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 September 20, 1996
(Date of earliest event reported)
INTEK Diversified Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-9160 04-2450145
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
970 West 190th St., Suite 720, Torrance, CA 90502
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 310-366-7335
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 20, 1996 (the "Closing Date"), INTEK
Diversified Corporation, a Delaware corporation ("INTEK"),
through Midland USA, Inc., a Delaware corporation and wholly-
owned subsidiary of INTEK ("MUSA"), consummated the acquisition
of the U.S. land mobile radio business (the "Business") of
Midland International Corporation ("MIC"), which consists of the
sale and distribution of land mobile radio products, including
two-way radios, parts and accessories, bearing the Midland
trademark, the Midland Trademark and related contracts and
goodwill of the Business (collectively, the "Assets").
The purchase price for the Assets was an amount up to 2.5
million shares of common stock of INTEK. In addition, cash
consideration of $3,417,246 for inventory and other assets which
are used in the Business (the "Inventory") was paid to MIC. MIC
was entitled to receive 150,000 shares of common stock of INTEK
on the Closing Date. The remaining 2.35 million shares of common
stock of INTEK (the "Escrow Shares") were deposited into an
escrow account with American Stock Transfer & Trust Company. MIC
is entitled to receive the Escrow Shares (subject to certain
adjustments) upon consummation of the acquisition by INTEK of
Securicor Radiocoms Limited ("Radiocoms"), a wholly-owned
subsidiary of Securicor Communications Limited, an England and
Wales corporation (the "Securicor Transaction") or if Securicor
and INTEK, or their respective affiliates, enter into one or more
transactions within six months of the termination of the stock
purchase agreement for the Securicor Transaction (the "Securicor
Agreement"), which, in the aggregate, convey majority control of
INTEK to Securicor upon the closing of such transactions.
Radiocoms is engaged in the design, development and manufacture
of a range of land mobile radio products using linear modulation
technology. The Escrow Shares will be voted for and against the
Securicor Transaction and the transactions contemplated thereby,
including an amendment to INTEK's Certificate of Incorporation to
increase the number of shares authorized to accomodate the
Securicor Transaction, in proportion to the vote of INTEK's
stockholders, excluding Simmonds Capital Limited, an Ontario
corporation, Roamer One Holdings, Inc., an Ohio corporation and
Securicor International Limited, an affiliate of Securicor
Communications Limited.
Simultaneous with the acquisition of the Assets and
Inventory, Securicor Communications Limited ("Securicor") and
MUSA entered into a loan agreement on September 19, 1996 (the
"Loan Agreement"), under which Securicor agreed to provide MUSA
with a revolving credit facility for up to $15 million (the
"Credit Facility"). MUSA has pledged its assets, and INTEK
pledged its shares in MUSA, as security for the funds advanced by
<PAGE>
Securicor under the Credit Facility. MUSA financed the cash
portion of the purchase price for the Inventory from an advance
under the Credit Facility. Upon consummation of the Securicor
Transaction, INTEK will assume the obligations outstanding under
the Credit Facility and such obligations shall become obligations
outstanding under a separate loan that will be extended by
Securicor to INTEK upon consummation of the Securicor
Transaction.
In the event the Securicor Transaction is not consummated,
the amounts outstanding under the Credit Facility are due and
payable on the Termination Date (I.E. the earlier of the date the
Securicor Agreement is terminated and December 31, 1996). INTEK
may extend the repayment date of such obligations for an
additional thirty (30) days (or in one instance up to sixty (60)
days) upon the payment of $500,000 to Securicor. MIC has been
granted an option by INTEK for a period of thirty (30) days
following the termination of the Securicor Agreement to acquire
the stock of MUSA upon the payment of 150,000 shares of common
stock of INTEK and the payment to Securicor of all outstanding
obligations under the Credit Facility.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF MIDLAND INTERNATIONAL CORP.-
UNITED STATES OPERATIONS (MIDLAND)
1. Audited Balance Sheets of Midland as of
December 31, 1995 and 1994 and related
Statements of Operations and Net Worth and
Cash Flows for the years ended December 31,
1995 and 1994, the ten-month period ended
October 31, 1993 and the two-month period
ended December 31, 1993; and
2. Unaudited Balance Sheet of Midland as of June
30, 1996 and Unaudited Statements of
Operations and Net Worth and Cash Flows for
the six-month period ended June 30, 1996 and
1995;
(b) PRO FORMA FINANCIAL INFORMATION.
1. Pro forma Combined Balance Sheet of INTEK and
U.S. land mobile radio business dated
December 31, 1995; and
<PAGE>
2. Pro forma Statements of Operations and Cash
Flows of INTEK and U.S. land mobile radio
business based on audited Statements of
Operations and Statement of Cash Flows of
INTEK for the year ended December 31, 1995
and on the audited Statements of Operations
and Cash Flows for Midland for the year ended
December 31, 1995.
(c) EXHIBITS.
2.1 Amended and Restated Sale of Assets and
Trademark Agreement dated as of September 19,
1996, by and among INTEK Diversified
Corporation, Simmonds Capital Limited and
Midland International Corporation.
10.1 Escrow Agreement dated as of September 19,
1996, among INTEK Diversified Corporation,
Midland International Corporation and
American Stock Transfer & Trust Company.
10.2 Assignment and Assumption Agreement dated as
of September 1, 1996, by and between INTEK
Diversified Corporation and Midland USA, Inc.
10.3 Loan Agreement dated as of September 19,
1996, between Midland USA, Inc. and Securicor
Communications Limited.
10.4 Non-Recourse Guaranty and Pledge Agreement
dated as of September 19, 1996, between INTEK
Diversified Corporation and Securicor
Communications Limited.
10.5 Revolving Credit Note dated September 19,
1996, by Midland USA, Inc. to the order of
Securicor Communications Limited.
10.6 Security Agreement dated September 19, 1996,
made by Midland USA, Inc. and INTEK
Diversified Corporation in favor of Securicor
Communications Limited.
<PAGE>
SCHEDULES
Pursuant to Item 601(b)(2) of Regulation S-K, certain
schedules to the Asset Agreement set forth above have been
omitted. INTEK hereby agrees to furnish such schedules upon
request of the Securities and Exchange Commission.
SCHEDULES OMITTED
Schedule 1.68 - Executive Officers of INTEK
Schedule 1.69 - Executive Officers of MIC
Schedule 1.73 - U.S. Trademarks
Schedule 2.1(c) - Contracts
Schedule 2.1(e) - Other Assets and Inventory
Schedule 2.1(g) - Real Property Leases
Schedule 2.1(j) - Prepaid Expenses
Schedule 2.3(a)(3) - Accrued Employee Liabilities as of the
Effective Date
Schedule 2.3(a)(8) - INTEK Purchase Orders
Schedule 2.3(a)(10) - LMR Dealer Co-op Totals
Schedule 3.3 - Reimbursement Schedule
Schedule 8.2 - Performance Bonds / Letters of Credit /
Guaranties
Schedule 8.4(a) - Transferred Employees
Schedule 13.1 - MIC Retained Agreements
Schedule 6.1(a) MIC - Organization and Standing; Power and
Authority
Schedule 6.1(b) MIC - Exceptions to Business in Ordinary
Course
Schedule 6.1(c) MIC - Compliance with Contracts
Schedule 6.1(d) MIC - Consents and Approvals; No Violation
Schedule 6.1(e) MIC - Exceptions to Title
Schedule 6.1(f) MIC - Intellectual Property Matters
Schedule 6.1(h)(3) MIC - Compliance with Employee Benefit
Plans
Schedule 6.1(i) MIC - Legal Proceedings
Schedule 6.1(j) MIC - Suppliers and Customers
Schedule 6.1(n) MIC - Personal Property Leases
Schedule 6.1(p) MIC - FCC Licenses
Schedule 6.2(a) INTEK - Organization and Standing; Power
and Authority
Schedule 6.2(b) INTEK - Options, Warrants
Schedule 6.2(d) INTEK - Subsidiaries
Schedule 6.2(e) INTEK - Exceptions to Business in Ordinary
Course
Schedule 6.2(f) INTEK - Consents, Approvals; No Violations
Schedule 6.2(h) INTEK - Employee Relations
<PAGE>
Schedule 6.2(i) INTEK - Employee Plans
Schedule 6.2(j) INTEK - Material Contracts
Schedule 6.2(n) INTEK - Environmental Matters
Schedule 6.2(o) INTEK - Labor Relations
Schedule 6.2(p) INTEK - Real Property Matters
Schedule 6.2(q) INTEK - Legal Proceedings
Schedule 6.2(r) INTEK - FCC Licenses
Schedule 6.2(s) INTEK - Units In Service
Schedule 6.2(t) INTEK - Contracts, Leases and Site Licenses
Schedule 6.2(u) INTEK - Related Party Transactions
Schedule 6.2(v) INTEK - Compliance with Laws
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, INTEK has duly caused this Report to be
signed on its behalf by the undersigned hereunto duly authorized.
Dated: INTEK Diversified Corporation
By: /s/ David Neibert
-------------------------
Name: David Neibert
Title: Executive Vice President
<PAGE>
FINANCIAL STATEMENTS
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
WITH REPORT OF INDEPENDENT AUDITORS
1
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors......................................................... 3
Audited Financial Statements
Balance Sheets....................................................................... 4
Statements of Operations and Net Worth............................................... 5
Statements of Cash Flows............................................................. 6
Notes to Financial Statements........................................................ 7
</TABLE>
2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Midland International Corporation -- United States Operations
We have audited the accompanying balance sheets of Midland International
Corporation -- United States Operations (Midland), as of December 31, 1995 and
1994 and the related statements of operations and net worth, and cash flows for
the years ended December 31, 1995 and 1994, and the two-month period ended
December 31, 1993. These financial statements are the responsibility of
Midland's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Midland International
Corporation -- United States Operations at December 31, 1995 and 1994 and the
results of its operations and its cash flows for the years ended December 31,
1995 and 1994, and the two-month period ended December 31, 1993, in conformity
with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, Midland's recurring
operating losses raise substantial doubt about its ability to continue as a
going concern. Management's plan as to these matters is also described in Note
1. The 1995 financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
ERNST & YOUNG LLP
February 29, 1996
3
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 215 $ 1,154
Accounts receivable, less allowance for doubtful
accounts of $47,000
and $55,000 in 1995 and 1994, respectively 2,978 6,546
Receivable from subsidiaries 1,407 2,894
Amounts receivable from affiliates 100 867
Inventories 4,011 13,760
Refundable income taxes 288 91
Prepaid expenses and other current assets 229 249
--------- ---------
Total current assets 9,228 25,561
Deferred income taxes (Note 5) -- 558
Furniture and equipment, net of accumulated depreciation
of $53,000
and $13,000 in 1995 and 1994, respectively 137 84
OTHER ASSETS:
Debt issuance costs, net of accumulated amortization of
$180,000
and $76,000 in 1995 and 1994, respectively -- 104
Investment in ADC (Note 10) 1,058 --
Other 86 78
--------- ---------
TOTAL ASSETS $ 10,509 $ 26,385
--------- ---------
--------- ---------
LIABILITIES AND NET WORTH:
Current liabilities:
Notes payable to bank (Note 2) $ -- $ 9,226
Accounts payable 943 3,696
Accrued salaries and benefits 801 1,237
Other accrued expenses 1,100 1,645
Deferred income taxes (Note 5) 814 1,435
Amounts payable to Simmonds 1,327 458
--------- ---------
Total current liabilities: 4,985 17,737
Deferred income taxes (Note 5) 63 --
Excess of fair value of acquired net assets over cost,
net of accumulated amortization of $1,475,000 and
$794,000 in 1995 and 1994, respectively 567 1,248
Net worth 4,894 7,400
--------- ---------
TOTAL LIABILITIES AND NET WORTH $ 10,509 $ 26,385
--------- ---------
--------- ---------
</TABLE>
See accompanying notes
4
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
STATEMENTS OF OPERATIONS AND NET WORTH
<TABLE>
<CAPTION>
TWO-MONTH
DECEMBER 31, PERIOD ENDED
---------------- DECEMBER 31,
1995 1994 1993
------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales $27,406 $49,388 $6,780
Cost of sales 23,176 39,177 5,294
------- ------- ------
Gross profit 4,230 10,211 1,486
Selling, general and administrative expenses 8,476 11,120 1,677
------- ------- ------
Operating loss (4,246) (909) (191)
Other income (expense):
Interest expense (591) (668) (31)
Restructuring expense (Note 8) (203) -- --
Gain on sale of consumer products division (Note 9) 927 -- --
Amortization of excess of fair value of acquired net assets over cost 681 681 113
Other income, net (Note 10) 638 1,083 817
------- ------- ------
Income (loss) before income taxes (2,794) 187 708
Income tax provision (benefit) (Note 5) (288) 89 240
------- ------- ------
Net income (loss) (2,506) 98 468
Net worth, beginning of period 7,400 7,302 6,834
------- ------- ------
Net worth, end of period $ 4,894 $ 7,400 $7,302
------- ------- ------
------- ------- ------
</TABLE>
See accompanying notes.
5
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWO-MONTH
DECEMBER 31, PERIOD ENDED
------------------ DECEMBER 31,
1995 1994 1993
-------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (2,506) $ 98 $ 468
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization 146 83 9
Gain on disposal of furniture and equipment -- (4) --
Gain on sale of consumer products division (927) -- --
Gain from ADC transaction (150) -- --
Provision for doubtful accounts 8 -- 11
Deferred income taxes -- (23) 26
Amortization of excess of fair value of acquired net assets over cost (681) (681) (114)
Changes in operating assets and liabilities, net of the effects of the sale of division:
Accounts receivable 3,464 619 (2,093)
Intercompany receivable 1,487 427 (337)
Amounts receivable from affiliates 767 (804) (63)
Inventories 6,539 (4,853) (887)
Refundable income taxes (197) (91) --
Prepaid expenses and other current assets 14 (72) 218
Accounts payable (2,752) (342) 1,487
Accrued salaries and benefits (436) (210) 144
Other accrued expenses (272) (53) 208
Income taxes payable -- (222) 185
Amounts payable to Simmonds 869 793 (2,024)
-------- -------- ------------
Net cash provided by (used in) operating activities 5,373 (5,335) (2,762)
INVESTING ACTIVITIES
Purchases of furniture and equipment (126) (91) (7)
Proceeds from sale of furniture and equipment -- 4 --
Proceeds from sale of consumer products division 3,088 -- --
Purchases of other assets (8) (101) --
-------- -------- ------------
Net cash provided by (used in) investing activities 2,954 (188) (7)
FINANCING ACTIVITIES
Proceeds from borrowings on line of credit 19,591 56,716 8,064
Principal payments on line of credit borrowings (28,857) (50,188) (5,327)
Debt issuance costs incurred -- -- (160)
-------- -------- ------------
Net cash provided by (used in) financing activities (9,266) 6,528 2,577
-------- -------- ------------
Net increase (decrease) in cash (939) 1,005 (192)
Cash at beginning of period 1,154 149 341
-------- -------- ------------
Cash at end of period $ 215 $ 1,154 $ 149
-------- -------- ------------
-------- -------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for income taxes $ -- $ 420 $ --
-------- -------- ------------
-------- -------- ------------
Cash paid during the period for interest $ 655 $ 577 $ 7
-------- -------- ------------
-------- -------- ------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY
Exchange of inventory for shares of American Digital Communications, Inc. $ 1,058 $ -- $ --
-------- -------- ------------
-------- -------- ------------
</TABLE>
See accompanying notes.
6
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
Midland International Corporation (the Company) is a wholly-owned subsidiary
of SCL, Inc., (the Parent), which is a wholly-owned subsidiary of Simmonds
Capital Limited (Simmonds), a Canadian company. The Company is engaged primarily
in the light assembly and distribution of two-way land mobile radios and related
equipment and, until May 1995, certain other consumer product radios, both
domestically and internationally (see Note 9).
During February 1996, the Company, together with Simmonds, entered into a
letter of intent to combine the United States operations of the Company with
certain operations of Securicor Radiocoms Limited (Securicor), a United Kingdom
company, and Intek Diversified Corporation (Intek), a publicly-held company in
the United States.
According to the terms of the agreement and plan of merger, the Company will
contribute substantially all of its United States businesses, operations, assets
and liabilities to Intek in exchange for shares of common stock of Intek. In
connection with the proposed combination, Intek intends to circulate a merger
proxy to its shareholders requesting approval of the proposed combination. As a
result of the financial statement requirements for businesses acquired under the
proxy rules promulgated by the Securities and Exchange Commission, the
accompanying financial statements represent only the United States operations to
be sold by the Company, hereafter referred to as Midland. The accompanying
financial statements of Midland exclude the Company's wholly-owned subsidiaries,
since such operations will not be included in the operations to be contributed
to Intek. Simmonds and the Company presently expect the combination to close
during the third quarter of 1996. The receivable from subsidiaries amounting to
$1,407,000 and $2,894,000 at December 31, 1995 and 1994, respectively, is
eliminated in the consolidated financial statements of the Parent.
Effective November 1, 1993, 100% of the outstanding capital stock of the
Company was acquired by the Parent in exchange for $8,688,000 in cash and
$121,000 in liabilities, including acquisition costs of approximately $275,000.
The acquisition was accounted for as a purchase; accordingly, the assets and
liabilities of Midland were recorded at their estimated fair values at the date
of acquisition. The excess of the estimated fair value of the net assets
acquired over the purchase price, which amounted to $2,042,000, is being
amortized on the straight-line basis over three years.
BASIS OF PRESENTATION
Midland's financial statements have been prepared on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. Midland has incurred operating
losses of $4,246,000, $909,000 and $191,000 in 1995, 1994 and 1993,
respectively. Midland's ability to continue as a going concern is dependent upon
its ability to successfully close its pending merger transaction with Intek and
Securicor as described above. If Midland is unable to successfully close its
pending merger transaction, it may be necessary to undertake other actions and
seek other financial arrangements, as appropriate. The financial statements do
not include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
7
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories, which consist primarily of finished goods and component parts,
are stated at the lower of cost or market. Cost has been determined using the
last-in, first-out (LIFO) method. If the first-in, first-out (FIFO) method of
costing inventory had been used during the years ended December 31, 1995 and
1994 and during the two-month period ended December 31, 1993, no material
difference in the carrying value of inventories or cost of sales would have
resulted.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
Midland accounts for income taxes using the liability method in accordance
with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The liability method provides that deferred tax assets and
liabilities are recorded based on the difference between the tax bases of assets
and liabilities and their carrying amount for financial reporting purposes, as
measured by the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
ACCOUNTS RECEIVABLE
Midland grants credit to certain domestic customers who meet its
preestablished credit requirements. Generally, Midland does not require security
when trade credit is granted to such domestic customers but does require
substantially all foreign customers to issue letters of credit which secure
payment of the accounts receivable balances. Credit losses are provided for in
Midland's financial statements and consistently have been within management's
expectations.
FURNITURE AND EQUIPMENT
Furniture and equipment are recorded at cost, and depreciation is computed
using accelerated methods over their estimated useful lives of five to seven
years.
DEBT ISSUANCE COSTS
Costs incurred in connection with the issuance of debt were capitalized and
amortized on the straight-line method over three years, the term of the related
debt. As a result of the termination of the credit facility as discussed in Note
2, all capitalized debt issuance costs have been fully amortized as of December
31, 1995.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded at the approximate rate of
exchange at the transaction date. Assets and liabilities resulting from these
transactions are translated at the rate of exchange in effect at each balance
sheet date. All differences are recorded in results of operations and amounted
to exchange gains of approximately $20,000 and $212,000 for the years ended
December 31, 1995 and 1994, respectively. There was no exchange gain for the
two-month period ended December 31, 1993. These gains are included in other
income, net in the accompanying statements of operations.
8
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Midland expenses advertising costs as incurred. For the years ended December
31, 1995 and 1994 and for the two-month period ended December 31, 1993,
advertising costs amounting to approximately $329,000, $398,000 and $24,000,
respectively, were charged to operations.
CONCENTRATION
Midland acquired approximately 59%, 49% and 37% of its aggregate inventory
purchases from a single manufacturer located in Japan during the years ended
December 31, 1995 and 1994 and for the two-month period ended December 31, 1993,
respectively. Midland's regular supply of inventory could be adversely affected
should this supplier terminate its relationship with Midland. Additionally,
significant fluctuations in the value of the United States dollar versus the yen
could have a material effect on Midland's profit margins. At December 31, 1995,
Midland had a purchase commitment with this supplier to purchase approximately
$560,000 of inventory.
2. LINE OF CREDIT
During 1995 and 1994, Midland had a revolving line of credit agreement with
a bank which was secured by substantially all its assets and provided for
borrowings based on a specified percentage of accounts receivable and
inventories up to a maximum of $16,000,000.
Pursuant to the provisions of the line of credit agreement, Midland was
subject to certain restrictive covenants which, among other things, required the
maintenance of certain financial ratios and minimum levels of working capital
and net worth. Due primarily to losses incurred in 1995, Midland was in
violation of its credit agreement during the year ended December 31, 1995. In
September 1995, Midland was notified that the bank would exercise its right
under the credit agreement and demand repayment of all borrowings thereunder and
terminate the credit agreement. All borrowings under the credit agreement were
fully repaid at November 30, 1995.
3. RELATED PARTIES
Midland entered into several related-party transactions with Simmonds and
its affiliates and subsidiaries of the Company during the years ended December
31, 1995 and 1994 and during the two-month period ended December 31, 1993 as
described below (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net sales to Simmonds and affiliates $ 4,939 $ 6,923 $ 411
Purchases from Simmonds and affiliates 2,503 187 --
Net sales to subsidiaries of the Company 411 1,358 203
Management fees charged to Midland by Simmonds 564 691 80
</TABLE>
Net sales to Simmonds and affiliates of Simmonds, aggregating $4,939,000,
$6,923,000 and $411,000 for the years ended December 31, 1995 and 1994 and for
the two-month period ended December 31, 1993, respectively, generated gross
margins of approximately 3%, 7% and 15%, respectively.
9
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
4. COMMITMENTS AND CONTINGENCIES
Midland leases certain office equipment and facilities under operating
leases. These leases expire on varying dates through 1997. Future minimum lease
rentals under noncancelable operating leases for the years ended December 31 are
as follows (in thousands):
<TABLE>
<S> <C>
1996 $ 53
1997 4
---
$ 57
---
---
</TABLE>
Rental expense under all operating leases amounted to $330,000, $116,000 and
$52,000 for the years ended December 31, 1995 and 1994 and for the two-month
period ended December 31, 1993, respectively. In addition to the leases
described above, Midland has commitments under operating leases for various
automobiles which generally have initial lease terms of two years. In most cases
management expects, that in the normal course of business, existing automobile
leases with annual rentals of approximately $97,200 will be renewed or replaced
by new leases.
5. INCOME TAXES
At December 31, 1995, Midland had net operating loss carryforwards of
approximately $2,800,000 which expire as follows: $850,000 in 2009 and
$1,950,000 in 2010. These operating losses may be used to offset future taxable
income in the United States. For financial reporting purposes, a valuation
allowance of $1,061,000 and $323,000 has been recognized to offset the deferred
tax assets relating to these net operating loss carryforwards at December 31,
1995 and 1994, respectively. As of December 31, 1993, there was no valuation
allowance recorded.
10
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
5. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Midland's deferred tax assets and liabilities as of December 31, 1995 and 1994
are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Current:
Accrued expenses $ 278 $ 334
Other 18 21
--------- ---------
296 355
Noncurrent:
Alternative minimum tax 14 304
Basis difference in acquired assets 134 188
Net operating loss carryforwards 1,061 323
--------- ---------
1,209 815
--------- ---------
Total deferred tax assets 1,505 1,170
Deferred tax liabilities:
Current:
Basis difference in acquired assets (1,050) (1,714)
--------- ---------
(1,050) (1,714)
Valuation allowance (1,332) (333)
--------- ---------
Net deferred tax liabilities $ (877) $ (877)
--------- ---------
--------- ---------
</TABLE>
The income tax provision (benefit) for the years ended December 31, 1995 and
1994 and for the two-month period ended December 31, 1993 differs from the
amounts computed at the statutory federal income tax rate as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Provision (benefit) at statutory rate $ (950) $ 64 $ 241
State income tax provision (benefit) -- (2) 2
Nontaxable amortization of the excess of fair value of acquired net
assets over cost (232) (232) (38)
State tax effects of net operating losses, for which valuation
allowances have been provided (78) (34) --
Nondeductible items 15 28 6
Change in valuation allowance 999 333 --
Other (42) (68) 29
--------- --------- ---------
$ (288) $ 89 $ 240
--------- --------- ---------
--------- --------- ---------
</TABLE>
11
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
5. INCOME TAXES (CONTINUED)
Midland's provision (benefit) for income taxes for the years ended December
31, 1995 and 1994 and for the two-month period ended December 31, 1993 were as
follows (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
----------- ----------- ---------
<S> <C> <C> <C>
1995
Federal $ (288) $ -- $ (288)
State -- -- --
----- --- ---------
$ (288) $ -- $ (288)
----- --- ---------
----- --- ---------
1994
Federal $ 112 $ (20) $ 92
State -- (3) (3)
----- --- ---------
$ 112 $ (23) $ 89
----- --- ---------
----- --- ---------
1993
Federal $ 214 $ 23 $ 237
State -- 3 3
----- --- ---------
$ 214 $ 26 $ 240
----- --- ---------
----- --- ---------
</TABLE>
6. EMPLOYEE BENEFIT PLAN
Midland has a defined contribution profit-sharing/thrift plan (the Plan)
which covers all employees who have reached the age of 25 and who have completed
one year of service. Plan participants may contribute up to 10% of their annual
compensation, subject to maximum limitations established by the Internal Revenue
Service. Midland's annual contribution to the Plan, as defined, is the lesser of
an amount equal to 12.5% of Midland's pretax income before the contribution, if
any, for the year or an amount equal to 15% of the total annual compensation of
the Plan's participants. There was no contribution to the Plan for the year
ended December 31, 1995 and for the two-month period ended December 31, 1993.
For the year ended December 31, 1994, Midland's contribution to the Plan was
$26,000.
7. FOREIGN OPERATIONS AND MAJOR CUSTOMER
Net sales to international customers amounted to approximately $5,245,000,
$8,515,000 and $829,000 for the years ended December 31, 1995 and 1994 and for
the two-month period ended December 31, 1993, respectively.
Sales to one retail customer accounted for approximately 7%, 11% and 24% of
sales for the years ended December 31, 1995 and 1994 and the two-month period
ended December 31, 1993, respectively. Additionally, this customer accounted for
approximately 23% of accounts receivable at December 31, 1994.
8. RESTRUCTURING
During March 1995, Midland initiated a plan of restructuring whereby certain
operations, primarily warehousing and engineering, were relocated to Canada and
merged into Simmonds' operations. In connection with this restructuring, a total
of 17 employees were terminated. During the year ended December 31, 1995,
termination benefits totaling approximately $203,000 were charged to operations
in connection with the restructuring, all of which were paid during the year.
12
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
AND TWO-MONTH PERIOD ENDED DECEMBER 31, 1993
9. SALE OF CONSUMER PRODUCTS DIVISION
In June 1995, Midland reached an agreement to sell (i) all of its operating
assets of the consumer wireless communications business, primarily including
inventory, equipment and customer lists and (ii) a transferable license to use
the "Midland" trademark and logo for the sale of wireless communication
products. In exchange, Midland received net proceeds of approximately $3,088,000
for the license and the operating assets and recognized a gain of approximately
$927,000. Sales from Midland's wireless communications business represented
approximately 17%, 30% and 38% of net sales for the years ended December 31,
1995 and 1994 and for the two-month period ended December 31, 1993,
respectively. Additionally, the wireless communications business represented
approximately 22% of total assets at December 31, 1994.
10. SALE OF LICENSES
Effective December 29, 1995, Midland, together with Simmonds, entered into a
transaction pursuant to which Midland agreed to sell a license for the exclusive
distribution of its LTR radio product line and all of its related LTR inventory
to American Digital Communications, Inc. (ADC), a publicly-held corporation in
the United States, in exchange for 4,230,906 shares of the common stock of ADC.
The ADC shares were valued at $1,058,000, resulting in a gain of approximately
$150,000 which has been classified as other income in the accompanying financial
statements.
During February 1994, Simmonds entered into an agreement in connection with
licensing the "Midland" trademark. Pursuant to the terms of the licensing
agreement, Simmonds received $1,000,000 in exchange for its granting of
exclusive rights to market certain of Midland's products in certain geographic
regions of Eastern Europe. Midland has recorded no income as a result of this
transaction.
During December 1993, Midland entered into a similar agreement under which
it received an aggregate of $1,250,000 in exchange for its granting of exclusive
rights to market certain of the Midland's products in certain geographic areas
of Europe and Africa. Such license fees, net of related commission expense
payable to Simmonds of $250,000, have been recorded and classified as other
income in the two-month period ended December 31, 1993.
13
<PAGE>
FINANCIAL STATEMENTS
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
FOR THE TEN-MONTH PERIOD ENDED OCTOBER 31, 1993
WITH REPORT OF INDEPENDENT AUDITORS
14
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
FINANCIAL STATEMENTS
FOR THE TEN-MONTH PERIOD ENDED OCTOBER 31, 1993
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors......................................................... 16
Audited Financial Statements
Balance Sheet.......................................................................... 17
Statement of Operations and Net Worth.................................................. 18
Statement of Cash Flows................................................................ 19
Notes to Financial Statements.......................................................... 20
</TABLE>
15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Midland International Corporation -- United States Operations
We have audited the accompanying balance sheet of Midland International
Corporation -- United States Operations (Midland), as of October 31, 1993 and
the related statements of operations and net worth, and cash flows for the
ten-month period ended October 31, 1993. These financial statements are the
responsibility of Midland's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Midland International
Corporation -- United States Operations at October 31, 1993 and the results of
its operations and its cash flows for the ten-month period ended October 31,
1993, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
February 29, 1996
16
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
BALANCE SHEET
<TABLE>
<CAPTION>
OCTOBER 31,
1993
---------------
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash $ 341
Accounts receivable, less allowance for doubtful accounts $72,000 5,337
Receivable from subsidiaries 2,984
Inventories 8,020
Prepaid expenses and other current assets 395
-------
Total current assets 17,077
Deferred income taxes 1,507
Furniture and equipment, net of accumulated depreciation of $1,202,000 (Note 4) 1,395
Other assets 23
-------
Total assets $ 20,002
-------
-------
LIABILITIES AND NET WORTH
Current liabilities:
Accounts payable $ 2,553
Accrued salaries and benefits 1,303
Other accrued expenses 1,503
Amounts payable to Parent 1,563
-------
Total current liabilities 6,922
Net worth 13,080
-------
Total liabilities and net worth $ 20,002
-------
-------
</TABLE>
See accompanying notes
17
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
STATEMENT OF OPERATIONS AND NET WORTH
TEN-MONTH PERIOD ENDED OCTOBER 31, 1993
(IN THOUSANDS)
<TABLE>
<S> <C>
Net sales $ 33,266
Cost of sales 27,168
---------
Gross profit 6,098
Selling, general and administrative expenses 9,609
---------
Operating loss (3,511)
Other income (expense):
Interest expense (1)
Other income, net 1,236
---------
Loss before income taxes (2,276)
Income tax benefit (539)
---------
Net loss (1,737)
Net worth, beginning of period 16,392
Amount due from Western Auto (1,575)
---------
Net worth, end of period $ 13,080
---------
---------
</TABLE>
See accompanying notes.
18
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
STATEMENT OF CASH FLOWS
TEN-MONTH PERIOD ENDED OCTOBER 31, 1993
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $ (1,737)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,029
Gain on disposal of furniture and equipment (2)
Provision for doubtful accounts 14
Changes in operating assets and liabilities:
Accounts receivable (262)
Inventories 3,853
Prepaid expenses and other current assets (135)
Receivable from subsidiaries (2,278)
Accounts payable (48)
Accrued salaries and benefits (218)
Other accrued expenses 358
---------
Net cash provided by operating activities 574
INVESTING ACTIVITIES
Purchases of furniture and equipment (31)
Proceeds from sale of furniture and equipment 27
Proceeds from collection of note receivable 366
Purchases of other assets (357)
---------
Net cash provided by investing activities 5
FINANCING ACTIVITIES
Proceeds from advances from Western Auto 33,230
Payments on advances from Western Auto (33,471)
---------
Net cash used in financing activities (241)
---------
Net increase in cash 338
Cash at beginning of period 3
---------
Cash at end of period $ 341
---------
---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 13
---------
---------
</TABLE>
See accompanying notes.
19
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TEN-MONTH PERIOD ENDED OCTOBER 31, 1993
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
Midland International Corporation (the Company), a wholly-owned subsidiary
of Western Auto Supply Company (Western Auto), which is a wholly-owned
subsidiary of Sears, Roebuck and Company (Sears), is engaged primarily in the
light assembly and distribution of two-way land mobile radios and related
equipment and, until May 1995, certain other consumer product radios, both
domestically and internationally (SEE NOTE 7).
Effective November 1, 1993, 100% of the outstanding capital stock of the
Company was acquired by Simmonds Capital Limited (Simmonds) in exchange for
$8,688,000 in cash and $121,000 in liabilities, including acquisition costs of
approximately $275,000. The acquisition has been accounted for as a purchase.
Accordingly, the assets and liabilities of Midland were recorded at their
estimated fair values at the date of acquisition. The excess of the estimated
fair value of the net assets acquired over the purchase price amounted to
$2,042,000.
During February 1996, the Company, together with Simmonds, entered into a
letter of intent to combine the United States operations of the Company with
certain operations of Securicor Radiocoms Limited, a United Kingdom company, and
Intek Diversified Corporation (Intek), a publicly-held company in the United
States.
According to the terms of the agreement and plan of merger, the Company will
contribute substantially all of its United States businesses, operations, assets
and liabilities to Intek in exchange for shares of common stock of Intek. In
connection with the proposed combination, Intek intends to circulate a merger
proxy to its shareholders requesting approval of the proposed combination. As a
result of the financial statement requirements for businesses acquired under the
proxy rules promulgated by the Securities and Exchange Commission, the
accompanying financial statements represent only the United States operations to
be sold by the Company, hereafter referred to as Midland. The accompanying
financial statements of Midland exclude the Company's wholly-owned subsidiaries,
since such operations will not be included in the operations to be contributed
to Intek. Simmonds and the Company presently expect the combination to close
during the third quarter of 1996.
INVENTORIES
Inventories, which consist primarily of finished goods and component parts,
are stated at the lower of cost, determined using the average cost method which
approximates FIFO, or market.
INCOME TAXES
Midland was part of a group of companies which filed consolidated income tax
returns with Sears. The income tax benefit recorded by Midland for the ten-month
period ended October 31, 1993 was based on the tax-sharing arrangement by and
between Midland, Western Auto and Sears.
The deferred tax asset and income tax benefit recorded for the ten-month
period ended October 31, 1993 was allocated to Midland by Western Auto based on
the tax-sharing arrangement by and between Midland, Western Auto and Sears.
20
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TEN-MONTH PERIOD ENDED OCTOBER 31, 1993
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE
Midland grants credit to certain domestic customers who meet Midland's
preestablished credit requirements. Generally, Midland does not require security
when trade credit is granted to such domestic customers, but does require
substantially all foreign customers to issue letters of credit which secure
payment of the accounts receivable balances. Credit losses are provided for in
the financial statements and consistently have been within management's
expectations.
FURNITURE AND EQUIPMENT
Furniture and equipment are recorded at cost, and depreciation has been
calculated using the straight-line method over the assets' estimated useful
lives of five to seven years.
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are recorded at the approximate rate of
exchange at the transaction date. Assets and liabilities resulting from these
transactions are translated at the rate of exchange in effect at the balance
sheet date. For the ten-month period ended October 31, 1993, Midland recorded
exchange losses of approximately $441,000. These losses are included in other
income, net in the accompanying statement of operations.
2. RELATED PARTIES
In connection with the acquisition described in NOTE 1, Midland agreed to
forgive $1,575,000 due from Western Auto which was charged directly to net worth
in the accompanying financial statements. In addition, Midland entered into
several related-party transactions as described below (IN THOUSANDS):
<TABLE>
<S> <C>
Net sales to subsidiaries of the Company $ 868
Net sales to Western Auto 40
Commission income from Western Auto 170
Rent and other costs charged to Western Auto 174
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
Midland leases certain office equipment under operating leases. These leases
expire on varying dates through 1997. Future minimum lease rentals under
noncancelable operating leases for years ending December 31 are as follows (IN
THOUSANDS):
<TABLE>
<S> <C>
1994 $ 15,125
1995 16,500
1996 16,500
1997 1,375
---------
$ 49,500
---------
---------
</TABLE>
Rental expense under all operating leases amounted to $281,000 for the
ten-month period ended October 31, 1993. In addition to the leases described
above, Midland has commitments under operating leases for various automobiles
which generally have initial lease terms of two years. In most cases management
expects that in the normal course of business, existing automobile leases with
annual rentals of approximately $82,300 will be renewed or replaced by new
leases.
Midland was contingently liable for outstanding letters of credit at October
31, 1993 totaling $8,268,800.
21
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
TEN-MONTH PERIOD ENDED OCTOBER 31, 1993
4. FURNITURE AND EQUIPMENT
At October 31, 1993, furniture and equipment consisted of the following (in
thousands):
<TABLE>
<S> <C>
Furniture and equipment $ 1,766
Production tooling 831
---------
2,597
Accumulated depreciation 1,202
---------
$ 1,395
---------
---------
</TABLE>
5. EMPLOYEE BENEFIT PLAN
Midland has a defined contribution profit-sharing/thrift plan (the Plan)
which covers substantially all employees who have reached the age of 25 and who
have completed one year of service. Plan participants may contribute up to 10%
of their annual compensation, subject to maximum limitations established by the
Internal Revenue Service. Midland's annual contribution to the Plan, as defined,
is the lesser of an amount equal to 12.5% of Midland's pretax income before the
contribution, if any, for the year or an amount equal to 15% of the total annual
compensation of the Plan's participants. There were no contributions to the Plan
for the ten-month period ended October 31, 1993.
6. FOREIGN OPERATIONS
Net sales to international customers amounted to approximately $4,222,000
for the ten-month period ended October 31, 1993.
7. SALE OF CONSUMER PRODUCTS DIVISION
In April 1995, Midland reached an agreement to sell (i) all of its operating
assets of the consumer wireless communications business, primarily consisting of
inventory, equipment and customer lists and (ii) a transferable license to use
the "Midland" trademark and logo for the sale of wireless communication
products. In exchange, Midland received net proceeds of approximately $3,088,000
for the license and the operating assets. A gain was recorded on this sale
transaction in 1995. The operations of the wireless communications business
represented approximately 25% of consolidated sales for the ten-month period
ended October 31, 1993.
22
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1996
---------------
(IN THOUSANDS)
<S> <C>
ASSETS
Current assets:
Cash $ 62
Accounts receivable, less allowance for doubtful accounts $42,000 1,647
Receivable from subsidiaries 1,493
Amounts receivable from affiliates 86
Inventories 4,268
Refundable income taxes 288
Prepaid expenses and other current assets 785
------
Total current assets 8,629
Deferred income taxes (Note 2) --
Furniture and equipment, net of accumulated depreciation of $74,000 117
Other assets
Investment in ADC 1,058
Other 56
------
Total assets $ 9,860
------
------
LIABILITIES AND NET WORTH
Current liabilities:
Accounts payable $ 1,199
Accrued salaries and benefits 781
Other accrued expenses 1,155
Deferred income taxes 814
Amounts payable to Simmonds 1,736
------
Total current liabilities 5,685
Deferred income taxes 63
Excess of fair value of acquired net assets over cost, net of accumulated
amortization of $1,645,000 227
Net worth 3,885
------
Total liabilities and net worth $ 9,860
------
------
</TABLE>
23
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
STATEMENTS OF OPERATIONS AND NET WORTH
(UNAUDITED)
<TABLE>
<CAPTION>
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Net sales $ 5,869 $ 18,211
Cost of sales 4,513 15,424
------------- -------------
Gross profit 1,356 2,787
Selling, general and administrative expenses 2,892 4,538
------------- -------------
Operating loss (1,536) (1,751)
Other income (expense):
Interest expense -- (440)
Restructuring expense -- (203)
Gain on sale of Consumer Product Division -- 927
Amortization of excess of fair value of acquired net assets over cost 340 340
Other income, net 187 428
------------- -------------
Loss before income taxes (1,009) (699)
Income tax provision (Note 2) -- --
------------- -------------
Net loss (1,009) (699)
Net worth, beginning of period 4,894 7,400
------------- -------------
Net worth, end of period $ 3,885 $ 6,701
------------- -------------
------------- -------------
</TABLE>
24
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS (NOTE 1)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, 1996 JUNE 30, 1995
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,009) $ (699)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization 54 62
Loss on disposal of furniture and equipment 2 1
Provision for doubtful accounts (6) (7)
Deferred income taxes -- 280
Amortization of excess of fair value of acquired net assets over cost (340) (340)
Changes in operating assets and liabilities:
Accounts receivable 1,337 (375)
Receivable from subsidiaries (86) 1,157
Amounts receivable from affiliates 14 354
Inventories (257) 5,933
Refundable income taxes -- 91
Prepaid expenses and other current assets (556) (40)
Accounts payable 256 (2,529)
Accrued salaries and benefits (20) (174)
Other accrued expenses 55 (526)
Income taxes payable -- (258)
Amounts payable to Simmonds 409 (1,693)
------------- -------------
Net cash provided by (used in) operating activities (147) 1,237
INVESTING ACTIVITIES
Purchases of furniture and equipment (9) (10)
Proceeds from sale of furniture and equipment 3 --
Proceeds of other assets -- (24)
------------- -------------
Net cash provided by investing activities $ (6) $ (34)
FINANCING ACTIVITIES
Proceeds from borrowings on line of credit $ -- $ 4,468
Principal payments on line of credit borrowings -- (6,871)
------------- -------------
Net cash used in financing activities -- (2,403)
------------- -------------
Net increase (decrease) in cash (153) (1,200)
Cash at beginning of period 215 1,154
------------- -------------
Cash (overdraft) at end of period $ 62 $ (46)
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ -- $ 440
------------- -------------
------------- -------------
</TABLE>
25
<PAGE>
MIDLAND INTERNATIONAL CORPORATION --
UNITED STATES OPERATIONS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF BUSINESS
Midland International Corporation (the Company) is a wholly-owned subsidiary
of SCL Inc., (the Parent), which is a wholly-owned subsidiary of Simmonds
Capital Limited (Simmonds), a Canadian Company. The Company is engaged primarily
in the light assembly and distribution of two-way land mobile radios and related
equipment and, until June 1995, certain other consumer product radios, both
domestically and internationally.
During February 1996, the Company, together with Simmonds, entered into a
letter of intent to combine the United States operations of the Company with
certain operations of Securicor Radiocoms Limited (Securicor), a United Kingdom
company, and Intek Diversified Corporation (Intek), a publicly-held company in
the United States.
According to the terms of the agreement and plan of merger, the Company will
contribute substantially all of its United States businesses, operations, assets
and liabilities to Intek in exchange for shares of common stock of Intek. In
connection with the combination, Intek is required to file a Form 8-K with the
Securities and Exchange Commission. As a result of the financial statement
requirements for businesses acquired under rules promulgated by the Securities
and Exchange Commission, the accompanying financial statements represent only
the United States operations to be sold by the Company, hereafter referred to as
Midland. The accompanying financial statements of Midland exclude the Company's
wholly-owned subsidiaries, since such operations will not be included in the
operations to be contributed to Intek. The receivables from subsidiaries,
amounting to $1,493,000 at June 30, 1996, is eliminated in the consolidated
financial statements of the Parent.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six months ended
June 30, 1996 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1996. For further information, refer to the
audited financial statements and footnotes thereto included herein.
2. INCOME TAXES
The accompanying financial statements reflect no income tax benefit for the
six months ended June 30, 1996 and 1995, since the deferred tax assets relating
to the Company's net operating loss carryforwards have been offset by increases
in the valuation allowance.
26
<PAGE>
SUMMARY OF UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
present pro forma results of operations for 12 months ended December 31, 1995
(INTEK and MIC) and the six-month period ended June 30, 1996. The fiscal year
end for INTEK and MIC is December 31. The six-month period ended June 30, 1996
for INTEK and MIC is comprised of each company's first two quarters of fiscal
1996. The pro forma statement of operations gives effect to the consummation of
the Acquisition as if the Acquisition was consummated as of January 1, 1995 for
the twelve-month period presented and January 1, 1996 for the six month period
presented. The pro forma balance sheet gives effect to the Acquisition as if it
was consummated on June 30, 1996. The pro forma financial statements have been
prepared using the purchase method of accounting.
The unaudited pro forma condensed combined financial statements and notes
thereto should be read in conjunction with the separate audited consolidated
financial statements and related notes thereto of MIC included herein. The
following unaudited pro forma condensed combined financial statements do not
purport to be indicative of the results which actually would have occurred if
the Acquisition had been consummated on the dates indicated or which may be
obtained in the future.
27
<PAGE>
INTEK
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE 12 MONTHS ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS AND
ELIMINATIONS
INTEK MIDLAND ----------------------
HISTORICAL HISTORICAL DEBIT CREDIT INTEK PROFORMA
----------- -------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
Net sales............................... $ 3,547 $27,406 $ (71)(b) $ 30,882
Cost of sales........................... 3,254 23,176 59(b) 26,371
----------- -------- --------------
Gross profit............................ 293 4,230 4,511
Operating expense....................... 3,518 8,476 717(d) 42(a) 12,669
----------- -------- --------------
Operating loss.......................... (3,225) (4,246) (8,158)
Other income (expense):
Gain on sale of assets held for sale.... 1,204 1,204
Interest expense, net................... (209) (591) 470(f) (1,270)
Financing costs......................... (635) (635)
Restructuring expense................... (203) 203(c) 0
Gain on sale of Consumer Products
Division............................... 927 927(c) 0
Amortization of excess of fair value of
acquired net assets over cost.......... 681 681(a) 0
Other, net.............................. 28 638 638(c) 28
----------- -------- --------------
Loss from continuing operations before
income taxes........................... (2,837) (2,794) (8,831)
Income tax provision (benefit).......... (288) 288(a) 0
----------- -------- ---------- --------- --------------
Net loss................................ $(2,837) $(2,506) $ 3,792 $ 304 $ (8,831)
----------- -------- ---------- --------- --------------
----------- -------- ---------- --------- --------------
Loss per share.......................... $(0.30) $(0.73)
----------- --------------
----------- --------------
Weighted average shares outstanding..... 9,558,982 12,058,982(e)
----------- --------------
----------- --------------
</TABLE>
The accompanying notes are an integral part of these Pro Forma Financial
Statements.
28
<PAGE>
INTEK DIVERSIFIED CORPORATION
PRO FORMA NOTES
FOR THE 12 MONTHS ENDED DECEMBER 31, 1995 (INTEK AND MIC)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
(a) To eliminate MIC assets not acquired in the Acquisition.
(b) To eliminate sales associated with mobile equipment sold by INTEK to MIC.
These transactions were recorded in their respective historical financial
statements for the periods presented in the accompanying Pro Forma Financial
Statements.
(c) To eliminate historical operating results associated with other MIC business
interest not acquired.
(d) For purposes of the accompanying Pro Forma Financial Statements, the excess
purchase price over tangible assets acquired have, in INTEK's case, been
assigned to the value of INTEK's management agreements allowing it to
utilize the 220 MHz licenses and the option agreements relating to certain
licenses which, if exercised and assigned pursuant to the approval of the
FCC, would allow INTEK to exercise all rights and benefits in perpetuity
with respect to such 220 MHz licenses. These management agreements have
terms of 5 years and are renewable indefinitely thereafter. An estimated
economic life of 15 years has been ascribed to these intangibles. This
estimated useful life is INTEK management's best estimate based upon the
likelihood of renewing the underlying 220 MHz licenses with the FCC and the
flexible utility provided by 220 MHz. This flexibility will mitigate the
risk of spectrum obsolescence prior to the end of the 15-year period.
The intangibles associated with the Acquisition have been assigned to brand
equity in the Midland name. MIC has sold mature radio equipment under the
Midland name for over 35 years and has a strong installed radio base in the
U.S.
For the purposes of these Pro Forma Financial Statements, a fair value of
$4.16 per share has been ascribed to Company Common Stock. The fair value
was calculated by averaging the quoted market price of Company Common Stock
for 10 days prior to September 19, 1996 and applying a 20% discount. This
discount is based upon the illiquidity of the large size of the block of
stock issued in the Transactions, the small public float of Company Common
Stock, comparative comparison with similar transactions for other companies
and recent stock issuances.
The intangibles related to the Acquisition were calculated as follows:
<TABLE>
<CAPTION>
MIC
------------
<S> <C>
Company Common Stock shares issued to MIC................... 2,500,000
Fair market value per share................................. X$4.16
------------
Fair market value of shares issued to MIC................... $ 10,400
Cash Consideration.......................................... $ 4,275
------------
Fair market value of consideration.......................... $ 14,675
Historical book value of MIC at June 30, 1996............... $ 3,926
------------
Midland intangible.......................................... $ 10,749
------------
------------
<CAPTION>
INTEK
------------
<S> <C>
Company Common Stock shares outstanding after issuance of
2.5 million shares to MIC.................................. 13,625,000
Fair market value per share................................. X$4.16
------------
Fair market value of INTEK.................................. $ 56,680
------------
------------
</TABLE>
29
<PAGE>
INTEK DIVERSIFIED CORPORATION
PRO FORMA NOTES (CONTINUED)
FOR THE 12 MONTHS ENDED DECEMBER 31, 1995 (INTEK AND MIC)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
(e) The pro forma weighted average shares outstanding are calculated as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------
<S> <C>
INTEK historical...................................... 9,558,982
Shares issued in the Acquisition...................... 2,500,000
------------------
12,058,982
------------------
------------------
</TABLE>
(f) To reflect interest on initial draw against $15 million Interim Note.
30
<PAGE>
INTEK DIVERSIFIED CORPORATION
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE 6 MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS AND
ELIMINATIONS
INTEK MIDLAND ---------------------- INTEK
HISTORICAL HISTORICAL DEBIT CREDIT PROFORMA
------------- ------------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 544 $ 5,869 $ 202(b) $ 6,211
Cost of sales............................ 591 4,513 168(b) 4,936
------------- ------------- ------------
Gross profit............................. (47) 1,356 1,275
Operating expense........................ 2,309 2,892 537(c) 74(a) 5,630
34(b)
------------- ------------- ------------
Operating loss........................... (2,356) (1,536) (4,355)
Other income (expense):
Loss on sale of assets held for sale... (158) (158)
Interest expense, net.................. (117) 235(f) (352)
Financing costs........................ (333) (333)
Amortization of excess of fair value of
acquired net assets over cost......... 340 340(a) 0
Other, net............................. 12 187 199
------------- ------------- ------------
Loss from continuing operations before
income taxes............................ (2,952) (1,009) (4,999)
Income tax provision (benefit)........... 0
------------- ------------- --------- ----- ------------
Net loss................................. $ (2,952) $ (1,009) $ 1,314 $ 276 $ (4,999)
------------- ------------- --------- ----- ------------
------------- ------------- --------- ----- ------------
Less preferred dividends.................
Loss applicable to common shareholders...
Loss per share........................... $(0.27) $(0.37 )
------------- ------------
------------- ------------
Weighted average shares outstanding...... 10,982,767 13,482,767 (d)
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these Pro Forma Financial
Statements.
31
<PAGE>
INTEK DIVERSIFIED CORPORATION
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS AND
ELIMINATIONS
---------------------- INTEK
INTEK MIDLAND DEBIT CREDIT PROFORMA
--------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash, cash equivalents.................................. $ 782 $ 62 $ 62(a) $ 782
Accounts receivable..................................... 454 3,226 2,004(a) 1,676
Restricted cash......................................... 966 966
Notes receivable, current portion....................... 135 135
Inventories............................................. 2,992 4,268 1,978(a) 5,282
Advances for mobile equipment inventory................. 1,796 1,796
Prepaid expenses and other current assets............... 383 1,073 1,009(a) 447
Assets held for sale.................................... 1,555 1,555
--------- ----------- -------------
Total current assets.................................... 9,063 8,629 12,639
PROPERTY AND EQUIPMENT, AT COST......................... 7,860 191 159(a) 8,210
Less accumulated depreciation........................... (63) (74) 74(a) (63)
--------- ----------- -------------
Net property and equipment.............................. 7,797 117 8,147
NOTE RECEIVABLE......................................... 70 70
DEFERRED FINANCING COSTS................................ 236 236
INVESTMENT IN ADC....................................... 1,058 1,058(a) 0
INVESTMENT IN JOINT VENTURE............................. 125 125
INTANGIBLES............................................. 10,749(a) 10,749
OTHER................................................... 56 56(a) 0
--------- ----------- -------------
TOTAL ASSETS............................................ $ 17,291 $ 9,860 $ 31,966
--------- ----------- -------------
--------- -----------
</TABLE>
The accompanying notes are an integral part of these Pro Forma Financial
Statements.
32
<PAGE>
INTEK
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADJUSTMENTS AND
ELIMINATIONS
---------------------- INTEK
INTEK MIDLAND DEBIT CREDIT PROFORMA
--------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable........................................ $ 151 $ 1,199 $ 1,199(a) $ 151
Accrued liabilities..................................... 621 1,936 1,936(a) 621
Related party payable................................... 32 1,736 1,736(a) 32
Deferred income taxes................................... 814 814(a) 0
Notes payable........................................... 2,500 2,500
Letter of credit liability.............................. 917 917
Licensee deposits....................................... 366 366
--------- ----------- -------------
Total current liabilities............................... 4,587 5,685 4,587
NOTE PAYABLE -- CONVERTIBLE............................. 5,000 5,000
DEFERRED INCOME TAX..................................... 633 63 63(a) 633
LONG-TERM DEBT.......................................... 4,275(f) 4,275
EXCESS OF FAIR VALUE OF ACQUIRED NET ASSETS OVER COST... 227 227(a) 0
SHAREHOLDERS' EQUITY
Common stock............................................ 116 25(e) 141
Capital in excess of par value.......................... 14,453 10,375(e) 24,828
Treasury stock, at cost................................. (770) (770)
Retained earnings (deficit)............................. (6,728) 3,885 3,885(e) (6,728)
--------- ----------- -------------
TOTAL SHAREHOLDER'S EQUITY.............................. 7,071 3,885 17,471
--------- ----------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............. $ 17,291 $ 9,860 $ 31,966
--------- ----------- -------------
--------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these Pro Forma Financial
Statements.
33
<PAGE>
INTEK DIVERSIFIED CORPORATION
PRO FORMA NOTES
FOR THE 6 MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
(a) To eliminate MIC assets not acquired in the Acquisition and to record the
purchase price allocations associated with the Acquisition.
(b) To eliminate sales and selling expenses associated with mobile equipment
sold by INTEK to MIC. These transactions were recorded in their respective
historical financial statements for the periods presented in the
accompanying Pro Forma Financial Statements.
(c) For purposes of the accompanying pro forma financial statements, the excess
purchase price over tangible assets acquired have, in INTEK's case, been
assigned to the value of INTEK's management agreements allowing it to
utilize the 220 MHz licenses and the option agreements relating to certain
licenses, if exercised and assigned pursuant to the approval of the FEC,
would which allow INTEK to exercise all rights and benefits in perpetuity
with respect to such 220 MHz licenses. These management agreements have
terms of 5 years and are renewable indefinitely thereafter. An estimated
economic life of 15 years has been ascribed to these intangibles. This
estimated useful life is INTEK management's best estimate based upon the
likelihood of renewing the underlying 220 MHz licenses with the FCC and the
flexible utility provided by the 220 MHz. This flexibility will mitigate the
risk of spectrum obsolescence prior to the end of the 15-year period.
The intangibles associated with the MIC acquisitions relate to brand equity
in the Midland name. MIC has sold mature radio equipment under the Midland
name for over 35 years and has a strong installed radio base in the U.S.
The intangibles related to the Acquisition were calculated as follows:
<TABLE>
<CAPTION>
MIC
-------------
<S> <C>
Company Common Stock shares issued to MIC 2,500,000
Fair market value per share X$ 4.16
-------------
Fair market value of shares issued to MIC $ 10,400
Cash consideration $ 4,275
-------------
Fair market value of consideration $ 14,675
Historical book value of MIC at June 30, 1996 $ 3,926
-------------
Midland intangible $ 10,749
-------------
-------------
<CAPTION>
INTEK
-------------
<S> <C>
Company Common Stock shares outstanding after issuance of 2.5 million shares to
MIC 13,625,000
Fair market value per share X$ 4.16
-------------
Fair market value of INTEK $ 56,680
-------------
-------------
</TABLE>
(d) The pro forma weighed average shares outstanding are calculated as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------
<S> <C>
INTEK historical 10,982,767
Shares issued in the Acquisition 2,500,000
--------------
13,482,767
--------------
--------------
</TABLE>
(e) To reflect INTEK's issuance of 2.5 million shares of its Common Stock in
exchange for all the Acquired Assets and certain liabilities of MIC.
34
<PAGE>
INTEK DIVERSIFIED CORPORATION
PRO FORMA NOTES (CONTINUED)
FOR THE 6 MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
For the purposes of these Pro Forma Financial Statements, a fair value of
$4.16 per share has been ascribed to the Company Common Stock. The fair
value was calculated by averaging the quoted market price of Company Common
Stock for 10 days prior to August 19, 1996 and applying a 20% discount. This
discount is based upon the illiquidity of the large size of the block of
stock issued in the Transactions, the small public float of INTEK Common
Stock, comparative comparison with similar transactions for other companies
and recent stock issuances.
(f) To record initial draw against $15 million credit line through Securicor and
to reflect interest.
35
<PAGE>
INDEX TO EXHIBITS
EXHIBIT PAGE
_________________________________________________
2.1 Amended and Restated Sale of Assets and Trademark
Agreement dated as of September 19, 1996, by and
among INTEK Diversified Corporation, Simmonds
Capital Limited and Midland International
Corporation.
10.1 Escrow Agreement dated as of September 19,
1996, among INTEK Diversified Corporation,
Midland International Corporation and
American Stock Transfer & Trust Company.
10.2 Assignment and Assumption Agreement dated as
of September 1, 1996, by and between INTEK
Diversified Corporation and Midland USA, Inc.
10.3 Loan Agreement dated as of September 19,
1996, between Midland USA, Inc. and Securicor
Communications Limited.
10.4 Non-Recourse Guaranty and Pledge Agreement
dated as of September 19, 1996, between INTEK
Diversified Corporation and Securicor
Communications Limited.
10.5 Revolving Credit Note dated September 19,
1996, by Midland USA, Inc. to the order of
Securicor Communications Limited.
10.6 Security Agreement dated September 19, 1996,
made by Midland USA, Inc. and INTEK
Diversified Corporation in favor of Securicor
Communications Limited.
________________________________________________________________
AMENDED AND RESTATED
SALE OF ASSETS
AND
TRADEMARK AGREEMENT
by and among
INTEK DIVERSIFIED CORPORATION,
SIMMONDS CAPITAL LIMITED
and
MIDLAND INTERNATIONAL CORPORATION
______________________________________________________________
<PAGE>
AMENDED AND RESTATED
SALE OF ASSETS AND TRADEMARK AGREEMENT
THIS AMENDED AND RESTATED SALE OF ASSETS AND TRADEMARK
AGREEMENT dated as of September 19, 1996 (this "Agreement")
and effective as of June 18, 1996 is made and entered into by
and among Intek Diversified Corporation, a Delaware
corporation ("Intek"), Simmonds Capital Limited, an Ontario
corporation ("Simmonds"), and Midland International
Corporation, a Delaware corporation and indirect wholly owned
subsidiary of Simmonds ("MIC"), and amends and restates in
full that certain Sale of Assets and Trademark License
Agreement (the "Original Agreement") dated as of June 18, 1996
among Intek, MIC and Simmonds.
RECITALS
A. MIC is in the business of developing, distributing
and reselling LMR Products (as defined in Section 1.37 of this
Agreement) under the U.S. Trademarks (as defined in Section
1.73 of this Agreement) and is the owner of the U.S.
Trademarks.
B. Intek, through its subsidiaries, is in the business
of developing, constructing and managing specialized mobile
radio ("SMR") networks in the United States utilizing licenses
granted by the Federal Communications Commission ("FCC") for
the 220 to 222 megahertz narrow band spectrum.
C. Pursuant to the terms of the Original Agreement, MIC
agreed to grant to Intek a license to sell LMR Products under
the U.S. Trademarks in the U.S. and to sell certain other
assets of MIC to Intek, and Intek agreed to acquire such
license and assets.
D. Intek and Securicor Communications Limited., an
England and Wales corporation ("Securicor"), entered into a
Stock Purchase Agreement (the "Securicor Agreement") dated
June 18, 1996, as amended September 20, 1996, pursuant to
which Securicor agreed to sell all of the outstanding
securities (other than certain preferred shares) of
Securicor's wholly-owned subsidiary, Securicor Radiocoms
Limited, to Intek in consideration for 25,000,000 shares of
common stock, par value $0.01 per share of Intek (the
"Securicor Transaction").
E. The transactions contemplated in the Securicor
Agreement and the Original Agreement were originally scheduled
to close simultaneously.
1
<PAGE>
F. Intek, MIC and Simmonds desire to amend the Original
Agreement to provide for, among other things, (i) the closing
of the transactions contemplated in the Original Agreement, as
herein amended, simultaneously with the execution and delivery
of this Agreement or as soon thereafter as is practicable,
(ii) an outright assignment by MIC of the U.S. Trademarks to
MUSA, as Intek's assignee, with a license back of the U.S.
Trademarks to MIC for certain uses, (iii) the sale of certain
additional inventory and fixed assets to Intek and the
assumption by Intek of certain liabilities of MIC, and (iv) a
revision to the purchase price in the event that the Securicor
Transaction is not consummated.
A G R E E M E N T
NOW, THEREFORE, in consideration of the Recitals and the
mutual covenants hereinafter set forth, and for other good and
valuable consideration, the parties agree as follows:
1. DEFINITIONS
1.1 "Acquired Assets" shall have the meaning set forth
in Section 2.1.
1.2 "Additional Purchase Shares" shall mean the shares
of Common Stock to be issued to MIC pursuant to the
terms of Section 3.1(b)(2)(A) of this Agreement upon
consummation of the Securicor Transaction.
1.3 "Affiliate" means, with respect to any Person, any
other Person that controls such Person, or is
controlled by or under common control with such
Person. With respect to Intek, the term "Affiliate"
shall not include Securicor Group plc, Securicor,
MIC, Simmonds nor their respective subsidiaries.
1.4 "Assumed Liabilities" shall have the meaning set
forth in Section 2.3(a).
1.5 "Bankruptcy Exception" shall have the meaning set
forth in Section 6.1(a).
1.6 "Beneficiary" shall have the meaning set forth in
Section 11.3(a).
1.7 "Business Day" shall mean any day of the year on
which national banking institutions in New York are
2
<PAGE>
open to the public for conducting business and are
not required or authorized to close.
1.8 "Claimant" shall have the meaning set forth in
Section 11.3(f).
1.9 "Closing" shall have the meaning set forth in
Section 4.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986,
as amended, in effect as of the date of this
Agreement.
1.11 "Collateral" shall have the meaning set forth in the
Securicor Loan Agreement.
1.12 "Common Stock" shall mean the common stock, par
value $0.01 per share, of Intek.
1.13 "Computer Services Agreement" shall mean the
agreement providing for MUSA to acquire certain
computer services from Simmonds pursuant to the
Computer Services Agreement hereto as EXHIBIT A.
1.14 "Contracts" shall have the meaning set forth in
Section 2.1(c).
1.15 "Damages" shall have the meaning set forth in
Section 11.1.
1.16 "Direct Claim" shall have the meaning set forth in
Section 11.3(f).
1.17 "Direct Claim Notice" shall have the meaning set
forth in Section 11.3(f).
1.18 "Dollar" shall mean United States Dollar.
1.19 "Effective Date" shall mean August 1, 1996.
1.20 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
1.21 "Escrow Agent" shall mean American Stock Transfer &
Trust Company, a New York corporation, and its
successors as escrow agent pursuant to the terms of
the Escrow Agreement.
3
<PAGE>
1.22 "Escrow Agreement" shall mean the Escrow Agreement
entered into among MIC, Intek and Escrow Agent, in
substantially the form attached hereto as EXHIBIT B.
1.23 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
1.24 "FCC" shall have the meaning set forth in Recital B.
1.25 "Governmental Entity" shall have the meaning set
forth in Section 6.1(d).
1.26 "Hart-Scott-Rodino Act" shall mean the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as
amended.
1.27 "Indemnitor" shall have the meaning set forth in
Section 11.3(a).
1.28 "Intek Assignment and Assumption Agreement" shall
mean the Assignment and Assumption Agreement entered
into between Intek and MUSA as of the Closing and in
the form attached hereto as EXHIBIT C.
1.29 "Intek Disclosure Schedules" shall mean the
disclosure schedules prepared by Intek and delivered
to MIC and Simmonds simultaneously with the
execution and delivery of this Agreement.
1.30 "Intek Documents" shall have the meaning set forth
in Section 6.2(a).
1.31 "Intek Representative" shall mean the Chairman of
Intek or such officer of Intek as the Chairman shall
designate in writing.
1.32 "Intek Officer's Certificate" shall have the meaning
set forth in Section 5.2(b).
1.33 "Intek Stockholders' Meeting" shall have the meaning
set forth in Section 9.6.
1.34 "Intek Subsidiaries" shall have the meaning set
forth in Section 6.2(d).
1.35 "IRS" shall mean the Internal Revenue Service.
4
<PAGE>
1.36 "Legal Proceeding" shall have the meaning set forth
in Section 6.1(i).
1.37 "LMR Products" means any existing and future land
mobile radio products for use in the professional
and/or commercial markets, including, without
limitation, antennas which are usable with both
Midland Consumer Products and LMR Products;
PROVIDED, HOWEVER, that notwithstanding Section 13
of this Agreement or any other provision contained
herein to the contrary, such antennas may be
manufactured, promoted, sold and/or distributed in
the U.S. by both MIC and Intek, and their respective
Affiliates. The term "LMR Products" is not intended
to include and shall not include (a) Midland
Consumer Products, or (b) the Midland 70-1336, 70-
1526, 70-9020 and 70-9405 products, or (c) and any
subsequent upgrades, enhancements, modifications or
improvements of the products described in Sections
1.37 (a) and 1.37 (b) above.
1.38 "Material Adverse Change" or "Material Adverse
Effect" means an event or circumstance which
materially adversely affects the business,
properties, financial condition or operations (taken
as a whole) of the U.S. LMR Distribution Business,
in the case of MIC, or of Intek and its subsidiaries
(taken as a whole), in the case of Intek.
1.39 "MIC Disclosure Schedules" shall mean the disclosure
schedules prepared by MIC and delivered to Intek
simultaneously with the execution and delivery of
this Agreement.
1.40 "MIC Documents" shall have the meaning set forth in
Section 6.1(a).
1.41 "MIC Materials" shall have the meaning set forth in
Section 8.1(a).
1.42 "MIC Representative" shall mean the Chief Executive
Officer of MIC or such officer of MIC as the Chief
Executive Officer shall designate in writing.
1.43 "MIC/Simmonds Officers' Certificates" shall have the
meaning set forth in Section 5.1(a).
5
<PAGE>
1.44 "Midland Consumer Products" means consumer wireless
products and consumer electronic products consisting
of consumer communications equipment, consumer
automotive equipment, consumer marine equipment,
consumer amateur radio products and consumer audio
products and/or video home entertainment equipment,
which are being sold at any time in department
stores and/or in electronic specialty stores,
including, but not limited to, citizen band radios,
GMRS radios, marine radios, scanners, intercoms,
radio recorders, car radios, itinerant radios,
consumer GPS marine products, satellite receivers,
video cassette recorders, video cameras,
stereophonic and high fidelity components and/or
systems, compact disc players, laser disc players,
cordless telephones, consumer paging products,
telephones with video, and other telephones and
antennas and other accessories for the foregoing.
"Midland Consumer Products" specifically does not
include cellular telephones, personal communications
systems (PCS) telephones, commercial and two-way
paging products, commercial wireless satellite
antennas, LMR antenna products, all other electronic
or communications equipment for use in the
professional and commercial market, and antennas and
other accessories for the foregoing.
1.45 "MUSA" shall mean Midland USA , Inc., a Delaware
corporation and wholly owned subsidiary of Intek.
1.46 "Net Operating Losses" shall mean the loss, if any,
incurred by MUSA in the operation of the U.S. LMR
Distribution Business between August 1, 1996 and the
date of the closing of the Securicor Transaction,
calculated by subtracting the following amounts from
the aggregate net revenue of the U.S. LMR
Distribution Business during such period:
(a) costs of all goods and services sold in the
U.S. LMR Distribution Business in generating
such net revenue;
(b) employment costs, lease and operation expenses
of facilities, sales and marketing expenses,
general and administrative expenses, service
agreements, depreciation and amortization (but
expressly excluding any amortization of the
purchase price, the Trademarks or the goodwill
6
<PAGE>
of MIC acquired pursuant to this Agreement)
incurred in the operations of the U.S. LMR
Distribution Business; and
(c) interest expense and Taxes incurred by MUSA
directly related to the conduct of the U.S. LMR
Distribution Business.
1.47 "Obligations" shall have the meaning set forth in
the Securicor Loan Agreement.
1.48 "Option" shall have the meaning set forth in Section
10.1.
1.49 "Option Exercise Date" shall mean the date thirty
(30) days following the Securicor Transaction
Termination Date.
1.50 "Original Agreement" shall have the meaning set
forth in the preface to this Agreement.
1.51 "Performance Guarantees" shall have the meaning set
forth in Section 8.2.
1.52 "Person" means an individual, partnership (general
or limited), corporation, association or other form
of business organization (whether or not regarded as
a legal entity under applicable law), trust, estate
or any other entity.
1.53 "Prepaid Expenses" shall have the meaning set forth
in Section 2.1(j) of this Agreement.
1.54 "Product Purchasing Services Agreement" shall mean
the Product Purchasing Agreement to be entered into
between MIC and Intek in the form attached hereto as
EXHIBIT D
1.55 "Proxy Statement" shall have the meaning set forth
in Section 9.6.
1.56 "Registration Rights Agreement" means the
registration rights agreement to be entered into as
of the closing of the Securicor Transaction by and
among Intek, Roamer One, Inc., Securicor
Communications Limited, Securicor International
Limited, Simmonds, MIC, Anglo York Industries, Inc.,
Choi & Choi, HK Limited, Octagon Investments
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Limited, Murray Sinclair and certain other holders
of the Common Stock of Intek, and in the form
attached hereto as EXHIBIT E.
1.57 "Responsible Party" shall have the meaning set forth
in Section 11.3(d).
1.58 "Securicor Agreement" shall have the meaning set
forth in Recital D.
1.59 "Securicor Loan Agreement" means the $15,000,000
Loan Agreement dated as of September 19, 1996
between MUSA, as Borrower, and Securicor
Communications Limited, as Lender.
1.60 "Securicor Transaction Termination Date" shall mean
the effective date of any termination of the
Securicor Agreement by Intek or Securicor pursuant
to the terms of the Securicor Agreement as in effect
on the date hereof.
1.61 "Securicor Transaction" shall have the meaning set
forth in Recital D.
1.62 "Securities Act" shall mean the Securities Act of
1933, as amended.
1.63 "SMR" shall have the meaning set forth in Recital B.
1.64 "Subsidiary" means any Person fifty percent (50%) or
more of whose issued and outstanding voting
securities is owned or controlled, directly or
indirectly, by the specified Person.
1.65 "Taxes" means all federal, state, local or foreign
taxes, imposts, levies, or other assessments,
including, without limitation, gross receipts,
franchise, income, profits, license, payroll,
employment, excise, severance, stamp, occupation,
premium, windfall profit, environmental, customs
duties, capital, withholding, payroll, social
security, unemployment, disability, real property,
personal property, inventory, sales, use, transfer,
registration, gains, value added, alternative or
add-on minimum, estimated, or other tax of any kind
or nature whatsoever, including any interest,
penalty or addition thereto and any transferee or
successor liability therefor (by contract or
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otherwise), whether imposed singly or on a
consolidated, combined or unitary basis, and whether
disputed or not.
1.66 "Third Party Claim" shall have the meaning set forth
in Section 11.3(a).
1.67 "Third Party Claim Notice" shall have the meaning
set forth in Section 11.3(a).
1.68 "To the Knowledge of the Executive Officers of
Intek" means what the corporate officers of Intek
and the Intek Subsidiaries, all as listed on
Schedule 1.68 of the Intek Disclosure Schedules,
actually know or would know after reasonable
investigation, in light of their positions and
responsibilities with Intek.
1.69 "To the Knowledge of the Executive Officers of MIC"
means to what the corporate officers of MIC listed
on Schedule 1.69 of the MIC Disclosure Schedules,
actually know or would know after reasonable
investigation, in light of their positions and
responsibilities with MIC.
1.70 "Transferred Employees" means those employees of MIC
listed on Schedule 8.4(a) that accept Intek's offer
of employment pursuant to Section 8.4(a).
1.71 "U.S." means the United States and its territories
and possessions
1.72 "U.S. LMR Distribution Business" means the sale and
distribution of LMR Products bearing the U.S.
Trademarks within the U.S., as presently conducted
by MIC.
1.73 "U.S. Trademarks" shall mean the trademarks
described on Schedule 1.73 of the MIC Disclosure
Schedules and the trade name "Midland" in the U.S.
and similar variations thereof, and all
registrations, applications and renewals thereof,
and all logos, whether or not registered, used in
connection therewith.
1.74 "U.S. Trademarks License" shall mean the license to
use the U.S. Trademarks granted by MUSA to MIC
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pursuant to the terms of the U.S. Trademarks License
Agreement.
1.75 "U.S. Trademarks License Agreement" shall mean the
U.S. Trademarks License Agreement attached hereto as
EXHIBIT F.
2. SALE OF ASSETS AND U.S. TRADEMARKS
2.1 SALE OF ASSETS AND U.S. TRADEMARKS. Simultaneously
with the execution and delivery of this Agreement by
the parties hereto and on the terms and subject to
the conditions of this Agreement, but effective as
of the Effective Date, MIC hereby grants, sells and
assigns to Intek, the following rights, assets and
interests of MIC related to the conduct of the U.S.
LMR Distribution Business (collectively the
"Acquired Assets") and conveys to MUSA the Acquired
Assets as Intek shall direct, subject to MUSA and
Intek's entering into the Intek Assignment and
Assumption Agreement:
(a) The U.S. Trademarks and the goodwill of the
business associated with U.S. Trademarks;
(b) All accounts receivable arising on or after the
Effective Date in the conduct of the U.S. LMR
Distribution Business; provided, however, that
any such accounts receivable which have been
collected by MIC prior to the date of the
Closing shall not be Acquired Assets hereunder
but shall be set off against Intek's obligation
to reimburse MIC for certain costs, all as set
forth in Section 3.3(a) of this Agreement.
(c) Subject to Sections 2.2 and 2.3, an assignment
of all of MIC's right, title and interest in or
to all of MIC's:
(1) written or oral supply agreements under
which MIC is the purchaser;
(2) quotations;
(3) dealer and distributor relationships;
(4) customer supply and support obligations;
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(5) backlog orders; and
(6) other contracts, agreements, commitments
or undertakings, including, without
limitation, the purchase orders set forth
on Schedule 2.3(a)(8) to this Agreement
but excluding the Performance Guarantees;
which are listed on Schedule 2.1(c)
(collectively, the "Contracts") which Contracts
constitute all of the material contracts of any
nature (other than the Performance Guarantees
or contracts relating to the use and
acquisition of tooling) entered into by MIC
which relate principally to the U.S. LMR
Distribution Business or which are assets
necessary for the conduct of the U.S. LMR
Distribution Business. To the extent that MIC
can provide Intek with the benefits of
nonassignable items pursuant to the third
sentence of Section 2.2 of this Agreement, such
benefits shall also constitute "Acquired
Assets."
(d) To the extent such information relates to the
U.S. LMR Distribution Business, all customer
lists, the sales history, warranty claims
records, manuals, non-proprietary books and
records, and credit information with respect to
customers of the U.S. LMR Distribution Business
(collectively, the "Records").
(e) Certain other inventory, fixed assets, rights
and property related to the U.S. LMR
Distribution Business as listed on Schedule
2.1(e).
(f) All of MIC's right, title and interest in and
to the invention described in U.S. Patent
#4,718,586 (Swivel Fastening Device) which
patent has expired for nonpayment of
maintenance fees.
(g) All of MIC's leasehold and other interests in
the real property leases listed on Schedule
2.1(g), including, without limitation, any
easements and rights-of-way and any prepaid
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rent, security deposits and options to renew or
purchase under any such leases.
(h) All U.S. telephone numbers used by MIC for the
U.S. LMR Distribution Business and keys for all
Acquired Assets where such exist.
(i) All of MIC's rights under or pursuant to all
warranties, representations, indemnities and
guarantees made by suppliers, manufacturers and
contractors in connection with the Acquired
Assets listed in Sections 2.1(c) and 2.1(e).
(j) All deferred and prepaid charges, sums, and
fees of MIC which relate solely to the Acquired
Assets and/or the operation of the U.S. LMR
Distribution Business as set forth on Schedule
2.1(j) ("Prepaid Expenses").
(k) All permits or authorizations issued by
Governmental Entities held or used by MIC
solely in connection with the operation of the
U.S. LMR Distribution Business (to the extent
transfer thereof is permitted by applicable
law), including without limitation all FCC
Title III radio licenses (the "FCC Licenses")
and grantee codes, type acceptances,
certifications or other equipment
authorizations (the "Equipment Authorizations")
used by MIC exclusively in connection with the
U.S. LMR Distribution Business.
(l) As of October 16, 1996, all of MIC's right,
title and interest in and to the P. O. Boxes
and the Distribution Account (as such terms are
defined in Section 3.4(e) of this Agreement).
2.2 ASSIGNABILITY AND CONSENTS. Notwithstanding
anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to
assign any order, contract, agreement, lease,
commitment, license, franchise, authorization or
concession, to the extent that an attempted
assignment thereof, without the consent of another
party thereto or of a Governmental Entity would
constitute a breach of any such order, contract,
agreement, lease, commitment, license, franchise,
authorization or concession. MIC shall use its
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<PAGE>
reasonable efforts, and Intek shall cooperate in all
reasonable respects with MIC, to obtain consent to
any such assignment or a novation of such contract
substituting Intek or MUSA for MIC. For any item
for which such consent or novation is not obtained,
MIC shall, for a period commencing on the Effective
Date and ending upon expiration of the current term
of such nonassignable item (without giving effect to
any extension thereof, whether automatic or
otherwise) or, if no expiration date is stated
therein, thirteen months after the Effective Date,
provide to Intek the benefit of any such
nonassignable item, and MIC shall pay to Intek all
monies or other property received by MIC under any
such nonassignable item within five (5) business
days of MIC's receipt thereof, provided that Intek
makes all payments required to be made by MIC
pursuant to the terms of such nonassignable items
and that Intek performs or obtains performance of
all obligations required of MIC under such
nonassignable items, in advance of or at such time
as such payment or performance is required. At the
end of period described in the immediately preceding
sentence, MIC shall have no further duties or
obligations hereunder with respect to such
nonassignable items and the failure to obtain any
necessary consent or waiver with respect thereto
shall not be a breach of any provision of this
Agreement. In the event that Intek or MUSA performs
its obligations under a nonassignable item, Intek's
may bring such action on behalf of MIC and in MIC's
name as shall be reasonably necessary to enforce
MIC's or Intek's rights under such nonassignable
item; PROVIDED, HOWEVER, that Intek shall bear all
costs and expenses of any kind whatsoever incurred
by MIC in connection with any such actions and
PROVIDED FURTHER that, notwithstanding anything to
the contrary contained herein, Intek shall indemnify
and hold MIC harmless from and against any and all
Damages incurred by MIC directly or indirectly in
connection with such actions.
2.3 ASSUMED LIABILITIES. Simultaneously with the
execution and delivery of this Agreement by the
parties hereto, and on the terms and subject to the
conditions of this Agreement, Intek hereby assumes,
and agrees to pay, perform and discharge, and
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<PAGE>
promptly reimburse MIC for any payments made by MIC
with respect to, the Assumed Liabilities.
(a) The "Assumed Liabilities" shall include only
the following liabilities and obligations of
MIC, whether primary or secondary, direct or
indirect, absolute or contingent:
(1) except as set forth under Section
2.3(a)(3) below, all liabilities or
obligations arising on or after the
Effective Date under or with respect to
any of the Acquired Assets or in
connection with the operation of the U.S.
LMR Distribution Business, including,
without limitation, all of MIC's
liabilities arising after the Effective
Date under the Contracts, but excluding
(A) any liabilities or obligations with
respect to antennas sold by MIC in
connection with products other than LMR
Products and (B) any liabilities and
obligations of MIC for Taxes for taxable
periods ended on or before the Effective
Date, and (but only to the extent
attributable to the period ending at the
close of business on the Effective Date)
for taxable periods including the
Effective Date;
(2) all liabilities or obligations arising or
existing under any unfilled customer
orders included in the Acquired Assets;
(3) all liabilities and obligations with
respect to the Transferred Employees
incurred or accrued after the Effective
Date and the liabilities and obligations
with respect to vacation pay and sick
leave for Transferred Employees accrued as
of the Effective Date with respect to
periods prior to the Effective Date (as
set forth on Schedule 2.3(a)(3). Except
as set forth in the immediately preceding
sentence, Intek shall not assume any
obligations or liabilities of MIC or
Simmonds with respect to any Transferred
Employee or any other employee or former
employee of MIC or employee benefit plan
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<PAGE>
maintained by MIC, including, but not
limited to, any liabilities or obligations
with respect to (A) any employee benefit
plan under ERISA or the Code (other than
with respect to claims incurred after the
Effective Date with respect to the health
and life insurance plans assumed by Intek
under the provisions of Section 7.3(a)),
(B) continuation requirements of Section
4980B of the Code and Part 6 of Title I of
ERISA in respect of any MIC employee who
does not become a Transferred Employee;
(C) any severance plan, program, agreement
or arrangement or any other obligations
relating to the termination of employment
with MIC of any Transferred Employee or
other employee of MIC (whether or not
arising by reason of the transaction
contemplated by this Agreement); (D) any
deferred compensation plan, program,
agreement, arrangement or the like
operated by Simmonds, MIC or any
subsidiary of parent thereof in respect to
any Transferred Employee attributable to
such employee's employment with MIC on or
prior to the Effective Date and with
respect to any other employee or former
employee of MIC whether attributable to
such employment before or after the
Effective Date; (E) any obligation or
liability with respect to workers'
compensation in respect of any Transferred
Employee attributable to such employee's
employment with MIC on or prior to the
Effective Date and with respect to any
other employee or former employee of MIC
whether attributable to such employment
before or after the Effective Date; and
(F) any obligation or liability with
respect to an inactive employee listed on
Schedule 7.3(a) prior to the date such
employee accepts employment with Intek in
accordance with the provisions of Section
7.3(a);
(4) all liabilities and obligations (including
fines and penalties) for death, personal
injury, other injury to persons, property
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<PAGE>
damage or losses or deprivation of rights
(A) resulting from, directly or
indirectly, use or exposure to any LMR
Products sold in the U.S. or (B) resulting
from directly or indirectly, any tort,
breach of contract or warranty, violation
of any statute, ordinance, regulation or
other governmental requirement in
connection with the Acquired Assets or the
conduct of the U.S. LMR Distribution
Business (but excluding any such
liabilities or obligations with respect to
which, before the date of the Closing, (x)
MIC has received a written notice of a
claim, or (y) to the Knowledge of the
Executive Officers of MIC, a claim has
been asserted);
(5) all liabilities and obligations for breach
of product warranties for LMR Products
distributed by MIC in the conduct of the
U.S. LMR Distribution Business;
(6) all liabilities and obligations of MIC or
any Affiliate of MIC arising after the
date of the Closing under the U.S.
Trademarks licenses and sublicenses listed
on Schedule 1.73 of this Agreement;
(7) all accounts payable arising on or after
the Effective Date in connection with the
operation of the U.S. LMR Distribution
Business;
(8) all of MIC's liabilities and obligations
existing as of August 1, 1996 or arising
thereafter with respect to any inventory
ordered by MIC in connection with the U.S.
LMR Distribution Business, including,
without limitation, MIC's obligation to
repay Intek the sum of $1,291,051 advanced
by Intek against Intek's purchase of the
equipment listed on the purchase orders
set forth on Schedule 2.3(a)(8);
(9) all obligations arising after the
Effective Date in connection with the U.S.
LMR Distribution Business, including
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<PAGE>
payroll, utilities, and Taxes, but
excluding income, franchise or gains taxes
incurred by MIC or Simmonds in connection
with the transactions contemplated hereby;
and
(10) all of MIC's liabilities and obligations
existing as of August 1, 1996 or arising
thereafter in connection with MIC's dealer
advertising allowance program as set forth
on Schedule 2.3(a)(10).
3. CONSIDERATION
3.1 PURCHASE PRICE.
(a) PAYMENT. In consideration of MIC's sale of the
Acquired Assets to Intek, at the Closing Intek
shall
(1) issue to MIC certificate(s) evidencing
150,000 fully paid, nonassessable shares
of Common Stock free and clear of all
liens and encumbrances; and
(2) issue and deliver to the Escrow Agent, as
escrow agent, certificate(s) evidencing
2,350,000 shares of Common Stock, pursuant
to the terms of the Escrow Agreement; and
(3) assume the Assumed Liabilities as provided
in Section 2.3 of this Agreement; and
(4) pay cash to MIC in the amount of
$2,301,280 and forgive MIC's obligation to
provide Intek with inventory under certain
purchase orders prepaid by Intek in the
amount of $492,471 in full consideration
for the fixed assets and inventory listed
on Schedule 2.1(e) to this Agreement and
the Prepaid Expenses; and
(5) pay cash to MIC in the amount of $323,495
which amount is the estimated amount of
post-Effective Date operating expenses of
the U.S. LMR Distribution Business from
August 1, 1996 through the date of the
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Closing, to be reimbursed to MIC as
provided in Section 3.3;
(6) pay cash to MIC in the amount of $300,000
(which amount is to reimburse MIC for
$200,000 advanced by MIC after August 1,
1996 against purchase orders being
acquired by Intek pursuant to the terms of
this Agreement, and $100,000, which amount
represents the parties best estimate as of
closing of the portion of the Hitachi
Credit allocable to MIC pursuant to
Section 3.5).
(b) ADJUSTMENTS TO THE PURCHASE PRICE.
(1) ADJUSTMENTS FOR CUSTOMER DEPOSITS AT
CLOSING. At the Closing, the Purchase
Price shall be reduced by the amount of
any customer deposits for services and
equipment not performed prior to the
Effective Date by MIC to the extent that
Intek, or its assigns, assume the
obligations directly related to such
customer deposits. This Purchase Price
adjustment shall be effected by MIC's
delivery, or release from consignment, to
Intek of inventory appropriate for
application to such customer obligations
and having an aggregate value (as
determined pursuant to the Consignment
Agreement) equal to the aggregate amount
of all such customer deposits.
(2) POST CLOSING ADJUSTMENT TO PURCHASE
PRICE/CONSUMMATION OF SECURICOR
TRANSACTION. If the transactions
contemplated in the Securicor Agreement
are consummated, or, if the Securicor
Agreement is terminated by either party in
accordance with its terms and within six
months after such termination (the
"Standstill Period"), Securicor and Intek,
or their respective Affiliates, engage in,
or enter into agreements to engage in, one
or more transactions which collectively
would effectively transfer a controlling
interest in Intek to Securicor or any
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Affiliate of Securicor, then the Purchase
Price shall be adjusted as follows:
(A) The Purchase Price shall be increased
by 2,350,000 shares of Common Stock,
payable to MIC immediately upon
closing of such transactions out of
the shares of Common Stock deposited
by Intek into escrow pursuant to
Section 3.1(a)(2) of this Agreement;
and
(B) The Purchase Price shall be reduced
by the Net Operating Losses, if any,
of the U.S. LMR Distribution Business
as conducted by Intek or its assignee
for the period commencing on August
1, 1996 and ending on the date on
which the transactions contemplated
in the Securicor Agreement are
consummated; PROVIDED HOWEVER, that
such adjustment shall not exceed
$833,125 and PROVIDED FURTHER that
such adjustment shall be effectuated
solely by MIC's return to Intek of
such number of shares of Common Stock
as shall be equal to the lesser of
(X) the quotient of Net Operating
Losses divided by $5.375 and (Y)
155,000 Common Shares.
(C) In addition to the foregoing, upon
consummation of the Securicor
Transaction, Intek shall cause to be
executed and delivered to MIC and
Simmonds the Registration Rights
Agreement, duly executed and
delivered by each party thereto other
than MIC and Simmonds.
3.2 TRANSFER TAXES. Intek shall pay the cost of all
Taxes and expenses, if any, and all other charges of
any Governmental Entity applicable to the
transactions contemplated by this Agreement, other
than income, franchise or gains taxes incurred by
MIC or Simmonds in connection with the transactions
contemplated hereby.
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3.3 REIMBURSEMENT OF OPERATING EXPENSES PAID AFTER THE
EFFECTIVE DATE. Intek shall reimburse MIC for all
expenses and costs paid by MIC in the conduct of the
U.S. LMR Distribution Business during the period
commencing on the Effective Date and continuing
through the Closing as follows:
(a) At the Closing Intek shall pay cash to MIC in
an amount equal to $323,495 which amount the
parties agree represents is their best estimate
of the amounts actually paid by MIC in the
conduct of the U.S. LMR Distribution Business
during the period commencing on the Effective
Date and ending on the date of the Closing, as
more fully described on Schedule 3.3 to this
Agreement (the "Reimbursement Schedule") after
deducting all cash collected by MIC prior to
the date of the Closing with respect to
accounts receivable generated on or after
August 1, 1996 out of the operations of the
U.S. LMR Distribution Business.
(b) Within thirty (30) days after the Closing MIC
shall deliver to Intek a revised Reimbursement
Schedule setting forth such amounts as shall
have actually been paid by MIC in the conduct
of the U.S. LMR Distribution Business for the
period commencing on August 1, 1996 and ending
on the date of the Closing together with such
supporting documentation as Intek shall
reasonably request and, if the amount set forth
on the revised Reimbursement Schedule is less
than $323,495, cash in an amount equal to the
difference. The revised Reimbursement Schedule
shall be deemed to be true and correct for the
purpose of determining the amount payable to
MIC by Intek under this Section 3.3(b) to the
extent that Intek does not provide specific
written objections within ten (10) business
days after Intek's receipt of the revised
Reimbursement Schedule.
(c) Within ten (10) business days after Intek's
receipt of the revised Reimbursement Schedule,
Intek shall pay cash to MIC equal to the amount
of expenses set forth on the revised
Reimbursement Schedule to the extent such
expenses exceed $323,495, to the extent that
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Intek has not provided specific written
objections as set forth above.
(d) The MIC Representative and Intek Representative
shall meet within five business days of either
party's request therefore and use their
reasonable best efforts to amicably resolve any
disputes raised by Intek or MIC with respect to
amounts to be reimbursed under the revised
Reimbursement Schedule. Intek, or MIC, as the
case may be, shall immediately pay any amount
determined to be owing to the other as mutually
agreed upon by the MIC Representative and the
Intek Representative. In the event that the
MIC Representative and the Intek Representative
are unable to reach an agreement with respect
to any such dispute, then the matter shall be
submitted to binding arbitration in accordance
with the provisions of Section 14.13 of this
Agreement.
3.4 COLLECTIONS OF ACCOUNTS RECEIVABLE.
(a) If all or part of any payment received by Intek
or any Affiliate of Intek relates exclusively
to an account receivable arising prior to the
Effective Date, such payment shall be held in
trust for MIC and shall not be commingled with
any other assets of Intek or such Affiliate.
Intek shall immediately deliver to MIC, or
cause its Affiliate to immediately deliver to
MIC, such payment in the form received together
with such endorsements as shall be necessary
for MIC to deposit and collect such payment.
(b) If all or part of any payment received by MIC,
Simmonds or any Affiliate thereof relates
exclusively to an account receivable arising
after the Effective Date, such payment shall be
held in trust for Intek and shall not be
commingled with any other assets of MIC,
Simmonds or such Affiliate. MIC and Simmonds
shall immediately deliver to Intek, or cause
its Affiliate to immediately deliver to Intek,
such payment in the form received together with
such endorsements as shall be necessary for
Intek to deposit and collect such payment.
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(c) If a payment is received which relates to
accounts receivables arising both before and
after the Effective Date, the recipient thereof
shall immediately pay to the other party cash
in an amount equal to that portion of the
payment which is specifically identified to a
receivable or receivables owned by such other
party.
(d) If a customer's payment does not specifically
identify an invoice, or MUSA is unable to
identify the invoice to which such receivable
should be applied with reasonable certainty,
MUSA shall contact the customer directly and
request that the customer identify the invoice
to which such receivable should be applied.
The recipient shall promptly thereafter pay to
the other party cash in an amount equal to that
portion of the payment which was so identified
to a receivable or receivables owned by such
other party.
(e) To facilitate the collection of receivables
pursuant to this Section 3.4, MIC and Intek
shall not, and Intek shall not permit MUSA to,
change the payment instructions to customers of
the U.S. LMR Distribution Business during the
90 day period commencing on the date of the
Closing. On October 16, 1996, MIC shall convey
to MUSA all of MUSA's right, title and interest
into post office boxes P.O. Box 263, Dept. 505,
Kansas City MO 64193-0505, P.O. Box 263, Dept.
979, Kansas City MO 64193-0979 (the "P.O.
Boxes") and bank account number 010161070176
titled to MIC at Boatmen's First National Bank
of Kansas City (the "Distribution Account").
On each Business Day during the period
beginning on the date hereof and continuing
until March 31, 1997, each party's
representative (designated and granted
appropriate powers of attorney as provided in
Section 3.5(f) of this Agreement) will review
the collections received in the P.O. Boxes or
otherwise deposited into the Distribution
Account and will allocate such payments in
accordance with Sections 3.4(a) through 3.4(d)
of this Agreement.
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(f) Intek hereby appoints Howard Parkinson to act
as its designated representative under Section
3.4(e) of this Agreement. MIC hereby appoints
Marvin Marstall to act as its designated
representative under Section 3.4(e) of this
Agreement. Each party will grant its
designated representative with the limited
power of attorney as shall be necessary to
perform the obligations set forth in this
Section 3.4 (including, without limitation, the
power to endorse and deposit customer checks
made payable to such party). A party may
replace its designated representative by a
writing to the other party appointing a new
designated representative. In addition to the
representatives designated by MIC and Intek,
Simmonds shall have the right to have Carrie
Weiler, or such other person as Simmonds shall
designate in writing, observe the review
process on behalf of Simmonds, and Securicor
shall have the right to have John Tostevin, or
such other person as Securicor shall designate
in writing, observe the review process.
(g) Each party shall have thirty (30) days to
provide the other with written objections to
the allocation of any payments received under
this Section 3.4, such thirty (30) day period
to commence upon such parties receipt of notice
of the allocation and reasonable documentation
evidencing such allocation. The MIC
Representative and the Intek Representative
shall meet within five business days of either
party's request therefore and use their
reasonable best efforts to amicably resolve any
disputes raised by Intek with respect to the
revised Reimbursement Schedule. Intek shall
pay any amount thus determined to be owing to
MIC, and MIC shall pay any amount thus
determined to be owing to Intek, as mutually
agreed upon by the MIC Representative and the
Intek Representative. In the event that the
MIC Representative and the Intek Representative
are unable to reach an agreement with respect
to any such dispute, then the matter shall be
submitted to binding arbitration in accordance
with the provisions of Section 14.13 of this
Agreement.
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3.5 HITACHI CREDIT ALLOCATION. The parties acknowledge
that as of the Effective Date, Hitachi Denshi, Ltd.
has provided certain credits (price deductions) of
approximately $200,000 (the "Hitachi Credits")
allocable among purchase orders and inventory which
are Acquired Assets (the "Intek Credits") and
purchase orders and inventory which are retained by
MIC (the "MIC Credits"). The parties have estimated
that approximately $100,000 of the Hitachi Credits
are MIC Credits and accordingly have provided for
Intek to make an initial payment of $100,000 to MIC
at the Closing (as provided in Section 3.1(a)(6)).
MIC and Intek shall use their best efforts to
accurately allocate the Hitachi Credits between the
MIC Credits and Intek Credits. If MIC and Intek are
unable to reach agreement on this matter within
thirty (30) days after the Closing, than the MIC
Representative and the Intek Representative shall
meet within five days after the request of either of
MIC or Intek to resolve the matter. If it is
determined that the amount of the MIC Credits exceed
$100,000, then within five (5) days of such
determination Intek shall pay cash to MIC in the
amount of such excess. If it is determined that the
amount of the Intek Credits exceed $100,000, then
within five (5) days of such determination MIC shall
pay cash to Intek in the amount of such excess.
4. CLOSING.
4.1 CLOSING. On the terms and subject to the conditions
set forth in this Agreement, the closing of the
transaction contemplated hereby (the "Closing")
shall take place simultaneously with the execution
and delivery of this Agreement at 10:00 a.m.,
eastern standard time, at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, New York, N.Y.
10022, effective as of the Effective Date when all
of the deliveries contemplated in Sections 4.2 and
4.3 have been made or otherwise waived by the
parties in writing.
4.2 DELIVERIES AT CLOSING BY SIMMONDS AND MIC.
Simultaneously with the execution and delivery of
this Agreement, Simmonds and MIC shall execute and
deliver or cause to be executed and delivered by a
duly authorized representative of Simmonds or MIC,
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as the case may be, to Intek, each of the following
documents:
(a) this Agreement;
(b) the Escrow Agreement;
(c) a duly executed Assignment of United States
Trademark Rights, assigning the U.S. Trademarks
to Intek or its assignee pursuant to the terms
hereof, in the form attached hereto as EXHIBIT
G;
(d) the U.S. Trademarks License;
(e) such bills of sale, assignments, quit claim
deeds and other good and sufficient instruments
of transfer conveying to Intek or its assigns
MIC's entire right, title and interest in and
to the Acquired Assets except as otherwise
provided under Section 2.2 of this Agreement;
(f) the Computer Services Agreement;
(g) the Product Purchasing Services Agreement;
(h) the opinion of Jones, Day, Reavis & Pogue,
counsel to MIC, dated the date of the Closing
and in the form attached hereto as EXHIBIT H;
and
(i) MIC/Simmonds Officers' Certificates.
4.3 DELIVERIES AT CLOSING BY INTEK. Simultaneously with
the execution and delivery of this Agreement, Intek
shall execute and deliver, or cause to be executed
and delivered to Simmonds and/or MIC, as the case
may be, each of the following documents:
(a) this Agreement;
(b) certificates evidencing 150,000 shares of
Common Stock in payment of the Purchase Price
pursuant to Section 3.1(a)(1) of this
Agreement;
(c) the Escrow Agreement;
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(d) Certificates evidencing 2,350,000 shares of
Common Stock, delivered to the Escrow Agent
pursuant to the terms of the Escrow Agreement;
(e) the U.S. Trademarks License Agreement duly
executed and delivered by Intek or Intek's
assignee of the U.S. Trademarks;
(f) such instruments of assumption of the Assumed
Liabilities, duly executed by Intek and or its
assignee of the Acquired Assets, as the case
may be, all as MIC may reasonably request;
(g) the Computer Services Agreement duly executed
and delivered by Intek;
(h) the Product Purchase Services Agreement duly
executed and delivered by Intek;
(i) the opinion of Kohrman, Jackson & Krantz
L.P.A., counsel to Intek and MUSA, dated the
date of the Closing and in the form attached
hereto as EXHIBIT I;
(j) the Intek Officer's Certificate; and
(k) a copy of the fairness opinion, or opinions,
delivered in writing by Fahnestock & Co. Inc.
that the consideration to be paid under this
Agreement and under the Securicor Agreement is
fair to the stockholders of Intek.
5. CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO INTEK'S OBLIGATIONS. The
obligations of Intek to consummate the transactions
contemplated by this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of
the following conditions (any one or more of which
may be waived in whole or in part by Intek):
(a) MIC/SIMMONDS OFFICERS' CERTIFICATES. (i) Each
of the representations and warranties of MIC
and Simmonds contained in this Agreement shall
be true, complete and correct in all material
respects on and as of the Closing, and (ii) MIC
shall have performed or complied with, in all
material respects, all covenants and agreements
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contemplated by this Agreement to be performed
or complied with by MIC at or prior to the
Closing and (iii) MIC and Simmonds shall have
delivered to Intek certificates of MIC's and
Simmonds respective Chief Financial Officer or
Secretary (collectively the "MIC/Simmonds
Officers' Certificates") certifying to the
accuracy of items (i) and (ii) above, or if
MIC's Chief Financial Officer shall be unable
to certify the accuracy of (i) and (ii) above,
then he shall set forth in the MIC/Simmonds
Officers' Certificates (x) the manner in which
any of the representations and warranties of
MIC and Simmonds contained herein shall not be
true, complete and correct in all material
respects, and (y) each failure by MIC and/or
Simmonds to perform or comply with, in all
material respects, any covenant or agreement
contemplated by this Agreement to be performed
or complied with by MIC and/or Simmonds at or
prior to the Closing. If Intek elects to
consummate the transactions contemplated under
this Agreement after delivery of such
MIC/Simmonds Officers' Certificates, the items
set forth in the MIC/Simmonds Officers'
Certificates shall not constitute a breach of
this Agreement and Intek shall not be entitled
to any indemnity therefor.
(b) NO MATERIAL ADVERSE CHANGE. Since the date
hereof, there shall not have been any Material
Adverse Change in the U.S. LMR Distribution
Business.
(c) BOARD RATIFICATION. On or prior to the
Closing, Intek's Board of Directors shall have
ratified and reaffirmed the actions and
determinations of the Special Committee of the
Board of Directors of Intek referenced in this
Agreement, including, without limitation, (i)
the determination that the transaction
contemplated by this Agreement and the
Securicor Agreement is advisable and in the
best interests of Intek and its stockholders,
(iii) the approval of this Agreement and the
Securicor Agreement and, subject to the
fulfillment or waiver at or prior to the
Closing Date of the conditions set forth in
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Section 5.1, the transactions contemplated
hereby and by the Securicor Agreement and (iii)
all other action required to be taken to
authorize the issuance of the additional shares
of Common Stock and to submit for consideration
by the stockholders of Intek an amendment of
the certificate of incorporation of Intek to
authorize additional shares of Common Stock.
(d) DELIVERIES. Each of the Deliveries to be made
by MIC or Simmonds to Intek pursuant to Section
4.2 of this Agreement shall have been made.
(e) CONSENTS, PERMITS AND GOVERNMENTAL APPROVALS.
All consents, waivers, permits, authorizations
and approvals (other than approvals to the
assignment of Contracts with Governmental
Entities) required to be obtained by MIC from
any third party or any Governmental Entity
prior to the Closing (excluding such consents,
waivers, permits, authorizations and approvals
the failure to obtain which, individually or in
the aggregate, will not have a Material Adverse
Effect on the U.S. LMR Distribution Business or
on MIC's ability to consummate the transactions
and receive the benefits contemplated hereby)
shall have been received.
5.2 CONDITIONS PRECEDENT TO MIC'S OBLIGATIONS. The
obligations of MIC to consummate the transactions
contemplated by this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of
the following conditions (any one or more of which
may be waived in whole or in part by MIC):
(a) SECURICOR LOAN AGREEMENT. Securicor and MUSA
shall have entered into the Securicor Loan
Agreement.
(b) INTEK OFFICER'S CERTIFICATE. (i) Each of the
representations and warranties of Intek
contained in this Agreement shall be true,
complete and correct in all material respects
on and as of the Closing; (ii) Intek shall have
performed or complied with, in all material
respects, all covenants and agreements
contemplated by this Agreement to be performed
or complied with by Intek at or prior to the
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Closing; and (iii) Intek shall have delivered
to MIC a certificate of Intek's Chief Financial
Officer (the "Intek Officer's Certificate")
certifying as to the accuracy of items (i) and
(ii) above, or if Intek's Chief Financial
Officer shall be unable to certify the accuracy
of (i) and (ii) above, then he shall set forth
in the Intek Officer's Certificate (x) the
manner in which any of the representations and
warranties of Intek contained herein shall not
be true, complete and correct in all material
respects, and (y) each failure by Intek to
perform or comply with, in all material
respects, any covenant or agreement
contemplated by this Agreement to be performed
or complied with by Intek at or prior to the
Closing. If MIC elects to consummate the
transaction contemplated under this Agreement
after delivery of such Intek Officer's
Certificate, the items set forth in the Intek
Officer's Certificate shall not constitute a
breach of this Agreement and MIC shall not be
entitled to any indemnity therefor.
(c) NO MATERIAL ADVERSE CHANGE. Since the date
hereof, there shall not have been any Material
Adverse Change in the financial condition,
results of operation or business of Intek.
(d) CAPITALIZATION. Since the date hereof, Intek
shall not have issued any interest in its
equity securities, except with the consent of
Ed Hough, John Simmonds and Nicholas Wilson,
except for Intek's issuance of a $2.5 million
convertible debentures or any shares of Common
Stock relating thereto, the 30,000 shares of
Common Stock issued in connection with the
extension of the term of the $2.5 million
convertible debentures, or up to 1,000,000
shares of Common Stock in an equity offering.
(e) DELIVERIES. Each of the Deliveries to be made
by Intek to MIC or Simmonds pursuant to Section
4.3 of this Agreement shall have been made.
(f) CONSENTS, PERMITS AND GOVERNMENTAL APPROVALS.
All consents, waivers, permits, authorization
and approvals required to be obtained by Intek
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from any third party or Governmental Entity
prior to the Closing (excluding such consents,
waivers, permits, authorizations and approvals
the failure to obtain which, individually or in
the aggregate, will not have a Material Adverse
Effect on Intek's ability to consummate the
transactions and receive the benefits
contemplated hereby) shall have been received.
(g) INSTRUMENTS OF ASSUMPTION. Intek shall have
delivered to MIC such instruments of assumption
of the Assumed Liabilities as MIC may
reasonably request.
6. REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF MIC AND SIMMONDS.
MIC and Simmonds jointly and severally represent and
warrant to Intek that:
(a) ORGANIZATION, STANDING, POWER AND AUTHORITY.
MIC is a corporation duly organized, validly
existing and in good standing under the laws of
the State of Delaware. MIC has all requisite
corporate power and authority to operate the
U.S. LMR Distribution Business as it is now
conducted, and to enter and perform its
obligations under this Agreement and each other
agreement, document, instrument or certificate
contemplated by this Agreement or to be
executed by MIC in connection with the
consummation of the transactions contemplated
by this Agreement (together with this
Agreement, the "MIC Documents"). MIC is duly
qualified or authorized to do business as a
foreign corporation and is in good standing
under the laws of each jurisdiction in which it
owns or leases real property and each other
jurisdiction in which the conduct of the U.S.
LMR Distribution Business or the ownership of
its properties requires such qualification (all
of which jurisdictions are listed on Schedule
6.1(a) of the MIC Disclosure Schedules), except
where the failure to be so qualified or
authorized could not reasonably be expected to
have a Material Adverse Effect on the U.S. LMR
Distribution Business or the Acquired Assets.
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Except as set forth on Schedule 6.1(a) of the
MIC Disclosure Schedules, neither MIC nor any
of its Affiliates is subject to any agreement,
commitment or understanding which restricts or
may restrict the conduct of the U.S. LMR
Distribution Business in the U.S. in any
material respect. The execution and delivery
of this Agreement, the consummation of the
transactions contemplated hereby have been, and
prior to the Closing the execution of the other
MIC Documents and the consummation of the
transactions contemplated therein will be, duly
approved by the Board of Directors of MIC and
no other corporate proceedings on the part of
MIC are necessary to authorize this Agreement
or to consummate the transactions so
contemplated. This Agreement has been, and
prior to the Closing each of the other MIC
Documents will be, duly executed and delivered
by, and constitutes, or will constitute, a
valid and binding obligation of MIC,
enforceable against MIC in accordance with its
terms, except as enforceability hereof may be
limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar
laws affecting the enforcement of creditors'
rights generally and except that the
availability of the equitable remedy of
specific performance or injunctive relief is
subject to the discretion of the court before
which any proceedings may be brought (the
"Bankruptcy Exception").
(b) BUSINESS IN ORDINARY COURSE. Except as set
forth in Schedule 6.1(b) of the MIC Disclosure
Schedules, since March 7, 1996 MIC has
conducted the U.S. LMR Distribution Business
only in the ordinary course of business
consistent with past practice. Since March 7,
1996, there has been no Material Adverse Change
in the U.S. LMR Distribution Business, nor has
any event occurred, nor has any condition or
state of facts arisen, which has not been
disclosed to Intek and could, to the Knowledge
of the Executive Officers of MIC, reasonably be
expected to be have a Material Adverse Effect
on the U.S. LMR Distribution Business. Except
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as set forth on Schedule 6.1(b) of the MIC
Disclosure Schedules, since March 7, 1996:
(1) MIC has not materially amended, canceled,
terminated, relinquished, waived or
released any Contract, right, debt, claim
or obligation that otherwise would have
been included as part of the Acquired
Assets except in the ordinary course of
business consistent with past practice of
MIC;
(2) MIC has not received any notice or
citation for any violation of, nor, to the
Knowledge of the Executive Officers of
MIC, has any complaint been filed with the
FCC alleging a violation of, any rule,
regulation or policy of the FCC, and MIC
has not allowed any equipment
authorization issued by the FCC to MIC to
lapse or be impaired in any manner or, to
the Knowledge of the Executive Officers of
MIC, operated the U.S. LMR Distribution
Business in any manner not in compliance
with its FCC equipment authorizations and
all applicable FCC rules, regulations and
policies; and
(3) MIC has not agreed to do any of the
foregoing.
(c) CONTRACTS. MIC and its Affiliates have made
available or delivered to Intek true, correct
and complete copies of all written Contracts
listed on Schedule 2.1(c) of the MIC Disclosure
Schedules. The Contracts constitute all of the
material contracts of any nature whatsoever
entered into by MIC that relate principally to
the U.S. LMR Distribution Business. To the
Knowledge of the Executive Officers of MIC,
each Contract is valid and enforceable in
accordance with its terms, subject to the
Bankruptcy Exception. MIC has not amended or
modified, other than in the ordinary course of
business, in any material respect or consented
to the termination of any Contract other than
as contemplated under this Agreement. Except
as set forth on Schedule 6.1(c) of the MIC
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Disclosure Schedules, to the Knowledge of the
Executive Officers of MIC, MIC has performed in
all material respects all obligations required
to be performed by it to date under the
Contracts, and neither MIC nor, to the
Knowledge of the Executive Officers of MIC, any
other party to any Contract has breached or
improperly terminated any Contract, or is in
material default under any Contract, and, to
the Knowledge of the Executive Officers of MIC,
there exists no condition or event which after
notice or lapse of time or both, would
constitute any such breach, termination or
default. To the Knowledge of the Executive
Officers of MIC, no previous or current party
to any material Contract has given notice of or
made a claim with respect to any breach or
default thereunder, the consequences of which
individually or in the aggregate, could
reasonably be expected to have a Material
Adverse Effect on the U.S. LMR Distribution
Business or the Acquired Assets. Except as set
forth in Schedule 6.1(d) of the MIC Disclosure
Schedules and subject to Section 2.2 hereof, no
Contract requires the consent from, or delivery
of notice to, any person in connection with the
transactions contemplated hereby and the rights
of MIC under the Contracts are assignable to
Intek (without being subject to any rights of
termination or modification as a result of the
transactions contemplated by this Agreement)
and upon assignment as provided herein Intek
shall be entitled to the full right, title and
benefit under each Contract.
(d) CONSENTS AND APPROVALS; NO VIOLATION. Neither
the execution and delivery of this Agreement or
the other MIC Documents nor the performance by
MIC of the transactions contemplated hereby or
thereby conflicts with or results in any breach
of any provision of MIC's certificate of
incorporation or by-laws, except as set forth
on Schedule 6.1(d) of the MIC Disclosure
Schedules, violates, conflicts with,
constitutes a material breach or default (or an
event which, with notice or lapse of time or
both, would constitute a material breach or
default) under, or results in or gives rise to
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a right of termination of, or accelerates the
performance required by, or results in the
creation of any lien or other encumbrance upon
any of the Acquired Assets or the properties of
the U.S. LMR Distribution Business under any of
the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust,
license, lease, contract, agreement, or other
obligation or instrument to which MIC is a
party or by which the Acquired Assets or the
U.S. LMR Distribution Business is bound, which,
individually or in the aggregate, would have a
Material Adverse Effect on the Acquired Assets
or the U.S. LMR Distribution Business, require
any consent, approval, authorization or permit
of or from, or filing with or notification to,
any court, governmental authority or other
regulatory or administrative agency or
commission, domestic or foreign ("Governmental
Entity"), or other third party except (A)
filings required under the Hart-Scott-Rodino
Act (B) consents, approvals, authorizations,
permits, filings or notifications which, if not
obtained or made would not, individually or in
the aggregate, have a Material Adverse Effect
on the Acquired Assets or the U.S. LMR
Distribution Business or would materially delay
or impair the ability of MIC to consummate the
transactions contemplated hereby, or (C) third
party consents, approvals, authorizations,
permits, filings or notifications which if not
obtained or made would not, individually or in
the aggregate, have a Material Adverse Effect
on the Acquired Assets or the U.S. LMR
Distribution Business, or violates any
statute, rule, regulation, order or decree of
any Governmental Entity by which MIC or any of
its assets is bound.
(e) ACQUIRED ASSETS. Except as set forth in
Schedule 6.1(e) of the MIC Disclosure
Schedules, MIC has good and marketable title to
and owns the Acquired Assets, free and clear of
all liens and claims of any kind or nature
whatsoever. Except as disclosed on Schedule
6.1(e) of the MIC Disclosure Schedules, none of
such Acquired Assets are subject to, or held
under, any lease, mortgage, security agreement,
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conditional sales contract or other title
retention agreement, or are other than in the
sole possession and under the sole control of
MIC. Except as set forth on Schedule 6.1(e) of
the MIC Disclosure Schedules, the delivery by
MIC, at the Closing, to MUSA as instructed by
Intek pursuant to the terms of the Intek
Assignment and Assumption Agreement of the Bill
of Sale to be included among the MIC Documents
and the other instruments of transfer will vest
MUSA, as Intek's assignee, as of the date
hereof, with good and marketable title to all
of the Acquired Assets, free and clear of all
liens and claims whatsoever, except those liens
created, imposed or granted by Intek, MUSA or
any Affiliate of Intek or MUSA.
(f) INTANGIBLE PROPERTY. Except as set forth on
Schedule 6.1(f) of the MIC Disclosure
Schedules, MIC has good and lawful title, free
and clear of any liens or other encumbrances,
to the U.S. Trademarks and any and all patent,
copyrights, and know-how transferred under this
Agreement (collectively, "Intangible
Property"); to the knowledge of the Executive
Officers of MIC, the Intangible Property is
valid and subsisting and is enforceable in
whole or in part in the U.S.; to the Knowledge
of the Executive Officers of MIC there are no
actual or threatened claims by third parties
regarding the Intangible Property; to the
Knowledge of the Executive Officers of MIC the
Intangible Property does not infringe or
otherwise violate any rights of any third
party; no third party has been given the right
or license to use the Intangible Property in
connection with the sale or distribution of LMR
Products in the U.S.; and to the Knowledge of
the Executive Officers of MIC, no rights,
licenses, or permissions of any Person are used
or needed to conduct the U.S. LMR Distribution
Business.
(g) BROKERS, FINDERS AND AGENTS. No Person has
acted, directly or indirectly, as a broker,
finder or financial advisor for MIC or its
Affiliates in connection with the transactions
contemplated by this Agreement, and no Person
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is entitled to any fee or commission or like
payment in respect thereof.
(h) EMPLOYEE BENEFIT PLANS.
(1) Except for the Midland International
Corporation Employees' Profit Sharing
Thrift Plan, no "employee pension plan",
as defined in Section 3(2) of ERISA (a
"Pension Plan"), is maintained by MIC,
Simmonds or any subsidiary or parent
thereof or any trade or business (whether
or not incorporated) which are under
control, or which are treated as a single
employer with MIC, Simmonds or any
subsidiary or parent thereof under Section
414(b), (c), (m) or (o) of the Code
("ERISA Affiliate"), or to which MIC,
Simmonds, or any subsidiary or parent
thereof or any ERISA Affiliate contributed
or are obligated to contribute. None of
the Pension Plans is a "defined benefit
plan" as defined in Section 3(35) of
ERISA, is a "multiemployer plan" or is or
has been subject to Sections 4063 or 4064
of ERISA; and, since January 1, 1990, none
of MIC, Simmonds or any subsidiary or any
parent thereof or any ERISA Affiliate has
contributed, or been obligated to
contribute, to a multiemployer plan.
(2) With respect to the Transferred Employees,
MIC has complied with the notice and
continuation requirements of Section 4980B
of the Code and Part 6 of Title I of ERISA
and the applicable regulations thereunder.
(3) Each "employee benefit plan," as defined
in Section 3(3) of ERISA (an "Employee
Benefit Plan") maintained by MIC is in
material compliance with all applicable
laws including ERISA and the Code. Except
as set forth on Schedule 6.1(h)(3), No
condition exists that is reasonably
expected to subject MIC to a material
civil penalty under Section 502(i) of
ERISA or material liability under Section
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4069 of ERISA or Section 4795 of the Code
or other material liability with respect
to any Employee Benefit Plan. There is no
material violation of ERISA with respect
to the furnishing of applicable reports,
documents and notices regarding the
Employee Benefit Plans to the Transferred
Employees. Each Employee Benefit Plan
that is required to file a Form 5500 with
the Internal Revenue Service has timely
done so with respect to each of the last
three completed plan years.
(i) LITIGATION, PRODUCT LIABILITY. As of the date
hereof, there is no litigation, suit,
proceeding, action, claim or investigation
("Legal Proceeding") pending, or to the
Knowledge of the Executive Officers of MIC,
threatened, that questions the validity of this
Agreement, the MIC Documents or any action
taken or to be taken by MIC in connection with
the consummation of the transactions
contemplated hereby or thereby. Except as set
forth on Schedule 6.1(i) of the MIC Disclosure
Schedules, there is no Legal Proceeding pending
or, to the Knowledge of the Executive Officers
of MIC, threatened against MIC with respect to
the U.S. LMR Distribution Business or the
Acquired Assets (including, without limitation,
any claims in respect of any warranties of
MIC). MIC is not subject to any outstanding
judgment, decree or order entered in any Legal
Proceeding affecting or naming MIC or affecting
the U.S. LMR Distribution Business or the
Acquired Assets, and to the Knowledge of the
Executive Officers of MIC, no such judgment,
order or decree has been threatened. To the
Knowledge of the Executive Officers of MIC,
there is no basis for any Legal Proceeding
against MIC with respect to the U.S. LMR
Distribution Business or the Acquired Assets.
(j) SUPPLIERS AND CUSTOMERS. Schedule 6.1(j) of
the MIC Disclosure Schedules lists the three
largest suppliers and ten largest customers of
the U.S. LMR Distribution Business in the U.S.
during the period commencing on May 1, 1995 and
ending on June 30, 1996. Except as set forth
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on Schedule 6.1(j) of the MIC Disclosure
Schedules, no supplier which is material to the
U.S. LMR Distribution Business or customer
which is material to the U.S. LMR Distribution
Business has canceled or otherwise terminated,
or, to the Knowledge of the Executive Officers
of MIC, threatened to cancel or otherwise
terminate, its relationship with MIC or has
during the last 12 months decreased materially,
or, to the Knowledge of the Executive Officers
of MIC, threatened to decrease or limit its
services, supplies or materials to MIC or its
usage or purchase of services or products of
MIC. To the Knowledge of the Executive
Officers of MIC, no such supplier or customer
intends to cancel or otherwise modify its
relationship with MIC or to decrease materially
or limit its services, supplies or materials to
MIC or its usage or purchase of services or
products of the U.S. LMR Distribution Business,
and the contemplated transactions will not
materially adversely affect the relationship of
the U.S. LMR Distribution Business with any
such supplier or customer.
(k) INFORMATION IN DISCLOSURE DOCUMENTS. To the
Knowledge of the Executive Officers of MIC, the
information with respect to MIC and its
Affiliates provided by MIC for inclusion in the
Proxy Statement will not, at the time of the
mailing of the Proxy Statement and any
amendments or supplements thereto, and at the
time of the Intek Stockholders' Meeting,
contain any untrue statement of a material fact
or omit to state any material fact required to
be stated therein or necessary in order to make
the statements therein, in light of the
circumstances under which they are made, not
misleading.
(l) FINANCIAL STATEMENTS. MIC has delivered to
Intek true, correct and complete copies of the
(A) audited consolidated balance sheet of MIC
as at December 31, 1995 and the related audited
statements of income and of changes in
financial position or of cash flows, whichever
is applicable, of MIC for the period ended
December 31, 1995 (including the related notes
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and schedules thereto and all auditors' reports
thereon and (B) unaudited consolidated balance
sheet of MIC as at June 30, 1996 (the "Balance
Sheet Date") and the related unaudited
statements of income and of changes in
financial position or of cash flows, whichever
is applicable, of MIC for the period then ended
(including the related notes and schedules
thereto and all auditors' reports thereon)
(collectively, the "Financial Statements").
Each of the Financial Statements is complete
and correct in all material respects, and,
except as set forth in the footnotes thereto,
has been prepared in accordance with generally
accepted accounting principles ("GAAP") and
presents fairly the financial position, results
of operations and changes in financial position
or cash flows, whichever is applicable, of MIC
and its subsidiaries as at the date and for the
period indicated.
(m) REAL PROPERTY. There does not exist any actual
or, to the Knowledge of the Executive Officers
of MIC, threatened or contemplated condemnation
or eminent domain proceedings that affect any
real estate subject to real property leases set
forth on Schedule 2.1(g) (each a "Real Property
Lease") or any part thereof, and MIC has not
received any notice, oral or written, of the
intention of any Governmental Entity or other
Person to take or use all or any part thereof.
The real property covered by the Real Property
Leases constitutes all of the real property
located in the U.S. that is necessary for the
conduct of the U.S. LMR Distribution Business
as presently conducted. MIC has actual and
exclusive possession of the leasehold estates
in each Real Property Lease, free and clear of
any liens. Each of the Real Property Leases is
valid and enforceable in accordance with its
terms, subject to the Bankruptcy Exception, and
there is not under any such Real Property Lease
any existing breach, default, event of default
or event which, with notice and/or lapse of
time, would constitute a breach, default or
event of default (A) by MIC, or (B) to the
knowledge of the Executive Officers of MIC, by
any other party to any such lease, except where
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such breach, default or event of default could
not reasonably be expected to have a Material
Adverse Effect on the U.S. LMR Distribution
Business. Upon consummation of the
transactions contemplated hereby, each Real
Estate Lease will entitle Intek to the
exclusive use, occupancy and possession of the
real estate specified therein for the purposes
for which MIC now uses such real estate in the
conduct of the U.S. LMR Distribution Business.
True, correct and complete copies of all Real
Property Leases have been delivered or made
available to Intek. No previous or current
party to any such Real Property Lease has given
notice of or made a claim with respect to any
breach or default thereunder.
(n) TANGIBLE PERSONAL PROPERTY.
(1) Schedule 6.1(n) of the MIC Disclosure
Schedules sets forth all leases of
personal property relating to personal
property used in or necessary to the
operation of the U.S. LMR Distribution
Business requiring lease payments equal to
or exceeding $20,000 per annum ("Personal
Property Leases"). MIC has delivered to
Intek true, correct and complete copies of
the Personal Property Leases, including
all amendments, modifications,
supplements, side letters or consents
affecting the obligations of any party
thereunder.
(2) Except as set forth on Schedule 6.1(n) of
the MIC Disclosure Schedules:
(A) Each of the Personal Property Leases
is in full force and effect and is
valid and enforceable in accordance
with its terms, subject to the
Bankruptcy Exception, and there is no
default under any Personal Property
Lease either by MIC or, to the
Knowledge of the Executive Officers
of MIC, by any other party thereto,
and no event has occurred that with
the lapse of time or the giving of
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notice or both would constitute a
default thereunder. Each of the
Personal Property Leases is freely
transferable by MIC to Intek and no
third party consents are required for
such transfer; and
(B) No previous or current party to any
such Personal Property Lease has
given notice of or made a claim with
respect to any breach or default
thereunder.
(3) With respect to those Personal Property
Leases that were assigned or subleased to
MIC by a third party, all necessary
consents to such assignments or subleases
have been obtained. On the date hereof,
Intek will succeed to all of the right,
title and interest of MIC under every
Personal Property Lease.
(o) COMPLIANCE WITH LAWS. To the Knowledge of the
Executive Officers of MIC, MIC has complied
with all laws applicable to the conduct of the
U.S. LMR Distribution Business and the use of
the Acquired Assets, except for such instances
of non-compliance as could not, individually or
in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Acquired
Assets or the U.S. LMR Distribution Business.
(p) FCC LICENSES. Except as set forth in Schedule
6.1(p) of the MIC Disclosure Schedules:
(1) each of the FCC Licenses is valid and in
good standing;
(2) MIC has operated any systems constructed
pursuant to the FCC Licenses in accordance
with the terms of such FCC Licenses and in
compliance with all applicable FCC rules,
regulations or policies;
(3) there is no investigation pending, or to
the Knowledge of the Executive Officers of
MIC threatened, concerning any FCC
Licenses or Equipment Authorizations; and
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(4) MIC has no reason to believe that the FCC
will not assign to Intek the FCC Licenses
or that Intek will be unable to obtain any
comparable equipment authorizations to
replace the Equipment Authorizations.
(q) DISCLAIMERS OF MIC. Except as otherwise
expressly provided herein in this Article 6.1,
the Acquired Assets that consist of tangible
personal property, and each item thereof, are
furnished AS IS, WHERE IS AND WITH ALL FAULTS
AND WITHOUT WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE.
6.2 REPRESENTATIONS AND WARRANTIES OF INTEK. Intek
hereby represents and warrants to MIC that:
(a) ORGANIZATION, STANDING, POWER AND AUTHORITY.
Each of Intek and MUSA is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
Delaware. Each of Intek and MUSA has all
requisite corporate power and authority to make
and perform its obligations under this
Agreement and each other agreement, document,
instrument or certificate contemplated by this
Agreement or to be executed by Intek or its
assignee of any of the Acquired Assets, as the
case may be, in connection with the
consummation of the transactions contemplated
by this Agreement and by the Intek Assignment
Agreement (collectively with this Agreement,
the "Intek Documents"). Except as set forth on
Schedule 6.2(a), each of Intek and MUSA is duly
qualified and authorized to do business as a
foreign corporation and is in good standing
under the laws of each jurisdiction in which it
owns or leases real property and each other
jurisdiction in which the conduct of its
business or the ownership of its properties
requires such qualification (all of which
jurisdictions are listed on Schedule 6.2(a) of
the Intek Disclosure Schedules), except where
the failure to be so qualified or authorized
could not reasonably be expected to have a
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Material Adverse Effect on Intek or MUSA, as
the case may be. The execution and delivery of
this Agreement and the consummation of the
transactions contemplated hereby have been, and
prior to the Closing the execution of each of
the other Intek Documents, and the consummation
of the transaction contemplated thereby will
be, duly approved by unanimous vote of the
Special Committee of the Board of Directors of
Intek and by the unanimous vote of the Board of
Directors of MUSA, and no other corporate
proceedings on the part of Intek or MUSA are
necessary to authorize this Agreement or to
consummate the transactions so contemplated.
This Agreement has been, and prior to the
Closing each of the other Intek Documents will
be, duly executed and delivered by, and
constitutes, or will constitute, a valid and
binding obligation of, Intek and MUSA, to the
extent that either is a party to such Intek
Document, enforceable against Intek and MUSA in
accordance with its terms, subject to the
Bankruptcy Exception.
(b) CAPITALIZATION. As of the date hereof, the
authorized capital stock of Intek consists of
20,000,000 shares of Common Stock. As of the
date hereof, 11,203,904 shares of Common Stock,
were issued and outstanding; 465,582 shares of
Common Stock were held in treasury; 500,000
shares of Common Stock were reserved for
issuance under Intek's 1988 Key Employee Stock
Option Plan (the "1988 Option Plan"), and no
options representing the right to purchase
shares of Common Stock are outstanding under
the 1988 Option Plan; 600,000 shares of Common
Stock were reserved for issuance under Intek's
1994 Stock Option Plan (the "1994 Option
Plan"), and options representing the right to
purchase 250,000 shares of Common Stock are
outstanding under the 1994 Option Plan; and
300,000 shares of Common Stock were reserved
for issuance under Intek's 1994 Directors'
Stock Option Plan (the "Directors' Option
Plan"), and options representing the right to
purchase 65,000 shares of Common Stock are
outstanding under the Directors' Option Plan.
All shares of Common Stock outstanding or held
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in treasury are duly authorized, validly
issued, fully paid and nonassessable and are
not subject to preemptive rights. Except as
set forth in this Section 6.2(b) or in Schedule
6.2(b) of the Intek Disclosure Schedules or as
may be issued pursuant to the Securicor
Agreement or for issuance of securities
permitted by Section 5.2(d), as of the date
hereof, there are no shares of capital stock of
Intek authorized, issued or outstanding and
there are no outstanding subscriptions,
options, warrants, rights, convertible
securities or any other agreements or
commitments of any character relating to the
issued or unissued capital stock or other
securities of Intek obligating Intek to issue,
deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital
stock of Intek or obligating Intek to grant,
extend or enter into any subscription, option,
warrant, right, convertible security or other
similar agreement or commitment. There are no
voting trusts or other agreements or
understandings to which Intek or its
subsidiaries is a party with respect to the
voting of the capital stock of Intek.
(c) SHARES ISSUED TO MIC. All of the shares of
Common Stock issuable to MIC, or to the Escrow
Agent pursuant to the Escrow Agreement, in
accordance with this Agreement shall be, when
so issued, duly authorized, validly issued,
fully paid and nonassessable, not be subject to
any preemptive rights, and be free and clear of
any liens, encumbrances or restrictions. The
shares issued by Intek to MIC hereunder shall
equal approximately 6% of the outstanding
shares of Common Stock of Intek on a fully
diluted basis as of the date of the Closing,
assuming issuance of all shares of Common
Stock Intek has a commitment to issue, the
additional shares of Common Stock Intek to be
delivered to MIC out of escrow pursuant to this
Agreement upon consummation of the Securicor
Transaction and the issuance by Intek of
25,000,000 shares of Common Stock to Securicor
pursuant to the Securicor Agreement upon
consummation of the Securicor Transaction, and
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the shares of Common Stock Intek is permitted
to issue pursuant to Section 6.2(b)(ii)(A) of
the Securicor Agreement. As of the date
hereof, all 11,203,904 shares of Common Stock
which are issued and outstanding are listed and
traded on the National Association of
Securities Dealers Automatic Quotation System
Small Cap Market (the "NASDAQ Small Cap
Market") under the symbol "IDCC", and Intek is
in full compliance with its listing agreement.
The shares issued to MIC pursuant to this
Agreement shall be listed on the NASDAQ Small
Cap Market.
(d) SUBSIDIARIES. Schedule 6.2(d) of the Intek
Disclosure Schedules sets forth the name and
state of incorporation of each subsidiary (as
defined herein) of Intek (collectively, the
"Intek Subsidiaries") existing as of the date
hereof. Except as set forth on Schedule 6.2(d)
of the Intek Disclosure Schedules, each of the
Intek Subsidiaries is a corporation duly
organized, validly existing and in good
standing under the laws of its respective
jurisdiction of incorporation and is duly
qualified to do business as a foreign
corporation in each jurisdiction in which its
ownership or lease of property or the nature of
the business conducted by it makes such
qualification necessary, except for such
jurisdictions in which the failure to be so
qualified would not have a Material Adverse
Effect on Intek. Each of the Intek
Subsidiaries has the requisite corporate power
and authority to own, lease and operate its
properties and assets and to carry on its
businesses as they are now being conducted.
Except as set forth on Schedule 6.2(d) of the
Intek Disclosure Schedules, all outstanding
shares of capital stock of each Intek
Subsidiary are owned by Intek or another Intek
Subsidiary and are validly issued, fully paid
and nonassessable, are not subject to
preemptive rights and are owned free and clear
of all liens, claims and encumbrances. Except
as set forth on Schedule 6.2(d) of the Intek
Disclosure Schedules, there are no outstanding
subscriptions, options, warrants, rights,
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convertible securities or any other agreements
or commitments of any character relating to the
issued or unissued capital stock or other
securities of any Intek Subsidiary obligating
any Intek Subsidiary to issue, deliver or sell,
or cause to be issued, delivered or sold,
additional shares of its capital stock or
obligating any Intek Subsidiary to grant,
extend or enter into any subscription, option,
warrant, right, convertible security or other
similar agreement or commitment. As of the
date of this Agreement, MUSA has no
subsidiaries.
(e) BUSINESS IN ORDINARY COURSE. Except as set
forth on Schedule 6.2(e) of the Intek
Disclosure Schedules, since December 31, 1995,
Intek and each Intek Subsidiary have conducted
their respective businesses only in the
ordinary course of business consistent with
past practice and there has been no Material
Adverse Change with respect to Intek, nor has
any event occurred, nor has any condition or
state of facts arisen, which has not been
disclosed to MIC and could, to the Knowledge of
the Executive Officers of Intek, reasonably be
expected to have a Material Adverse Effect on
Intek.
(f) CONSENTS AND APPROVALS; NO VIOLATION. Neither
the execution and delivery of this Agreement or
the other Intek Documents by Intek or MUSA, as
the case may be, nor the consummation by Intek
or MUSA of the transactions contemplated hereby
or thereby conflicts with or results in any
breach of any provision of Intek's or MUSA's
respective certificates of incorporation or by-
laws, except as set forth on Schedule 6.2(f) of
the Intek Disclosure Schedules, violates,
conflicts with, constitutes a material breach
or default (or an event which, with notice or
lapse of time or both, would constitute a
material breach or default) under, or results
in or gives rise to a right of termination of,
or accelerates the performance required by, or
results in the creation of any lien or other
encumbrance upon any of the properties or
assets of Intek, MUSA or any of the Intek
46
<PAGE>
Affiliates under, any of the terms, conditions
or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease,
agreement or other instrument or obligation to
which Intek is a party or to which they or any
of their respective properties or assets are
subject, except for such violations, conflicts,
breaches, defaults, terminations, accelerations
or creations of liens or other encumbrances,
which, individually or in the aggregate, would
not have a Material Adverse Effect on Intek or
any Intek Affiliate, requires any consent,
approval, authorization or permit of or from,
or filing with or notification to, any
Governmental Entity, or other third party
except (A) filings under the Hart-Scott-Rodino
Act in connection with the issuance of the
Additional Shares to MIC pursuant to Section
3.1(b)(2)(A) of this Agreement, (B) pursuant to
the Exchange Act, (C) filings with, and
approvals by, the FCC or any successor thereto,
or (D) third party consents, approvals,
authorizations, permits, filings or
notifications which if not obtained or made
would not, individually or in the aggregate,
have a Material Adverse Effect on Intek or
MUSA, or violates any statute, rule,
regulation, order or decree of any Governmental
Entity by which Intek, MUSA, the Intek
Subsidiaries, or any of their respective
assets, is bound.
(g) BROKERS, FINDERS AND AGENTS. Except for
Fahnestock & Co. Inc., no Person has acted,
directly or indirectly, as a broker, finder or
financial advisor for Intek or its Affiliates
in connection with the transactions
contemplated by this Agreement, and no Person
is entitled to any fee or commission or like
payment in respect thereof. Intek shall be
solely responsible for, and shall hold MIC and
Simmonds harmless from and against, all
expenses and fees payable to Fahnestock & Co.
Inc. in connection with the transactions
contemplated hereunder.
(h) EMPLOYEE RELATIONS. Except as set forth in
Schedule 6.2(h) of the Intek Disclosure
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Schedules, there are no material controversies
pending, or, to the Knowledge of the Executive
Officers of Intek and MUSA, threatened that
involve any employees employed by Intek, MUSA
or of any Intek Subsidiary.
(i) EMPLOYEE PLANS. Except as set forth on
Schedule 6.2(i) of the Intek Disclosure
Schedules, all employee benefit, welfare,
bonus, deferred compensation, pension, profit
sharing, stock option, employee stock
ownership, consulting, severance, or fringe
benefit plans, formal or informal, written or
oral, and all trust agreements related thereto,
relating to any present or former directors,
officers or employees of Intek or any Intek
Subsidiary (collectively, "Intek Employee
Plans") have been maintained, operated, and
administered in substantial compliance with
their terms and currently comply, and have at
all relevant times complied, in all material
respects with ERISA and the Code, to the extent
applicable, and any other applicable laws.
With respect to each Intek Employee Plan which
is a pension plan (as defined in Section 3(2)
of ERISA), except as set forth in Schedule
6.2(i) of the Intek Disclosure Schedules:
each pension plan as amended (and any trust
relating thereto) intended to be a qualified
plan under Section 401(a) of the Code either
has been determined by the Internal Revenue
Service ("IRS") to be so qualified or is the
subject of a pending application for such
determination that was timely filed, there is
no accumulated funding deficiency (as defined
in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, and no waiver of
the minimum funding standards of such sections
has been requested from the IRS, no reportable
event described in Section 4043 of ERISA has
occurred, no defined benefit plan has been
terminated, nor has the Pension Benefit
Guaranty Corporation instituted proceedings to
terminate a defined benefit plan or to appoint
a trustee or administrator of a defined benefit
plan, and no circumstances exist that
constitute grounds under Section 4042 of ERISA
entitling the Pension Benefit Guaranty
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Corporation to institute any such proceedings,
no pension plan is a "multiemployer plan" and
as of the last day of the most recent plan year
which ended prior to the date hereof and for
which an actuarial valuation has been issued by
the plan's actuary, with respect to each
defined benefit plan which is a "single-
employer plan" (within the meaning of Section
4001(a)(15) of ERISA) the actuarially
determined present value of all "benefit
liabilities" (within the meaning of Section
4001(a)(16) of ERISA), as determined on the
basis of the actuarial assumptions contained in
the plan's most recent actuarial valuation, did
not exceed the then current value of the assets
of the plan and there has been no material
change in the financial condition of the plan
since the last day of the most recent plan
year. No liability under subtitle C or D of
Title IV of ERISA has been incurred by Intek or
any Intek Subsidiary with respect to any
"single-employer plan", formerly maintained by
any of them or by any entity which is
considered one employer with Intek under
Section 4001 of ERISA or Section 414 of the
Code.
(j) MATERIAL CONTRACTS. Except as set forth in
Schedule 6.2(j) of the Intek Disclosure
Schedules, the Securicor Agreement, this
Agreement and the Securicor Loan Agreement,
neither Intek, MUSA nor any other Intek
Subsidiary is a party to, or is bound by any
agreement, indenture or other instrument
relating to the borrowing of money by Intek,
MUSA or any such Intek Subsidiary or the
guarantee by Intek, MUSA or any such Intek
Subsidiary of any such obligation (other than
trade payables and instruments relating to
transactions entered into in the ordinary
course of business), any contract or agreement
or amendment thereto that would be required to
be filed as an exhibit to a Report on Form 10-K
filed by Intek with the Commission, any
contract relating to the disposition of any
assets or any business interests of Intek,
other than in the ordinary course of business,
under which the buyer has any continuing
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obligations or indemnity arrangements, any
warranty or other agreement relating to any
products manufactured or distributed by Intek
or any Intek Subsidiary, any other contract or
agreement or amendment thereto that places any
restrictions on the ability of Intek, MUSA or
any other Intek Subsidiary to engage in any
business activity which restrictions would have
a Material Adverse Effect on Intek or MUSA
(collectively, the "Intek Contracts"). Neither
Intek, MUSA nor any Intek Subsidiary is in
default under any Intek Contract, which default
is reasonably likely to have, either
individually or in the aggregate, a Material
Adverse Effect on Intek, and there has not
occurred any event that with the lapse of time
or the giving of notice or both would
constitute such a default.
(k) INTEK CORPORATE ACTION. The Special Committee
of the Board of Directors of Intek has, by
unanimous vote, determined that the transaction
contemplated by this Agreement and the
Securicor Agreement is advisable and in the
best interests of Intek and its stockholders,
and approved this Agreement and the Securicor
Agreement and the transactions contemplated
hereby and by the Securicor Agreement.
(l) INFORMATION IN DISCLOSURE DOCUMENTS. The
information with respect to Intek or any
subsidiary of Intek provided by Intek for
inclusion in the Intek Proxy Statement to be
mailed to Intek's shareholders in connection
with the transactions contemplated by this
Agreement, will not, at the time of the mailing
of the Intek Proxy Statement and any amendments
or supplements thereto, and at the time of the
Intek Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state
any material fact required to be stated therein
or necessary in order to make the statements
therein, in light of the circumstances under
which they are made, not misleading; provided
that Intek makes no representation or warranty
with respect to information provided by MIC for
inclusion in the Intek Proxy Statement. The
Intek Proxy Statement shall comply as to form
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in all material respects with the provisions of
the Exchange Act, and the respective rules and
regulations promulgated thereunder.
(m) FINANCIAL STATEMENTS. Intek has delivered to
MIC true, correct and complete copies of the
(A) audited consolidated balance sheet of Intek
as at December 31, 1995 and the related audited
statements of income and of changes in
financial position or of cash flows, whichever
is applicable, of Intek for the period then
ended (including the related notes and
schedules thereto and all auditors' reports
thereon) , and (B) unaudited consolidated
balance sheet of Intek as at June 30, 1996 (the
"Intek Balance Sheet Date") and the related
unaudited statements of income and of changes
in financial position or of cash flows,
whichever is applicable, of Intek for the
period then ended (including the related notes
and schedules thereto and all auditors' reports
thereon) (collectively, the "Intek Financial
Statements"). Each of the Intek Financial
Statements is complete and correct in all
material respects, and, except as set forth in
the footnotes thereto, has been prepared in
accordance with GAAP and presents fairly the
financial position, results of operations and
changes in financial position or cash flows,
whichever is applicable, of Intek and its
subsidiaries as at the date and for the period
indicated.
(n) ENVIRONMENTAL MATTERS. For purposes of this
Section 6.2(n), the following terms shall have
the indicated meaning:
(1) "Real Property" means all real property
presently or formerly owned or operated by
Intek or any Intek Subsidiary on which
facilities are or were located and all
real property (including property held as
trustee or in any other fiduciary
capacity) over which Intek or any Intek
Subsidiary currently or formerly has
exercised dominion, management or control.
To the extent that Real Property includes
site leases, the representations contained
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in the Section 6.2(n) shall be limited to
the Knowledge of the Executive Officers of
Intek.
(2) "Environmental Law" means any applicable
federal, state or local statute, law
ordinance, rule, regulation, code,
license, permit, authorization, approval,
consent, order, judgment, decree,
injunction, directive, requirement or
agreement with any Governmental Entity,
now existing, relating to: (aa) the
protection, preservation or restoration of
the environment (including, without
limitation, air water vapor, surface
water, groundwater, drinking water supply,
surface land, subsurface land, plant and
animal life or any other natural
resource), or to human health or safety,
or (bb) the exposure to, or the use,
storage, recycling, treatment, generation,
transportation, processing, handling,
labeling, production, release or disposal
of Hazardous Substances, in each case as
amended. The term Environmental Law
includes, without limitation,
(A) the following statutes, each as
amended:
(i) the Federal Clean Air Act;
(ii) the Federal Clean Water Act;
(iii) the Federal Resource
Conservation and Recovery Act
of 1976 ("RCRA");
(iv) the Federal Comprehensive
Environmental Response
Compensation and Liability Act
of 1980 ("CERCLA");
(v) the Federal Toxic Substances
Control Act;
(vi) the Federal Occupational
Safety and Health Act of 1970;
(vii) the Federal Safe Drinking
Water Act;
(viii)the Federal Insecticide,
Fungicide and Rodenticide
Act;
(ix) the California Hazardous Waste
Control Law;
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(x) the California Hazardous
Substance Account Act;
(xi) the Porter-Cologne Water
Quality Control Act; and
(xii) the California Air Pollution
Control Law; and
(B) any common law or equitable doctrine
(including, without limitation,
injunctive relief and tort doctrines
such as negligence, nuisance,
trespass and strict liability) that
may impose liability or obligations
for injuries or damages due to, or
threatened as a result of, the
presence of or exposure to any
Hazardous Substance.
(3) "Hazardous Substance" means any substance,
whether liquid, solid or gas, listed,
defined, designated or classified as
hazardous, toxic, radioactive or
dangerous, under any applicable
Environmental Law, whether by type or by
quantity. Hazardous Substance includes,
without limitation, (aa) any "hazardous
substance" as defined in CERCLA, (bb) any
"hazardous waste" as defined in RCRA, and
(cc) any toxic waste, pollutant,
contaminant, hazardous substance, toxic
substance, hazardous waste, special waste
or petroleum or any derivative or by-
product thereof, radon, radioactive
material, friable asbestos, asbestos
containing material releasing friable
asbestos, urea formaldehyde foam
insulation, lead and polychlorinated
biphenyls ("PCBs").
(4) Except as set forth on Schedule 6.2(n) of
the Intek Disclosure Schedules or as would
not individually or in the aggregate have
a Material Adverse Effect on Intek,
(A) Intek and each Intek Subsidiary is
and has been in compliance with all
applicable Environmental Laws,
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(B) the Real Property does not contain
any Hazardous Substance in violation
of any applicable Environmental Law,
(C) neither Intek nor any Intek
Subsidiary has received any written
notices, demand letters or written
requests for information from any
Governmental Entity or any third
party indicating that Intek or such
Intek Subsidiary may be in violation
of, or liable under, any
Environmental Law,
(D) to the Knowledge of the Executive
Officers of Intek, there are no
civil, criminal or administrative
actions, suits, demands, claims,
hearings, investigations or
proceedings pending or to the
Knowledge of the Executive Officers
of Intek threatened against Intek or
any Intek Subsidiary with respect to
Intek or any Intek Subsidiary or the
Real Property relating to any
violation, or alleged violation, of
any Environmental Law,
(E) no reports have been filed, or, to
the Knowledge of the Executive
Officers of Intek, are required to
be filed, by Intek or any Intek
Subsidiary concerning the release of
any Hazardous Substance or the
threatened or actual violation of
any Environmental Law on or at the
Real Property,
(F) to the Knowledge of the Executive
Officers of Intek, there are no
underground storage tanks on, in or
under any of the Real Property and
no underground storage tanks have
been closed or removed from any Real
Property while such Real Property
was owned or operated by Intek or
any Intek Subsidiary, and
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(G) to the Knowledge of the Executive
Officers of Intek, neither Intek nor
any Intek Subsidiary has incurred,
and none of the Real Property is
presently subject to, any
liabilities fixed (or, to the
knowledge of Intek, contingent)
relating to any suit, settlement,
court order, administrative order,
judgment or claim asserted or
arising under any Environmental Law.
(5) To the Knowledge of the Executive Officers
of Intek, there are no permits or licenses
required under any Environmental Law in
respect of the Real Property presently
operated by Intek or any Intek Subsidiary.
(6) Neither Intek nor any Intek Subsidiary has
received written notice that any part of
the Real Property has been or is listed as
a site containing Hazardous Substances
pursuant to any Environmental Law.
(o) LABOR RELATIONS. Except as set forth in
Schedule 6.2(o) of the Intek Disclosure
Schedules, neither Intek nor any Intek
Subsidiary is a party to or bound by any
collective bargaining agreement respecting its
employees, nor is there pending, or to the
Knowledge of the Executive Officers of Intek
threatened, any strike, walkout or other work
stoppage or labor organizational effort, and
neither Intek nor any Intek Subsidiary has
received any union grievances, complaints, or
claims, the liability for which would have a
Material Adverse Effect on Intek.
(p) REAL ESTATE. Except as set forth on Schedule
6.2(p) of the Intek Disclosure Schedules, no
real property is owned by Intek or any Intek
Subsidiary. Schedule 6.2(p) sets forth the
description of all real property leases to
which Intek is a party. There does not exist
any actual or, to the Knowledge of the
Executive Officers of Intek, threatened or
contemplated condemnation or eminent domain
proceedings that affect any real estate subject
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to real property leases set forth on Schedule
6.2(p), or otherwise operated or utilized by
Intek, or any part thereof, and Intek has not
received any notice, oral or written, of the
intention of any Governmental Entity or other
Person to take or use all or any part thereof.
(q) LITIGATION. As of the date hereof, there is no
Legal Proceeding pending, or to the Knowledge
of the Executive Officers of Intek, threatened,
that questions the validity of this Agreement,
the Intek Documents or any action taken or to
be taken by Intek in connection with the
consummation of the transactions contemplated
hereby or thereby. Except as set forth on
Schedule 6.2(q) of the Intek Disclosure
Schedules, there is no Legal Proceeding pending
or, to the Knowledge of the Executive Officers
of Intek, threatened against Intek or any Intek
Subsidiary (including, without limitation, any
claims in respect of any warranties of Intek)
which, insofar as the Executive Officers of
Intek can reasonably foresee, would have a
Material Adverse Effect on Intek. Neither
Intek nor any Intek Subsidiary is subject to
any outstanding judgment, decree or order
entered in any Legal Proceeding affecting or
naming Intek or any Intek Subsidiary or having
a Material Adverse Effect on Intek, and to the
Knowledge of the Executive Officers of Intek,
no such judgment, order or decree has been
threatened. To the Knowledge of the Executive
Officers of Intek, there is no basis for any
Legal Proceeding against Intek or any Intek
Subsidiary which could reasonably be expected
to have a Material Adverse Effect on Intek.
(r) LICENSES. Schedule 6.2(r) of the Intek
Disclosure Schedules sets forth a complete list
of all FCC licenses in which Intek has an
interest or under which Intek operates any part
of its business. Intek is not, as of the date
hereof, the record and beneficial licensee and
owner of any FCC licenses. Intek is entitled
to act and is acting as of the date hereof as
manager, pursuant to valid and subsisting
management agreements, of each of the FCC
licenses identified as managed FCC Licenses on
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Schedule 6.2(r) of the Intek Disclosure
Schedules (the "Licenses") and, to the
knowledge of the Executive Officers of Intek,
the persons identified on Schedule 6.2(r) of
the Intek Disclosure Schedules as the holders
of the Licenses are the sole record and
beneficial licensees and owners of such
Licenses). Except as set forth on Schedule
6.2(r) of the Intek Disclosure Schedules,
neither Intek nor any of its Affiliates
currently owns, of record or beneficially, or
manages any other FCC licenses. Except as set
forth on Schedule 6.2(r) of the Intek
Disclosure Schedules, to the knowledge of the
Executive Officers of Intek, there is no
pending or threatened action by the FCC or any
other Governmental Entity or third party to
suspend, revoke, terminate or challenge any of
the Licenses or otherwise investigate the
operation of Intek's SMR business or the
accuracy of the loading of the system or
systems of Intek's SMR business. Except as set
forth in Schedule 6.2(r) of the Intek
Disclosure Schedules, Intek is as of the date
hereof in compliance in all material respects
with all regulations concerning construction
and spacing of the Licenses or the facilities
associated therewith, and all other federal
statutes, and rules, regulations and policies
of the FCC applicable to Intek, the Licenses,
or Intek's SMR business. To the Knowledge of
the Executive Officers of Intek, none of the
Licenses is currently subject to or operating
under any short-space agreement or any FCC
waiver of otherwise applicable rules and
regulations, except as disclosed in Schedule
6.2(r) of the Intek Disclosure Schedules.
Except as disclosed in Schedule 6.2(r), there
are no payments due and payable by Intek, nor
any dispute regarding any payments due from
Intek between Intek and the licensee of any of
the Licenses and, to the knowledge of the
Executive Officers of Intek, there are no
payments due and payable by any third party
(including any predecessor in interest with
respect to the Licenses), nor any dispute
regarding any payments by any third party
between such third party or Intek and the
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licensees of any License relating to the
Licenses, including without limitation any
payments to the licensees of the Licenses.
(s) UNITS IN SERVICE. Schedule 6.2(s) of the Intek
Disclosure Schedules sets forth a true and
complete list, by customer, of the units in
service in connection with the Licenses (the
"Units in Service"). The Units in Service are,
to the knowledge of the Executive of Officers
of Intek, in the possession of the indicated
customers, which customers are billed for their
use of such Units in Service at the actual
customer rates shown in Schedule 6.2(s) of the
Intek Disclosure Schedules and which customers
are required to pay such billed amounts in full
(subject to Intek's normal prompt payment,
volume and similar discounts, all of which have
been disclosed in writing to MIC) on or before
the relevant due date reflected in the relevant
billing.
(t) CONTRACTS, LEASES AND SITE LICENSES. Schedule
6.2(t) of the Intek Disclosure Schedules sets
forth a true and complete index and current
copies (or written summaries, including all
material terms, in the case of oral agreements)
of all material contracts (excluding customer
contracts), leases and site licenses related to
the assets, Intek's business and the Licenses,
including without limitation, site licenses,
equipment leases or installment sale contracts,
partnership, joint-venture or joint-use
agreements, management agreements, dealer
agreements, short-space agreements or the like.
Except as set forth on Schedule 2.1(c) of the
Intek Disclosure Schedules, all of the
contracts, leases and site licenses relating to
the Licenses have been entered into by Intek on
arm's length terms with non-Affiliates are in
full force and effect and are valid and
enforceable in accordance with their terms.
Intek has received no notice from any Person of
termination of any such contract, lease, or
site license, and the consummation of the
transaction herein contemplated shall not
affect a termination of or give any Person the
right to terminate or modify any such contract,
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lease or site lease. Except as set forth on
Schedule 2.1(c) of the Intek Disclosure
Schedules, to the Knowledge of the Executive
Officers of Intek, none of the contracting
parties is in default in any material respect
or has acted or failed to act in a manner
which, with notice or the passage of time or
both, will result in a material default under
any of the contracts, leases, and site licenses
and no penalties have been incurred nor are any
material amendments pending with respect to any
of the contracts, leases and site licenses.
(u) RELATED PARTY TRANSACTIONS. Except as set
forth in Schedule 6.2(u) of the Intek
Disclosure Schedules, no current shareholder,
director, or officer of Intek or any of its
Subsidiaries is presently a party to, or since
January 1, 1996, has entered into, directly or
indirectly through his, her or its Affiliates,
any arrangement or transaction with Intek or
any of its Subsidiaries providing for the
furnishing of services (except as director or
officer) by or to, or the rental of real or
personal property from or to, or otherwise
requiring cash payments to or by any such
person (except as a director or officer), other
than those that do not involve payments, or the
furnishing of goods or services having a fair
market value by, from or to Intek or any of its
Subsidiaries of more than $25,000 in any
calendar year.
(v) COMPLIANCE WITH LAWS. Except as set forth on
Schedule 6.2(v) of the Intek Disclosure
Schedules, to the Knowledge of the Executive
Officers of Intek, each of Intek, its
subsidiaries and its Affiliates has complied
with all laws applicable to the conduct of its
business, except for such instances of non-
compliance as could not, individually or in the
aggregate, reasonably be expected to have a
Material Adverse Effect on Intek.
7. COVENANTS OF MIC.
7.1 MIC'S REPRESENTATION LETTER. MIC and Intek shall
execute and deliver a written representation letter
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(a "Shareholder Representation Letter") with respect
to the Common Stock to be delivered to MIC pursuant
to this Agreement providing that:
(a) MIC agrees that it shall not sell, transfer,
assign, pledge or otherwise dispose of the
Common Stock unless such sale, transfer,
assignment, pledge or other disposition has
been registered or is exempt under the
Securities Act and has been registered or
qualified or is exempt from registration or
qualification under applicable securities laws
and MIC provides to Intek an opinion of counsel
satisfactory to Intek that a sale, transfer,
assignment, pledge or other disposition of such
Common Stock may be made without registration.
(b) MIC represents as follows:
(1) The Common Stock to be acquired by MIC
will be acquired for MIC's own account and
not with a view to, or present intention
of, distribution thereof in violation of
the Securities Act, or any applicable
state securities laws and will not be
disposed of in contravention of the
Securities Act or any applicable state
securities laws;
(2) MIC is sophisticated in financial matters
and is able to evaluate the risks and
benefits of the investment in the Common
Stock;
(3) The Executive Officers of MIC had an
opportunity to ask questions and receive
answers concerning Intek and the terms and
conditions of the acquisition of the
Common Stock and have had full access to
such other information concerning Intek as
MIC has requested; and
(4) MIC acknowledges that the Common Stock has
not been registered under the Securities
Act and, therefore, cannot be sold unless
subsequently registered under the
Securities Act or an exemption from such
registration is available, and MIC is able
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to bear the economic risk of any
investment in the Common Stock for an
indefinite period of time.
(c) MIC acknowledges that until such time as the
Common Stock has been registered for resale
pursuant to the Securities Act, each
certificate representing the Common Stock shall
be endorsed with the following legend:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF UNLESS
THEY HAVE FIRST BEEN REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS
OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE AND THE
CORPORATION SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER, EVIDENCE OF SUCH
EXEMPTION REASONABLY SATISFACTORY TO THE
CORPORATION (WHICH MAY INCLUDE, AMONG
OTHER THINGS, AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION).
(d) MIC acknowledges that Intek may place stop
transfer orders against the registration or
transfer of any Common Stock until such time as
the requirements of the foregoing legend are
satisfied.
(e) Intek acknowledges that the legend described in
Section 7.1(c) hereof and any stop transfer
instructions issued pursuant to Section 7.1(d)
hereof shall be removed promptly and Intek
shall issue promptly a new certificate to MIC
of such Common Stock if the sale of such Common
Stock has been registered under the Securities
Act and a prospectus meeting the requirements
of Section 10 of the Securities Act is
available or if MIC provides to Intek an
opinion of counsel reasonably satisfactory to
Intek that a public sale, transfer or
assignment of such Common Stock may be made
without registration.
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7.2 SATISFACTION OF MIC OBLIGATIONS POST-CLOSING.
(a) RETURN OF ACQUIRED ASSETS. If Intek, MUSA
Securicor Communications is compelled to return
any Acquired Assets to MIC to be applied
against the satisfaction of any obligation of
MIC which arises within one year after the
Closing, then Simmonds shall, promptly upon
receipt of a written request therefor,
accompanied by an assignment to Simmonds of all
of the requesting entity's right, title and
interest in any claim against MIC with respect
to such Acquired Asset, pay cash to such entity
in an amount equal to the value of such
Acquired Asset as of the date of this
Agreement. Each of MIC and Simmonds hereby
agrees that Securicor Communications Limited
shall be an intended third-party beneficiary of
the provisions of this Section 7.2.
(b) RETURN OF MUSA PROPERTY. If a customer of the
U.S. LMR Distribution Business returns
merchandise to MIC which merchandise was
supplied by MUSA pursuant to MUSA's obligations
to such customer under the Contracts (whether
or not such Contract was assignable), or if MIC
receives from a customer any other cash or
other proceeds arising from MUSA's performance
of its obligations to a customer, then MIC
shall, at MUSA expense, deliver such inventory,
cash or proceeds to MUSA in the form received.
Simmonds shall promptly pay to MUSA the amount
of such proceeds or the cost of such inventory
upon MUSA's written request therefor if MIC
fails to comply with its obligations under this
Section 7.2(b).
8. COVENANTS OF INTEK
8.1 CONFIDENTIALITY OF INFORMATION.
(a) The materials made available to Intek, MUSA or
Securicor by MIC or MIC's Affiliates, whether
in verbal, written or any other form
(collectively, the "MIC Materials"), are deemed
to be confidential and proprietary information
of MIC to the extent such MIC Materials are not
purchased as part of the Acquired Assets. No
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such MIC Materials shall be copied,
photographed, or in any way duplicated without
the express prior written consent of MIC except
to the extent such MIC Materials have
previously been made available to the general
public other than by Intek, MUSA, Securicor or
their respective Affiliates. MIC will provide
copies of the MIC Materials, or any part of
them, to Intek, MUSA or Securicor upon their
respective requests therefore. At the election
of MIC, Securicor may be required to execute a
confidentiality agreement containing provisions
no less burdensome than those set forth in this
Section 8.1 with respect to Intek prior to
having the MIC Materials made available to it
hereunder.
(b) Intek shall notify, and shall cause any
Affiliate of Intek, including MUSA, to notify
all employees, agents or representatives of
Intek or any Affiliate of Intek receiving or
otherwise learning of the MIC Materials, that
the contents thereof must be kept confidential
pursuant to this Agreement, and that any
disclosure to a third party or use of MIC
Materials not purchased as part of the Acquired
Assets without MIC's written permission will
constitute a breach of this Agreement.
(c) Intek agrees, and agrees to obtain for the
benefit of MIC from any third party provided
the MIC Materials in accordance with the
provisions hereof, that upon any repudiation of
this Agreement or if there is no Closing for
any reason whatsoever, neither Intek nor any
such third party will implement, use or
disclose the MIC Materials not purchased as
part of the Acquired Assets for a period of
three (3) years beginning on the date of any
repudiation regardless of whether MIC
surrenders, assigns or otherwise disposes of
its rights and duties under the Agreement
unless the MIC Materials are or become known
to the general public, except if such public
knowledge is the result of Intek's or such
third party's own actions and/or breach of this
Agreement; or such disclosure is required under
applicable law or an order of a Governmental
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Entity. In the event that any repudiation
shall occur, Intek shall return, and cause all
other Persons who received such MIC Materials
through Intek to return, to MIC all tangible
MIC Materials, notes, records and recordings,
except to the extent that such MIC Materials
have been purchased as Acquired Assets
hereunder.
(d) Unless purchased by Intek pursuant to the terms
of this Agreement, the MIC Materials shall,
without limitation, remain the property of MIC,
and upon the termination of this Agreement
shall be returned promptly to MIC at its
request, together with ALL copies, notes,
extracts, summaries and analyses thereof,
whether or not such copies have been provided
by MIC.
(e) Intek acknowledges that any violation of this
Section 8.1 will cause immediate and
irreparable harm to MIC and that the damages
which MIC will suffer may be difficult or
impossible to measure. Therefore, upon any
actual or impending violation of this Section
8.1, MIC will be entitled to the issuance of a
restraining order and/or a preliminary and
permanent injunction, without bond, restraining
and/or enjoining such violation by Intek or any
entity or Person acting in concert with Intek.
This remedy will be in addition to any other
remedy which may otherwise be available to MIC.
8.2 REPLACEMENT OF PERFORMANCE BONDS. On or before
September 30, 1996, Intek or its assigns shall
provide all letters of credit, guaranties and
performance bonds as shall be necessary for Intek to
obtain the release of MIC and its Affiliates from
the guaranties, letters of credit, or performance
bonds set forth on Schedule 8.2 (collectively, the
"Performance Guarantees").
8.3 RIGHTS OF INSPECTION. From and after the Closing,
Intek shall, whenever reasonably requested by MIC,
permit MIC to have access to all business records
turned over to Intek and/or MUSA pursuant to this
Agreement. Intek shall preserve and maintain, or
shall cause MUSA to preserve and maintain, the
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records relating to the U.S. LMR Distribution
Business which are part of the Acquired Assets for
at least six years after the Closing.
8.4 EMPLOYEE MATTERS.
(a) On or prior to the date of the Closing, Intek
or its Affiliates will offer employment on an
"at-will basis" to the employees of MIC listed
on Schedule 8.4(a); provided that (i) the
acceptance by an employee of an offer of
employment made pursuant to this Section 8.4
shall become effective as of the Effective Date
subject to the condition subsequent that the
transactions contemplated by this Agreement
closes, and (ii) an employee who is absent from
active service on the Effective Date shall not
be offered employment by Intek unless and until
such inactive employee is capable of returning
to active service in the same capacity and
position that such employee occupied
immediately prior to his absence, provided such
return to active service occurs prior to the
second anniversary of the Effective Date.
Nothing herein shall obligate MIC to continue
the employment of any employee. Employees
receiving and accepting Intek's offer of
employment pursuant to the terms hereof shall
hereinafter be referred to as "Transferred
Employees." Intek's offer of employment to
such Transferred Employees shall provide for
the same base salary payable to such
Transferred Employee by MIC immediately prior
to such offer of employment by Intek, but on
such other terms and conditions of employment,
if any, as Intek may offer to the Transferred
Employee's in its sole discretion; PROVIDED,
HOWEVER, that Transferred Employees will be
offered a health and life insurance program
which shall not exclude coverage for conditions
existing prior to Closing (except to the extent
excluded prior to the Closing) and which, taken
as a whole, will be comparable to the health
and life insurance program now offered to such
Transferred Employees by MIC, provided that the
insurance company which currently provides MIC
with health and life insurance coverage is
willing to provide such coverage to Intek on
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and after the date of the Closing at a cost
comparable to that paid by MIC immediately
before the Closing. Intek shall grant all
Transferred Employees credit for purposes of
eligibility and vesting under Intek's employee
benefit plans, programs, agreements or
arrangements for such Transferred Employees'
years of service as employees of MIC to the
same extent a similarly situated Intek
employee's service with Intek is taken into
account for purposes of eligibility and vesting
under such employee benefit plans, programs,
agreements or arrangements.
(b) No provision of this Section 8.4 shall create
any right in any Transferred Employee or in his
or her beneficiaries.
(c) On and after the date of Closing, MIC shall not
be liable for any expense or liability that may
arise from employment with or termination of
any Transferred Employee by Intek, provided
that nothing in this Section 8.4(c) shall limit
MIC's indemnification obligations under Section
11.1.
8.5 OWNERSHIP AND PROPRIETARY RIGHTS. Intek agrees that
it will maintain all patent, copyright, trade secret
and other similar notices of the proprietary rights
of MIC or third parties in and on all copies of the
MIC Materials not purchased as Acquired Assets under
this Agreement. Ownership of all MIC Materials and
of all intellectual property rights of MIC not
purchased by Intek as Acquired Assets under this
Agreement is and shall remain in MIC. All
intellectual property rights purchased by Intek as
Acquired Assets under this Agreement shall vest with
Intek subject to MIC's rights under the U.S.
Trademarks License Agreement.
8.6 AGREEMENTS WITH RESPECT TO OTHER TRANSACTIONS. From
and after the execution and delivery of this
Agreement, Intek will not amend, modify, supplement,
waive any rights or remedies under or grant any
consent under the Securicor Agreement (including any
schedule and exhibit thereto), or agree to do any of
the foregoing, without the prior written consent of
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Simmonds (which consent shall not be unreasonably
withheld).
9. MUTUAL ADDITIONAL COVENANTS
9.1 EXPENSES. Except as otherwise provided in this
Agreement, each party shall bear its own legal,
accounting and other expenses incurred by it in
connection with this Agreement, and the other
agreements and transactions contemplated by this
Agreement.
9.2 PUBLIC ANNOUNCEMENT. The parties agree that no
party shall issue or cause publication of any press
release or other announcement, disclosure or public
communication with respect to this Agreement or the
transactions contemplated by this Agreement without
the consent of the others. Nothing in this
Agreement shall prohibit any party, after reasonable
efforts to consult with the others, from issuing or
causing publication of any press release,
announcement or other public communication to the
extent that such party reasonably believes that the
action is required by law in connection with
obtaining necessary approvals and consents and
complying with applicable law (e.g. any requirement
that a party hereto make any filings with the
Securities and Exchange Commission relating to this
Agreement and the transactions contemplated in this
Agreement).
9.3 COOPERATION. Neither MIC nor Intek shall
voluntarily undertake any course of action
inconsistent with satisfaction of the requirements
applicable to it under this Agreement. Intek, MIC
and Simmonds shall each promptly take all actions as
may be appropriate to enable them to perform their
obligations under this Agreement.
9.4 INTERIM OPERATIONS. During the period from the date
of this Agreement through the Option Exercise Date,
except as expressly provided in this Agreement, as
required by law, or as otherwise unanimously
approved in advance by a committee composed of Ed
Hough, Nicholas Wilson and John Simmonds (which
approval shall not be unreasonably withheld):
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(a) Intek shall operate, or cause MUSA to operate,
the U.S. LMR Distribution Business.
(b) Intek shall not permit or cause MUSA to
declare, set aside, pay or make any dividend or
other distribution or payment (whether in cash,
stock or property) with respect to, or purchase
or redeem, any shares of its capital stock.
(c) Intek shall cause MUSA to maintain or cause to
be maintained, or Intek, if it owns the U.S.
Trademarks, shall maintain or cause to be
maintained, the U.S. Trademarks in full force
and effect.
(d) Neither Intek nor MUSA shall amend or otherwise
agree to or take any action effectively
amending or terminating the Securicor Loan
Agreement or the Securicor Agreement.
(e) Neither Intek nor MUSA shall use the advances
under or other proceeds of the Securicor Loan
Agreement other than for the benefit of MUSA.
9.5 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Intek
and MIC shall, so long as all related fees are
reasonable or such actions are expressly approved by
a committee composed of Ed Hough, Nicholas Wilson
and John Simmonds (which approval shall not be
unreasonably withheld):
(a) prepare and file all necessary forms and
responses as shall be required to obtain
governmental approval under Hart-Scott-Rodino
for all of the transactions contemplated herein
and in the Securicor Agreement as promptly as
possible after the Closing, with filing fees
for such filings under Hart-Scott-Rodino to be
paid by INTEK;
(b) cooperate with one another in promptly
determining whether any other filings are
required to be made or consents, waivers,
approvals, permits or authorizations are
required to be obtained under any other
applicable federal, state or foreign law or
regulation or any Contracts and in promptly
making any such filings, furnishing information
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required in connection therewith and seeking in
a timely fashion to obtain any such consents,
waivers, approvals, permits or authorizations;
and
(c) deliver to the other parties of this Agreement
copies of all such reports and filings promptly
after they are filed. Intek shall be
responsible for all fees required to be paid in
connection with any such consents, approvals,
permits or authorizations.
9.6 PROXY STATEMENT. As soon as practicable after the
Closing, Intek shall prepare and file with the
Securities and Exchange Commission a proxy statement
and related solicitation materials relating to a
special meeting of the holders of the Intek's common
stock, $.01 par value (the "Intek Stockholders'
Meeting") concerning the Securicor Agreement and the
transactions contemplated thereby (such proxy
statement, as amended or supplemented from time to
time, being herein referred to as the "Proxy
Statement"), and shall use its best efforts to cause
the Proxy Statement to be mailed to its stockholders
at such time and in such manner as permits the Intek
Stockholders' Meeting to be held as promptly as
practicable. MIC and Simmonds shall each use its
best efforts to furnish all information as may be
reasonably requested by Intek and, in any case, as
required with respect to Intek by Regulation 14A
under the Exchange Act for inclusion in the Proxy
Statement. The information provided by Intek and
MIC, respectively, for use in the Proxy Statement
shall, on the date when the Proxy Statement is first
mailed to Intek's stockholders, and on the date of
the Intek Stockholders' Meeting, be true and correct
in all material respects and shall not omit to state
any material fact required to be stated therein or
necessary in order to make the statements contained
therein not misleading, and Intek, MIC and Simmonds
each agree promptly to correct any information
provided by it for use in the Proxy Statement which
shall have become false or misleading. Intek shall
duly call, give notice of, convene and hold the
Intek Stockholders' Meeting, for the purpose of
approving, among other matters, the transactions
contemplated under the Securicor Agreement. Intek,
through its Board of Directors, shall recommend to
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its stockholders approval of the foregoing. The
Proxy Statement will comply as to form in all
material respects with all applicable requirements
of the Exchange Act, and no amendment or supplement
to the Proxy Statement shall be made by Intek
without the prior written approval of MIC (which
approval shall not be unreasonably withheld), except
as otherwise required by applicable laws.
9.7 HITACHI SUPPLY AGREEMENT.
(a) After the Closing, neither MIC nor Simmonds
will take any action that would result in the
termination or terminability of the Hitachi
Supply Agreement prior to its scheduled
termination date, or take any action that would
result in MUSA's failure to be included within
the definition of "Midland Affiliate" as set
forth in the Hitachi Supply Agreement;
PROVIDED, HOWEVER, that nothing herein shall
obligate MIC to satisfy any minimum purchase
requirements under the Hitachi Supply
Agreement.
(b) After the Closing, Intek will not take, nor
will it permit MUSA to take, any action that
would result in the termination or
terminability of the Hitachi Supply Agreement
prior to its scheduled termination date, and
Intek will not take, nor will it permit MUSA to
take, any action that would result in MUSA's
failure to be included within the definition of
"Midland Affiliate" as set forth in the Hitachi
Supply Agreement; PROVIDED, HOWEVER, that MIC
and Simmonds acknowledge that Intek intends to
continue to purchase 220 MHZ products from
Securicor and that Intek shall have no
obligation to satisfy any minimum purchase
requirements under the Hitachi Supply
Agreement. Intek shall, however, use its best
efforts in a commercially reasonable manner to
market and sell MIC and Hitachi products at a
volume comparable to historical levels achieved
by MIC in its conduct of the U.S. LMR
Distribution Business.
9.8 REMOVAL OF RETAINED ASSETS. Within ten (10)
Business days after the Closing, MIC shall remove
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from the leased facility located at 1690 Topping
Avenue, Kansas City, Missouri 64120 (the
"Facility") all inventory and other assets which are
not Acquired Assets. Intek shall cause MUSA to
provide MIC such access to the Facility as MIC shall
reasonably require to remove such assets as promptly
as practicable.
10. OPTION TO ACQUIRE CAPITAL STOCK OF MUSA.
10.1 GRANT OF OPTION. Intek hereby grants to MIC an
option (the "Option") to acquire all of the
outstanding and issued capital stock of MUSA upon
satisfaction of the requirements and payment of the
amounts set forth in Section 10.2 of this Agreement
on or before the Option Exercise Date and provided,
in any event, that all of the Obligations under the
Securicor Loan Agreement shall have been repaid in
full on or before MIC's exercise of the Option.
Notwithstanding anything to the contrary in this
Agreement, MIC may assign the option to an Affiliate
of MIC. Upon the satisfaction of the requirements
set forth in Section 10.2 Intek shall, on the Option
Exercise Date, deliver to MIC, or to such Person as
MIC shall assign the Option, as the case may be, all
of the outstanding and issued capital stock of MUSA,
free and clear of all liens and encumbrances.
10.2 OPTION EXERCISE REQUIREMENTS. For MIC to exercise
the Option, MIC or an Affiliate of MIC, must satisfy
the following on or before the Option Exercise Date:
(a) All of the Obligations then existing under the
Securicor Loan Agreement shall have been paid
in full as of the Option Exercise Date.
(b) MIC or an MIC Affiliate shall assume all of the
outstanding liabilities of MUSA incurred in
connection with its conduct of the U.S. LMR
Distribution Business; and
(c) MIC shall pay to Intek such number of shares of
the Common Stock of Intek as shall be equal to
the Purchase Price of this Agreement and shall
deliver to Intek all certificates evidencing
such shares of Common Stock, with stock powers
duly executed in blank for transfer.
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10.3 RELEASE OF RIGHTS AND OBLIGATIONS. Except with
respect to any claim MIC may have against Intek for
a breach of Intek's obligations under Section 9.4(e)
of this Agreement (Intek's obligation not to, and
not to permit MUSA to, use any proceeds of the
Securicor Loan Agreement other than for the benefit
of MUSA), all representations, warranties and
covenants under this Agreement shall cease and
terminate immediately upon the transfer of the MUSA
shares to MIC in connection with MIC's exercise of
the Option.
10.4 DELIVERY OF MUSA CAPITAL STOCK. Upon MIC's or an
MIC Affiliate payment of the Exercise Price and the
payment in full to Securicor Communications Limited
by MIC or Intek, as the case may be, of all of the
Obligations then outstanding under the Securicor
Loan Agreement as provided in Section 10.2, Intek
shall deliver to MIC or such MIC Affiliate one or
more certificates evidencing all of the outstanding
capital stock of MUSA, free and clear of all liens
and encumbrances.
10.5 REPRESENTATIONS REGARDING MUSA CAPITAL STOCK. Intek
hereby represents and warrants to MIC that all of
the shares of capital stock of MUSA to be delivered
to MIC or its Affiliate upon exercise of the Option
will be duly authorized, validly issued, fully paid
and nonassessable and not subject to any preemptive
rights, and shall be free and clear of any liens,
encumbrances or restrictions as of the exercise of
the Option.
10.6 OPTION PERIOD. The Option shall be exercisable by
MIC or its assigns during the period commencing upon
Intek's written notice to MIC and Simmonds that the
Securicor Agreement has been terminated and
continuing through the Option Exercise Date.
11. INDEMNIFICATION
11.1 MIC'S AND SIMMONDS' INDEMNIFICATION OBLIGATIONS.
From and after the Closing, but subject to the
conditions and limitations of this Agreement or any
other MIC Document, MIC and Simmonds shall defend,
indemnify and save Intek and its directors,
officers, employees, Affiliates, agents, successors
and assigns harmless from and against any and all
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loss, cost, damage or expense (including attorneys'
fees), net of any tax benefits (collectively
"Damages") whatsoever resulting from or arising out
of (a) any breach or inaccuracy of any covenant,
representation or warranty or obligation of MIC
contained in this Agreement, (b) any liability or
obligation of MIC other than the Assumed
Liabilities, whether arising prior to, on or after
the Effective Date, (c) any claims by any employee
or former employee of MIC (whether or not a
Transferred Employee) arising out of the employment
or termination of employment of the employee on or
prior to the Closing Date or as a result of
transactions contemplated by this Agreement,
including any claim pursuant to the Worker
Adjustment and Retraining Notification Act, and (d)
any liability for brokerage or finder's fee or
commission claimed by any person based upon the
actions or alleged actions of MIC for or on account
of this Agreement or the transactions contemplated
hereby.
11.2 INTEK'S INDEMNIFICATION OBLIGATIONS. From and after
the Closing, but subject to the conditions and
limitations this Agreement, Intek shall defend,
indemnify and save MIC, Simmonds and their
respective directors, officers, employees,
Affiliates, agents, successors and assigns harmless
from and against any and all Damages whatsoever
resulting from or arising out of (a) any breach or
inaccuracy of any covenant, representation or
warranty of Intek contained in this Agreement or any
other Intek Document, (b) the conduct of the U.S.
LMR Distribution Business after the Closing, (c) the
Assumed Liabilities, and (d) any liability for
brokerage or finder's fee or commission claimed by
any person based upon the actions or alleged actions
of Intek for or on account of this Agreement or the
transactions contemplated hereby.
11.3 NOTICE AND OPPORTUNITY TO DEFEND.
(a) In the event that any action, suit, proceeding,
investigation, claim or demand is asserted
against or sought to be collected from an
indemnified party (a "Third Party Claim") for
which such indemnified party (each a
"Beneficiary") intends to assert a right of
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indemnity under Section 11.1 or 11.2, the
Beneficiary shall notify the other party (the
"Indemnitor") with reasonable promptness of
such Third Party Claim, specifying, to the
extent known, the nature, circumstances and
amount of the Third Party Claim (a "Third Party
Claim Notice"). The Indemnitor shall have 14
days from its receipt of a Third Party Claim
Notice to notify the Beneficiary whether the
Indemnitor disputes the Beneficiary's right of
indemnity with respect to such Third Party
Claim and if the Indemnitor does not dispute
such right, whether or not the Indemnitor
desires to defend the Beneficiary against such
Third Party Claim.
(b) If the Indemnitor notifies the Beneficiary
within the 14-day period that the Indemnitor
does not dispute the Beneficiary's right of
indemnity and the Indemnitor desires to defend
against such Third Party Claim, then the
Indemnitor shall have the right to assume and
control, at its sole cost and expense, the
defense of such Third Party Claim by
appropriate proceedings with counsel reasonably
acceptable to the Beneficiary. Beneficiary may
participate in, but not control, any such
defense or settlement, at its sole cost and
expense.
(c) If the Indemnitor disputes the Beneficiary's
right of indemnity with respect to a Third
Party Claim, or does not dispute such right of
indemnity but fails to promptly assume and
prosecute the defense of such Third Party
Claim, then the Beneficiary shall be entitled
to assume and control the defense of such Third
Party Claim, and the Beneficiary shall be
entitled to indemnification for the cost of
such defense.
(d) The party responsible for the defense of any
Third Party Claim (the "Responsible Party")
shall, to the extent reasonably requested by
the other party, keep such other party informed
as to the status of any Third Party Claim for
which such party is not the Responsible Party,
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including, without limitation, all settlement
negotiations and offers.
(e) Neither MIC or Simmonds, on the one hand, nor
Intek, on the other hand, shall enter into any
settlement of any Third Party Claim without the
prior written consent of the other party. The
Responsible Party shall promptly notify the
other party of each settlement offer (including
whether or not the Responsible Party is willing
to accept the proposed settlement with respect
a Third Party Claim). Such other party agrees
to notify the Responsible Party with reasonable
promptness whether or not such party is willing
to accept the proposed settlement offer. If
the party other than the Responsible Party
fails to consent to any settlement offer of a
Third Party Claim that only involves the
payment of a sum of money and has no other
consequence, such other party may continue to
contest or defend such Third Party Claim and,
in such event, the maximum total indemnity with
respect to such Third Party Claim (including
the reasonable costs and expenses of contesting
or defending such Third Party Claim incurred
after the party other than the Responsible
Party fails to consent to such settlement
offer) shall not exceed the amount of such
settlement offer.
(f) In the event that a Beneficiary has a claim for
indemnity that does not involve a Third Party
Claim (a "Direct Claim"), Intek, MIC or
Simmonds, as the case may be, (a "Claimant")
shall notify the Indemnitor of such Direct
Claim with reasonable promptness, specifying,
to the extent known, the nature, circumstances
and amount of such Direct Claim (a "Direct
Claim Notice"). If the Indemnitor notifies the
Claimant that it disputes the claim for
indemnity with respect to a Direct Claim set
forth in a Direct Claim Notice, the resolution
of such Direct Claim shall be determined in
accordance with Section 14.13.
(g) All claims for indemnification under this
Article 10 must be asserted by Intek or MIC or
Simmonds, as the case may be, prior to twelve
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(12) months after the Closing or with respect
to any covenant, twelve (12) months after the
later of the Closing or the breach of such
covenant.
(h) For purposes of this Agreement, the amount of
damages of Intek or MIC or Simmonds with
respect to Third Party Claims and Direct Claims
shall be reduced to the extent of any
applicable insurance proceeds or other third
party recovery received by it. Intek or MIC or
Simmonds, as applicable, shall timely file
claims for insurance proceeds and/or defense
and pursue all other third party reimbursement
rights with respect to any Damages sustained by
them.
(i) Notwithstanding Sections 11.1 and 11.2 of this
Agreement, neither Intek nor MIC shall be
entitled to indemnification under this Article
11 with respect to any breach of any
representation or warranty contained in this
Agreement or any other MIC Document or Intek
Document unless and until its aggregate claims
exceeds Fifty Thousand Dollars ($50,000)
calculated on a cumulative basis and not on a
per claim basis. Once indemnifiable claims for
breaches of representations and warranties by
MIC or Intek exceed $50,000 in the aggregate,
such party shall be entitled to payment for all
amounts indemnifiable under this Section 11 for
such claims to the extent they exceed $50,000.
(j) Notwithstanding anything to the contrary
contained in this Agreement:
(1) If the Securicor Transaction does not
Close and MIC does not receive the upward
price adjustment set forth in Section
3.1(b)(2)(A) of this Agreement, then (A)
the aggregate liability of MIC and
Simmonds under Section 11.1(a) shall not
exceed $30,000, and (B) the aggregate
liability of Intek under Section 11.2(a),
other than for Damages incurred by MIC or
Simmonds as a direct result of (x) Intek's
breach of its covenants set forth in
Sections 3.2, 8.1 or 10 of this Agreement
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(y) or any breach or inaccuracy of Intek's
representations and warranties contained
in Section 6.2(c), shall not exceed
$30,000.
(2) If the Securicor Transaction does Close
and MIC does receive the upward price
adjustment set forth in Section
3.1(b)(2)(A) of this Agreement, then (A)
the aggregate liability of MIC and
Simmonds under Section 11.1(a), other than
for Damages incurred by Intek as a direct
result of MIC's breach of its
representations and warranties set forth
in Section 6.1(f) of this Agreement and/or
its covenants set forth in Sections 2.2
and 13 of this Agreement, shall not exceed
$600,000 and (B) the aggregate liability
of Intek under Section 11.2(a), other than
for Damages incurred by MIC or Simmonds as
a direct result of Intek's breach of its
covenants set forth in Sections 3.2 and
8.1 of this Agreement, shall not exceed
$600,000.
11.4 PAYMENT OF DAMAGES. Claims to an indemnified party
under this Section 11 shall be paid in shares of
Intek's Common Stock, and the number of shares of
Intek's Common Stock to be transferred in
satisfaction of such Claims and the terms of such
transfer shall be determined by dividing the amount
of such Claims by the Applicable Average Share
Value. For purposes hereof, the "Applicable Average
Share Value" shall be equal to the average of the
Daily Closing Prices for each of the ten Business
Days immediately preceding the date on which the
amount of such Claims are determined.
11.5 EXCLUSIVE REMEDY. From and after the Closing, the
indemnification rights set forth in this Section 11
and the right to specific performance under Section
14.12 of this Agreement shall be the sole and
exclusive remedy for claims or Damages resulting
from any misrepresentation, breach or inaccuracy of
any representation, warranty, covenant or agreement
of Intek or MIC contained in this Agreement, and
none of MIC or Intek shall assert any such claim
except as provided in this Section 11; PROVIDED,
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HOWEVER, that the foregoing shall not apply to any
claims or Damages based on fraud or a breach by any
party hereto of its obligations under Section 13 of
this Agreement.
11.6 SUBORDINATION TO SECURICOR. MIC's rights to
indemnification hereunder shall be subordinate to
Securicor's rights under the Securicor Loan
Agreement. MIC shall take no action to interfere
with Securicor's ability to exercise its rights
under the Securicor Loan Agreement with respect to
the Collateral.
12. ASSIGNMENT AND SUBLICENSE. Neither party hereto may
transfer its rights or obligations hereunder, except that
MIC may assign in part or in whole its rights and
obligations hereunder to SCL, Inc., a Delaware
corporation and the sole shareholder of MIC ("SCL, Inc.")
or to Simmonds, and SCL, Inc. or Simmonds in turn, may
assign in part or in whole its rights and obligations
hereunder to any Affiliate of SCL, Inc. or Simmonds,
MIC, SCL, Inc., Simmonds or any Affiliate of MIC or SCL,
Inc. or Simmonds may appoint distributors and
sublicensees in accordance with the U.S. Trademarks
License Agreement, and Intek may assign its rights and
obligations hereunder to MUSA pursuant to the terms and
the Intek Assignment and Assumption Agreement; PROVIDED,
HOWEVER, that no such assignment by Intek, MIC, SCL, Inc.
or Simmonds shall relieve the assignor thereof of any of
its obligations under this Agreement without the prior
written consent of MIC and Simmonds. Subject to the
foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the legal representatives,
successors and assigns of the parties hereto. No
assignment of this Agreement, nor any sale, assignment or
transfer pursuant to this Section 12, shall release the
assignor from any of its duties, obligations or
liabilities under this Agreement unless the other party
shall consent to such release in writing. Each of MIC
and Simmonds acknowledges the Assignment and Assumption
Agreement and consent to such assignment pursuant to the
terms and conditions of the letter agreement among MIC,
Simmonds, Intek and MUSA dated September 20, 1996.
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13. NON-COMPETE.
13.1 MIC/SIMMONDS NON-COMPETE. Each of Simmonds and MIC
agrees that, for a period of three (3) years
following the Closing, neither MIC, Simmonds, nor
their respective subsidiaries will sell, distribute
or otherwise transfer LMR Products in the U.S.,
integrate LMR products from any source into LMR
systems within the U.S., or solicit or encourage any
dealer of LMR Products to modify or terminate its
arrangements with Intek regarding the distribution
of any LMR Products; PROVIDED, HOWEVER, that this
covenant shall not apply (a) with respect to the
performance by MIC or Simmonds or their respective
subsidiaries of their obligations under any
agreement which is not included in the Acquired
Assets and which is in existence on the date hereof,
as set forth on Schedule 13.1 to this Agreement, and
(b) to the extent that any law, regulation or order
of a Governmental Authority would be violated
thereby.
13.2 INTEK NON-COMPETE. Intek agrees that Intek will
not, and Intek will not permit MUSA or any other
subsidiary of Affiliate of Intek to, directly or
indirectly sell, distribute or otherwise transfer,
or to use the MIC name to sell, distribute or
transfer:
(a) any products bearing the U.S. Trademarks to
end-users outside of the U.S.; or
(b) Midland Consumer Products bearing the U.S.
Trademarks in the U.S.
14. MISCELLANEOUS
14.1 AMENDMENTS. This Agreement may be amended only by a
writing executed by the parties.
14.2 ENTIRE AGREEMENT. This Agreement amends, supersedes
and replaces in its entirety the Other Agreement.
This Agreement and the other agreements expressly
provided for in this Agreement set forth the entire
understanding of the parties to this Agreement and
supersede all prior contracts, agreements,
arrangements, communications, discussions,
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representations and warranties, whether oral or
written, between the parties.
14.3 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the
State of New York without giving effect to its
principles of conflict of laws.
14.4 NOTICES. Any notice, request or other communication
required or permitted under this Agreement shall be
in writing and shall be deemed to have been duly
given when received if personally delivered or
after being sent by telecopy, with confirmed answer
back, or within 1 business day of being sent by
established overnight courier, to the parties at
their respective addresses set forth below:
To Simmonds: c/o Simmonds Capital Limited
5255 Yonge Street, Suite 1050
Willowdale, Ontario
Canada, M2N 6P4
Attn: Mr. David O'Kell
With a copy to: Jones, Day, Reavis & Pogue
901 Lakeside Avenue
North Point
Cleveland, Ohio 44114
Attn: Mary Lynn Durham, Esq.
Fax: (216) 579-0212
To MIC: Midland International Corporation
c/o Simmonds Capital Limited
5255 Yonge Street, Suite 1050
Willowdale, Ontario
Canada, M2N 6P4
Attn: Mr. David O'Kell
With a copy to: Jones, Day, Reavis & Pogue
901 Lakeside Avenue
North Point
Cleveland, Ohio 44114
Attn: Mary Lynn Durham, Esq.
Fax: (216) 579-0212
To Intek: Intek Diversified Corporation
970 West 190th Street, Suite 720
Torrance, California 90502
Attn: Mr. Nicholas Wilson
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With a copy to: Manatt, Phelps & Phillips PLL
11355 West Olympic Boulevard
Los Angeles, CA 90064
Attn: Nancy H. Wojtas, Esq.
Any party by written notice to the other may change
the address or the persons to whom notices or
copies shall be directed.
14.5 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be
deemed to be an original, and all of which together
will constitute one and the same instrument.
14.6 BULK SALES Intek waives compliance by MIC with the
provisions of the so-called "bulk sales" laws of any
state.
14.7 WAIVERS. Any waiver by any party of any violation
of, breach of or default under any provision of this
Agreement or any other agreements provided for in
this Agreement, by the other party shall not be
construed as, or constitute, a continuing waiver of
such provision, or waiver of any other violation of,
breach of or default under any other provision of
this Agreement or any other agreements provided for
in this Agreement.
14.8 THIRD PARTIES. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to
confer upon or give any person or entity other than
Intek, MIC, Simmonds and their Affiliates any rights
or remedies under or by reason of this Agreement.
14.9 SCHEDULES AND EXHIBITS. The Intek Disclosure
Schedules, the MIC Disclosure Schedules and the
other Schedules and Exhibits attached to this
Agreement are incorporated in this Agreement and
shall be part of this Agreement for all purposes as
modified by the Intek Officer's Certificate or the
MIC/Simmonds Officers' Certificates, as the case may
be.
14.10 HEADINGS. The headings in this Agreement are
solely for convenience of reference and shall not
be given any effect in the construction or
interpretation of this Agreement.
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14.11 INDEPENDENT CONTRACTOR. Each party is and shall
remain an independent contractor. Nothing in this
Agreement shall be deemed to establish a
partnership, joint venture, or agency relationship
between the parties. Neither party may obligate
or bind the other party in any manner to a third
party.
14.12 SPECIFIC PERFORMANCE. Intek and MIC acknowledge
and agree that any breach by the other party of
the foregoing provisions, including, without
limitation, any covenant of each party, may cause
the injured party irreparable injury for which
there is no adequate remedy of law. Therefore,
Intek and MIC expressly agree that MIC or Intek
shall be entitled, as the case may be, in addition
to any remedy available, injunctive or other
equitable relief to require specific performance
or prevent a breach of the foregoing provisions.
14.13 ARBITRATION. Any controversy or claim arising out
of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules
of the American Arbitration Association, and
judgment upon the award rendered by the
arbitrator(s) may be entered in any court having
jurisdiction thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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{Signature Page for Amended and Restated Sale of Assets and
Trademark Agreement dated as of September 19, 1996}
IN WITNESS WHEREOF, the parties have caused their duly
authorized representatives to execute this Agreement as of the
date first above written.
INTEK DIVERSIFIED CORPORATION
By: /s/ David Neibert
Name: David Neibert
Title: Executive Vice President
SIMMONDS CAPITAL LIMITED
By: /s/ David O'Kell
Name: David O'Kell
Title: Executive Vice President
MIDLAND INTERNATIONAL CORPORATION
By: /s/ David O'Kell
Name: David O'Kell
Title: Executive Vice President
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TABLE OF CONTENTS
PAGE
1. DEFINITIONS.........................................................2
1.1 "Acquired Assets"....................................2
1.2 "Additional Purchase Shares".........................2
1.3 "Affiliate"..........................................2
1.4 "Assumed Liabilities"................................2
1.5 "Bankruptcy Exception"...............................2
1.6 "Beneficiary"........................................2
1.7 "Business Day".......................................2
1.8 "Claimant"...........................................3
1.9 "Closing"............................................3
1.10 "Code"...............................................3
1.11 "Collateral".........................................3
1.12 "Common Stock".......................................3
1.13 "Computer Services Agreement"........................3
1.14 "Contracts"..........................................3
1.15 "Damages"............................................3
1.16 "Direct Claim".......................................3
1.17 "Direct Claim Notice"................................3
1.18 "Dollar".............................................3
1.19 "Effective Date".....................................3
1.20 "ERISA"..............................................3
1.21 "Escrow Agent".......................................3
1.22 "Escrow Agreement"...................................4
1.23 "Exchange Act".......................................4
1.24 "FCC"................................................4
1.25 "Governmental Entity"................................4
1.26 "Hart-Scott-Rodino Act"..............................4
1.27 "Indemnitor".........................................4
1.28 "Intek Assignment and Assumption Agreement"..........4
1.29 "Intek Disclosure Schedules".........................4
1.30 "Intek Documents"....................................4
1.31 "Intek Representative"...............................4
1.32 "Intek Officer's Certificate"........................4
1.33 "Intek Stockholders' Meeting"........................4
1.34 "Intek Subsidiaries".................................4
1.35 "IRS"................................................4
1.36 "Legal Proceeding"...................................5
1.37 "LMR Products".......................................5
1.38 "Material Adverse Change" or "Material Adverse
Effect"..............................................5
1.39 "MIC Disclosure Schedules"...........................5
1.40 "MIC Documents"......................................5
1.41 "MIC Materials"......................................5
1.42 "MIC Representative".................................5
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1.43 "MIC/Simmonds Officers' Certificates"................5
1.44 "Midland Consumer Products"..........................6
1.45 "MUSA"...............................................6
1.46 "Net Operating Losses"...............................6
1.47 "Obligations"........................................7
1.48 "Option".............................................7
1.49 "Option Exercise Date"...............................7
1.50 "Original Agreement".................................7
1.51 "Performance Guarantees".............................7
1.52 "Person".............................................7
1.53 "Prepaid Expenses"...................................7
1.54 "Product Purchasing Services Agreement"..............7
1.55 "Proxy Statement"....................................7
1.56 "Registration Rights Agreement"......................7
1.57 "Responsible Party"..................................8
1.58 "Securicor Agreement"................................8
1.59 "Securicor Loan Agreement"...........................8
1.60 "Securicor Transaction Termination Date".............8
1.61 "Securicor Transaction"..............................8
1.62 "Securities Act".....................................8
1.63 "SMR"................................................8
1.64 "Subsidiary".........................................8
1.65 "Taxes"..............................................8
1.66 "Third Party Claim"..................................9
1.67 "Third Party Claim Notice"...........................9
1.68 "To the Knowledge of the Executive Officers of
Intek"...............................................9
1.69 "To the Knowledge of the Executive Officers of
MIC".................................................9
1.70 "Transferred Employees"..............................9
1.71 "U.S."...............................................9
1.72 "U.S. LMR Distribution Business".....................9
1.73 "U.S. Trademarks"....................................9
1.74 "U.S. Trademarks License"............................9
1.75 "U.S. Trademarks License Agreement"..................10
2. SALE OF ASSETS......................................................10
2.1 SALE OF ASSETS AND U.S. TRADEMARKS...................10
2.2 ASSIGNABILITY AND CONSENTS...........................12
2.3 ASSUMED LIABILITIES..................................13
3. CONSIDERATION.......................................................17
3.1 PURCHASE PRICE.......................................17
3.2 TRANSFER TAXES.......................................19
3.3 REIMBURSEMENT OF OPERATING EXPENSES PAID AFTER THE
EFFECTIVE DATE.......................................20
3.4 COLLECTIONS OF ACCOUNTS RECEIVABLE...................21
3.5 HITACHI CREDIT ALLOCATION............................24
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4. CLOSING.............................................................24
4.1 CLOSING..............................................24
4.2 DELIVERIES AT CLOSING BY SIMMONDS AND MIC............24
4.3 DELIVERIES AT CLOSING BY INTEK.......................25
5. CONDITIONS PRECEDENT................................................26
5.1 CONDITIONS PRECEDENT TO INTEK'S OBLIGATIONS..........26
(a) MIC/SIMMONDS OFFICERS' CERTIFICATES...........26
(b) NO MATERIAL ADVERSE CHANGE....................27
(c) BOARD RATIFICATION............................27
(d) DELIVERIES....................................28
(e) CONSENTS, PERMITS AND GOVERNMENTAL
APPROVALS.....................................28
5.2 CONDITIONS PRECEDENT TO MIC'S OBLIGATIONS............28
(a) SECURICOR LOAN AGREEMENT......................28
(b) INTEK OFFICER'S CERTIFICATE...................28
(c) NO MATERIAL ADVERSE CHANGE....................29
(d) CAPITALIZATION................................29
(e) DELIVERIES....................................29
(f) CONSENTS, PERMITS AND GOVERNMENTAL
APPROVALS.....................................29
(g) INSTRUMENTS OF ASSUMPTION.....................30
6. REPRESENTATIONS AND WARRANTIES......................................30
6.1 REPRESENTATIONS AND WARRANTIES OF MIC AND
SIMMONDS.............................................30
(a) ORGANIZATION, STANDING, POWER AND
AUTHORITY.....................................30
(b) BUSINESS IN ORDINARY COURSE...................31
(c) CONTRACTS.....................................32
(d) CONSENTS AND APPROVALS; NO VIOLATION..........33
(e) ACQUIRED ASSETS...............................34
(f) INTANGIBLE PROPERTY...........................35
(g) BROKERS, FINDERS AND AGENTS...................35
(h) EMPLOYEE BENEFIT PLANS........................36
(i) LITIGATION, PRODUCT LIABILITY.................37
(j) SUPPLIERS AND CUSTOMERS.......................37
(k) INFORMATION IN DISCLOSURE DOCUMENTS...........38
(l) FINANCIAL STATEMENTS..........................38
(m) REAL PROPERTY.................................39
(n) TANGIBLE PERSONAL PROPERTY....................40
(o) COMPLIANCE WITH LAWS..........................41
(p) FCC LICENSES..................................41
(q) DISCLAIMERS OF MIC............................42
6.2 REPRESENTATIONS AND WARRANTIES OF INTEK..............42
(a) ORGANIZATION, STANDING, POWER AND
AUTHORITY.....................................42
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(b) CAPITALIZATION................................43
(c) SHARES ISSUED TO MIC..........................44
(d) SUBSIDIARIES..................................45
(e) BUSINESS IN ORDINARY COURSE...................46
(f) CONSENTS AND APPROVALS; NO VIOLATION..........46
(g) BROKERS, FINDERS AND AGENTS...................47
(h) EMPLOYEE RELATIONS............................47
(i) EMPLOYEE PLANS................................48
(j) MATERIAL CONTRACTS............................49
(k) INTEK CORPORATE ACTION........................50
(l) INFORMATION IN DISCLOSURE DOCUMENTS...........50
(m) FINANCIAL STATEMENTS..........................51
(n) ENVIRONMENTAL MATTERS.........................51
(o) LABOR RELATIONS...............................55
(p) REAL ESTATE...................................55
(q) LITIGATION....................................56
(r) LICENSES......................................56
(s) UNITS IN SERVICE..............................58
(t) CONTRACTS, LEASES AND SITE LICENSES...........58
(u) RELATED PARTY TRANSACTIONS....................59
(v) COMPLIANCE WITH LAWS..........................59
7. COVENANTS OF MIC....................................................59
7.1 MIC'S REPRESENTATION LETTER..........................59
7.2 SATISFACTION OF MIC OBLIGATIONS POST-CLOSING.........62
(a) RETURN OF ACQUIRED ASSETS.....................62
(b) RETURN OF MUSA PROPERTY.......................62
8. COVENANTS OF INTEK..................................................62
8.1 CONFIDENTIALITY OF INFORMATION.......................62
8.2 REPLACEMENT OF PERFORMANCE BONDS.....................64
8.3 RIGHTS OF INSPECTION.................................64
8.4 EMPLOYEE MATTERS.....................................65
8.5 OWNERSHIP AND PROPRIETARY RIGHTS.....................66
8.6 AGREEMENTS WITH RESPECT TO OTHER TRANSACTIONS........66
9. MUTUAL ADDITIONAL COVENANTS.........................................67
9.1 EXPENSES.............................................67
9.2 PUBLIC ANNOUNCEMENT..................................67
9.3 COOPERATION..........................................67
9.4 INTERIM OPERATIONS...................................67
9.5 CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS...........68
9.6 PROXY STATEMENT......................................69
9.7 HITACHI SUPPLY AGREEMENT.............................70
9.8 REMOVAL OF RETAINED ASSETS...........................70
10. OPTION TO ACQUIRE CAPITAL STOCK OF MUSA.........................71
10.1 GRANT OF OPTION......................................71
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<PAGE>
10.2 OPTION EXERCISE REQUIREMENTS.........................71
10.3 RELEASE OF RIGHTS AND OBLIGATIONS....................72
10.4 DELIVERY OF MUSA CAPITAL STOCK.......................72
10.5 REPRESENTATIONS REGARDING MUSA CAPITAL STOCK.........72
10.6 OPTION PERIOD........................................72
11. INDEMNIFICATION.................................................72
11.1 MIC'S AND SIMMONDS' INDEMNIFICATION
OBLIGATIONS..........................................72
11.2 INTEK'S INDEMNIFICATION OBLIGATIONS..................73
11.3 NOTICE AND OPPORTUNITY TO DEFEND.....................73
11.4 PAYMENT OF DAMAGES...................................77
11.5 EXCLUSIVE REMEDY.....................................77
11.6 SUBORDINATION TO SECURICOR...........................78
12. ASSIGNMENT AND SUBLICENSE.......................................78
13. NON-COMPETE.....................................................79
13.1 MIC/SIMMONDS NON-COMPETE.............................79
13.2 INTEK NON-COMPETE....................................79
14. MISCELLANEOUS...................................................79
14.1 AMENDMENTS...........................................79
14.2 ENTIRE AGREEMENT.....................................79
14.3 GOVERNING LAW........................................80
14.4 NOTICES..............................................80
14.5 COUNTERPARTS.........................................81
14.6 BULK SALES...........................................81
14.7 WAIVERS..............................................81
14.8 THIRD PARTIES........................................81
14.9 SCHEDULES AND EXHIBITS...............................81
14.10 HEADINGS.............................................81
14.11 INDEPENDENT CONTRACTOR...............................82
14.12 SPECIFIC PERFORMANCE.................................82
14.13 ARBITRATION..........................................82
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SCHEDULES AND EXHIBITS
EXHIBITS
Exhibit A Computer Services Agreement
Exhibit B Escrow Agreement
Exhibit C Intek Assignment and Assumption Agreement
Exhibit D Product Purchase Services Agreements
Exhibit E Registration Rights Agreement
Exhibit F U.S. Trademarks License Agreement
Exhibit G Assignment of United States Trademark
Rights
Exhibit H Form of Opinion of MIC's Counsel
Exhibit I Form of Opinion of Intek's Counsel
SCHEDULES
Schedule 1.68 Executive Officers of Intek
Schedule 1.69 Executive Officers of MIC
Schedule 1.73 U.S. Trademarks
Schedule 2.1(c) Contracts
Schedule 2.1(e) Other Assets and Inventory
Schedule 2.1(g) Real Property Leases
Schedule 2.1(j) Prepaid Expenses
Schedule 2.3(a)(3) Accrued Employee Liabilities as of the
Effective Date
Schedule 2.3(a)(8) Intek Purchase Orders
Schedule 2.3(a)(10) LMR Dealer Co-op Totals
Schedule 3.3 Reimbursement Schedule
Schedule 8.2 Performance Bonds / Letters of Credit /
Guaranties
Schedule 8.4(a) Transferred Employees
Schedule 13.1 MIC Retained Agreements
MIC DISCLOSURE SCHEDULES
Schedule 6.1(a) MIC - Organization and Standing; Power
and Authority
Schedule 6.1(b) MIC - Exceptions to Business in Ordinary
Course
Schedule 6.1(c) MIC - Compliance with Contracts
Schedule 6.1(d) MIC - Consents and Approvals; No Violation
Schedule 6.1(e) MIC - Exceptions to Title
Schedule 6.1(f) MIC - Intellectual Property Matters
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<PAGE>
Schedule 6.1(h)(3) MIC - Compliance with Employee Benefits
Plans
Schedule 6.1(i) MIC - Legal Proceedings
Schedule 6.1(j) MIC - Suppliers and Customers
Schedule 6.1(n) MIC - Personal Property Leases
Schedule 6.1(p) MIC - FCC Licenses
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<PAGE>
INTEK DISCLOSURE SCHEDULES
Schedule 6.2(a) Intek - Organization and Standing; Power
and Authority
Schedule 6.2(b) Intek - Options, Warrants
Schedule 6.2(d) Intek - Subsidiaries
Schedule 6.2(e) Intek - Exceptions to Business in
Ordinary Course
Schedule 6.2(f) Intek - Consents, Approvals; No
Violations
Schedule 6.2(h) Intek - Employee Relations
Schedule 6.2(i) Intek - Employee Plans
Schedule 6.2(j) Intek - Material Contracts
Schedule 6.2(n) Intek - Environmental Matters
Schedule 6.2(o) Intek - Labor Relations
Schedule 6.2(p) Intek - Real Property Matters
Schedule 6.2(q) Intek - Legal Proceedings
Schedule 6.2(r) Intek - FCC Licenses
Schedule 6.2(s) Intek - Units In Service
Schedule 6.2(t) Intek - Contracts, Leases and Site
Licenses
Schedule 6.2(u) Intek - Related Party Transactions
Schedule 6.2(v) Intek - Compliance with Laws
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ESCROW AGREEMENT
This ESCROW AGREEMENT, dated as of September 19, 1996
(the "Closing Date"), among INTEK DIVERSIFIED CORPORATION, a
Delaware corporation ("Intek"), MIDLAND INTERNATIONAL
CORPORATION, a Delaware corporation ("Midland"), and AMERICAN
STOCK TRANSFER & TRUST COMPANY, a New York corporation, as
escrow agent ("Escrow Agent"). The Escrow Agent is the
transfer agent for issuance of Common Stock. This Escrow
Agreement shall also constitute written instruction by Intek
to Escrow Agent as Intek's transfer agent.
This is the Escrow Agreement referred to in Section
3.1(a)(2) of the Amended and Restated Sale of Assets and
Trademark Agreement dated as of the date hereof (the "Amended
Assets and Trademark Agreement") among Intek, Midland and
Simmonds Capital Limited, an Ontario corporation which
indirectly owns all of the capital stock of Midland.
Pursuant to the terms of a certain Stock Purchase
Agreement dated as of June 18, 1996, as amended by the
Amendment No. 1 to Stock Purchase Agreement dated as of the
date hereof, between Intek and Securicor Communications
Limited, a corporation formed under the laws of England and
Wales ("Securicor"), Intek agreed to acquire all of the
outstanding capital stock, other than certain shares of
preferred stock, of Securicor Radiocoms Limited, a corporation
formed under the laws of England and Wales and a wholly owned
subsidiary of Securicor, in exchange for 25,000,000 shares of
Common Stock (the "Securicor Transaction"). It is currently
contemplated that the Securicor Transaction will close in the
fourth quarter of 1996. Intek, Simmonds and Midland
acknowledge that if the Securicor Transaction closes, Intek
will be able to obtain additional efficiencies and synergies
in the operations of the combined businesses being acquired by
Intek, and further that the early consummation of the
transaction among Intek, Midland and Simmonds will be a
material benefit to Intek, and that, therefore, if the
Securicor Transaction does close the purchase price of the
U.S. LMR Distribution Business (the "Purchase Price") should
be increased by an amount of up to 2,350,000 shares of Common
Stock, subject to certain downward adjustment to reflect Net
Operating Losses (as defined in the Amended Assets and
Trademark Agreement) incurred by Midland USA, a Delaware
corporation and wholly owned subsidiary of Intek ("MUSA"), in
its conduct of the U.S. LMR Distribution Business.
Pursuant to the terms of the Amended Assets and Trademark
Agreement, Midland agreed to sell to Intek, or to otherwise
provide Intek the benefit of, certain Acquired Assets (as
defined in the Amended Assets and Trademark Agreement)
including that certain Agreement (the "Hitachi Supply
Agreement") dated May 12, 1994, between Midland and Hitachi
Denshi, Ltd., a Japanese corporation ("Hitachi"), whereby
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Hitachi agreed to manufacture and sell to Midland certain
mobile radios ("Hitachi Products") and granted Midland an
exclusive right to sell Hitachi Products in a certain
territory, as such Hitachi Supply Agreement related to the
sale of Hitachi Products in the United States and its
territories and possessions. The terms of the Hitachi Supply
Agreement provide, among other things, that Hitachi may
terminate the Hitachi Supply Agreement if Midland transfers
"an important part of [Midland's] . . . stock, assets or
business to a third party . . . ." Pursuant to the terms of
the Amended Assets and Trademark Agreement, if the Securicor
Transaction is consummated but the Hitachi Supply Agreement is
terminated under certain circumstances prior to May 31, 1997,
the Purchase Price shall be subject to a reduction of up to
500,000 shares of Common Stock.
The parties, intending to be legally bound, hereby agree
as follows:
1. DEFINED TERMS.
(a) Defined terms used in the Amended Assets and
Trademark Agreement and not expressly defined herein shall
have the meanings set forth in the Amended Assets and
Trademark Agreement.
(b) "Certified Court Order" shall mean a final non-
appealable order of a court of competent jurisdiction
accompanied by a legal opinion of counsel for the presenting
party, satisfactory to the Escrow Agent, to the effect that
such court order is final and non-appealable. Escrow Agent
shall upon receipt and without further investigation, act upon
and comply with the terms of any Certified Court Order.
2. ESTABLISHMENT OF ESCROW.
(a) Intek hereby irrevocably instructs the Escrow
Agent as Intek's transfer agent to issue to and deposit with
Escrow Agent stock certificate(s) representing 2,350,000
shares of the common stock, par value $.01 per share, of Intek
(the "Initial Common Stock") pursuant to Section 3.1(a)(2) of
the Amended Assets and Trademark Agreement (as increased from
time to time by any and all stock splits, dividends and other
distributions paid in respect of the Escrow Fund (as defined
herein), including future stock dividends, and as reduced from
time to time by any disbursements, or losses on investments,
the "Common Stock") (the "Escrow Fund"). Such stock
certificates are issued in the name of Escrow Agent and are
accompanied by duly executed assignments, with signature(s)
guaranteed, as shall be necessary to enable the Escrow Agent
to deliver the Escrow Fund in whole or in part to Midland as
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<PAGE>
provided in this Escrow Agreement. Escrow Agent acknowledges
receipt thereof.
(b) Midland hereby agrees to deposit with Escrow
Agent such other duly executed documents, as shall be
necessary to enable Escrow Agent to return the Escrow Fund in
whole or in part to Intek as provided in this Escrow
Agreement.
(c) Escrow Agent hereby agrees to act as escrow
agent and to hold, safeguard, invest and disburse the Escrow
Fund pursuant to the terms and conditions hereof.
3. TITLE TO ESCROW FUND.
(a) Until the earlier of the date of the occurrence
of a Price Adjustment Event (as defined in Section 5(a)) or
the disbursement to Midland of all or part of the Escrow Fund
as provided herein, Intek shall hold title thereto and shall
retain beneficial ownership and voting control of the Escrow
Fund and neither Midland nor its assignees shall have the
right to:
(i) sell, transfer, assign, mortgage, pledge,
subject to any lien, charge or
encumbrance, hypothecate or otherwise
transfer any right, title or interest, or
(ii) exercise any voting or other consensual
rights with respect to the Escrow Fund.
Prior to the occurrence of a Price Adjustment Event, Escrow
Agent shall not vote the shares of Common Stock contained in
the Escrow Fund except as expressly instructed by Intek;
PROVIDED, HOWEVER, that with respect to the vote of Intek's
Stockholders necessary to amend Intek's Certificate of
Incorporation and approve the Stock Purchase Agreement and the
transactions contemplated thereby as necessary to consummate
the Securicor Transaction (the "Proposed Transactions"),
Escrow Agent shall vote the shares of Common Stock contained
in the Escrow Fund, and Intek shall conduct the count of the
vote of stockholders in a two-tier voting process, as follows:
(x) Intek shall first count the vote of the
Common Stock held and actually voted at
the Stockholders' Meeting by the
stockholders of Intek who are not parties
to the Voting Agreement (the "Independent
Stockholders"); and
(y) Intek will then notify the Escrow Agent of
the results of such votes by the
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<PAGE>
Independent Stockholders for, or against,
such Proposed Transactions. The Escrow
Agent will cast the votes of the Common
Stock in the Escrow Fund for and against
the Proposed Transactions in proportion to
the votes of such Independent
Stockholders. For illustration purposes
only: Should the Independent Stockholders
vote 55% in favor of and 45% against the
Proposed Transactions, the Escrow Agent
will cast 55% of the votes of the Escrow
Fund in favor of and 45% of the votes of
the Escrow Fund against the Proposed
Transactions. Absent such notification,
Escrow Agent will not vote the Escrow
Fund.
(b) Upon the occurrence of a Price Adjustment
Event, Intek shall assign and transfer to Midland, and Midland
shall be vested with, title in, and voting control of, the
Escrow Fund, free and clear of all liens and encumbrances,
other than those that arise through Midland, and Midland will
thereafter have:
(i) the right to receive and retain any and
all dividends and other nonstock
distributions paid in respect of the
Escrow Fund in the name of and for the
benefit of Midland or its assigns, and
(ii) the exclusive right to exercise any voting
or other consensual rights with respect to
shares of Common Stock remaining in the
Escrow Fund from time to time.
Escrow Agent, upon such assignment, will execute and deliver
such stock powers and assignments as shall be necessary to
convey title to the Escrow Fund to MIC and Intek will duly
endorse and deliver to the Escrow Agent stock certificates in
the name of MIC and evidencing all of the Common Stock in the
Escrow Fund.
4. INVESTMENT OF ESCROW FUND. The Escrow Agent shall
not sell, encumber or otherwise dispose of the Common Stock
held as a part of the Escrow Fund, other than a distribution
of the Escrow Fund as provided herein, except that the Escrow
Agent shall,
(a) upon the joint written direction of Midland and
Intek, if a Price Adjustment Event has not occurred; or
4
<PAGE>
(b) upon the written direction of Midland if a
Price Adjustment Event has occurred,
effect a sale or other disposition of Common Stock in a
transaction involving (i) the receipt by the shareholders of
Intek of cash in any merger or reorganization in exchange or
partly in exchange for shares of common stock of Intek; (ii)
the sale of all or substantially all of the assets of Intek
for cash and the distribution to shareholders of Intek of the
proceeds of such sale as a liquidating distribution; or (iii)
a cash tender offer for all or a part of the shares of common
stock of Intek. In the event of any receipt of cash by the
Escrow Agent as a result of any of such transactions, such
cash shall be invested by the Escrow Agent, from time to time,
to the extent possible, in United States Treasury bills having
a remaining maturity of 90 days or less and resale obligations
secured by such United States Treasury Bills or in money
market mutual funds invested solely in such United States
Treasury Bills, with any remainder being deposited and
maintained in a money market deposit account with Escrow
Agent, until disbursement of the Escrow Fund pursuant to the
terms and conditions set forth herein. Escrow Agent is
authorized to liquidate in accordance with its customary
procedures any portion of the Escrow Fund consisting of
investments to provide for payments required to be made under
this Agreement.
5. PURPOSE OF ESCROW. The purpose of the Escrow Fund
is:
(a) to set aside 2,350,000 shares of Common Stock
of the Purchase Price to provide a mechanism for an upward
adjustment to the Purchase Price (as defined in the Amended
Assets and Trademark Agreement) of up to 2,350,000 shares of
Common Stock if one of the following events occur (each a
"Price Adjustment Event"):
(i) the closing of the Securicor Transaction;
or
(ii) Securicor and Intek, or their respective
affiliates, enter into one or more
transactions within six months of the
termination of the Securicor Agreement
which transaction(s) collectively
convey(s) majority control of Intek to
Securicor and/or Securicor's Affiliates
(collectively) upon the closing of such
transaction(s);
and
5
<PAGE>
(b) if a Price Adjustment Event occurs, to set
aside 500,000 shares of the Escrow Fund (the "Hitachi Portion
of the Escrow Fund"), after conveyance to Midland of title to
the Escrow Fund, to provide a mechanism for indemnifying Intek
against any actual out-of-pocket loss, cost, liability or
expense incurred by Intek ("Losses") resulting from the
termination by Hitachi of the Hitachi Supply Agreement
without the consent of Intek prior to May 12, 1997 (an
"Hitachi Related Indemnity Event"); PROVIDED, HOWEVER, that
for purposes of this Agreement an Hitachi Related Indemnity
Event shall not be deemed to have occurred and Intek shall not
be entitled to any portion of the Hitachi Escrow Fund, if (i)
Intek takes an action which results in termination of the
Hitachi Supply Agreement (excluding the transactions
contemplated by the Amended Assets and Trademark Agreement);
PROVIDED, HOWEVER, that, for the purposes of the foregoing,
Intek shall not be deemed to have taken any such action if
Intek fails to satisfy any minimum purchase requirements under
the Hitachi Supply Agreement or continues to purchase 220 MHz
products from Securicor or (ii) Hitachi's action to terminate
the Hitachi Supply Agreement notwithstanding, Hitachi
continues to be willing to sell Hitachi Products to Intek
after May 12, 1997, upon substantially the terms set forth in
the Hitachi Supply Agreement or on such other terms as are
agreed to by Intek or (iii) Intek has not ordered any Hitachi
Products pursuant to the Hitachi Supply Agreement during the
sixty (60) days immediately preceding Hitachi's termination of
the Hitachi Supply Agreement.
6. INITIAL RELEASE OF ESCROW FUNDS. Upon Escrow Agent's
receipt of either joint written directions by Midland and
Intek certifying as to the occurrence of a Price Adjustment
Event, or a Certified Court Order determining that a Price
Adjustment Event has occurred and directing the Escrow Agent
to disburse all or a portion of the Escrow Fund accordingly,
accompanied by a legal opinion of counsel for the presenting
party, satisfactory to the Escrow Agent, to the effect that
such court order is final and non-appealable, the Escrow Agent
will release, or allocate, without further investigation, all
of the Escrow Fund, as follows:
(a) Such number of shares of Common Stock as shall
be equal to the purchase price adjustment for Net Operating
Losses, as determined pursuant to Section 3.1(b)(2)(B) of the
Amended Asset and Trademark Agreement, but in any event not
more than 155,000 shares of Common Stock (the "Net Operating
Loss Shares"), shall be returned by the Escrow Agent to Intek
and the Escrow Agent shall promptly thereafter deliver to
Intek a certificate or certificates evidencing all such shares
of Common Stock; and
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<PAGE>
(b) the Hitachi Portion of the Escrow Fund shall be
set aside by the Escrow Agent to indemnify Intek pursuant to
paragraph 7 of this Agreement, although title to and voting
rights arising from such shares of Common Stock shall
immediately vest with Midland; PROVIDED, HOWEVER, that neither
Midland nor its assignees shall have the right to sell,
transfer, assign, mortgage, pledge, subject to any lien,
charge or encumbrance, hypothecate or otherwise transfer any
right, title or interest in the Hitachi Portion of the Escrow
Fund; and
(c) the balance of Escrow Fund, other than the
Hitachi Portion of the Escrow Fund and the Net Operating Loss
Shares, will be conveyed to Midland and the Escrow Agent shall
promptly thereafter deliver to Midland (i) a certificate or
certificates evidencing all such shares of Common Stock and
(ii) all other assets that are part of the Escrow Fund.
7. PAYMENT OF CLAIMS AGAINST THE HITACHI PORTION OF THE
ESCROW FUND.
(a) INDEMNITY CLAIM. Within thirty (30) days after
the occurrence of an Hitachi Related Indemnity Event, but in
any event prior to the Hitachi Escrow Termination Date (as
hereinafter defined), Intek shall give notice (the "Indemnity
Notice") to Midland and Escrow Agent specifying in reasonable
detail the occurrence of such Hitachi Related Indemnity Event
and the nature and dollar amount of Losses incurred by Intek
resulting from the occurrence of such Hitachi Related
Indemnity Event (a "Claim"); PROVIDED, HOWEVER, that Intek
shall not be entitled to reimbursement or indemnity for Claims
hereunder except to the extent that such Claims, in the
aggregate:
(i) exceed $50,000; and
(ii) are less than or equal to the Hitachi
Portion of the Escrow Fund (after
deducting all amounts expended or
disbursed by Escrow Agent pursuant to the
terms of this Escrow Agreement with
respect to the Hitachi Portion of the
Escrow Fund).
Escrow Agent shall not independently inquire into or consider
the merits of any Claim but shall be entitled to rely upon and
shall perform its duties hereunder in strict accordance with
the provisions of this Escrow Agreement.
(b) SATISFACTION OF DISPUTED INDEMNITY CLAIM. If
Midland gives notice (a "Counter Notice") to Intek and Escrow
Agent disputing a Claim which Counter Notice shall specify in
7
<PAGE>
reasonable detail the reason for the dispute and the dollar
amount in dispute (each a "Disputed Claim") within thirty (30)
days following receipt by Escrow Agent of the Indemnity Notice
asserting such Claim (the "Counter Notice Period"), Escrow
Agent shall not make any payment to Intek with respect to any
such Disputed Claim except upon Escrow Agent's receipt of, and
then only in accordance with the terms of, (i) a joint written
instruction of Intek and Midland instructing Escrow Agent to
disburse or retain all or a portion of the Escrow Fund in
resolution of such Disputed Claims, or (ii) a Certified Court
Order directing the Escrow Agent to disburse or retain a
portion of the Escrow Fund in satisfaction of such Disputed
Claims and accompanied by a legal opinion of counsel for the
presenting party, satisfactory to the Escrow Agent, to the
effect that such court order is final and non-appealable.
Escrow Agent shall upon receipt and without further
investigation, act upon and comply with the terms of any such
joint written instruction or Certified Court Order.
(c) SATISFACTION OF AN UNDISPUTED CLAIM. If the
Escrow Agent does not receive a Counter Notice with respect to
a Claim before expiration of the Counter Notice Period (an
"Undisputed Claim"), the amount of such Undisputed Claim shall
be deemed to be the amount set forth in the Indemnity Notice
asserting such Undisputed Claim and its shall be satisfied in
the manner set forth in Section 7(d) of this Escrow Agreement.
(d) PAYMENT OF CLAIMS. The Escrow Agent shall make
any payment to Intek required pursuant to Section 7(b) or
Section 7(c) of this Agreement by withdrawing from the Hitachi
Portion of the Escrow Fund and transferring to Intek, first, a
number of shares from the Hitachi Portion of the Escrow Fund
determined by dividing the amount of the Claim by the average
of then applicable Average Share Price. For purposes of this
Agreement, "Average Share Price" shall mean the average of the
last reported sale price of Common Stock on the NASDAQ System
for the ten (10) trading days immediately preceding, as
applicable, (i) the end of the Counter Notice Period (counting
the last day of such Counter Notice Period) with respect to
any Undisputed Claim, or (ii) the date upon which Escrow Agent
receives written joint written instructions from Midland and
Intek or a Certified Court Order, with respect to any Disputed
Claim. If such transfer of shares from the Hitachi Portion of
the Escrow Fund is insufficient to satisfy such Claim, then,
to the extent that there are cash or other proceeds remaining
in the Escrow Account which are derived from or identified to
the Hitachi Portion of the Escrow Fund, Escrow Agent shall
liquidate such balance and apply it to satisfy the unpaid
amount of such Claim remaining after application of Hitachi
Portion of the Escrow Fund thereto.
8
<PAGE>
8. TERMINATION OF ESCROW. This Escrow Agreement shall
terminate as to all or a portion of the Escrow Fund as
follows:
(a) TERMINATION OF ESCROW WITHOUT PRICE ADJUSTMENT
EVENT. If a Price Adjustment Event has not occurred within
Six (6) months and one (1) day following the termination of
the Securicor Agreement in accordance within its terms, this
Escrow Agreement shall terminate with respect to all of the
Escrow Fund (a "Full Termination"). Upon Escrow Agent's
receipt of either joint certification by Midland and Intek
certifying as to the Full Termination of this Escrow
Agreement; or a Certified Court Order certifying as to the
Full Termination of this Escrow Agreement and directing the
Escrow Agent to disburse the Escrow Fund accordingly,
accompanied by a legal opinion of counsel for the presenting
party, satisfactory to the Escrow Agent, to the effect that
such court order is final and non-appealable, the Escrow Agent
will release all of the Escrow Fund to Intek and the Escrow
Agent shall promptly thereafter deliver to Intek a certificate
or certificates evidencing all such shares of Common Stock.
(b) PARTIAL TERMINATION UPON DISBURSEMENT FOR PRICE
ADJUSTMENT EVENT. This Escrow Agreement shall terminate with
respect to the Escrow Fund, other than the Hitachi Portion of
the Escrow Fund, upon the disbursement by the Escrow Agent of
all of the Escrow Fund other than the Hitachi Portion of the
Escrow Fund pursuant to Section 6 of this Escrow Agreement.
(c) TERMINATION WITH RESPECT TO HITACHI PORTION OF
THE ESCROW FUND. This Escrow Agreement shall terminate with
respect to the Hitachi Portion of the Escrow Fund on the
earlier of (the "Hitachi Escrow Termination Date"):
(i) Any transaction after the occurrence of a
Price Adjustment Event resulting in
Securicor holding less 51% of the voting
securities of Intek;
(ii) Disbursement by the Escrow Agent of the
Hitachi Portion of the Escrow Fund
pursuant to the Section 7 of this Escrow
Agreement; and
(iii) May 31, 1997;
except that this Escrow Agreement shall thereafter continue in
effect with respect to the Hitachi Portion of the Escrow Fund
with respect, and then only to the extent of, any amounts
reserved against Claims pending as of the Hitachi Escrow
Termination Date. Intek shall notify Escrow Agent in writing
of the occurrence of the events described in sections 8(b) or
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8(c) above within five business days after consummation of
such events. On the Hitachi Escrow Termination Date, Escrow
Agent shall pay and distribute the then remaining balance of
the Hitachi Portion of the Escrow Fund to Midland; except that
Escrow Agent shall retain an amount equal to the aggregate
dollar amount of any Claims asserted by Intek in a Claim
Notice which are then pending until such Claims have been
resolved pursuant to Section 7(b) of this Agreement, and will
immediately after the resolution of such Claims distribute to
Midland the balance of such reserves which are not applied to
satisfy such Claims.
9. DUTIES OF ESCROW AGENT.
(a) Escrow Agent shall not be under any duty to
give the Escrow Fund held by it hereunder any greater degree
of care than it gives its own similar property and shall not
be required to invest any funds held hereunder except as
directed in this Agreement. Uninvested funds held hereunder
shall not earn or accrue interest.
(b) Escrow Agent shall not be liable, except for
its own gross negligence or willful misconduct and, except
with respect to claims based upon such gross negligence or
willful misconduct that are successfully asserted against
Escrow Agent, the other parties hereto shall jointly and
severally indemnify and hold harmless Escrow Agent (and any
successor Escrow Agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of
and in connection with this Agreement. Without limiting the
foregoing, Escrow Agent shall in no event be liable in
connection with its investment or reinvestment of any cash
held by it hereunder in good faith, in accordance with the
terms hereof, including, without limitation, any liability for
any delays (not resulting from its gross negligence or willful
misconduct) in the investment or reinvestment of the Escrow
Fund, or any loss of interest incident to any such delays.
(c) Escrow Agent shall be entitled to rely upon any
order, judgment, certification, demand, notice, instrument or
other writing delivered to it hereunder without being required
to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of the service
thereof. Escrow Agent may act in reliance upon any instrument
or signature believed by it to be genuine and may assume that
the person purporting to give receipt or advice or make any
statement or execute any document in connection with the
provisions hereof has been duly authorized to do so. Escrow
Agent may conclusively presume that the undersigned
representative of any party hereto which is an entity other
than a natural person has full power and authority to instruct
10
<PAGE>
Escrow Agent on behalf of that party unless written notice to
the contrary is delivered to Escrow Agent.
(d) Escrow Agent may act pursuant to the advice of
counsel with respect to any matter relating to this Agreement
and shall not be liable for any action taken or omitted by it
in good faith in accordance with such advice.
(e) Escrow Agent does not have any interest in the
Escrow Fund deposited hereunder but is serving as escrow
holder only and having only possession thereof. Any payments
of income from this Escrow Fund shall be subject to
withholding regulations then in force with respect to United
States taxes. The parties hereto will provide Escrow Agent
with appropriate Internal Revenue Service Forms W-9 for tax
identification number certification, or non-resident alien
certifications. This Section 9(e) and Section 9(b) shall
survive notwithstanding any termination of this Agreement or
the resignation of Escrow Agent.
(f) Escrow Agent makes no representation as to the
validity, value, genuineness or the collectability of any
security or other document or instrument held by or delivered
to it.
(g) Escrow Agent shall not be called upon to advise
any party as to the wisdom in selling or retaining or taking
or refraining from any action with respect to any securities
or other property deposited hereunder.
(h) Escrow Agent (and any successor Escrow Agent)
may at any time resign as such by delivering the Escrow Fund
to any successor Escrow Agent jointly designated by the other
parties hereto in writing, or to any court of competent
jurisdiction, whereupon Escrow Agent shall be discharged of
and from any and all further obligations arising in connection
with this Agreement. The resignation of Escrow Agent will take
effect on the earlier of (i) the appointment of a successor
(including a court of competent jurisdiction) or (ii) the day
which is 30 days after the date of delivery of its written
notice of resignation to the other parties hereto. If at that
time Escrow Agent has not received a designation of a
successor Escrow Agent, Escrow Agent's sole responsibility
after that time shall be to retain and safeguard the Escrow
Fund until receipt of a designation of successor Escrow Agent
or a joint written disposition instruction by the other
parties hereto or a final non-appealable order of a court of
competent jurisdiction.
(i) Intek shall pay Escrow Agent compensation (as
payment in full) for the services to be rendered by Escrow
Agent hereunder in the amount of $500.00 at the time of
11
<PAGE>
execution of this Agreement and agrees to reimburse Escrow
Agent for all reasonable expenses, disbursements and advances
incurred or made by Escrow Agent in performance of its duties
hereunder (including reasonable fees, expenses and
disbursements of its counsel).
(j) No printed or other matter in any language
(including, without limitation, prospectuses, notices,
reports and promotional material) that mentions Escrow Agent's
name or the rights, powers, or duties of Escrow Agent shall be
issued by the other parties hereto or on such parties' behalf
unless Escrow Agent shall first have given its specific
written consent thereto.
(k) The other parties hereto authorize Escrow
Agent, for any securities held hereunder, to use the services
of any United States central securities depository it
reasonably deems appropriate, including, without limitation,
the Depositary Trust Company and the Federal Reserve Book
Entry System.
10. LIMITED RESPONSIBILITY. This Agreement expressly
sets forth all the duties of Escrow Agent with respect to any
and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow
Agent. Escrow Agent shall not be bound by the provisions of
any agreement among the other parties hereto except this
Agreement.
11. OWNERSHIP FOR TAX PURPOSES. For purposes of federal
and other taxes based on income, the owner of the Escrow Fund,
and the party to report all income, if any, that is earned on,
or derived from, the Escrow Fund as its income, in the taxable
year or years in which such income is properly includible and
pay any taxes attributable thereto will be the party holding
title to the Escrow Fund during such period during the term of
this Agreement.
12. NOTICES. All notices, consents, waivers and other
communications under this Agreement must be in writing and
will be deemed to have been duly given when (a) delivered by
hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt) provided
that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt
requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses
and telecopier numbers as a party may designate by notice to
the other parties):
12
<PAGE>
Midland: c/o Simmonds Capital Limited
5255 Yonge Street, Suite 1050
Willowdale, Ontario, Canada, M2N 6P4
Attention: David O'Kell
Facsimile No.: 416-221-3800
with a copy to: Jones, Day Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Mary Lynn Durham, Esq.
Facsimile No.: 216-579-0212
Intek: 970 West 190th Street, Suite 720
Torrance, California 90502
Attention: David Neibert
Facsimile No.: 310-366-7712
with copies to: Securicor Communications Limited
Sutton Park House
15 Carshalton Road
Sutton, Surrey, SM1 4LD England
Attention: Dr. Ed Hough
Facsimile No.: 011-44-181-661-0205
Weil, Gotshal & Manges LLP
767 Park Avenue
New York, NY 10153
Attention: Howard Chatzinoff, Esq.
Facsimile No.: 212-310-8007
Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Attention: Steven L. Wasserman, Esq.
Facsimile No.: 216-621-6536
Escrow Agent: American Stock Transfer & Trust Company
6201 Fifteenth Street
Brooklyn, NY 11219
Attention: Executive Vice President
Facsimile No. 718-331-1852
with a copy to: Herbert Lemer, Esq.
American Stock Transfer & Trust Company
6201 Fifteenth Street
Brooklyn, NY 11219
Facsimile No.: 718-921-8331
13. JURISDICTION; SERVICE OF PROCESS. Any action or
proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought
against any of the parties in the courts of the State of
13
<PAGE>
Delaware, or, if it has or can acquire jurisdiction, in the
United States District Court for the District of Delaware, and
each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such
action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in
the preceding sentence may be served on any party anywhere in
the world.
14. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which will be deemed to be an
original and all of which, when taken together, will be deemed
to constitute one and the same.
15. SECTION HEADINGS. The headings of sections in this
Agreement are provided for convenience only and will not
affect its construction or interpretation.
16. WAIVER. The rights and remedies of the parties to
this Agreement are cumulative and not alternative. Neither the
failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise
of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement or the documents referred
to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right
unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the
specific instance for which it is given; and (c) no notice to
or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred
to in this Agreement.
17. EXCLUSIVE AGREEMENT AND MODIFICATION. This
Agreement supersedes all prior agreements among the parties
with respect to its subject matter and constitutes (along with
the documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may
not be amended except by a written agreement executed by
Intek, Midland and the Escrow Agent.
18. EXCLUSIVE REMEDY. Notwithstanding anything to the
contrary contained herein, in the Amended Assets and Trademark
Agreement or otherwise:
14
<PAGE>
(a) Intek's rights to receive the shares of Common
Stock identified to the Hitachi Escrow Fund hereunder shall
constitute Intek's sole and exclusive remedy for any Losses or
other injury incurred by Intek resulting if Midland is unable
to assign the Hitachi Supply Agreement to Intek or to
otherwise provide Intek with the benefit of the Hitachi Supply
Agreement as required pursuant to the Amended Assets and
Trademark Agreement; and
(b) Intek right to receive the shares of Common
Stock identified to the Price Adjustment Escrow Fund hereunder
shall constitute Intek's sole and exclusive remedy for payment
in the event of an adjustment to the Purchase Price pursuant
to the terms of the Amended Assets and Trademark Agreement.
19. ASSIGNMENT. This Escrow Agreement shall inure to
the benefit of and be binding upon each of the parties hereto
and their respective successors and assigns.
20. GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York, without regard to the
conflicts of law principles thereof.
[Signatures commence on next page.]
15
<PAGE>
[Signature Page for Escrow Agreement]
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
INTEK DIVERSIFIED CORPORATION MIDLAND INTERNATIONAL
CORPORATION
By: /s/ Steven L. Wasserman By: /s/ David O'Kell
Name: Steven L. Wasserman Name: David O'Kell
Title: Secretary Title: Executive Vice President
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Herbert J. Lemmer
Name: Herbert J. Lemmer
Title: Vice President
16
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Assignment")
is entered into and effective as of September 1, 1996 by and
between INTEK Diversified Corporation ("INTEK") and Midland USA,
Inc. ("MUSA"). Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Amended and
Restated Sale of Assets and Trademark Agreement (the "Agreement")
dated as of September 19, 1996 among INTEK, Simmonds Capital
Limited and Midland International Corporation. For good and
valuable consideration, receipt and sufficiency of which are
hereby acknowledged, INTEK and MUSA hereby agree as follows:
1. ASSIGNMENT. INTEK hereby assigns and transfers to
MUSA all of its right, title and interest in and to the Acquired
Assets, all of its rights and obligations under the Agreement and
all deposits, payments or advance payments (collectively, the
"Deposits") for product purchase orders identified on Schedule A
hereto, but with respect to the Deposits, such assignment shall
be effective only at such time as MUSA shall pay to INTEK the
Second Payment (as defined below).
2. ASSUMPTION. MUSA hereby accepts such assignment,
expressly assumes the Assumed Liabilities and shall be bound by
all of the terms, covenants and conditions thereof and shall
perform all obligations thereunder.
3. PAYMENTS. On the date hereof, MUSA shall pay to
INTEK, by wire transfer, the sum of $1,350,000 (the "First
Payment") as partial consideration for certain deposits for
product purchases made by INTEK and as described in more detail
on Schedule 2.3(b)(8) to the Agreement, which deposits constitute
part of the Acquired Assets. INTEK acknowledges receipt of the
First Payment. MUSA shall pay to INTEK the sum of Four Hundred
Fifty Thousand Dollars ($450,000), by wire transfer, on October
20, 1996 for the Deposits and upon receipt thereof, such Deposits
shall be deemed assigned to MUSA.
4. INDEMNIFICATION. From and after the Closing, but
subject to the conditions and limitations set forth in this
Assignment, MUSA shall defend, indemnify and save INTEK and its
directors, officers, employees, affiliates, agents, successors
and assigns harmless from and against any and all loss, cost,
damage or expense (including attorneys' fees) whatsoever (the
"Damages") resulting from or arising out of the Assumed
Liabilities, whether arising prior to, on or after the Effective
Date.
5. SUBORDINATION. The payment of any Damages by or
on behalf of MUSA will be subordinated in right of payment to the
prior payment in full of all Obligations under the Loan Agreement
1
<PAGE>
(the "Loan Agreement") dated September 19, 1996 between MUSA and
Securicor Communications Limited ("Securicor Communications"), as
the same may be amended from time to time. MUSA shall not make
any payment for the Damages until such time as the Obligations
(as defined in the Loan Agreement) have been paid to Securicor
Communications. Upon any distribution to creditors of MUSA in
any insolvency or liquidation proceeding relating to MUSA or its
respective properties, an assignment for the benefit of creditors
or any marshaling of MUSA's assets and liabilities, Securicor
Communications will be entitled to receive payment in full of all
Obligations before payment is made on account of the Damages by
or on behalf of MUSA, and until all Obligations are paid in full,
any distribution to which INTEK would be entitled shall be made
to Securicor Communications.
6. NOTICES. All notices and other communications
provided for hereunder shall be in writing (including
telegraphic, telex, telecopy, or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered by hand, if
to INTEK at:
INTEK Diversified Corporation
970 West 190th Street, Suite 720
Torrance, California 90502
Attention: David Neibert
Telecopy No.: (310) 366-7712
with a copy to:
Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attention: Nancy H. Wojtas, Esq.
Telecopy No.: (310) 312-4224
to MUSA at:
Midland USA, Inc.
970 West 190th Street, Suite 720
Torrance, California 90502
Attention: David Neibert
Telecopy No.: (310) 366-7712
with a copy to
Kohrman, Jackson & Krantz, P.L.L.
One Cleveland Center
1375 East 9th Street
Cleveland, Ohio 44114
Attention: Steven Wasserman, Esq.
Telecopy No.: (216) 621-6536
2
<PAGE>
or, as to each party, at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this Section. All
such notices and other communications shall, when mailed,
telegraphed, telexed, telecopied, cabled or delivered, be
effective seven days after being deposited in the mail in the
United States, or when delivered to the telegraph company,
confirmed by telex answerback, telecopied with confirmation or
receipt, delivered to the cable company, or delivered by hand to
the addressee or its agent, respectively.
7. AMENDMENTS, Etc. No amendment or waiver of any
provision of this Agreement shall in any event be effective
unless the same shall be in writing, approved and signed by the
parties hereto and then any such waiver or consent shall only be
effective in the specific instance and for the specific purpose
for which given.
8. NO WAIVER; REMEDIES.
(a) No failure on the part of either party to
exercise, and no delay in exercising any right hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative, may be exercised singly
or concurrently, and are not exclusive of any remedies provided
by law.
(b) Failure by any party at any time or times
hereafter to require strict performance by any other person of
any of the provisions, warranties, terms or conditions contained
herein shall not waive, affect or diminish any right of any party
at any time or times hereafter to demand strict performance
thereof, and such right shall not be deemed to have been modified
or waived by any course of conduct or knowledge of any party, or
any agent, officer or employee of such party.
9. SUCCESSORS AND ASSIGNS. This Agreement and all
obligations of the parties hereunder shall be binding upon the
successors and assigns of such parties.
10. GOVERNING LAW. This Agreement shall be governed
by, and be construed and interpreted in accordance with, the law
of the State of California. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of
such prohibition or invalidity and without invalidating the
remaining provisions of this Agreement.
3
<PAGE>
11. SECTION TITLES. The Section titles contained in
this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this
Agreement.
IN WITNESS WHEREOF, the parties have entered into this
Assignment as of the date first written above.
INTEK DIVERSIFIED CORPORATION
By: /s/ Steven L. Wasserman
Its: Secretary
MIDLAND USA, INC.
By: /s/ David Neibert
Its: President
ACKNOWLEDGED BY:
MIDLAND INTERNATIONAL
CORPORATION
By: /s/ David O'Kell
Its: Executive Vice President
4
<PAGE>
$15,000,000
LOAN AGREEMENT
Dated as of September 19, 1996
between
MIDLAND USA, INC.
as Borrower
and
SECURICOR COMMUNICATIONS LIMITED
as Lender
<PAGE>
LOAN AGREEMENT, dated as of September 19, 1996,
between MIDLAND USA, INC., a Delaware corporation having an
office at 1690 North Topping Avenue, Kansas City, Missouri
64120 ("Borrower") and a wholly-owned subsidiary of INTEK
DIVERSIFIED CORPORATION ("Intek"), and SECURICOR
COMMUNICATIONS LIMITED, a company incorporated under the laws
of England and Wales having an office at 15 Carshalton Road,
Sutton, Surrey, SM1 4LD, England ("Lender").
W I T N E S S E T H:
WHEREAS, Midland International Corporation, a
Delaware corporation ("Midland"), Intek and Simmonds Capital
Limited, an Ontario corporation ("Simmonds"), entered into an
Amended and Restated Sale of Assets and Trademark License
Agreement, dated as of September 19, 1996 (the "Asset and
Trademark Agreement"), pursuant to which Midland agreed to
sell to Intek the Trademark (as defined herein) and certain
other assets, as described therein (collectively, the
"Acquired Assets"), in consideration for up to 2,500,000
shares of common stock, par value $0.01 per share of Intek,
an assumption of certain liabilities of Midland (the "Assumed
Liabilities") and a cash payment, all as set forth in the
Asset and Trademark Agreement (the "Midland Transaction"); and
WHEREAS, Intek has assigned and transferred to
Borrower all of its right, title and interest in and to the
Acquired Assets and the Asset and Trademark Agreement (and all
other agreements entered into by Intek in connection
therewith) and Borrower has assumed the Assumed Liabilities
and all obligations of Intek under the Asset and Trademark
Agreement (and all other agreements entered into by Intek in
connection therewith), all in accordance with the terms of the
Assignment and Assumption Agreement (as defined herein) and
referred to herein as the "Intek-Borrower Transfer"; and
WHEREAS, Intek and Lender entered into a Stock
Purchase Agreement, dated as of June 18, 1996, as amended by
agreement of the parties dated as of September 19, 1996 (the
"Stock Agreement"), pursuant to which Lender agreed to sell to
Intek all of the outstanding securities (other than certain
preferred shares) of Lender's wholly-owned subsidiary,
Securicor Radiocoms Limited ("Radiocoms"), in consideration
for 25,000,000 shares of Common Stock (the "Securicor
Transaction"); and
WHEREAS, pursuant to the Stock Agreement, Lender has
agreed, among other things, to loan up to $15 million to Intek
following the consummation of the Securicor Transaction to
finance the combined business of Intek, the U.S. LMR
Distribution Business and Radiocoms (the "New Intek Loan");
and
1
<PAGE>
WHEREAS, it is currently contemplated that the
Midland Transaction will be consummated on or about September
19, 1996; and
WHEREAS, it is currently contemplated that the
Securicor Transaction will be consummated during the fourth
quarter of 1996; and
WHEREAS, following the consummation of the Midland
Transaction, Borrower will require significant funding to
finance its operations until such time as the Securicor
Transaction is consummated and the proceeds of the New Intek
Loan are available and has requested that Lender provide such
funding on the terms and subject to the conditions set forth
herein; and
WHEREAS, Borrower has secured the Obligations by a
perfected first priority security interest in the Collateral
(as defined herein); and
WHEREAS, Lender, Borrower and Intek have agreed that
in the event the Securicor Transaction is consummated, the
Obligations (as defined herein) outstanding hereunder on the
date of such consummation shall thereafter be assumed by Intek
and become obligations under the New Intek Loan (subject to
the terms thereof), as set forth in that certain letter
agreement between the parties, dated September 19, 1996 (the
"Intek Loan Assumption Agreement"); and
NOW, THEREFORE, in consideration of the premises and
the mutual covenants hereinafter contained, the parties hereto
agree as follows:
1. DEFINITIONS
In addition to the defined terms appearing above,
capitalized terms used in this Agreement shall have (unless
otherwise provided elsewhere in this Agreement) the following
respective meanings when used herein:
"Acquired Assets" shall have the meaning ascribed to
it in the recitals hereof.
"Affiliate" shall mean, with respect to any Person,
any other Person that controls such Person or is controlled by
or under common control with such Person.
"Agreement" shall mean this Loan Agreement,
including all amendments, modifications and supplements hereto
and any appendices, exhibits or schedules to any of the
foregoing, and shall refer to the Agreement as the same may be
in effect at the time such reference becomes operative.
2
<PAGE>
"Ancillary Agreements" shall mean all supplemental
agreements, undertakings, instruments, documents or other
writings executed by Borrower.
"Asset and Trademark Agreement" shall have the
meaning ascribed to it in the recitals hereof.
"Assignment and Assumption Agreement" shall mean the
Assignment and Assumption Agreement, dated as of September 19,
1996, by and between Intek and Borrower.
"Balance Sheet Date" shall have the meaning ascribed
to it in the recitals hereof.
"Business Day" shall mean any day that is not a
Saturday, a Sunday or a day on which banks are required or
permitted to be closed in the State of New York.
"Cash Collateral Account" shall have the meaning
ascribed to it in Section 2.2(c) hereof.
"Cash Equivalents" shall mean (i) marketable direct
obligations issued or unconditionally guaranteed by the United
States of America or any agency thereof maturing within one
year from the date of acquisition thereof; (ii) commercial
paper maturing no more than one year from the date of creation
thereof and at the time of their acquisition having the
highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; and (iii)
certificates of deposit, maturing no more than one year from
the date of creation thereof, issued by commercial banks
incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of
not less than $200,000,000 and having a rating of "A" or
better by a nationally recognized rating agency.
"Charges" shall mean all federal, state, county,
city, municipal, local, foreign or other governmental taxes at
the time due and payable, levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Collateral,
(ii) the Obligations, (iii) Borrower's or any of its
Subsidiaries' ownership or use of any of its assets, or (iv)
any other aspect of Borrower's or any of the Subsidiaries'
business.
"Closing Date" shall mean the date of the initial
Revolving Credit Advance.
"Code" shall mean the Uniform Commercial Code of the
jurisdiction with respect to which such term is used, as in
effect from time to time.
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<PAGE>
"Collateral" shall mean the collateral covered by
the Security Agreement, the Trademark Agreement and the Non-
Recourse Guaranty and Pledge Agreement.
"Collateral Documents" shall mean the Security
Agreement, Trademark Agreement and the Non-Recourse Guaranty
and Pledge Agreement.
"Common Stock" shall mean common stock, par value
$0.01 of Intek.
"Default" shall mean any event which, with the
passage of time or notice or both would, unless cured or
waived, become an Event of Default.
"Event of Default" shall have the meaning ascribed
to it in Section 9.1 hereof.
"Extension Fee" shall have the meaning ascribed to
it in Section 2.5 hereof.
"FCC" shall mean the Federal Communications
Commission, or any successor thereto.
"Federal Reserve Board" shall have the meaning
ascribed to it in Section 4.8 hereof.
"Fiscal Year" shall mean the calendar year.
Subsequent changes of the fiscal year of Borrower shall not
change the term "Fiscal Year," unless Lender shall consent in
writing to such changes.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from
time to time.
"Governmental Authority" means any nation or
government, any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Guaranteed Indebtedness" shall mean, as to any
Person, any obligation of such Person guaranteeing any
indebtedness, lease, dividend, or other obligation ("primary
obligations") of any other Person (the "primary obligor") in
any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any
such primary obligation, (b) to advance or supply funds: (i)
for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or
4
<PAGE>
solvency or any balance sheet condition of the primary
obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to
make payment of such primary obligation, or (d) to indemnify
the owner of such primary obligation against loss in respect
thereof.
"Hitachi Supply Agreement" shall mean the agreement
between Midland and Hitachi Denshi Ltd., a Japanese
corporation ("Hitachi"), dated as of May 12, 1994 and pursuant
to which Hitachi agreed, among other things, to manufacture
and sell to Midland certain mobile radios.
"Indebtedness" of any Person shall mean (i) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (including,
without limitation, reimbursement and all other obligations
with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured, but not including
obligations to trade creditors incurred in the ordinary course
of business), (ii) all obligations evidenced by notes, bonds,
debentures or similar instruments, (iii) all indebtedness
created or arising under any conditional sale or other title
retention agreements with respect to property acquired by such
Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are
limited to repossession or sale of such property), (iv) all
Guaranteed Indebtedness, (v) all Indebtedness referred to in
clause (i), (ii), (iii) or (iv) above secured by (or for which
the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in
property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness,
and (vi) the Obligations.
"Intek-Borrower Transfer" shall have the meaning
ascribed to it in the recitals hereof.
"Intek Loan Assumption Agreement" shall have the
meaning ascribed to it in the recitals hereof.
"Letter of Credit Obligations" shall mean all
outstanding obligations incurred by Lender at the request of
Borrower, whether direct or indirect, contingent or otherwise,
due or not due, in connection with the issuance or guarantee,
by Lender or another, of letters of credit, bank acceptances
in respect of letters of credit, or the like. The amount of
such Letter of Credit Obligations shall equal the maximum
amount which may be payable by Lender thereupon or pursuant
thereto.
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"Letters of Credit" shall mean commercial or standby
letters of credit issued at the request and for the account of
Borrower, and bankers' acceptances issued by Borrower, for
which Lender has incurred Letter of Credit Obligations
pursuant thereto.
"Lien" shall mean any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien,
charge, claim, security interest, easement or encumbrance, or
preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any lease or title retention
agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or
agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any
jurisdiction).
"Loan Documents" shall mean this Agreement, the
Note, the Collateral Documents, those other Ancillary
Agreements as to which Lender is a party or a beneficiary and
all other agreements, instruments, documents and certificates,
including, without limitation, pledges, powers of attorney,
consents, assignments, contracts, notices, and all other
written matter whether heretofore, now or hereafter executed
by or on behalf of Borrower or any of its Affiliates, or any
employee of Borrower or any of its Affiliates, and delivered
to Lender in connection with this Agreement or the
transactions contemplated hereby.
"Material Adverse Effect" or "Material Adverse
Change" shall mean an event or circumstance which materially
adversely affects the business, properties, financial
condition or operations (taken as a whole) of Borrower.
"Maximum Lawful Rate" shall have the meaning
ascribed to it, in Section 2.4(c) hereof.
"Maximum Revolving Credit Loan" shall mean, at any
particular time, an amount equal to $15,000,000.
"Mees Pierson" shall mean Mees Pierson ICS Limited,
a company incorporated under the laws of England and Wales.
"Midland" shall have the meaning ascribed to it in
the recitals hereof.
"Net Cash Proceeds" shall have the meaning ascribed
to it in Section 2.4(a) hereof.
"New Intek Loan" shall have the meaning ascribed to
it in the recitals hereof.
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"Non-Recourse Guaranty and Pledge Agreement" shall
mean the Agreement made in favor of Lender by Intek,
substantially in the form attached as Exhibit C hereto,
including all amendments, modifications and supplements
thereto, and shall refer to the Non-Recourse Guaranty and
Pledge Agreement as the same may be in effect at the time such
reference becomes operative.
"Note" shall mean the Revolving Credit Note.
"Obligations" shall mean all loans, advances, debts,
liabilities, and obligations, for monetary amounts (whether or
not such amounts are liquidated or determinable) owing by
Borrower to Lender (including all Letter of Credit
Obligations), and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other instrument,
arising under any of the Loan Documents. This term includes,
without limitation, all interest (whether capitalized or
otherwise), charges, expenses, attorneys' fees and any other
sum chargeable to Borrower (including the Extension Fee) under
any of the Loan Documents.
"Permitted Encumbrances" shall mean the following
encumbrances: (i) Liens for taxes or assessments or other
governmental charges or levies, either not yet due and payable
or to the extent that nonpayment thereof is permitted by the
terms of this Agreement; (ii) pledges or deposits securing
obligations under workmen's compensation, unemployment
insurance, social security or public liability laws or similar
legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or
leases to which Borrower is a party as lessee made in the
ordinary course of business; (iv) deposits securing public or
statutory obligations of Borrower; (v) workers', mechanics',
suppliers', carriers', warehousemen's or other similar liens
arising in the ordinary course of business and securing
indebtedness aggregating not in excess of $100,000 at any time
outstanding, not yet due and payable; (vi) deposits securing,
or in lieu of, surety, appeal or customs bonds in proceedings
to which Borrower is a party; (vii) any attachment or judgment
lien, unless the judgment it secures shall not, within 60 days
after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such
stay; and (viii) zoning restrictions, easements, licenses, or
other restrictions on the use of real property or other minor
irregularities in title (including leasehold title) thereto,
so long as the same do not materially impair the use, value,
or marketability of such real property, leases or leasehold
estates.
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"Person" shall mean any individual, sole
proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Radiocoms" shall have the meaning ascribed to it in
the recitals hereof.
"Repayment Date" means the first to occur of the
following: (a) the date (the "Specified Repayment Date") 30
days after the Termination Date, provided that if the Intek
shareholder meeting to consider the Securicor Transaction is
held after October 31, 1996 but before November 30, 1996 then
the Specified Repayment Date shall be extended by such number
of days (up to a maximum of 30 days) as is equal to the number
of days between October 31, 1996 and the date of such meeting
and (b) the date on which the Securicor Transaction is
consummated.
"Restricted Payment" shall mean (i) the declaration
of any dividend or the incurrence of any liability to make any
other payment or distribution of cash or other property or
assets in respect of Borrower's Stock or (ii) any payment on
account of the purchase, redemption or other retirement of
Borrower's Stock or any other payment or distribution made in
respect thereof, either directly or indirectly.
"Revolving Credit Advance" shall have the meaning
ascribed to it in Section 2.1(a) hereof.
"Revolving Credit Loan" shall mean the aggregate
amount of Revolving Credit Advances outstanding at any time.
"Revolving Credit Note" shall have the meaning
ascribed to it in Section 2.1(b) hereof.
"Securicor Transaction" shall have the meaning
ascribed to it in the recitals hereof.
"Security Agreement" shall mean the agreement
entered into between Lender and Borrower, substantially in the
form attached as Exhibit D hereto, including all amendments,
modifications and supplements thereto, and shall refer to the
Security Agreement as the same may be in effect at the time
such reference becomes operative.
"Simmonds" shall have the meaning ascribed to it in
the recitals hereof.
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"Solvent" shall mean, when used with respect to any
Person, that:
(a) the present fair saleable value of such
Person's assets (including, without limitation, the fair
saleable value of the goodwill arising in connection with
the Midland Transaction and other intangible assets) is
in excess of the total amount of such Person's
liabilities;
(b) such Person is able to pay its debts as
they become due; and
(c) such Person does not have unreasonably
small capital to carry on such Person's business as
theretofore operated and all businesses in which such
Person is about to engage.
"Stock" shall mean all shares, options, warrants,
general or limited partnership interests, participations or
other equivalents (regardless of how designated) of or in a
corporation, partnership or equivalent entity whether voting
or nonvoting, including, without limitation, common stock,
preferred stock, or any other "equity security" (as such term
is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended).
"Subsidiary" shall mean any Person 50% or more of
whose issued and outstanding voting securities is owned or
controlled, directly or indirectly, by the specified Person.
"Taxes" shall have the meaning ascribed thereto in
Section 2.11 hereof.
"Termination Date" shall mean the first to occur of
the following: (i) the date on which the Stock Agreement is
terminated pursuant to Section 3.2 thereof or (ii) December
31, 1996.
"Trademark Agreement" shall mean the Trademark
Agreement relating to the grant of a security interest in the
Trademark, made in favor of Lender by Borrower, substantially
in the form attached as Exhibit E hereto.
"Trademark" shall mean the Trademark described on
Schedule 4.13(b) hereto and the trade name "Midland" and
similar variations thereof, and all registrations,
applications and renewals thereof and all logos, whether or
not registered, used in connection therewith.
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"US LMR Distribution Business" shall mean the
business consisting of the sale and distribution of LMR
Products bearing the Trademark within the US LMR Distribution
Territory as conducted by Borrower and in no event shall
include the business carried on directly by Intek or any of
its subsidiaries other than Borrower.
"US LMR Distribution Territory" shall mean the
United States of America and the territories and possessions
thereof.
Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the
meaning customarily given such term in accordance with GAAP,
and all financial computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance
with GAAP consistently applied. That certain terms or
computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit
the foregoing. All other undefined terms contained in this
Agreement shall, unless the context indicates otherwise, have
the meanings provided for by the Code as in effect in the
State of New York to the extent the same are used or defined
therein. The words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a
whole, including the Exhibits and Schedules hereto, as the
same may from time to time be amended, modified or
supplemented, and not to any particular section, subsection or
clause contained in this Agreement.
Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
2. AMOUNT AND TERMS OF CREDIT
2.1. REVOLVING CREDIT ADVANCES. (a) Upon and
subject to the terms and conditions hereof, Lender shall make
available, from time to time, until the Termination Date, for
Borrower's use and upon the request of Borrower therefor,
advances (each, a "Revolving Credit Advance") in an aggregate
amount outstanding (which amount shall include all outstanding
Letter of Credit Obligations, whether or not then due and
payable) which shall not at any given time exceed the Maximum
Revolving Credit Loan. Subject to the provisions of Section
2.4 hereof and the applicable conditions set forth in Section
3 hereof, and until all amounts outstanding in respect of the
Revolving Credit Loan shall become due and payable on the
Repayment Date, Borrower may from time to time borrow, repay
and reborrow under this Section 2.1(a). Each Revolving Credit
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Advance shall be made on notice, given no later than 1:00 P.M.
(New York City time) on the second Business Day prior to the
proposed Revolving Credit Advance, by Borrower to Lender.
Each such notice (a "Notice of Revolving Credit Advance")
shall be in writing in substantially the form of Exhibit A
hereto, executed by Howard Parkinson (or such other officer of
Borrower approved by Lender in its sole and absolute
discretion in writing) and either David Neibert or Gregg
Marston specifying therein the requested date and amount of
such Advance. Lender shall, before 5:00 P.M. (New York City
time) on the date of the proposed Revolving Credit Advance,
upon fulfillment of the applicable conditions set forth in
Section 3, wire to a bank designated by Borrower and
reasonably acceptable to Lender the amount of such Revolving
Credit Advance.
(b) The Revolving Credit Loan made by Lender shall
be evidenced by a promissory note to be executed and delivered
by Borrower at the time of the Revolving Credit Loan, the form
of which is attached hereto and made a part hereof as Exhibit
B (the "Revolving Credit Note"). The Revolving Credit Note
shall be payable to the order of Lender and shall represent
the obligation of Borrower to pay the amount of the Maximum
Revolving Credit Loan or, if less, the aggregate unpaid
principal amount of all Revolving Credit Advances made by
Lender to Borrower, with interest thereon as prescribed in
Section 2.4(a). The date and amount of each Revolving Credit
Advance and each payment of principal and interest or
capitalization of interest with respect thereto shall be
recorded on the books and records of Lender, which books and
records shall constitute PRIMA FACIE evidence of the accuracy
of the information therein recorded. The entire unpaid
balance of the Revolving Credit Loan (including capitalized
interest thereon) and all other Obligations shall be due and
payable on the Repayment Date.
2.2. LETTERS OF CREDIT. (a) Lender shall, subject
to the terms and conditions hereinafter set forth, (i) incur
Letter of Credit Obligations in respect of the issuance, on
the Closing Date, of such Letters of Credit supporting
obligations of Borrower, as Borrower shall request by written
notice to Lender (executed by Howard Parkinson (or such other
officer of Borrower approved by Lender in its sole and
absolute discretion in writing) and either David Neibert or
Gregg Marston) which is received by Lender not less than 2
Business Days prior to the Closing Date, and (ii) incur from
time to time on written request of Borrower, additional Letter
of Credit Obligations in respect of Letters of Credit
supporting obligations of Borrower; PROVIDED, HOWEVER, that
no such Letter of Credit shall have an expiry date which is
after March 31, 1997. It is understood that the determination
of the bank or other legally authorized Person (including
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Lender) which shall issue or accept, as the case may be, any
letter of credit or bankers acceptance contemplated by this
Section 2.2(a) shall be made by Lender, in its sole
discretion.
(b) In the event that Lender shall make any payment
on or pursuant to any Letter of Credit Obligation, such
payment shall then be deemed to constitute a Revolving Credit
Advance under Section 2.1(a) hereof.
(c) In the event that any Letter of Credit
Obligation, whether or not then due and payable, shall for any
reason be outstanding on the Termination Date, Borrower will
pay to Lender cash or Cash Equivalents in an amount equal to
the maximum amount then available to be drawn under the Letter
of Credit. Such funds or Cash Equivalents shall be held by
Lender in a cash collateral account (the "Cash Collateral
Account"). The Cash Collateral Account shall be in the name
of Lender (as a cash collateral account), and shall be under
the sole dominion and control of Lender and subject to the
terms of this Section 2.2. Borrower hereby pledges, and
grants to Lender a security interest in, all such funds or
Cash Equivalents held in the Cash Collateral Account from time
to time and all proceeds thereof, as security for the payment
of all amounts due in respect of the Letter of Credit
Obligations, whether or not then due.
From time to time after funds are deposited in the
Cash Collateral Account, Lender may apply such funds or Cash
Equivalents then held in the Cash Collateral Account to the
payment of any amounts, in such order as Lender may elect, as
shall be or shall become due and payable by Borrower to Lender
with respect to such Letter of Credit Obligations.
Neither Borrower nor any person or entity claiming
on behalf of or through Borrower shall have any right to
withdraw any of the funds or Cash Equivalents held in the Cash
Collateral Account, except that upon the termination of any
Letter of Credit Obligation in accordance with its terms and
the payment of all amounts payable by Borrower to Lender in
respect thereof, any funds remaining in the Cash Collateral
Account in excess of the then remaining Letter of Credit
Obligations shall be promptly returned to Borrower.
Lender shall not have any obligation to invest the
funds in the Cash Collateral Account or deposit such funds in
an interest-bearing account, and interest and earnings
thereon, if any, shall be the property of Lender. Interest
and earnings on the Cash Equivalents in the Cash Collateral
Account shall be the property of Borrower.
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(d) In the event that Lender shall incur any Letter
of Credit Obligations pursuant hereto at the request or on
behalf of Borrower hereunder, Borrower shall pay to Lender, as
compensation to Lender for such Letter of Credit Obligation,
all fees and charges paid by Lender on account of such Letter
of Credit Obligation to the issuer or like party. Fees
payable in respect of Letter of Credit Obligations shall be
paid to Lender, in arrear, on the first day of each month for
the preceding month.
2.3. USE OF PROCEEDS. Borrower shall apply the
proceeds of the Revolving Credit Advances only for the US LMR
Distribution Business (including for the repayment of Intek
for the outstanding deposits made in connection with the
equipment relating to the US LMR Distribution Business ordered
by Intek and evidenced by the purchase orders listed on
Schedule 2.3 hereto).
2.4. INTEREST ON REVOLVING CREDIT LOAN. (a)
Interest accrues on the amount outstanding from time to time
under the Revolving Credit Loan at the rate of 11% per annum,
calculated on the basis of a 360 day year for the number of
days elapsed. Interest will be capitalized on a monthly basis
and shall be added to the principal amount outstanding from
time to time under the Revolving Credit Loan. Interest
accrued and uncapitalized on the Repayment Date shall be
payable on such date.
(b) So long as any Event of Default shall be
continuing, the interest rate applicable to the Revolving
Credit Loan shall be increased by 3% per annum above the rate
otherwise applicable.
(c) Notwithstanding anything to the contrary set
forth in this Section 2.4, if at any time until payment in
full of all of the Obligations 11% exceeds the highest rate of
interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable
hereto (the "Maximum Lawful Rate"), then in such event and so
long as the Maximum Lawful Rate would be so exceeded, the rate
of interest payable hereunder shall be equal to the Maximum
Lawful Rate; PROVIDED, HOWEVER, that if at any time thereafter
the 11% is less than the Maximum Lawful Rate, Borrower shall
continue to pay interest hereunder at the Maximum Lawful Rate
until such time as the total interest received by Lender from
the making of advances hereunder is equal to the total
interest which Lender would have received had the 11% been
(but for the operation of this paragraph) the interest rate
payable since the Closing Date. Thereafter, the interest rate
payable hereunder shall be the 11%, unless and until such rate
shall again exceed the Maximum Lawful Rate, in which event
this paragraph shall again apply.
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2.5. EXTENSION FEE. Borrower shall pay to Lender a
fee (the "Extension Fee") equal to $500,000 payable on the
Repayment Date in the event that all the Obligations have not
been repaid (or assumed by Intek) in full on or prior to the
Termination Date.
2.6. RECEIPT OF PAYMENTS. (a) Borrower shall make
each payment under this Agreement not later than 11:00 A.M.
(New York City time) on the day when due in lawful money of
the United States of America in immediately available funds to
Lender's depositary bank as designated by Lender from time to
time for deposit in Lender's depositary account. For purposes
only of computing interest hereunder, all payments shall be
applied by Lender on the day payment has been credited by
Lender's depository bank to Lender's account in immediately
available funds. For purposes of determining the amount of
funds available for borrowing by Borrower pursuant to Section
2.1(a) hereof, such payments shall be applied by Lender
against the outstanding amount of the Revolving Credit Loan at
the time they are credited to its account.
2.7. APPLICATION OF PAYMENTS. Borrower irrevocably
waives the right to direct the application of any and all
payments at any time or times hereafter received by Lender
from or on behalf of Borrower, and Borrower irrevocably agrees
that Lender shall have the continuing exclusive right to apply
any and all such payments against the then due and payable
Obligations of Borrower and in repayment of the Revolving
Credit Loan as Lender may deem advisable. Lender is
authorized to, and at its option may, make advances on behalf
of Borrower for payment of all fees, expenses, charges, costs,
principal and interest incurred by Borrower hereunder when and
as Borrower fails to promptly pay any such amounts. At
Lender's option and to the extent permitted by law, any
advances so made may be deemed Revolving Credit Advances
constituting part of the Revolving Credit Loan hereunder.
2.8. ACCOUNTING. Lender will provide a monthly
accounting of transactions under the Revolving Credit Loan to
Borrower within 10 days of the end of the month. Each and
every such accounting shall (absent manifest error) be deemed
final, binding and conclusive upon Borrower in all respects as
to all matters reflected therein, unless Borrower, within 20
days after the date any such accounting is rendered, shall
notify Lender in writing of any objection which Borrower may
have to any such accounting, describing the basis for such
objection with specificity. In that event, only those items
expressly objected to in such notice shall be deemed to be
disputed by Borrower. Lender's determination, based upon the
facts available, of any item objected to by Borrower in such
notice shall (absent manifest error) be final, binding and
conclusive on Borrower, unless Borrower shall commence a
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judicial proceeding to resolve such objection within 45 days
following Lender's notifying Borrower of such determination.
2.9. INDEMNITY. Borrower shall indemnify and hold
Lender and its officers, directors, employees, agents,
Affiliates and shareholders (collectively, the "Indemnified
Persons") harmless from and against any and all suits,
actions, proceedings, claims, damages, losses, liabilities and
expenses (including, without limitation, reasonable attorneys'
fees and disbursements, including those incurred upon any
appeal) which may be instituted or asserted against or
incurred by any Indemnified Person as the result of the
execution of the Loan Documents or extension of credit
hereunder; PROVIDED, HOWEVER, that Borrower shall not be
liable for such indemnification to such Indemnified Person to
the extent that any such suit, action, proceeding, claim,
damage, loss, liability or expense results from such
Indemnified Person's negligence or willful misconduct.
2.10. ACCESS. Lender and any of its officers,
employees and/or agents shall have the right, exercisable as
frequently as Lender determines to be appropriate, during
normal business hours (or at such other times as may
reasonably be requested by Lender), to inspect the properties
and facilities of Borrower and to inspect, audit and make
extracts from all of Borrower's records, files and books of
account. Borrower shall deliver any document or instrument
reasonably necessary for Lender, to obtain records from any
service bureau maintaining records for Borrower, and shall
maintain duplicate records or supporting documentation on
media, including, without limitation, computer tapes and discs
owned by Borrower. Borrower shall instruct its banking and
other financial institutions to make available to Lender such
information and records as Lender may reasonably request.
2.11. TAXES. (a) Any and all payments by Borrower
hereunder or under the Note shall be made, in accordance with
this Section 2.11, free and clear of and without deduction for
any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on or measured by the
net income of Lender by the jurisdiction under the laws of
which Lender is organized or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If Borrower shall be required by law
to deduct any Taxes from or in respect of any sum payable
hereunder or under the Note to Lender, (i) the sum payable
shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section 2.11) Lender
receives an amount equal to the sum it would have received had
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no such deductions been made, (ii) Borrower shall make such
deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxing or other authority in
accordance with applicable law.
(b) In addition, Borrower shall pay any present or
future stamp or documentary taxes or any other sales,
transfer, excise, mortgage recording or property taxes,
charges or similar levies that arise from any payment made
hereunder or under the Note or from the execution, sale,
transfer, delivery or registration of, or otherwise with
respect to the Loan Documents and any other agreements and
instruments contemplated thereby (hereinafter referred to as
"Other Taxes").
(c) Borrower shall indemnify Lender for the full
amount of Taxes or Other Taxes (including without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.11) paid by Lender and
any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date
such Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, Borrower shall furnish to Lender, at its address
referred to in Section 10.10, the original or a certified copy
of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and
obligations of Borrower contained in this Section 2.11 shall
survive both (i) the payment in full of principal and interest
hereunder and under the Notes and (ii) the Termination of this
Agreement.
3. CONDITIONS PRECEDENT
3.1. CONDITIONS TO THE INITIAL REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT. Notwithstanding any other
provision of this Agreement and without affecting in any
manner the rights of Lender hereunder, Borrower shall have no
rights under this Agreement (but shall have all applicable
obligations hereunder), and Lender shall not be obligated to
make available any Revolving Credit Advance or Letter of
Credit, unless and until Borrower shall have delivered to
Lender, in form and substance satisfactory to Lender and
(unless otherwise indicated) each dated the Closing Date:
(a) A Revolving Credit Note to the order of Lender
duly executed by Borrower.
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(b) Opinions of Manatt, Phelps & Phillips, LLP
(counsel to Borrower), Kohrman Jackson & Krantz (counsel to
Intek) and Howard, Darby & Levin (counsel to Borrower and
Intek with respect to issues involving New York law),
substantially in the forms attached as, respectively, Exhibits
F, G and H hereto.
(c) Opinion of Jones, Day, Reavis & Pogue counsel
to Midland, substantially in the form attached as Exhibit I
hereto.
(d) Resolutions of the boards of directors of
Borrower, Midland and Intek, certified by the Secretary or
Assistant Secretary of such entity, as the case may be, as of
the Closing Date, to be duly adopted and in full force and
effect on such date, authorizing (i) the consummation of each
of the transactions contemplated by the Loan Documents and
(ii) specific officers to execute and deliver this Agreement
and the other Loan Documents.
(e) A copy of the organizational charter and all
amendments thereto of each of Borrower and Intek, certified as
of a recent date by the Secretary of State of the jurisdiction
of its organization, and copies of each of Borrower's and
Intek's by-laws, certified by the Secretary or Assistant
Secretary of Borrower or Intek, as the case may be, as true
and correct as of the Closing Date.
(f) Governmental certificates, dated the most
recent practicable date prior to the Closing Date, with
telegram updates where available, showing that the Borrower is
organized and in good standing in the jurisdiction of its
organization and is qualified as a foreign corporation and in
good standing in all other jurisdictions in which it is
qualified to transact business.
(g) The Asset and Trademark Agreement duly executed
and delivered by Midland, Intek and Simmonds, together with:
(i) copies of all closing documents and
certificates delivered in connection therewith,
including a letter from each counsel delivering an
opinion in connection therewith stating that Lender
can rely on such opinion as if addressed to it; and
(ii) a certificate from the chief executive
officer of Intek certifying that the transactions
contemplated by the Asset and Trademark Agreement
have been completed.
(h) The Assignment and Assumption Agreement duly
executed and delivered by Borrower and Intek.
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(i) The Security Agreement and the Trademark
Agreement, duly executed and delivered by Borrower; the Non-
Recourse Guaranty and Pledge Agreement duly executed and
delivered by Intek; together with:
(i) acknowledgement copies of proper
Financing Statements (Form UCC-1) duly filed under
the Uniform Commercial Code of each jurisdiction as
may be necessary or, in the opinion of Lender,
desirable to perfect the security interests created
by the Security Agreement,
(ii) certified copies of Requests for
Information or Copies (Form UCC-11), or equivalent
reports, listing the Financing Statements referred
to in paragraph (i) above and all other effective
financing statements which name Borrower or Intek
(under their present names and any previous names)
as debtor and which are filed in the jurisdictions
referred to in said paragraph (i), together with
copies of such other financing statements (none of
which shall cover the Collateral purported to be
covered by the Security Agreement),
(iii) evidence of the completion of all
recordings and filings of the Security Agreement and
Trademark Agreement as may be necessary or, in the
opinion of Lender, desirable to perfect the security
interests and liens created by the Security
Agreement and Trademark Agreement,
(iv) certificates representing the Pledged
Shares referred to in the Non-Recourse and Guaranty
and Pledge Agreement and undated stock powers for
such certificates executed in blank,
(v) evidence that all other actions necessary
or, in the opinion of Lender, desirable to perfect
and protect the security interests created by the
Security Agreement, Trademark Agreement and Non-
Recourse Guaranty and Pledge Agreement have been
taken.
(j) Releases duly executed and delivered by Mees
Pierson and Octagon Capital Canada Corporation (with respect
to Midland) and Mees Pierson (with respect to Intek),
releasing any liens or claims on or security interests in, the
Collateral or in the rights in the Asset and Trademark
Agreement, as well as waiving any claims each may have arising
from the Midland Transaction or the transactions contemplated
by the Loan Documents, together with acknowledgement copies
of proper Financing Statements (Form UCC-2 or 3) duly filed
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under the Uniform Commercial Code of each jurisdiction as may
be necessary to evidence the foregoing releases.
(k) A certificate of the chief executive officer of
Borrower that Borrower is Solvent after giving effect to the
initial Revolving Credit Advance and the payment of all
estimated legal, investment banking, accounting and other fees
related hereto and thereto (such certificate may state that in
making the representation therein Borrower has relied on the
projections attached thereto, provided that Borrower states
that it believes that the assumptions underlying such
projections are reasonable).
(l) A certificate of the chief executive officer of
Borrower stating that all of the representations and
warranties of the Borrower contained herein or in any of the
Loan Documents are correct on and as of the Closing Date as
though made on and as of such date, and no event has occurred
and is continuing, or would result from the Revolving Credit
Advance, if made on the Closing Date, which constitutes or
would constitute a Default or an Event of Default.
(m) Certificates of the Secretary or an Assistant
Secretary of each of Borrower and Intek, dated the Closing
Date, as to the incumbency and signatures of the officers of,
respectively, Borrower or Intek executing any of the Loan
Documents and any other certificate or other document to be
delivered pursuant hereto or thereto, together with evidence
of the incumbency of such Secretary or Assistant Secretary.
(n) Evidence satisfactory to Lender that Simmonds
shall have paid to Lender in cash $2,187,603.00 in
satisfaction of all outstanding invoices payable by Simmonds
or Midland issued on or prior to the date hereof (as set forth
on Schedule 3.1(n) hereto).
(o) Such additional information and materials as
Lender may reasonably request, including, without limitation,
copies of any debt agreements, security agreements and other
material contracts.
3.2. FURTHER CONDITIONS TO EACH REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT. It shall be a further condition
to the funding of each subsequent Revolving Credit Advance and
incurrence of Letter of Credit Obligations that the following
statements shall be true on the date of each such funding or
advance:
(a) All of the representations and warranties of
the Loan Parties contained herein or in any of the Loan
Documents shall be correct on and as of the Closing Date and
the date of each such Revolving Credit Advance as though made
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on and as of such date, except to the extent that any such
representation or warranty expressly relates to an earlier
date and for changes therein permitted or contemplated by this
Agreement.
(b) No event shall have occurred and be continuing,
or would result from the funding of any Revolving Credit
Advance, which constitutes or would constitute a Default or an
Event of Default.
(c) The aggregate unpaid principal amount of the
Revolving Credit Loan after giving effect to such Revolving
Credit Advance shall not exceed the Maximum Revolving Credit
Loan.
The acceptance by Borrower of the proceeds of any
Revolving Credit Advance or the incurrence by Lender of Letter
of Credit Obligations shall be deemed to constitute, as of the
date of such acceptance, (i) a representation and warranty by
Borrower that the conditions in this Section 3.2 have been
satisfied and (ii) a confirmation by Borrower of the granting
and continuance of Lender's Lien pursuant to the Collateral
Documents.
Notwithstanding the foregoing, the satisfaction of
the conditions set out in clause (a) and (b) above shall not
be required in respect of a $450,000 Revolving Credit Advance
to be made on or after October 20, 1996 to be used solely to
repay Intek for the outstanding deposits made in respect of
equipment relating to the US LMR Distribution Business ordered
by Intek and evidenced by the purchase orders listed on
Schedule 2.3 hereto.
4. REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Revolving Credit Loan,
as herein provided for, Borrower makes the following
representations and warranties to Lender, each and all of
which shall be true and correct as of the date of execution
and delivery of this Agreement:
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Borrower (i) is a corporation duly organized, validly existing
and in good standing under the laws of its state of
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incorporation; (ii) except as indicated on Schedule 4.1(ii)
hereto, is duly qualified to do business and is in good
standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business
requires such qualification (except for jurisdictions in which
such failure to so qualify or to be in good standing would not
have a Material Adverse Effect); (iii) has the requisite
corporate power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its prop
erties, to lease the property it operates under lease, and to
conduct its business as now, heretofore and proposed to be
conducted; (iv) except as indicated on Schedule 4.1(iv)
hereto, has all material licenses, permits, consents or
approvals from or by, and has made all material filings with,
and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for
such ownership, operation and conduct; (v) is in compliance
with its certificate of incorporation and by-laws; and (vi) is
in compliance with all applicable provisions of law where the
failure to comply would have a Material Adverse Effect.
4.2. EXECUTIVE OFFICES. The current location of
Borrower's executive offices and principal place of business
is set forth in Schedule 4.2 hereto.
4.3. SUBSIDIARIES. Borrower currently has no
Subsidiaries.
4.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS. The execution, delivery and performance by
Borrower of the Loan Documents, Ancillary Agreements and all
instruments and documents to be delivered by Borrower, to the
extent it is a party thereto, hereunder and thereunder and the
creation of all Liens provided for herein and therein: (i) are
within Borrower's corporate power; (ii) have been duly
authorized by all necessary or proper corporate action; (iii)
are not in contravention of any provision of Borrower's
certificates or articles of incorporation or by-laws; (iv)
will not violate any law or regulation, or any order or decree
of any court or governmental instrumentality in any material
respect; (v) will not conflict with or result in the breach or
termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which Borrower
is a party or by which Borrower or any of its property is
bound; (vi) will not result in the creation or imposition of
any Lien upon any of the property of Borrower other than those
in favor of Lender, all pursuant to the Loan Documents; and
(vii) do not require the consent or approval of any
Governmental Authority or any other Person. Each of the Loan
Documents has been duly executed and delivered for the benefit
of or on behalf of Borrower and each constitutes a legal,
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valid and binding obligation of Borrower, to the extent it is
a party thereto, enforceable against it in accordance with its
terms.
4.5. SOLVENCY. After giving effect to the initial
Revolving Credit Advance, if made on the Closing Date, and the
payment of all estimated legal, investment banking, accounting
and other fees related hereto, Borrower will be Solvent as of
and on the Closing Date (it being understood that in making
such representation Borrower has relied on the projections
previously provided to Lender, which are based on assumptions
that Borrower believes are reasonable).
4.6. LABOR MATTERS. There are no strikes or other
labor disputes against Borrower pending or, to Borrower's
knowledge, threatened which would have a Material Adverse
Effect.
4.7. INVESTMENT COMPANY ACT. Borrower is not an
"investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company
Act of 1940, as amended. The making of the Revolving Credit
Advances by Lender, the application of the proceeds and
repayment thereof by Borrower and the consummation of the
transactions contemplated by this Agreement and the other Loan
Documents will not violate any provision of such Act or any
rule, regulation or order issued by the Securities and
Exchange Commission thereunder.
4.8. MARGIN REGULATIONS. Borrower does not own any
"margin security," as that term is defined in Regulations G
and U of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), and the proceeds of the
Revolving Credit Advances will be used only for the purposes
contemplated hereunder. The Revolving Credit Advances will
not be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of
reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any
other purpose which might cause any of the loans under this
Agreement to be considered a "purpose credit" within the
meaning of Regulations G, T, U or X of the Federal Reserve
Board. Borrower will not take or permit any agent acting on
its behalf to take any action which might cause this Agreement
or any document or instrument delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.
4.9. NO LITIGATION. No action, claim or proceeding
is now pending or, to the knowledge of Borrower, threatened
against Borrower at law, in equity or otherwise, before any
court, board, commission, agency or instrumentality of any
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federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of
arbitrators, which, if determined adversely, could have a
Material Adverse Effect, nor to the knowledge of Borrower does
a state of facts exist which is reasonably likely to give rise
to such proceedings.
4.10. ASSET AND TRADEMARK AGREEMENT. The closing
of the Midland Transaction and the consummation of the Intek-
Borrower Transfer will occur immediately prior to the Closing
Date. A true and complete copy of each of the Asset and
Trademark Agreement (including all exhibits, schedules and
amendments thereto) and all documents delivered by any party
in connection therewith has been delivered to Lender.
4.11. HITACHI SUPPLY AGREEMENT. Borrower is a
"Midland Affiliate" under the Hitachi Supply Agreement and
entitled to make purchases thereunder.
4.12. OUTSTANDING STOCK; OPTIONS; WARRANTS, ETC.
The Stock of Borrower owned by Intek as at the date of this
Agreement constitutes all of the issued and outstanding Stock
of Borrower. Borrower has no outstanding rights, options,
warrants or agreements pursuant to which it may be required to
issue or sell any Stock or other equity security.
4.13. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.
Borrower owns all material patents, patent applications,
copyrights, trademarks, trademark applications, and know-how
(collectively, "Intangible Property") necessary to continue to
conduct its business as heretofore conducted by it, now
conducted by it and proposed to be conducted by it, each of
which is listed, together with Patent and Trademark Office
application or registration numbers, where applicable, on
Schedule 4.13(a) hereto. Further, (i) Borrower has good and
lawful title to the Intangible Property (subject to the
licenses set forth on Schedule 4.13(d) hereto); (ii) to
Borrower's knowledge, the Intangible Property is valid and
subsisting and is enforceable; (iii) to Borrower's knowledge,
there are no actual or threatened claims by third parties
regarding the Intangible Property; (iv) to Borrower's
knowledge, the Intangible Property does not infringe or
otherwise violate any rights of any third party, except where
any violation or infringement would not have a Material
Adverse Effect.
4.14. LIENS. The Liens granted to Lender pursuant
to the Collateral Documents will at the Closing Date be fully
perfected first priority Liens in and to the Collateral
described therein.
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4.15. NO MATERIAL ADVERSE EFFECT. No event has
occurred and is continuing which has had or could have a
Material Adverse Effect.
5. FINANCIAL STATEMENTS AND INFORMATION
5.1. REPORTS AND NOTICES. Borrower covenants and
agrees that from and after the Closing Date and until the
Termination Date, it shall deliver to Lender:
(a) Within 30 days after the end of each fiscal
month, (i) a copy of the unaudited balance sheets of Borrower
as of the end of such month and the related statements of
income and cash flows for that portion of the Fiscal Year
ending as of the end of such month, and (ii) a copy of the
unaudited statements of income of Borrower for such month, all
prepared in accordance with GAAP (subject to normal year-end
adjustments), accompanied by the certification of the chief
executive officer or chief financial officer of Borrower that
all such financial statements are complete and correct and
present fairly in accordance with GAAP (subject to normal
year-end adjustments), the financial position, the results of
operations and the statements of cash flows of Borrower as at
the end of such month and for the period then ended, and that
there was no Default or Event of Default in existence as of
such time.
(b) As soon as practicable, but in any event within
two (2) Business Days after Borrower becomes aware of the
existence of any Default or Event of Default, or any
development or other information which would have a Material
Adverse Effect, telephonic or telegraphic notice specifying
the nature of such Default or Event of Default or development
or information, including the anticipated effect thereof,
which notice shall be promptly confirmed in writing within
five (5) days.
(c) If requested by Lender, copies of all federal,
state, local and foreign tax returns and reports in respect of
income, franchise or other taxes on or measured by income
(excluding sales, use or like taxes) filed by Borrower.
(d) Such other information respecting Borrower's
business (including with respect to orders received and
inventory purchased), financial condition or prospects as
Lender may, from time to time, reasonably request.
5.2. COMMUNICATION WITH ACCOUNTANTS. Borrower
authorizes Lender to communicate directly with its independent
certified public accountants and tax advisors and authorizes
those accountants to disclose to Lender any and all financial
statements and other supporting financial documents and
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<PAGE>
schedules including copies of any management letter with
respect to the business, financial condition and other affairs
of Borrower. At Lender's request, Borrower shall deliver a
letter addressed to such accountants and tax advisors
instructing them to comply with the provisions of this Section
5.2.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Lender
shall otherwise consent in writing, from and after the date
hereof and until the Repayment Date:
6.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF
BUSINESS. Borrower shall: (a) do or cause to be done all
things necessary to preserve and keep in full force and effect
its corporate existence, and its rights and franchises; (b)
transact business only in such names as Borrower shall specify
to Lender in writing not less than thirty days prior to the
first date such name is used by Borrower and (c) at all times
maintain, preserve and protect all of its Trademarks and any
tradenames.
6.2. PAYMENT OF OBLIGATIONS. (a) Borrower shall:
(i) pay and discharge or cause to be paid and discharged all
its Indebtedness, including, without limitation, all the
Obligations as and when due and payable, and (ii) pay and
discharge or cause to be paid and discharged promptly all (A)
Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed), and (B) lawful claims for
labor, materials, supplies and services or otherwise before
any thereof shall become in default.
(b) Borrower may in good faith contest, by proper
legal actions or proceedings diligently pursued, the validity
or amount of any Charges or claims arising under Section
6.2(a)(ii), provided that at the time of commencement of any
such action or proceeding, and during the pendency thereof (i)
adequate reserves with respect thereto are maintained on the
books of Borrower, in accordance with GAAP; (ii) such contest
operates to suspend collection of the contested Charges or
claims and is maintained and prosecuted continuously with
diligence; (iii) none of the Collateral would be subject to
forfeiture or loss or any Lien by reason of the institution or
prosecution of such contest; (iv) no Lien shall exist for such
Charges or claims during such action or proceeding; (v)
Borrower shall promptly pay or discharge such contested
Charges and all additional charges, interest, penalties and
expenses, if any, and shall deliver to Lender evidence
acceptable to Lender of such compliance, payment or discharge,
if such contest is terminated or discontinued adversely to
Borrower; and (vi) Lender has not advised Borrower in writing
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<PAGE>
that Lender reasonably believes that nonpayment or
nondischarge thereof would have a Material Adverse Effect.
(c) Notwithstanding anything to the contrary
contained in Section 6.2(b) above, Borrower shall have the
right to pay the charges or claims arising under Section
6.2(a)(ii) and in good faith contest, by proper legal actions
or proceedings, the validity or amount of such Charges or
claims.
6.3. BOOKS AND RECORDS. Borrower shall keep its
books, accounts and records in the ordinary course of
business.
6.4. LITIGATION. Borrower shall notify Lender in
writing, promptly upon learning thereof, of any litigation
commenced against Borrower, and of the institution against any
of them of any suit or administrative proceeding that may have
a Material Adverse Effect.
6.5. INSURANCE. Borrower shall maintain insurance
covering, without limitation, fire, theft, burglary, public
liability, property damage, product liability and insurance on
all property and assets, all in amounts customary for its
business and in any event in compliance with any insurance
requirements under any Loan Documents and with a lender's loss
payable clause for the benefit of Lender.
6.6. COMPLIANCE WITH LAW. Borrower shall comply in
all material respects with all federal, state and local laws
and regulations applicable to it.
6.7. SUPPLEMENTAL DISCLOSURE. From time to time as
may be necessary (in the event that such information is not
otherwise delivered by Borrower to Lender pursuant to this
Agreement), so long as there are Obligations outstanding
hereunder, Borrower will supplement each Schedule (if any) or
representation herein with respect to any matter hereafter
arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or
described in such Schedule or as an exception to such
representation or which is necessary to correct any
information in such Schedule or representation which has been
rendered inaccurate thereby; PROVIDED, HOWEVER, that such
supplement to such Schedule or representation shall not be
deemed an amendment thereof unless otherwise consented to by
the Lender.
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7. NEGATIVE COVENANTS
Borrower covenants and agrees that, without Lender's
prior written consent, from and after the date hereof and
until the Repayment Date:
7.1. MERGERS, ETC. Borrower shall not directly or
indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the
assets or capital stock of, or otherwise combine with, any
Person or form any Subsidiary.
7.2. INVESTMENTS; LOANS AND ADVANCES. Borrower
shall not make any investment in, or make or accrue loans or
advances of money to any Person, through the direct or
indirect holding of securities or otherwise.
7.3. INDEBTEDNESS. (a) Except as otherwise
expressly permitted by this Section 7.3 or by any other
section of this Agreement or as set forth on Schedule 7.3
hereto, Borrower shall not create, incur, assume or permit to
exist any Indebtedness, except (i) Indebtedness secured by
Liens permitted under Section 7.8 hereof, (ii) the Revolving
Credit Loan, and (iii) the Letter of Credit Obligations.
(b) Except as otherwise expressly permitted by
Section 7.9 hereof, Borrower shall not sell or transfer,
either with or without recourse, any assets, of any nature
whatsoever, in respect of which a Lien is granted or to be
granted pursuant to any Loan Document or engage in any sale-
leaseback or similar transaction involving any of such assets.
7.4. CAPITAL STRUCTURE. Borrower shall not make
any changes in its capital structure (including, without
limitation, in the terms of its outstanding Stock) or amend
its certificate of incorporation or by-laws.
7.5. MAINTENANCE OF BUSINESS. Borrower shall not
engage in any business other than the US LMR Distribution
Business.
7.6. TRANSACTIONS WITH AFFILIATES. (a) Borrower
shall not enter into or be a party to any transaction with any
Affiliate of Borrower, other than with Intek, and then only in
the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and
reasonable terms that are fully disclosed to Lender and are no
less favorable to Borrower than would be obtained in a
comparable arm's-length transaction with a Person not an
Affiliate of Borrower.
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(b) Except as set forth on Schedule 7.6(b) hereto,
Borrower shall not enter into any agreement or transaction to
pay to any Person any management or similar fee based on or
related to Borrower's operating performance or income or any
percentage thereof, nor pay any management or similar fee to
an Affiliate.
7.7. GUARANTEED INDEBTEDNESS. Borrower shall not
incur any Guaranteed Indebtedness except (i) by endorsement of
instruments or items of payment for deposit to the general
account of Borrower, and (ii) for Guaranteed Indebtedness
incurred for the benefit of Borrower if the primary obligation
is permitted by this Agreement.
7.8. LIENS. Borrower shall not create or permit
any Lien on any of its properties or assets except:
(a) presently existing or hereafter created Liens
in favor of Lender; and
(b) Permitted Encumbrances.
7.9. SALES OF ASSETS. Borrower shall not sell,
transfer, convey or otherwise dispose of any assets or
properties; PROVIDED, HOWEVER, that the foregoing shall not
prohibit (i) the sale of inventory in the ordinary course of
business, (ii) the sale of surplus or obsolete equipment and
fixtures, and (iii) transfers resulting from any casualty or
condemnation of assets or properties.
7.10. EVENTS OF DEFAULT. Borrower shall not take
or omit to take any action, which act or omission would
constitute (i) a default or an event of default pursuant to,
or noncompliance with any of, the terms of any of the Loan
Documents or (ii) a material default or an event of default
pursuant to, or noncompliance with any other contract, lease,
mortgage, deed of trust or instrument to which it is a party
or by which it or any of its property is bound, or any
document creating a Lien, unless such default, event of
default or non-compliance would not have a Material Adverse
Effect.
7.11. RESTRICTED PAYMENTS. Borrower shall not make
any Restricted Payments.
8. TERM
8.1. TERMINATION. Subject to the provisions of
Section 2 hereof, the financing arrangement contemplated
hereby in respect of the Revolving Credit Loan shall be in
effect until the Termination Date.
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8.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
FINANCING ARRANGEMENT. Except as otherwise expressly provided
for in the Loan Documents, no termination or cancellation
(regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or
impair the powers, obligations, duties, rights and liabilities
of Borrower or the rights of Lender relating to any
transaction or event occurring prior to such termination.
Except as otherwise expressly provided herein or in any other
Loan Document, all undertakings, agreements, covenants,
warranties and representations contained in the Loan Documents
shall survive such termination or cancellation and shall
continue in full force and effect until such time as all of
the Obligations have been paid in full in accordance with the
terms of the agreements creating such Obligations, at which
time the same shall terminate.
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.1. EVENTS OF DEFAULT. The occurrence of any one
or more of the following events (regardless of the reason
therefor) shall constitute an "Event of Default" hereunder:
(a) Borrower shall fail to make any payment of
principal of, or interest on or any other amount owing in
respect of, the Revolving Credit Loan or any of the other
Obligations when due and such failure continues for a period
of five (5) days.
(b) Borrower shall fail or neglect to perform, keep
or observe any of the provisions of Section 7 hereof.
(c) Borrower shall fail or neglect to perform, keep
or observe any other provision of this Agreement or of any of
the other Loan Documents and the same shall remain unremedied
for a period ending on the first to occur of twenty (20) days
after Borrower shall receive written notice of any such
failure from any Lender or forty five (45) days after Borrower
shall become aware thereof.
(d) A default shall occur under any other
agreement, document or instrument to which Borrower is a party
or by which Borrower's property is bound, and such default (i)
involves the failure to make any payment (whether of
principal, interest or otherwise) due (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise) in respect of any Indebtedness of Borrower in an
aggregate amount exceeding $50,000, or (ii) causes (or permits
any holder of such Indebtedness or a trustee to cause) such
Indebtedness or a portion thereof in an aggregate amount
exceeding $50,000, to become due prior to its stated maturity
or prior to its regularly scheduled dates of payment.
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(e) Any representation or warranty herein or in any
Loan Document or in any written statement pursuant thereto or
hereto, report, financial statement or certificate made or
delivered to Lender by Borrower shall be untrue or incorrect
in any material respect, as of the date when made or deemed
made (including those made or deemed made pursuant to Section
3.2).
(f) Any provision of any Collateral Document, after
delivery thereof pursuant to Section 3.1, shall for any reason
cease to be valid or enforceable in accordance with its terms,
or any security interest created under any Collateral Document
shall cease to be a valid and perfected first priority
security interest or Lien (except as otherwise stated therein)
in any of the Collateral purported to be covered thereby.
(g) Any of the assets of Borrower shall be
attached, seized, levied upon or subjected to a writ or
distress warrant, or come within the possession of any
receiver, trustee, custodian or assignee for the benefit of
creditors of Borrower and shall remain unstayed or undismissed
for thirty (30) consecutive days; or any Person other than
Borrower shall apply for the appointment of a receiver,
trustee or custodian for any of the assets of Borrower and
shall remain unstayed or undismissed for thirty (30)
consecutive days; or Borrower shall have concealed, removed or
permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any
of its property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or
other similar law.
(h) A case or proceeding shall have been commenced
against Borrower in a court having competent jurisdiction
seeking a decree or order in respect of Borrower (i) under
title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal, state or
foreign bankruptcy or other similar law, (ii) appointing a
custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) of Borrower or of any
substantial part of its or their properties, or (iii) ordering
the winding-up or liquidation of the affairs of Borrower and
such case or proceeding shall remain undismissed or unstayed
for thirty (30) consecutive days or such court shall enter a
decree or order granting the relief sought in such case or
proceeding.
(i) Borrower shall (i) file a petition seeking
relief under title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable
federal, state or foreign bankruptcy or other similar law,
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(ii) consent to the institution of proceedings thereunder or
to the filing of any such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of
Borrower or of any substantial part of its properties, (iii)
fail generally to pay its debts as such debts become due, or
(iv) take any corporate action in furtherance of any such
action.
(j) There shall have been a change of control of
Intek or a sale of a material part of its assets and for this
purpose, "change of control" means the acquisition, whether
directly or indirectly by an entity other than Midland of more
than 20% of the Stock or assets of Intek.
(k) Howard Parkinson (or such replacement as is
approved by Lender in its reasonable discretion) for any
reason ceases to serve as a consultant to Borrower and is not
replaced within ten (10) days with a replacement approved by
Lender in its reasonable discretion or the responsibilities of
his position are materially diminished from those he had with
respect to the US LMR Distribution Business when employed by
Midland prior to the consummation of the Midland Transaction.
(l) The Hitachi Supply Agreement is terminated for
any reason without the prior written agreement of Lender, such
agreement is amended without the prior written agreement of
Lender or Borrower ceases to be able to make purchases
thereunder on the terms in effect on the date of this
Agreement.
9.2. REMEDIES. If any Event of Default shall have
occurred and be continuing, Lender shall without notice, (i)
terminate this facility with respect to further Revolving
Credit Advances, whereupon no Revolving Credit Advances may be
made hereunder, and/or (ii) declare all Obligations to be
forthwith due and payable, whereupon all Obligations shall
become and be due and payable, without presentment, demand,
protest or further notice of any kind, all of which are
expressly waived by Borrower.
9.3. WAIVERS BY BORROWER. Except as otherwise
provided for in this Agreement and applicable law, Borrower
waives (i) presentment, demand and protest and notice of
presentment, dishonor, notice of intent to accelerate, notice
of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any
or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by
Lender on which Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard,
(ii) all rights to notice and a hearing prior to Lender's
31
<PAGE>
taking possession or control of, or to Lender's replevy,
attachment or levy upon, the Collateral or any bond or
security which might be required by any court prior to
allowing Lender to exercise any of its remedies, and (iii) the
benefit of all valuation, appraisal and exemption laws.
Borrower acknowledges that it has been advised by counsel of
its choice with respect to this Agreement, the other Loan
Documents and the transactions evidenced by this Agreement and
the other Loan Documents.
9.4. RIGHT OF SET-OFF. Upon the occurrence and
during the continuance of any Event of Default, Lender is
hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and
all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time
owing by Lender to or for the credit or the account of
Borrower against any and all of the obligations of Borrower
now or hereafter existing under this Agreement, and the Note
held by Lender irrespective of whether or not Lender shall
have made any demand under this Agreement or such Note and
although such obligations may be unmatured. Lender agrees
promptly to notify Borrower after any such set-off and
application made by Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of
such set-off and application. The rights of Lender under this
Section are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which
Lender may have.
10. MISCELLANEOUS
10.1. COMPLETE AGREEMENT; MODIFICATION OF
AGREEMENT; SALE OF INTEREST. (a) The Loan Documents
constitute the complete agreement between the parties with
respect to the subject matter hereof and may not be modified,
altered or amended except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or
transfer any of the Loan Documents or any portion thereof
(other than pursuant to the Intek Assumption Agreement),
including, without limitation, Borrower's rights, title,
interests, remedies, powers and duties hereunder or
thereunder. Borrower hereby consents to Lender's sale of
participations, assignment, transfer or other disposition, at
any time or times, of any of the Loan Documents or of any
portion thereof or interest therein, including, without
limitation, Lender's rights, title, interests, remedies,
powers or duties thereunder, whether evidenced by a writing or
not. Borrower agrees that it will use its best efforts to
assist and cooperate with Lender in any manner reasonably
requested by Lender to effect the sale of participations in or
32
<PAGE>
assignments of any of the Loan Documents or of any portion
thereof or interest therein.
(b) In the event Lender assigns or otherwise
transfers all or any part of the Revolving Credit Note
Borrower shall, upon the request of Lender, issue a new
Revolving Credit Note to effectuate such assignment or
transfer.
10.2. FEES AND EXPENSES. If, at any time or times,
regardless of the existence of an Event of Default (except
with respect to paragraphs (ii) and (iii), which shall be
subject to an Event of Default having occurred and be
continuing), Lender shall employ counsel or other advisors for
advice or other representation or shall incur reasonable legal
or other costs and expenses in connection with:
(i) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by Lender,
Borrower or any other Person) in any way relating to
the Collateral, any of the Loan Documents or any
other agreements to be executed or delivered in
connection herewith;
(ii) any attempt to enforce any rights of
Lender;
(iii) any attempt to verify, protect, collect,
sell, liquidate or otherwise dispose of the
Collateral;
then, and in any such event, the attorneys' and other parties'
fees reasonably arising from such services, including those of
any appellate proceedings, and all expenses, costs, charges
and other fees reasonably incurred by such counsel and others
in any way or respect arising in connection with or relating
to any of the events or actions described in this Section
shall be payable, on demand, by Borrower to Lender and shall
be additional Obligations secured under this Agreement and the
other Loan Documents. Without limiting the generality of the
foregoing, such expenses, costs, charges and fees may include:
paralegal fees, costs and expenses; accountants' and
investment bankers' fees, costs and expenses; court costs and
expenses; photocopying and duplicating expenses; court
reporter fees, costs and expenses; long distance telephone
charges; air express charges; telegram charges; secretarial
overtime charges; and expenses for travel, lodging and food
paid or incurred in connection with the performance of such
legal services.
10.3. NO WAIVER BY LENDER. Lender's failure, at
any time or times, to require strict performance by Borrower
33
<PAGE>
or Intek of any provision of this Agreement any of the other
Loan Documents shall not waive, affect or diminish any right
of Lender thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Lender of
an Event of Default by Borrower under the Loan Documents shall
not suspend, waive or affect any other Event of Default by
Borrower under this Agreement and any of the other Loan
Documents whether the same is prior or subsequent thereto and
whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any
of the other Loan Documents and no Event of Default by
Borrower under this Agreement and no defaults by Borrower or
Intek under any of the other Loan Documents shall be deemed to
have been suspended or waived by Lender, unless such
suspension or waiver is by an instrument in writing signed by
an officer of Lender and directed to Borrower or Intek
specifying such suspension or waiver.
10.4. REMEDIES. Lender's rights and remedies under
this Agreement shall be cumulative and nonexclusive of any
other rights and remedies which Lender may have under any
other agreement, including without limitation, the Loan
Documents, by operation of law or otherwise.
10.5. WAIVER OF JURY TRIAL. THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THE LOAN DOCUMENTS.
10.6. SEVERABILITY. Wherever possible, each
provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but
if any provision of this Agreement 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 Agreement.
10.7. PARTIES. This Agreement and the other Loan
Documents shall be binding upon, and inure to the benefit of,
the successors of Borrower and Lender and the assigns,
transferees and endorsees of Lender.
10.8. CONFLICT OF TERMS. Except as otherwise
provided in this Agreement or any of the other Loan Documents
by specific reference to the applicable provisions of this
Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of
the other Loan Documents, the provision contained in this
Agreement shall govern and control.
34
<PAGE>
10.9. GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. LENDER AND
BORROWER AGREE TO SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE
ANY OBJECTION AS TO VENUE IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK. SERVICE OF PROCESS ON BORROWER OR LENDER IN ANY
ACTION ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS
SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS
LISTED IN SECTION 10.10 HEREOF. NOTHING HEREIN SHALL PRECLUDE
LENDER OR BORROWER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION.
10.10. NOTICES. Except as otherwise provided
herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of
the parties by another, or whenever any of the parties desires
to give or serve upon another any communication with respect
to this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in
writing and either shall be delivered in person with receipt
acknowledged or by registered or certified mail, return
receipt requested, postage prepaid, or telecopied and
confirmed by telecopy answerback addressed as follows:
(a) If to Lender at:
15 Carshalton Road
Sutton, Surrey SM1 4LD
England
Attention: Ed Hough
Telecopy No. (0181) 661 0205
With copies to:
Weil, Gotshal & Manges
99 Bishopsgate
London, EC2M 3XD
Attention: David Lefkowitz, Esq.
Telecopy No. 0171 426 0990
35
<PAGE>
(b) If to Borrower, at:
1690 North Topping Avenue
Kansas City, Missouri 64120
Attention: Howard Parkinson
Telecopy No. 816 920 1102
With copies to:
Intek Diversified Corporation
970 West 190th Street, Suite 720
Torrance, California 90502
Attention: David Neibert
Telecopy No. 310 366 7712
Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attention: Nancy Wojtas
Telecopy No. 310 312 4224
or at such other address as may be substituted by notice given
as herein provided. The giving of any notice required
hereunder may be waived in writing by the party entitled to
receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall
be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged,
telecopied and confirmed by telecopy answerback or seven (7)
Business Days after the same shall have been deposited (i) in
the United States mail (in the case of notice being given by
Borrower or any other Person in the United States) or (ii) in
the United Kingdom mail (in the case of notice being given by
Lender or any other Person located in the United Kingdom).
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication
to the persons designated above to receive copies shall in no
way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other
communication.
10.11. SURVIVAL. The representations and
warranties of Borrower in this Agreement shall survive the
execution, delivery and acceptance hereof by the parties
hereto and the closing of the transactions described herein or
related hereto.
10.12. SECTION TITLES. The Section titles and
Table of Contents contained in this Agreement are and shall be
without substantive meaning or content of any kind whatsoever
36
<PAGE>
and are not a part of the agreement between the parties
hereto.
10.13. COUNTERPARTS. This Agreement may be
executed in any number of separate counterparts, each of which
shall, collectively and separately, constitute one agreement.
37
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly
executed as of the date first written above.
MIDLAND USA, INC.
By: /s/ David Neibert
Name: David Neibert
Title: President
SECURICOR COMMUNICATIONS LIMITED
By: /s/ M.G. Wilkinson
Name: M.G. Wilkinson
Title: Director
The undersigned hereby guarantees to Borrower the performance
by Lender of all of its obligations under this Agreement.
SECURITY SERVICES PLC
By: /s/ Nigel Griffins
Name: Nigel Griffins
Title: Director
Date: September 19, 1996
38
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. DEFINITIONS..........................................................2
2. AMOUNT AND TERMS OF CREDIT...........................................10
2.1. REVOLVING CREDIT ADVANCES..........................10
2.2. LETTERS OF CREDIT..................................11
2.3. USE OF PROCEEDS....................................13
2.4. INTEREST ON REVOLVING CREDIT LOAN..................13
2.5. EXTENSION FEE......................................14
2.6. RECEIPT OF PAYMENTS................................14
2.7. APPLICATION OF PAYMENTS............................14
2.8. ACCOUNTING.........................................14
2.9. INDEMNITY..........................................15
2.10. ACCESS.............................................15
2.11. TAXES..............................................15
3. CONDITIONS PRECEDENT.................................................16
3.1. CONDITIONS TO THE INITIAL REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT.......................16
3.2. FURTHER CONDITIONS TO EACH REVOLVING CREDIT
ADVANCE AND LETTER OF CREDIT.......................19
4. REPRESENTATIONS AND WARRANTIES.......................................20
4.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW...........20
4.4. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE
OBLIGATIONS........................................21
4.5. SOLVENCY...........................................22
4.6. LABOR MATTERS......................................22
4.7. INVESTMENT COMPANY ACT.............................22
4.8. MARGIN REGULATIONS.................................22
4.9. NO LITIGATION......................................22
4.10. ASSET AND TRADEMARK AGREEMENT......................23
4.11. HITACHI SUPPLY AGREEMENT...........................23
4.12. OUTSTANDING STOCK; OPTIONS; WARRANTS, ETC..........23
4.13. PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.......23
4.14. LIENS..............................................23
4.15. NO MATERIAL ADVERSE EFFECT.........................24
5. FINANCIAL STATEMENTS AND INFORMATION.................................24
5.1. REPORTS AND NOTICES................................24
5.2. COMMUNICATION WITH ACCOUNTANTS.....................24
6. AFFIRMATIVE COVENANTS................................................25
6.1. MAINTENANCE OF EXISTENCE AND CONDUCT OF
BUSINESS...........................................25
6.2. PAYMENT OF OBLIGATIONS.............................25
6.3. BOOKS AND RECORDS..................................26
6.4. LITIGATION.........................................26
i
<PAGE>
6.5. INSURANCE..........................................26
6.6. COMPLIANCE WITH LAW................................26
6.7. SUPPLEMENTAL DISCLOSURE............................26
7. NEGATIVE COVENANTS...................................................27
7.1. MERGERS, ETC.......................................27
7.2. INVESTMENTS; LOANS AND ADVANCES....................27
7.3. INDEBTEDNESS.......................................27
7.4. CAPITAL STRUCTURE..................................27
7.5. MAINTENANCE OF BUSINESS............................27
7.6. TRANSACTIONS WITH AFFILIATES.......................27
7.7. GUARANTEED INDEBTEDNESS............................28
7.8. LIENS..............................................28
7.9. SALES OF ASSETS....................................28
7.10. EVENTS OF DEFAULT..................................28
7.11. RESTRICTED PAYMENTS................................28
8. TERM ................................................................28
8.1. TERMINATION........................................28
8.2. SURVIVAL OF OBLIGATIONS UPON TERMINATION OF
FINANCING ARRANGEMENT..............................29
9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES...............................29
9.1. EVENTS OF DEFAULT..................................29
9.2. REMEDIES...........................................31
9.3. WAIVERS BY BORROWER................................31
9.4. RIGHT OF SET-OFF...................................32
10. MISCELLANEOUS.......................................................32
10.1. COMPLETE AGREEMENT; MODIFICATION OF
AGREEMENT; SALE OF INTEREST........................32
10.2. FEES AND EXPENSES..................................33
10.3. NO WAIVER BY LENDER................................33
10.4. REMEDIES...........................................34
10.5. WAIVER OF JURY TRIAL...............................34
10.6. SEVERABILITY.......................................34
10.7. PARTIES............................................34
10.8. CONFLICT OF TERMS..................................34
10.9. GOVERNING LAW......................................35
10.10. NOTICES............................................35
10.11. SURVIVAL...........................................36
10.12. SECTION TITLES.....................................36
10.13. COUNTERPARTS.......................................37
ii
<PAGE>
SCHEDULES
Schedule 2.3 Intek Purchase Orders
Schedule 3.1(n) Simmonds and Midland Invoices
Schedule 4.1 Corporate Matters
Schedule 4.2 Executive Office
Schedule 4.13 Patents, Trademarks, Copyrights and Licenses
Schedule 7.3 Indebtedness
Schedule 7.6 Certain Transactions
EXHIBITS
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Non-Recourse Guaranty and Pledge Agreement
Exhibit D - Form of Security Agreement
Exhibit E - Form of Trademark Agreement
Exhibit F - Form of Legal Opinion of Counsel to Borrower
Exhibit G - Form of Legal Opinion of Counsel to Intek
Exhibit H - Form of New York Legal Opinion of Counsel to
Borrower and Intek
Exhibit I - Form of Jones, Day, Reavis & Pogue Legal Opinion
to Intek
iii
<PAGE>
SCHEDULE 2.3
INTEK PURCHASE ORDERS
<PAGE>
SCHEDULE 3.1(n)
SIMMONDS AND MIDLAND INVOICES
<PAGE>
SCHEDULE 4.1
CORPORATE MATTERS
4.1(ii) Qualified to Do Business
Colorado
Florida
Kansas
Indiana
Massachusetts
Michigan
Nevada
North Carolina
Ohio
Texas
4.1(iv) Licenses, Permits, Consents, Approvals
Employment Taxes:
Colorado
Florida
Kansas
Indiana
Massachusetts
Michigan
Missouri
Nevada
North Carolina
Ohio
Texas
Resale Permits:
Colorado
Florida
Missouri
North Carolina
Texas
<PAGE>
SCHEDULE 4.2
EXECUTIVE OFFICE
The executive offices and principal place of business of Midland
USA, Inc. are located at 1690 North Topping Avenue, Kansas City,
Missouri 64120.
<PAGE>
SCHEDULE 4.13
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
4.13(a) Patents
US Patent Number 4,718,586 (Swivel Fastening Device)
4.13(b) Trademarks
The trademark "Midland" Reg. No 927193, serial number 72-277,496,
first registered on January 18, 1972 and renewed on December 13,
1991.
The trademark "Midland" Reg. No 895483, serial number 72-156,089,
first registered on July 28, 1970 and renewed on December 18,
1990.
4.13(c) Copyrights
None
4.13(d) Licenses
1) Midland USA - Midland International Corp. Trademark License
Agreement dated September 19, 1996.
2) Midland International Corp. - Midland Consumer Int'l.
Exclusive License Agreement dated June 30, 1995.
3) Midland International Corp. - LETT Electronics Private Label
Agreement dated March 1, 1995.
4) Midland International Corp. - American Digital
Communications, Inc. Asset Purchase Agreement dated December
29, 1995.
<PAGE>
SCHEDULE 7.3
INDEBTEDNESS
1. Equipment leases (i) which Midland is assigning pursuant to
the Asset and Trademark Agreement or (ii) entered into by the
Borrower having annual payments less than or equal to $50,000.
2. Purchase orders for product to be purchased from vendors for
use in the U.S. LMR Distribution Business.
<PAGE>
SCHEDULE 7.6
CERTAIN TRANSACTIONS
1. The Product Purchasing Services Agreement, dated September
19, 1996, between Midland and Borrower.
2. The Computer Services Agreement, dated September 19, 1996,
between Borrower and Simmonds Capital Limited.
3. The Consignment Agreement, dated as of September 19, 1996,
between Borrower and Midland.
4. The License Agreement, dated September 19, 1996, between
Borrower and Midland.
<PAGE>
NON-RECOURSE GUARANTY AND PLEDGE AGREEMENT
NON-RECOURSE GUARANTY AND PLEDGE AGREEMENT, dated as
of September 19, 1996, between INTEK DIVERSIFIED CORPORATION,
a Delaware corporation (the "Pledgor"), and SECURICOR
COMMUNICATIONS LIMITED, a company incorporated under the laws
of England and Wales ("Lender").
W I T N E S S E T H:
WHEREAS, Pledgor is the record and beneficial owner
of the shares of stock described in Schedule I hereto (the
"Pledged Shares") issued by Midland USA, Inc., a Delaware
corporation ("Borrower"); and
WHEREAS, Borrower and Lender have entered into a
Loan Agreement, dated as of September 19, 1996 (as at any time
amended, modified or supplemented, the "Loan Agreement"),
pursuant to which Lender has agreed to make certain Revolving
Credit Advances available to Borrower (the "Loans") the
proceeds of which are to be used for Borrower's business as
described in the Loan Agreement); and
WHEREAS, Pledgor will derive substantial direct and
indirect economic benefit from the making of the Loans; and
WHEREAS, in connection with the making of the Loans
under the Loan Agreement and as security for all of the
Obligations of Borrower under the Loan Agreement, Lender is
requiring that Pledgor shall have executed and delivered this
Non-Recourse Guaranty and Pledge Agreement and granted the
security interest contemplated hereby;
NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained, and to induce Lender to
make Loans under the Loan Agreement, it is agreed as follows:
1. DEFINITIONS. Unless otherwise defined herein,
terms defined in the Loan Agreement are used herein as therein
defined, and the following shall have (unless otherwise
provided elsewhere in this Non-Recourse Guaranty and Pledge
Agreement) the following respective meanings (such meanings
being equally applicable to both the singular and plural form
of the terms defined):
"Agreement" shall mean this Non-Recourse Guaranty
and Pledge Agreement, including all amendments, modifications
and supplements and any exhibits or schedules to any of the
foregoing, and shall refer to the Agreement as the same may be
in effect at the time such reference becomes operative.
1
<PAGE>
"Bankruptcy Code" shall mean title 11, United States
Code, as amended from time to time, and any successor statute
thereto.
"Pledged Collateral" shall have the meaning assigned
to such term in Section 2 hereof.
"Secured Obligations" shall have the meaning
assigned to such term in Section 3 hereof.
2. PLEDGE. Pledgor hereby pledges to Lender, and
grants to Lender, a first priority security interest in, all
of the following (collectively, the "Pledged Collateral")
except as otherwise provided in Section 8(b):
(a) the Pledged Shares owned by Pledgor and the
certificates representing the Pledged Shares, and all
dividends, distributions, cash, instruments and other property
or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or
all of the Pledged Shares owned by Pledgor; and
(b) all additional shares of capital stock of
Borrower from time to time acquired by Pledgor in any manner
(which shares shall be deemed to be part of the Pledged
Shares), and the certificates representing such additional
shares, and all dividends, distributions, cash, instruments
and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in
exchange for any or all of such shares.
3. SECURITY FOR OBLIGATIONS. This Agreement
secures, and the Pledged Collateral is security for, the
prompt payment in full when due, whether at stated maturity,
by acceleration or otherwise, and performance of the
Obligations, whether for principal, premium, interest, fees,
costs and expenses of Lender incurred in connection with this
Agreement, and all obligations of Pledgor now or hereafter
existing under this Agreement (collectively, the "Secured
Obligations").
4. DELIVERY OF PLEDGED COLLATERAL. All
certificates representing or evidencing the Pledged Shares
shall be delivered to and held by or on behalf of Lender
pursuant hereto and shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form
and substance satisfactory to Lender. Lender shall have the
right, at any time in its discretion and without notice to
Pledgor, to transfer to or to register in the name of Lender
or any of its nominees any or all of the Pledged Shares. In
addition, Lender shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged
2
<PAGE>
Shares for certificates or instruments of smaller or larger
denominations.
5. NON-RECOURSE GUARANTY. Pledgor hereby
guarantees to Lender, on a non-recourse basis, prompt payment
(whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, it being understood
that Lender's sole recourse against Pledgor shall be limited
to the Pledged Collateral. Pledgor hereby waives any right of
subrogation, reimbursement, contribution or any similar right
against Borrower or any other guarantor in respect of the
Secured Obligations.
6. REPRESENTATIONS AND WARRANTIES. Pledgor
represents and warrants to Lender that:
(a) Pledgor is, and at the time of delivery of the
Pledged Shares to Lender pursuant to Section 4 hereof will be,
the sole holder of record and the sole beneficial owner of the
Pledged Collateral pledged by Pledgor free and clear of any
Lien thereon or affecting the title thereto except for the
Lien created by this Agreement.
(b) All of the Pledged Shares have been duly
authorized, validly issued and are fully paid and non-
assessable.
(c) Pledgor has the right and requisite authority
to pledge, assign, transfer, deliver, deposit and set over the
Pledged Collateral pledged by such Pledgor to Lender as
provided herein.
(d) None of the Pledged Shares of Pledgor has been
issued or transferred in violation of the securities registra
tion, securities disclosure or similar laws of any
jurisdiction to which such issuance or transfer may be
subject.
(e) No consent, approval, authorization or other
order of any Person and no consent, authorization, approval,
or other action by, and no notice to or filing with, any
Governmental Entity is required to be made or obtained by
Pledgor either (i) for the pledge by Pledgor of the Pledged
Collateral pursuant to this Agreement or for the execution,
delivery or performance of this Agreement by Pledgor or
(ii) for the exercise by Lender of the voting or other rights
provided for in this Agreement or the remedies in respect of
the Pledged Collateral pursuant to this Agreement, except as
may be required in connection with such disposition by laws
affecting the offering and sale of securities generally.
3
<PAGE>
(f) The pledge, assignment and delivery of the
Pledged Collateral pursuant to this Agreement will create a
valid first priority Lien on and a first priority perfected
security interest in the Pledged Collateral pledged by
Pledgor, and the proceeds thereof, securing the payment of the
Secured Obligations, subject to no other Lien or security
interest.
(g) This Agreement has been duly executed and
delivered by Pledgor and constitutes a legal, valid and
binding obligation of Pledgor enforceable in accordance with
its terms, except as enforceability may be limited by
bankruptcy, insolvency, or other similar laws affecting the
rights of creditors generally or by the application of general
equity principles.
The representations and warranties set forth in this
Section 6 shall survive the execution and delivery of this
Agreement.
7. COVENANTS. Pledgor covenants and agrees that
until the Repayment Date:
(a) Without the prior written consent of Lender,
Pledgor will not sell, assign, transfer, pledge, or otherwise
encumber any of its rights in or to the Pledged Collateral
pledged by Pledgor or any unpaid dividends or other
distributions or payments with respect thereto or grant a Lien
on any of the foregoing except as otherwise permitted by the
Loan Agreement.
(b) Pledgor will, at its expense, promptly execute,
acknowledge and deliver all such instruments and take all such
action as Lender from time to time may request in order to
ensure to Lender the benefits of the Liens in and to the
Pledged Collateral intended to be created by this Agreement,
including the filing of any necessary Uniform Commercial Code
financing statements, which may be filed by Lender with or
without the signature of Pledgor, and will cooperate with
Lender, at Pledgor's expense, in obtaining all necessary
approvals and making all necessary filings under federal or
state law in connection with such Liens or any sale or
transfer of the Pledged Collateral.
(c) Pledgor has and will defend the title to the
Pledged Collateral and the Liens of Lender thereon against the
claim of any Person and will maintain and preserve such Liens
until the Repayment Date.
(d) Pledgor will, upon obtaining any additional
shares of capital stock of Borrower which are not already
Pledged Collateral, promptly (and in any event within three
4
<PAGE>
(3) Business Days) deliver to Lender a Pledge Amendment, duly
executed by Pledgor, in substantially the form of Schedule II
hereto (a "Pledge Amendment"), in respect of the additional
Pledged Shares which are to be pledged pursuant to this
Agreement. Pledgor hereby authorizes Lender to attach each
Pledge Amendment to this Agreement and agrees that all Pledged
Shares listed on any Pledge Amendment delivered to Lender
shall for all purposes hereunder be considered Pledged
Collateral.
8. PLEDGOR'S RIGHTS. As long as no Default or
Event of Default shall have occurred and be continuing and
until written notice shall be given to Pledgor in accordance
with Section 9(a) hereof,
(a) Pledgor shall have the right, from time to
time, to vote and give consents with respect to the Pledged
Collateral or any part thereof for all purposes not
inconsistent with the provisions of this Agreement, the Loan
Agreement, and any other agreement; PROVIDED, HOWEVER, that no
vote shall be cast, and no consent shall be given or action
taken, which would have the effect of impairing the position
or interest of Lender in respect of the Pledged Collateral or
which would authorize or effect (except as and to the extent
expressly permitted by the Loan Agreement) (i) the dissolution
or liquidation, in whole or in part, of Borrower, (ii) the
consolidation or merger of Borrower with any other Person,
(iii) the sale, disposition or encumbrance of all or
substantially all of the assets of Borrower, (iv) any change
in the authorized number of shares, the stated capital or the
authorized share capital of Borrower or the issuance of any
additional shares of stock of Borrower, or (v) the alteration
of the voting rights with respect to the stock of Borrower;
(b) (i) Pledgor shall be entitled, from time to
time, to collect and receive for its own use and shall not be
required to pledge pursuant to Section 2, all cash dividends
paid in respect of the Pledged Shares to the extent not in
violation of the Loan Agreement other than any and all
(A) dividends paid or payable other than in cash in respect
of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any
Pledged Collateral, (B) dividends and other distributions paid
or payable in cash in respect of any Pledged Collateral in
connection with a partial or total liquidation or dissolution,
and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral;
PROVIDED, HOWEVER, that until actually paid all rights to such
dividends shall remain subject to the Lien created by this
Agreement; and
5
<PAGE>
(ii) all dividends (other than such cash
dividends as are permitted to be paid to Pledgor in accordance
with clause (i) above) and all other distributions in respect
of any of the Pledged Shares of Pledgor, whenever paid or
made, shall be delivered to Lender to hold as Pledged
Collateral and shall, if recovered by Pledgor, be received in
trust for the benefit of Lender, be segregated from the other
property or funds of Pledgor, and be forthwith delivered to
Lender as Pledged Collateral in the same form as so received
(with any necessary indorsement).
9. DEFAULTS AND REMEDIES. (a) Upon the occurrence
of an Event of Default and during the continuation of such
Event of Default, then or at any time after the occurrence
thereof and following written notice thereof to Pledgor
(provided that such notice is not rescinded by Lender) Lender
(personally or through an agent) is hereby authorized and
empowered to transfer and register in its name or in the name
of its nominee the whole or any part of the Pledged
Collateral, to exchange certificates or instruments
representing or evidencing Pledged Shares for certificates or
instruments of smaller or larger denominations, to exercise
the voting rights with respect thereto, to collect and receive
all cash dividends and other distributions made thereon, to
sell in one or more sales after ten (10) days' notice of the
time and place of any public sale or of the time after which a
private sale is to take place (which notice Pledgor agrees is
commercially reasonable), but without any previous notice or
advertisement, the whole or any part of the Pledged Collateral
and to otherwise act with respect to the Pledged Collateral as
though Lender was the outright owner thereof, Pledgor hereby
irrevocably constituting and appointing Lender as the proxy
and attorney-in-fact of Pledgor, with full power of
substitution to do so, and which shall remain in effect until
the Secured Obligations are paid in full; PROVIDED, HOWEVER,
Lender shall not have any duty to exercise any such right or
to preserve the same and shall not be liable for any failure
to do so or for any delay in doing so. Any sale shall be made
at a public or private sale at Lender's place of business, or
at any public building in the City of New York or elsewhere to
be named in the notice of sale, either for cash or upon credit
or for future delivery at such price as Lender may deem fair,
and Lender may be the purchaser of the whole or any part of
the Pledged Collateral so sold and hold the same thereafter in
its own right free from any claim of Pledgor or any right of
redemption. Each sale shall be made to the highest bidder,
but Lender reserves the right to reject any and all bids at
such sale which, in its discretion, it shall deem inadequate.
Demands of performance, except as otherwise herein
specifically provided for, notices of sale, advertisements and
the presence of property at sale are hereby waived and any
6
<PAGE>
sale hereunder may be conducted by an auctioneer or any
officer or agent of Lender.
(b) If, at the original time or times appointed for
the sale of the whole or any part of the Pledged Collateral,
the highest bid, if there be but one sale, shall be inadequate
to discharge in full all the Secured Obligations, or if the
Pledged Collateral be offered for sale in lots, if at any of
such sales, the highest bid for the lot offered for sale would
indicate to Lender, in its discretion, the unlikelihood of the
proceeds of the sales of the whole of the Pledged Collateral
being sufficient to discharge all the Secured Obligations,
Lender may, on one or more occasions and in its discretion,
postpone any of said sales by public announcement at the time
of sale or the time of previous postponement of sale, and no
other notice of such postponement or postponements of sale
need be given, any other notice being hereby waived; PROVIDED,
HOWEVER, that any sale or sales made after such postponement
shall be after seven (7) days' notice to Pledgor.
(c) In the event of any sales hereunder, Lender
shall, after deducting all costs or expenses of every kind
(including reasonable attorneys' fees and disbursements) for
care, safekeeping, collection, sale, delivery or otherwise,
apply the residue of the proceeds of the sales to the payment
or reduction, either in whole or in part, of the Secured
Obligations in accordance with the agreements and instruments
governing and evidencing such Obligations, returning the
surplus, if any, to Pledgor.
(d) If, at any time when Lender in its sole
discretion determines, following the occurrence and during the
continuance of an Event of Default, that, in connection with
any actual or contemplated exercise of its rights (when
permitted under this Section 9) to sell the whole or any part
of the Pledged Collateral hereunder, it is necessary or
advisable to effect a public registration of all or part of
the Pledged Collateral pursuant to the Securities Act of 1933,
as amended (or any similar statute then in effect) (the
"Act"), Pledgor shall, in an expeditious manner, and to the
extent Pledgor has authority or the right to, cause Borrower
to and if Pledgor cannot cause Borrower to, then Pledgor must
cooperate with Borrower to do all things reasonably requested
by Lender to effect such registration:
(e) Lender agrees that it will not seek any mone
tary damages from any Pledgor and that it shall only seek
specific performance of its rights under this Agreement.
Pledgor agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it
of the provisions of this Agreement and hereby agrees to waive
7
<PAGE>
the defense in any action for specific performance that a
remedy at law would be adequate.
(f) If, at any time when Lender shall determine to
exercise its right to sell the whole or any part of the
Pledged Collateral hereunder, such Pledged Collateral or the
part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under the Act, Lender may, in its
discretion (subject only to applicable requirements of law),
sell such Pledged Collateral or part thereof by private sale
in such manner and under such circumstances as Lender may deem
necessary or advisable, but subject to the other requirements
of this Section 9, and shall not be required to effect such
registration or to cause the same to be effected. Without
limiting the generality of the foregoing, in any such event
Lender in its discretion (a) may, in accordance with
applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose
of registering such Pledged Collateral or part thereof could
be or shall have been filed under said Act (or similar
statute), (b) may approach and negotiate with a single
possible purchaser to effect such sale, and (c) may restrict
such sale to a purchaser who will represent and agree that
such purchaser is purchasing for its own account, for
investment and not with a view to the distribution or sale of
such Pledged Collateral or part thereof. In addition to a
private sale as provided above in this Section 9, if any of
the Pledged Collateral shall not be freely distributable to
the public without registration under the Act (or similar
statute) at the time of any proposed sale pursuant to this
Section 9, then Lender shall not be required to effect such
registration or cause the same to be effected but, in its
discretion (subject only to applicable requirements of law),
may require that any sale hereunder (including a sale at
auction) be conducted subject to restrictions (i) as to the
financial sophistication and ability of any Person permitted
to bid or purchase at any such sale, (ii) as to the content of
legends to be placed upon any certificates representing the
Pledged Collateral sold in such sale, including restrictions
on future transfer thereof, (iii) as to the representations
required to be made by each Person bidding or purchasing at
such sale relating to that Person's access to financial
information about Pledgor and such Person's intentions as to
the holding of the Pledged Collateral so sold for investment,
for its own account, and not with a view to the distribution
thereof, and (iv) as to such other matters as Lender may, in
its discretion, deem necessary or appropriate in order that
such sale (notwithstanding any failure so to register) may be
effected in compliance with the Bankruptcy Code and other laws
affecting the enforcement of creditors' rights and the Act and
all applicable state securities laws.
8
<PAGE>
(g) Pledgor acknowledges that notwithstanding the
legal availability of a private sale or a sale subject to the
restrictions described above in paragraph (f), Lender may, in
its discretion, elect to register any or all the Pledged
Collateral under the Act (or any applicable state securities
law) in accordance with its rights hereunder. Pledgor,
however, recognizes that Lender may be unable to effect a
public sale of any or all the Pledged Collateral and may be
compelled to resort to one or more private sales thereof.
Pledgor also acknowledges that any such private sale may
result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.
Lender shall be under no obligation to delay a sale of any of
the Pledged Collateral for the period of time necessary to
permit the registrant to register such securities for public
sale under the Act, or under applicable state securities laws,
even if Pledgor would agree to do so.
(h) Pledgor agrees that following the occurrence
and during the continuance of an Event of Default it will not
at any time plead, claim or take the benefit of any appraisal,
valuation, stay, extension, moratorium or redemption law now
or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of the
whole or any part of the Pledged Collateral or the possession
thereof by any purchaser at any sale hereunder, and Pledgor
waives the benefit of all such laws to the extent it lawfully
may do so. Pledgor agrees that it will not interfere with any
right, power and remedy of Lender provided for in this
Agreement or now or hereafter existing at law or in equity or
by statute or otherwise, or the exercise or beginning of the
exercise by Lender of any one or more of such rights, powers
or remedies. No failure or delay on the part of Lender to
exercise any such right, power or remedy and no notice or
demand which may be given to or made upon Pledgor by Lender
with respect to any such remedies shall operate as a waiver
thereof, or limit or impair Lender's right to take any action
or to exercise any power or remedy hereunder, without notice
or demand, or prejudice its rights as against Pledgor in any
respect.
(i) Pledgor further agrees that a breach of any of
the covenants contained in this Section 9 will cause
irreparable injury to Lender, that Lender has no adequate
remedy at law in respect of such breach and, as a consequence,
agrees that each and every covenant contained in this Section
9 shall be specifically enforceable against Pledgor, and
Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants
except for a defense that the Secured Obligations are not then
9
<PAGE>
due and payable in accordance with the agreements and
instruments governing and evidencing such obligations.
10. APPLICATION OF PROCEEDS. Any cash held by
Lender as Pledged Collateral and all cash proceeds received by
Lender in respect of any sale of, liquidation of, or other
realization upon all or any part of the Pledged Collateral
shall be applied by Lender as follows:
FIRST, to Lender in an amount sufficient to pay in
full the expenses of Lender in connection with such sale,
disposition or other realization, including all expenses,
liabilities and advances incurred or made by Lender in
connection therewith, including, without limitation,
attorney's fees;
SECOND, to Lender in an amount equal to the then
unpaid principal of and accrued interest and prepayment
premiums, if any, on the Secured Obligations;
THIRD, to Lender in an amount equal to any other
Secured Obligations which are then unpaid; and
FINALLY, after payment in full of all Secured
Obligations, to pay to Pledgor, or as a court of compe
tent jurisdiction may direct, any surplus then remaining
from such proceeds.
11. WAIVER. No delay on Lender's part in exer
cising any power of sale, Lien, option or other right here
under, and no notice or demand which may be given to or made
upon Pledgor by Lender with respect to any power of sale,
Lien, option or other right hereunder, shall constitute a
waiver thereof, or limit or impair Lender's right to take any
action or to exercise any power of sale, Lien, option, or any
other right hereunder, without notice or demand, or prejudice
Lender's rights as against Pledgor in any respect.
12. ASSIGNMENT. Lender may assign, indorse or
transfer any instrument evidencing all or any part of the
Secured Obligations and the holder of such instrument shall be
entitled to the benefits of this Agreement.
13. TERMINATION. Immediately following the payment
of all Secured Obligations, Lender shall deliver to Pledgor
the Pledged Collateral pledged by Pledgor at the time subject
to this Agreement and all instruments of assignment executed
in connection therewith, free and clear of the Liens hereof
and, except as otherwise provided herein, all of Pledgor's
obligations hereunder shall at such time terminate.
10
<PAGE>
14. LIEN ABSOLUTE. All rights of Lender hereunder,
and all obligations of Pledgor hereunder, shall be absolute
and unconditional irrespective of:
(a) any lack of validity or enforceability of the
Loan Agreement, the Note, any other Loan Document or any other
agreement or instrument governing or evidencing any Secured
Obligations;
(b) any change in the time, manner or place of
payment of, or in any other term of, all or any part of the
Secured Obligations, or any other amendment or waiver of or
any consent to any departure from the Loan Agreement, the
Note, any other Loan Document or any other agreement or
instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Secured Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor.
15. RELEASE. Pledgor consents and agrees that
Lender may at any time, or from time to time, in its
discretion (a) renew, extend or change the time of payment,
and/or the manner, place or terms of payment of all or any
part of the Secured Obligations and (b) exchange, release
and/or surrender all or any of the Pledged Collateral, or any
part(s) thereof, by whomsoever deposited, which is now or may
hereafter be held by Lender in connection with all or any of
the Secured Obligations; all in such manner and upon such
terms as Lender may deem proper, and without notice to or
further assent from Pledgor, it being hereby agreed that
Pledgor shall be and remain bound upon this Agreement,
irrespective of the existence, value or condition of any of
the Pledged Collateral, and notwithstanding any such change,
exchange, settlement, compromise, surrender, release, renewal
or extension, and notwithstanding also that the Secured
Obligations may, at any time exceed the aggregate principal
amount thereof set forth in the Loan Agreement, or any other
agreement governing any Secured Obligations. Pledgor hereby
waives notice of acceptance of this Agreement, and also
presentment, demand, protest and notice of dishonor of any and
all of the Secured Obligations, and promptness in commencing
suit against any party hereto or liable hereon, and in giving
any notice to or of making any claim or demand hereunder upon
Pledgor. No act or omission of any kind on Lender's part
shall in any event affect or impair this Agreement.
11
<PAGE>
16. REINSTATEMENT. This Agreement shall remain in
full force and effect and continue to be effective should any
petition be filed by or against Pledgor for liquidation or
reorganization, should Pledgor become insolvent or make an
assignment for the benefit of creditors or should a receiver
or trustee be appointed for all or any significant part of
Pledgor's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any
obligee of the Secured Obligations, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as
though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Secured Obligations shall
be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
17. MISCELLANEOUS. (a) Lender may execute any of
its duties hereunder by or through agents or employees and
shall be entitled to advice of counsel concerning all matters
pertaining to its duties hereunder.
(b) Neither Lender nor any of its officers,
directors, employees, agents or counsel shall be liable for
any action lawfully taken or omitted to be taken by it or them
hereunder or in connection herewith, except for its or their
own negligence or willful misconduct.
(c) THIS AGREEMENT SHALL BE BINDING UPON PLEDGOR
AND ITS SUCCESSORS AND ASSIGNS, AND SHALL INURE TO THE BENEFIT
OF, AND BE ENFORCEABLE BY, LENDER AND ITS SUCCESSORS AND
ASSIGNS, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS IN EFFECT IN THE STATE
OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF
LAWS, AND NONE OF THE TERMS OR PROVISIONS OF THIS AGREEMENT
MAY BE WAIVED, ALTERED, MODIFIED OR AMENDED EXCEPT IN WRITING
DULY SIGNED FOR AND ON BEHALF OF LENDER AND PLEDGOR.
18. SEVERABILITY. If for any reason any provision
or provisions hereof are determined to be invalid and contrary
to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this
Agreement which are valid.
19. NOTICES. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by
any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to
12
<PAGE>
this Agreement, each such notice, demand, request, consent,
approval, declaration or other communication shall be in
writing and either shall be delivered in person with receipt
acknowledged or sent by registered or certified mail, return
receipt requested, postage prepaid, or by telecopy and
confirmed by telecopy answerback, addressed as follows:
(a) If to Lender, at:
15 Carshalton Road
Sutton
Surrey SM1 4LD
Attention: Ed Hough
Telecopy Number: 0181 661 0205
with a copy to:
Weil, Gotshal & Manges
99 Bishopsgate
London EC2M 3XD
Attention: David Lefkowitz, Esq.
Telecopy Number: 0171 426 1000
(b) If to Pledgor, at its address specified in
Schedule I
With a copy to:
Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles
California 90064
Attention: Nancy Wojtas
Telecopy Number: 310 312 4224
or at such other address as may be substituted by notice given
as herein provided. The giving of any notice required
hereunder may be waived in writing by the party entitled to
receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall
be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged,
telecopied and confirmed by telecopy answerback, or seven (7)
Business Days after the same shall have been deposited (i) in
the United States mail (in the case of notice being given by
the Pledgor or any other Person located in the United States)
or (ii) in the United Kingdom mail (in the case of notice
being given by the Lender or any other Person located in the
United Kingdom). Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or
13
<PAGE>
other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of
such notice, demand, request, consent, approval, declaration
or other communication.
20. SECTION TITLES. The Section titles contained
in this Agreement are and shall be without substantive meaning
or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.
21. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, which shall, collectively and
separately, constitute one agreement.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Non-Recourse Guaranty and Pledge Agreement to be duly
executed as of the date first written above.
INTEK DIVERSIFIED CORPORATION
By: /s/ David Neibert
Name: David Neibert
Title: Executive Vice President
Accepted and Acknowledged by:
SECURICOR COMMUNICATIONS LIMITED
By: /s/ M.G. Wilkinson
Name: M.G. Wilkinson
Title: Director
15
<PAGE>
SCHEDULE I
Attached to and forming a part of that certain
Non-Recourse Guaranty and Pledge Agreement dated as of
September 19, 1996 by Pledgor to Securicor Communications
Limited.
<TABLE>
<CAPTION>
Number of Shares
Name and Address Class of Certificate Number of Issued and
of Pledgor Issuer Stock Number(s) Shares Outstanding
- ----------------------------- ----------------- -------- ----------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Intek Diversified Corporation Midland USA, Inc. Common 1 100 100
970 West 190th Street Stock, par
Suite 970 value $0.01
Torrance, California 90502
</TABLE>
16
<PAGE>
SCHEDULE II
to the Non-Recourse Guaranty and Pledge Agreement
PLEDGE AMENDMENT
This Pledge Amendment, dated ____________, 19__
is delivered pursuant to Section 7(d) of the Non-Recourse
Guaranty and Pledge Agreement referred to below. The undersigned
hereby agrees that this Pledge Amendment may be attached to that
certain Non-Recourse Guaranty and Pledge Agreement, dated as of
September 19, 1996 by the undersigned and others, as Pledgor, to
Securicor Communications Limited, and that the Pledged Shares
listed on this Pledge Amendment shall be and become a part of the
Pledged Collateral referred to in said Non-Recourse Guaranty and
Pledge Agreement and shall secure all Secured Obligations
referred to in said Non-Recourse Guaranty and Pledge Agreement.
INTEK DIVERSIFIED CORPORATION
By:_________________________
Name:
Title:
<TABLE>
<CAPTION>
Number of Shares
Name and Address Class of Certificate Number of Issued and
of Pledgor Issuer Stock Number(s) Shares Outstanding
- ----------------------------- ----------------- -------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Intek Diversified Corporation Midland USA, Inc. Common
970 West 190th Street Stock, par
Suite 970 value $0.01
Torrance, California 90502
</TABLE>
17
<PAGE>
REVOLVING CREDIT NOTE
$15,000,000 New York, New York
September 19, 1996
FOR VALUE RECEIVED, the undersigned, MIDLAND USA,
INC., a Delaware corporation (hereinafter referred to as
"Borrower"), hereby PROMISES TO PAY to the order of SECURICOR
COMMUNICATIONS LIMITED, a corporation formed under the laws of
England and Wales ("Lender"), at 15 Carshalton Road, Sutton,
Surrey, SM1 4LD, or at such other place as the holder of this
Revolving Credit Note may designate from time to time in
writing, in lawful money of the United States of America and
in immediately available funds, the amount of fifteen million
dollars ($15,000,000), or such lesser principal amount as may
be outstanding pursuant to the Loan Agreement (as hereinafter
defined), together with interest on the unpaid principal
amount of this Revolving Credit Note outstanding from time to
time from the date hereof at the rate or rates provided in the
Loan Agreement.
This Revolving Credit Note is issued pursuant to
that certain Loan Agreement dated as of September 19, 1996
between Borrower and Lender (the "Loan Agreement"), and is
entitled to the benefit and security of the Loan Documents
provided for therein, to which reference is hereby made for a
statement of all of the terms and conditions under which the
loan evidenced hereby is made. All capitalized terms, unless
otherwise defined herein, shall have the meanings ascribed to
them in the Loan Agreement.
The principal amount of the indebtedness evidenced
hereby shall be payable on the Repayment Date. Interest
thereon shall accrue on a daily basis at the rate specified in
the Loan Agreement and shall be capitalized on a monthly
basis. Any accrued but uncapitalized interest shall be
payable on the Repayment Date.
If any payment on this Revolving Credit Note becomes
due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal,
interest thereon shall continue to accrue at the then
applicable rate during such extension.
Upon and after the occurrence of an Event of
Default, this Revolving Credit Note may, as provided in the
Loan Agreement, and without demand, notice or legal process of
any kind, be declared, and immediately shall become, due and
payable.
1
<PAGE>
Demand, presentment, protest and notice of nonpay
ment and protest are hereby waived by Borrower.
THIS REVOLVING CREDIT NOTE HAS BEEN EXECUTED,
DELIVERED AND ACCEPTED AT NEW YORK, NEW YORK AND SHALL BE
INTERPRETED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
MIDLAND USA, INC.
By: /s/ David Neibert
Name: David Neibert
Title: President
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SECURITY AGREEMENT
SECURITY AGREEMENT, dated September 19, 1996, made
by Midland USA, Inc., a Delaware corporation (the "Grantor")
and a wholly-owned subsidiary of Intek Diversified
Corporation, a Delaware corporation ("Intek"), in favor of
Securicor Communications Limited, a company incorporated under
the laws of England and Wales (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Loan Agreement
dated as of September 19, 1996 between Borrower and Lender (as
the same may from time to time be amended, modified or
supplemented, the "Loan Agreement"), Lender has agreed to make
Revolving Credit Advances as defined in the Loan Agreement;
and
WHEREAS, Lender is willing to make the Revolving
Credit Advances but only upon the condition, among others,
that Grantor shall have executed and delivered to Lender this
Security Agreement.
NOW, THEREFORE, in consideration of the premises and
of the mutual covenants herein contained and for other good
and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. As used in this Agreement, terms
defined in the Loan Agreement are used herein as therein
defined, and the following terms have the meanings specified
below (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"ACCOUNT" means any "account," as such term is
defined in Section 9-106 of the UCC, now owned or hereafter
acquired by the Grantor and, in any event, includes, without
limitation, (i) all accounts receivable, book debts and other
forms of obligations (other than forms of obligations
evidenced by Chattel Paper, Documents or Instruments) now
owned or hereafter received or acquired by or belonging or
owing to the Grantor (including, without limitation, under any
trade name, style or division thereof) whether arising out of
goods sold or services rendered by the Grantor or from any
other transaction, whether or not the same involves the sale
of goods or services by the Grantor (including, without
limitation, any such obligation which might be characterized
as an account or contract right under the UCC), (ii) all of
the Grantor's rights in, to and under all purchase orders or
receipts now owned or hereafter acquired by it for goods or
services, and all of the Grantor's rights to any goods
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represented by any of the foregoing (including, without
limitation, unpaid seller's rights of rescission, replevin,
reclamation and stoppage in transit and rights to returned,
reclaimed or repossessed goods), (iii) all moneys due or to
become due to the Grantor under all contracts for the sale of
goods or the performance of services or both by the Grantor
(whether or not yet earned by performance on the part of the
Grantor or in connection with any other transaction), now in
existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase
orders and contracts, and (iv) all collateral security and
guarantees of any kind given by any Person with respect to any
of the foregoing.
"ACCOUNT DEBTOR" means any "account debtor," as
such term is defined in Section 9-105(1)(a) of the UCC.
"BLOCKED ACCOUNT #1" means account #
010161070176 at Boatman's First National Bank of Kansas City,
14 West 10th Street, Kansas City, MO 64105.
"BLOCKED ACCOUNT #2" means account #
010161070184 at Boatman's First National Bank of Kansas City,
14 West 10th Street, Kansas City, MO 64105.
"BLOCKED ACCOUNTS" means the blocked accounts
maintained by the Grantor with the Blocked Account Bank, all
monies, instruments and other property deposited therein and
all certificates and instruments, if any, representing or
evidencing such Blocked Accounts.
"BLOCKED ACCOUNT BANK" means a financial
institution selected or approved by the Lender and with
respect to which the Grantor has delivered to the Lender an
executed Blocked Account Letter.
"BLOCKED ACCOUNT LETTER" means a letter,
substantially in the form of Annex I hereto (with such changes
as may be agreed to by the Lender), executed by the Grantor
and the Lender and acknowledged and agreed to by a Blocked
Account Bank.
"CASH COLLATERAL ACCOUNT" has the meaning
specified in Section 5(s).
"CHATTEL PAPER" means any "chattel paper," as
such term is defined in Section 9-105(1)(b) of the UCC, now
owned or hereafter acquired by the Grantor.
"COLLATERAL" has the meaning assigned to it in
Section 2 of this Agreement.
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"CONTRACTS" means all contracts, undertakings
or other agreements (other than Chattel Paper, Documents or
Instruments) in or under which the Grantor may now or
hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any agreement
relating to the terms of payment or the terms of performance
thereof.
"COPYRIGHTS" means copyrights, registrations
and applications therefor, and any and all (i) renewals and
extensions thereof, (ii) income, royalties, damages and
payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments
for past or future infringements or misappropriations thereof,
(iii) rights to sue for past, present and future infringements
or misappropriations thereof, and (iv) all other rights
corresponding thereto throughout the world.
"DOCUMENTS" means any "document," as such term
is defined in Section 9-105(1)(f) of the UCC, now owned or
hereafter acquired by the Grantor.
"EQUIPMENT" means any "equipment," as such term
is defined in Section 9-109(2) of the UCC, now owned or here
after acquired by the Grantor and, in any event, includes,
without limitation, all machinery, equipment, furnishings,
fixtures, vehicles, computers and other electronic
data-processing and office equipment now owned or hereafter
acquired by the Grantor and any and all additions,
substitutions and replacements of any of the foregoing,
wherever located, together with all attachments, components,
parts, equipment and accessories installed thereon or affixed
thereto.
"GENERAL INTANGIBLES" means any "general
intangibles," as such term is defined in Section 9-106 of the
UCC, now owned or hereafter acquired by the Grantor and, in
any event, includes, without limitation, all customer lists,
Trademarks, Patents, rights in Intellectual Property
Collateral, Licenses, permits, Copyrights, Trade Secrets,
proprietary or confidential information, inventions (whether
patented or patentable or not) and technical information,
procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models,
drawings, materials and records, goodwill, rights of
indemnification and all right, title and interest which the
Grantor may now or hereafter have in or under any Contract,
now owned or hereafter acquired by the Grantor.
"GOVERNMENTAL AUTHORITY" means any nation or
government, any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial,
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regulatory or administrative functions of or pertaining to
government.
"INSTRUMENT" means any "instrument," as such
term is defined in Section 9-105(1)(i) of the UCC, now owned
or hereafter acquired by the Grantor, other than instruments
that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INTELLECTUAL PROPERTY COLLATERAL" means:
(a) All Trademarks of the Grantor, including,
without limitation, the Trademarks listed on Schedule III
hereto;
(b) all Copyrights of the Grantor, including,
without limitation, the Copyrights listed on Schedule IV
hereto;
(c) all Licenses of the Grantor, including,
without limitation, the Licenses listed on Schedule V hereto;
(d) all Patents of the Grantor, including,
without limitation, the Patents listed on Schedule VI hereto;
(e) all Trade Secrets of the Grantor; and
(f) the entire goodwill of the Grantor's
business connected with the use of and symbolized by the
Trademarks.
"INVENTORY" means any "inventory," as such term
is defined in Section 9-109(4) of the UCC, now owned or here
after acquired by the Grantor, and wherever located, and, in
any event, includes, without limitation, all inventory,
merchandise, goods and other personal property now owned or
hereafter acquired by the Grantor which are held for sale or
lease or are furnished or are to be furnished under a contract
of service or which constitute raw materials, work in process
or materials used or consumed or to be used or consumed in the
Grantor's business, or the processing, packaging, delivery or
shipping of the same, and all finished goods.
"LENDER" has the meaning assigned to in the
recitals and in any event refers to Securicor Communications
Limited in its capacity as Lender.
"LICENSES" means license agreements in which
the Grantor grants or receives a grant of any interest in
Copyrights, Trademarks, Patents and Trade Secrets (all as
defined herein) and other intellectual property and any and
all (i) renewals, extensions, supplements, amendments and
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continuations thereof, (ii) income, royalties, damages and
payments now and hereafter due or payable to the Grantor with
respect thereto, including, without limitation, damages and
payments for past, present and future violations or
infringements or misappropriations thereof, and (iii) rights
to sue for past, present and future violations or
infringements or misappropriations thereof.
"OBLIGOR" has the meaning assigned to it in
Section 5(s)(iii) of this Agreement.
"PATENTS" means patents and patent applications
along with any and all (i) inventions and improvements
described and claimed therein, (ii) reissues, divisions,
continuations, renewals, extensions and continuations-in-part
thereof, (iii) income, royalties, damages and payments now and
hereafter due and/or payable to the Grantor with respect
thereto, including, without limitation, damages and payments
for past or future infringements or misappropriations thereof,
(iv) rights to sue for past, present and future infringements
or misappropriations thereof, and (v) all other rights
corresponding thereto throughout the world.
"PERMITTED LIENS" means Liens permitted by
Section 7.8 of the Loan Agreement existing as of the date
hereof or to be created hereafter.
"PROCEEDS" means "proceeds," as such term is
defined in Section 9-306(1) of the UCC, and, in any event,
shall include, without limitation, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to the
Grantor from time to time with respect to any of the
Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to the Grantor from time to time in
connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by
any Governmental Authority (or any Person acting under color
of Governmental Authority), and (iii) any and all other
amounts from time to time paid or payable under or in
connection with any of the Collateral.
"SECURED OBLIGATIONS" means (i) all of the
unpaid principal amount of, and accrued interest on, the Note,
(ii) the Extension Fee, and all other fees owing by the
Grantor under the Loan Agreement to the Lender and (iii) all
other Indebtedness, liabilities and obligations of the Grantor
to the Lender, whether now existing or hereafter incurred, and
whether created under, arising out of or in connection with
the Loan Agreement, this Security Agreement, any of the other
Loan Documents or otherwise.
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"TRADE SECRETS" means trade secrets, along with
any and all (i) income, royalties, damages and payments now
and hereafter due and/or payable to the Grantor with respect
thereto, including, without limitation, damages and payments
for past, present and future infringements or
misappropriations thereof, (ii) rights to sue for past,
present and future infringements or misappropriations thereof,
and (iii) all other rights corresponding thereto throughout
the world.
"TRADEMARKS" means trademarks including service
marks and trade names, whether registered or at common law,
registrations and applications therefor, and the entire
product lines and goodwill of Grantor's business connected
therewith and symbolized thereby, together with any and all
(i) renewals thereof, (ii) income, royalties, damages and
payments now and hereafter due or payable or both with respect
thereto, including, without limitation, damages and payments
for past, present and future infringements or
misappropriations thereof, (iii) rights to sue for past,
present and future infringements or misappropriations thereof,
and (iv) all other rights corresponding thereto throughout the
world.
"UCC" means the Uniform Commercial Code as the
same may, from time to time, be in effect in the State of New
York; PROVIDED, HOWEVER, in the event that, by reason of
mandatory provisions of law, any or all of the attachment,
perfection or priority of the Lender's security interest in
any Collateral is governed by the Uniform Commercial Code as
in effect in a jurisdiction other than the State of New York,
the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection or
priority and for purposes of definitions related to such
provisions.
2. GRANT OF SECURITY INTEREST.
(a) As collateral security for the full and prompt
payment when due (whether at stated maturity, by acceleration
or otherwise) of, and the performance of, all the Secured
Obligations and to induce the Lender to make the Revolving
Credit Advances available pursuant to the Loan Agreement, the
Grantor hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to the Lender, and hereby grants to
the Lender, a security interest in, all of the Grantor's
right, title and interest in, to and under the following (all
of which being hereinafter collectively called the
"Collateral"):
(i) all Accounts;
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(ii) all Chattel Paper;
(iii) all Contracts and any and all claims
of the Grantor for damages arising out of or for breach of or
a default under any Contract and the right of the Grantor to
perform or to compel performance under any Contract and to
exercise all remedies thereunder;
(iv) all Documents;
(v) all Equipment;
(vi) all General Intangibles;
(vii) all Instruments;
(viii) all Inventory;
(ix) all present and future Blocked
Accounts and all funds, certificates and instruments, if any,
from time to time held in or representing or evidencing such
Blocked Accounts PROVIDED, HOWEVER, the foregoing grant with
respect to Blocked Account #1 shall not be effective until the
30th day following the date hereof;
(x) all other goods and personal property
of the Grantor whether tangible or intangible or whether now
owned or hereafter acquired by the Grantor and wherever
located; and
(xi) to the extent not otherwise included,
all Proceeds of each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits and
products of, each of the foregoing.
(b) In addition, as collateral security for the
prompt and complete payment when due of the Secured Obliga
tions, the Lender is hereby granted a lien and security
interest in all property of the Grantor held by the Lender
including, without limitation, all property of every
description, now or hereafter in the possession or custody of
or in transit to the Lender for any purpose, including
safekeeping, collection or pledge, for the account of the
Grantor, or as to which the Grantor may have any right or
power.
3. RIGHTS OF THE LENDER; LIMITATIONS ON LENDER'S
OBLIGATIONS.
(a) It is expressly agreed by the Grantor that,
anything herein to the contrary notwithstanding, the Grantor
shall remain liable under each of the Contracts and Licenses
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to observe and perform all the conditions and obligations to
be observed and performed by it thereunder and the Grantor
shall perform all of its duties and obligations thereunder,
all in accordance with and pursuant to the terms and
provisions of each such Contract and License. The Lender
shall not have any obligation or liability under any Contract
or License by reason of or arising out of this Agreement or
the granting of a security interest in any contract to the
Lender or by reason of the receipt by the Lender of any
payment relating to any Contract or License pursuant hereto,
nor shall the Lender be required or obligated in any manner to
perform or fulfill any of the obligations of the Grantor under
or pursuant to any Contract or License, or to make any
payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency
of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to
collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may
be entitled at any time or times.
(b) The Lender authorizes the Grantor to collect
its Accounts, Chattel Paper and Instruments, provided that
such collection is performed in a prudent and businesslike
manner, and the Lender may, upon the occurrence and during the
continuance of any Event of Default and without notice, limit
or terminate said authority at any time. If required by the
Lender at any time during the continuance of any Event of
Default, any Proceeds, when first collected by the Grantor,
received in payment of any such Account or in payment for any
of its Inventory or on account of any of its Contracts, shall
be promptly deposited by the Grantor in precisely the form
received (with all necessary indorsements) in a special bank
account maintained by the Lender and subject to withdrawal
only by the Lender, as hereinafter provided, and until so
turned over shall be deemed to be held in trust by the Grantor
for and as the Lender's property and shall not be commingled
with the Grantor's other funds or properties. Such Proceeds,
when deposited, shall continue to be collateral security for
all of the Secured Obligations and shall not constitute
payment thereof until applied as hereinafter provided. The
Lender shall apply all or a part of the funds on deposit in
said special account to the principal of or interest on or
both in respect of any of the Secured Obligations in
accordance with the provisions of Section 8(d) hereof and any
part of such funds which the Lender elects not so to apply and
deem not required as collateral security for the Secured
Obligations shall be paid over from time to time by the Lender
to the Grantor. If an Event of Default has occurred and is
continuing, at the request of the Lender the Grantor shall
deliver to the Lender all original and other documents
evidencing, and relating to, the sale and delivery of such
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Inventory or the performance of labor or service which created
such Accounts, including, without limitation, all original
orders, invoices and shipping receipts; and, prior to the
occurrence of an Event of Default the Grantor shall deliver
photocopies thereof to the Lender at its request.
(c) The Lender may at any time, upon the occurrence
and during the continuance of any Default or Event of Default,
after first notifying the Grantor of its intention to do so,
notify Account Debtors of the Grantor, parties to Contracts of
the Grantor, obligors of Instruments of the Grantor and
obligors in respect of Chattel Paper of the Grantor that the
Accounts and the right, title and interest of the Grantor in
and under such Contracts, such Instruments and such Chattel
Paper have been assigned to the Lender and that payments shall
be made directly to the Lender. Upon the request of the
Lender, the Grantor will so notify such Account Debtors,
parties to such Contracts, obligors of such Instruments and
obligors in respect of such Chattel Paper. Upon the
occurrence and during the continuance of an Event of Default,
the Lender may in its own name or in the name of others
communicate with such Account Debtors, parties to such
Contracts, obligors of such Instruments and obligors in
respect of such Chattel Paper to verify with such Persons to
the Lender's satisfaction the existence, amount and terms of
any such Accounts, Contracts, Instruments or Chattel Paper.
(d) Upon reasonable prior notice to the Grantor
(unless a Default or Event of Default has occurred and is
continuing, in which case no notice is necessary), the Lender
shall have the right to make test verifications of the
Accounts and physical verifications of the Inventory in any
manner and through any medium that it considers advisable, and
the Grantor agrees to furnish all such assistance and
information as the Lender may require in connection therewith.
The Grantor, at its own cost and expense, will cause certified
independent public accountants satisfactory to the Lender to
prepare and deliver to the Lender, at any time and from time
to time promptly upon the Lender's request, the following
reports: (i) a reconciliation of all its Accounts, (ii) an
aging of all its Accounts, (iii) trial balances, and (iv) a
test verification of such Accounts as the Lender may request.
The Grantor at its expense will cause certified independent
public accountants satisfactory to the Lender to prepare and
deliver to the Lender the results of the annual physical
verification of its Inventory made or observed by such
accountants.
(e) Notwithstanding anything to the contrary con
tained herein, unless an Event of Default has occurred and is
continuing, the Grantor may continue to exploit, license,
franchise, use, enjoy and protect (whether in the United
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States of America or any foreign jurisdiction) the
Intellectual Property Collateral in the ordinary course of
business and the Lender shall from time to time execute and
deliver, upon written request of Grantor and at Grantor's sole
cost and expense, any and all instruments, certificates or
other documents, in the form so requested, necessary or
appropriate in the judgment of Grantor to enable Grantor to do
so.
(f) In order to more fully protect the Intellectual
Property Collateral in respect of which security interests
have been granted to the Lender by the Grantor hereunder, the
Grantor shall hereafter transfer to the Lender such additional
rights, privileges, marks and licenses as Lender or Grantor
may in its discretion determine to be necessary and
appropriate to the continuing exploitation, licensing, use,
enjoyment and protection (whether in the United States of
America or any foreign jurisdiction) of the Intellectual
Property Collateral.
(g) The Grantor shall have the duty to preserve and
maintain all rights in the Intellectual Property Collateral in
respect of which a failure to be able to continue to use the
same would have a Material Adverse Effect in a manner
substantially consistent with its present practices. The
Grantor shall take all action reasonably requested by the
Lender to register, record and/or perfect the Lender's rights
hereunder. Such duties shall include, but not be limited to,
the following:
(i) The Grantor shall take appropriate action
at its expense to halt the infringement of any of the
Intellectual Property Collateral if such infringement would
have a Material Adverse Effect on the value of the
Intellectual Property Collateral or the Grantor's ability to
use the Intellectual Property Collateral;
(ii) The Grantor shall not amend, modify,
terminate or waive any provisions of any other contract to
which the Grantor is a party in any manner which might have a
Material Adverse Effect upon the Intellectual Property
Collateral.
4. REPRESENTATIONS AND WARRANTIES. The Grantor
hereby represents and warrants to the Secured Parties as
follows:
(a) The Grantor is a corporation duly incorporated,
validly existing and in good standing under the laws of
Delaware.
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(b) The execution, delivery and performance by the
Grantor of this Agreement are within the Grantor's corporate
powers, have been duly authorized by all necessary corporate
action, do not contravene the Grantor's certificate of
incorporation or by-laws, any requirement of law or any order
or decree of any court, or any contractual obligation of the
Grantor, and do not result in or require the creation of any
Lien (other than pursuant to the Loan Agreement) upon or with
respect to any of its properties.
(c) No consent, authorization, approval or other
action by, and no notice to or filing with, any Governmental
Authority is required for the due execution, delivery and
performance by the Grantor of this Agreement.
(d) This Agreement has been duly executed and
delivered by the Grantor and is the legal, valid and binding
obligation of the Grantor, enforceable against the Grantor in
accordance with its terms except that enforceability hereof
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting
the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought.
(e) There are no pending or threatened actions,
investigations or proceeding affecting the Grantor before any
court, Governmental Authority or arbitrator other than those
that in the aggregate, if adversely determined, would have no
Material Adverse Effect.
(f) The Grantor is the sole owner of each item of
the Collateral in which it purports to grant a security
interest hereunder, having good title thereto, free and clear
of any and all Liens, except for the security interest granted
pursuant to this Agreement and other Permitted Liens. No
material amounts payable under or in connection with any of
its Accounts or Contracts are evidenced by Instruments which
have not been delivered to the Lender.
(g) No effective security agreement, financing
statement, equivalent security or lien instrument or
continuation statement covering all or any part of the
Collateral is on file or of record in any public office,
except such as may have been filed by the Grantor in favor of
the Lender pursuant to this Agreement or such as relate to
other Permitted Liens.
(h) Appropriate financing statements having been
filed in the jurisdictions listed on Schedule I hereto, this
Agreement is effective to create a valid and continuing first
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priority Lien on the Collateral, prior to all other Liens
except Permitted Liens. All action necessary or desirable to
protect and perfect such security interest in each item of the
Collateral has been duly taken.
(i) The Grantor's principal place of business and
the place where its records concerning the Collateral are kept
and the location of its Inventory and Equipment are set forth
on Schedule II hereto.
(j) The amount represented by the Grantor to the
Lender from time to time as owing by each Account Debtor or by
all Account Debtors in respect of the Accounts of the Grantor
will at such time be the correct amount actually and
unconditionally owing by such Account Debtors thereunder.
(k) With respect to the Intellectual Property
Collateral:
(i) The Trademarks and the Copyrights,
Licenses, Patents and Trade Secrets are subsisting and have
not been adjudged invalid or unenforceable, in whole or in
part;
(ii) The Grantor has the full right, power
and authority to grant all of the right, title and interest
herein granted;
(iii) The Grantor has not previously
assigned, transferred, conveyed or otherwise encumbered such
right, title and interest;
(iv) The Grantor is the sole and exclusive
owner of the Intellectual Property Collateral, all of which is
free and clear of any Liens, charges and encumbrances, and no
other person or entity has any claim with respect to the
Intellectual Property Collateral whatsoever;
(v) The Intellectual Property Collateral
is sufficient for the purpose of producing goods, performing
services and otherwise carrying on the business of the
Grantor;
(vi) Schedules III, IV, V and VI attached
hereto list all Trademarks, Copyrights and Licenses and
Patents related to the Intellectual Property Collateral;
(vii) To the best of the Grantor's
knowledge, the Intellectual Property Collateral does not
infringe any rights owned or possessed by any third party
except such infringements as could not have a Material Adverse
Effect;
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(viii) There are no claims, judgments or
settlements to be paid by the Grantor or pending claims or
litigation relating to the Intellectual Property Collateral;
(ix) No effective security agreement,
financing statement, equivalent security or lien instrument or
continuation statement covering all or any part of the
Intellectual Property Collateral is on file or of record in
any public office, except such as may have been filed by the
Grantor in favor of the Lender pursuant to this Agreement or
such as relate to other Permitted Liens; and
(x) All appropriate filings have been
made with the United States Patent and Trademark Office and
the United States Copyright Office and any appropriate filing
offices located in foreign countries, and this Agreement is
effective to create a valid and continuing first priority lien
on and first priority security interest in the Intellectual
Property Collateral in favor of the Lender. All action
necessary or desirable to protect and create such security
interest in each item of the Intellectual Property Collateral
has been duly taken.
(l) The Grantor has no trade names, fictitious
names or other names except its legal name, and does not
operate in any jurisdiction under, and, except as set forth on
Schedule II hereto, has not had or operated in any
jurisdiction within the five-year period preceding the date
hereof under, any trade name, fictitious name or other name
other than its legal name.
5. COVENANTS AND BLOCKED ACCOUNTS. The Grantor
covenants and agrees with the Lender that from and after the
date of this Agreement and so long as the Loan Agreement is
in effect or any Secured Obligations are outstanding:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS.
At any time and from time to time, upon the written request of
the Lender, and at the sole expense of the Grantor, the
Grantor will promptly and duly execute and deliver any and all
such further instruments and documents and take such further
action as the Lender may reasonably deem desirable to obtain
the full benefits of this Agreement and of the rights and
powers herein granted, including, without limitation, using
its best efforts to secure all consents and approvals neces
sary or appropriate for the assignment to the Lender of any
Contract held by the Grantor or in which the Grantor has any
rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the
Liens and security interests granted hereby, transferring
Collateral to the Lender's possession (if a security interest
in such Collateral can be perfected by possession) and placing
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the interest of the Lender as lienholder on the certificate of
title of any vehicle. The Grantor also hereby authorizes the
Lender to file any such financing or continuation statement
without the signature of the Grantor to the extent permitted
by applicable law. If any of the Collateral shall be or
become evidenced by any Instrument, the Grantor agrees to
pledge such Instrument to the Lender and shall duly endorse
such Instrument in a manner satisfactory to the Lender and
deliver the same to the Lender.
(b) MAINTENANCE OF RECORDS. The Grantor will keep
and maintain at its own cost and expense satisfactory and
complete records of the Collateral, including, without
limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings
with the Collateral. The Grantor will mark its books and
records pertaining to the Collateral to evidence this
Agreement and the Lien and security interests granted hereby.
All Chattel Paper will be marked with the following legend:
"This writing and the obligations evidenced or secured hereby
are subject to the security interest of Securicor
Communications Limited, as the Lender". If requested by the
Lender, the security interest of the Lender shall be noted on
the certificate of title of each vehicle. For the Lender's
further security, the Grantor agrees that the Lender shall
have a special property interest in all of the Grantor's books
and records pertaining to the Collateral and, upon the
occurrence and during the continuance of any Event of Default,
the Grantor shall deliver and turn over any such books and
records to the Lender or to its representatives at any time on
demand of the Lender. Prior to the occurrence of an Event of
Default and upon reasonable notice from the Lender, the
Grantor shall permit any representative of the Lender to
inspect such books and records and will provide photocopies
thereof to the Lender.
(c) INDEMNIFICATION. In any suit, proceeding or
action brought by the Lender relating to any Account, Chattel
Paper, Contract, General Intangible or Instrument for any sum
owing thereunder, or to enforce any provision of any Account,
Chattel Paper, Contract, General Intangible or Instrument, the
Grantor will save, indemnify and keep the Lender harmless from
and against all expense, loss or damage suffered by reason of
any defense, set-off, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of
a breach by the Grantor of any obligation thereunder or
arising out of any other agreement, Indebtedness or liability
at any time owing to, or in favor of, such obligor or its
successors from the Grantor, and all such obligations of the
Grantor shall be and remain enforceable against and only
against the Grantor and shall not be enforceable against the
Lender.
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(d) COMPLIANCE WITH LAWS, ETC. The Grantor will
comply, in all material respects, with all acts, rules,
regulations, orders, decrees and directions of any
Governmental Authority, applicable to the Collateral or any
part thereof or to the operation of the Grantor's business;
PROVIDED, HOWEVER, that the Grantor may contest any act,
regulation, order, decree or direction in any reasonable
manner which shall not, in the sole opinion of the Lender,
adversely affect the Lender's rights hereunder or adversely
affect the first priority of its Lien on and security interest
in the Collateral.
(e) PAYMENT OF OBLIGATIONS. The Grantor will pay
promptly when due all taxes, assessments and governmental
charges or levies imposed upon the Collateral or in respect of
its income or profits therefrom and all claims of any kind
(including, without limitation, claims for labor, materials
and supplies), except that no such charge need be paid if (i)
such non-payment does not involve any danger of the sale,
forfeiture or loss of any of the Collateral or any interest
therein, and (ii) such charge is adequately reserved against
in accordance with and to the extent required by GAAP.
(f) COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. In all
material respects, the Grantor will comply with and perform
all obligations, covenants, conditions and agreements with
respect to any Account, Chattel Paper, Contract, License and
all other agreements to which it is a party or by which it is
bound.
(g) LIMITATION ON LIENS ON COLLATERAL. The Grantor
will not create, permit or suffer to exist, and will defend
the Collateral against and take such other action as is
necessary to remove, any Lien on the Collateral except
Permitted Liens, and will defend the right, title and interest
of the Lender in and to any of the Grantor's rights under the
Chattel Paper, Contracts, Documents, General Intangibles and
Instruments and to the Equipment and Inventory and in and to
the Proceeds thereof against the claims and demands of all
Persons whomsoever.
(h) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. Upon
the occurrence and during the continuance of any Default or
Event of Default, the Grantor will not, without the Lender's
prior written consent, grant any extension of the time of
payment of any of the Accounts, Chattel Paper or Instruments,
or compromise, compound or settle the same for less than the
full amount thereof, or release, wholly or partly, any Person
liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
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(i) MAINTENANCE OF INSURANCE. The Grantor will
maintain, with financially sound and reputable companies,
insurance policies (i) insuring its Inventory and Equipment
against loss by fire, explosion, theft and such other casu
alties as are usually insured against by companies engaged in
the same or similar businesses and (ii) insuring the Grantor
and the Lender against liability for personal injury and
property damage relating to such Inventory and Equipment, such
policies to be in such amounts and against at least such
risks as are usually insured against in the same general area
by companies engaged in the same or a similar business, naming
the Lender as an additional insured with a lender loss payable
clause in favor of the Lender. All insurance with respect to
the Inventory and Equipment shall (i) contain a clause which
provides that the Lender's interest under the policy will not
be invalidated by any act or omission of, or any breach of
warranty by, the insured, or by any change in the title,
ownership or possession of the insured property, or by the use
of the property for purposes more hazardous than is permitted
in the policy, and (ii) provide that no cancellation,
reduction in amount or change in coverage thereof shall be
effective until at least ten days after receipt by the Lender
of written notice thereof.
(j) LIMITATIONS ON DISPOSITION. The Grantor will
not sell, lease, transfer or otherwise dispose of any of the
Collateral, or attempt or contract to do so, except as
permitted by the Loan Agreement.
(k) FURTHER IDENTIFICATION OF COLLATERAL. The
Grantor will, if so requested by the Lender, furnish to the
Lender, as often as the Lender reasonably requests, statements
and schedules further identifying and describing the
Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in
reasonable detail.
(l) NOTICES. The Grantor will advise the Lender
promptly, in reasonable detail, (i) of any material Lien or
claim made or asserted against any of the Collateral, (ii) of
any material change in the composition of the Collateral, and
(iii) of the occurrence of any other event which would have a
Material Adverse Effect on the aggregate value of the
Collateral or in the security interests created hereunder.
(m) RIGHT OF INSPECTION. Upon reasonable notice to
the Grantor (unless a Default or an Event of Default has
occurred and is continuing, in which case no notice is
necessary), the Lender shall at all times have full and free
access during normal business hours to all the books and
records and correspondence of the Grantor, and the Lender or
its representatives may examine the same, take extracts
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therefrom and make photocopies thereof, and the Grantor agrees
to render to the Lender, at the Grantor's cost and expense,
such clerical and other assistance as may be reasonably
requested with regard thereto. Upon reasonable notice to the
Grantor (unless a Default or an Event of Default has occurred
and is continuing, in which case no notice is necessary), the
Lender and its representatives shall also have the right to
enter into and upon any premises where any of the Equipment or
Inventory is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests
therein.
(n) MAINTENANCE OF EQUIPMENT. The Grantor will
keep and maintain the Equipment in good operating condition
sufficient for the continuation of the business conducted by
the Grantor on a basis consistent with past practices, and the
Grantor will provide all maintenance and service and all
repairs necessary for such purpose.
(o) CONTINUOUS PERFECTION. The Grantor will not
change its name, identity or corporate structure in any manner
which might make any financing or continuation statement filed
in connection herewith seriously misleading within the meaning
of Section 9-402(7) of the UCC (or any other then applicable
provision of the UCC) unless the Grantor shall have given the
Lender at least 30 days' prior written notice thereof and
shall have taken all action (or made arrangements to take such
action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or
reasonably requested by the Lender to amend such financing
statement or continuation statement so that it is not
seriously misleading. The Grantor will not change its
principal place of business or remove its records or change
the location of its Inventory and Equipment, each as set forth
on Schedule II hereto, unless it gives the Lender at least 30
days' prior written notice thereof and has taken such action
as is necessary to cause the security interest of the Lender
in the Collateral to continue to be perfected.
(p) TAXES. The Grantor will pay promptly when due
all taxes, assessments and governmental charges or levies
imposed upon the Intellectual Property Collateral or in
respect of its income or profits therefrom and all claims of
any kind, except that no such charge need be paid if (i) such
non-payment does not involve any danger of forfeiture or loss
of any of the Intellectual Property Collateral or any interest
therein and (ii) such charge is adequately reserved against in
accordance with and to the extent required by GAAP.
(q) MAINTENANCE OF RECORDS. The Grantor will keep
and maintain at its own cost and expense satisfactory and
complete records of the Intellectual Property Collateral,
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including, without limitation, a record of all payments
received and all credits granted with respect to the
Intellectual Property Collateral and all other dealings with
the Intellectual Property Collateral. The Grantor will mark
its books and records pertaining to the Intellectual Property
Collateral to evidence this Agreement and the security
interests granted hereby. For the Lender's further security,
the Grantor agrees that the Lender shall have a special
property interest in all of the Grantor's books and records
pertaining to the Intellectual Property Collateral and, upon
the occurrence and during the continuation of any Event of
Default, the Grantor shall deliver and turn over any such
books and records to the Lender or its representatives at any
time on demand of the Lender. Prior to the occurrence of an
Event of Default and upon reasonable notice from the Lender,
the Grantor shall permit any representative of the Lender to
inspect such books and records as set forth in Section 12.
(r) NEW INTELLECTUAL PROPERTY. In the event, prior
to the time the Secured Obligations have been indefeasibly
paid in full, the Grantor shall (i) obtain any rights to or
interests in any new inventions whether or not patentable,
patents, patent applications or any reissue, divisions,
continuations, renewals, extensions, or continuations-in-part
of any patent or improvement of any patent, trademarks, trade
names, service marks, and registrations or applications
therefor, copyrights and registrations or applications
therefor, or licenses, or (ii) become entitled to the benefit
of any patent, copyright or trademark, or any registrations or
applications therefor, license, license renewal, trade secret
or copyright renewal, the provisions of this Agreement shall
automatically apply thereto and anything enumerated in clause
(i) or (ii) of this Section 5 shall constitute Intellectual
Property Collateral. The Grantor agrees, promptly following
the written request by the Lender, to amend this Agreement by
amending any or all of Schedules III, IV, V and VI, as
applicable, to include any such future trademarks, trademark
registrations, trademark applications, trade names, service
marks, copyrights and licenses which would be Intellectual
Property Collateral, and to immediately prepare, execute and
record with all appropriate foreign country, Federal, state
and/or local offices and authorities a Security Agreement for
any such new Intellectual Property Collateral, in form and
substance similar to this Agreement, and to deliver to the
Lender reasonable proof of such recordation.
(s) THE BLOCKED ACCOUNTS.
(i) The Grantor hereby transfers to the
Lender the exclusive dominion and control of Blocked Account
#2 effective the date hereof and Blocked Account #1 effective
on the 30th day following the date hereof.
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(ii) The Grantor agrees and covenants that
all Proceeds of Accounts shall be deposited into Blocked
Account #1 in accordance with the provisions of Section 3.5 of
the Asset and Trademark Agreement (and thereafter all or a
portion of such proceeds shall be transferred into Blocked
Account #2 in accordance with the terms thereof) and all other
cash and Proceeds of all other Collateral shall be deposited
directly into Blocked Account #2.
(iii) The Grantor shall cause each Person
obliged to make payments to the Grantor for any reason (each
such Person being an "Obligor" of the Grantor) to make all
payments, or to continue to make all payments, as the case may
be, with respect to all Collateral, to Blocked Account #1 and,
in any event the Borrower shall cause any payments received by
the Borrower or any other Person from any Obligor to be
deposited immediately upon receipt into such Blocked Account
#1.
(iv) In the event the Grantor or any
Blocked Account Bank shall, after the date hereof, terminate
the agreement with respect to the maintenance of a Blocked
Account for any reason, or if the Lender shall demand such
termination as a result of the failure of the Blocked Account
Bank to comply with any of the terms of the Blocked Account
Letter, or there shall occur and be continuing an Event of
Default or if the Lender determines in its sole discretion
that the financial condition of the Blocked Account Bank has
materially deteriorated, at the Lender's request, the Grantor
agrees to notify all of its Obligors that were making payments
to such terminated Blocked Account or Blocked Account Bank to
make all future payments to another Blocked Account Bank with
respect to which the Grantor has delivered to the Lender an
executed Blocked Account Letter, and which has not been
terminated.
(v) The Grantor hereby agrees that it
shall not make or maintain any deposits in any account with,
or maintain any investment account with, any financial
institution other than a Blocked Account Bank.
(vi) So long as no Event of Default shall
have occurred and be continuing, the Grantor is hereby
authorized by the Lender to direct the disposition of such
funds then on deposit with the Blocked Account Bank (but in
the case of Blocked Account #1, in and only in a manner
consistent with Section 3.5 of the Asset and Trademark
Agreement), which direction shall not be exercised by the
Lender unless and until an Event of Default shall have
occurred and be continuing. Lender agrees that in the event
it gives directions with respect to Blocked Account #1
pursuant hereto, it shall do so in and only in a manner
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consistent with Section 3.5 of the Asset and Trademark
Agreement.
(vii) If any Event of Default shall have
occurred and be continuing, upon notification by the Lender to
the Grantor and the Blocked Account Bank the authorization of
the Grantor under clause (vi) above shall be revoked and all
deposits contained therein (other than any to which Grantor
shall be obligated to turn over to Simmonds or Midland
pursuant to Section 3.5 of the Asset and Trademark Agreement,
which shall be so turned over) shall be transferred to an
account established by the Lender, in the name of the Lender
and under the sole dominion and control of the Lender (the
"Cash Collateral Account"), to be held by the Lender as
Collateral for the Secured Obligations or applied to the
Secured Obligations in accordance with this Agreement (all
such deposits in any such Cash Collateral Account shall
constitute "Collateral" for all purposes of this Agreement).
6. THE LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) The Grantor hereby irrevocably constitutes and
appoints the Lender and any officer or agent thereof, with
full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in
the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Lender's
discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to
execute and deliver any and all documents and instruments
which the Lender may deem necessary or desirable to accomplish
the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives the Lender the power
and right, on behalf of the Grantor, without notice to or
assent by the Grantor to do the following:
(i) to ask, demand, collect, receive and
give acquittances and receipts for any and all moneys due and
to become due under any Collateral and, in the name of the
Grantor or in its own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances
or other Instruments for the payment of moneys due under any
Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise
deemed appropriate by the Lender for the purpose of collecting
any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Lender for the purpose of collecting any
and all such moneys due under any Collateral whenever payable;
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(ii) to pay or discharge taxes, Liens,
security interests or other encumbrances levied or placed on
or threatened against the Collateral, to effect any repairs or
any insurance called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs
thereof; and
(iii) (A) to direct any party liable for
any payment under any of the Collateral to make payment of any
and all moneys due, and to become due thereunder, directly to
the Lender or as the Lender shall direct; (B) to receive
payment of and receipt for any and all moneys, claims and
other amounts due, and to become due at any time, in respect
of or arising out of any Collateral; (C) to sign and indorse
any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with
Accounts and other Documents constituting or relating to the
Collateral; (D) to commence and prosecute any suits, actions
or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and
to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against the
Grantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described
above and, in connection therewith, to give such discharges or
releases as the Lender may deem appropriate; (G) to license
or, to the extent permitted by an applicable license,
sublicense, whether general, special or otherwise, and whether
on an exclusive or non-exclusive basis, any patent or
trademark, throughout the world for such term or terms, on
such conditions, and in such manner, as the Lender shall in
its sole discretion determine; and (H) generally to sell,
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though the Lender were the absolute owner
thereof for all purposes, and to do, at the Lender's option
and the Grantor's expense, at any time, or from time to time,
all acts and things which the Lender reasonably deems
necessary to protect, preserve or realize upon the Collateral
and the Lender's and the Banks' Lien therein, in order to
effect the intent of this Agreement, all as fully and
effectively as the Grantor might do.
(b) The Lender agrees that, except upon the
occurrence and during the continuance of any Default or Event
of Default, it will forbear from exercising the power of
attorney or any rights granted to the Lender pursuant to this
Section 6. The Grantor hereby ratifies, to the extent
permitted by law, all that any said attorney shall lawfully do
or cause to be done by virtue hereof. The power of attorney
granted pursuant to this Section 6, being coupled with an
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interest, shall be irrevocable until the Secured Obligations
are indefeasibly paid in full.
(c) The powers conferred on the Lender hereunder
are solely to protect the Lender's interests in the Collateral
and shall not impose any duty upon it to exercise any such
powers. The Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such
powers and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Grantor for
any act or failure to act, except for its own negligence or
willful misconduct.
(d) The Grantor also authorizes the Lender, at any
time and from time to time upon the occurrence and during the
continuance of a Default or Event of Default, (i) to
communicate in its own name with any party to any Contract
with regard to the assignment of the right, title and interest
of the Grantor in and under the Contracts hereunder and other
matters relating thereto and (ii) to execute, in connection
with the sale provided for in Section 8 hereof, any
indorsements, assignments or other instruments of conveyance
or transfer with respect to the Collateral.
7. PERFORMANCE BY THE LENDER OF THE GRANTOR'S
OBLIGATIONS. If the Grantor fails to perform or comply with
any of its agreements contained herein and the Lender, as
provided for by the terms of this Agreement, shall itself
perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses of
the Lender incurred in connection with such performance or
compliance, together with interest thereon at the highest rate
then in effect in respect of the Revolving Credit Advances,
shall be payable by the Grantor to the Lender on demand and
shall constitute Secured Obligations secured hereby.
8. REMEDIES, RIGHTS UPON AN EVENT OF DEFAULT.
(a) If any Default or Event of Default shall occur
and be continuing, the Lender shall have the right to exercise
in addition to all other rights and remedies granted to it in
this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations,
all rights and remedies of a secured party under the UCC.
Without limiting the generality of the foregoing, the Grantor
expressly agrees that in any such event the Lender, without
demand of performance or other demand, advertisement or notice
of any kind (except the notice specified below of time and
place of public or private sale) to or upon the Grantor or any
other Person (all and each of which demands, advertisements
and/or notices are hereby expressly waived to the maximum
extent permitted by the UCC and other applicable law), may
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forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or sell
or otherwise dispose of and deliver said Collateral (or
contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or
broker's board or any of the Lender's offices or elsewhere at
such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The
Lender shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of
said Collateral so sold, free of any right or equity of
redemption, which equity of redemption the Grantor hereby
releases. The Grantor further agrees, at the Lender's request
to assemble the Collateral and make it available to the Lender
at places which the Lender shall reasonably select, whether at
the Grantor's premises or elsewhere. The Lender shall apply
the net proceeds of any such collection, recovery receipt,
appropriation, realization or sale, as provided in Section
8(d) hereof, the Grantor remaining liable for any deficiency
remaining unpaid after such application, and only after so
paying over such net proceeds and after the payment by the
Lender of any other amount required by any provision of law,
including Section 9-504(1)(c) of the UCC, need the Lender
account for the surplus, if any, to the Grantor. To the
maximum extent permitted by applicable law, the Grantor waives
all claims, damages, and demands against the Lender arising
out of the repossession, retention or sale of the Collateral.
The Grantor agrees that the Lender need not give more than ten
days' notice of the time and place of any public sale or of
the time after which a private sale may take place and that
such notice is reasonable notification of such matters. The
Grantor shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient
to pay all amounts to which the Lender is entitled, the
Grantor also being liable for the fees and expenses of any
attorneys employed by the Lender to collect such deficiency.
(b) The Grantor also agrees to pay all costs of the
Lender, including, without limitation, attorneys' fees,
incurred in connection with the enforcement of any of its
rights and remedies hereunder.
(c) The Grantor hereby waives presentment, demand,
protest or any notice (to the maximum extent permitted by
applicable law) of any kind in connection with this Agreement
or any Collateral.
(d) Without limitation of the foregoing, upon the
occurrence and during the continuation of a Default or an
Event of Default, the Lender may to the fullest extent
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permitted by applicable law, without prior notice to the
Grantor, and without advertisement, hearing or process of law
in any kind, (i) exercise any and all rights as beneficial and
legal owner of the Intellectual Property Collateral,
including, without limitation, any and all consensual rights
and powers with respect to the Intellectual Property Col
lateral, and (ii) sell or assign or grant a license or fran
chise to use, or cause to be sold or assigned or granted a
license or franchise to use, any or all of the Intellectual
Property Collateral, in each case, free of all rights and
claims of the Grantor therein and thereto. Upon the occur
rence and during the continuation of an Event of Default, the
Lender may (i) sell or assign the Intellectual Property
Collateral, or any part thereof, for cash upon credit as the
Lender may deem appropriate or (ii) grant licenses or
franchises or both to use the Intellectual Property Collateral
on such terms and conditions as the Lender shall determine.
In connection therewith, the Lender shall have the right to
impose such limitations and restrictions on the sale or
assignment of the Intellectual Property Collateral as the
Lender may deem to be necessary or appropriate to comply with
any law, rule or regulation (Federal, state, local or that of
a foreign country) having applicability to any such sale and
requirements for any necessary governmental approvals.
(e) Notwithstanding any provisions of this
Agreement to the contrary, if, after giving effect to any
sale, transfer, assignment or other disposition of any or all
of the Collateral pursuant hereto and after the application of
the proceeds hereunder to Secured Obligations, any Secured
Obligations remain unpaid or unsatisfied, the Grantor shall
remain liable for the unpaid and unsatisfied amount of such
Secured Obligations.
(f) Upon the declaration of an Event of Default,
the Grantor agrees that it will promptly (and in any event
within three Business Days) deliver to the Lender or its
designee an assignment of the Intellectual Property
Collateral, duly executed by the Grantor, in substantially the
form of Annex II annexed hereto. The Grantor agrees that the
Lender may duly execute such an assignment as Grantor's true
and lawful attorney-in-fact pursuant to Section 6 hereof.
(g) Whenever an Event of Default shall have
occurred and be continuing, the Lender shall have the right,
but shall in no way be obligated, to bring suit in its own
name to protect or enforce the Trademarks, Copyrights, Li
censes, Patents and Trade Secrets, and, if the Lender shall
commence any such suit, the Grantor shall, at the request of
the Lender, do any and all lawful acts and execute any and all
proper documents required by the Lender in aid of such
protection or enforcement.
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(h) The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be
distributed by the Lender in the following order of
priorities:
FIRST, to the Lender in an amount sufficient to pay
in full the expenses of Lender in connection with such
sale, disposition or other realization, including all
expenses, liabilities and advances incurred or made by
Lender in connection therewith, including, without
limitation, attorney's fees;
SECOND, to the Lender in an amount equal to the then
unpaid principal of and accrued interest and prepayment
premiums, if any, on the Secured Obligations;
THIRD, to the Lender in an amount equal to any other
Secured Obligations which are then unpaid; and
FINALLY, upon payment in full of all of the Secured
Obligations, to pay to the Grantor or as a court of
competent jurisdiction may direct, any surplus then
remaining from such Proceeds.
9. LIMITATION ON THE LENDER'S DUTY IN RESPECT OF
COLLATERAL. The Lender shall have no duty as to any
Collateral in its possession or control or in the possession
or control of any agent or nominee of it or any income thereon
or as to the preservation of rights against prior parties or
any other rights pertaining thereto, except that the Lender
shall use reasonable care with respect to the Collateral in
its possession or under its control. Upon request of the
Grantor, the Lender shall account for any moneys received by
it in respect of any foreclosure on or disposition of the
Collateral.
10. REINSTATEMENT. This Agreement shall remain in
full force and effect and continue to be effective should any
petition be filed by or against the Grantor for liquidation or
reorganization, should the Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver
or trustee be appointed for all or any significant part of the
Grantor's assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any
obligee of the Secured Obligations, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as
though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded,
reduced, restored or returned, the Secured Obligations shall
25
<PAGE>
be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.
11. NOTICES. All notices and other communications
provided for hereunder shall be in writing (including tele
graphic, telex, telecopy, or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered by hand,
if to the Grantor, addressed to it at 1690 North Topping
Avenue, Kansas City, Missouri 64120, Attention: Howard
Parkinson, Telecopy No: 816 920 1102 with copies to Manatt
Phelps & Phillips LLP, 11355 West Olympic Boulevard, Los
Angeles, California 90064, Attention: Nancy Wojtas, Telecopy
No: 310 312 4224 and Intek Diversified Corporation, 970 West
190th Street, Suite 720, Torrance, California 90502,
Attention: David Neibert, Telecopy No: 310 366 7712 and if to
the Lender, addressed to it at the address of the Lender
specified in the Loan Agreement, or, as to each party, at such
other address as shall be designated by such party in a
written notice to each other party complying as to delivery
with the terms of this Section. All such notices and other
communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective seven days after
being deposited in the mail (i) in the United States in the
case of notice being given by any Person located in the United
States or (ii) in the United Kingdom in the case of notice
being given by any Person located in the United Kingdom, or
when delivered to the telegraph company, confirmed by telex
answerback, telecopied with confirmation or receipt, delivered
to the cable company, or delivered by hand to the addressee or
its agent, respectively.
12. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement nor consent to any departure by
the Grantor therefrom shall in any event be effective unless
the same shall be in writing, approved and signed by the
Lender and then any such waiver or consent shall only be
effective in the specific instance and for the specific
purpose for which given.
13. NO WAIVER; REMEDIES. (a) No failure on the
part of the Lender to exercise, and no delay in exercising any
right hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right hereunder preclude
any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative, may
be exercised singly or concurrently, and are not exclusive of
any remedies provided by law or any of the other Loan
Documents.
(b) Failure by the Lender at any time or times
hereafter to require strict performance by the Grantor or any
other Person of any of the provisions, warranties, terms or
26
<PAGE>
conditions contained in any of the Loan Documents now or at
any time or times hereafter executed by the Grantor or any
such other Person and delivered to the Lender shall not waive,
affect or diminish any right of any of the Lender at any time
or times hereafter to demand strict performance thereof, and
such right shall not be deemed to have been modified or waived
by any course of conduct or knowledge of the Lender, or any
agent, officer or employee of the Lender.
14. SUCCESSORS AND ASSIGNS. This Agreement and all
obligations of the Grantor hereunder shall be binding upon the
successors and assigns of the Grantor, and shall, together
with the rights and remedies of the Lender hereunder, inure to
the benefit of the Lender, and its successors and assigns.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK. WHEREVER POSSIBLE,
EACH PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH
MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT
IF ANY PROVISION OF THIS AGREEMENT SHALL BE PROHIBITED BY OR
INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY AND WITHOUT INVALIDATING THE REMAINING PROVISIONS
OF THIS AGREEMENT.
16. WAIVER OF JURY TRIAL. THE GRANTOR WAIVES ANY
RIGHT IT MAY HAVE TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER, UNDER
THE LOAN AGREEMENT OR UNDER ANY OF THE OTHER LOAN DOCUMENTS OR
ANY OTHER DOCUMENT RELATING TO ANY OF THE FOREGOING.
17. FURTHER INDEMNIFICATION. The Grantor agrees to
pay, and to save the Lender harmless from, any and all
liabilities with respect to, or resulting from any delay in
paying, any and all excise, sales or other similar taxes which
may be payable or determined to be payable with respect to any
of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
27
<PAGE>
18. SECTION TITLES. The Section titles contained in
this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this
Agreement.
IN WITNESS WHEREOF, The Grantor has caused this
Agreement to be executed and delivered by its duly authorized
officer on the date first above written.
MIDLAND USA, INC.
By: /s/ David Neibert
Name: David Neibert
Title: President
Accepted and acknowledged by:
SECURICOR COMMUNICATIONS LIMITED, as Lender
By: /s/ M.G. Wilkinson
Name: M.G. Wilkinson
Title: Director
28
<PAGE>
SCHEDULE I
FILINGS
JURISDICTION FILING OFFICE
------------ ---------------------
California Secretary of State
County of Los Angeles
Missouri Secretary of State
County of Jackson
<PAGE>
SCHEDULE II
LOCATION OF RECORDS AND CERTAIN COLLATERAL; FICTITIOUS NAMES
Principal Place
of Business
- -------------------------
Midland USA, Inc.
1690 North Topping Avenue
Kansas City, MO 64120
Location of Books
and Records, Inventory
and Equipment
- -------------------------
Midland USA, Inc.
1690 North Topping Avenue
Kansas City, MO 64120
Fictitious Names
- ----------------
Borrower operates under the name Intek-Midland USA, Inc. in
California
<PAGE>
SCHEDULE III
TRADEMARKS
<TABLE>
<CAPTION>
Mark Registered Number Serial Number Date of Registration
- -------- ----------------- ------------- --------------------
<S> <C> <C> <C>
"Midland" 927193 72-277,496 January 18, 1972
renewed December 13,
1991
"Midland" 895483 72-156,089 July 28, 1970
renewed December 18,
1990
</TABLE>
<PAGE>
SCHEDULE IV
COPYRIGHTS
None
<PAGE>
SCHEDULE V
LICENSES
1) Midland USA - Midland International Corp. Trademark
License Agreement dated September 19, 1996.
2) Midland International Corp. - Midland Consumer Int'l.
Exclusive License Agreement dated June 30, 1995.
3) Midland International Corp. - LETT Electronics Private
Label Agreement dated March 1, 1995.
4) Midland International Corp. - American Digital
Communications, Inc. Asset Purchase Agreement dated
December 29, 1995.
<PAGE>
SCHEDULE VI
PATENTS
US Patent Number 4,718,586 (Swivel Fastening Device)
<PAGE>
ANNEX I
BLOCKED ACCOUNT LETTER
Boatman's First National _______________, 19__
Bank of Kansas City
14 West 10th Street
Kansas City, MO 64105
Gentlemen:
We refer to the following account maintained with
you by Midland USA, Inc., a Delaware corporation (the
"Company"), into which certain monies, instruments and other
property are deposited from time to time (collectively, the
"Blocked Account"): _______________. The Company has granted
to Securicor Communications Limited (a company incorporated
under the laws of England and Wales, the "Lender") under the
Loan Agreement, dated as of September 19, 1996, among the
Company and the Lender, a security interest in all assets and
properties of the Company, including, among other things, the
Blocked Account, all monies, instruments and other property
deposited therein and all certificates and instruments, if
any, representing or evidencing the Blocked Account. It is a
condition to the continued maintenance of the Blocked Account
with you that you agree to this Letter Agreement.
By signing this Letter Agreement, you agree that
from the date hereof1. the Blocked Account shall be under the
exclusive dominion and control of the Lender, that you will
act as its bailee and that all monies, instruments or other
property of the Company received in connection therewith
whether or not deposited in the Blocked Account shall be held
solely for the benefit of the Lender. You agree to:
__________________
1. [or such other date as may be provided in the Loan
Agreement]
(a) follow your usual operating procedures for the
handling of any remittance received in the Blocked Account
that is drawn in foreign currency or that contains restrictive
endorsements or irregularities, such as a variance between the
written and numerical amounts, undated or postdated items,
missing signature, incorrect payee, etc;
(b) indorse and process all checks and other
remittance items not covered by paragraph (a) above on which
the payee or endorsee is the Company or, in your sole discre
tion, a reasonable variation of the Company (an "Acceptable
I-1
<PAGE>
Payee"), and deposit such checks and other remittance items in
the Blocked Account; and
(c) maintain a record of all checks and other
remittance items received in the Blocked Account and, in
addition to providing the Company with photostats, vouchers,
enclosures, etc. of checks and other remittance items received
on a daily basis, as well as a monthly statement, furnish to
the Lender at its request, free of any service charge payable
by the Lender, your regular bank statement with respect to the
Blocked Account, with the words "Securicor Communications
Limited, as Lender Re: Midland USA, Inc." included thereon so
that there is no confusion as to ownership of the Blocked
Account and so that the Lender is able to properly identify
the Blocked Account.
The Company shall hold in trust for the Lender until
remitted to you for deposit in the Blocked Account any and all
cash and cash equivalents received under the above paragraph.
You hereby agree to follow the instructions of the
Company with respect to the disposition of any and all money
deposited in the Blocked Account as directed by the Company
unless and until you have received written instructions to the
contrary from the Lender, in which case you agree to follow
such instructions from the Lender.
The Company hereby agrees to pay, indemnify and hold
you harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, legal fees) with
respect to the performance by you or any of your directors,
officers, agents or employees of this Letter Agreement, except
for your (or such director's, officer's, agent's or
employee's) gross negligence or willful misconduct.
In addition, the Company hereby indemnifies and
holds you harmless from and against all actions, proceedings,
claims, dismissals, losses, outlays, damages or expenses,
including legal fees, of every nature and character as may
arise or be made against you arising out of or in connection
with its depositing checks payable to or endorsed in favor of
an Acceptable Payee if such Acceptable Payee is incorrect,
except for your gross negligence or willful misconduct.
The Company hereby agrees to pay to you such fees
and charges with respect to the Blocked Account in accordance
with your standard charges or as shall from time to time be
mutually agreed upon by the Company and you. If such fees and
expenses have not been paid when due, you shall be entitled to
charge the Blocked Account for any such fees and expenses.
I-2
<PAGE>
You undertake to perform only such duties as are
expressly set forth herein. Notwithstanding any other pro
vision of this Letter Agreement, it is agreed by the parties
hereto that you shall not be liable for any action taken by
you or any of your directors, officers, agents or employees in
accordance with this Letter Agreement, except for your (or
such director's, officer's, agent's or employee's) gross
negligence or willful misconduct.
The Company acknowledges that the agreements made by
it and the authorizations granted by it herein are irrevocable
unless otherwise agreed to in writing by the Lender and that
the authorizations granted herein to you and the Lender are
powers coupled with an interest.
You waive and agree not to assert, claim or endeavor
to exercise, and by executing this Letter Agreement bar and
estop yourself from asserting, claiming or exercising, and you
acknowledge that you have not heretofore received a notice
from any other party asserting, claiming or exercising, any
right of setoff, banker's lien or other purported form of
claim with respect to the Blocked Account and funds from time
to time therein. You shall have no rights in the Blocked
Account or the funds therein. To the extent you may ever have
any such rights, you hereby expressly subordinate all such
rights to all rights of the Lender.
This Letter Agreement shall be effective as of the
day first above written. To the extent inconsistent with this
Letter Agreement, this Letter Agreement shall supersede any
other agreement relating to the matters referred to herein,
including any other account agreement between the Company and
you relating to the collection of receivables. This Letter
Agreement constitutes the entire agreement with respect to the
Blocked Account and is binding upon the parties hereto and
their respective successors and assigns and shall inure to
their benefit. Neither this Letter Agreement nor any
provision hereof may be changed, amended, modified or waived
orally, but only by an instrument in writing signed by the
parties hereto. Any provision of this Letter Agreement which
may prove unenforceable under any law or regulation shall not
affect the validity of any other provision hereof.
You may terminate this Letter Agreement only upon
thirty days' prior written notice to that effect to the
Company and the Lender, by cancelling the Blocked Account
maintained with you and transferring all funds, if any, in
such Blocked Account as directed by the Lender. After any
such termination, you shall nonetheless remain obligated
promptly to transfer to an account designated by the Lender
anything from time to time received in the Blocked Account
from obligors of the Company.
I-3
<PAGE>
All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing
(including by telegraph, telecopy, telex or nationally
recognized courier service), and shall be deemed to have been
duly given or made when delivered by hand, or seven days after
being deposited (i) in the United States mail in the case of
notice being given by a party located in the United States or
(ii) in the United Kingdom in the case of a party located in
the United Kingdom, in each case with postage prepaid, or, in
the case of telegraphic notice, when delivered to the
telegraph company, or, in the case of telex notice, when sent,
answer back received, or, in the case of telecopy notice, when
sent, or, in the case of an internationally recognized courier
service, one business day after delivery to such courier
service, addressed as follows, or to such other address as may
be hereafter notified by the respective parties hereto:
Midland USA, Inc.
1690 North Topping Avenue
Kansas City, Missouri 64120
USA
Attention: Howard Parkinson
Telecopy Number: 816 920 1102
With copies to:
Intek Diversified Corporation
970 West 190th Street, Suite 720
Torrance, California 90502
Attention: David Neibert
Telecopy Number: 310 366 7712
Manatt, Phelps & Phillips LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attention: Nancy Wojtas
Telecopy Number: 310 312 4224
Securicor Communications Limited
15 Carshalton Road
Sutton, Surrey SM1 4LD
England
Attention: Ed Hough
Telecopy No. (0181) 661-0205
I-4
<PAGE>
With copies to:
Weil, Gotshal & Manges
99 Bishopsgate
London, EC2M 3XD
England
Attention: David Lefkowitz, Esq.
Telecopy No. 0171 426 0990
Blocked
Account Bank:
Boatman's First National
Bank of Kansas City
14 West 10th Street
Kansas City, MO 64105
Attention: Michael Austin
Telecopy No: 816 696-7426
You are hereby notified, pursuant to New York
Uniform Commercial Code Section 9-302 (1)(g), that the Company
has granted a security interest in favor of the Lender in the
Blocked Account identified above.
This Letter Agreement shall be governed by, and
construed in accordance with, the laws of the State of New
York.
I-5
<PAGE>
This Letter Agreement may be executed in any number
of counterparts which together shall constitute one
and the same instrument.
Very truly yours,
MIDLAND USA, INC.
By:__________________________
Name:
Title:
SECURICOR COMMUNICATIONS LIMITED
By:__________________________
Name:
Title:
Acknowledged and agreed to as of
the date first above written.
BOATMAN'S FIRST NATIONAL
BANK OF KANSAS CITY
By:___________________________
Name:
Title:
I-6
<PAGE>
ANNEX II
ASSIGNMENT OF INTELLECTUAL PROPERTY COLLATERAL
AGREEMENT made this ___ day of ____________, 19__,
by and between Midland USA, Inc., a Delaware corporation (the
"Assignor") and Securicor Communications Limited, a company
incorporated under the laws of England and Wales (the
"Lender").
W I T N E S S E T H:
WHEREAS, Assignor and the Lender are parties to the
Loan Agreement dated as of September 19, 1996 (said Agreement,
as it hereafter may be amended or otherwise modified from time
to time, being referred to as the "Loan Agreement") and the
Security Agreement dated as of September 19, 1996 (the
"Security Agreement") which provides that upon the occurrence
of certain events specified therein Assignor and the Lender
shall execute this Assignment; and
WHEREAS, the aforementioned events have occurred;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements hereinafter set forth, the parties
agree as follows:
(i) INCORPORATION. This Assignment is made
pursuant to and subject to the terms of the Loan Agreement and
the Security Agreement, each of which is deemed incorporated
herein by this reference and shall constitute part of this
Assignment as if fully set forth herein.
(ii) ASSIGNMENT. Assignor hereby conveys, sells,
assigns, transfers and sets over to the Lender all of
Assignor's right, title interest in and to the Intellectual
Property Collateral (as defined in the Security Agreement).
(iii) NOTICES. All notices hereunder to the
parties hereto shall be made in the manner and to the
addresses specified in the Security Agreement.
(iv) FURTHER INSTRUMENTS. The parties agree to
promptly execute and deliver all further instruments necessary
or desirable to carry out the purposes of this Agreement.
II-1
<PAGE>
(v) SCHEDULES. The terms and conditions of the
Schedules referred to herein are incorporated herein by this
reference and shall constitute part of this Assignment as if
fully set forth herein.
(vi) HEADINGS. The headings in this Assignment are
for purposes of reference only and shall not in any way limit
or otherwise affect the meaning or interpretation of any of
the terms hereof.
IN WITNESS WHEREOF, the parties have executed this
Assignment as of the date first written above.
MIDLAND USA, INC.
By:________________________
Name:
Title:
SECURICOR COMMUNICATIONS LIMITED
By:________________________
Name:
Title:
II-2
<PAGE>
STATE OF )
ss.:
COUNTY OF )
On this ___ day of ___________, 19__, before me came
__________________________, to me known to be an officer of
Midland USA, Inc., the company described in and which executed
the above instrument, and duly acknowledged that he executed
the same.
____________________________
NOTARY PUBLIC
STATE OF )
ss.:
COUNTY OF )
On this ___ day of ___________, 19__, before me came
Midland USA, Inc., to me known to be an officer of Securicor
Communications Limited, the company described in and which
executed the above instrument, and duly acknowledged that he
executed the same.
_____________________________
NOTARY PUBLIC
II-3
<PAGE>
