<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 31, 1996
Tigera Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-12113 94-2691724
- ---------------- -------------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
667 Madison Avenue, New York, New York 10021
-------------------------------------- ----------
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, including Area Code: (212) 644-8880
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 31, 1996, Tigera Group, Inc., a Delaware corporation ("Tigera"
or the "Registrant"), completed (the "Closing") the purchase of 85% of the
capital stock of Connectivity Products Incorporated, a Delaware corporation
("CPI"), a privately held company in the wire and cable manufacturing,
distribution and assembly business, from James S. Harrington, Duane A. Gawron,
Trustee of the Living Trust of Duane A. Gawron, Margo Gawron, John E. Pylak,
Trustee of the John E. Pylak Living Trust, Rebecca Pylak and Kurt Cieszkowski
(collectively, the "Sellers"). The remaining 15% ownership is held by the
Sellers.
Pursuant to the Stock Redemption and Purchase Agreement dated as of
May 17, 1996 by and among Tigera, CPI and the Sellers, the Sellers received:
(i) from CPI, (A) an aggregate of $7,622,919 (the "Redemption Amount"),
$250,000 of which was placed in escrow, in consideration for shares of CPI
Common Stock redeemed by CPI, (B) promissory notes due May 31, 2003 in the
aggregate amount of $6,000,000 and (C) additional promissory notes due May 31,
2003 in the aggregate amount of $3,000,000, payment of which is contingent upon
the achievement by CPI of certain financial targets; and (ii) from Tigera, an
aggregate of $7,990,000 (the "Purchase Amount"), $1,000,000 of which was placed
in escrow. In addition, Tigera invested an additional $1,350,000 in Preferred
Stock of CPI and $400,000 for a subordinated note payable by CPI for working
capital purposes. Tigera has committed to invest an additional $2,150,000 in
preferred stock of CPI to fund future expansion.
Simultaneously with the Closing, CPI refinanced its senior credit
facility with the First National Bank of Boston and NBD Bank to increase the
amount available for borrowing thereunder to approximately $45,000,000. At the
Closing, a total of approximately $32,000,000, including the Redemption Amount,
was outstanding under such credit facility.
James S. Harrington, CPI's chief executive and a founder, was elected
President and Chief Executive Officer of Tigera. He succeeds Donald T. Pascal,
who was named Chairman of the Board of Tigera. The other three founders of
CPI, Duane A. Gawron, John E. Pylak and Kurt Cieszkowski, were elected Senior
Vice Presidents of Tigera. In addition, Messrs. Harrington, Gawron and Pylak
were appointed as directors of Tigera, increasing the size of Tigera's Board of
Directors to 12.
CPI consists of three operating divisions: BSCC in Leominster,
Massachusetts, the manufacturing facility; Energy
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<PAGE> 3
Electric Cable in Auburn Hills, Michigan, distribution; and Energy Electric
Assembly also in Auburn Hills, assembly. In addition, CPI has numerous
distribution warehouses in the Southeast and Midwest.
CPI, with corporate headquarters in Leominster, Massachusetts, was
formed by the merger of its three operating divisions in October 1995. CPI
increased its sales from approximately $44,000,000 in 1992 to approximately
$89,000,000 in 1995, without acquiring any operating companies. The two major
market segments served by CPI are industrial (security, automation, signal and
sound) and communications (networking, voice and data), which together
constituted over 90 percent of 1995 sales.
The purchase price of the stock was determined through negotiations
between the parties. The Purchase Amount was paid out of Tigera's available
cash. Prior to the transactions described herein, there was no material
relationship between CPI or any of the Sellers and the Registrant or any of the
Registrant's affiliates, any director or officer of the Registrant, or any
associate of any such officer or director.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(a) On June 10, 1996, as a result of the transactions described in
Item 2 above, BDO Seidman, LLP ("BDO"), the Registrant's independent
accountant, was dismissed to allow Coopers & Lybrand LLP, CPI's independent
accountant, to be engaged as the Registrant's independent accountant. BDO's
report on the financial statements of the Registrant for each of the last two
years did not contain an adverse opinion or disclaimer of opinion and was not
modified as to uncertainty, audit scope or accounting principles. The decision
to change accountants was recommended by the Registrant's Executive Committee.
There were no disagreements with BDO on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to BDO's satisfaction, would have caused it to make reference
to the subject matter of the disagreement in connection with its report.
(b) On June 10, 1996, Coopers & Lybrand LLP was engaged by the
Registrant as the principle accountant to audit the Registrant's financial
statements.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired. The Registrant has
determined that it is impracticable to provide the financial
statements required at the time this report on Form 8-K is being
filed. The required financial statements will be filed under cover of
Form 8-K/A as soon as practicable, but not later than August 16, 1996.
(b) Pro forma financial information. The Registrant has determined that
it is impracticable to provide the financial statements required at
the time this report on Form 8-K is being filed. The required
financial statements will be filed under cover of Form 8-K/A as soon
as practicable, but not later than August 16, 1996.
(c) Exhibits
2.1 Stock Redemption and Purchase Agreement dated as of May 17,
1996 (the "Purchase Agreement") by and among James S.
Harrington, Duane A. Gawron, Trustee of the Living Trust of
Duane A. Gawron, Margo Gawron, John E. Pylak, Trustee of the
John E. Pylak Living Trust, Rebecca Pylak and Kurt Cieszkowski
(collectively, the "Sellers"), Connectivity Products
Incorporated, a Delaware corporation, and the Registrant. (A
list of exhibits and schedules to the Purchase Agreement is
set forth therein. The Registrant agrees to furnish to the
Commission supplementally, upon request, a copy of any such
exhibits or schedules not otherwise filed herewith.)
2.2 Amendment No. 1 to the Purchase Agreement dated as of May 31,
1996.
10.1 Stockholders' Agreement relating to CPI dated as of May 17,
1996 among the Sellers, CPI and the Registrant.
10.2 Form of Employment Agreement dated as of May 17, 1996 by and
between CPI and each of Messrs. Harrington, Gawron, Pylak and
Cieszkowski.
10.3 Form of Redemption Note dated as of May 31, 1996 by CPI in
favor of each of the Sellers.
10.4 Form of Contingent Note dated as of May 31, 1996 by CPI in
favor of each of the Sellers.
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16.1 Letter dated as of June 14, 1996 from BDO Seidman, LLP to the
Registrant regarding change in certifying accountant.
99.1 Press Release of the Registrant dated May 31, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
TIGERA GROUP, INC.
(Registrant)
Dated: June 13, 1996 By: /s/James S. Harrington
Name: James S. Harrington
Title: President and
Chief Executive
Officer
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INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
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<S> <C>
2.1 Stock Redemption and Purchase Agreement dated as of May 17, 1996 (the "Purchase Agreement") by and among
James S. Harrington, Duane A. Gawron, Trustee of the Living Trust of Duane A. Gawron, Margo Gawron, John E.
Pylak, Trustee of the John E. Pylak Living Trust, Rebecca Pylak and Kurt Cieszkowski (collectively, the
"Sellers"), Connectivity Products Incorporated, a Delaware corporation, and the Registrant. (A list of
exhibits and schedules to the Purchase Agreement is set forth therein. The Registrant agrees to furnish to
the Commission supplementally, upon request, a copy of any such exhibits or schedules not otherwise filed
herewith.)
2.2 Amendment No. 1 to the Purchase Agreement dated as of May 31, 1996.
10.1 Stockholders' Agreement relating to CPI dated as of May 17, 1996 among the Sellers, CPI and the Registrant.
10.2 Form of Employment Agreement dated as of May 17, 1996 by and between CPI and each of Messrs. Harrington,
Gawron, Pylak and Cieszkowski.
10.3 Form of Redemption Note dated as of May 31, 1996 by CPI in favor of each of the Sellers.
10.4 Form of Contingent Note dated as of May 31, 1996 by CPI in favor of each of the Sellers.
16.1 Letter dated as of June 14, 1996 from BDO Seidman, LLP to the Registrant regarding change in certifying
accountant.
99.1 Press Release of the Registrant dated May 31, 1996.
</TABLE>
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EXHIBIT 2.1
================================================================================
STOCK REDEMPTION AND PURCHASE AGREEMENT
================================================================================
STOCK REDEMPTION AND PURCHASE AGREEMENT
by and among
JAMES S. HARRINGTON
DUANE A. GAWRON,
Trustee of the Living Trust
of Duane A. Gawron
MARGO GAWRON
JOHN E. PYLAK
Trustee of the John E. Pylak
Living Trust
REBECCA PYLAK
KURT CIESZKOWSKI
CONNECTIVITY PRODUCTS INCORPORATED
(a Delaware corporation)
and
TIGERA GROUP, INC., a
(a Delaware corporation)
Dated as of May 17, 1996
================================================================================
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TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE I CERTAIN DEFINITIONS.................................................................................. 2
Section 1.01. Definitions............................................................... 2
ARTICLE II STOCK REDEMPTION; PURCHASE AND SALE OF SHARES...................................................... 6
Section 2.01. Redemption of Redeemed Shares............................................. 6
Section 2.02. Redemption Price.......................................................... 7
Section 2.03. Purchase and Sale of Purchased Shares..................................... 7
Section 2.04. Purchase Price............................................................ 8
ARTICLE III CLOSING............................................................................................ 8
Section 3.01. Time and Place of Closing................................................. 8
Section 3.02. Pre-Closing Deliveries.................................................... 8
Section 3.03. Deliveries at the Closing................................................. 9
Section 3.04. Interdependence........................................................... 10
ARTICLE IV RELATED MATTERS..................................................................................... 10
Section 4.01. Further Assurances........................................................ 10
Section 4.02. Waiver of Objections Based on
Director's Fiduciary Duties............................................... 11
Section 4.03. Release by Sellers........................................................ 11
Section 4.04. Release by the Company.................................................... 12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................................................ 12
Section 5.01. Corporate Organization and Good
Standing.................................................................. 13
Section 5.02. Authorized Capitalization; Title to
Purchased Shares.......................................................... 13
Section 5.03. Authorization, Execution and Binding
Effect.................................................................... 14
Section 5.04. Consents and Approvals.................................................... 15
Section 5.05. Compliance With Laws...................................................... 15
Section 5.06. Financial Statements, Accounts
Receivable and Inventories................................................ 16
Section 5.07. Absence of Undisclosed Liabilities........................................ 17
Section 5.08. Absence of Certain Changes................................................ 17
Section 5.09. Legal Proceedings......................................................... 19
Section 5.10. Title to Properties and Related
Matters................................................................... 19
Section 5.11. Employee Benefit Plans; ERISA............................................. 20
Section 5.12. Taxes and Tax Returns..................................................... 22
Section 5.13. Contracts................................................................. 23
Section 5.14. Patents, Trademarks, Trade Names, etc..................................... 24
Section 5.15. Condition of Assets....................................................... 25
Section 5.16. Insurance................................................................. 25
Section 5.17. Subsidiaries.............................................................. 26
Section 5.18. Minute Books; Officers and Directors...................................... 26
Section 5.19. Environmental Matters..................................................... 26
Section 5.20. Finders................................................................... 27
Section 5.21. Employees; Labor Controversies............................................ 27
Section 5.22. Bank Accounts............................................................. 28
Section 5.23. Ownership of Purchaser's Securities....................................... 28
Section 5.24. No Misrepresentation or Omission.......................................... 28
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 28
Section 6.01. Corporate Organization.................................................... 28
</TABLE>
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Section 6.02. Authorized Capitalization................................................. 29
Section 6.03. Authorization, Execution and Binding
Effect.................................................................... 29
Section 6.04. Consents and Approvals.................................................... 30
Section 6.05. Finders................................................................... 30
Section 6.06. Stock Options............................................................. 31
Section 6.07. Investment Intent......................................................... 31
Section 6.08. No Misrepresentation or Omission.......................................... 32
ARTICLE VII SELLERS' COVENANTS................................................................................. 32
Section 7.01. Regular Course of Business................................................ 32
Section 7.02. No Solicitations.......................................................... 35
Section 7.03. Full Access............................................................... 35
Section 7.04. "Key Man" Insurance....................................................... 36
Section 7.05. Non-Competition; Confidentiality.......................................... 36
Section 7.06. Purchase of Purchaser's Securities........................................ 39
ARTICLE VIII PURCHASER'S COVENANTS............................................................................. 40
Section 8.01. Other Transactions........................................................ 40
ARTICLE IX ADDITIONAL COVENANTS................................................................................ 40
Section 9.01. Cooperation............................................................... 40
Section 9.02. Public Announcements...................................................... 40
ARTICLE X PURCHASER'S CONDITIONS PRECEDENT..................................................................... 41
Section 10.01. Representations and Warranties
True...................................................................... 41
Section 10.02. Performance of Obligations................................................ 41
Section 10.03. Consents and Approvals.................................................... 41
Section 10.04. Absence of Litigation..................................................... 41
Section 10.05. No Material Adverse Change................................................ 42
Section 10.06. Refinancing of Company Debt............................................... 42
Section 10.07. Subchapter S Election..................................................... 42
Section 10.08. Closing Deliveries........................................................ 42
ARTICLE XI SELLERS' AND THE COMPANY'S CONDITIONS PRECEDENT..................................................... 42
Section 11.01. Representations and Warranties True....................................... 42
Section 11.02. Performance of Obligations................................................ 43
Section 11.03. Consents and Approvals.................................................... 43
Section 11.04. Absence of Litigation..................................................... 43
Section 11.05. No Material Adverse Change................................................ 43
Section 11.06. Refinancing of Company Debt............................................... 43
Section 11.07. Closing Deliveries........................................................ 43
ARTICLE XII TERMINATION........................................................................................ 43
Section 12.01. Termination............................................................... 43
Section 12.02. Effect of Termination..................................................... 44
ARTICLE XIII SURVIVAL AND INDEMNIFICATION...................................................................... 44
Section 13.01. Survival of Representations and
Warranties, etc........................................................... 44
Section 13.02. Indemnification........................................................... 45
Section 13.03. Procedure for Indemnification............................................. 46
Section 13.04. Prior Acts of the Company................................................. 48
Section 13.05. Limitation on Sellers' Indemnification.................................... 48
</TABLE>
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Section 13.06. Use of Escrowed Funds; Offset of Notes.................................... 52
Section 13.07. Limitation on Purchaser's
Indemnification........................................................... 53
Section 13.08. Sole Remedy............................................................... 53
ARTICLE XIV SELLERS' AGENT..................................................................................... 53
Section 14.01. Appointment of Sellers' Agent............................................. 53
ARTICLE XV MISCELLANEOUS....................................................................................... 55
Section 15.01. Headings; Grammatical Usage............................................... 55
Section 15.02. Notices................................................................... 55
Section 15.03. Assignment; Third Parties................................................. 56
Section 15.04. Expenses and Transfer Taxes............................................... 56
Section 15.05. Complete Agreement........................................................ 56
Section 15.06. Amendments and Waivers.................................................... 56
Section 15.07. Counterparts.............................................................. 57
Section 15.08. Governing Law............................................................. 57
Section 15.09. Severability.............................................................. 57
Section 15.10. Force Majeure............................................................. 57
Section 15.11. Action by Purchaser....................................................... 58
</TABLE>
(iii)
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STOCK REDEMPTION AND PURCHASE AGREEMENT, dated as of May 17,
1996 (this "AGREEMENT"), is entered into by and among (1) JAMES S. HARRINGTON, a
resident of Ashburnham, Massachusetts ("MR. HARRINGTON"); (2) DUANE A. GAWRON,
Trustee of the Living Trust of Duane A. Gawron dated March 16, 1987 and a
resident of Orlando, Florida ("MR. GAWRON"); (3) MARGO GAWRON, a resident of
Orlando, Florida ("MS. GAWRON"); (4) JOHN E. PYLAK, Trustee of the John E. Pylak
Living Trust dated September 3, 1987, and a resident of Clarkston, Michigan
("MR. PYLAK"); (5) REBECCA PYLAK, a resident of Clarkston, Michigan "MS.
PYLAK"); (6) KURT CIESZKOWSKI, a resident of Gross Pointe Woods, Michigan ("MR.
CIESZKOWSKI"; and together with Mr. Harrington, Mr. Gawron, Ms. Gawron, Mr.
Pylak and Ms. Pylak, the "SELLERS", each being a "SELLER"); (5) TIGERA GROUP,
INC., a Delaware corporation (the "PURCHASER"); and (6) CONNECTIVITY PRODUCTS
INCORPORATED, a Delaware Corporation (the "COMPANY").
W I T N E S E T H:
WHEREAS, the Sellers are collectively the holders of 2,040
shares of the Common Stock, par value $.01 per share ("COMMON STOCK") of the
Company; and
WHEREAS, the Sellers desire to sell to the Company, and the
Company desires to purchase and redeem from the Sellers a portion of the shares
of Common Stock owned by the Sellers (the "REDEEMED SHARES") in accordance with
the terms hereof; and
WHEREAS, concurrently with the transaction described above,
the Sellers desire to sell to the Purchaser, and the Purchaser desires to
purchase from the Sellers, a portion of the shares of Common Stock owned by the
Sellers (the "PURCHASED SHARES") with the result that, after giving effect to
the purchases and sales between the Company and the Sellers and between the
Purchaser and the Sellers, 85% of the shares of Common Stock is owned by the
Purchaser and 15% of the shares of Common Stock is owned by the Sellers, subject
to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and
the respective representations, warranties, covenants, conditions, agreements,
and undertakings hereinafter set forth, the sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
<PAGE> 6
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01. Definitions
The following terms, as used herein, shall have the meanings
set forth below:
(a) "ADJUSTED EBITDA" shall have the meaning ascribed to such
term in the Contingent Note.
(b) "AFFILIATE" shall mean, with respect to any Person, any
Person directly or indirectly controlling, controlled by or under common control
with such other Person, and with respect to the Company from and after the
Closing Date, shall include without limitation the Purchaser and its direct and
indirect subsidiaries and any Person directly or indirectly controlling the
Purchaser.
(c) "AGREEMENT" shall mean this Stock Redemption and Purchase
Agreement, including the Exhibits and Schedules hereto.
(d) "BUSINESSES" shall mean the wire and cable product
manufacturing, distributing and assembling businesses carried on by the Company
prior to the Closing.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
(f) "DIVISIONS" shall mean the Company's BSCC manufacturing
division, Energy Electric Assembly division and Energy Electric Cable
distribution division.
(g) "ENVIRONMENTAL LAWS" shall mean all federal, state and
local statutes, ordinances, and other laws relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases,
or threatened releases of pollutants, contaminants, chemicals, or industrial,
hazardous, or toxic materials or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface, or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, hazardous, or toxic
materials or wastes, or any regulation, rule, code, plan, order, decree,
judgment, injunction, notice, or demand letter issued, entered, promulgated, or
approved thereunder.
(h) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(i) "ESCROW AGENT" shall mean State Street Bank and Trust
Company, the Strategic Partner for The First National Bank of Boston Corporate
Trust Services Department.
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(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(k) "FINANCIAL STATEMENTS" shall mean those financial
statements of Seller that are listed on SCHEDULE 5.06(a) hereto.
(l) "GAAP" shall mean generally accepted accounting principles
in the United States as in effect from time to time, consistently applied.
(m) "KNOWLEDGE" or "BEST KNOWLEDGE" shall mean the actual
knowledge after due inquiry of any executive or supervisory employee of the
applicable Person and, with respect to the Sellers, shall mean, in addition to
the actual knowledge after due inquiry of Sellers, the actual knowledge after
due inquiry of Carol Bosche, Kevin Higgenbottom, Steve LeBlanc, Everett McCarty,
Vickie Simek, Paul Snyder and Toni Woodring.
(n) "MATERIAL ADVERSE EFFECT" shall mean, with respect to any
Person, any change(s), effect(s), circumstance(s) or condition(s) that,
individually or in the aggregate, are or may reasonably be expected to be
materially adverse to (i) the assets, business, operations, income, prospects or
condition (financial or otherwise) of such Person or such Person and its
Affiliates taken as a whole, or the transactions contemplated by this Agreement
or (ii) the ability of such Person to perform its obligations under this
Agreement.
(o) "NONCOMPETITION PERIOD" shall mean the period commencing
on the Closing Date and ending on the third anniversary of the Closing Date.
(p) "PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, public benefit corporation or governmental entity (or
any department, agency or political subdivision thereof).
(q) "PREDECESSOR COMPANIES" shall mean (i) BSCC Corp., a
Massachusetts corporation; (ii) BSCC Group Corp., a Massachusetts corporation;
(iii) Energy Electric Assembly, Inc., a Michigan corporation; and (iv) Energy
Electric Cable, Inc., a Michigan corporation; each of which has been merged with
and into the Company.
(r) "SEC" shall mean the Securities and Exchange Commission.
(s) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(t) "STOCKHOLDER OFFICERS" shall mean Mr. Harrington, Mr.
Gawron, Mr. Pylak and Mr. Cieszkowski, and each of them.
3
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(u) "TAXES" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
(v) "TAX RETURN" shall mean any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
(w) "1996 APPROVED CAPITAL EXPENDITURES" shall mean the amount
of the Company's capital expenditures incurred between January 1, 1996 and the
Closing Date in excess of depreciation expense correctly recorded on the
Company's books for such period, but only to the extent that the Purchaser has
approved such capital expenditures in writing.
(x) "1996 PRE-CLOSING CASH DISTRIBUTIONS" shall mean all cash
distributed to the Sellers from January 1, 1996 until the Closing, other than
(i) payments of salary and bonus that are included as expense items in the
determination of 1996 Pre-Closing Net Income, (ii) the $3,230,000 distributed
to the Seller on January 1, 1996, as described in item (xii) of SCHEDULE 5.08
hereto, and (iii) the discharge of the Officer Notes.
(y) "1996 PRE-CLOSING NET INCOME" shall mean the consolidated
net income (or loss) of the Company and its subsidiaries for the period from
January 1, 1996 through the close of business on the Closing Date, determined in
accordance with GAAP, applied on a basis consistent with the Company's audited
financial statements for the year ended December 31, 1995, treating the Closing
Date as if the end of a fiscal year, after federal income taxes and state and
local taxes to the extent any such taxes are levied on the Company rather than
its shareholders, plus, to the extent included as expense items in the
determination of the Company's net income for such period, the amount of any
expenses directly related to or associated with the transactions contemplated by
this Agreement. The amount of net sales included in determining the Company's
net income shall be reduced by the amount of any credit memos, returns,
allowances and other adjustments relating to sales for such period, whether such
credit memos, returns, allowances or other adjustments occur during such period
or during any subsequent period.
4
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The following additional terms are defined in the Sections of
this Agreement set forth below:
Term Section
---- -------
"ACQUISITION TRANSACTION" 7.02
"BANK LOAN AGREEMENTS" 10.06
"BANKS" 10.06
"CASH REDEMPTION PAYMENT" 2.02
"CLOSING" 3.01
"CLOSING DATE" 3.01
"CLOSING DATE CASH PAYMENT" 2.04
"COMMON STOCK" Preamble
"COMPANY" Preamble
"CONFIDENTIAL INFORMATION" 7.05(a)
"CONTINGENT NOTES" 2.02
"CONTRACTS" 5.13
"EMPLOYEE BENEFIT PLANS" 5.11
"EMPLOYMENT AGREEMENTS" 3.02(a)
"ENCUMBRANCES" 5.10
"ENVIRONMENTAL BASKET" 13.05(a)
"ENVIRONMENTAL CAP AMOUNT" 13.05(c)
"ENVIRONMENTAL MATTERS" 13.05(a)
"ESCROW AGREEMENT" 3.03(e)
"EXTENSION DATE" 3.01
"GENERAL BASKET AMOUNT" 13.05(a)
"GENERAL CAP AMOUNT" 13.05(b)
"INDEMNIFIABLE LOSS" 13.02(a)
"INDEMNIFIABLE DIVISION LOSS" 13.03(c)
"INDEMNIFYING PARTY" 13.03(a)
"INDEMNITEE" 13.03(a)
"INDIVIDUAL ENVIRONMENTAL CAP AMOUNTS" 13.05(c)
"INDIVIDUAL GENERAL CAP AMOUNTS" 13.05(b)
"INTELLECTUAL PROPERTY" 5.14(a)
"MERGER DATE" 5.01(b)
"MR. CIESZKOWSKI" Preamble
"MR. GAWRON" Preamble
"MS. GAWRON" Preamble
5
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"MR. HARRINGTON" Preamble
"MR. PYLAK" Preamble
"MS. PYLAK" Preamble
"OFFICER NOTES" 2.02
"PERMISSIBLE EXCEPTIONS" 5.10(a)
"PURCHASE PRICE" 2.04
"PURCHASE PRICE ESCROW AMOUNT" 2.04
"PURCHASED SHARES" Preamble
"PURCHASER" Preamble
"PURCHASER'S DOWNSTREAM AFFILIATES" 7.05(a)
"RCRA" 5.19(b)
"REDEEMED SHARES" Preamble
"REDEMPTION NOTES" 2.02
"REDEMPTION PRICE" 2.02
"REDEMPTION PRICE ESCROW AMOUNT" 2.02
"RESPONSIBLE SELLER" 13.05(f)
"SELLERS" Preamble
"SELLERS' AGENT" 14.01
"SELLERS' PROPORTIONATE SHARE" 13.05(e)
"STANDSTILL PERIOD" 13.05(f)
"STOCKHOLDERS' AGREEMENT" 3.02(b)
"SUPERFUND" 5.19(b)
"TAX ALLOCATION AGREEMENT" 3.02(c)
"TAX MATTERS" 13.05(a)
"TERMINATION DATE" 12.01
"THIRD PARTY CLAIM" 13.03(a)
ARTICLE II
STOCK REDEMPTION; PURCHASE AND SALE OF SHARES
Section 2.01. Redemption of Redeemed Shares
Subject to and in accordance with the terms and conditions of
this Agreement, at the Closing, the Sellers shall sell, convey, assign,
transfer, and deliver to the Company, free and clear of all Encumbrances, and
the Company shall purchase and redeem from the Sellers, the Redeemed Shares,
with the number of Redeemed Shares being so redeemed from each Seller being as
determined in accordance with SCHEDULE 2.01 hereto.
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Section 2.02. Redemption Price
The aggregate redemption price for the Redeemed Shares (the
"REDEMPTION PRICE") shall consist of:
(i) the sum of (A) $7,950,000, plus (B) the amount of
1996 Pre-Closing Net Income, minus (C) the amount of 1996
Pre-Closing Cash Distributions, plus (D) $30,000 if the
Closing Date is May 29, 1996, or plus (E) $15,000 if the
Closing Date is May 30, 1996, or minus (F) $15,000 for each
day (but not for more than 30 days) between May 31, 1996 and
the Closing Date if the Closing Date is after May 31, 1996
(e.g. minus $45,000 if the Closing Date is June 3, 1996). Of
such amount, (i) $250,000 (the "REDEMPTION PRICE ESCROW
AMOUNT") shall be delivered to the Escrow Agent in accordance
with the Escrow Agreement and (ii) the remaining portion (the
"CASH REDEMPTION PAYMENT") shall be payable to the Sellers at
the Closing in cash by bank or certified check or by wire
transfer to an account or accounts in the United States
designated in writing by Sellers, such Cash Redemption Payment
being allocated among the Sellers as set forth on SCHEDULE
2.02(a) hereto; PLUS
(ii) the Company's 10% subordinated promissory notes
in the original aggregate principal amount of $6,000,000, each
in the form of EXHIBIT A hereto (the "REDEMPTION NOTES"),
which Redemption Notes shall be delivered to the Sellers at
the Closing and which shall be payable to each of the Sellers
in the denominations set forth on SCHEDULE 2.02(a) hereto;
PLUS
(iii) the Company's 10% contingent subordinated
promissory notes in the aggregate original principal amount of
$3,000,000, each in the form of EXHIBIT B hereto (the
"CONTINGENT NOTES"), which Contingent Notes shall be payable
to the Sellers in the denominations set forth on SCHEDULE
2.02(a) hereto; PLUS
(iv) $2,000,000 represented exclusively by the
promissory notes listed on SCHEDULE 2.02(b) hereto from the
Sellers in favor of the Company (the "OFFICER NOTES"), which
indebtedness is, effective as of the Closing, hereby released
and discharged by the Company;
provided, however that the Redemption Price shall be subject to adjustment in
accordance with SCHEDULE 2.02(b) hereto.
Section 2.03. Purchase and Sale of Purchased Shares
Subject to and in accordance with the terms and conditions of
this Agreement, at the Closing, the Sellers shall sell, convey, assign,
transfer, and deliver the Purchased Shares to the Purchaser and Purchaser's
successors and assigns forever,
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free and clear of all Encumbrances, with the number of Purchased Shares sold to
Purchaser by each Seller being as determined in accordance with SCHEDULE 2.01
hereto, and the Purchaser shall purchase the Purchased Shares from the Sellers.
Section 2.04. Purchase Price
The aggregate purchase price for the Purchased Shares (the
"PURCHASE PRICE") shall be $7,990,000, of which, (i) $1,000,000 (the "PURCHASE
PRICE ESCROW AMOUNT") shall be delivered to the Escrow Agent in accordance with
the Escrow Agreement, and (ii) the remaining portion (the "CLOSING DATE CASH
PAYMENT") shall be payable to the Sellers at the Closing in cash by a bank or
certified check or by wire transfer to an account or accounts in the United
States designated in writing by Sellers, such Closing Date Cash Payment being
allocated among the Sellers as set forth on SCHEDULE 2.04 hereto.
ARTICLE III
CLOSING
Section 3.01. Time and Place of Closing
The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices of Palmer & Dodge LLP, One
Beacon Street, Boston, Massachusetts 02108, at 10:00 a.m., local time, on May
29, 1996, except that if the conditions specified in Articles X and XI hereof
have not been satisfied prior to such date, the Sellers' Agent or the Purchaser
may extend the date of such closing (the "CLOSING DATE"), to a date not later
than June 27, 1996 or, if the conditions specified in Section 10.06 or 11.06
hereof have not been satisfied, to July 26, 1996 (in either case, the "EXTENSION
DATE").
Section 3.02. Pre-Closing Deliveries
Simultaneously with the execution and delivery of this
Agreement the parties are also executing and delivering the following documents,
each of which shall become effective upon the Closing but which shall be null
and void ab initio in the event that this Agreement is terminated prior to the
Closing:
(a) The Company is executing and delivering to each of the
Stockholder Officers, and each of the Stockholder Officers is executing and
delivering to the Company, employment agreements in substantially the form
attached as EXHIBIT C hereto (the "EMPLOYMENT AGREEMENTS").
(b) The Sellers, the Purchaser and the Company are executing
and delivering to each other the Stockholders' Agreement in the form attached as
EXHIBIT D hereto (the "STOCKHOLDERS' AGREEMENT").
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(c) The Purchaser and the Company are executing and delivering
to each other a Tax Allocation and Indemnification Agreement in the form
attached as EXHIBIT E hereto (the "TAX ALLOCATION AGREEMENT").
Section 3.03. Deliveries at the Closing
At the Closing:
(a) The Sellers shall deliver to the Company certificates
representing the Redeemed Shares, accompanied by stock powers duly executed in
blank and any required stock transfer and other documentary stamps affixed.
(b) The Company shall deliver to the Sellers:
(i) the Cash Redemption Payment;
(ii) the Redemption Notes; and
(iii) the Contingent Notes.
(c) The Sellers shall deliver to the Purchaser:
(i) certificates representing the Purchased Shares
registered in the name of Purchaser or registered in the names
of Sellers and accompanied by stock powers duly executed in
blank and any required stock transfer and other documentary
stamps affixed;
(ii) all other documents of assignment and other
instruments as, in the reasonable judgment of Purchaser and
its counsel, are necessary to vest in Purchaser good and valid
title to the Purchased Shares;
(iii) such consents and waivers of third parties as
may be necessary for Sellers and the Company to consummate the
transactions contemplated by this Agreement;
(iv) a certificate executed by each of the Sellers
certifying that each of the obligations of the Sellers to be
performed by them on or before the Closing Date pursuant to
the terms hereof has been duly performed and complied with;
(v) the opinion of Palmer & Dodge, counsel to the
Sellers, in form and substance reasonably satisfactory to
Purchaser;
(vi) the minute books and stock transfer books and
corporate seal of the Company.
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(d) The Purchaser shall deliver to the Sellers:
(i) the Closing Date Cash Payment;
(ii) such consents and waivers of third parties
as may be necessary for the Purchaser to consummate the
transactions contemplated by this Agreement;
(iii) a certificate executed by the chief executive
officer of Purchaser certifying that the each of the
obligations of Purchaser to be performed by it on or before
the Closing Date pursuant to the terms hereof has been duly
performed and complied with;
(iv) the opinion of Zimet, Haines, Friedman & Kaplan,
counsel to Purchaser, in form and substance reasonably
satisfactory to Sellers;
(v) agreements evidencing the stock options
described in Section 6.06 hereof.
(e) The Sellers, the Company, the Purchaser and the Escrow
Agent shall each execute and deliver to the other parties the escrow agreement
in the form of EXHIBIT H hereto or in such other form, reasonably acceptable to
the parties hereto, as the Escrow Agent may require (the "ESCROW AGREEMENT"),
and the Company and the Purchaser shall deliver the Redemption Price Escrow
Amount and the Purchase Price Escrow Amount, respectively, to the Escrow Agent.
(f) Each party hereto shall deliver to the appropriate
recipient all other previously undelivered documents, instruments, and writings
required to be delivered by it at the Closing pursuant to this Agreement or
otherwise required in connection herewith.
Section 3.04. Interdependence
The transfers and deliveries described in this Article III to
take place at the Closing are mutually interdependent and regarded as occurring
simultaneously as of the close of business on the Closing Date; and, unless
waived by both the transferor and transferee, no such transfer or delivery shall
become effective unless and until all other transfers and deliveries provided
for in this Article III have also been consummated.
ARTICLE IV
RELATED MATTERS
Section 4.01. Further Assurances
The parties hereto agree that each will execute and deliver to
the other any and all documents in addition to those
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expressly provided for in this Agreement that may be reasonably necessary or
appropriate to carry out the purposes of this Agreement and the transactions
contemplated hereby, whether at or after the Closing. The Sellers further agree
that from time to time after the Closing they will execute and deliver to
Purchaser or its designee such further conveyances, assignments, or other
written assurance, and take such further necessary actions, as Purchaser may
reasonably request to perfect Purchaser's title to the Purchased Shares. In
addition, the Sellers agree that after the Closing they will cooperate with
Purchaser's reasonable requests for assistance in connection with (i) any
litigation, or asserted liability, relating to the Company; (ii) providing
relevant information and data from any books or records relating to the Company
which the Sellers may have; and (iii) consulting with Purchaser concerning the
operations of the Company, including tax and financial matters that occurred or
existed prior to the Closing, and the Company shall pay the Sellers' reasonable
out of pocket expenses incurred in connection with such cooperation except to
the extent that such cooperation is related to a matter with respect to which
Purchaser or the Company (or their respective Affiliates) is entitled to
indemnification under Article XIII hereof.
Section 4.02. Waiver of Objections Based on Director's Fiduciary
Duties.
Without in any way limiting any of the other provisions of
this Agreement, each of the Sellers, solely in their capacity as stockholders of
the Company, hereby expressly waives any right such Seller may have to object,
based on the fiduciary duty (or any breach thereof) of the Company's directors,
serving as such prior to the Closing, to the Company and its stockholders, to
the Company fulfilling its obligations under this Agreement and the other
agreements to be entered into by the Company in connection herewith.
Section 4.03. Release by Sellers
Effective as of the Closing, the Sellers, for themselves and
their respective heirs, executors, administrators, beneficiaries and successors
and assigns, DO HEREBY RELEASE AND FOREVER DISCHARGE the Company and its
officers, directors and employees, and the respective heirs, executors,
administrators, beneficiaries and successors and assigns of the foregoing, from
all actions, causes of action, suits, libels, debts, dues, sums of money,
accounts, reckonings, bonds, bills, covenants, contracts, controversies,
agreements, promises, damages, judgments, executions, liens, claims and demands
whatsoever (collectively, "CLAIMS"), in law or in equity, that against the
Company or any of such other persons they ever had, now have or hereafter can,
shall or may have with respect to any matter, cause or thing occurring on or
prior to the Closing Date, whether personally, in their own right, together with
any other person, firm, corporation or other entity derivatively or otherwise
and, without limiting the foregoing, from any and all of their
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respective claims and rights for fees, compensation, commissions, or dividends
owed to them arising from or relating to (but only to such extent): (i) their
ownership of shares of the capital stock of the Company or any Predecessor
Company; (ii) any and all indebtedness of the Company to the Sellers or any of
them; (iii) any contract, agreement or understanding by and among one or more of
Sellers and the Company; and (iv) any claim for personal injury or property
damage, the existence of which claim was known by the Sellers, or any of them,
on the date hereof; provided, however, that the Sellers do not hereby release or
discharge any other Claims, including but not limited to Claims: (a) arising
under this Agreement or any other agreement or document contemplated hereby; (b)
with respect to indemnification to which Sellers would otherwise be entitled as
directors or officers or as former directors or officers of the Company, but
only to the extent that such claim for indemnification relates to a claim by a
third party other than Purchaser, Sellers or any of their respective Affiliates
or family members; or (c) for personal injury or property damage arising after
the Closing Date or which arose prior to the Closing Date but the existence of
which the Sellers did not know on or prior to the Closing Date.
Section 4.04. Release by the Company and Purchaser
Effective as of the Closing, the Company and the Purchaser,
for themselves and their respective successors and assigns, DO HEREBY RELEASE
AND FOREVER DISCHARGE each of the directors of the Company serving in such
capacity at any time prior to the Closing, and their respective heirs,
executors, administrators, beneficiaries and assigns, from all actions, causes
of action, suits, libels, debts, dues, sums of money, accounts, reckonings,
bonds, bills, covenants, contracts, controversies, agreements, promises,
damages, judgments, executions, liens, claims and demands whatsoever in law or
in equity, that against any of such directors or such other persons they ever
had, now have or hereafter can, shall or may have with respect to any matter,
cause or thing occurring on or prior to the Closing Date, arising from or
relating to (but only to such extent) such persons' actions in their capacities
as directors of the Company; provided, however, that the Company and the
Purchaser do not hereby release or discharge any other Claims, including but not
limited to Claims: (a) arising out of any of such person's actions in any
capacity other than a director of the Company; or (b) arising under this
Agreement or any other agreement or document contemplated hereby (except for any
claim that the Purchaser, solely in its capacity as a stockholder of the Company
following the Closing, might have for breach of the representations and
warranties set forth in Section 5.03(b) hereof or Section 5.05(a) hereof, but
only to the extent such Section 5.05(a) pertains to the matters referred to in
Section 5.03(b)).
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
Except as set forth and specifically referenced on the
Schedules hereto, the Sellers, jointly and severally (subject to the limitations
set forth in Section 13.02(a) hereof), hereby represent and warrant to the
Purchaser and the Company as follows, and each acknowledges and confirms that
Purchaser and the Company are each relying upon such representations and
warranties notwithstanding any investigation made by Purchaser or the Company on
their behalf and, with respect to the Company's reliance on such representations
and warranties, notwithstanding that most of such representations and warranties
relate to the Company itself:
Section 5.01. Corporate Organization and Good Standing
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware and is
duly qualified to do business as a foreign corporation, and is in good standing,
in each of the jurisdictions, listed on SCHEDULE 5.01 hereto, where the nature
of its business or properties makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect on the
Company. The Company has all requisite corporate power and authority to own,
operate, and lease its properties and to carry on its business as now being
conducted. Sellers have heretofore delivered to Purchaser complete and correct
copies of the Company's Certificate of Incorporation and By-Laws, each as
amended and in effect on the date hereof.
(b) The Predecessor Companies were duly merged with and into
the Company on October 3, 1995 (the "MERGER DATE") pursuant to an Agreement and
Plan of Merger by and among the Company and the Predecessor Companies and
Certificates/Articles of Merger filed in their respective states of
incorporation. Sellers have heretofore delivered to Purchaser complete and
correct copies of such Agreement and Plan of Merger and Certificates/Articles of
Merger, and the Purchaser acknowledges receipt of such copies.
Section 5.02. Authorized Capitalization; Title to Purchased
Shares
(a) The Company is authorized to issue 3,000 shares of Common
Stock, of which 2,040 shares (including the Redeemed Shares and the Purchased
Shares) are issued and outstanding on the date hereof. Immediately following the
Closing, 85% of the issued and outstanding shares of Common Stock will be held
of record by the Purchaser and an aggregate of 15% of the issued and outstanding
shares of Common Stock will be held beneficially and of record by the Sellers.
The number of shares of Common Stock held immediately after the Closing by the
Purchaser and in the
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aggregate by the Sellers shall be determined in accordance with SCHEDULE 2.01(a)
hereto. All of the outstanding shares of Common Stock have been duly authorized,
and are validly issued, fully paid and non-assessable.
(b) The Sellers are the record and beneficial owner of all of
the outstanding shares of the Common Stock, free and clear of any Encumbrances
or other rights of any other Person; provided, that the representations made in
this sentence are made severally and not jointly. The number of shares of Common
Stock owned beneficially and of record by each Seller as of the date hereof is,
and as of immediately prior to the Closing will be, as set forth on SCHEDULE
5.02(b) hereto.
(c) The Sellers have the right, title, power and authority to
sell, assign, transfer and deliver the Redeemed Shares to the Company and the
Purchased Shares to the Purchaser. Upon delivery of the certificates evidencing
the Redeemed Shares at the Closing to the Company, Sellers will transfer to the
Company good and valid title to such Redeemed Shares free and clear of any
Encumbrances or other rights of any other Person. Upon delivery of the
certificates evidencing the Purchased Shares at the Closing to Purchaser,
Sellers will transfer to Purchaser good and valid title to such Purchased Shares
free and clear of any Encumbrances or other rights of any other Person.
(d) Other than as set forth on SCHEDULE 5.02(b) hereto, no
shares of any class of securities of the Company are issued and outstanding; and
there are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire from the
Company any shares of Common Stock, or securities or obligations of the Company
of any kind whatsoever. There are no authorized, outstanding or existing
proxies, voting trusts or other agreements or understandings with respect to the
voting of the Purchased Shares. There are no outstanding contractual obligations
of any kind that would obligate the Company to register for sale under any
securities laws, or to repurchase, redeem or otherwise acquire, any shares of
Common Stock or any other securities of the Company.
(e) None of the shares of capital stock of the Company is
subject to any preemptive rights of any person, including, without limitation,
present or former stockholders of the Company.
(f) Neither Sellers nor the Company nor any agent acting on
behalf of the Sellers or the Company has offered any of the Purchased Shares or
any other securities of the Company, or all or a substantial portion of the
assets of the Company (other than inventory offered or sold in the ordinary
course of business) for sale to any person or persons other than Purchaser,
which offer remains outstanding on the date hereof or which offer could give
rise to liability on the part of the Company or the Purchaser.
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Section 5.03. Authorization, Execution and Binding Effect
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and the other agreements contemplated hereby
to which the Company is a party and to consummate the transactions contemplated
hereby and thereby. The Board of Directors and the shareholders of the Company
have duly authorized the execution and delivery of this Agreement and the other
agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby and no other corporate proceedings on the part
of the Company are necessary to approve and authorize the execution and delivery
of this Agreement and the other agreements contemplated hereby or the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by the Company and by each of the Sellers
and constitutes the legal, valid and binding agreement of each of them,
enforceable against each of them in accordance with its terms, except to the
extent that enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, or other similar laws affecting creditors' rights generally and
by general principles of equity.
(b) Without limiting the generality of Section 5.05(a) hereof,
the redemption of the Redeemed Shares has been duly authorized by the Board of
Directors of the Company and such redemption is in accordance with applicable
Delaware law.
Section 5.04. Consents and Approvals
Neither the execution and delivery by the Company and the
Sellers of this Agreement, nor the consummation by the Company and the Sellers
of the transactions contemplated hereby, nor compliance by the Company and the
Sellers with any of the provisions hereof will (i) violate or conflict with any
provision of the Certificate or Articles of Incorporation or By-Laws of the
Company, (ii) result in a violation of any order, writ, injunction, decree,
judgment or ruling of any court or governmental authority specifically naming
the Company, any Predecessor Company or any Seller, (iii) result in a violation
of or any law, rule or regulation applicable to any Seller or to the Company,
(iv) result in the material breach of or otherwise materially affect any of the
terms, conditions, or provisions of, any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, contract, agreement, or other instrument
or commitment or obligation of any Seller or the Company, or (v) require any
consent, approval, or authorization of, or notice to, or declaration, filing, or
registration with, any governmental or regulatory authority or any other Person,
except for such consents, approvals, authorizations, notices, declarations,
filings or registrations listed on SCHEDULE 5.04 hereto, each of which has been
obtained, given or made, as the case may be, and is unconditional and in full
force and effect.
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Section 5.05. Compliance With Laws
(a) The Company is, and the Company and the Predecessor
Companies have operated their businesses in, substantial compliance with all
laws, regulations, decrees and orders applicable to the Company or the
Predecessor Companies, including without limitation all applicable Environmental
Laws and all applicable laws, regulations, decrees and orders relating to
occupational health and safety matters; and the Company is not in default or
violation of, or to the best knowledge of the Sellers, under investigation with
respect to, any of such laws, regulations decrees or orders.
(b) The Company and the Predecessor Companies have duly and
timely filed all reports required to be filed by them with governmental
authorities and the Company has obtained all governmental permits and licenses
and other governmental consents which are required in connection with the
Businesses, except for such reports, licenses, permits and consents which, if
not filed or obtained, would not, individually or in the aggregate, have a
Material Adverse Effect. All of such permits, licenses and consents are in full
force and effect, and no proceedings for the suspension or cancellation of any
of them is pending or, to the best knowledge of the Sellers, threatened.
Section 5.06. Financial Statements, Accounts Receivable and
Inventories
(a) The Sellers have heretofore delivered to Purchaser copies
of the audited and unaudited Financial Statements listed on SCHEDULE 5.06(a)
hereto. The Company and the Predecessor Companies have maintained their
respective books of account in substantial compliance with applicable laws,
rules and regulations. The Financial Statements listed on SCHEDULE 5.06(a) have,
except as otherwise described on such Schedule (and, in the case of interim
period financial statements, except for the absence of footnotes and normal and
recurring year-end adjustments), been prepared in conformity with GAAP
consistently applied, are correct and complete in all material respects and
present accurately the financial position of the Company and the Predecessor
Companies as of the dates of such Financial Statements and the results of
operations of the Company and the Predecessor Companies for the periods covered
by such Financial Statements.
(b) All accounts receivable reflected on the balance sheets of
the Company: (i) have arisen from bona fide transactions in the ordinary course
of business of the Company, and (ii) represent valid and binding obligations due
to the Company enforceable in accordance with their terms. Except as
specifically referenced on SCHEDULE 5.06(a) hereto, the Sellers are not aware of
any accounts receivable that are not collectible in the ordinary course of
business in the recorded amounts thereof (net of reserves of five percent in the
aggregate as of March 31, 1996), without valid set-off or counterclaim. Sellers
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have heretofore delivered to Purchaser true and correct lists (and agings) of
all accounts receivable of the Company showing amounts owed for 30, 60 and 90
days as of the dates specified on such lists.
(c) The inventories of the Company as reflected on the most
recent balance sheet listed on SCHEDULE 5.06(a) consist only of material in
merchantable condition and saleable or usable in the ordinary course of
business.
Section 5.07. Absence of Undisclosed Liabilities
Except as specifically set forth and described on SCHEDULE
5.07 hereto, the Company has, and on the Closing Date will have, no liabilities
(absolute, contingent or otherwise), other than: (i) those reflected or reserved
against on the most recent balance sheet of the Company included in the
Financial Statements and heretofore delivered to Purchaser, and (ii) those
incurred since the date of such balance sheet in the ordinary course of business
in arms' length transactions with Persons not affiliated with or related to the
Company or any Seller and which do not have and cannot reasonably be expected to
have, in the aggregate, a Material Adverse Effect on the Company.
Section 5.08. Absence of Certain Changes
Since December 31, 1995, there has not been, occurred, or
arisen, except as specifically permitted by this Agreement or as set forth in
SCHEDULE 5.08 hereto (provided, however, that inclusion of any matter on such
Schedule shall not constitute Purchaser's consent or approval for purposes of
calculating the Redemption Price (including any adjustments thereto) under this
Agreement):
(i) any new indebtedness or any increase in existing
indebtedness of the Company (other than trade payables, not
owed to Sellers or any employees, agents or Affiliates of
Sellers or the Company, incurred in the ordinary course of
business in amounts consistent with prior periods), or any
non-current liabilities;
(ii) any assumption, guarantee, endorsement, or other
liability or responsibility (whether direct, contingent, or
otherwise) by the Company for the obligations of any other
Person;
(iii) any loans, advances, or capital
contributions to, or investments in, any other
individual, corporation, or other entity by the
Company;
(iv) any payment, discharge, or satisfaction of any
claim, liability, or obligation (absolute, accrued,
contingent, or otherwise), by the Company, other than the
payment, discharge, or satisfaction, in the
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ordinary course of business and consistent with past
practice;
(v) to the best knowledge of Sellers, any lien on
any of the assets of the Company;
(vi) any disposition of or lapse of any rights to
the use of any Intellectual Property;
(vii) any sale, transfer, or other disposition of any
of the properties or assets of the Company, except for the
sale of inventory in the ordinary course of business and
consistent with past practice;
(viii) except as approved in writing by the
Purchaser, any capital expenditure by the Company in the
aggregate in excess of the aggregate depreciation expense for
the period from January 1, 1996 through the date hereof, or
any purchase of any other non-current assets;
(ix) any agreement on the part of the Company or any
Seller to take any action which, if taken on or prior to the
date hereof, would require disclosure pursuant to this
Agreement and which has not been so disclosed;
(x) any waiver or release by the Company of rights
of material value;
(xi) any wage, salary or other compensation increase,
or any bonus, applicable to directors, to any group or
classification of employees of the Company generally or to any
management employee of the Company;
(xii) any dividend or other distribution (in cash
securities or other property) to shareholders made or declared
by the Company; provided, however, that the $3,230,000
distribution described on SCHEDULE 5.08 hereto as having been
made on January 1, 1996 shall, for purposes of this Agreement
and all of the other agreements and documents being executed
and delivered in connection herewith, be deemed to have been
made in 1995;
(xiii) any agreement by the Company or any Seller,
whether in writing or otherwise, to do any of the
foregoing;
(xiv) any change in accounting principles; or
(xv) any casualty loss or damage (whether or not
covered by insurance) which would, individually or in the
aggregate, result in a Material Adverse Effect on the Company
or the conduct of the Businesses.
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Section 5.09. Legal Proceedings
Except as described on SCHEDULE 5.09 hereto, there are no
claims, actions, suits, arbitrations, inquiries, investigations, or proceedings
pending or, to the best knowledge of the Sellers, threatened or imminent, (i)
against or relating to the Company or any Predecessor Company, (ii) against or
relating to any Seller to the extent that any such claim, action, suit,
arbitration, inquiry, investigation, or proceeding (individually or together)
could have an adverse effect on the ability of any Seller to perform his
obligations under this Agreement, (iii) which question or challenge the validity
of this Agreement or any action taken or to be taken by the Sellers or the
Company pursuant hereto, or (iv) which constitute requests for environmental
clean-up actions, cost reimbursement or contribution by any Federal, state or
local agencies or any private parties with respect to any property now or
heretofore owned or leased by the Company or any Predecessor Company. Except as
set forth on SCHEDULE 5.09 hereto, Sellers and the Company are not aware of any
incident involving personal injury or property damage relating to the use of the
Company's (or any Predecessor Company's) products. Except as set forth in
SCHEDULE 5.09 hereto, to the best knowledge of the Sellers, no complaints have
been made by employees or customers to any public authority relating to the
Company's present or past business practices (including past business practices
of the Predecessor Companies). Neither the Company nor any Seller is subject to
any judgment, order or decree, or to any governmental restriction not applicable
generally to companies engaged in the same businesses as the Company.
Section 5.10. Title to Properties and Related Matters
(a) The Company has good and valid title to all of its
tangible assets and properties (including without limitation the assets and
properties reflected on the Company's most recent balance sheet included in the
Financial Statements), free and clear of all title defects and all liens,
mortgages, pledges, claims, charges, security interests, and other encumbrances
("ENCUMBRANCES") except Encumbrances which are disclosed on SCHEDULE 5.10(A)
hereto which do not, individually or in the aggregate, impair the current use,
occupancy, or value, or the validity of title, of the property subject thereto
(such exceptions being referred to herein as the "PERMISSIBLE EXCEPTIONS").
(b) SCHEDULE 5.10(B) hereto lists and describes all real
property leased by the Company. All facilities operated by the Company have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof, except where the
failure to obtain such approvals, licenses and permits would not, individually
or in the aggregate, have a Material Adverse Effect. All facilities operated by
the Company have been operated and
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maintained in substantial compliance with all applicable laws,
rules, and regulations.
(c) Neither the Company nor any Predecessor Company
has owned any real property at any time within the past six (6) years.
(d) With respect to each parcel of leased real property listed
on SCHEDULE 5.10(b) hereto:
(i) Sellers have delivered to Purchaser a correct and
complete copy of the relevant lease, which lease is legal,
valid, binding, enforceable against the Company and to the
best knowledge of Sellers against the other parties thereto,
and each such lease is in full force and effect, and will not,
as a result of the transactions contemplated by this
Agreement, cease following the Closing to be legal, valid,
binding, enforceable by the Company and in full force and
effect on identical terms;
(ii) there are no disputes, oral agreements or
forbearance in effect as to the relevant lease; and
(iii) all rental and other amounts required to be
paid under the relevant lease have been duly and timely paid
and to the best knowledge of Sellers neither party to the
relevant lease is in breach or default of the terms thereof.
(e) SCHEDULE 5.10(e) hereto lists and describes all material
tangible personal property in the nature of machinery and equipment owned or
leased by the Company.
Section 5.11. Employee Benefit Plans; ERISA
(a) SCHEDULE 5.11 hereto lists each pension, retirement,
profit-sharing, deferred compensation, bonus or other incentive plan, or other
employee benefit program, arrangement, agreement or understanding, or medical,
vision, dental or other health plan, or life insurance or disability plan, or
any other employee benefit plan, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA, to which the Company
contributes or the Company or any Predecessor Company has contributed or has
been required to contribute or is a party or is bound or under which it may have
liability or under which employees or former employees of the Company or any
Predecessor Company (or their beneficiaries) are or were eligible to participate
or derive a benefit ("EMPLOYEE BENEFIT PLANS"). Sellers have delivered to
Purchaser true, correct and complete copies of all Employee Benefit Plans and
any related funding agreements, including all amendments, supplements, and
modifications thereto, all of which are legally valid and binding and in full
force and effect, and not in default in any respect,
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and copies of the most recent determination letter received from the Internal
Revenue Service and the most recent Form 5500 Annual Report with respect to each
such plan. Neither the Company nor any Predecessor Company has been a
participating employer in any "multiemployer plan" within the meaning of Section
3(37) of ERISA. None of the assets of the Company is subject to any lien in
favor of, or enforceable by, the Pension Benefit Guaranty Corporation or the
Internal Revenue Service.
(b) The execution and delivery of this Agreement by the
Sellers and the consummation of the transactions contemplated hereunder do not
constitute and will not result in any "prohibited transaction" within the
meaning of Section 406 of ERISA, or Section 4975 of the Code.
(c) The Employee Benefit Plans and any trusts thereunder have
been maintained and administered in accordance with their terms and with all
provisions of ERISA and other laws applicable thereto and to the extent intended
to qualify under Section 401 of the Code are so qualified, and nothing has
occurred which might cause the loss of such qualification or the imposition of
any liability, penalty or tax thereunder with respect to the operation of such
Employee Benefit Plans. Neither the Company nor any Predecessor Company has
incurred, and neither Purchaser nor the Company will incur as a result of the
transactions under this Agreement, any liability to the Pension Benefit Guaranty
Corporation or the Internal Revenue Service. Neither any of the Employee Benefit
Plans nor any trusts thereunder have been terminated or have incurred any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA or Section 412 of the Code (whether or not waived), nor have there been
any "reportable events", as such term is defined in Section 4043 of ERISA, with
respect thereto since the effective date of ERISA, nor does the present value of
accrued benefits (vested or non-vested) of the participants of any such Employee
Benefit Plan or trust thereunder exceed the assets of such Employee Benefit
Plan. No proceeding by the Pension Benefit Guaranty Corporation to terminate any
such Employee Benefit Plan has been instituted. No action, suit, proceeding,
hearing or investigation with respect to the administration or the investment of
the assets of any Employee Benefit Plan is pending.
(d) The execution and delivery of this Agreement by the
Sellers and the consummation of the transactions contemplated hereunder will not
result in any obligation or liability of the Company or Purchaser (with respect
to accrued benefits or otherwise) to any employee or former employee of the
Company or any Predecessor Company or to the Pension Benefit Guaranty
Corporation or the Internal Revenue Service in respect of any such Employee
Benefit Plans or any trust thereunder.
(e) All required reports, returns and descriptions have been
filed or distributed appropriately with respect to each Employee Benefit Plan.
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(f) All contributions (including without limitation all
employer contributions and all employee salary reduction contributions) which
are due have been paid to each Employee Benefit Plan and all contributions for
any period ending on or before the Closing Date which are not yet due have been
paid to each such Employee Benefit Plan or accrued in accordance with past
custom and practice of the Company. All premiums or other payments for all
periods ending on or before the Closing Date have been paid with respect to each
such Employee Benefit Plan which is a welfare benefit plan within the meaning of
Section 3(1) of ERISA.
(g) Except as expressly set forth and described on SCHEDULE
5.11 hereto, the Sellers are not entitled to and do not receive any benefits
under any Employee Benefit Plans in excess of the benefits to which other full
time employers are entitled under such Employee Benefit Plans.
Section 5.12
. Taxes and Tax Returns
(a) Except as described in SCHEDULE 5.12(a) hereto, the
Company and the Predecessor Companies have timely filed all Tax Returns that
they were required to file and all of such Tax Returns were correct and complete
in all material respects. All Taxes which are due and payable by the Company or
the Predecessor Companies have been paid in full, and the Company is not
delinquent in the payment of any foreign or domestic tax, assessment or
governmental charge or deposit and has no tax deficiency or claim outstanding,
proposed or assessed against it, and there is no basis for any such deficiency
or claim (including without limitation by reason of the Company's succession by
merger to the liabilities of the Predecessor Companies). There is no dispute or
claim concerning any Taxes of the Company or the Predecessor Companies either
(i) claimed or raised by any authority in writing or (ii) as to which any Seller
has knowledge. No claim has ever been made in any jurisdiction where the Company
does not file Tax Returns that the Company or any Predecessor Company is or may
be subject to taxation by that jurisdiction. All required Tax Returns have been
filed and all Taxes have been paid for the year ended December 31, 1994.
(b) The Company and the Predecessor Companies have withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other Person.
(c) Except as described in SCHEDULE 5.12(a) hereto, there is
not now in force any extension of time with respect to the date on which any Tax
Return was or is due to be filed by or with respect to the Company or any
Predecessor Company, or any waiver or agreement by the Company or any
Predecessor Company for the extension of time for the assessment of any Tax.
Neither the Company nor any Predecessor Company has filed a consent under Code
Sec. 341(f) concerning collapsible corporations.
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(d) The Sellers have heretofore delivered to Purchaser correct
and complete copies of all federal, state or local income Tax Returns,
examination reports and statements of deficiencies filed by, assessed against or
agreed to by the Company and each Predecessor Company since their respective
dates of incorporation. Neither the Company nor any Predecessor Company (i) is
or was party to any Tax allocation or sharing agreement, (ii) has been a member
of an affiliated group filing a consolidated federal income Tax Return, and
(iii) has any liability for the Taxes of any other Person under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(e) Except as set forth on SCHEDULE 5.12(e) hereto, neither
the Company's nor any Predecessor Company's federal, state or local income tax
returns have ever been audited by the Internal Revenue Service or the
appropriate state or local authorities.
(f) The unpaid Taxes of the Company for the portion of 1996
and all other periods prior to the Closing Date (including without limitation
tax year 1995) do not exceed the accrual for such Taxes set forth on the most
recent balance sheet of the Company heretofore provided to the Purchaser.
Section 5.13. Contracts
(a) SCHEDULE 5.13(a) hereto lists all contracts, agreements,
instruments, arrangements, understandings, leases, and rental agreements,
whether written or oral (collectively, "CONTRACTS"), to which the Company is a
party or is otherwise bound, other than immaterial contracts (which for purposes
of this Agreement shall mean contracts which (i) do not provide for aggregate
payments by or to the Company in excess of $50,000 over the entire contract term
thereof and (ii) are not (considered individually or together with other
contracts not listed on SCHEDULE 5.13(a)) otherwise material to the Company (in
respect of the Company's earnings, prospects, financial condition or
otherwise)). True and correct copies of all Contracts listed or described in
SCHEDULE 5.13(a) have heretofore been delivered to Purchaser.
(b) Except as set forth and described (including a
reference in each case to the relevant clause of this Section
5.13(b)) on SCHEDULE 5.13(b) hereto:
(i) there are no outstanding purchase orders for the
Company's products in amounts (in each case) in excess of
$50,000 which, to the best knowledge of the Sellers, will
result in any loss to the Company upon completion or
performance thereof;
(ii) the Company has no outstanding Contracts with
any of its current or former shareholders, officers,
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employees, agents, consultants, advisors, salesmen or
sales representatives;
(iii) to the best knowledge of Sellers, all Contracts
to which the Company is a party are valid and in full force
and effect and constitute the legal, valid and binding
obligations of the Company and the other parties thereto;
(iv) there are no existing defaults by the Company
or, to the best knowledge of the Sellers, by any other party,
under any Contract to which the Company is a party, and to the
best knowledge of the Sellers, no event, act or omission has
occurred which (with or without notice, lapse of time or the
happening or occurrence of any other event) would result in a
material default thereunder;
(v) no other party to any Contract to which the
Company is a party has asserted the right, and to the best
knowledge of Sellers, no basis exists for the assertion of any
right, to renegotiate the terms or conditions of any such
Contract; and
(vi) the transactions contemplated by this Agreement
shall not constitute an assignment under, or otherwise require
the consent of any other party to, any Contract to which the
Company is a party.
Section 5.14. Patents, Trademarks, Trade Names, etc.
(a) SCHEDULE 5.14(a) hereto lists: (i) all patents, patent
applications, common law and registered trademarks, service marks, trade names,
logos, and assumed names and pending registrations thereof owned by the Company
or otherwise used by the Company, including for each such patent, trademark, or
service mark, if registered, the registration number, application and
registration dates, and expiration dates, and class, and including for each such
patent, trademark, service mark, trade name, logo and assumed name used but not
owned by the Company, a description of the license agreement or other
arrangement pursuant to which each is so used; and (ii) all common law or
registered copyrights and pending applications therefor owned by the Company or
otherwise used by the Company, including, if registered, the registration
number, and filing and expiration dates of each such copyright and including for
each such copyright used but not owned by the Company, a description of the
license agreement or other arrangement pursuant to which each such copyright is
so used. All of the foregoing, together with all other trade secrets,
inventions, technology, know-how, processes, and proprietary information owned
by the Company, or otherwise used by the Company, which are entitled to legal
protection, are sometimes referred to collectively herein as the "INTELLECTUAL
PROPERTY."
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(b) Except as set forth on SCHEDULE 5.14(b) hereto, the
Company has not received any notice that its current use of any of the
Intellectual Property constitutes infringement of the intellectual property of
any third party, and to the best knowledge of the Sellers, such current use of
the Intellectual Property does not constitute infringement of the intellectual
property of any third party. None of the Sellers has knowledge that any third
party is infringing any of the Intellectual Property. With respect to the
patents and patent applications and the trademark registrations and applications
in the United States, each of the items listed thereon has been properly
solicited in or before, and registered, filed, issued and maintained in
accordance with the laws, rules and regulations of the United States and all
applicable fees relating thereto which are due and payable have been paid.
Except as set forth in SCHEDULE 5.14(b), each of the patents and trademark
registrations in the United States is registered with all appropriate government
offices and agencies and is valid, enforceable and in full force and effect,
and, except as it may be restricted or prohibited by any law, rule, regulation,
or decision, the Company has the exclusive right to use, transfer, and assign,
free and clear of any liens or encumbrances, each such patent and trademark
registration listed on SCHEDULE 5.14(a) as owned by it. None of the Intellectual
Property is subject to any outstanding order, decree, judgment, stipulation,
injunction, or settlement agreement restricting the use thereof by Seller.
Section 5.15. Condition of Assets
The owned and leased property and assets of the Company
include all of the properties, assets, and rights which are used in the Business
of the Company as currently conducted. The improvements, fixtures and
appurtenances on or to any real property leased by the Company and the tangible
property owned and/or leased by the Company, are in good operating condition,
order and repair, subject to ordinary wear and tear, and are suitable for the
purposes for which they are presently being used. None of such property or
assets has been affected by any fire, accident or other casualty that,
individually or in the aggregate have a Material Adverse Effect upon the Company
or the Businesses.
Section 5.16. Insurance
SCHEDULE 5.16 hereto sets forth a list and brief description
(specifying the insurer, the policy number, the deductible amount, the policy
limits, and descriptions of outstanding claims) of all policies or binders of
insurance maintained by the Company and in effect on the date hereof, including,
without limitation, workers' compensation, general liability, fire and theft.
The Company has not received any notice from any of its insurance carriers that
any insurance premiums will be materially increased in the future or that any
insurance coverage listed on such SCHEDULE 5.16 will not be available in the
future on substantially the same terms as now in
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effect. None of the insurance policies carried by the Company at any time within
the six months prior to the Closing Date has lapsed, been cancelled or otherwise
terminated.
Section 5.17. Subsidiaries
The Company does not conduct any of its business through any
subsidiary or other entity or enterprise; and except as described on SCHEDULE
5.17 hereto, the Company does not own, directly or indirectly, any equity
securities of any entity or enterprise.
Section 5.18. Minute Books; Officers and Directors
True, correct, complete and current copies of the minute books
of the Company have heretofore been delivered to the Purchaser. SCHEDULE 5.18
hereto sets forth the names and titles of each of the officers and directors of
the Company.
Section 5.19. Environmental Matters
(a) The Company has obtained all permits, licenses, and other
authorizations which are required to be held or obtained by it under all
applicable Environmental Laws. Without limiting the generality of Section 5.05
hereof, the Company is in full compliance with all terms and conditions of the
required permits, licenses, and authorizations, and is also in full compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in the
Environmental Laws.
(b) There is no pending or, to the best knowledge of the
Sellers, threatened or imminent, civil or criminal litigation, notice of
violation, or administrative proceeding relating in any way to the Environmental
Laws (including notices, demand letters, or claims under the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("SUPERFUND"), and similar state or local laws) involving the Company or any of
its assets or properties or any of the Predecessor Companies. There have not
been, and there are not any events, conditions, circumstances, activities,
practices, incidents, actions, or plans which may interfere with or prevent
continued compliance, or which may give rise to any common law or legal
liability, or otherwise form the basis of, any claim, action, suit, proceeding,
hearing, study, or investigation, based on or related to the Company's or any
Predecessor Company's manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, release,
or threatened release into the environment, of any pollutant, contaminant,
chemical, industrial, hazardous, or toxic material or waste, including, without
limitation, any liability arising, or any claim, action, demand, suit,
proceeding, hearing, study, or investigation which may be brought, under RCRA,
Superfund, or similar state or local laws.
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Section 5.20. Finders
Neither any of the Sellers nor any of their respective
Affiliates has paid or become obligated to pay any fee or commission to any
broker, finder, or intermediary for or on account of the transactions provided
for in this Agreement other than Berger & Rodger, L.L.C., whose fee it is
contemplated will be paid by the Company. The Sellers agree to indemnify
Purchaser against, and to hold Purchaser harmless from, any claims for brokerage
or similar commission or other compensation which may be made against Purchaser
by any third party other than Berger & Rodger L.L.C. in connection with the
transactions contemplated hereby, which claim is based upon such third party
having acted as broker, finder, investment banker, or in any similar capacity on
behalf of any Seller or any of their respective Affiliates. The Company shall
indemnify Purchaser and Sellers against, and hold Purchaser and Sellers harmless
from, any claim for brokerage or similar commission or commitment by Berger &
Rodger, L.L.C.
Section 5.21. Employees; Labor Controversies
(a) SCHEDULE 5.21(a) hereto contains a full and complete list
of all full-time employees of the Company (other than employees earning less
than $30,000 per annum in total compensation from the Company), listed by
Division, together with a brief description of each such employee's function and
compensation arrangements (including without limitation salaries and bonus
compensation) affecting them.
(b) To the best knowledge of Sellers, there are no
controversies between the Company and any of its employees or any unresolved
labor grievances or unfair labor practice or labor arbitration proceedings
pending or threatened relating to the Businesses that, if resolved adversely to
the Company, would, individually or in the aggregate, have a Material Adverse
Effect on the Company or would otherwise disrupt the business operations of the
Company.
(c) The Company is not party to any collective bargaining or
union contracts or agreements, no union or other organization is authorized to
bargain on behalf of any of the Company's employees, and to the best knowledge
of Sellers, there are not any union organizational efforts presently being made
or threatened involving any of the Company's employees.
(d) The Company has not received notice of any claim not
previously settled, dismissed or withdrawn that the Company has not complied
with any laws relating to the employment of labor, including any provisions
thereof relating to wages, hours, collective bargaining, the payment of social
security and similar taxes, equal employment opportunity, employment
discrimination and employment safety, or that the Company is liable for any
arrears of wages or any taxes or penalties for failure to comply with any of the
foregoing.
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Section 5.22. Bank Accounts
SCHEDULE 5.22 hereto sets forth the names and locations of all
banks, depositories and other financial institutions in which each Company has
an account or safe deposit box and the names of all persons authorized to draw
thereon or to have access thereto.
Section 5.23. Ownership of Purchaser's Securities
None of the Sellers owns any shares of the common stock or
other securities of the Purchaser, and except for the exercise of any stock
options heretofore or hereafter granted by the Purchaser or as contemplated by
the Stockholders' Agreement, no Seller has any present intention of purchasing
or otherwise acquiring any shares of the common stock or other securities of the
Purchaser.
Section 5.24. No Misrepresentation or Omission
No representation or warranty by the Sellers in this Article 5
or in any other Article or Section of this Agreement, (including without
limitation the Schedules hereto), or in any certificate or other document
furnished or to be furnished to the Purchaser by the Sellers simultaneously with
the execution and delivery hereof or at the Closing pursuant to the terms of
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading, provided, however, that Sellers do not hereby make any
representations or warranties as to any projections of the future financial
performance of the Company.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
The Purchaser hereby represents and warrants to each of the
Sellers as follows and acknowledges and confirms that the Sellers are relying
upon such representations and warranties notwithstanding any investigation made
by the Sellers or on their behalf:
Section 6.01. Corporate Organization
Purchaser is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware and is duly
qualified to do business as a foreign corporation, and is in good standing, in
the State of New York, which presently is the only state where the nature of its
business or properties makes such qualification necessary. Purchaser has all
requisite corporate power and authority to own,
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operate, and lease its properties and to carry on its business as now being
conducted and as presently contemplated to be conducted. Purchaser has
heretofore delivered to Sellers complete and correct copies of Purchaser's
Certificate of Incorporation and By-Laws, each as amended and in effect on the
date hereof.
Section 6.02. Authorized Capitalization
(a) Purchaser is authorized to issue 40,000,000 shares of common stock,
par value $.01 per share ("TIGERA COMMON STOCK"), 750,000 shares of Series B
Common Stock, par value $.01 per share ("TIGERA SERIES B STOCK"), and 10,000,000
shares of preferred stock, par value $.01 per share ("TIGERA PREFERRED STOCK"),
of which as of the date of the Agreement 22,236,301 shares of such Tigera Common
Stock and no shares of Tigera Series B Stock or Tigera Preferred Stock are
issued and outstanding on the date hereof. All of such outstanding shares have
been duly authorized and are validly issued, fully paid and non-assessable. As
of the date of this Agreement, there are outstanding warrants and options
(including the options granted subject to stockholder approval) to purchase an
aggregate of 4,693,593 shares of Tigera Common Stock, excluding the options or
warrants anticipated to be issued to Berger & Rodger, L.L.C. pursuant to the
agreement dated February 1, 1996 between Berger & Rodger, L.L.C. and the
Purchaser, for their services in connection with this transaction.
(b) Other than as set forth or described in Section 6.02(a) hereof, no
shares of any class of securities of the Purchaser are issued and outstanding;
and there are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire from the
Purchaser any shares of Tigera Common Stock, or securities or obligations of the
Purchaser of any kind whatsoever. Except as set forth in or contemplated by this
Agreement or any of the other agreements being executed and delivered in
connection herewith, there are no outstanding contractual obligations of any
kind that would obligate the Purchaser to register for sale under any securities
laws, or to repurchase, redeem or otherwise acquire, any shares of the common
stock or other securities of the Purchaser.
(c) None of the shares of capital stock of the Purchaser is subject to
any preemptive rights of any person, including, without limitation, present or
former stockholders of the Purchaser.
Section 6.03. Authorization, Execution and Binding Effect
Purchaser has full corporate power and authority to execute and deliver
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party and to consummate the transactions contemplated hereby and
thereby. The
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Board of Directors of Purchaser has duly approved and authorized the execution
and delivery of this Agreement and the other agreements contemplated hereby and
the consummation of the transactions contemplated hereby and thereby, and no
other corporate proceedings on the part of Purchaser are necessary to approve
and authorize the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Purchaser and constitutes the legal, valid and binding
agreement of Purchaser, enforceable against Purchaser in accordance with its
terms, except to the extent that enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws affecting
creditors' rights generally and by general principles of equity.
Section 6.04. Consents and Approvals
Neither the execution and delivery by Purchaser of this Agreement, nor
the consummation by Purchaser of the transactions contemplated hereby, nor
compliance by Purchaser with any of the provisions hereof will (i) violate or
conflict with any provision of the Certificate of Incorporation or By-Laws of
Purchaser, (ii) result in a violation of any order, writ, injunction, decree,
judgment, ruling, law, rule, or regulation of any court or governmental
authority, applicable to Purchaser, (iii) result in the breach of or otherwise
affect any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, contract,
agreement, or other material instrument or commitment or obligation of
Purchaser; or (iv) require any consent, approval, authorization of, or notice
to, or declaration, filing, or registration with, any governmental or regulatory
authority or any other Person, except for such consents, approvals,
authorizations, notices, declarations, filings or registrations which have been
obtained, given or made, as the case may be, and which are unconditional and in
full force and effect.
Section 6.05. Finders
Neither Purchaser nor any of its Affiliates has paid or become
obligated to pay any fee or commission to any broker, finder, or intermediary,
for or on account of the transactions provided for in this Agreement other than
Berger & Rodger, L.L.C., whose fee it is contemplated will be paid by the
Company. The Purchaser agrees to indemnify the Sellers against, and to hold them
harmless from, any claims for brokerage or similar commission or other
compensation which may be made against the Sellers by any third party other than
Berger & Rodger, L.L.C. in connection with the transactions contemplated hereby,
which claim is based upon such third party having acted as broker, finder,
investment banker, or in any similar capacity on behalf of Purchaser or any of
its Affiliates.
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Section 6.06. Stock Options
(a) The Purchaser has heretofore granted to the Sellers and such other
employees of the Company as are listed on the list heretofore provided by the
Sellers to the Purchaser, subject to shareholder approval of the Purchaser's
1996 Stock Incentive Plan, options to purchase for a price of $2.03125 per
share, an aggregate of 1,888,593 shares of common stock of Purchaser. Such stock
options have been granted to such optionees in the denominations set forth on
such list and are or will be evidenced by stock option agreements in such form
as shall be agreed by the Purchaser and the Sellers' Agent. Shares of Tigera
Common Stock have, subject to stockholder approval, been reserved for issuance
upon exercise of such stock options.
(b) Not later than the first anniversary date of the Closing Date, the
Purchaser will cause a meeting of its shareholders to be duly called and held,
or obtain a written consent in lieu thereof, in accordance with the laws of the
State of Delaware and the Purchaser's Certificate of Incorporation and By-Laws,
for the purpose, inter alia, of considering and approving the Purchaser's 1996
Stock Incentive Plan, and the Purchaser shall recommend the approval and use all
reasonable efforts to obtain the necessary approval of such 1996 Stock Incentive
Plan at such meeting. If any event occurs that, but for the lack of shareholder
approval of the Purchaser's 1996 Stock Incentive Plan, would permit a Seller to
exercise any of the options referred to in Section 6.06(a) hereof prior to such
first anniversary date of the Closing Date, then promptly following such event
the Purchaser shall, in consideration for the surrender by each Seller of such
options, pay to such Seller an amount in cash equal to the product of (i) the
amount by which the per share market price of the Purchaser's common stock
(which for purposes of this Section 6.06 shall mean the last reported trading
price of Purchaser's common stock on the date of such event (or if such common
stock is not traded on the date of such event, then the last reported trading
price on the most recent date on which shares of the Purchaser's common stock
was traded)) exceeds the per share exercise price of such stock option, times
(ii) the number of shares covered by such Seller's stock options.
Section 6.07. Investment Intent
Purchaser is acquiring the Purchased Shares for its own account, for
investment purposes only, and not with a view to the distribution, resale,
transfer or other disposition thereof and recognizes that none of the Purchased
Shares has been registered under the Securities Act; and Purchaser will not
sell, transfer, pledge or hypothecate any of the Purchased Shares in violation
of the Securities Act. The Purchaser is a highly sophisticated investor, who
through its officers and directors, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investments, and the Purchaser is an "accredited investor" (as that
term is defined in Rule 501 promulgated under the Securities Act) by
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virtue of the Purchaser being a corporation, not formed for the specific purpose
of acquiring the Purchased Shares, with total assets in excess of $5,000,000.
Section 6.08. No Misrepresentation or Omission
No representation or warranty by Purchaser in this Article 6 or in any
other Article or Section of this Agreement, or in any certificate or other
document furnished or to be furnished to the Sellers by Purchaser simultaneously
with the execution and delivery hereof or at the Closing pursuant to the terms
of this Agreement, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The Purchaser's Annual Report on Form 10-KSB for the
year ended December 31, 1995 filed with the SEC and all reports filed with the
SEC by the Purchaser subsequent to the filing date of such Form 10-KSB were at
the date filed true and correct in all material respects. The Purchaser has not
suffered any material adverse developments since the filing date of its most
recent Quarterly Report on Form 10-QSB and is not aware of any event that has
occurred to the Purchaser since the filing date that would or that is reasonably
likely to constitute or result in a Material Adverse Effect with respect to
Purchaser.
ARTICLE VII
SELLERS' COVENANTS
Section 7.01. Regular Course of Business
From the date hereof until the Closing has been completed (or, if
sooner, the termination of this Agreement), and except as otherwise consented to
or approved by the Purchaser in writing or required by this Agreement:
(a) The Company will, and Sellers will cause the Company to, conduct
its businesses substantially in the same manner as heretofore conducted and will
not engage in any transaction or activity, enter into any agreement or make any
commitment (or materially amend any agreement or commitment existing on the date
hereof), except (i) in the ordinary course of business and consistent with past
practices, or (ii) as contemplated by this Agreement. Except as otherwise
permitted by this Agreement, the Company will not, and Sellers will cause the
Company not to, take any action which would cause, or omit to take any
reasonable action which in all likelihood would prevent, any of the
representations and warranties contained in Article V to fail to be true in all
material respects as if such representations and warranties were deemed to be
made at and as of the Closing Date (except to the extent any such representation
or warranty was expressly made only as of a different date).
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(b) Without limiting the generality of subsection (a) of this Section,
without the prior written consent of the Purchaser or except as set forth on
SCHEDULE 7.01 hereto or as required or specifically permitted by this Agreement,
the Company will not, and Sellers will cause the Company not to:
(i) engage in any business other than the Businesses;
(ii) suffer to exist as of the Closing Date (immediately prior to
the Closing) any indebtedness (other than trade payables, not owed to
Sellers or any employees, agents or Affiliates of Sellers or the
Company, incurred in the ordinary course of business in amounts
consistent with prior periods) in an aggregate amount in excess of the
sum of (A) $22,100,000, plus (B) 55% of the amount of 1996 Pre-Closing
Net Income, plus (C) the amount of 1996 Approved Capital Expenditures,
plus (D) the amount, but not in excess of $1,000,000, by which 1996
Pre-Closing Cash Distributions exceeds 1996 Pre-Closing Net Income,
plus (E) any cash fees paid by the Company in connection with the
transactions contemplated by this Agreement;
(iii) assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly, contingently, or otherwise) for the
obligations of any other Person;
(iv) amend its articles or certificate of incorporation or by-laws
or increase the size of its Board of Directors;
(v) issue or sell any shares of the Company's capital stock or
other securities or issue options, warrants to purchase, or rights to
subscribe to, any shares of its capital stock;
(vi) declare or pay any dividend or other distribution (in cash,
securities or other property) to shareholders;
(vii) assign or knowingly breach any provision of any lease or
other Contract to which it is a party;
(viii) make any loans or capital contributions to or investments
in any other Person;
(ix) acquire (by merger, consolidation, lease or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or purchase any debt or equity
securities, provided, however, that excess funds not needed for the
business of the Company may be placed in (a) short-term
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obligations of the United States or (b) banks of recognized national
standing;
(x) sell, transfer, pledge, license, hypothecate, assign or
encumber, directly or indirectly, any of the Company's material assets
or properties (except for the sale of inventory in the ordinary course
of the Company's business, consistent with past practice);
(xi) merge or consolidate with or into any other corporation,
whether or not the Company is the surviving corporation, or take any
action towards the dissolution or liquidation of the Company;
(xii) increase the aggregate salary or other compensation of any
director, executive officer, or management employee of the Company or
of any group or classification of employees of the Company generally;
or reimburse its executive officers for other than properly documented
ordinary and necessary expenses incurred in the ordinary course of the
Company's business;
(xiii) amend any Contracts or enter into any material contracts or
waive any material rights other than in the ordinary course of its
business;
(xiv) enter into any employment, consulting or other similar
agreements or arrangements;
(xv) enter into any contracts or arrangements with any of its
stockholders, or any officer or director of the Company or any
affiliate of any such person or any member of the family of any such
person;
(xvi) make or commit to make any capital expenditures in an
aggregate amount, including capital expenditures made or committed
since January 1, 1996, in excess of the Company's aggregate
depreciation expense for the period from January 1, 1996 through the
Closing Date as set forth on the Closing Date Financial Statements,
plus $200,000 for capital expenditures made or committed through May
31, 1996 or plus $400,000 for capital expenditures made or committed
through June 30, 1996, or purchase any other non-current assets;
(xvii) agree, whether in writing or otherwise, to do any of the
foregoing; or
(xviii) make any change in accounting principles, (except as may
be required by generally accepted accounting principles, in which
event, the Sellers will fully and promptly disclose to the Purchaser
any such change and the reason(s) therefor).
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(c) Without limiting the generality of subsection (a) of this Section,
and except as otherwise consented to or approved by the Purchaser in writing or
required by this Agreement, the Company will, and the Sellers will cause the
Company to (all in a manner consistent with the Company's and Sellers' past
practices):
(i) use all reasonable efforts to preserve its business, business
organization and good will, keep available to the Company its present
executive officers and key employees, and preserve its present
relationships with persons having business dealings with it;
(ii) use all commercially reasonable efforts to maintain insurance
substantially at its current levels on all property, real, personal and
mixed, owned or leased by the Company;
(iii) duly comply with all laws applicable to it and its
properties, operations, business and employees;
(iv) use all reasonable efforts to (A) maintain and keep the
Company's properties in good repair and condition in all material
respects, except for ordinary wear and tear and damage due to casualty
or other extraordinary occurrence, and (B) perform in all material
respects the Company's obligations under the Contracts; and
(v) promptly notify the Purchaser, in writing, of any event which
has or could reasonably be expected to have a Material Adverse Effect
on the Company.
Section 7.02. No Solicitations
From the date of this Agreement until the Closing (or, if sooner, the
termination of this Agreement in accordance with its terms), neither the Company
nor the Sellers shall, nor shall any of the Company's officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by the Company or any Seller: (a) except with the
Purchaser, initiate, solicit, encourage or participate in any discussions,
negotiations, inquiries or proposals for the acquisition of all or substantially
all of the Company's assets or business or any material portion thereof or of
any of the Company's capital stock or to merger or consolidate with the Company,
(an "ACQUISITION TRANSACTION"), (b) afford to any person in connection with any
Acquisition Transaction, other than the Purchaser and their representatives,
access to the properties, books or records of the Company, or (c) otherwise
assist any person in connection with any of the foregoing.
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Section 7.03. Full Access
From the date hereof until the Closing has been completed (or, if
sooner, the termination of this Agreement) the Company will, and the Sellers
will cause the Company to, afford to the Purchaser, its counsel, accountants and
other authorized representatives, full and complete access, upon reasonable
notice and in a reasonable manner, to the Company's respective offices,
properties, books and records in order that the Purchaser may have full
opportunity to make such reasonable investigations as they shall desire as to
the business and affairs of the Company. The Company will, and the Sellers will
cause the Company to, cause the Company's officers, accountants and attorneys to
furnish, upon reasonable notice and in a reasonable manner, such additional
financial and operating data and other information as the Purchaser shall from
time to time reasonably request.
Section 7.04. "Key Man" Insurance
Each Seller agrees that (i) from and after the Closing, so long as such
Seller is employed by the Company, the Company shall have the right to seek to
insure the life and to maintain disability insurance on such Seller at the sole
cost and expense, and for the sole benefit, of the Company, and (ii) such Seller
will cooperate with the Company in obtaining such insurance (including providing
any needed medical information, submitting to such reasonable medical
examinations as may be required and executing reasonable consents which may be
required to effect such insurance).
Section 7.05. Non-Competition; Confidentiality
(a) Sellers recognize and acknowledge that they will derive substantial
benefit from the consummation of the transactions contemplated by this Agreement
and in addition that Purchaser is making a substantial investment pursuant to
this Agreement in reliance upon the fact that the knowledge and expertise
developed by Sellers in their management of the affairs of the Company will be
preserved and will not be used in competition with the Company. Each Seller
hereby agrees that it is reasonable and necessary for the protection of the
Purchaser and the Company that the Sellers agree, and accordingly each of them
does hereby severally agree, that, provided that the Company is not in material
breach (after all applicable notice and grace periods) of its obligations to the
Sellers under the Redemption Notes or the Contingent Notes, no Seller (nor any
member of any Seller's immediate family that resides with such Seller) will,
directly or indirectly, except for the benefit of the Company or its Affiliates,
or with the prior written consent of Purchaser, which consent may be granted or
withheld at Purchaser's sole discretion:
(i) during the Noncompetition Period, become an officer, director,
stockholder, partner, associate, employee, owner, agent, creditor,
independent
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contractor, co-venturer, consultant or otherwise, or have a financial
interest in or be associated with any other person, corporation, firm
or business that is a customer of or supplier to the Company or that is
engaged in the wire and cable product manufacturing, distributing or
assembling businesses anywhere in the United States or in any business
directly or indirectly competitive with that of the Company or its
Affiliates, as then constituted, or itself engage in such business;
provided, however, that nothing herein shall be construed to prohibit
any Seller from owning not more than 5% of any class of securities
(provided that the Sellers do not own, in the aggregate, in excess of
10% of any such class of securities) issued by an entity which is
subject to the reporting requirements of the Exchange Act; and provided
further, that the foregoing restrictions with respect to customers and
suppliers of the Company (other than customers or suppliers that are
themselves otherwise engaged in the wire and cable product
manufacturing, distributing or assembling business) shall apply only so
long as such Seller continues to be employed by or engaged as a
consultant to the Company; or
(ii) during the Noncompetition Period, solicit, cause or
authorize, directly or indirectly, to be solicited for or on behalf of
such Seller or third parties, from parties who were customers of the
Company or of Purchaser or Purchaser's Affiliates that are directly or
indirectly controlled by Purchaser ("PURCHASER'S DOWNSTREAM
AFFILIATES"), any business similar to the business transacted by or
with such customer by the Company or by Purchaser or Purchaser's
Affiliates; or
(iii) during the Noncompetition Period, accept or cause or
authorize, directly or indirectly, to be accepted for or on behalf of
such Seller or for third parties, any such business from any such
customers of the Company or of Purchaser or Purchaser's Downstream
Affiliates; or
(iv) from and after the date hereof, use, publish, disseminate or
otherwise disclose, directly or indirectly, any information heretofore
or hereafter acquired, developed or used by the Company, Purchaser or
any of Purchaser's Downstream Affiliates, relating to the Businesses or
the operations, employees or customers of the Company or Purchaser or
Purchaser's Downstream Affiliates which constitutes proprietary or
confidential information of the Company or Purchaser or Purchaser's
Downstream Affiliates ("CONFIDENTIAL INFORMATION"), including without
limitation this Agreement and the contents hereof and any Confidential
Information contained in any customer lists, mailing
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lists and sources thereof, statistical data and compilations,
trademarks, patents, inventions, formulae, methods, processes,
agreements, contracts, manuals or any other documents, but excluding
any information to the extent expressly set forth in the Company's
press releases or in publicly available documents filed with the SEC by
the Company; provided, however, that this clause (iv) shall not be
applicable to the extent that Sellers are required to testify in a
judicial or regulatory proceeding pursuant to the order of a judge or
administrative law judge after such Seller requests that the
confidentiality of such Confidential Information be preserved; and
provided further, that this clause (iv) shall not prohibit Sellers from
disclosing Confidential Information to their accounting and legal
advisors to the extent such advisors have agreed to preserve the
confidentiality of such Confidential Information; or
(v) during the Noncompetition Period,
(A) solicit, entice, persuade or induce, directly or
indirectly, any employee (or person who within the preceding 90
days was an employee) of the Company or its Affiliates or any
other person who is under contract with or rendering services to
the Company or its Affiliates, to terminate his or her employment
by, or contractual relationship with, the Company or any of its
Affiliates or to refrain from extending or renewing the same (upon
the same or new terms) or to refrain from rendering services to or
for the Company or any of its Affiliates or to become employed by
or to enter into contractual relations with any Persons other than
the Company or any of its Affiliates or to enter into a
relationship with a competitor of the Company or its Affiliates,
or
(B) authorize or assist in the taking of any such actions by
any person other than the Company or its Affiliates.
(b) The invalidity or non-enforceability of this Section 7.05 in any
respect shall not affect the validity or enforceability of this Section 7.05 in
any other respect or of any other provisions of this Agreement. In the event
that any provision of this Section 7.05 shall be held invalid or unenforceable
by a court of competent jurisdiction by reason of the geographic or business
scope or the duration thereof, such invalidity or unenforceability shall attach
only to the scope or duration of such provision and shall not affect or render
invalid or unenforceable any other provision of this Agreement, and, to the
fullest extent permitted by law, this Agreement shall be construed as if the
geographic or business scope or the duration
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of such provision had been more narrowly drafted so as not to be invalid or
unenforceable.
(c) The Sellers acknowledge that Purchaser would suffer irreparable
harm if any Seller were to breach the provisions of this Section 7.05 and that
Purchaser's remedy at law for any such breach is and will be insufficient and
inadequate and that in the event of such breach (or a threatened breach) of the
provisions of this Section 7.05, Purchaser shall be entitled to equitable
relief, including by way of temporary and permanent injunction, in addition to
any remedies Purchaser may have at law.
Section 7.06. Purchase of Purchaser's Securities
(a) Each Seller hereby agrees that, except as expressly permitted by
subsection (b), below or by any other agreement entered into between such Seller
and the Purchaser, for a period commencing on the date hereof and ending three
years after the Closing such Seller will not, directly or indirectly, whether
individually or as a member of an "entity" or "group" (as those terms are
defined in connection with Treas. Reg. Section 1.382-3(a) or Section 13(d) of
the Exchange Act, respectively), purchase or otherwise acquire any securities of
the Purchaser if, immediately after such purchase or acquisition, such Seller or
such "entity" or "group" will own (or will be treated as owning for purposes of
Section 382 of the Code) 5% or more of the issued and outstanding capital stock
of the Purchaser or will otherwise be treated as a "5-percent shareholder" for
purposes of Section 382 of the Code, and that such Seller will not itself become
a member of an "entity" or "group" that will so purchase securities of the
Purchaser. Sellers hereby represent to Purchaser that they are not, either as of
the date hereof, or as of the Closing (either as a result of, or after giving
effect to, the transactions contemplated by this Agreement), with respect to
their acquisition pursuant to this Agreement of an interest in the Common Stock
of Purchaser, a "group" for purposes of Section 13(d) of the Exchange Act (i.e.,
they are not acting together, and have not agreed to act together, for the
purpose of acquiring, holding, voting or disposing of the Common Stock of
Purchaser), and, based solely on the foregoing representation of the Sellers
(which Purchaser may assume to be true without independent investigation), the
Purchaser agrees and acknowledges, for the purposes described in this Section
7.06(a), that the consummation of the transactions contemplated by this
Agreement alone shall not result in the Sellers being considered as a "group"
for purposes of Section 13(d) of the Exchange Act.
(b) Subsection (a), above, shall not prevent the exercise of stock
options now held by or hereafter granted to any Seller; provided, that no
exercise of options shall result in any Seller or any entity within the meaning
of Treas. Reg. Section 1.382-3(a) of which such Seller may be members,
individually or in the aggregate, owning (or being treated as owning for
purposes of Section 382 of the Code) 5% or more of the issued and
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outstanding capital stock of the Purchaser or otherwise being treated as a
"5-percent shareholder" for purposes of Section 382 of the Code.
ARTICLE VIII
PURCHASER'S COVENANTS
Section 8.01. Other Transactions
From the date of this Agreement until the Closing (or, if sooner, the
termination of this Agreement in accordance with its terms), Purchaser shall not
acquire any other businesses without the prior written consent of a majority in
interest of the Sellers (based on the Sellers' percentage ownership of the
Common Stock on the date hereof).
ARTICLE IX
ADDITIONAL COVENANTS
Section 9.01. Cooperation
The Sellers and the Purchaser hereby covenant and agree that, from the
date hereof until the Closing shall have been completed (or, if sooner, the
termination of this Agreement), they will cooperate with each other and take all
reasonable actions that may be necessary or desirable to consummate as soon as
practicable the transaction contemplated pursuant to this Agreement, including,
without limitation, (i) preparing and filing all requisite applications,
documents and notifications in connection with the transactions contemplated
herein required by applicable law, (ii) responding as promptly as practicable to
all inquiries in connection therewith, (iii) except as may otherwise be agreed
by the Sellers and the Purchaser, removing or satisfying, if reasonably
practicable, any objections to the validity or legality of the transactions
contemplated by this Agreement, and (iv) satisfying the conditions to the
consummation of Closing set forth in Articles X and XI hereof; provided,
however, that in the event the Sellers or the Company proposes in connection
with any of the foregoing to alter or modify in any material respect the terms
of any existing Contract or to undertake any new material obligation, the prior
consent of the Purchaser shall be required.
Section 9.02. Public Announcements
The Purchaser and the Sellers will consult with each other, and the
Sellers will cause the Company to consult with the Purchaser, before issuing any
press release or making any public statement with respect to the transactions
contemplated by this Agreement. Except as may be required by applicable law, the
Company and the Sellers will not issue any such press release or
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make any such public statement without the prior consent of the Purchaser and,
except as may be required by law or as advised by counsel in connection with the
Purchaser's obligations as a public Company, prior the Closing the Purchaser
shall not issue any such press release or make any such public statement without
the prior consent of the Sellers' Agent. Without limiting the generality of the
foregoing, the parties agree that the Purchaser will, promptly after the
execution and delivery of this Agreement, issue a press release describing in
such detail as the Purchaser and its counsel consider to be necessary, advisable
and/or prudent, the Company, this Agreement and the transactions contemplated by
this Agreement.
ARTICLE X
PURCHASER'S CONDITIONS PRECEDENT
The obligations of the Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date, of each of the following conditions, each of which may be waived
by the Purchaser, in whole or in part, by the Purchaser:
Section 10.01. Representations and Warranties True
The representations and warranties of the Sellers contained in or made
pursuant to this Agreement shall have been and be true and correct in all
material respects as of the date of this Agreement and, except in the case of
those representations and warranties which are expressly made only as of a
different date, shall be true and correct in all material respects as if made on
and as of the Closing Date.
Section 10.02. Performance of Obligations
Each of the obligations of the Sellers to be performed by them on or
before the Closing Date pursuant to the terms hereof shall have been duly
performed and complied with by the Closing Date.
Section 10.03. Consents and Approvals
The Sellers shall have obtained all consents, waivers, approvals and
authorizations, and shall have given all notices to third parties, necessary,
under Contracts and otherwise, to convey, sell, transfer, assign and deliver the
Shares to the Purchaser and to vest in the Purchaser all right, title, interest
in, to, relating to or arising under the Shares.
Section 10.04. Absence of Litigation
No order, stay, judgment, or decree shall have been issued by any court
restraining or prohibiting, and no action, suit, or proceeding shall have been
commenced by any governmental
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authority seeking to restrain or prohibit, the consummation of the transactions
contemplated by this Agreement; and no statute, rule or regulation shall have
been enacted which makes consummation of any of the transactions contemplated
hereby illegal or otherwise prohibited.
Section 10.05. No Material Adverse Change.
Since the date of this Agreement, there shall have been no change in
the financial condition, business or affairs of the Company, and the Company
shall not have suffered any loss (whether or not insured) by reason of physical
damage caused by fire, earthquake, accident or other calamity that,
individually, or in the aggregate, constitute, or are reasonably likely to
constitute, a Material Adverse Effect.
Section 10.06. Refinancing of Company Debt
The Company shall have entered into new debt financing arrangements
with The First National Bank of Boston, NBD Bank, and/or other banks or
financial institutions (the "BANKS") on substantially the terms set forth on
EXHIBIT I hereto (the "BANK LOAN AGREEMENTS"), and the Company hereby authorizes
the Purchaser to negotiate on behalf of the Company with such Banks in
connection therewith.
Section 10.07. Subchapter S Election
The Company shall have delivered to the Purchaser the acknowledgments
by the Internal Revenue Service of the Subchapter S elections made by the
Company and each of the Predecessor Companies.
Section 10.08. Determination of 1995 Adjusted EBITDA
The Sellers and the Purchaser shall have agreed as to the amount of the
1995 Adjusted EBITDA (as defined in SCHEDULE 2.02(b) hereto).
Section 10.09. Closing Deliveries
The Sellers, the Company and the Escrow Agent shall each have delivered
to the applicable parties each of the agreements, documents and instruments to
be delivered by them pursuant to Section 3.02 hereof.
ARTICLE XI
SELLERS' AND THE COMPANY'S CONDITIONS PRECEDENT
The obligations of the Sellers and the Company to consummate the
transactions contemplated hereby shall be subject to the satisfaction, at or
prior to the Closing Date, of each of the following conditions, each of which
may be waived, in whole
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or in part, by the Sellers' Agent on behalf of the Sellers and the Company:
Section 11.01. Representations and Warranties True
The representations and warranties of the Purchaser contained in or
made pursuant to this Agreement shall have been and be true and correct in all
material respects as of the date of this Agreement and, except in the case of
those representations and warranties which are expressly made only as of a
different date, shall be true and correct in all material respects as if made on
and as of the Closing Date.
Section 11.02. Performance of Obligations
Each of the obligations of the Purchaser to be
performed by them on or before the Closing Date pursuant to the terms hereof
shall have been duly performed and complied with by the Closing Date.
Section 11.03. Consents and Approvals
The Purchaser shall have obtained all consents, waivers, approvals and
authorizations, and shall have given all notices to third parties, necessary in
order for the Purchaser to consummate the transactions contemplated by this
Agreement.
Section 11.04. Absence of Litigation
No order, stay, judgment, or decree shall have been issued by any court
restraining or prohibiting, and no action, suit, or proceeding shall have been
commenced by any governmental authority seeking to restrain or prohibit, the
consummation of the transactions contemplated by this Agreement; and no statute,
rule or regulation shall have been enacted which makes consummation of any of
the transactions contemplated hereby illegal or otherwise prohibited.
Section 11.05. No Material Adverse Change.
Since the date of this Agreement, there shall have been no change in
the financial condition, business or affairs of the Purchaser that,
individually, or in the aggregate, constitute, or are reasonably likely to
constitute, a Material Adverse Effect.
Section 11.06. Refinancing of Company Debt
The Banks shall have entered into, or be ready, willing and able to
enter into, the Bank Loan Agreements.
Section 11.07. Determination of 1995 Adjusted EBITDA
The Sellers and the Purchaser shall have agreed as to the amount of the
1995 Adjusted EBITDA.
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Section 11.08. Closing Deliveries
The Purchaser and the Escrow Agent shall have delivered to the Sellers
and the Company each of the agreements, documents and instruments, and the
Purchase Price, to be delivered by the Purchaser pursuant to Section 3.02
hereof.
ARTICLE XII
TERMINATION
Section 12.01. Termination
This Agreement may be terminated at any time prior to the Closing:
(a) By mutual consent of the Purchaser and Sellers' Agent;
(b) By either the Purchaser or the Sellers' Agent if, without fault of
the terminating party, the Closing shall not have occurred by the relevant
Extension Date (which date may be extended by mutual agreement of the Purchaser
and the Sellers' Agent); and
(c) By the Purchaser or by the Sellers' Agent if any court of competent
jurisdiction or other governmental body shall have issued an order, decree, or
ruling or taken any other action restraining, enjoining, or otherwise
prohibiting the transactions contemplated hereby and such order, decree, ruling,
or other action shall have become final and nonappealable.
The date on which this Agreement is terminated pursuant to this Section
is herein referred to as the "TERMINATION DATE".
Section 12.02. Effect of Termination
Except for the obligations contained in provisions of this Agreement
which expressly provide for obligations to survive the termination of this
Agreement, all obligations of the parties hereto under this Agreement shall
terminate as of the Termination Date, and there shall be no liability, except
liability for any breach of this Agreement prior to such termination, of any
party to another party.
ARTICLE XIII
SURVIVAL AND INDEMNIFICATION
Section 13.01. Survival of Representations and Warranties, etc.
Except as otherwise expressly provided by other provisions of this
Agreement, all representations and warranties,
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<PAGE> 49
covenants, agreements, and other undertakings of the parties contained in this
Agreement shall survive the Closing and shall remain in full force and effect,
regardless of any investigation made by or on behalf of any party hereto, until
the third anniversary of the Closing Date; provided, however, that all
representations and warranties of the Sellers which relate to title to the
Purchased Shares, Taxes and ERISA (i.e. the representations and warranties set
forth in Sections 5.02(c), 5.11 and 5.12 hereto), and the Sellers'
indemnification obligations with respect thereto, shall survive until the
expiration of all applicable statutes of limitation and any extensions thereof;
and provided further, that the expiration of any representation, warranty or
covenant shall not affect any claim made prior to the date of such expiration.
Section 13.02. Indemnification
(a) Subject to the limitations set forth in Section 13.05 hereof, each
of the Sellers shall indemnify, defend, and hold harmless Purchaser and
Purchaser's Affiliates (which after the Closing shall include the Company) from
and against any and all losses, diminution in value, liabilities, damages,
obligations, payments, costs, and expenses (whether or not any of the foregoing
result from or arise out of third party claims) including, without limitation,
the costs and expenses of any and all actions, suits, proceedings, judgments,
settlements, and compromises (entered into in accordance with this Article XIII)
relating thereto, and reasonable attorneys' fees in connection therewith)
(collectively, "INDEMNIFIABLE LOSSES" and each an "INDEMNIFIABLE LOSS") of
Purchaser and Purchaser's Affiliates, arising out of or due to, directly or
indirectly:
(i) any breach of any of the representations or warranties made by
Sellers in this Agreement;
(ii) any breach of any of the covenants, agreements, or
undertakings made by Sellers in this Agreement; or
(iii) any liability, payment or obligation of the Company relating
to or arising out of any claims made against Purchaser or the Company
for damage to the environment or any liability for environmental
cleanup costs, or relating to fines or penalties imposed by
governmental authorities for violations of Environmental Laws, in any
case only to the extent attributable to occurrences, circumstances or
actions occurring on or prior to the Closing Date (including without
limitation any occurrences, circumstances or actions that in fact
commenced or were in existence on or prior to the Closing Date at the
warehouse premises being leased or currently proposed to be leased by
the Company at 128526 South 81st Avenue, Tinley Park, Illinois, which
premises the Company has not yet commenced occupancy) whether or not
disclosed to
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<PAGE> 50
Purchaser pursuant to this Agreement or otherwise; provided, however,
that any cost or expense in preparing reports, plans, applications,
registrations and any other necessary filings, and any registration or
filing fees associated therewith, whether or not such reports or plans
were required to be prepared or filed prior to the Closing Date (but
not any fines or penalties resulting from the failure to timely prepare
and/or file such reports or plans), shall not be deemed to be
Indemnifiable Losses; any such Indemnifiable Loss referred to in this
clause (iii) being deemed for purposes of this Article XIII to be an
Environmental Matter (as hereinafter defined) and therefore subject to
indemnification limits and other provisions in this Article XIII that
are applicable to Environmental Matters; or
(iv) any liability, payment or obligation of the Company in
respect of Taxes for all periods ending on or prior to the Closing Date
and attributable to acts, events, occurrences or circumstances
occurring on or prior to the Closing Date, whether or not disclosed to
Purchaser pursuant to this Agreement or otherwise; any such
Indemnifiable Loss referred to in this clause (iv) being deemed for
purposes of this Article XIII to be a Tax Matter (as hereinafter
defined) and therefore subject to indemnification provisions applicable
to Tax Matters hereunder); provided, however, that any such
Indemnifiable Loss in respect of the Company's BSCC division's
liability for unpaid sales and use taxes for periods ending on or
before December 31, 1995 shall be subject to the General Basket Amount
and General Cap Amount limitations as set forth in Section 13.05
hereof; or
(v) any liability, payment or obligation of the Company relating
to or arising out of the matters described on SCHEDULE 5.09 hereto
relating to Techbestos, Inc., whether or not disclosed to Purchaser
pursuant to this Agreement or otherwise.
In no event shall both the Purchaser and any one of its Affiliates (including
the Company) be entitled to indemnification hereunder in respect of the same
Indemnifiable Loss except to the extent of actual out-of-pocket expenses.
(b) Purchaser shall indemnify, defend, and hold harmless the
Sellers from and against any and all Indemnifiable Losses of the
Sellers arising out of or due to, directly or indirectly:
(i) any breach of any of the representations or warranties made by
Purchaser in this Agreement; or
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<PAGE> 51
(ii) any breach of any of the covenants, agreements, or
undertakings made by Purchaser in this Agreement.
Section 13.03. Procedure for Indemnification
(a) If a party entitled to indemnification pursuant to Section 13.02
(the "INDEMNITEE") receives notice of the assertion by a person who is not a
party to this Agreement of any claim or of the commencement by any such person
of any action or proceeding (a "THIRD PARTY CLAIM") with respect to which
another party or parties to this Agreement (the "INDEMNIFYING PARTY") is
obligated to provide indemnification, the Indemnitee shall give the Indemnifying
Party notice thereof after becoming aware of such Third Party Claim. (The term
"Indemnifying Party" shall be deemed to include, in the case of the Sellers, all
of the Sellers; however, except as otherwise expressly provided herein, all
notices to or from the Sellers as the Indemnifying Party shall be made to or by
the Sellers' Agent.) Such notice shall describe the Third Party Claim in
reasonable detail, and shall indicate the amount (estimated if necessary) of the
Indemnifiable Loss that has been or may be sustained by the Indemnitee. With
respect to any Third Party Claim, provided that the Indemnifying Party has
acknowledged in writing to the Indemnitee that such Third Party Claim, if a
valid claim on the part of a third party against the Indemnitee, would be
indemnifiable by the Indemnifying Party under this Agreement, the Indemnifying
Party may elect to compromise or defend against such Third Party Claim with
counsel selected by the Indemnifying Party (but reasonably acceptable to the
Indemnitee) at such Indemnifying Party's own expense; provided, however, that
without the consent of the Indemnitee, the Indemnifying Party shall not settle
or compromise any claim. Following the termination of the 30-day period referred
to in Section 13.03(b) hewreof, the Indemnitee, without compromising its claim
for indemnification hereunder, may pay, compromise, or defend such Third Party
Claim with counsel selected by the Indemnitee, and subject to the aggregate
limits on the Sellers' liability set forth in Section 13.05 hereof, the
Indemnifying Party shall reimburse the Indemnitee for its legal and other
expenses incurred in connection with its investigation and defense of any such
Third Party Claim; provided, however, that if the Indemnifying Party has
acknowledged that such Third Party Claim, if a valid claim by a third party
against the Indemnitee, would be indemnifiable under this Agreement, the
Indemnitee shall not settle or compromise any claim without the prior written
consent of the Indemnifying Party. The Indemnifying Party may participate, at
its own expense, in the defense of such Third Party claim.
(b) Any claim for indemnity between the parties shall be asserted by
written notice given by the Indemnitee to the Indemnifying Party. The
Indemnifying Party shall have a period of 30 days within which to respond
thereto. If the Indemnifying Party does not respond within such 30-day period,
the
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<PAGE> 52
Indemnifying Party shall be deemed to have accepted responsibility to make
payment, and shall have no further right to contest the validity of such claim.
If the Indemnifying Party does respond within such 30-day period and rejects
such claim in whole or in part, the Indemnitee shall be free to pursue such
remedies to enforce the provisions of this Article XIII as may be available to
such party by applicable law.
(c) If the Indemnifying Party is the Seller (or Sellers), a majority in
interest of the Sellers (based on their percentage ownership of Common Stock on
the date hereof) shall determine whether such claim for indemnity relates
entirely to the business, operations, assets or liabilities of any one Division
(an "INDEMNIFIABLE DIVISION LOSS"), and the Sellers' Agent shall, within 30 days
of his receipt of written notice of a claim by the Indemnitee, give written
notice to the Indemnitee as to whether such claim relates to an Indemnifiable
Division Loss. In the event that the Sellers' Agent does not give such notice to
the Indemnitee within such 30-day period, then such claim shall be deemed not to
be an Indemnifiable Division Loss.
Section 13.04. Prior Acts of the Company
No claim for indemnification by Purchaser or its Affiliates (including,
without limitation, the Company) shall be subject to any defense based upon any
act or omission of the Company, or of any director, officer, employee or agent
of the Company, prior to the Closing Date (whether criminal, willful,
intentional, negligent or otherwise or with respect to which there may be strict
liability), and no such claim for indemnification shall be subject to any
counterclaim, setoff, defense or crossclaim against Purchaser, the Company or
any other of the Purchaser's Affiliates founded upon any right of contribution
or indemnification (other than indemnification to which the person is otherwise
entitled under this Article XIII) or otherwise based upon, resulting from or
arising out of any such act or omission. Notwithstanding the foregoing, no
Affiliate of the Company who was a director, officer, employee or agent of the
Company prior to the Closing Date shall be entitled to indemnification hereunder
for his or her own acts or omissions.
Section 13.05. Limitation on Sellers' Indemnification
The indemnification rights provided by this Article XIII shall be
subject to the following limitations:
(a) The Purchaser and its Affiliates shall not be entitled to assert
any claim with respect to any Indemnifiable Losses relating to or arising out of
matters other than (i) matters relating to title to the Purchased Shares (i.e.
Indemnifiable Losses arising out of breaches of the representation and
warranties set forth in Section 5.02(c) hereof), (ii) Taxes and ERISA (i.e.
Indemnifiable Losses arising out of breaches of the representations and
warranties set forth in Sections 5.11 and 5.12 hereof) (collectively, "TAX
MATTERS"),
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<PAGE> 53
and (iii) environmental matters (i.e. Indemnifiable Losses arising out of
breaches of the relevant representations and warranties set forth in this
Agreement, including those set forth in Sections 5.05 (but only to the extent
relating to Environmental Laws), 5.09 (but only to the extent relating to
environmental clean-up actions), and 5.19) ("ENVIRONMENTAL MATTERS"), until such
time as the aggregate amount of all of such Indemnifiable Losses exceed $250,000
(the "GENERAL BASKET AMOUNT"). The Purchaser and its Affiliates shall not be
entitled to assert any claim with respect to any Indemnifiable Losses relating
to or arising out of Environmental Matters until such time as the aggregate
amount of all of such Indemnifiable Losses exceed $5,000 (the "ENVIRONMENTAL
BASKET AMOUNT").
(b) At such time as Purchaser's and its Affiliates Indemnifiable Losses
relating to or arising out of matters other than title to the Purchased Shares,
Tax Matters and Environmental Matters exceed, in the aggregate, the General
Basket Amount, then the Purchaser and its Affiliates may assert all of their
claims for such Indemnifiable Losses in excess of the General Basket Amount up
to a maximum of $7,500,000 (the "GENERAL CAP AMOUNT"). Each Sellers' liability
with respect to Indemnifiable Losses that are subject to the General Cap Amount
shall be limited to the following amounts (the "INDIVIDUAL GENERAL CAP
AMOUNTS"), and no Seller shall, with respect to Indemnifiable Losses relating to
or arising out of matters other than title to the Purchased Shares, Tax Matters
and Environmental Matters, be liable for any amount in excess of such Individual
General Cap Amounts:
<TABLE>
<CAPTION>
GENERAL CAP
NAME OF SELLER AMOUNT
- -------------- -----------
<S> <C>
Mr. Harrington $2,205,750
Mr. Gawron 1,360,500
Ms. Gawron 735,000
Mr. Pylak 1,360,500
Ms. Pylak 735,000
Mr. Cieszkowski 1,103,250
==========
Total: $7,500,000
</TABLE>
(c) To the extent that Purchaser's and its Affiliates Indemnifiable
Losses relating to or arising out of Environmental Matters (as described above)
exceed $5,000 (the "ENVIRONMENTAL BASKET"), the Sellers shall be liable for
fifty percent (50%) of all such Indemnifiable Losses up to $500,000 (i.e. the
Sellers shall be liable for fifty cents of every dollar of the first $500,000 of
such Indemnifiable Losses above the Environmental Basket Amount); and the
Sellers shall be liable for 100% of such Indemnifiable Losses in excess of
$500,000, up to a maximum of $11,500,000 (including the amount of any
Indemnifiable Losses
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<PAGE> 54
that are subject to the General Cap Amount) (the "ENVIRONMENTAL CAP AMOUNT").
Each Sellers' liability with respect to Indemnifiable Losses that are subject to
the Environmental Cap Amount (including the amount of any Indemnifiable Losses
that are subject to such Seller's Individual General Cap Amount) shall be
limited to the following amounts (the "INDIVIDUAL ENVIRONMENTAL CAP AMOUNTS"),
and no Seller shall, with respect to Indemnifiable Losses relating to or arising
out of Environmental Matters, be liable for any amount in excess of the
Individual Environmental Cap Amounts:
<TABLE>
<CAPTION>
ENVIRONMENTAL
NAME OF SELLER CAP AMOUNT
- -------------- -------------
<S> <C>
Mr. Harrington $3,382,150
Mr. Gawron 2,086,100
Ms. Gawron 1,127,000
Mr. Pylak 2,086,100
Ms. Pylak 1,127,000
Mr. Cieszkowski 1,691,650
===========
Total: $11,500,000
</TABLE>
(d) The Purchaser and its Affiliates right to assert claims with
respect to any Indemnifiable Losses relating to or arising out of title to the
Purchased Shares and Tax Matters shall not be subject to any limitation (either
"basket" or "cap") as to amount.
(e) Except in the case of Indemnifiable Division Losses, the
indemnification obligations hereunder of each Seller shall be limited to such
Seller's proportionate share of any Indemnifiable Loss based on the percentages
set forth below (the "SELLERS' PROPORTIONATE SHARE"), but in any event not in
excess of their respective Individual General Cap Amounts or Individual
Environmental Cap Amounts, if and to the extent applicable:
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<PAGE> 55
<TABLE>
<CAPTION>
NAME OF SELLER PERCENTAGE
- -------------- ----------
<S> <C>
Mr. Harrington 29.41%
Mr. Gawron 18.14
Ms. Gawron 9.80
Mr. Pylak 18.14
Ms. Pylak 9.80
Mr. Cieszkowski 14.71
======
Total: 100%
</TABLE>
(f) In the case of any Indemnifiable Division Loss, then the Sellers'
Proportionate Share limitations referred to in subsection (e) above shall not
apply and instead, the Seller or Sellers listed below opposite the respective
Division name (the "RESPONSIBLE SELLER") shall be responsible and liable for the
entire amount of such Indemnifiable Division Loss; provided, however, that to
the extent that the Individual General Cap Amounts or the Individual
Environmental Cap Amounts are applicable, no Seller shall be liable for any
Indemnifiable Division Loss in excess of such amounts; and provided further,
that to the extent that the amount of Indemnifiable Division Losses exceed the
amount of any applicable Individual General Cap Amount or the Individual
Environmental Cap Amount, then each of the other Sellers shall be liable for the
excess of the Indemnifiable Division Losses over such amounts in amount in each
case equal to such Seller's Proportionate Share (as recalculated to exclude the
Responsible Seller's Proportionate Share).
<TABLE>
<CAPTION>
DIVISION RESPONSIBLE SELLER
- -------- ------------------
<S> <C>
BSCC (including BSCC Group) Mr. Harrington
Energy Electric Assembly Mr. Cieszkowski
Energy Electric Cable Mr. Gawron (32.5%)
Ms. Gawron (17.5%)
Mr. Pylak (32.5%)
Ms. Pylak (17.5%)
</TABLE>
In the case of any Indemnifiable Division Loss, the Purchaser or its
Affiliates, as the case may be, will first seek indemnification (as provided by
this Article XIII) from the Responsible Seller before seeking such
indemnification from the other Sellers, and in such event the Purchaser or its
Affiliate shall not seek indemnification for such Indemnifiable Division Loss
from any other Seller for a period of six months (the "STANDSTILL PERIOD")
commencing on the date of the written notice delivered pursuant to Section
13.03(b) hereof; provided, however, that in the event that such written notice
is delivered within
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<PAGE> 56
six months of the termination of an applicable survival period (as set forth in
Section 13.01 hereof), then the termination of such survival period shall be
tolled, with the effect that at the end of the Standstill Period, the applicable
survival period shall be extended by the same number of days that remained in
such survival period on the date of such notice. Following the termination of
the Standstill Period, if the Indemnitee has not then been indemnified for such
Indemnifiable Division Loss to the full extent provided by this Article XIII or
otherwise have settled or compromised with the Responsible Seller with respect
to such Indemnifiable Division Loss, the Indemnitee may give written notice of
such remaining Indemnifiable Division Loss and may proceed against the other
Sellers to the full extent provided hereunder as if such remaining Indemnifiable
Division Loss were an Indemnifiable Loss hereunder and not an Indemnifiable
Division Loss; provided, however, that in no event shall the Indemnitee be
entitled to recover in respect of such Indemnifiable Loss any amount in excess
of the General Cap Amount or the Environmental Cap Amount if such Cap Amounts
are applicable to such Indemnifiable Loss.
Notwithstanding the foregoing, nothing herein is intended to or shall
(i) lessen the liability of any of the Sellers with respect to any such
Indemnifiable Division Loss, or (ii) preclude the Purchaser or its Affiliates,
after the termination of the Tolling Period, from instituting proceedings
against or seeking indemnification from any other Seller as provided in Section
13.02 hereof, and after the termination of the Tolling Period, the Purchaser (or
its Affiliates) shall not be required to exhaust any or all remedies against the
Responsible Seller prior to instituting proceedings to enforce this Article XIII
against any other Seller (and Purchaser (or its Affiliates). In the event that
the Indemnitee subsequently receives indemnity payments from the Responsible
Seller in respect of the Indemnifiable Division Loss pursuant to this subsection
(f) that, when aggregated with the indemnity payments received hereunder from
Sellers other than the Responsible Seller, exceed the total amount of the
Indemnifiable Division Loss, then the Indemnity will refund the amount of such
excess to the non-Responsible Sellers on a pro rata basis, based on the amount
of indemnity payments made by each such non-Responsible Seller. To the extent
that any Seller other than the Responsible Seller pays or is required to pay any
amounts in respect of such Indemnifiable Division Losses, the Responsible Seller
(or Responsible Sellers) shall promptly reimburse and indemnify such other
Seller for such payment; provided, however, that if and to the extent
applicable, no Seller shall be liable for more than such Seller's Individual
General Cap Amount or Individual Environmental Cap Amount.
(g) Notwithstanding anything to contrary contained herein, in no event
shall the liability of the Sellers as a group relating to the transactions
contemplated by this Agreement (other than in respect of Tax Matters and title
to the Purchased Shares, and other than with respect to any Redemption Price
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<PAGE> 57
Adjustment determined in accordance with SCHEDULE 2.02(b) hereto) exceed
$11,500,000, nor shall the liability of the Sellers individually exceed the
following respective amounts: Mr. Harrington $3,382,150; Mr. Gawron $2,086,100;
Ms. Gawron $1,127,000; Mr. Pylak $2,086,100; Ms. Pylak $1,127,000; and Mr.
Cieszkowski $1,691,650.
Section 13.06. Use of Escrowed Funds; Offset of Notes
Any claim by Purchaser or its Affiliates for indemnification under this
Article XIII hereof shall, to the extent that Purchaser or its Affiliates are
entitled to such Indemnification, be satisfied first by recourse to the
Indemnification Escrow Fund (as defined in the Escrow Agreement) held in escrow
by the Escrow Agent. In the event that Indemnifiable Losses exceed the remaining
amount of the Indemnification Escrow Fund then held in escrow by the Escrow
Agent, the Purchaser or its Affiliates may, but shall not be required to, offset
the amount of such Indemnifiable Losses against amounts due under the Redemption
Notes and the Contingent Notes, subject to the limitations on the liability of
each Seller pursuant to Section 13.05 hereof.
Section 13.07. Limitation on Purchaser's Indemnification
(a) The Sellers and their Affiliates shall not be entitled to assert
any claim with respect to any Indemnifiable Losses until such time as the
aggregate amount of all of such Indemnifiable Losses exceed the $250,000. At
such time as the Sellers' and their Affiliates' Indemnifiable Losses exceed, in
the aggregate, the $250,000, then the Sellers and their Affiliates may assert
all of their claims for such Indemnifiable Losses in excess of the $250,000 up
to a maximum of $7,500,000.
Section 13.08. Sole Remedy
Except as otherwise expressly provided in Section 7.05(c) of this
Agreement, the indemnification provisions of this Article XIII shall from and
after the Closing be the sole remedy for any breach or alleged breach of any the
representations, warranties or covenants contained in this Agreement, and no
Indemnitee hereunder shall be entitled to recover from any Indemnifying Party
hereunder, whether in a proceeding brought to enforce this Article XIII or
otherwise, any amounts (including without limitation for reimbursement of legal
fees) in excess of the liability limitations (to the extent applicable) set
forth in Sections 13.05 and 13.07 hereof.
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<PAGE> 58
ARTICLE XIV
SELLERS' AGENT
Section 14.01. Appointment of Sellers' Agent
(a) Each of the Sellers hereby irrevocably constitutes and appoints Mr.
Harrington as such Sellers' agent (the "SELLERS' AGENT") for the purpose of
performing and consummating the transactions contemplated by this Agreement. The
appointment of Mr. Harrington as Sellers' Agent is coupled with an interest and
all authority hereby conferred shall be irrevocable and shall not be terminated
by any or all of the Sellers without the consent of the Purchaser, which consent
may be withheld for any reason unless a substitute Sellers' Agent reasonably
acceptable to the Purchaser is appointed by each of the Sellers simultaneously
with such termination; and such Sellers' Agent is hereby authorized and directed
to perform and consummate all of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each of the
Sellers, for themselves and their respective heirs, executors, administrators,
successors and assigns, hereby authorizes Sellers' Agent:
(1) to execute and deliver on each Sellers behalf all documents and
instruments which may be executed and delivered pursuant to this
Agreement; and
(2) to make and receive notices and other communications pursuant to
this Agreement and service of process in any legal action or other
proceeding arising out of or related to this Agreement or any of
the transactions hereunder.
(b) In the event of the death or disability of Mr. Harrington, a
majority in interest of the Sellers (to be determined based on each Seller's
ownership of the common stock of the Company on the date hereof (as determined
by reference to SCHEDULE 5.02(b) hereto) shall promptly appoint one of the other
Sellers as Sellers' Agent, but failing such appointment Mr. Gawron, Mr. Pylak or
Mr. Cieszkowski (in that order) shall be deemed to have been appointed as
Sellers' Agent until such time as a different Sellers' Agent shall have been
appointed and written notice of such appointment shall have been given to the
Purchaser.
(c) Any claim, action, suit or other proceeding, whether in law or
equity, to enforce any right, benefit or remedy granted to the Sellers under
this Agreement shall be asserted, brought, prosecuted or maintained only by
Sellers' agent. Any claim, action, suit or other proceeding, whether in law or
equity, to enforce any right, benefit or remedy granted to the Purchaser under
this Agreement may be asserted, brought, prosecuted or maintained by the
Purchaser against the Sellers or any of them, at the discretion of the
Purchaser, by service of process on the Sellers' Agent and without the necessity
of
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<PAGE> 59
serving process on, or otherwise joining or naming as a defendant in such claim,
action, suit or other proceeding, any other Seller. The Sellers shall be bound
by any determination of or against Sellers' Agent or the terms of any settlement
or release to which Sellers' Agent shall become a party.
(d) The Purchaser shall have no liability for the actions of the
Sellers' Agent and no responsibility to monitor his activities.
(e) Notwithstanding the foregoing, from and after the date hereof and
through the Closing Date, the Sellers' Agent shall not take any action on behalf
of the Sellers (including without limitation any action taken pursuant to
Section 14.01(c) hereof) unless Sellers holding an aggregate of at least 75% of
the Common Stock (measured as of the date hereof) consent in writing to such
action, and in connection with any action taken by the Sellers' Agent on behalf
of the Sellers during that period the Sellers' Agent shall provide evidence to
the Purchaser that he has obtained such consent, and following the Closing Date
the Sellers' Agent shall not take any action on behalf of the Sellers (including
without limitation any action taken pursuant to Section 14.01(c) hereof) unless
Sellers holding an aggregate of at least a majority of the Common Stock
(measured as of the date hereof) consent in writing to such action, and in
connection with any action taken by the Sellers' Agent on behalf of the Sellers
after the Closing Date the Sellers' Agent shall provide evidence to the
Purchaser that he has obtained such consent.
ARTICLE XV
MISCELLANEOUS
Section 15.01. Headings; Grammatical Usage
The descriptive headings of the several Articles and Sections of this
Agreement, and the Table of Contents, are inserted for convenience only and do
not constitute a part of this Agreement. In construing this Agreement, feminine
or neuter pronouns shall be substituted for those masculine in form and vice
versa, and plural terms shall be substituted for singular terms and vice versa,
in any place in which the context so requires.
Section 15.02. Notices
Any notices or other communications required or permitted hereunder
shall be given in writing and shall be sufficient if delivered personally or
sent by certified or registered mail, postage prepaid, addressed as follows:
55
<PAGE> 60
If to the Sellers, to:
James S. Harrington
Sellers' Agent
BSCC
214 Nashua Street
Leominster, Massachusetts 01453
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attention: William T. Whelan, Esq.
If to the Purchaser, to:
Tigera Group, Inc.
667 Madison Avenue
Suite 2500
New York, New York 10021
Attention: Mr. Donald T. Pascal
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Charles B. Friedman, Esq.
or to such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so mailed; provided that any notice or communications changing
any of the addresses set forth above shall be effective and deemed given only
upon its receipt.
Section 15.03. Assignment; Third Parties
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but except as expressly herein provided, neither this
Agreement nor any of the rights, interest, or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties. Neither this Agreement nor any other agreement contemplated
hereby shall be deemed to confer upon any Person not a party hereto or thereto
any rights or remedies.
Section 15.04. Expenses and Transfer Taxes
(a) Except as provided to the contrary in Section 15.04(b), all fees
and expenses incurred by the Sellers or the Company in connection with this
Agreement and the transactions contemplated hereby shall be borne by the
Sellers, and all fees
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<PAGE> 61
and expenses incurred by the Purchaser in connection with this Agreement and the
transactions contemplated hereby shall be borne by the Purchaser. Except as
provided to the contrary in Section 15.04(b), the Company shall not bear any of
such fees or expenses.
(b) Provided that the Closing shall have occurred, the Company shall
bear all of the costs relating to the transactions contemplated by this
Agreement, including without limitation Purchaser's and Sellers' legal and other
professional fees and expenses.
Section 15.05. Complete Agreement
This Agreement, which includes each of the Exhibits and Schedules
hereto, contains the entire understanding of the parties with respect to the
transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto. There are no restrictions, agreements,
promises, warranties, covenants, or undertakings other than those expressly set
forth herein or therein.
Section 15.06. Amendments and Waivers
This Agreement may be amended or modified, and the terms hereof may be
waived, only by a written instrument signed by the parties hereto or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. No course of dealing on the part of any party hereto, its agents
or employees, nor any failure or delay on their part with respect to the
exercise of any right, power or privilege given or granted hereunder shall
operate as a waiver thereof as to any future defaults, nor shall any single or
partial exercise by a party hereto of any right, power or privilege granted or
contained herein preclude such party from later or further exercise of any
right, power or privilege as to any future defaults.
Section 15.07. Counterparts
This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same Agreement and each of which shall be
deemed an original.
Section 15.08. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES HERETO HEREBY AGREES
THAT ANY SUIT, ACTION OR PROCEEDING FOR THE ENFORCEMENT OF THIS AGREEMENT SHALL
BE BROUGHT ONLY IN THE STATE COURTS OF OR FEDERAL COURTS SITTING IN THE STATE OF
DELAWARE. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE JURISDICTION OF SUCH
COURTS AND TO SERVICE OF PROCESS IN ANY SUCH
57
<PAGE> 62
SUIT, ACTION OR PROCEEDING BEING MADE UPON SUCH PARTY BY REGISTERED OR CERTIFIED
MAIL AT THE ADDRESS SPECIFIED IN SECTION 15.02 HEREOF. EACH PARTY HERETO HEREBY
WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING OR ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING IS
BROUGHT IN AN INCONVENIENT COURT.
Section 15.09. Severability
This Agreement shall be deemed severable; the invalidity or
unenforceability of any term or provision of this Agreement shall not affect the
validity or enforceability of this Agreement or of any other term hereof.
Section 15.10. Force Majeure
The obligations hereunder of each of the parties hereto shall be
suspended if, when and to the extent (but only to such extent) that such party
is unable to perform or is limited in its performance hereunder because of force
majeure, including, without limitation: (i) earthquakes, fires, floods, and
other acts of God, (ii) wars, riots, insurrections, or other civil commotions,
(iii) strikes, lockouts, or other labor disputes, (iv) delays of carriers, power
failures, or accidents, or (v) other interruptions of business, casualties,
events or circumstances beyond the control of such party and which could not be
avoided by the exercise of due care. When the limitation or curtailment caused
by force majeure shall have ended, the obligations hereunder shall be restored
to full force and effect.
Section 15.11. Action by Purchaser
Any reference in this Agreement, or in any of the agreements being or
to be entered into by the Purchaser in connection herewith, to action to be
taken by the Purchaser or to the Purchaser's consent, agreement or election,
shall, from and after the Closing, mean and refer to such action, consent,
agreement or election that has been authorized by the board of directors of the
Purchaser or by a committee of such board to which such authority has been
delegated.
58
<PAGE> 63
IN WITNESS WHEREOF, each of the parties hereto has executed, this Stock
Redemption and Purchase Agreement by its duly authorized officers, as of the day
and year first above written.
TIGERA GROUP, INC.
(a Delaware corporation)
By:/s/Donald T. Pascal
----------------------------------------
Donald T. Pascal
President
CONNECTIVITY PRODUCTS INCORPORATED
By:/s/James S. Harrington
----------------------------------------
James S. Harrington,
President
/s/James S. Harrington
-------------------------------------------
James S. Harrington,
individually,
/s/Duane A. Gawron
-------------------------------------------
Duane A. Gawron, Trustee of the
Living Trust of Duane A. Gawron
dated March 16, 1987
/s/Margo Gawron
-------------------------------------------
Margo Gawron,
individually,
/s/John E. Pylak
-------------------------------------------
John E. Pylak, Trustee of the
John E. Pylak Living Trust dated
September 3, 1987
/s/John E. Pylak, attorney in fact
-------------------------------------------
Rebecca Pylak,
individually,
/s/Kurt Cieszkowski
-------------------------------------------
Kurt Cieszkowski,
individually,
59
<PAGE> 64
The undersigned are the spouses of James S. Harrington, Margo Gawron,
Rebecca Pylak and Kurt Cieszkowski, married shareholders of Connectivity
Products Incorporated ("CPI"), who are signatories to the foregoing Stock
Redemption and Purchase Agreement (the "Purchase Agreement"). Each of them
acknowledges that he or she has read and clearly understands the aforementioned
Purchase Agreement. Each of the undersigned is aware that, by the provisions of
the Purchase Agreement, he or she, and his or her spouse, have agreed to the
transfers of shares of CPI including the transfer of any community property
interest in such shares. Each of the undersigned hereby expressly approves of
and agrees to be bound by the provisions of the Purchase Agreement in its
entirety.
Dated: May 17, 1996
/s/Eileen Harrington
----------------------------------------
Eileen Harrington
/s/Duane A. Gawron
----------------------------------------
Duane A. Gawron
/s/John E. Pylak
----------------------------------------
John E. Pylak
/s/Pari L. Cieszkowski
----------------------------------------
Pari L. Cieszkowski
60
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1 TO
STOCK REDEMPTION AND PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO STOCK REDEMPTION AND PURCHASE
AGREEMENT (this "Amendment No. 1") is entered into as of the 31st day of May,
1996 by and among James S. Harrington, Duane A. Gawron, Trustee of the Living
Trust of Duane A. Gawron dated March 16, 1987, Margo Gawron, John E. Pylak,
Trustee of the John E. Pylak Living Trust dated September 3, 1987, Rebecca
Pylak, Kurt Cieszkowski, Tigera Group, Inc. and Connectivity Products
Incorporated, amending the Stock Redemption and Purchase Agreement dated as of
May 17, 1996 (the "Purchase Agreement"), by and among the parties hereto. Terms
used but not otherwise defined herein are used with the meanings ascribed
thereto in the Purchase Agreement.
WHEREAS, the parties have heretofore entered into the Purchase
Agreement and desire to amend the Purchase Agreement as hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereby agree as follows:
1. Section 6.06(b) of the Purchase Agreement is hereby amended
by deleting the second sentence thereof and substituting therefor the following:
"If any event occurs that, but for the lack of shareholder
approval of Purchaser's 1996 Stock Incentive Plan, would
permit a Seller to exercise any of the options referred to in
Section 6.06(a) hereof prior to the approval of such 1996
Stock Incentive Plan by the stockholders of Purchaser (an
"Acceleration Event"), then, prior to such Acceleration Event,
and prior to the occurrence of any event which would prevent
Purchaser from doing same, Purchaser shall in consideration
for the surrender of each of such options, issue in place
thereof stock purchase warrants, on the same terms (except as
otherwise agreed by the Purchaser and any particular Seller),
to purchase the same number of shares of Tigera Common Stock."
2. Section 2(b) of Schedule 2.02(b) of the Purchase Agreement
is hereby amended by deleting "$5.50" from clause (i) thereof and substituting
therefor "$1.00".
<PAGE> 2
3. (a) Section 5.12 of the Purchase Agreement is hereby
amended by the insertion of the following as a new subsection (h):
"(h) A valid Subchapter S election for BSCC Corp. was timely
filed by or on behalf of BSCC Corp. and all tax returns filed
by or with respect to BSCC Corp. properly reflected such
corporation's status as a Subchapter S corporation under the
Code."
(b) The Purchaser hereby waives the condition set
forth in Section 10.07 of the Purchase Agreement (relating to the delivery of
Internal Revenue Service acknowledgments of Subchapter S elections) to the
extent that such condition relates to BSCC Corp.
4. The Sellers hereby represent that the amount of the 1996
Pre-Closing Cash Distributions is $2,100,000, and the parties hereby agree that
this representation shall not be subject to the "basket" or "cap" limitations
provided in Article XIII of the Purchase Agreement.
5. For purposes of determining the amount to be paid at the
Closing in respect of the Cash Redemption Payment, it is hereby agreed that the
estimated amount of the 1996 Pre-Closing Net Income is $1,772,919 (the
"Estimated 1996 Pre-Closing Net Income"), and that the amount to be paid by the
Company at the Closing in respect of the Cash Redemption Payment shall be
$7,372,919.00; and with respect to the determination of 1996 Pre-Closing Net
Income, it is hereby further agreed:
(i) that the Redemption Price Adjustment Schedule
that, pursuant to Section 1(d) of Schedule 2.02(b) of the
Purchase Agreement, is to accompany the 1996 Financial
Statements shall include the amount of the 1996 Pre-Closing
Net Income as determined by the Company's Auditors;
(ii) that the Company shall pay to the Sellers the
amount, if any, by which the amount of the 1996 Pre-Closing
Net Income exceeds the amount of the Estimated 1996
Pre-Closing Net Income;
(iii) that the Sellers shall pay to the Company the
amount, if any, by which the amount of the Estimated 1996
Pre-Closing Net Income exceeds the amount of the 1996
Pre-Closing Net Income;
(iv) that any dispute as to the amount of the 1996
Pre-Closing Net Income shall be resolved in the manner set
forth in Section 1(f) of Schedule 2.02(b) of the Purchase
Agreement;
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<PAGE> 3
(v) that any amount payable pursuant to clause (ii)
or clause (iii) above shall be paid, in cash, within the later
of (A) 15 days following the delivery of the Closing Date
Financial Statements and the accompanying Redemption Price
Adjustment Schedule or (B) in the event of a dispute as to the
amount of the 1996 Pre-Closing Net Income, 15 days following
the final resolution of such dispute in accordance with
Section 1(f) of Schedule 2.02(b); and
(vi) that any such payment shall not be subject to
any of the "basket" or "cap" limitations set forth in Article
XIII of the Purchase Agreement.
6. It is hereby agreed that the aggregate number of Redeemed
Shares shall be 1,274, that the aggregate number of Purchased Shares shall be
651.1 and that the aggregate number of shares of Common Stock to be retained by
the Sellers following the Closing shall be 114.9; and it is further agreed that
such amounts shall not as a result of any adjustments to the Redemption Price be
adjusted after the Closing.
7. Section 7.01(h)(ii) of the Purchase Agreement is hereby
amended by adding at the end thereof the following:
", plus excess accrued interest payable of $100,000, LIBOR
breakage penalty of $5,000 and incremental pre-closing M&A
cash of $50,000."
8. Except as expressly provided by this Amendment No. 1, the
Purchase Agreement shall in all respects remain unamended and in full force and
effect.
9. The parties hereto hereby agree that the amount of the
Company's 1995 Adjusted EBITDA is $8,229,242.00.
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<PAGE> 4
IN WITNESS WHEREOF, each of the parties hereto has executed
this Amendment No. 1 as of the date and year first above written.
/s/James S. Harrington
----------------------------------------
James S. Harrington
/s/Duane A. Gawron
----------------------------------------
Duane A. Gawron, Trustee of
the Living Trust of Duane A.
Gawron dated March 16, 1987
/s/Duane A. Gawron, attorney in
----------------------------------------
fact for Margo Gawron
Margo Gawron
/s/John E. Pylak
----------------------------------------
John E. Pylak, Trustee of the
John E. Pylak Living Trust
dated September 3, 1987
/s/John E. Pylak, attorney in
----------------------------------------
fact for Rebecca Pylak
----------------------------------------
Rebecca Pylak
/s/Kurt Cieszkowski
----------------------------------------
Kurt Cieszkowski
TIGERA GROUP, INC.
By: /s/Donald T. Pascal
------------------------------------
CONNECTIVITY PRODUCTS INCORPORATED
By: /s/James S. Harrington
------------------------------------
-4-
<PAGE> 1
EXHIBIT 10.1
STOCKHOLDERS' AGREEMENT dated as of May 17, 1996 among
CONNECTIVITY PRODUCTS INCORPORATED, a Delaware corporation (the "Corporation"),
the stockholders of the Corporation listed as "Continuing Stockholders" on the
signature page hereof (the "Continuing Stockholders"), and TIGERA GROUP, INC., a
Delaware corporation ("Tigera", and together with the Continuing Stockholders,
the "Stockholders", each being a "Stockholder");
W I T N E S S E T H:
WHEREAS, the Corporation is a corporation duly organized and
existing under the laws of the State of Delaware, and the Continuing
Stockholders own in the aggregate all of the shares of the common stock ("Common
Stock") thereof issued and outstanding on the date hereof;
WHEREAS, the Corporation, Tigera and the Continuing
Stockholders are entering into a Stock Redemption and Purchase Agreement of even
date herewith (the "Purchase Agreement") pursuant to which, inter alia, the
Corporation will purchase and redeem a portion of the Common Stock held by the
Continuing Stockholders and Tigera will also purchase from the Continuing
Stockholders a portion of the Common Stock held by the Continuing Stockholders
such that after giving effect to such transactions Tigera will own 85% of the
Common Stock and the Continuing Stockholders will collectively own 15% of the
Common Stock (the "Retained Shares"); and
WHEREAS, following the consummation of the transactions
contemplated by the Purchase Agreement (the "Closing"), each of the Stockholders
will own that number of shares of the Common Stock set forth opposite the name
of such Stockholder on Schedule I attached hereto (which Schedule shall be
completed on the Closing Date) and such Stockholders shall own, in the
aggregate, all of the shares of Common Stock then outstanding; and
WHEREAS, it is deemed to be in the best interests of the
Corporation and the Stockholders that provision be made for the continuity and
stability of the business and policies of the Corporation and, to that end, the
Corporation and the Stockholders hereby set forth their agreement with respect
to the shares of Stock (as hereinafter defined) owned by the Stockholders.
NOW THEREFORE, in consideration of the premises and of the
mutual covenants hereinafter set forth, the parties hereto hereby agree as
follows:
SECTION 1. Effectiveness of Agreement. This Agreement is
subject to and shall become effective simultaneously with the Closing, and in
the event that the Purchase Agreement is
<PAGE> 2
terminated prior to the Closing, then this Agreement shall be null and void ab
initio.
SECTION 2. Definitions. As used herein, the following terms
shall have the following respective meanings:
2.1 "Closing Date" shall mean the date on which the
Closing occurs.
2.2 "Employee Stockholders" shall mean each of James S.
Harrington, Duane A. Gawron, John E. Pylak and Kurt
Cieszkowski.
2.3 "Permitted Transferee" shall mean (A) with respect to
any Stockholder that is an individual, such
Stockholder's spouse, children, grandchildren or
parents, or a trust primarily for the benefit of any
of the forgoing or such Stockholder, (B) with respect
to any Stockholder that is a trust, the beneficiaries
of such trust, (C) with respect to any Stockholder
that is an entity, any subsidiary of such entity
provided, in the case of a transfer by Tigera, that
such subsidiary is not, after giving effect to such
transfer, engaged principally in a business other
than the wire and cable product manufacturing,
distributing and/or assembling business, (D) with
respect to any Stockholder, any other Stockholder,
and (E) with respect to any Stockholder other than
Tigera, any Person approved by Tigera in Tigera's
sole discretion; provided, that in each case, no
Person shall be a Permitted Transferee unless and
until such Person shall have agreed in writing to be
bound by the terms and conditions of this Agreement
and executed a counterpart of this Agreement.
2.4 "Person" shall mean any individual, partnership,
corporation, joint venture, trust, firm, association
or other entity.
SECTION 3. Nomination of Tigera Directors.
(a) Effective as of or promptly following the Closing, Tigera
shall cause the number of directors comprising its Board of Directors to be
increased by three and shall cause James S. Harrington, Duane A. Gawron and John
E. Pylak (the "CPI Nominees") to be elected to fill the vacancies in the Board
of Directors thus created. So long as each CPI Nominee shall remain an employee
of Tigera or any direct or indirect subsidiary of Tigera, at each annual meeting
of the stockholders of Tigera, and at each special meeting of the stockholders
of Tigera called for
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<PAGE> 3
the purpose of electing directors of Tigera, and at any time at which
stockholders of Tigera shall have the right to, or shall, vote for or consent in
writing to the election of directors of Tigera, then, and in each such event,
Tigera shall include the CPI Nominees (or such of the CPI Nominees that remain
employees of the Corporation or Tigera) in the "management slate" of nominees
for director and shall recommend to Tigera's stockholders the election thereof
as directors. If any CPI Nominee shall decline to be nominated or to serve as a
director of Tigera for any reason, then (i) Tigera shall not thereafter be
obligated to nominate or propose the election of such CPI Nominee as a director
of Tigera and (ii) Tigera shall not be obligated to nominate or propose the
election of any other person as a substitute or replacement for such CPI
Nominee.
(b) If a CPI Nominee shall at any time and for any reason
cease to be an employee of Tigera or a direct or indirect subsidiary of Tigera,
such CPI Nominee shall promptly deliver to the Board of Directors of Tigera his
resignation as a director thereof and Tigera shall have no further obligation
thereafter to nominate such CPI Nominee as a director.
(c) So long as he shall remain an employee of Tigera, or any
direct or indirect subsidiary of Tigera, Tigera shall invite Kurt Cieszkowski to
attend all meetings of its Board of Directors in a nonvoting observer capacity
and, in this respect, shall give Mr. Cieszkowski copies of all notices, minutes,
consents and other materials it provides to its directors; provided, however,
that Mr. Cieszkowski shall agree to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so provided; and, provided,
further, that Tigera reserves the right to withhold any information and to
exclude Mr. Cieszkowski from any meeting or portion thereof if access to such
information or attendance at such meeting could adversely affect the
attorney-client privilege between Tigera and its counsel.
SECTION 4. Limitations on Disposition of Common Stock by
Stockholders.
(a) Each Stockholder hereby agrees not to sell, assign,
transfer, convey or otherwise dispose of, or mortgage, pledge, grant a security
interest in or otherwise encumber (collectively, "dispose of") any of such
Stockholder's shares of Common Stock, whether now owned or hereafter acquired,
except in compliance with the terms of this Agreement.
(b) Without limiting the generality of subsection (a) above,
no Stockholder shall dispose of any shares of Common Stock unless (i) the
transferee is at the time of such disposition a party to this Agreement or
agrees in writing to be bound by the terms and conditions hereof and executes a
counterpart of this Agreement, (ii) such Stockholder has complied with
applicable
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<PAGE> 4
securities laws and regulations in connection with such disposition and, (iii)
if required by the Corporation in its sole discretion, delivered to the
Corporation an opinion of counsel with respect to such compliance with
applicable federal securities laws.
(c) Without limiting the generality of subsections (a) or (b)
above, no Stockholder shall dispose of any shares of Common Stock, other than to
a Permitted Transferee or otherwise as expressly authorized or required by this
Agreement.
(d) Subject to the limitations set forth in subsections (b)
and (c) above, (i) any Stockholder may from time to time transfer any or all of
such Stockholder's shares of Common Stock to a Permitted Transferee, and (ii)
Tigera may transfer all, but not less than all, of its shares of Common Stock to
any other Person subject to the provisions of Section 5 hereof.
(e) Nothing in this Agreement shall prevent or restrict Tigera
from pledging its shares of Common Stock to the Banks pursuant to the Bank Loan
Documents (as such terms are defined in the Purchase Agreement).
(f) Upon becoming a party to this Agreement, a Permitted
Transferee of a Stockholder shall for all purposes hereunder be deemed to be a
Stockholder, entitled to all of the rights and subject to all of the obligations
of a Stockholder hereunder, and a Permitted Transferee (other than the
Corporation or Tigera) of a Continuing Stockholder shall for all purposes
hereunder be deemed to be a Continuing Stockholder, entitled to all of the
rights and subject to all of the obligations of a Continuing Stockholder
hereunder.
(g) Any attempted disposition of shares of Common Stock not in
accordance with the terms and conditions of this Agreement shall be null and
void and of no force or effect.
SECTION 5. Tag Along/Drag Along Rights.
(a) In the event that Tigera shall desire to accept a bona
fide offer (a "Purchase Offer") from any person or persons, other than a
Permitted Transferee, to purchase all, but not less than all, of the shares of
Common Stock then held by Tigera (a "Complete Divestiture"), then Tigera shall
promptly deliver to each of the other Stockholders a written notice (the
"Purchase Offer Notice") stating Tigera's intention to sell such shares pursuant
to such Purchase Offer and setting forth the terms and conditions (including,
without limitation, the identity of the proposed purchaser, the number of shares
to be sold and the amount and type of consideration to be paid therefor) of such
Purchase Offer.
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<PAGE> 5
(b) In connection with any Complete Divestiture, Tigera shall
have the right ("Drag Along Right") to require each of the Continuing
Stockholders to participate in the sale of Common Stock by Tigera, thus selling
to the proposed purchaser all shares of Common Stock held by such Continuing
Stockholder on the terms and conditions set forth in the Purchase Offer Notice
(which shall be the same terms and conditions (on a per share basis) as are
applicable to Tigera's sale of shares of Common Stock to the proposed
purchaser). Such Drag Along Right shall be exercisable by Tigera's inclusion of
notice of such exercise in the Purchase Offer Notice sent by Tigera to the
Continuing Stockholders.
(c) In the event that Tigera does not exercise its Drag Along
Right with respect to any Complete Divestiture, the Continuing Stockholders
shall have the right ("Tag Along Right"), exercisable by delivery of a written
notice (a "Co-Sale Notice") to Tigera within ten (10) business days after
receipt by such Continuing Stockholder of the Purchase Offer Notice, to
participate in the sale of Common Stock by Tigera on the terms and conditions
set forth in the Purchase Offer Notice. Upon receipt of a Co-Sale Notice from
any Continuing Stockholder (a "Co-Selling Stockholder"), Tigera shall, subject
to agreement by the proposed purchaser, offer each Co-Selling Stockholder the
opportunity to sell to the proposed purchaser all, but not less than all, of
shares of Common Stock then held by such Co-Selling Stockholder. Tigera shall
thereafter use its reasonable efforts to obtain from the proposed purchaser an
agreement to purchase the additional shares of Common Stock proposed to be sold
by the Co-Selling Stockholder(s) on the same terms and conditions as the
Purchase Offer. If Tigera is not able to obtain such an agreement from the
proposed purchaser, then notwithstanding the foregoing, neither Tigera nor any
other Stockholder shall sell any shares of Common Stock to such proposed
purchaser.
(d) The closing of the purchase and sale of any shares of
Common Stock to be sold pursuant to the Drag Along Rights or the Tag Along
Rights contained in this Section 5 shall occur concurrently with the closing of
the sale of the shares of Common Stock by Tigera. At such closing, each
Continuing Stockholder (in the case of a sale pursuant to the Drag Along Rights)
or Co- Selling Stockholder (in the case of a sale pursuant to the Tag Along
Rights) shall deliver to the purchaser a certificate or certificates
representing the number of shares of Common Stock to be sold by such Co-Selling
Stockholder, registered in the name of such Continuing Stockholder or Co-Selling
Stockholder (as the case may be) and duly endorsed in blank, or accompanied by a
duly executed stock power in blank, with signatures duly guaranteed and all
requisite stock transfer stamps affixed thereto.
SECTION 6. Participation Rights.
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<PAGE> 6
(a) Subject to the terms and conditions set forth in this
Section 6, the Corporation hereby grants to each Stockholder the right to
purchase, on a pro rata basis, a portion of any "Additional Shares" (as defined
in subsection (d) below) which the Corporation may, from time to time, sell and
issue. For purposes of this Section 6, a Stockholder's pro rata share of such
Additional Shares shall the number of Additional Shares that is equal to the
product of (A) the total number of Additional Shares then proposed to be issued
by the Corporation times (B) such Stockholder's percentage ownership of the
total number of shares of Common Stock then outstanding.
(b) Prior to the issuance of any Additional Shares, the
Corporation shall deliver a notice (an "Offer Notice") to each Stockholder
stating (i) its bona fide intention to offer or issue such Additional Shares,
(ii) the number of such Additional Shares proposed to be offered, (iii) the
number of such Additional Shares that each Stockholder may purchase pursuant to
this Section 6, and (iii) the price and terms, if any, upon which the
Corporation proposes to offer such Additional Shares.
(c) Within 10 days after the giving of an Offer Notice, each
Stockholder may by written notice to the Corporation elect to purchase, at the
price and on the terms specified in the Offer Notice, up to that number of
Additional Shares as is specified in the Offer Notice.
(d) For purposes of this Agreement, the term "Additional
Shares" shall mean any shares of the Corporation's capital stock, whether now or
hereafter authorized, and any rights, options (other than stock options granted
to employees or others under a stock option plan adopted by the Corporation) or
warrants to purchase shares of the Corporation's capital stock, issued by the
Corporation after the Closing Date solely for cash consideration, other than any
such shares issued or issuable upon the exercise of stock options granted under
a stock option plan. Without limiting the generality of the foregoing, the term
"Additional Shares" shall not include shares of capital stock issued as all or
part of the consideration for an Acquisition.
SECTION 7. Commitment to Invest Additional Equity Capital in
the Corporation.
(a) It is the intent of the parties that the Corporation
acquire additional business units in the wire and cable industry (each, an
"Additional Business"), and that Tigera provide additional equity financing to
the Corporation in order to enable the Corporation to make such acquisitions
(each, an "Acquisition") and/or to provide working capital for internal growth
of the Corporation ("Internal Expansion"). In that connection, Tigera hereby
agrees that if and when (A) potential Acquisitions of Additional Businesses are
identified and proposed by the Corporation's management as businesses in the
wire and
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<PAGE> 7
cable industry that will provide synergies with the Corporation's existing
businesses or that are otherwise in the best interest of the Corporation to
acquire, or (B) the Corporation's management requires additional funding for
Internal Expansion, then the Board of Directors of Tigera, exercising its
unrestricted discretion, shall in each case determine whether such Acquisition,
including without limitation the proposed financial and other terms thereof, or
management's specific proposal for Internal Expansion, as the case may be, is,
under the circumstances then obtaining, an appropriate and beneficial investment
for the Corporation to make. If the Board of Directors of Tigera makes such an
affirmative determination, then Tigera shall, to the extent required to effect
such Acquisition or fund such Internal Expansion, purchase shares of preferred
stock of the Corporation (the "Preferred Stock"), for an aggregate price
(including purchases of Preferred Stock made in connection with prior
Acquisitions, proposed Acquisitions and prior Internal Expansion) of up to
$3,500,000, which Preferred Stock shall be issued on terms mutually agreed by
the Corporation and Tigera. Notwithstanding the foregoing, Tigera shall purchase
$1,000,000 of such Preferred Stock on the Closing Date. Without limiting the
generality of the foregoing, such Preferred Stock shall (i) be non-voting, (ii)
not pay a dividend, (iii) have a preference upon liquidation equal to its
initial subscription price, and (iv) be redeemable by the Corporation, subject
to any required approval or consent by the Corporation's lenders and provided
that the Redemption Notes and the Contingent Notes (as such terms are defined in
the Purchase Agreement) have been paid in full, at a redemption price equal to
its initial subscription price, in two equal installments, the first such
redemption installment being on or about the first date on which the foregoing
conditions have been satisfied and the second such installment being on or about
the first anniversary of the first of such redemption installments. The
Corporation and the Stockholders shall take such actions and execute and file
such documents as are reasonably necessary or appropriate in order to authorize
the issuance by the Corporation of such Preferred Stock.
(b) Prior to its subscription for the shares of Preferred
Stock as provided in subsection (a), above, Tigera shall at all times reserve,
and not expend for other purposes or distribute to its shareholders, an amount
equal to not less than $3,500,000 (less any amount actually used to purchase
shares of such Preferred Stock) for the purpose of such subscription for
Preferred Stock.
(c) So long as any Employee Stockholder continues to serve as
an officer of the Corporation, Tigera or any direct or indirect subsidiary of
Tigera, then neither Tigera nor the Corporation shall, without first obtaining
the consent of at least a majority in interest of such Employee Stockholders
(determined based on the Sellers' percentage ownership of Common
-7-
<PAGE> 8
Stock as of the date hereof), acquire any business not engaged in the wire and
cable industry.
SECTION 8. Commitment to Invest Equity Capital in Newco.
(a) In addition to the Acquisitions of Additional Businesses
referred to in Section 6 hereof, it is the intent of the parties to organize an
additional investment entity ("Newco") to make Acquisitions of Additional
Businesses in the wire and cable industry but which Additional Businesses the
Corporation elects not to acquire (or is unable to acquire), and that to the
extent practicable, the Employee Stockholders and other parties selected by
Tigera be given the opportunity to make equity investments in Newco; provided,
however, that no proposed Acquisition shall be presented to Newco for
consideration unless and until such proposed Acquisition shall first have been
presented to the Corporation and the Board of Directors of the Corporation shall
have determined not to make such proposed Acquisition. In that connection,
Tigera agrees to cause Newco to be organized and to cause Victory Capital LLC, a
Delaware limited liability company that is a holder of a substantial portion of
Tigera's outstanding capital stock ("Victory"), to invest from time to time in
accordance with subsection (b) below, an aggregate of not less than $5,000,000
in the capital stock of Newco.
(b) It is anticipated that Tigera would purchase for nominal
consideration 51% of the voting equity interest in Newco, thus permitting Tigera
to elect all of Newco's directors, and that Victory and other investors
(including any participating Employee Stockholders) would purchase the remainder
of Newco's voting equity interests and other equity interests constituting a
majority of the economic interest in Newco. The investment by Tigera and other
investors in Newco (the "Investor Group") shall be made from time to time after
(i) the Corporation's management identifies an Additional Business as a
potential Acquisition candidate and has delivered to Tigera, Newco and the
Investor Group a summary of the proposed terms of such Acquisition, together
with such other information with respect to such Acquisition and the Additional
Business as may be requested by Tigera, Newco and the Investor Group, and (ii)
Tigera, Newco, Victory and each other member of the Investor Group have in each
case determined that such Acquisition, including without limitation the proposed
financial and other terms thereof, is, as determined by the respective Boards of
Directors of Tigera, Newco and Victory and by each other member of the Investor
Group (in each case in such Board's or Person's unrestricted discretion), to be
an appropriate and beneficial investment for such investor to make.
Notwithstanding the foregoing, the business and affairs of Newco shall be
managed by its board of directors, and such board of directors shall in each
case have absolute discretion to accept or reject (for any reason) subscriptions
for equity interests in Newco; provided, that the Employee Stockholders
-8-
<PAGE> 9
shall at the time of Victory's investment in Newco have the right to subscribe
for shares of Newco on the same terms as Victory.
(c) Notwithstanding the identification by the Corporation's
management of potential Acquisition opportunities for the Corporation or for
Newco, and without limiting the generality of Section 7 or this Section 8, no
provision of this Agreement shall require Tigera, Newco, Victory or any other
Person to make any investment in the Corporation, Newco or any other entity, or
in the case of the Corporation and Newco, to complete any Acquisition of an
Additional Business, unless in each case such Person (and in the case of
entities, the board of directors or other governing body) determines, in such
Person's sole discretion, that such Acquisition is appropriate in the
circumstances then obtaining and in the best interest of such Person.
SECTION 9. Option to Purchase or Require the Purchase of
Shares of Common Stock.
(a) Tigera hereby grants to each Continuing Stockholder the
right to require Tigera to purchase the shares of Common Stock owned by such
Continuing Stockholder at the time such right is exercised, which right (the
"Put Option") shall be exercisable in accordance with terms and conditions, and
on the dates specified, in this Section 9.
(b) Each Continuing Stockholder hereby grants to Tigera an
option (the "Call Option"), exercisable in accordance with terms and conditions
and on the dates specified in this Section 9 to purchase all of the shares of
Common Stock owned by such Continuing Stockholder as of immediately following
the Closing and any shares of Common Stock thereafter acquired by such
Continuing Stockholder. In the event that the Call Option is exercised with
respect to fewer than all shares of Common Stock with respect to which such Call
Option is then exercisable, Tigera shall exercise such Call Option pro rata
among the Continuing Stockholders in accordance with their percentage ownership
of Common Stock at the time such Call Option is exercised.
(c) The Put Option and the Call Option (each, an "Option")
shall be exercisable on each of the 54th, 60th and 66th month anniversary dates
of the Closing Date (each, an "Option Exercise Date"); provided, however, that
Tigera shall not be required to purchase from any Continuing Stockholder, nor
shall any Continuing Stockholder be required to sell to Tigera, (i) on the first
Option Exercise Date, more than one-third of the shares of Common Stock held by
such Continuing Stockholder (such number being determined as of immediately
following the Closing on the Closing Date), and (ii) on the Second Option
Exercise Date, more than the sum of one-third of the shares of Common Stock held
by such Continuing Stockholder (such number being determined as of
-9-
<PAGE> 10
immediately following the Closing) plus the number of shares of Common Stock
with respect to which an Option could have been exercised but was not so
exercised on the first Option Exercise Date. On the third Option Exercise Date,
the Put Option and/or the Call Option may be exercised with respect to any or
all of the Retained Shares not previously purchased by Tigera. If any of such
Option Exercise Dates is not a business day (which for purposes hereof shall
mean any day other than Saturday, Sunday or bank holiday in the City of New
York), then the relevant Option Exercise Date shall be deemed to be the next
succeeding business day.
(d) An Option may be exercised, in whole or in part (subject
to the limitations set forth in subsection (c) above), by delivery by the party
exercising such option to Tigera or the Continuing Stockholders, as the case may
be, of written notice an "Option Exercise Notice", which (i) shall be delivered
not later than 60 days prior to the Option Exercise Date on which the Option is
being exercised, (ii) shall be irrevocable, and (iii) shall set forth the number
of shares of Common Stock to be purchased by Tigera from each Continuing
Stockholder.
(e) Following exercise of an Option by Tigera or a Continuing
Stockholder pursuant to subsection (d), payment shall be made on the relevant
Option Exercise Date (or on such other date as may be agreed by Tigera and the
"Sellers' Agent" (as defined in the Purchase Agreement)) at the office of Tigera
by certified or bank check to the order of the Continuing Stockholder, against
delivery of a certificate or certificates representing the shares of Common
Stock to be purchased by Tigera, registered in the name of such Continuing
Stockholder and duly endorsed in blank, or accompanied by a duly executed stock
power in blank, with signatures duly guaranteed and all requisite stock transfer
stamps affixed thereto; provided, however, that Tigera or the Sellers' Agent
may, upon not less than three (3) days' prior written notice, delay such payment
and delivery for a period not to exceed fifteen (15) days.
(f) The aggregate purchase price for the shares of Common
Stock purchased pursuant to a Call Option or a Put Option (the "Option Purchase
Price"), assuming that the Put Option and/or the Call Option is exercised as to
all of the Retained Shares, with the Option Purchase Price per share being equal
to the aggregate Option Purchase Price divided by the number of Retained Shares,
shall be an amount equal to the product of (A) a fraction, the numerator of
which is 15 and the denominator of which is 85, times (B) the result of
(i) the product of
(1) 26,979,894 (i.e. the number fully diluted shares
outstanding as of the Closing Date) (the "Outstanding
Share Number")
-10-
<PAGE> 11
times
(2) the Tigera Market Price (as hereinafter
defined)
minus
(ii) $10,244,206 (i.e. $3,500,000 plus the aggregate exercise
price of all outstanding options and warrants, including the
options granted to the Sellers).
The "Tigera Market Price" shall mean the average of the
closing trading price per share of shares Tigera's common stock for each date on
which such shares are traded during the period commencing 60 calendar days (or
if not a business day, the next succeeding business day) prior to the relevant
Option Exercise Date and ending on the fifth business day prior to such Option
Exercise Date. In the event that there are no closing trading prices for shares
of Tigera's common stock during any such 60-day period, then the "Tigera Market
Price" shall instead be such amount as shall be mutually agreed by Tigera and
the Sellers' Agent (or if only one Continuing Stockholder is selling shares of
Common Stock to Tigera pursuant to an Option on such Option Exercise Date, then
by Tigera and such Continuing Stockholder). If in such event Tigera and the
Sellers' Agent (or such Continuing Stockholder) are unable to agree on the
amount of the Tigera Market Price, then the "Tigera Market Price" shall be an
amount equal to the fair market value, per share, of Tigera's common stock as
determined by such firm of investment bankers as may be mutually selected by
Tigera and the Sellers' Agent (or such Continuing Stockholder, as the case may
be); however, failing agreement as to the firm of investment bankers, Tigera
shall select one firm of investment bankers and the Sellers' Agent shall select
one firm of investment bankers, and such firms shall together select a third
firm of investment bankers, which third firm (and not the firms separately
selected by Tigera and the Sellers' Agent) shall determine such fair market
value amount.
(g) In the event that Tigera at any time or from time to time
after the date hereof shall declare or pay any dividend on its common stock
("Tigera Common Stock") payable in Tigera Common Stock, or effect a subdivision
of the outstanding shares of the Tigera Common Stock into a greater number of
shares of the Tigera Common Stock (by reclassification, "stock split" or
otherwise than by payment of a dividend in shares of Tigera Common Stock), or in
the event that the outstanding shares of Tigera Common Stock shall at any time
or from time to time be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Tigera Common Stock (including
without limitation a "reverse stock split"), then, in any such event, the
Outstanding Share Number set forth in clause 9(f)(i)(1) above shall be adjusted
effective as of the close of business on (A) the record date for the
determination of
-11-
<PAGE> 12
shareholders entitled to receive such dividend if such dividend is in fact paid,
or (B) the day immediately preceding the day upon which such subdivision,
combination, consolidation, reclassification or other such action shall become
effective (any such day, as the case may be, shall be referred to herein as the
"Effective Date"), by multiplying the Outstanding Share Number in effect
immediately prior to the Effective Date by a fraction of which (x) the numerator
shall be equal to the number of shares of Tigera Common Stock outstanding
immediately after the Effective Date giving effect only to transactions of the
type described in this paragraph (computed on a fully diluted basis after giving
effect to the exercise of any outstanding options and warrants), and (y) the
denominator shall be the number of shares of Tigera Common Stock outstanding
immediately prior to the Effective Date (computed on a fully diluted basis after
giving effect to the exercise of any outstanding options and warrants). In no
event shall the Outstanding Share Number be changed or adjusted other than as
expressly provided by subsection 9(g) hereof. Without limiting the generality of
the foregoing, except as expressly provided by subsection 9(g) hereof, the
Outstanding Share Number shall not be changed or adjusted by reason of any
issuances of additional shares of Tigera Common Stock, whether for cash or other
consideration, or the issuance by Tigera of any additional options or warrants.
(h) In the event that at any time from and after the Closing
Date and prior to the 66th month anniversary of the Closing Date the Corporation
sells or otherwise disposes of all or substantially all of its assets, then
notwithstanding subsection 9(c) hereof, the Put Option and the Call Option shall
upon the consummation of such sale or disposition become immediately exercisable
as to all of the Retained Shares.
(i) In the event that at any time after the Closing Date (A)
there is a change in control of Tigera such that a majority of the outstanding
voting capital stock of Tigera is owned by a person or entity or "group" (as
defined in Section 13(d) of the Exchange Act) that is not on the date hereof a
holder of 5% or more of the outstanding shares of Tigera's common stock, or (B)
Tigera is merged into or consolidated with any other person (other than Newco or
a direct or indirect subsidiary of Tigera) or any other person (other than Newco
or a direct or indirect subsidiary of Tigera) is merged into or consolidated
with Tigera, or (C) Tigera sells or otherwise disposes of all or substantially
all of its assets, or (D) Tigera is liquidated or dissolved, then
notwithstanding subsection 9(c) hereof, the Put Option and the Call Option shall
immediately prior to the consummation of such sale or disposition become
immediately exercisable as to all of the Retained Shares.
(j) On any Option Exercise Date, and at the request of
Sellers, the parties shall use their best efforts to arrange an exchange of the
Common Stock for stock of Tigera on a tax free basis in lieu of the Put Option
or the Call Option set forth in
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<PAGE> 13
Section 9(a), provided that, in the reasonable opinion of the Board of Directors
of Tigera, such exchange is in the best interests of Tigera and those
corporations (including the Company) which file a federal consolidated income
tax return with Tigera. In the event of such exchange, all Retained Shares not
previously purchased by Tigera shall be so exchanged, and any stock of Tigera
received in such exchange shall be subject to demand and "piggyback"
registration rights on such terms as may be agreed to at such time by the
parties.
SECTION 10. Limitations on Fees.
So long as James S. Harrington continues to serve as the chief
executive officer of the Corporation, Tigera or any direct or indirect
subsidiary of Tigera, then neither the Corporation nor Tigera shall, without Mr.
Harrington's consent, pay any consulting fee or other compensation to an entity
that is an affiliate of Tigera, provided, that the employees of Tigera and
Victory may (without such consent) be compensated by Tigera or the Corporation
for their services to Tigera or the Corporation.
SECTION 11. Legends on Stock Certificates.
(a) Each certificate representing shares of Common Stock shall
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE
STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR ENCUMBERED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. IN ADDITION, THE SALE,
TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF MAY 17,
1996 BY AND AMONG CONNECTIVITY PRODUCTS INCORPORATED AND
CERTAIN HOLDERS OF THE STOCK OF SUCH CORPORATION. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF CONNECTIVITY PRODUCTS INCORPORATED."
SECTION 12. Other Agreements.
(a) Effective as of the Closing, this Agreement shall
supersede, and render void and cancel any and all other stockholders'
agreements, voting agreements, voting trusts or other agreements relating to the
ownership and voting rights of any stock, including, but not limited to, the
Stockholders'
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<PAGE> 14
Agreement dated October 3, 1995 by and among the Corporation and each of the
Continuing Stockholders.
(b) Each Continuing Stockholder agrees and covenants that it
will not enter into any agreement or understanding which is related to the
Corporation, any subsidiaries of the Corporation, or the capital stock of the
Corporation, with any other Person, without in each case the prior written
consent of Tigera. Tigera agrees and covenants that without the prior written
consent of the Seller's Agent, Tigera will not enter into any agreement or
understanding which impairs the rights of the Continuing Stockholders under this
Agreement.
SECTION 13. Duration of Agreement. The rights and obligations
of each Stockholder under this Agreement shall terminate as to such Stockholder
upon the earliest to occur of (a) the disposition by such Stockholder, in
accordance with this Agreement, of all shares of Common Stock owned by such
Stockholder, and (b) the tenth anniversary of the date hereof.
SECTION 14. Severability. If any provisions of this Agreement
shall be determined to be illegal and unenforceable by any court of law, the
remaining provisions shall be severable and enforceable in accordance with their
terms.
SECTION 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE
PARTIES HERETO HEREBY AGREES THAT ANY SUIT, ACTION OR PROCEEDING FOR THE
ENFORCEMENT OF THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF OR
FEDERAL COURTS SITTING IN THE STATE OF DELAWARE. EACH PARTY HERETO IRREVOCABLY
CONSENTS TO THE JURISDICTION OF SUCH COURTS AND TO SERVICE OF PROCESS IN ANY
SUCH SUIT, ACTION OR PROCEEDING BEING MADE UPON SUCH PARTY BY REGISTERED OR
CERTIFIED MAIL AT THE ADDRESS SPECIFIED IN SECTION 19 HEREOF. EACH PARTY HERETO
HEREBY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING OR ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT COURT.
SECTION 16. Successors and Assigns. This Agreement shall not
be assignable by any party without the written consent of the other parties
hereto.
SECTION 17. Action by the Corporation . Any reference in this
Agreement to action by the Corporation or by the Board of Directors of the
Corporation (including without limitation any requirement for the consent of the
Corporation or of the Board of
-14-
<PAGE> 15
Directors of the Corporation) shall for all purposes mean and refer to action
taken or to be taken (or consent given) by a majority the full Board of
Directors, and not by a committee thereof, which action (or consent) may be by
resolution adopted at a meeting of the Board or Directors or (to the extent
permitted by applicable corporate law) by written consent executed by not less
than a majority of the directors of the Corporation.
SECTION 18. Action by Tigera. Any reference in this Agreement
to action by Tigera (including without limitation any requirement for the
consent of or election by Tigera) shall, from and after the Closing, for all
purposes mean and refer to action taken or to be taken (or consent given) by the
board of directors of Tigera or by a committee of such board to which such
authority has been delegated.
SECTION 19. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or at such other address as may hereafter be designated
in writing by such party to the other parties:
(i) if to the Corporation or Tigera, to:
Connectivity Products Incorporated
or Tigera Group, Inc.
667 Madison Avenue
Suite 2500
New York, New York 10021
Attention: Donald T. Pascal
with a copy to:
Herbert M. Friedman, Esq.
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
(ii) if to an Continuing Stockholder, to:
the address for such Stockholder on
Schedule I attached hereto.
All such notices, requests, consents and other communications shall, if
delivered by hand or courier service, be deemed to have been given when
received, and if sent by mail, five days following deposit in the mail, postage
prepaid.
-15-
<PAGE> 16
SECTION 20. Modification. Except as otherwise provided herein,
neither this Agreement nor any provisions hereof can be modified, changed,
discharged or terminated except by an instrument in writing signed by the party
against whom the enforcement of any modification, change, discharge or
termination is sought; provided, that this Agreement shall be amended to add any
Permitted Transferee of Common Stock under this Agreement as a signatory to this
Agreement.
SECTION 21. Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 22. Nouns and Pronouns. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns shall
include the plural and vice-versa.
SECTION 23. Entire Agreement. This Agreement and the other
writings referred to therein or delivered pursuant thereto contain the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements and understandings with
respect thereto.
SECTION 24. Counterparts. This Agreement may be executed in
any number of counterparts, and each such counterpart hereof shall be deemed to
be an original instrument, but all such counterparts together shall constitute
but one agreement.
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<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders' Agreement on the day, month and year first above written.
CONNECTIVITY PRODUCTS INCORPORATED
By: /s/James S. Harrington
------------------------------------
TIGERA GROUP, INC.
By: /s/Donald T. Pascal
------------------------------------
CONTINUING STOCKHOLDERS:
/s/James S. Harington
----------------------------------------
James S. Harrington
/s/Duane A. Gawron
----------------------------------------
Duane A. Gawron, Trustee of the
Living Trust of Duane A. Gawron
dated March 16, 1987
/s/Margo Gawron
----------------------------------------
Margo Gawron
/s/John E. Pylak
----------------------------------------
John E. Pylak, Trustee of the John
E. Pylak Living Trust dated
September 3, 1987
/s/John E. Pylak, attorney in fact
----------------------------------------
Rebecca Pylak
/s/Kurt Cieszkowski
----------------------------------------
Kurt Cieszkowski
-17-
<PAGE> 18
SCHEDULE I
<TABLE>
<CAPTION>
Number
Stockholder Name/Address of Shares
- ------------------------ ---------
<S> <C>
TIGERA GROUP, INC. 651.1
667 Madison Avenue
Suite 2500
New York, NY 10021
James S. Harrington 33.7941
126 Willard Road
Ashburnham, MA 01430
Duane A. Gawron, Trustee of 20.8379
the Living Trust of Duane
A. Gawron dated March 16, 1987
5265 Isleworth CC Drive
Windermere, FL 34786
Margo Gawron 11.2647
5265 Isleworth CC Drive
Windermere, FL 34786
John E. Pylak, Trustee of the 20.8397
John E. Pylak Living Trust
dated September 3, 1987
5536 St. Elizabeth Ct.
Clarkston, MI 48348
Rebecca Pylak 11.2647
5536 St. Elizabeth Ct.
Clarkston, MI 48348
Kurt Cieszkowski 16.8971
111 Cloverly Road
Grosse Pointe Woods, MI 48326
</TABLE>
<PAGE> 1
EXHIBIT 10.2
The attached form of Employment Agreement is being entered
into by each of the following individuals, and the Employment Agreements will be
substantively the same as the attached form except for (i) the insertion of
employee titles, as set forth below and (ii) the choice of governing law, which
in each case shall be the law of the state in which the employee's main office
is located.
<TABLE>
<CAPTION>
Name Title
- ---- -----
<S> <C>
James S. Harrington President and Secretary
Duane A. Gawron Treasurer and Vice-President
John E. Pylak Vice-President
Kurt Cieszkowski Vice-President
</TABLE>
<PAGE> 2
EMPLOYMENT AGREEMENT
AGREEMENT made and entered into this 17th day of May, 1996, by
and between Connectivity Products Incorporated, a Delaware corporation
(hereinafter referred to as the "Company") and [__________________] (hereinafter
referred to as "the Employee").
WHEREBY, it is agreed as follows:
1. Subject to the provisions of Paragraph 2 hereof, the
Company shall employ the Employee, and Employee agrees to perform services for
the Company as _______________ of the Company, or such other executive duties
and in executive positions as may be directed from time to time by the Board of
Directors of the Company, for the period from the date of the Closing (as
hereinafter defined) through the third anniversary date thereof (the "Term of
Employment," which term shall include any period of employment by the Company
subsequent to such third anniversary).
2. The effectiveness of this Agreement is subject to the
closing of the transactions contemplated by the Stock Redemption and Purchase
Agreement of even date herewith (the "Purchase Agreement") entered into by and
among the Company, the shareholders of the Company and Tigera Group, Inc.
("Tigera"). Upon such closing (the "Closing"), this Agreement shall become
<PAGE> 3
effective and the Employment Agreement dated October 3, 1995 by and between the
Company and the Employee (the "Prior Employment Agreement") shall in all
respects terminate (including without limitation any provisions thereof that, by
such terms, are to survive the termination of the Prior Employment Agreement and
the Employee's employment thereunder), no further amounts shall be payable
thereunder and neither party shall have any liability arising thereunder, and
the Prior Employment Agreement shall thereafter be of no further force or
effect. In the event that the Purchase Agreement is terminated prior to the
Closing, then this Agreement shall be null and void ab initio and the Prior
Employment Agreement shall remain in full force and effect.
3. During the Term of Employment, Employee shall at all times
be subject to direction of the Board of Directors of the Company. Employee shall
devote substantially all of his business time and, consistent with current
practices, his best efforts, attention and energies to the Company's business,
and the Employee shall not during the Term of Employment be engaged in any other
substantial business activity, whether or not such business activity is pursued
for gain, profit, or any pecuniary advantage; provided, however, that the
Company may consent in writing to Employee engaging in other business activities
and provided further, that, except as restricted by Paragraph 4, Employee may
invest his assets in such form or manner as will not require his services in the
operation of the affairs of the companies in which such investments are made.
-2-
<PAGE> 4
4. (a) Employee acknowledges that in and as a result of his
employment by the Company he will be making use of, acquiring, and/or adding to
confidential information of a special and unique nature and value relating to
such matters as the Company's patents, copyrights, proprietary information,
trade secrets, systems, procedures, manuals, confidential reports, pricing
structures, compensation structures, marketing strategies, and lists and
identities of customers, as well as the nature and type of services rendered by
the Company, the products, the equipment, and methods used and preferred by the
Company's customers, and the prices and fees paid by them (all of which are
deemed for all purposes confidential and proprietary information). The Employee
hereby agrees that it is reasonable and necessary for the protection of the
Company that the Employee agree, and as a material inducement to the Company to
enter into this Agreement and to pay to Employee the compensation stated,
Employee hereby covenants and agrees, that the Employee will not (nor will any
member of Employee's immediate family that resides with Employee), directly or
indirectly, except for the benefit of the Company or its affiliates (which for
purposes of this Agreement shall mean any person or entity directly or
indirectly controlling, controlled by or under common control with the Company),
or with the prior written consent of the Company's Board of Directors, which
consent may be granted or withheld at the Board's sole discretion:
(i) during the Noncompetition Period (as hereinafter
defined), become an officer, director,
-3-
<PAGE> 5
stockholder, partner, associate, employee, owner, agent,
creditor, independent contractor, co-venturer, consultant or
otherwise, or have a financial interest in or be associated
with any other person, corporation, firm or business that is a
customer of or supplier to the Company or that is engaged in
the wire and cable product manufacturing, distributing or
assembling businesses anywhere in the United States or in any
business directly or indirectly competitive with that of the
Company or its affiliates, as then constituted, or himself
engage in such business; provided, however, that nothing
herein shall be construed to prohibit the Employee from owning
not more than 5% of any class of securities (provided that the
Employee and the other "Seller" parties to the Purchase
Agreement do not own, in the aggregate, in excess of 10% of
any such class of securities) issued by an entity which is
subject to the reporting requirements of the Securities
Exchange Act of 1934; and provided further, that the foregoing
restrictions with respect to customers and suppliers of the
Company (other than customers or suppliers that are themselves
otherwise engaged in the wire and cable product manufacturing,
distributing or assembling business) shall apply only so long
as the Employee continues to be employed by or engaged as a
consultant to the Company; or
-4-
<PAGE> 6
(ii) during the Nonsolicitation Period (as
hereinafter defined), solicit, cause or authorize, directly or
indirectly, to be solicited for or on behalf of the Employee
or third parties, from parties who were customers of the
Company, Tigera or Tigera's affiliates that are directly or
indirectly controlled by Tigera ("Tigera's Downstream
Affiliates"), any business similar to the business transacted
by or with such customer by the Company or its affiliates; or
(iii) during the Nonsolicitation Period, accept or
cause or authorize, directly or indirectly, to be accepted for
or on behalf of the Employee or for third parties, any such
business from any such customers of the Company or of Tigera
or Tigera's Downstream Affiliates; or
(iv) from and after the date hereof, use, publish,
disseminate or otherwise disclose, directly or indirectly, any
information heretofore or hereafter acquired, developed or
used by the Company, Tigera or any of Tigera's Downstream
Affiliates, relating to the business of the Company or the
operations, employees or customers of the Company which
constitutes proprietary or confidential information of the
Company or Tigera or Tigera's Downstream Affiliates
("Confidential Information"), including without limitation any
Confidential Information contained in any customer
-5-
<PAGE> 7
lists, mailing lists and sources thereof, statistical data and
compilations, trademarks, patents, inventions, formulae,
methods, processes, agreements, contracts, manuals or any
other documents, but excluding any information to the extent
expressly set forth in the Company's press releases or in
publicly available documents filed with the Securities and
Exchange Commission by the Company; provided, however, that
this clause (iv) shall not be applicable to the extent that
the Employee is required to testify in a judicial or
regulatory proceeding pursuant to the order of a judge or
administrative law judge after the Employee requests that the
confidentiality of such Confidential Information be preserved;
and provided further, that this clause (iv) shall not prohibit
the Employee from disclosing Confidential Information to his
accounting and legal advisors to the extent such advisors have
agreed to preserve the confidentiality of such Confidential
Information; or
(v) during the Nonsolicitation Period,
(A) solicit, entice, persuade or induce,
directly or indirectly, any employee (or person who
within the preceding 90 days was an employee) of the
Company or its affiliates or any other person who is
under contract with or rendering services to the
Company or its affiliates, to
-6-
<PAGE> 8
terminate his or her employment by, or contractual
relationship with, the Company or such affiliate or
to refrain from extending or renewing the same (upon
the same or new terms) or to refrain from rendering
services to or for the Company or such affiliate or
to become employed by or to enter into contractual
relations with any person or entity other than the
Company or such affiliate or to enter into a
relationship with a competitor of the Company or its
affiliates, or
(B) authorize or assist in the taking of any
such actions by any person other than the Company or
its affiliates.
(b) All lists, records files, and documents of any
type whatsoever (including but not limited to computer disks, cards (including,
but not limited to, business cards, address cards and "rolodex" cards), magnetic
tapes, or film), relating to the Company's business or the business of any of
the Company's licensees or customers, which Employee shall prepare, use, or come
into contact with, shall be and remain solely and exclusively the proprietary
property of the Company and shall, at the termination of Employee's employment
with the Company, be delivered to the Company, and Employee shall retain no
excerpts, notes, photographs, photocopies, reproductions, samples, prototype
models or copies thereof without the prior written approval of the Company. As
used in this Paragraph 4,
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<PAGE> 9
"licensees" and "customers" shall include, in addition to those licensees and
customers of the Company then existing, those prospective licensees or customers
which the Company shall have solicited for the transaction of business or
conducted business with during the term hereof.
(c) For purposes of this Agreement, the term "Noncompetition
Period" shall mean the period commencing on the date of the Closing and ending
on the later of (i) the third anniversary of the date of the Closing, or (ii)
the date that the Employee ceases to be an employee of or consultant to the
Company. For purposes of this Agreement, the term "Nonsolicitation Period" shall
mean the period commencing on the date of the Closing and ending on the later of
(i) the fifth anniversary of the date of the Closing, or (ii) the second
anniversary of the date that the Employee ceases to be an employee of or
consultant to the Company.
(d) The invalidity or non-enforceability of this Paragraph 4
in any respect shall not affect the validity or enforceability of this Paragraph
4 in any other respect or of any other provisions of this Agreement. In the
event that any provision of this Paragraph 4 shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the geographic
or business scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall not
affect or render invalid or unenforceable any other provision of this Agreement,
and, to
-8-
<PAGE> 10
the fullest extent permitted by law, this Agreement shall be construed as if the
geographic or business scope or the duration of such provision had been more
narrowly drafted so as not to be invalid or unenforceable.
(e) The Employee acknowledges that the Company would suffer
irreparable harm if the Employee were to breach the provisions of this Paragraph
4 and that the Company's remedy at law for any such breach is and will be
insufficient and inadequate and that in the event of such breach (or a
threatened breach) of the provisions of this Paragraph 4, the Company shall be
entitled to equitable relief, including by way of temporary and permanent
injunction, in addition to any remedies the Company may have at law.
5. During the Term of Employment, the Employee shall be paid
by way of remuneration for his services a base salary of One Hundred
Seventy-Five Thousand Dollars ($175,000.00) per year, payable in equal
installments on normal paydays of salaried employees of the Company. In addition
thereto, Employee shall be reimbursed for his reasonable and legitimate expenses
(including travel and entertainment) in the performance of the duties required
of him for the Company upon presentation of proper itemized accounts.
6. (a) In addition to the base salary described in Paragraph 5
hereof, Employee shall be entitled to an annual cash bonus (the "Annual Bonus")
for each calendar year during the Term
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<PAGE> 11
of Employment in an amount for each year equal to five percent (5%) of the
amount by which (i) the Adjusted Bonus EBITDA (as hereinafter defined) of the
Company for such year exceeds (ii) the Adjusted Bonus EBITDA of the Company for
the calendar year prior to such year; provided, however, that (A) for calendar
year 1996, the amount of the Annual Bonus shall be the amount equal to the
product of (X) the amount by which (i) the Adjusted Bonus EBITDA of the Company
for calendar year 1996 exceeds (ii) the Adjusted Bonus EBITDA of the Company for
calendar year 1995, times (Y) a fraction, the numerator of which is the amount
by which the Adjusted Bonus EBITDA of the Company for calendar year 1996 exceeds
the Adjusted Bonus EBITDA of the Company for the portion of 1996 from January 1,
1996 through the Closing Date and the denominator of which is the Adjusted Bonus
EBITDA of the Company for calendar year 1996; and (B) for the last calendar year
of the Term of Employment, if not a full calendar year, the amount of the Annual
Bonus shall be the amount equal to the amount by which (i) the Adjusted Bonus
EBITDA of the Company for the portion of such calendar year prior to the
termination of the Term of Employment exceeds (ii) the Adjusted Bonus EBITDA of
the Company for the corresponding portion of the immediately preceding calendar
year; and provided further, that the Annual Bonus for each calendar year (or
portion thereof) shall not exceed the amount of base salary paid to the Employee
for such year (or partial year).
(b) Two-thirds of the Annual Bonus shall be paid each year
within 21 days following the delivery to the Board of
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<PAGE> 12
Directors of the Company's unaudited annual financial statements for such year
prepared by the Company's management, and the remaining one-third of the Annual
Bonus shall be paid each year within 30 days following the delivery to the Board
of Directors of the Company's audited financial statements for such year;
provided, however, that for the last calendar year of the Term of Employment, if
not a full calendar year, two-thirds of the Annual Bonus for such year shall be
paid within 21 days following the delivery to the Board of Directors of the
Company's unaudited financial statements for the portion of such year prior to
the termination of the Term of Employment, and the remaining one-third of the
Annual Bonus for such year shall be paid within 30 days following completion of
a review of such unaudited financial statements by the Company's outside
auditors, but in any case not later than 60 days following delivery to the Board
of Directors of such unaudited financial statements. Notwithstanding the
foregoing, in the event that the Employee's employment is terminated for cause
(as hereinafter defined) or if Employee terminates his employment in breach of
this Agreement, then no Annual Bonus shall be earned in year of such termination
or thereafter.
(c) For purposes of this Agreement, the term "Adjusted Bonus
EBITDA" shall mean, for a particular period, the sum of the amounts for such
period of (i) the consolidated net income (or loss) of the Company and its
subsidiaries, plus (ii) the amount of Annual Bonuses payable to the "Sellers"
(as defined in the Purchase Agreement) for such period, plus (iii) the amount
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<PAGE> 13
of aggregate interest expense (net of interest income) of the Company, plus (iv)
the amount of aggregate income tax expense of the Company, plus (v) the amount
of aggregate depreciation expense of the Company, plus (vi) the amount of
aggregate amortization expense of the Company, plus (vii) the amount of any
extraordinary expenses, plus (viii) to the extent included as expense items in
the calculation of the Company's consolidated net income, (A) the aggregate
expense amount for compensation payable to persons who were employees or
directors of Tigera or Victory Capital LLC immediately prior to the Closing, and
(B) the aggregate expense amount for rent and other office expenses payable by
Tigera in respect of its New York City offices, and (C) the amount of any fees
payable to public relations firms retained by Tigera, and (D) the amount of any
legal fees payable in connection with the preparation of periodic reports and
proxy statements required to be filed pursuant to the Securities Exchange Act of
1934, as amended, and (E) the aggregate amount of all other overhead expenses
incurred by Tigera that are not related to the business or operations of the
Company, other than the fees and expenses of Tigera's and the Company's
accountants and auditors, minus (ix) the amount of any extraordinary income; in
each case determined in accordance with generally accepted accounting principles
in the United States as in effect from time to time, applied consistently with
the Company's audited financial statements for the year ended December 31, 1995;
provided, however, that the calculation of Adjusted Bonus EBITDA shall exclude
any income (or loss) and any expense items of any business units acquired by the
Company or its parent corporation
-12-
<PAGE> 14
after the Closing and to the extent included as expense items in the Company's
consolidated net income, any fees and expenses incurred in connection with the
acquisition of such acquired business units. Such definition of "Adjusted Bonus
EBITDA" is not, and is not intended to be, the same as the definition in the
Contingent Note (as defined in the Purchase Agreement) of the term "Adjusted
EBITDA".
7. In the event that Employee shall be unable to perform, in
the opinion of the Board of Directors of the Company, his required duties by
reason of illness or incapacity ("Disability"), the Employee's compensation
shall continue in full for the Term of Employment, except that with respect to
the Annual Bonus, (i) the Annual Bonus for the year in which such Disability
commences shall be equal to (A) the amount of such Annual Bonus determined in
accordance with Paragraph 6 hereof for the full calendar year multiplied by (B)
a fraction, the numerator of which is the number of days in such year prior to
the commencement of such Disability and the denominator of which is 365; and
(ii) no Annual Bonus shall be earned for any year subsequent to the commencement
of such Disability. In the event of such Disability, coverage under any
insurance programs provided by the Company for the benefit of the Employee with
regard to life insurance, sickness and accident disability, hospitalization and
medical services, including major medical coverage, and income protection
(hereinafter "benefit programs"), whether insured or paid by the Company, will
to the extent permitted on commercially reasonable terms under the Company's
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<PAGE> 15
then existing policies (but only to the extent that such benefit programs are
specifically disclosed on the Schedules to the Purchase Agreement or are
subsequently adopted by the Company after the Closing Date), be continued by the
Company (to the maximum extent also maintained from time-to-time for elected
officers of the Company) during such illness or incapacity, but not longer than
the Term of Employment. In the event that Employee is unable to perform his
required duties for the Company, but does perform services for any other person,
firm, corporation, association or other entity, his disability shall be deemed
to have terminated and the Company may forthwith terminate all compensation and
insurance coverage.
8. In the event that Employee is discharged by the Company for
cause, as defined hereunder, or the Employee resigns his employment in breach of
this Agreement, then all compensation, benefits and benefit programs of every
kind provided by the Company shall cease at the time of such discharge or
resignation and no Annual Bonus shall be paid or deemed to be earned for the
calendar year in which such discharge occurs; however, such termination shall
not terminate or otherwise impair the provisions of this Agreement (including
without limitation Paragraph 4 hereof) that, by their terms, are to survive the
termination of the Term of Employment. Discharge for cause may be immediate and
without prior notice. "Discharge for Cause" for purposes of this Agreement shall
mean: 1) proven or admitted; a) embezzlement, or b) material dishonest misuse of
Company funds or assets; 2) an admitted or proven act constituting a felony or
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<PAGE> 16
misdemeanor (other than minor offenses such as traffic violations) or conviction
for such act; 3) violation of the provisions of Paragraph 4 of this Agreement;
4) continued conduct materially adverse to the interests of the Company which
does not cease within thirty (30) days of written notice from the Board of
Directors of the Company; 5) repeated material failure by the Employee, after
written warning by the Board of Directors, to perform the duties of his
employment (including without limitation material failure to follow or comply
with the reasonable and lawful written directives of the Board of Directors of
the Company); or 6) breach of any statutory or common law fiduciary duty of
loyalty to the Company which is not cured within thirty (30) days of written
notice from the Board of Directors of the Company.
9. In the event that the Employee is discharged by the Company
other than for cause, death or disability, the Employee's compensation,
including without limitation the Annual Bonus (to the extent provided in
Paragraph 6 hereof), shall continue in full for the Term of Employment. If the
Company so discharges the Employee other than for cause, death or disability and
(i) if the Company defaults in its obligation to continue to pay the Employee's
compensation in accordance with the foregoing and such default continues for a
period of thirty consecutive days, or (ii) if the Company is in material breach
(after all applicable notice and grace periods) of its obligations to the
Employee under the "Redemption Note" or the "Contingent Note" issued to the
Employee under the Purchase Agreement, then
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<PAGE> 17
notwithstanding the provisions of Paragraph 4(c) hereof, then the Noncompetition
Period and the Nonsolicitation Period under this Agreement and, with respect to
the Employee, the Noncompetition Period under the Purchase Agreement, shall
terminate on the thirty-first day following such default. In the event of such
discharge, coverage under all benefit plans and insurance programs provided by
the Company for the benefit of the Employee shall terminate on the date of such
discharge except to the extent continued pursuant to the Employee's rights under
"COBRA" or other applicable law.
10. In the event of the Employee's death during the Term of
Employment, the Employee's base salary shall continue to be paid in full for the
Term of Employment and the Annual Bonus shall be paid in full (to the extent
provided in Paragraph 6(a) hereof) for the year in which such death occurs. No
Annual Bonus shall be payable for any year subsequent to the year of the
Employee's death.
11. During the Term of Employment, the Company will provide
Employee with life insurance, hospital and medical insurance, major medical
insurance, and sickness and accident disability insurance, and include Employee
in employee benefit plans, all in such amounts of coverage and under policies
and plans at least equal to the maximum benefits afforded elected officers of
the Company on the date hereof, but only to the extent that such policies and
plans are specifically disclosed on
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<PAGE> 18
the Schedules to the Purchase Agreement or are subsequently adopted by the
Company after the Closing Date.
12. On the third anniversary of the date of the Closing, and
on each anniversary of such date thereafter, unless either the Company or
Employee shall have given to the other not less than 60 day's written notice
prior to such anniversary date that such party does not intend to renew this
Agreement, and unless Employee's employment by the Company shall then be or
theretofore have been terminated, Employee's employment by the Company and the
term of this Agreement shall automatically be deemed to be extended for an
additional period of one (1) year; provided, however, that in the event of such
extension the Company shall in each instance review prior to such 60-day period,
and if deemed appropriate by the Board of Directors, revise or adjust, the
compensation provisions of this Agreement. In the event that this Agreement is
not so extended, then the Term of Employment shall terminate in accordance
herewith; provided, however, that such termination shall not terminate or
otherwise impair the provisions of this Agreement (including without limitation
Paragraph 4 hereof) that, by their terms, are to survive the termination of the
Term of Employment.
13. The Employee hereby agrees that all patents, patent
applications, trademarks and service marks, and all trade secrets, inventions,
technology, know-how, processes, and other proprietary information, whether or
not patentable or copyrightable, (hereinafter referred to collectively as
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<PAGE> 19
"inventions") conceived or reduced to writing by the Employee while employed by
the Company or any of its predecessor companies, whether alone or with others
and whether during or after usual working hours, are and shall from inception be
the exclusive property of the Company in perpetuity throughout the world, free
of any claim whatsoever by the Employee or any other person, and the Company
shall have the right to register the domestic and foreign copyright in and/or
patent of such inventions in the Company's name or in the name of the Company's
designee as owner and author (as employer for hire) and to secure any and all
renewals and extensions of such copyright and/or patents. In the event and to
the extent that, by operation of law or for any other reason, the Company or the
Company's designee is not or cannot be an "employer for hire" (as such term is
used for purposes of applicable copyright and/or patent law) as provided in the
immediately preceding sentence, the Employee hereby assigns to the Company all
of Employee's right and title in or to such designs and the domestic and foreign
copyright or patent, as the case may be, in or to such designs, and all renewal
and extensions of such copyright and or patents. Without limiting the generality
of the foregoing, the Company and its subsidiaries, affiliates and licensees
shall have the sole, exclusive and unlimited right throughout the world to
manufacture or license the manufacture of products using, embodying or otherwise
based upon or derived from such inventions; to sell, transfer, deal in or
otherwise dispose of such inventions and/or such products throughout the world
under any trademarks, trade names or labels designated by the Company; and to
alter or modify
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<PAGE> 20
such designs; all without any additional payments to the Employee; or,
notwithstanding the provisions hereof, the Company and its subsidiaries,
affiliates and licensees may, at their election, delay or refrain from doing any
one or more of the foregoing. The Employee shall (without any additional
compensation) upon the request of Board of Directors of the Corporation made
from time to time promptly disclose in writing to the Board of Directors of the
Company all such inventions. On request of the Company, the Employee shall
(without any additional compensation), from time to time during and after the
expiration or termination of his employment, execute and deliver such further
instruments (including without limitation instruments of transfer and
applications for copyrights, letters patent and assignments thereof) and do all
such other acts and things as may be deemed necessary or desirable by the
Company to protect and/or enforce its rights in respect of such designs. The
Employee hereby appoints the Company as his agent and attorney-in-fact to sign
any such documents in his name and to make appropriate disposition of them
consistent with this agreement. Said appointment constitute a power coupled with
an interest and is irrevocable. All expenses of filing or prosecuting any patent
or copyright applications shall be borne by the Company, but the Employee shall
cooperate in filing and/or prosecuting any such application.
14. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon its successors
and assigns. This Agreement shall be binding
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<PAGE> 21
upon the heirs and personal representatives of Employee, but the rights and
obligations of Employee are personal and may not be assigned except with respect
to such benefits as may inure to Employee's estate by specific provision herein.
15. Any reference in this Agreement to action by the Company
or by the Board of Directors of the Company (including without limitation any
requirement for the consent of the Company or of the Board of Directors of the
Company) shall for all purposes mean and refer to action taken or to be taken
(or consent given) by a majority the full Board of Directors, and not be a
committee thereof, which action (or consent) may be by resolution adopted at a
meeting of the Board or Directors or (to the extent permitted by applicable
corporate law) by written consent executed by not less than a majority of the
directors of the Company.
16. If any provision or part of this Agreement shall be held
invalid or unenforceable for any reason, such invalidity or unenforceability
shall not affect any other provision or part hereof which can be given effect
without such invalid or unenforceable provision or part.
17. This writing constitutes the whole Agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other agreements, discussions and understandings with respect thereto, and there
are no representations or warranties, express or implied, with respect
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<PAGE> 22
thereto outside of this writing. This Agreement may be altered or amended only
in writing executed by the parties hereto.
18. The applicable law of the [Commonwealth] [State] of
_____________ shall be controlling with respect to all matters of enforcement
and interpretation of this Agreement.
19. Any notices or other communications required or permitted
to be sent hereunder shall be in writing and shall be duly given if personally
delivered or sent postage pre-paid by certified or registered mail, return
receipt requested, if to the Employee, to his address as set forth on the
signature page hereof; and if to the Company, to:
Connectivity Products, Inc.
c/o Donald T. Pascal
667 Madison Avenue
Suite 2500
New York, NY 10021-8029
Either party may change his or its address for the sending of notice to such
party by written notice to the other party sent in accordance with the
provisions hereof.
20. Any reference in this Agreement to action by the Company
(including without limitation any requirement for the consent of or election by
the Company) shall for all purposes mean and refer to action taken or to be
taken (or consent given) by the board of directors of the Company or by a
committee of such board to which such authority has been delegated.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands the day and year first above written.
CONNECTIVITY PRODUCTS INCORPORATED
By:_____________________________________
Its:___________________________
EMPLOYEE
________________________________________
Name:
Address:
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<PAGE> 1
EXHIBIT 10.3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION, UNLESS AN EXEMPTION FROM THE REQUIREMENT OF SUCH
REGISTRATION IS AVAILABLE UNDER THE CIRCUMSTANCES AT THE TIME OBTAINING AND, IF
REQUIRED AT THE SOLE DISCRETION OF THE MAKER, DEMONSTRATED BY AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE MAKER. THIS NOTE IS FURTHER SUBJECT TO
THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 11 HEREOF.
REDEMPTION NOTE
$________ May 31, 1996
1. CONNECTIVITY PRODUCTS INCORPORATED, a Delaware corporation
(the "MAKER"), for value received, hereby promises to pay to the order of
____________, whose address is __________________________________ (the
"HOLDER"), the principal sum of $_________, payable in cash on May 31, 2003, as
hereinafter provided.
2. This Note is one of a duly authorized issue of "REDEMPTION
NOTES" issued pursuant to the terms and provisions of the Stock Redemption and
Purchase Agreement, dated as of May 17, 1996 (the "PURCHASE AGREEMENT"), by and
among (A) the Maker, (B) Tigera Group, Inc., a Delaware corporation ("TIGERA"),
and (C) the shareholders of the Maker. This Note is in all respects subject to
the terms and conditions of the Purchase Agreement, and any conflict between the
terms hereof and those of the Purchase Agreement shall be resolved in favor of
the terms of the Purchase Agreement. Capitalized terms not otherwise defined are
used as defined in the Purchase Agreement. The aggregate original principal
amount of the Redemption Notes is $6,000,000.00.
3. The principal sum shall be payable, in lawful currency of
the United States in immediately available funds, at the principal offices of
the Maker, as set forth in Section 16 of this Note, on May 31, 2003.
4. Interest on the principal sum shall accrue from the date of
this Note at a rate of Ten Percent (10%) per annum. Such interest shall be due
and payable, in lawful currency of the United States in immediately available
funds, quarterly, in arrears on each March 31, June 30, September 30 and
December 31, commencing June 30, 1996. All interest hereunder shall be computed
on the basis of the actual number of days elapsed over a year of 365 days.
<PAGE> 2
5. (a) The Holder, by Holder's acceptance hereof, and each
subsequent holder, by its acceptance of any interest in this Redemption Note,
agrees that the indebtedness represented hereby shall, to the extent provided in
Section 5(b) hereof, be subordinate to (i) the rights of holders of the Maker's
trade indebtedness and (ii) the rights of holders of the Maker's indebtedness to
banks or other lending institutions now existing or hereafter incurred which may
be designated as senior indebtedness by the board of directors of the Company
(which indebtedness to banks and other lending institutions is hereinafter
collectively referred to as "Senior Indebtedness").
(b) In furtherance of the subordination provided by subsection
(a), no payments of principal may be made (x) until indefeasible payment in full
in cash of Term Loan A (as defined in the Amended and Restated Revolving Credit
and Term Loan Agreement dated as of May 31, 1996 among the Maker, the lending
institutions listed on Schedule 1 thereto (the "Banks"), NBD Bank and The First
National Bank of Boston, as Co-Agents for themselves and the other Banks (the
"Credit Agreement")), (y) while any Default or Event of Default (as defined in
the Credit Agreement or in any other documents, including any subordination
agreements, entered into in connection with the Senior Indebtedness) exists in
respect of any Senior Indebtedness or (z) which would cause a Default or an
Event of Default in respect of any Senior Indebtedness, and no payments of
interest may be made (A) while any Material Default or Event of Default (as
defined in the Subordination Agreement executed simultaneously with the Credit
Agreement or in any other documents, including any additional subordination
agreements entered into in connection with the Senior Indebtedness) exists or
(B) which would cause a Material Default or Event of Default in respect of any
Senior Indebtedness, and the Holder agrees that any payments which would
otherwise be made pursuant hereto shall be applied to the Senior Indebtedness,
and any such payments received by the Holder hereof shall be held in trust for
the holders of the Senior Indebtedness until all such events of default have
been cured.
(c) The Holder hereof agrees to take any and all further
action and to execute and deliver any further documents that any holder or
holders of Senior Indebtedness may reasonably request in order to preserve and
protect any right or interest granted or intended to be granted hereby.
(d) The Maker agrees that without the Holder's consent Maker
will not incur any new Senior Indebtedness that includes subordination
provisions that are more restrictive with respect to this Note or otherwise less
favorable to the Holder than the subordination provisions applicable hereto on
the date hereof.
6. This Note may, at the option of the Maker, be prepaid in
whole or in part at any time without penalty, with payments to be first applied
against interest accrued and unpaid to the date of such prepayment.
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<PAGE> 3
7. The unpaid principal sum of this Note, together with all
accrued interest thereon, shall, at the option of the holder of this Note, by
written demand to the Maker, become immediately due and payable, without
presentment, protest or any further notice or demand of any kind, all of which
are hereby expressly waived, if any of the following "Events of Default" shall
occur and be continuing:
(i) the Maker shall fail to pay in full any
installment of principal of this Note when due;
(ii) the Maker shall fail to pay in full any
installment of interest on this Note when due, and such
failure shall continue for 15 days after written notice, by
registered mail or certified mail, return receipt requested,
addressed to the Maker;
(iii) the Maker shall be in default under the terms
of the Bank Loan Agreements (as defined in the Purchase
Agreement) which default results in the actual acceleration of
the maturity of the indebtedness to the Banker (as defined in
the Purchase Agreement) under such Bank Loan Agreements;
(iv) the Maker shall sell all or substantially all of
its assets, merge with or into another entity or Tigera shall
sell or otherwise transfer a majority of the voting stock of
the Maker, unless the purchaser of such assets or stock or the
surviving entity in such merger (as the case may be) is an
entity, engaged (either directly or through its subsidiaries)
in the wire and cable product manufacturing, distributing
and/or assembling businesses, that, immediately prior to such
sale or merger, is directly or indirectly controlled by
Tigera;
(v) the Maker shall voluntarily dissolve, liquidate
its assets or wind up its affairs or take any corporate action
to effectuate any of such transactions; or
(vi) the Maker shall (A) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of
itself or of all or a substantial part of its assets, (B)
admit in writing its inability to pay its debts as they
mature, (C) make a general assignment for the benefit of
creditors, (D) be adjudicated bankrupt or insolvent, or (E)
file a voluntary petition in bankruptcy or a petition or
answer seeking reorganization or an arrangement with creditors
or to take advantage of any insolvency law or an answer
admitting the material allegations of a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding,
or corporate action shall be taken by it for the purpose of
effecting any of the
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<PAGE> 4
foregoing, or (F) have a receiver, trustee, custodian or
liquidator appointed for all or a substantial part of its
property or assets, and such receiver, trustee, custodian or
liquidator so appointed shall not be discharged within 30 days
after the date of such appointment, or if a warrant of
attachment or any similar process shall be issued against its
property and such warrant of attachment or similar process
shall not have been released, discharged or bonded within 30
days after its entry or levy.
8. If an Event or Default shall occur, the Maker shall be
liable for the Holder's reasonable costs of collection, including, but not
limited to, reasonable attorneys' fees and disbursements and court costs.
9. No waiver of a breach of, or default under, any provision
of this Note shall be deemed a waiver of such provision or of any subsequent
breach or default of the same or similar nature or of any other provision
hereof.
10. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES HERETO HEREBY AGREES
THAT ANY SUIT, ACTION OR PROCEEDING FOR THE ENFORCEMENT OF THIS NOTE SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF OR FEDERAL COURTS SITTING IN THE STATE OF
DELAWARE. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE JURISDICTION OF SUCH
COURTS AND TO SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BEING
MADE UPON SUCH PARTY BY REGISTERED OR CERTIFIED MAIL AT THE ADDRESS SPECIFIED IN
SECTION 16 HEREOF. EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING OR ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT COURT.
11. This Note and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that this Note shall be
transferable only subject to all of Maker's rights and defenses hereunder and
only with the prior written consent of the Maker, which consent in each case may
be granted or denied in Maker's sole discretion; provided, however, that Maker's
consent shall not be required in the case of a transfer of this Note to another
Seller (as defined in the Purchase Agreement) or to the Holder's spouse,
children, grandchildren or parents or to a trust primarily for the benefit of
any of the foregoing or the Holder or, if the Holder is a trust, to the
beneficiaries of such trust.
12. This Note embodies all the terms of the indebtedness
represented hereby, and may not be amended orally.
13. Any claim by the Maker, Tigera or their respective
Affiliates against the original Holder hereof under Article XIII
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<PAGE> 5
of the Purchase Agreement for which any such party is entitled to
indemnification pursuant to the terms thereof may be satisfied by the Maker (but
the Maker shall not be obligated to do so) in whole or in part out of amounts
otherwise payable under this Note.
14. In construing this Note, feminine or neuter pronouns shall
be substituted for those masculine in form and vice versa, and plural terms
shall be substituted for singular terms and vice versa, in any place in which
the context so requires.
15. Any reference in this Note to action by the Maker
(including without limitation any requirement for the consent of the Maker)
shall for all purposes mean and refer to action taken or to be taken (or consent
given) by a majority the full Board of Directors of the Maker, and not be a
committee thereof, which action (or consent) may be by resolution adopted at a
meeting of the Board or Directors or (to the extent permitted by applicable
corporate law) by written consent executed by not less than a majority of the
directors of the Maker.
16. Any notices or other communications required or permitted
hereunder shall be given in writing and shall be sufficient if delivered
personally or sent by certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Holder, to the address set forth on the first page
of this Note, with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attention: William T. Whelan, Esq.
If to the Maker, to:
Connectivity Products Incorporated
214 Nashua Street
Leominster, Massachusetts 01453
Attention: President
with copies to:
- 5 -
<PAGE> 6
Mr. Donald T. Pascal
Chairman
Tigera Group, Inc.
667 Madison Avenue
Suite 2500
New York, New York 10021-8029
and:
Herbert M. Friedman, Esq.
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
or to such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so mailed; provided that any notice or communications changing
any of the addresses set forth above shall be effective and deemed given only
upon its receipt.
IN WITNESS WHEREOF, the Maker has caused this
Redemption Note to be executed on its behalf by the undersigned, thereunto duly
authorized, as of the year and date first above written.
CONNECTIVITY PRODUCTS INCORPORATED
By:_____________________________________
Name:
Title:
- 6 -
<PAGE> 1
EXHIBIT 10.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION, UNLESS AN EXEMPTION FROM THE REQUIREMENT OF SUCH
REGISTRATION IS AVAILABLE UNDER THE CIRCUMSTANCES AT THE TIME OBTAINING AND, IF
REQUIRED AT THE SOLE DISCRETION OF THE MAKER, DEMONSTRATED BY AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE MAKER. THIS NOTE IS FURTHER SUBJECT TO
THE RESTRICTIONS ON TRANSFER SET FORTH IN SECTION 12 HEREOF.
CONTINGENT NOTE
$__________ May 31, 1996
1. CONNECTIVITY PRODUCTS INCORPORATED, a Delaware corporation
(the "MAKER"), for value received, hereby promises to pay to the order of
__________________, whose address is _____________________________________ (the
"HOLDER"), the principal sum of $_______, payable in cash on May 31, 2003, as
hereinafter provided.
2. This Note is one of a duly authorized issue of "CONTINGENT
NOTES" issued pursuant to the terms and provisions of the Stock Redemption and
Purchase Agreement, dated as of May 17, 1996 (the "PURCHASE AGREEMENT"), by and
among (A) the Maker, (B) Tigera Group, Inc., a Delaware corporation ("TIGERA"),
and (C) the shareholders of the Maker. This Note is in all respects subject to
the terms and conditions of the Purchase Agreement, and any conflict between the
terms hereof and those of the Purchase Agreement shall be resolved in favor of
the terms of the Purchase Agreement. Capitalized terms not otherwise defined are
used as defined in the Purchase Agreement. The aggregate original principal
amount of the Contingent Notes is $3,000,000.00.
3. Notwithstanding anything contained herein to the contrary,
no principal or interest shall be payable on this Note, and this Note shall be
void and of no further force and effect, unless the amount of the Maker's
"Cumulative Adjusted EBITDA" (as defined below) equals or exceeds $22,000,000.
The Cumulative Adjusted EBITDA shall be determined by the Maker's independent
accounting firm (which firm shall be a recognized accounting firm of national
standing) not later than March 31, 1998; provided, however, that (a) if such
accounting firm determines that Cumulative Adjusted EBITDA is equal to or in
excess of $22,000,000, such determination may be reviewed, at the option
<PAGE> 2
and cost of the Maker, which review shall be completed not later than May 31,
1998 by a second independent accounting firm (which firm shall be a recognized
accounting firm of national standing) selected by the Board of Directors of
Maker, and, (b) if such accounting firm determines that Cumulative Adjusted
EBITDA is less than $22,000,000, such determination may be reviewed, at the
option of the Sellers' Agent (as defined in the Purchase Agreement) but at the
expense of the Maker, which review shall be completed not later than May 31,
1998 by a second independent accounting firm (which firm shall be a recognized
accounting firm of national standing) selected by the Sellers' Agent, and if, in
the case of (a) above, such second accounting firm determines that Cumulative
Adjusted EBITDA is less than $22,000,000, or if, in the case of (b) above, such
second accounting firm determines that Cumulative Adjusted EBITDA equals or
exceeds $22,000,000, then, in either such case, the two accounting firms shall
jointly choose a third independent accounting firm (which firm shall be a
recognized accounting firm of national standing) to determine Cumulative
Adjusted EBITDA, which determination shall be conclusive and binding on the
parties hereto. The cost of such third review and determination shall be borne
by the Maker. For purposes of this Note, "CUMULATIVE ADJUSTED EBITDA" shall mean
the Maker's cumulative "Adjusted EBITDA" (as defined below) for the calendar
years 1996 and 1997. For purposes of this Note, "ADJUSTED EBITDA" shall mean,
with respect to the Maker for a particular period, the sum of the amounts for
such period of (i) the consolidated net income (or loss) of the Maker and its
subsidiaries (after all salary and bonus expenses), plus (ii) the amount of
aggregate interest expense (net of interest income) of the Maker, plus (iii) the
amount of aggregate income tax expense of the Maker, plus (iv) the amount of
aggregate depreciation expense of the Maker, plus (v) the amount of aggregate
amortization expense of the Maker, plus (vi) the amount of any salary paid to
Stockholder Officers (as defined in the Purchase Agreement) for the period from
January 1, 1996 through the Closing Date under the Purchase Agreement, but only
to the extent that such salary exceeds, on an annualized basis, $175,000 per
year for each such Stockholder Officer, plus (vii) the amount of any
extraordinary expenses, plus (viii) for the year ending December 31, 1996, the
amount of $30,065, plus (ix) to the extent included as expense items in the
calculation of the Maker's consolidated net income, (A) the aggregate expense
amount for compensation payable to persons who were employees or directors of
Tigera or Victory Capital LLC immediately prior to the Closing, and (B) the
aggregate expense amount for rent and other office expenses payable by Tigera in
respect of its New York City offices, and (C) the amount of any fees payable to
public relations firms retained by Tigera, and (D) the amount of any legal fees
payable in connection with the preparation of periodic reports and proxy
statements required to be filed pursuant to the Securities Exchange Act of 1934,
as amended, and (E) the aggregate amount of all other overhead expenses incurred
by
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<PAGE> 3
Tigera that are not related to the business or operations of the Maker, other
than the fees and expenses of Tigera's and Maker's accountants and auditors,
plus (x) to the extent included as expense items in the calculation of the
Maker's consolidated net income (but only to the extent not included in clause
(ix) above), the amount of any fees and expenses incurred in connection with the
transactions contemplated by the Purchase Agreement, plus (xi) any amounts paid
by the Maker from and after January 1, 1996 in respect of the Maker's BSCC
division's sales and use tax liability for any period ending on or before
December 31, 1995, minus (xii) the amount of any extraordinary income; in each
case determined in accordance with generally accepted accounting principles in
the United States as in effect from time to time, applied consistently with the
Maker's audited financial statements for the year ended December 31, 1995;
provided, however, that the calculation of Adjusted EBITDA shall exclude any
income (or loss) and any expense items of any business units acquired by the
Maker or Tigera after the date hereof and to the extent included as expense
items in the calculation of the Maker's consolidated net income, any fees and
expenses incurred in connection with the acquisition of such acquired business
units. Such definition of "Adjusted EBITDA is not, and is not intended to be,
the same as the definition in the Employment Agreements (as defined in the
Purchase Agreement) of the term "Adjusted Bonus EBITDA".
4. Subject to the terms of Section 3 of this Note, the
principal sum shall be payable, in lawful currency of the United States in
immediately available funds, at the principal offices of the Maker, as set forth
in Section 17 of this Note, on May 31, 2003.
5. Interest on the principal sum shall accrue from January 1,
1998, at a rate of Ten Percent (10%) per annum. Such interest shall be due and
payable, in lawful currency of the United States in immediately available funds,
quarterly, in arrears on each March 31, June 30, September 30 and December 31,
commencing June 30, 1998. All interest hereunder shall be computed on the basis
of the actual number of days elapsed over a year of 365 days.
6. (a) The Holder, by Holder's acceptance hereof, and each
subsequent holder, by its acceptance of any interest in this Contingent Note,
agrees that the indebtedness represented hereby shall, to the extent provided in
Section 6(b) hereof, be subordinate to (i) the rights of holders of the Maker's
trade indebtedness and (ii) the rights of holders of the Maker's indebtedness to
banks or other lending institutions now existing or hereafter incurred which may
be designated as senior indebtedness by the board of directors of the Company
(which indebtedness to banks or other lending institutions is hereinafter
collectively referred to as "Senior Indebtedness").
-3-
<PAGE> 4
(b) In furtherance of the subordination provided by subsection
(a), no payments of principal may be made (x) until indefeasible payment in full
in cash of Term Loan A (as defined in the Amended and Restated Revolving Credit
and Term Loan Agreement dated as of May 31, 1996 among the Maker, the lending
institutions listed on Schedule 1 thereto (the "Banks"), NBD Bank and The First
National Bank of Boston, as Co-Agents for themselves and the other Banks (the
"Credit Agreement")), (y) while any Default or Event of Default (as defined in
the Credit Agreement or in any other documents, including any subordination
agreements, entered into in connection with the Senior Indebtedness) exists in
respect of any Senior Indebtedness or (z) which would cause a Default or an
Event of Default in respect of any Senior Indebtedness, and no payments of
interest may be made (A) while any Material Default or Event of Default (as
defined in the Subordination Agreement executed simultaneously with the Credit
Agreement or in any other documents, including any additional subordination
agreements entered into in connection with the Senior Indebtedness) exists or
(B) which would cause a Material Default or Event of Default in respect of any
Senior Indebtedness, and the Holder agrees that any payments which would
otherwise be made pursuant hereto shall be applied to the Senior Indebtedness,
and any such payments received by the Holder hereof shall be held in trust for
the holders of the Senior Indebtedness until all such events of default have
been cured.
(c) The Holder hereof agrees to take any and all further
action and to execute and deliver any further documents that any holder or
holders of Senior Indebtedness may reasonably request in order to preserve and
protect any right or interest granted or intended to be granted hereby.
(d) The Maker agrees that without the Holder's consent Maker
will not incur any new Senior Indebtedness that includes subordination
provisions that are more restrictive with respect to this Note or otherwise less
favorable to the Holder than the subordination provisions applicable hereto on
the date hereof.
7. This Note may, at the option of the Maker, be prepaid in
whole or in part at any time without penalty, with payments to be first applied
against interest accrued and unpaid to the date of such prepayment.
8. Subject to the terms of Section 3 of this Note, the unpaid
principal sum of this Note, together with all accrued interest thereon, shall,
at the option of the holder of this Note, by written demand to the Maker, become
immediately due and payable, without presentment, protest or any further notice
or demand of any kind, all of which are hereby expressly waived, if
-4-
<PAGE> 5
any of the following "Events of Default" shall occur and be continuing:
(i) the Maker shall fail to pay in full any
installment of principal of this Note when due;
(ii) the Maker shall fail to pay in full any
installment of interest on this Note when due, and such
failure shall continue for 15 days after written notice, by
registered mail or certified mail, return receipt requested,
addressed to the Maker;
(iii) the Maker shall be in default under the terms
of the Bank Loan Agreements (as defined in the Purchase
Agreement) which default results in the actual acceleration of
the maturity of the indebtedness to the Banks (as defined in
the Purchase Agreement) under such Bank Loan Agreements;
(iv) the Maker shall sell all or substantially all of
its assets, merge with or into another entity or Tigera shall
sell or otherwise transfer a majority of the voting stock of
the Maker, unless the purchaser of such assets or stock or the
surviving entity in such merger (as the case may be) is an
entity, engaged (either directly or through its subsidiaries)
in the wire and cable product manufacturing, distributing
and/or assembling business, that, immediately prior to such
sale or merger, is directly or indirectly controlled by
Tigera;
(v) the Maker shall voluntarily dissolve, liquidate
its assets or wind up its affairs or take any corporate action
to effectuate any of such transactions; or
(vi) the Maker shall (A) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of
itself or of all or a substantial part of its assets, (B)
admit in writing its inability to pay its debts as they
mature, (C) make a general assignment for the benefit of
creditors, (D) be adjudicated bankrupt or insolvent, or (E)
file a voluntary petition in bankruptcy or a petition or
answer seeking reorganization or an arrangement with creditors
or to take advantage of any insolvency law or an answer
admitting the material allegations of a petition filed against
it in any bankruptcy, reorganization or insolvency proceeding,
or corporate action shall be taken by it for the purpose of
effecting any of the foregoing, or (F) have a receiver,
trustee, custodian or liquidator appointed for all or a
substantial part
-5-
<PAGE> 6
of its property or assets, and such receiver, trustee,
custodian or liquidator so appointed shall not be discharged
within 30 days after the date of such appointment, or if a
warrant of attachment or any similar process shall be issued
against its property and such warrant of attachment or similar
process shall not have been released, discharged or bonded
within 30 days after its entry or levy.
9. If an Event or Default shall occur, the Maker shall be
liable for the Holder's reasonable costs of collection, including, but not
limited to, reasonable attorneys' fees and disbursements and court costs.
10. No waiver of a breach of, or default under, any provision
of this Note shall be deemed a waiver of such provision or of any subsequent
breach or default of the same or similar nature or of any other provision
hereof.
11. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES HERETO HEREBY AGREES
THAT ANY SUIT, ACTION OR PROCEEDING FOR THE ENFORCEMENT OF THIS NOTE SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF OR FEDERAL COURTS SITTING IN THE STATE OF
DELAWARE. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE JURISDICTION OF SUCH
COURTS AND TO SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BEING
MADE UPON SUCH PARTY BY REGISTERED OR CERTIFIED MAIL AT THE ADDRESS SPECIFIED IN
SECTION 17 HEREOF. EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING OR ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT COURT.
12. This Note and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, however, that this Note shall be
transferable only subject to all of Maker's rights and defenses hereunder and
only with the prior written consent of the Maker, which consent in each case may
be granted or denied in Maker's sole discretion; provided, however, that Maker's
consent shall not be required in the case of a transfer of this Note to another
Seller (as defined in the Purchase Agreement) or to the Holder's spouse,
children, grandchildren or parents or to a trust primarily for the benefit of
any of the foregoing or the Holder or, if the Holder is a trust, to the
beneficiaries of such trust.
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<PAGE> 7
13. This Note embodies all the terms of the indebtedness
represented hereby, and may not be amended orally.
14. Any claim by the Maker, Tigera or their respective
Affiliates against the original Holder hereof under Article XIII of the Purchase
Agreement for which any such party is entitled to indemnification pursuant to
the terms thereof may be satisfied by the Maker (but the Maker shall not be
obligated to do so) in whole or in part out of amounts otherwise payable under
this Note.
15. In construing this Note, feminine or neuter pronouns shall
be substituted for those masculine in form and vice versa, and plural terms
shall be substituted for singular terms and vice versa, in any place in which
the context so requires.
16. Any reference in this Note to action by the Maker
(including without limitation any requirement for the consent of the Maker)
shall for all purposes mean and refer to action taken or to be taken (or consent
given) by a majority the full Board of Directors of the Maker, and not be a
committee thereof, which action (or consent) may be by resolution adopted at a
meeting of the Board or Directors or (to the extent permitted by applicable
corporate law) by written consent executed by not less than a majority of the
directors of the Maker.
17. Any notices or other communications required or permitted
hereunder shall be given in writing and shall be sufficient if delivered
personally or sent by certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Holder, to the address set forth on the first page
of this Note, with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attention: William T. Whelan, Esq.
If to the Maker, to:
Connectivity Products Incorporated
214 Nashua Street
Leominster, Massachusetts 01453
Attention: President
with copies to:
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<PAGE> 8
Mr. Donald T. Pascal
Chairman
Tigera Group, Inc.
667 Madison Avenue
Suite 2500
New York, New York 10021-8029
and:
Herbert M. Friedman, Esq.
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
or to such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so mailed; provided that any notice or communications changing
any of the addresses set forth above shall be effective and deemed given only
upon its receipt.
IN WITNESS WHEREOF, the Maker has caused this
Contingent Note to be executed on its behalf by the undersigned, thereunto duly
authorized, as of the year and date first above written.
CONNECTIVITY PRODUCTS INCORPORATED
By:_____________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 16.1
BDO SEIDMAN, LLP
330 MADISON AVENUE
NEW YORK, NEW YORK 10017
June 14, 1996
Securities and Exchange Commission 450 5th Street N.W.
Washington, D.C. 20549
Gentlemen:
We have been furnished with a copy of the response to Item 4 of Form 8-K for the
event that occurred on June 10, 1996, to be filed by our former client, Tigera
Group, Inc. We agree with the statements made in response to that Item insofar
as they relate to our Firm.
Very truly yours,
/s/ BDO Seidman, LLP
<PAGE> 1
EXHIBIT 99.1
TIGERA GROUP, INC.
645 Madison Avenue
NEW YORK, NEW YORK 10022
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACT:
Friday May 31, 1996 Donald R. Dwight
(603) 795-2800
TIGERA GROUP COMPLETES ACQUISITION
OF CONNECTIVITY PRODUCTS, INC.
New York, N.Y. -- May 31 -- Tigera Group, Inc. (OTC:TYGR) today
completed the purchase of 85 percent of the capital stock of Connectivity
Products, Inc. (CPI), a privately held company in the wire and cable
manufacturing, distribution and assembly business. The remaining 15 percent
ownership is held by the company's founders, who are continuing to manage the
business.
Tigera purchased its 85 percent interest from the founders for
approximately $8.0 million, and also granted stock options to the founders and
other employees of CPI to purchase approximately seven percent of Tigera.
Tigera, which is investing additional funds of approximately $1.5 million for
working capital at closing, has also committed to invest $2.0 million in
preferred stock equity in Connectivity to fund expansion.
Tigera also announced the completion of a recapitalization of CPI and
a commitment of an approximate $45 million senior credit facility to CPI from
the First National Bank of Boston and NBD Bank. At the closing, a total of
approximately $32 million of bank debt was taken down and $6.0 million of
subordinated debt was seller financed.
CPI consists of three operating divisions: BSCC Corp. in Leominster,
the manufacturing facility; Energy Electric Cable in Detroit, distribution, and
Energy Electric Assembly, also Detroit, assembly. In addition, the company has
numerous distribution warehouses in the Southeast and Midwest.
CPI, with corporate headquarters in Leominster, Mass., was formed by
the merger of its three operating divisions in October 1995. CPI increased its
sales from approximately $44 million in 1992 to approximately $89 million in
1995, without acquiring any operating companies. The two
<PAGE> 2
major market segments served by Connectivity are industrial (security,
automation, signal and sound) and communications (networking, voice and data),
which together constituted over 90 percent of 1995 sales.
James S. Harrington, CPI's chief executive and a founder, became
president and chief executive of Tigera at the close of the transaction. He
succeeds Donald T. Pascal, who moved to chairman of Tigera's Board of Directors,
succeeding Co-Chairmen Deborah A. Farrington and Louis Marx, Jr., both of whom
remain on the board.
Three other founder executives of CPI, Duane Gawron, John Pylak and
Kurt Cieszkowski, were elected senior vice presidents of Tigera. In addition,
Messrs. Harrington, Gawron and Pylak have joined Tigera's Board of Directors,
increasing the board to 12 members.
Tigera, which has net assets of about $12 million, has been seeking to
commit those funds to purchase a significant position in an attractive operating
company for several years. With the Connectivity transaction, future
acquisitions will be focused in the wire and cable industry.
