article VI of this
Agreement to be true and correct as of the Closing Date.
(e) The Seller and SCL jointly and severally agree to indemnify,
defend and hold harmless the Purchaser Persons from and against any and all
Losses resulting from, arising out of,
<PAGE>
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or imposed upon or incurred by any such Purchaser Person by reason of or in
connection with (1) the claims identified in Section 5.24(j) of the Disclosure
Schedule, or (2) claims relating to the lease of certain premises known as Bay
41,5370 Canotek Road, Gloucester, including, without limitation, claims arising
in connection with litigation commenced by that certain Statement of Claim
(Court File No. 97CV-001010-CM) which was filed in the Ontario Court (General
Division) by 1142616 Ontario Inc. and 1101545 Ontario, Inc. and is disclosed in
Section 5.10(b) of the Disclosure Schedule.
(f) The parties understand and agree that prior to the Closing
Date, SCL delivered to Saltmarsh Enterprises written notice of termination of
that certain Consulting Agreement dated August 1, 1996 (the "Saltmarsh
Contract"), which notice states a termination date of July 31, 1997. STI
shall pay Saltmarsh Enterprises for its services through such termination
date, at the monthly rate specified in the Saltmarsh Contract. Except for
such obligation to pay for such services for such period, STI shall have no
obligations under the Saltmarsh Contract. The Seller and SCL jointly and
severally agree to indemnify, defend and hold harmless the Purchaser Persons
from and against all Losses resulting from, arising out of or imposed upon or
incurred by any such Purchaser Person by reason of or in connection with the
termination of the Saltmarsh Contract or any claims of Saltmarsh Enterprises
or John Saltmarsh related to or based upon such agreement or the termination
thereof (other than any failure of STI to pay Saltmarsh Enterprises as
provided herein).
(g) The Seller and SCL jointly and severally agree to indemnify,
defend and hold harmless the Purchaser Persons from and against any and all
Losses resulting from, arising out of, imposed upon or incurred by any such
Purchaser Person by reason of or in connection with the failure of SCL and/or
SCLE to obtain and deliver to the Purchaser, in form and substance satisfactory
to the Purchaser, acting reasonably, prior to the Closing Date, any consent to
the transactions contemplated hereby which is required under any agreement
referenced in Section 5.7 of the Disclosure Schedule. The Seller and SCL shall
use their best efforts to obtain all such consents, in form and substance
satisfactory to the Purchaser, acting reasonably, not delivered at Closing.
(h) SCL and the Seller shall, at their expense, take all actions
necessary to cause that certain Lien in favour of Michael Kolcun in the amount
of $140,097.80 and the Writ of Execution evidencing such Lien which is
registered at Land Titles 66 Toronto (File Number 93-025294) to be released
within ten Business Days after the Closing Date. SCL and the Seller jointly and
severally agree to indemnify, defend and hold harmless the Purchaser Persons
from and against all Losses resulting from, arising out of, imposed upon or
incurred by any such Purchaser Person by reason of or in connection with such
Lien and Writ or the failure of SCL and SCLE to cause them to be released as
provided herein.
Section 8.3. PROCEDURES FOR INDEMNIFICATION. "Indemnitor" shall
mean the party against whom indemnity is sought, and "Indemnitee" shall mean the
party seeking indemnification.
<PAGE>
- 32 -
(a) A claim for indemnification hereunder ("Indemnification Claim")
shall be made by Indemnitee by delivery of a written declaration to Indemnitor
requesting indemnification and specifying the basis on which indemnification is
sought and the amount of asserted Losses and, in the case of a Third Party
Claim, containing such other information as Indemnitee shall have concerning
such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim, the
procedures set forth in Section 8.4 shall be observed by Indemnitor and
Indemnitee.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor shall have thirty (30) days to object to such
Indemnification Claim by delivery of a written notice of such objection to
Indemnitee, specifying in reasonable detail the basis of such objection.
Failure to timely so object shall constitute acceptance of the Indemnification
Claim by the Indemnitor and the Indemnification Claim shall be paid in
accordance with Section 8.3(d).
(d) Upon determination of the amount of the Indemnification Claim,
whether by failure of Indemnitor to object to such claim, agreement between
Indemnitor and Indemnitee or otherwise, Indemnitor shall pay the amount of such
Indemnification Claim within fifteen (15) days of the date such amount is
determined.
Section 8.4. THIRD PARTY CLAIMS.
(a) Should any Action or potential claim (any of which is hereinafter
individually referred to as a "Circumstance") be instituted against Indemnitee
which, if prosecuted successfully, would be a matter for which Indemnitee is
entitled to indemnification under this Agreement (a "Third Party Claim"), the
Indemnitee shall give the Indemnitor written notice describing the Circumstance
in reasonable detail. The Indemnitor shall undertake to compromise or defend,
at its own expense and by its own counsel (who shall be reasonably acceptable to
Indemnitee), any such matter involving the asserted liability of the Indemnitee;
PROVIDED, that any such compromise (1) shall include as an unconditional term
thereof the giving by the claimant or the plaintiff to such Indemnitee of a
release from all liability in respect of such claim and (2) shall not result in
the imposition on the Indemnitee of any remedy other than monetary damages to be
paid in full by the Indemnitor pursuant to Section 8.2. Indemnitor shall
confirm to Indemnitee in writing within ten (10) days after receipt of
Indemnitee's notice that Indemnitor will undertake to compromise or defend such
asserted liability. The assumption of the defense of any Third Party Claim by
the Indemnitor shall be an acknowledgment by the Indemnitor of its obligation to
indemnify the Indemnitee with respect to such claim. The Indemnitee agrees to,
and to cause its own independent counsel to, cooperate fully with the Indemnitor
and its counsel in the compromise of, or defense against, any such asserted
liability. All reasonable out-of-pocket costs and expenses incurred by the
Indemnitee in connection with such cooperation (including, without limitation,
the reasonable fees and expenses of the Indemnitee's own independent counsel)
shall be borne by the Indemnitor. In any
<PAGE>
- 33 -
event, the Indemnitee shall have the right to participate with its own counsel
(the reasonable fees and expenses of which will be borne by Indemnitor) in the
defense of such asserted liability.
(b) If, however, the Indemnitor fails or refuses to undertake the
defense of such Third Party Claim (or fails to object by written notice to
Indemnitee to the Indemnitee's assumption of such defense), the Indemnitee shall
have the right to undertake the compromise and defense of such claim. Upon the
Indemnitee's assumption of the defense of any Third Party Claim, Indemnitee
shall promptly give notice thereof to Indemnitor and shall make an
Indemnification Claim as provided in Section 8.3(a). Under no circumstances
shall the Indemnitee compromise any such asserted liability without the written
consent of the Indemnitor (which consent shall not be unreasonably withheld),
except in cases where the Indemnitor shall have failed or refused to undertake
the defense or compromise of any such asserted liability as provided herein.
(c) The Indemnitor and the Indemnitee shall co-operate and provide
each other with reasonable access to books, records (with the ability to take
copies thereof) and Personnel of the Company which are in their possession or
under their respective control or direction in order to properly conduct a
defense of any Circumstance. Each party shall use such care in maintaining the
records of the Company in their care or under their control as they use with
their own business records.
ARTICLE IX
MISCELLANEOUS
Section 9.1. GOVERNING LAW. This Agreement shall be construed,
interpreted and enforced in accordance with, and the rights and obligations of
the parties shall be governed by, the laws of the Province of Ontario and the
federal laws of Canada applicable therein, and each party hereby irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the courts of such
province and all courts competent to hear appeals therefrom.
Section 9.2. CAPTIONS. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement. Unless specifically provided otherwise, all
references to Article and Section numbers in this Agreement are references to
Articles and Sections of this Agreement. Unless specifically provided
otherwise, as used in this Agreement, the terms "herein," "hereof" and
"hereunder" refer to this Agreement in its entirety and are not limited to any
specific paragraph hereof. Unless otherwise specifically provided herein, all
dollar amounts referred to herein are expressed in Canadian funds.
<PAGE>
- 34 -
Section 9.3. NOTICES. All notices or other communications required
or permitted to be given hereunder shall be in writing and shall be mailed,
telecopied, dispatched by reputable commercial courier or delivered by hand as
follows:
If to the Purchaser, addressed to it at:
Richey Electronics, Inc.
7441 Lincoln Way
Garden Grove, California 92641
Attention: President
Telecopier: 714-897-7887
With copies to:
Kathy Wales
Dewey Ballantine
333 South Hope Street, 30th Floor
Los Angeles, California 90071
Telecopier: 213-625-0562
Michael Creery
Davies, Ward & Beck
1 First Canadian Place
Suite 4400
Toronto, Ontario M5X 1B1
Telecopier: 416-863-0871
If to the Seller or SCL, addressed to it at:
Simmonds Capital Limited
5255 Yonge Street, Suite 1050
Willowdale, Ontario M2N 6P4
Attention: President
Telecopier: 416-221-3800
With a copy to:
John Burns
Gowling, Strathy & Henderson
Suite 4900, Commerce Court West
Toronto, Ontario M5L IJ3
Telecopier: 416-862-7661
<PAGE>
- 35 -
If any notice or other communication required or permitted to be given hereunder
is given by mail, it will be effective on the fifth calendar day after deposit
in the mail with first class postage prepaid except in the event of an actual or
threatened disruption in postal services, in which case notices shall be given
by telecopier, courier or personal delivery until the resumption of normal
postal service; if given by telecopier on a Business Day during regular business
hours of the recipient, when sent and, if not so given, then, at the opening of
the recipient's business on the next Business Day; if dispatched by reputable
commercial courier, on the scheduled delivery date; or if given by personal
delivery, when delivered.
Section 9.4. PARTIES IN INTEREST. Except as hereinafter provided,
this Agreement may not be transferred, assigned, pledged or hypothecated by any
party hereto, other than by operation of law. The Purchaser shall have the
right, without the consent of the other parties to this Agreement, to make a
collateral assignment of its rights hereunder to one or more institutional
lenders and to assign its rights hereunder to any of its Affiliates or to any
Person that acquires all or substantially all of the assets of the Purchaser or
all or substantially all of the assets used or held for use in the Business.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Section 9.5. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
Signatures may be exchanged by telecopy, and each party agrees to be bound by
its own telecopied signature and to accept the telecopied signatures of the
other parties.
Section 9.6. AMENDMENTS. This Agreement may not be changed orally,
but only by an agreement in writing signed by the parties hereto.
Section 9.7. WAIVER. Any party may waive compliance by another with
any of the provisions of this Agreement. No waiver of any provision shall be
construed as a waiver of any other provision. Any waiver must be in writing and
signed by the party to be charged with such waiver.
Section 9.8. SEVERABILITY. In case any provision in this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
Section 9.9. THIRD PARTY BENEFICIARIES. Each party hereto intends
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any Person other than the parties hereto and the Indemnitees.
Section 9.10. ATTORNEYS' FEES. In the event any party brings any
suit or other proceeding with respect to the subject matter or enforcement of
this Agreement or with respect to a breach of a representation or warranty
hereunder, the prevailing party (as determined by the court,
<PAGE>
- 36 -
agency or other authority before which such suit or proceeding is commenced)
shall, in addition to such other relief as may be awarded, be entitled to
recover attorneys' fees, expenses and costs of investigation as actually
incurred (including, without limitation, attorneys' fees, expenses and costs of
investigation incurred in appellate proceedings, costs incurred in establishing
the right to indemnification, or in any action or participation in, or in
connection with, any bankruptcy case or proceeding).
Section 9.11. CONSTRUCTION. Each party has reviewed and revised this
Agreement and, therefore, the rule of construction requiring that any ambiguity
be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
Section 9.12. PUBLICITY. Except as otherwise required by applicable
Laws or stock exchange rules as advised by counsel, none of the parties to this
Agreement shall issue any press release or make any other public announcement
concerning the purchase and sale of the Purchased Shares, without obtaining the
prior written approval of the Purchaser and SCL, which approval shall not be
unreasonably withheld or delayed.
Section 9.13. DEBIT MEMOS. In connection with the representations
and warranties in Section 5.19(b), the Company and the Purchaser shall, after
the Closing Time, act in good faith with respect to the debit memos and the
collection thereof.
Section 9.14. USE OF SIMMONDS NAME. For a period of six months after
the Closing, the Company shall continue to have the right to use the name
"Simmonds" in connection with the Business and in a manner not to be
inconsistent with the reputation of such name in the business community.
Thereafter,(a) the Company shall not use such name, except in connection with
Tax Returns, filings with other Governmental Authorities and for similar
purposes, and (b) the Company shall change its name so that it does not include
"Simmonds," effective upon the expiration of such six month period.
Section 9.15. ENTIRE AGREEMENT. This Agreement, and the Disclosure
Schedule which forms a part hereof, contain the entire understanding of the
parties hereto with respect to the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter (including, without limitation, the
Confidentiality Agreement and the Letter of Intent).
[Signature Page Follows]
<PAGE>
- 37 -
IN WITNESS WHEREOF, the parties hereto have caused this Share Purchase
Agreement to be executed as of the date first above written.
The Purchaser:
RICHEY ELECTRONICS, INC.
By:
-----------------------------
Richard N. Berger
Vice President and
Chief Financial Officer
The Seller:
SCL ELECTRONICS LTD.
By:
-----------------------------
David C. O'Kell
Executive Vice President
and Secretary
The Company:
SIMMONDS TECHNOLOGIES INC.
By:
-----------------------------
David C. O'Kell
Executive Vice President
and Secretary
SCL
SIMMONDS CAPITAL LIMITED
By:
-----------------------------
David C. O'Kell
Executive Vice President
and Secretary
[Signature Page to Share Purchase Agreement]
<PAGE>
Exhibit 2.2
INTERCOMPANY DEBT REPAYMENT AGREEMENT
THIS INTERCOMPANY DEBT REPAYMENT AGREEMENT (this "Agreement"), dated
June 13, 1997, is made by and among SIMMONDS CAPITAL LIMITED, a corporation
incorporated under the laws of the Province of Ontario ("SCL"), SCL ELECTRONICS
LTD., a corporation incorporated under the laws of Canada ("SCLE"), and SIMMONDS
TECHNOLOGIES INC., a corporation amalgamated under the laws of the Province of
Ontario ("STI"), with reference to the following facts:
A. STI is a wholly-owned subsidiary of Richey Electronics, Inc., a
Delaware corporation ("Richey").
B. SCLE is a wholly-owned subsidiary of SCL.
C. As of the date hereof, STI is indebted to SCL and its affiliates
(other than SCLE) and to SCLE for borrowed money and for payables net of
receivables in the following amounts: (i) $8,313,247 to SCL and its affiliates
(other than SCLE) (the "SCL Intercompany Debt") and (ii) $3,833,275 to SCLE
(the "SCLE Intercompany Debt"). Such amounts and all other dollar amounts
referred to in this Agreement are expressed in Canadian funds.
D. The parties desire to provide for the repayment of such
intercompany debt on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I
THE WARRANT
1.1. RICHEY WARRANT. STI is the holder of a warrant issued by Richey
in connection with a portion of Richey's capitalization of STI (the "Richey
Warrant"). Pursuant to the Richey Warrant, STI has the right to purchase shares
of common stock of Richey as provided therein.
1.2. ASSIGNMENT OF RICHEY WARRANT. Concurrently herewith, STI shall
assign to SCL all of its rights under the Richey Warrant.
<PAGE>
- 2 -
ARTICLE II
THE SEGREGATED INVENTORY
2.1. SEGREGATED INVENTORY. STI will physically segregate certain
inventory at the warehouse which it shares with A.C. Simmonds & Sons Limited
("ACS") in Pickering, Ontario (the "Pickering Warehouse") and at its warehouses
in Calgary and Edmonton. The aggregate value of such inventory as reflected on
STI's books is $4,700,000, of which (i) $2,366,725 will be allocated to SCL and
its affiliates (other than SCLE) (the "SCL Segregated Inventory") and (ii)
$2,333,275 will be allocated to SCLE (the "SCLE Segregated Inventory").
2.2. SALE OF SEGREGATED INVENTORY. STI hereby sells the SCL
Segregated Inventory to SCL and the SCLE Segregated Inventory to SCLE, which in
each case has become non-core inventory for STI. Such inventory which is at the
Pickering Warehouse shall be moved to ACS's portion of such Warehouse, within 90
days after the date of this Agreement and, at the request and expense of SCL and
SCLE, the inventory segregated at STI's warehouses in Calgary and Edmonton will
be moved to ACS's portion of the Pickering Warehouse. During such 90-day
period, STI shall have the right to substitute other non-core inventory for such
inventory, provided that such substitutions do not reduce the aggregate value of
the SCL Segregated Inventory and the SCLE Segregated Inventory to less than the
respective amounts thereof as specified above.
ARTICLE III
OBLIGATION TO PAY
3.1. OBLIGATION TO PAY. STI hereby promises to pay to SCL on March
31, 2002, a sum which shall be determined as provided in Exhibit 1 hereto. On
the date on which such payment is due, STI shall have the right (but not the
obligation) to offset against such payment, in whole or in part, amounts then
due from SCL or SCLE to Richey or STI under the terms of the Share Purchase
Agreement of even date herewith pursuant to which Richey acquired STI or under
the terms of the related letter agreement among SCL, SCLE, STI and Richey of
even date herewith and SCL shall have the right (but not the obligation) to
offset such payment against amounts, in whole or in part, then due by it to
Richey or STI under such Share Purchase Agreement or letter agreement. For
purposes hereof, amounts then due from SCL or SCLE shall include interest at the
Prime Rate plus five percent (5%), from the date on which such amounts became
due to the date on which such payment is made. As used herein, "Prime Rate"
means the rate per annum quoted by Canadian Imperial Bank of Commerce from time
to time as its prime rate for Canadian Dollar commercial loans made in Canada.
3.2. RELATED TERMS. With respect to such obligation to pay, STI
hereby expressly waives diligence, presentment for payment, notice of
non-payment and protest.
<PAGE>
- 3 -
ARTICLE IV
CASH PAYMENT
On the date of this Agreement, STI will pay the sum of $1,500,000 to
SCLE or as it may direct in writing.
ARTICLE V
ACKNOWLEDGMENT
5.1. SATISFACTION OF SCL INTERCOMPANY DEBT. SCL on behalf of itself
and its affiliates (other than SCLE) hereby (i) accepts the foregoing in
complete satisfaction of the SCL Intercompany Debt which is hereby discharged
and (ii) releases all agreements relating to such indebtedness and all liens and
security interests in respect of properties of STI.
5.2. SATISFACTION OF SCLE INTERCOMPANY DEBT. SCLE hereby (i) accepts
the foregoing in complete satisfaction of the SCLE Intercompany Debt which is
hereby discharged and (ii) releases all agreements relating to such indebtedness
and all liens and security interests in respect of properties of STI.
ARTICLE VI
MISCELLANEOUS
Section 6.1. GOVERNING LAW. This Agreement shall be construed,
interpreted and enforced in accordance with, and the rights and obligations of
the parties shall be governed by, the laws of the Province of Ontario and the
federal laws of Canada applicable therein, and each party hereby irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the courts of such
province and all courts competent to hear appeals therefrom.
Section 6.2. CAPTIONS. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement. All references to exhibits in this Agreement
are references to exhibits attached to this Agreement, which exhibits are
incorporated herein by this reference.
Section 6.3. PARTIES IN INTEREST. Except as hereinafter provided,
this Agreement may not be transferred, assigned, pledged or hypothecated by any
party hereto, other than by operation of law. Each of SCL and SCLE shall have
the right, on notice to but without the consent of STI, to make a collateral
assignment of its rights hereunder to one or more institutional lenders and to
assign its rights hereunder to any of its affiliates or to any person that
acquires all or
<PAGE>
- 4 -
substantially all of its assets. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
Section 6.4. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
Signatures may be exchanged by telecopy, and each party agrees to be bound by
its own telecopied signature and to accept the telecopied signatures of the
other parties.
Section 6.5. AMENDMENTS. This Agreement may not be changed orally,
but only by an agreement in writing signed by the parties hereto.
Section 6.6. ATTORNEYS' FEES. In the event any party brings any
suit or other proceeding with respect to the subject matter or enforcement of
this Agreement, the prevailing party (as determined by the court, agency or
other authority before which such suit or proceeding is commenced) shall, in
addition to such other relief as may be awarded, be entitled to recover
attorneys' fees, expenses and costs of investigation as actually incurred
(including, without limitation, attorneys' fees, expenses and costs of
investigation incurred in appellate proceedings, costs incurred in establishing
the right to indemnification, or in any action or participation in, or in
connection with, any bankruptcy case or proceeding).
Section 6.7. CONSTRUCTION. Each party has reviewed and revised this
Agreement and, therefore, the rule of construction requiring that any ambiguity
be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
Section 6.8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
SCL
SIMMONDS CAPITAL LIMITED
By:
-------------------------------------
David C. O'Kell
Executive Vice President
and Secretary
SCLE
SCL ELECTRONICS LTD.
By:
-------------------------------------
David C. O'Kell
Executive Vice President
and Secretary
STI
SIMMONDS TECHNOLOGIES INC.
By:
-------------------------------------
Richard N. Berger
Vice President and
Chief Financial Officer
[Signature Page to Intercompany Debt Repayment Agreement]
<PAGE>
Exhibit 4.1
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT OR STATE LAW, THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS OF THIS WARRANT.
WARRANT
To Purchase Common Stock of
RICHEY ELECTRONICS, INC.
------------------------
Expiring March 31, 2002
THIS IS TO CERTIFY THAT, for value received, SIMMONDS CAPITAL
LIMITED, or registered assigns, is entitled, at any time and from time to
time prior to the Expiration Date (as hereinafter defined), to purchase from
RICHEY ELECTRONICS, INC., a Delaware corporation ("Company"), at the Exercise
Price (as hereinafter defined and subject to adjustment as provided herein) a
number of shares of Common Stock (as hereinafter defined) equal to the
quotient of 2,000,000 divided by the Exercise Price, all on the terms and
conditions hereinafter set forth.
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" of any Person means any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For purposes of this definition, "control," when used with respect
to any Person, means the power to direct the management and policies of such
Person, whether though the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day which is not a Saturday, a Sunday, or any
other day on which banking institutions are authorized or required to be closed
in the City of Los Angeles.
"Change of Control" has the meaning specified in Article VI.
"Closing Date" means June 13, 1997.
<PAGE>
-2-
"Closing Price" means with respect to the Common Stock on any Trading
Day, the last reported sales price regular way or, in case no such reported sale
takes place on such date, the average of the reported closing bid and asked
prices regular way, in either case on Nasdaq, or if the Common Stock is not
listed or admitted to trading on Nasdaq, on the principal securities exchange on
which the Common Stock is listed or admitted to trading or, if not listed or
admitted to trading on any securities exchange, the closing sale price of the
Common Stock, or in case no reported sale takes place, the average of the
closing bid and asked prices, on an interdealer quotation system or any
comparable system, or if the Common Stock is not so quoted, the Closing Price
shall be as determined in good faith by Company's Board of Directors.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the shares of common stock, par value $0.001 per
share, of Company.
"Company" has the meaning specified in the preamble to this Warrant
and shall include its successors.
"Current Market Value" means as of any specified date, the average of
the daily Closing Prices for the Common Stock for the ten (10) consecutive
Trading Days immediately preceding such date, except in the event of a Change of
Control in which case such term shall have the meaning specified in Article VI.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Price" has the meaning specified in Section 2.1 hereof.
"Expiration Date" means March 31, 2002.
"Holder" means Simmonds Technologies Inc. and any other Person in
whose name this Warrant is subsequently registered on the books of Company
maintained for such purpose; provided that for purposes of Article IV hereof,
Holder means only Simmonds Technologies Inc.
"Nasdaq" means The Nasdaq Stock Market.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof or any other entity.
"Payment Shares" has the meaning specified in Section 2.3 hereof.
"Permitted Transferee" has the meaning specified in Section 3.2.
<PAGE>
-3-
"Securities Act" means the Securities Act of 1933, as amended.
"Trading Day" means (i) if the Common Stock is listed or admitted for
trading on a national securities exchange, a day on which such exchange is open
for business or (ii) if the Common Stock is quoted on the Nasdaq National
Market, a day on which trades may be made thereon or (iii) if the Common Stock
is not so listed, admitted for trading or quoted, any Business Day.
"Transfer" means any sale, transfer, gift, donation, assignment,
pledge, encumbrance, hypothecation, grant of security interest or other
disposition of any nature whatsoever.
"Warrant" means this Warrant, and any amendments hereto, and all
warrants issued upon transfer or in substitution for this Warrant.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of this Warrant.
ARTICLE II
EXERCISE OF WARRANT
Section 2.1 EXERCISE PRICE. The exercise price per share of Common
Stock shall be equal to 125% of the average of the Closing Price of the Common
Stock for the ten consecutive Trading Days immediately preceding the fifth
Trading Day following the Closing Date (the "Exercise Price"). The Exercise
Price and the number of shares issuable upon exercise of this Warrant are
subject to adjustment upon the occurrence of certain events pursuant to the
provisions of Article V of this Warrant.
Section 2.2 MANNER OF EXERCISE. In order to exercise this Warrant, in
whole or in part, Holder shall deliver to Company, at any time on or before 5:00
p.m. California time on the Expiration Date: (i) a written notice of Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to be purchased (which shall not include any fraction of
a share), (ii) payment of the Exercise Price with respect to such shares and
(iii) this Warrant. Such notice shall be substantially in the form of the
subscription notice appearing at the end of this Warrant as Exhibit A, duly
executed by Holder. Upon receipt thereof, Company shall, as promptly as
practicable, and in any event within five (5) Business Days thereafter, execute
and deliver to Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such exercise. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as Holder shall request in the notice and
shall be registered in the name of Holder or, subject to Article III, such other
name as shall be designated in the notice. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named
<PAGE>
-4-
therein shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the notice, together with payment as set forth below,
and this Warrant are received by Company as described above and all taxes
required to be paid by Holder, if any, pursuant to Section 2.4 prior to the
issuance of such shares have been paid or Holder has agreed to pay such taxes
when finally determined. If this Warrant shall have been exercised in part,
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased shares of Common Stock called for
by this Warrant, which new warrant shall in all other respects be identical to
this Warrant, or, at the request of Holder, appropriate notation may be made on
this Warrant and the same returned to Holder. Notwithstanding any provision
herein to the contrary, Company shall not be required to register shares in the
name of any Person who acquired this Warrant or any Warrant Shares otherwise
than in accordance with this Warrant.
Section 2.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price
shall be made by wire transfer or certified check payable to the order of
Company; PROVIDED, HOWEVER, that Holder shall have the right, at its election,
in lieu of delivering the Exercise Price in cash, to instruct Company in the
subscription notice to retain, in payment of the Exercise Price, a number of
shares of Common Stock (the "Payment Shares") equal to the quotient of the
aggregate Exercise Price of the shares as to which this Warrant is then being
exercised divided by the Current Market Value per share of Common Stock as of
the date the notice of exercise is received by Company and to deduct the number
of Payment Shares from the shares to be delivered to Holder.
Section 2.4 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and, to the extent permitted by law,
without any preemptive rights. Company shall pay all expenses in connection
with, and all taxes and other governmental charges that may be imposed with
respect to, the issue or delivery thereof, unless such tax or charge is imposed
by law upon Holder, in which case such taxes or charges shall be paid by Holder.
Company shall not be required, however, to pay any tax or other charge imposed
in connection with any Transfer involved in the issue of any certificate for
shares of Common Stock issuable upon exercise of this Warrant in any name other
than that of Holder, and in such case Company shall not be required to issue or
deliver any stock certificate until such tax or other charge has been paid or it
has been established to the satisfaction of Company that no such tax or other
charge is due.
ARTICLE III
TRANSFERS
Section 3.1 TRANSFERS GENERALLY. This Warrant may not be Transferred by
Holder, in whole or in part, except as expressly permitted by this Article III.
Any attempted Transfer that is not permitted under the terms of this Warrant
shall be null and void, and Company shall not give effect to any such attempted
Transfer on its register.
<PAGE>
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Section 3.2 PERMITTED TRANSFERS. Notwithstanding the foregoing, subject
to the further provisions of this Article, Transfers of this Warrant, in whole
but not in part, to the following transferees (collectively, "Permitted
Transferees") are expressly permitted:
(a) Any Affiliate of Holder; and
(b) A bona fide pledgee as security for any indebtedness incurred by
Holder, provided that such pledgee shall, prior to such pledge, execute and
deliver to Company, a written agreement not to dispose of this Warrant or
Warrant Shares so pledged, or retain this Warrant or Warrant Shares in full or
partial satisfaction of such indebtedness, without complying with the provisions
of this Warrant.
Section 3.3 NO REGISTRATION RIGHTS. It is understood and agreed that
Company does not intend to, and shall have no obligation to, file a registration
statement with the Commission under the Securities Act or to comply with any
state securities laws in connection with any proposed Transfer of the Warrant or
the Warrant Shares. Accordingly, a Transfer of the Warrant (which satisfies the
requirements of Section 3.2) or the Warrant Shares shall only be permitted when
Company shall have received an opinion of counsel of Holder reasonably
satisfactory to Company that such registration and qualification are not
required in order to ensure compliance with the Securities Act and applicable
securities laws. In addition, in the event of any such Transfer of the Warrant
or the Warrant Shares to a transferee, such transferee shall be bound by the
terms and provisions of this Warrant, including this Article III.
Section 3.4 MANNER OF TRANSFER OF WARRANT. Subject to compliance with
this Article III, a Transfer of this Warrant and all rights hereunder, in whole
but not in part, shall be registered on the books of Company, upon surrender of
this Warrant to Company, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by Holder and funds
sufficient to pay any transfer taxes payable upon the making of such Transfer.
Upon such surrender and such payment, Company shall execute and deliver a new
warrant, identical in all respects to this Warrant, in the name of the assignee
and this Warrant shall promptly be canceled. This Warrant, if properly assigned
in compliance with this Article III, may be exercised by a new Holder for the
purchase of shares of Common Stock without having a new warrant issued.
Section 3.5 TRANSFER RESTRICTION LEGEND. Each certificate for Warrant
Shares initially issued upon exercise of this Warrant, and each certificate for
Warrant Shares issued to any subsequent transferee of any such certificate,
shall bear the following legend (and any additional legend required under
applicable law, rule or regulation) on the face thereof unless otherwise agreed
by Company by written notice thereof to its stock transfer agent:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED OR
QUALIFIED FOR SALE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE
<PAGE>
-6-
SECURITIES LAWS OF ANY STATE AND MAY BE SOLD OR OTHERWISE TRANSFERRED
ONLY IF REGISTERED OR QUALIFIED UNDER APPLICABLE FEDERAL AND STATE
SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION OR
QUALIFICATION IS AVAILABLE.
ARTICLE IV
REPRESENTATIONS
Holder hereby represents and warrants as follows and acknowledges that
Company is relying on such representations and warranties in connection with its
sale of the Warrant to Holder:
(a) The Warrant and the Warrant Shares which may be purchased upon
exercise of the Warrant are being acquired by Holder for its own account, for
investment and not with a view to the distribution thereof, nor with any present
intention of distributing the same.
(b) Holder understands that neither the Warrant nor the Warrant
Shares have been or will be registered or qualified under the Securities Act or
any applicable state securities laws, by reason of their issuance in a
transaction exempt from the registration or qualification requirements of the
Securities Act and such laws, and that the Warrant and the Warrant Shares must
be held indefinitely unless, subject to the provisions of Article III, a
subsequent disposition thereof is registered or qualified under the Securities
Act and such laws or is exempt from such registration or qualification. Holder
further understands and agrees that Company does not intend to, and shall have
no obligation to, file a registration statement with the Commission under the
Securities Act or to comply with any state securities laws in connection with
any proposed Transfer by Holder of the Warrant or the Warrant Shares.
Accordingly, the Warrant and the Warrant Shares must be held by Holder
indefinitely unless, subject to the provisions of Article III, an exemption from
such registration or qualification is available.
(c) Holder is an "accredited investor" (as defined in Rule 501(a) of
Regulation D under the Securities Act). Holder (i) has been furnished with or
has had access to all information that Holder has requested from Company
regarding Company or otherwise deemed necessary in order to make an informed
decision with respect to this Warrant and (ii) has generally such knowledge and
experience in business and financial matters and with respect to investments in
securities, such as this Warrant, so as to enable Holder to understand and
evaluate the risks of, and make an informed investment decision with respect to,
this Warrant.
<PAGE>
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ARTICLE V
ADJUSTMENTS
Section 5.1 WARRANT SUBJECT TO DILUTION. The number of shares of Common
Stock for which this Warrant is exercisable and the Exercise Price shall not be
subject to adjustment, except as expressly provided herein. Accordingly, except
as expressly provided herein, Holder's rights under this Warrant shall be
subject to dilution, including, without limitation, by reason of capital
reorganizations or reclassifications, issuance of additional Common Stock in
private placements or public offerings, issuances of rights, options, warrants
or convertible or exchangeable securities and other events.
Section 5.2 STOCK DIVIDENDS, SUBDIVISIONS OR COMBINATIONS. If Company
shall hereafter (i) pay a dividend or make a distribution payable in shares of
Common Stock to all holders of Common Stock, (ii) subdivide its outstanding
Common Stock into a larger number of shares or (iii) combine its outstanding
Common Stock into a smaller number of shares, then (x) the number of shares of
Common Stock purchasable upon exercise of this Warrant immediately after the
record date or the effective date for any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event would own or be entitled to receive after the
happening of such event and (y) the Exercise Price shall be adjusted to equal
the then current Exercise Price multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to the adjustment and the denominator of which
shall be the number of shares for which this Warrant is exercisable immediately
after such adjustment. All calculations shall be made to the nearest full
share.
Section 5.3 NOTICE OF ADJUSTMENT. Whenever the number of shares of
Common Stock purchasable upon the exercise of this Warrant is adjusted as herein
provided, Company shall promptly give Holder notice thereof, setting forth a
brief statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made.
Section 5.4 STATEMENT ON WARRANTS. Irrespective of any adjustment in
the number of shares purchasable upon the exercise of this Warrant, this Warrant
may continue to express the same number of shares as are stated herein.
<PAGE>
-8-
ARTICLE VI
CHANGE OF CONTROL
If Company consolidates or merges into any other corporation, or
conveys, transfers or leases all or substantially all of its assets to any
Person, or any other corporation merges into Company, and in the case of any
such transaction, the outstanding Common Stock is changed or exchanged into
other securities and/or property (including cash) (any such event being called a
"Change of Control"), then, Holder shall be deemed (i) to have exercised this
Warrant and in connection therewith to have instructed Company to retain Payment
Shares in payment of the Exercise Price and (ii) to have received the remaining
number of shares of Common Stock, all immediately prior to such Change of
Control. For purposes of calculating the number of such Payment Shares, the
Current Market Value per share of Common Stock shall be the fair market value of
such other securities and/or property (including cash) into which the Common
Stock is to be changed or exchanged as determined in good faith by Company's
Board of Directors. Notwithstanding anything to the contrary contained herein,
if such Current Market Value as so determined is less than the Exercise Price,
this Warrant shall be deemed to have expired without being exercised,
immediately prior to such Change of Control. Without limiting the foregoing, it
is expressly understood and agreed that Holder shall not under any circumstances
be entitled to exercise this Warrant following a Change of Control.
ARTICLE VII
LOSS OR MUTILATION
Upon receipt by Company of evidence satisfactory to Company of the
loss, theft, destruction or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of indemnity or security
satisfactory to Company, or, in the case of mutilation, upon cancellation of
such Warrant, the Company will deliver, in lieu of such lost, stolen, destroyed
or mutilated Warrant, a new warrant which shall in all respects be identical to
this Warrant.
ARTICLE VIII
RESERVATION OF COMMON STOCK
Company shall at all times reserve and keep available for issue upon
the exercise of this Warrant such number of its authorized but unissued shares
of Common Stock as will be sufficient to permit the exercise in full of this
Warrant.
<PAGE>
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ARTICLE IX
WARRANT HOLDER NOT DEEMED STOCKHOLDER
Company may deem and treat the registered Holder of this Warrant as the
absolute owner thereof (notwithstanding any notation of ownership or other
writing thereon made by anyone), for the purpose of any exercise thereof and for
all other purposes, and Company shall not be affected by any notice to the
contrary. Prior to the exercise of this Warrant, Holder, as such, shall not be
entitled to any rights of a stockholder of Company, including, without
limitation, the right to vote or to consent to any action of the stockholders,
to receive dividends or other distributions, to exercise any preemptive right or
to receive any notice of meetings of stockholders and, except as otherwise
provided in this Warrant, shall not be entitled to receive any notice of any
proceedings of Company.
ARTICLE X
MISCELLANEOUS
Section 10.1 NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be mailed,
telecopied, dispatched by reputable commercial courier or delivered by hand as
follows:
If to Company, addressed to it at:
Richey Electronics, Inc.
7441 Lincoln Way
Garden Grove, California 92641
Attention: President
Telecopier: 714-897-7887
With copies to:
Kathy Wales
Dewey Ballantine
333 South Hope Street, 30th Floor
Los Angeles, California 90071
Telecopier: 213-625-0562
Michael Creery
Davies Ward & Beck
1 First Canadian Place
Suite 4400
Toronto, Ontario M5X 1B1
Telecopier: 416-863-0871
<PAGE>
-10-
If to the initial Holder, addressed to it at:
Simmonds Technologies Inc.
580 Granite Court
Pickering, Ontario L4W 3Z4
Attention: President
Telecopier: 905-837-3939
With a copy to:
John Burns
Gowling, Strathy & Henderson
Suite 4900, Commerce Court West
Toronto, Ontario M5L IJ3
Telecopier: 416-862-7661
Any notices to any subsequent Holder of this Warrant shall be sent to its last
known address or facsimile transmission number appearing on the books of Company
maintained for such purpose. If any notice or other communication required or
permitted to be given hereunder is given by mail, it will be effective on the
fifth calendar day after deposit in the mail with first class postage prepaid,
except in the event of an actual or threatened disruption in postal services, in
which case notices shall be given by telecopier, courier or personal delivery
until the resumption of normal postal service; if given by telecopier on a
Business Day during regular business hours of the recipient, when sent and, if
not so given, then, at the opening of the recipient's business on the next
Business Day; if dispatched by reputable commercial courier, on the scheduled
delivery date; or if given by personal delivery, when delivered.
Section 10.2 GOVERNING LAW. This Warrant shall be governed by the laws
of the State of California applicable to contracts made and to be performed
entirely in that state, without regard to the principles thereof regarding
conflict of laws.
Section 10.3 BINDING EFFECT. Subject to the provisions of Article III,
this Warrant shall be binding upon and inure to the benefit of Company and its
successors and Holder and its successors and assigns.
Section 10.4 SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
<PAGE>
-11-
Section 10.5 AMENDMENT. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of Company and Holder.
Section 10.6 HEADINGS. The headings and subheadings in this Warrant are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this Warrant
or any provision hereof.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, Simmonds Capital Limited, as Holder of this
Warrant, hereby consents to the provisions contained in this Warrant, and
the Company has caused this Warrant to be duly executed.
Dated: June 13, 1997.
RICHEY ELECTRONICS, INC.
By____________________________
Richard N. Berger
Vice President and
Chief Financial Officer
SIMMONDS CAPITAL LIMITED
By _____________________________
David C. O'Keil
Executive Vice President and
Secretary
[SIGNATURE PAGE TO WARRANT]
<PAGE>
EXHIBIT A
SUBSCRIPTION NOTICE
[To be executed only upon exercise of Warrant]
The undersigned registered owner of the attached Warrant irrevocably
exercises such Warrant for the purchase of ___________ shares of Common Stock of
Richey Electronics, Inc. and herewith makes payment therefor, all at the price
and on the terms and conditions specified in such Warrant and requests that
certificates for the shares of Common Stock hereby purchased be issued in the
name of and delivered to __________________________________ whose address is
___________________________________ and, if such shares of Common Stock shall
not include all of the shares of Common Stock issuable as provided in such
Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.
/ / If this box is checked, then Holder is utilizing the procedure
specified in Section 2.3 hereof, and Company shall withhold the Payment Shares
in lieu of Holder delivering the Exercise Price in cash.
Dated:
_________________________________
(Name of Registered Owner)
_________________________________
(Signature of Registered Owner)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the attached
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant:
NAME AND ADDRESS OF ASSIGNEE
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of Richey Electronics,
Inc. maintained for such purpose, with full power of substitution in the
premises.
Dated: ____________________ Print Name: ________________________
Signature: _________________________
Witness: ___________________________
NOTICE: The signature of this assignment must correspond with the name as
written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit 99.1
NEWS RELEASE
For: Richey Electronics, Inc.
7441 Lincoln Way
Garden Grove, CA 92842-3120
Contact: Richard N. Berger
714/898-8288
RICHEY ELECTRONICS, INC. COMPLETES PURCHASE OF SIMMONDS
TECHNOLOGIES, INC. FROM SIMMONDS CAPITAL LIMITED
Garden Grove, California, June 13, 1997 - Richey Electronics, Inc.
(Nasdaq NNM:RCHY) and Simmonds Capital Limited (TSE: SMM) today announced that
they have closed the transaction in which Richey purchased from Simmonds all of
the common stock of Simmonds Technologies, Inc. ("STI"). STI, an indirect,
wholly-owned subsidiary of Simmonds, is a Canada-wide distributor of
interconnect, electromechanical and passive electronic components, headquartered
in Toronto, with additional branch locations in the Montreal, Ottawa, Winnipeg,
Saskatoon, Calgary, Edmonton and Vancouver regions. In 1996, STI had sales of
approximately C$42 million.
Pursuant to the transaction, Richey refinanced STI's bank indebtedness
of approximately C$7.8 million. In events related to the transaction, Richey
issued to Simmonds a warrant to purchase approximately 200,000 shares of Richey
common stock at an exercise price of approximately $10 per share (based upon a
premium to the average closing price of Richey's common stock for the 10
consecutive trading days ending on the fifth day following the closing),
contributed C$1.5 million toward the settlement of certain long-term liabilities
of STI to be retained by Simmonds, and transferred C$4.7 million worth of non-
core inventory to Simmonds. Simmonds also receive the right to a future payment
from Richey based upon STI's operating earnings in 2001. Other details of the
transaction were not disclosed.
William C. Cacciatore, Chairman and Chief Executive Officer of Richey
commented: "This acquisition instantly positions Richey as a national
distributor in Canada, specializing in the distribution of interconnect,
electromechanical and passive electronic componets. While STI has experienced
a history of significant losses, we are convinced that as a member of the Richey
family, it can be returned to sustainable profitability. We intend to
immediately begin doing business in Canada under the Richey name, and will later
introduce our strong value-added service capabilities to the Canadian market.
The twenty six vendors STI
<PAGE>
and Richey represent in common have been very supportive of this acquisition and
we look forward to working with them, as well as our non-common suppliers, in
building our Canadian sales."
Mr. Cacciatore continued: "From a financial point of view, we expect
that the acquisition of STI could have a dilutive effect on Richey's earnings up
to 2 cents per share, fully diluted, in each of the third and fourth quarters of
1997. Thereafter, we expect STI to turn profitable and contribute approximately
4 to 5 cents per share, fully diluted, in 1998. Very importantly, we anticipate
being able to use STI's Canadian net operating loss carry forwards of
approximately C$12 million to shelter future income from taxes, significantly
improving the cash flow characteristics of the transaction for Richey."
Mr. Cacciatore concluded: "We are very excited by the prospects this
acquisition presents. We have acquired a strong product and market position in
Canada and an excellent management team dedicated to working with us to improve
the business. As consolidation trends in our industry continue, we believe it
will become even more important to our key suppliers and customers for
distributors to serve the entire North American market. The STI acquisition
positions Richey to capitalize on these trends."
John G. Simmonds, Chairman and Chief Executive Officer of Simmonds,
said: "We began the process of building a Canada-wide distribution company
almost four years ago and succeeded in that effort with STI. We came to believe
that long-term success in the distribution industry will require more than just
a national presence in Canada. As a result, we have chosen to form an alliance
with Richey in this transaction. Our warrant to purchase Richey stock will
allow us to participate in the overall company's success, while the potential
payout will directly reflect the continued developments of STI's market presence
in Canada. We look to the future of Richey and STI with great confidence and
optimism."
Richey Electronics is a distributor of interconnect, electromechanical
and passive electronic components and a provider of related value-added
services. Simmonds Capital Limited, Toronto, Ontario, is a diversified
electronics company involved in the global wireless communications market and
the production and distribution of electronic components.
Certain statements made herein are forward-looking within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, the Company's ability to return STI to
sustainable profitability and the effect of the acquisition of STI on earnings
per share. Investors are cautioned that all forward-looking statements involve
risks and uncertainties, including, without limitation, risks related to the
Company's ability to successfully integrate STI's
<PAGE>
operation in a timely fashion, to reduce STI's costs of operation and to
maintain relationships with STI's existing vendors and customers. This list is
not meant to be exhaustive. Investors who seek more information about the
Company's business and relevant risk factors may wish to review the Company's
SEC reports, including, but not limited to, its Annual Report on Form 10-K for
1996.
