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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 30, 1995
-----------------
(Date of earliest event reported)
PIONEER-STANDARD ELECTRONICS, INC.
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(Exact name of Registrant as specified in its charter)
Ohio 0-5734 34-0907152
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(State or other jurisdiction (Commission (I.R.S. employer
of incorporation) file number) identification no.)
4800 East 131st Street, Cleveland, Ohio 44105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 587-3600
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Item 2. Acquisition or Disposition of Assets.
On November 30, 1995, Pioneer-Standard Electronics, Inc. (the
"Company") acquired 50% of the Common Stock (the "Stock") of
Pioneer/Technologies Group Inc., a Maryland corporation ("Technologies"). Prior
to this acquisition, the Company owned of record 50% of the Common Stock of
Technologies. The acquisition was accomplished pursuant to a Plan and Agreement
of Merger, dated November 30, 1995, by and among the Company, Technologies,
Pioneer-Standard of Maryland, Inc., a wholly-owned subsidiary of the Company,
the Shareholders of Technologies (the "Shareholders") and Bruce S. Tucker as
Shareholders Representative (the "Merger Agreement"), pursuant to which
Pioneer-Standard of Maryland, Inc., was merged with and into Technologies. A
copy of the Merger Agreement is filed as an Exhibit hereto.
In connection with the purchase of the Stock, Technologies entered
into Noncompetition Agreements with each of Bruce S. Tucker and Jay S. Ross,
former employees of Technologies. These Agreements provide that each individual
will not, for a period of two years, directly or indirectly compete with
Technologies. Copies of the Noncompetition Agreements are filed as Exhibits
hereto.
As consideration for the Stock, the Company assumed certain
liabilities, including approximately $35 million of bank debt, of Technologies
and, subject to claims which may be made under the Escrow Agreement described
below, will pay the Shareholders $50 million in cash. The obligation of the
Company to pay the Shareholders the cash purchase price is secured by a Letter
of Credit. On January 4, 1996 the Shareholders are entitled to receive $48
million in cash, after surrendering the Letter of Credit. At that time, two
million dollars will be deposited with NationsBank, N.A. as Escrow Agent to
secure certain indemnification provisions of the Merger Agreement. A copy of
the Escrow Agreement is filed as an Exhibit hereto. The purchase price for the
Stock was determined through arm's length negotiations among the parties.
The consideration to be paid by the Company was financed under a
Credit Agreement, dated November 29, 1995, by and among the Company,
Pioneer-Standard of Maryland, Inc., certain Banks and National City Bank, as
Agent (the "Credit Agreement"). The principal amount advanced and to be paid on
January 4, 1996 under the Credit Agreement is subject to an interest rate of
various floating rate options. It is anticipated that some portion of the loans
under the Credit Agreement will be refinanced with a combination of equity and
fixed rate debt, given favorable market conditions.
Technologies distributes electronic components and computer products
and provides technical support through 11 locations in the southeast and
northwest regions of the United States.
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Other than the Noncompetition Agreements set forth above, and the fact
that, prior to this transaction, the Company owned 50% of the Common Stock of
Technologies, there are no material relationships between Technologies and the
Company or any of their affiliates, directors or officers, except that James L.
Bayman and Prestan B. Heller, directors of the Company, also serve as directors
of Technology.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired.*
(b) Pro Forma Financial Information.*
(c) Exhibits.
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Sequential
Exhibit No. Description Page No.
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2.1 Plan and Agreement of Merger, dated November 30, 1995, by and
among Pioneer-Standard Electronics, Inc., Pioneer-Standard of ----
Maryland, Inc., Pioneer/Technologies Group Inc., the Shareholders
identified on the Signature Pages, and Bruce S. Tucker, as
Shareholders Representative (without Schedules).**
4.1 Credit Agreement dated as of November 29, 1995 by and among
Pioneer-Standard Electronics, Inc., Pioneer-Standard of Maryland, ----
Inc., the Banks identified on the Signature Pages thereto and
National City Bank, as Agent.
23.1 Consent of Ernst & Young. ***
99.1 Escrow Agreement, dated as of November 30, 1995, by and among
Pioneer-Standard Electronics, Inc., certain stockholders of ----
Pioneer/Technologies Group Inc., Bruce S. Tucker as Shareholders
Representative and Nations Bank, N.A.
99.2 Noncompetition Agreement, dated as of November 30, 1995, by and
between Pioneer-Standard of Maryland, Inc. f/k/a ----
Pioneer/Technologies Group Inc. and Bruce S. Tucker.
</TABLE>
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<TABLE>
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99.3 Noncompetition Agreement dated as of November 30, 1995 by and
between Pioneer-Standard of Maryland, Inc. f/k/a ----
Pioneer/Technologies Group Inc. and Jay S. Ross.
</TABLE>
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* The financial statements of Technologies for the periods specified in
Rule 3-05(b) of Regulation S-X and the pro forma financial information
required pursuant to Article 11 of Regulation S-X currently are not
available and will be filed as soon as is practicable, but not later
than 60 days after the date that this Report is due.
** The Registrant agrees by this filing to supplementally furnish a copy
of the schedules of this Agreement to the Commission upon request.
*** To be filed by Amendment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIONEER-STANDARD ELECTRONICS, INC.
By: /s/ John V. Goodger
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John V. Goodger, Vice President,
Treasurer and Assistant Secretary
Date: December 13, 1995
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EXECUTION COPY
PLAN AND AGREEMENT OF MERGER
Dated November 30, 1995
By and Among
PIONEER-STANDARD ELECTRONICS, INC.
and
PIONEER-STANDARD OF MARYLAND, INC.
and
PIONEER/TECHNOLOGIES GROUP, INC.
and
THE SHAREHOLDERS
IDENTIFIED ON THE SIGNATURE PAGES HERETO
and
BRUCE S. TUCKER, AS SHAREHOLDERS REPRESENTATIVE
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TABLE OF CONTENTS
(not part of Agreement)
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Page
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ARTICLE 1 CERTAIN DEFINITIONS.......................................... 2
ARTICLE 2 The Merger and Related Matters............................... 12
2.1 Merger........................................... 12
2.2 Name of Surviving Corporation.................... 12
2.3 Articles of Incorporation and By-laws............ 12
2.4 Directors and Officers........................... 12
2.5 Certain Effects of the Merger.................... 13
2.6 Further Action................................... 14
ARTICLE 3 Closing, Filing, Effectiveness............................... 14
3.1 Closing and Closing Date......................... 14
3.2 Filing and Effective Time........................ 14
3.3 Audited Balance Sheet............................ 15
ARTICLE 4 Status and Change of Shares; Payment and
Distribution; Shareholders Representative.................... 17
4.1 Merger Subsidiary Stock.......................... 17
4.2 Technologies Common Stock........................ 17
4.3 Payment of Cash Purchase Price;
Post-Closing Distributions....................... 18
4.4 Surrender of Certificates........................ 20
4.5 Shareholders Representative...................... 22
ARTICLE 5 Representations and Warranties of
Technologies................................................. 29
5.1 Corporate Status................................. 29
5.2 Corporate Action................................. 29
5.3 No Defaults...................................... 30
5.4 Financial Statements............................. 31
5.5 Conduct of Business.............................. 32
5.6 Condition of Assets.............................. 33
5.7 Title, Liens, etc................................ 34
5.8 Employees........................................ 35
5.9 Litigation....................................... 37
5.10 Brokers.......................................... 37
5.11 Approvals and Consents........................... 38
5.12 Intellectual Properties.......................... 38
5.13 Contracts........................................ 39
5.14 Compliance with Laws............................. 39
5.15 Technologies Capitalization;
Subsidiaries..................................... 39
5.16 Tax Matters...................................... 41
5.17 Insurance........................................ 42
5.18 Environmental Matters............................ 42
5.19 Absence of Undisclosed Liabilities............... 43
5.20 Permits.......................................... 44
</TABLE>
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Page
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5.21 Indebtedness to and from Officers,
Directors, Shareholders and
Affiliates....................................... 44
5.22 Executive Officers, Directors and
Certain Authorized Persons....................... 45
5.23 Conflicts of Interest............................ 45
5.24 Customers and Suppliers.......................... 46
5.25 Corporate Documents, Books and Records........... 46
5.26 Ordinary Warranty................................ 47
5.27 Inventory........................................ 47
5.28 Accounts Receivable.............................. 48
5.29 Net Worth........................................ 49
5.30 Material Facts................................... 49
ARTICLE 5-A Representations and Warranties and
Covenants of Shareholders.................................... 49
5A.1 Ownership........................................ 49
5A.2 Enforceability................................... 49
5A.3 Conflicts of Interest............................ 50
5A.4 Consents......................................... 50
5A.5 Noninterference.................................. 51
ARTICLE 6 Representations and Warranties of PSE
and Merger Subsidiary........................................ 51
6.1 Corporate Status; Capitalization................. 51
6.2 Corporate Action................................. 52
6.3 No Defaults...................................... 52
6.4 Brokers.......................................... 53
6.5 Litigation....................................... 53
6.6 Funds............................................ 53
6.7 Approvals and Consents........................... 54
6.8 Business of Merger Subsidiary.................... 54
6.9 Material Facts................................... 54
ARTICLE 7 Certain Obligations of PSE and Merger
Subsidiary................................................... 54
7.1 Opinions of Counsel.............................. 54
7.2 Deliveries....................................... 54
7.3 Vote of Technologies Common Stock................ 55
7.4 Letter of Credit................................. 55
7.5 Noncompetition Agreements........................ 55
ARTICLE 8 Certain Obligations of Technologies.......................... 55
8.1 Opinions of Counsel.............................. 55
8.2 Deliveries....................................... 56
8.3 No Dissenting Shares............................. 56
8.4 Vote of Technologies Common Stock................ 56
ARTICLE 9 Survival of Representations and
Warranties; Indemnification.................................. 57
9.1 Survival......................................... 57
9.2 Indemnification of PSE........................... 58
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9.3 Limitations as to Indemnification
Obligation....................................... 59
9.4 Notice and Settlement of Claims of
PSE and Surviving Corporation;
Arbitration...................................... 61
9.5 Notice and Settlement of Tax
Liabilities and Damages.......................... 62
9.6 Notice and Settlement of Other Third-
Party Claims..................................... 63
9.7 No Waiver for Notices............................ 64
9.8 Indemnification by PSE........................... 65
ARTICLE 10 Miscellaneous................................................ 65
10.1 Expenses......................................... 65
10.2 Assignments...................................... 65
10.3 Further Assurances............................... 66
10.4 Public Announcement.............................. 66
10.5 Notices.......................................... 66
10.6 Captions......................................... 67
10.7 Law Governing.................................... 67
10.8 Waiver of Provisions............................. 68
10.9 Counterparts..................................... 68
10.10 Entire Agreement................................. 68
10.11 Access to Books and Records...................... 68
10.12 Schedules and Amendments to Schedules............ 69
10.13 Releases......................................... 69
</TABLE>
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PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER dated November 30, 1995, by and among
PIONEER-STANDARD ELECTRONICS, INC. ("PSE"), an Ohio corporation;
PIONEER-STANDARD OF MARYLAND, Inc. ("Merger Subsidiary"), a Maryland
corporation; PIONEER/TECHNOLOGIES GROUP INC., a Maryland corporation
("Technologies"); the holders of outstanding shares of capital stock of
Technologies identified on the signature pages hereto (the "Shareholders"); and
BRUCE S. TUCKER, as the Shareholders Representative hereunder (the "Shareholders
Representative"). Merger Subsidiary and Technologies are sometimes herein called
the "Constituent Corporations".
R E C I T A L S
WHEREAS, PSE presently owns of record and beneficially 50% of the
issued and outstanding Shares of Technologies Common Stock; and
WHEREAS, PSE and Merger Subsidiary wish to own 100% of the Common
Stock of Technologies by way of a merger of Merger Subsidiary with and into
Technologies; and
WHEREAS, the Constituent Corporations and PSE deem it advisable and
generally to the welfare and advantage of their respective shareholders that,
subject to the terms and conditions set forth herein, Merger Subsidiary merge
into Technologies pursuant to this Agreement and the Maryland General
Corporation Law (the "Act") with the effect that Technologies becomes a direct
wholly-owned subsidiary of PSE and the Shareholders of Technologies receive the
consideration for their Shares specified in Section 4.2 (the "Merger");
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NOW, THEREFORE, the parties hereby agree to the following terms and
conditions relating to the Merger contemplated hereby and the mode of carrying
the Merger into effect:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the meanings
specified or referred to in this Article 1.
"Act" shall have the meaning specified in the Recitals hereof.
"Affiliate" shall mean with respect to any Person, any entity that
directly or indirectly controls, is controlled by, or is under common control
with such Person.
"Agreement" shall mean this Plan and Agreement of Merger, as it may be
amended from time to time hereafter in accordance with the terms hereof.
"Arbitration" shall have the meaning specified in Section 9.4.
"Articles of Incorporation" shall mean Technologies's Articles of
Incorporation (Charter No. DO 173252), as amended, on file with the Secretary of
State of Maryland as of the date hereof.
"Audited Balance Sheet" shall have the meaning specified in Section
3.3.
"Audited Statements" shall have the meaning specified in Section 5.4.
"Basket" shall have the meaning specified in Section 9.3(a).
"Benefit Plans" shall have the meaning specified in Section 5.8(b)
"Business Condition" shall mean, in the case of any Person, the
financial condition, results of operations, properties, assets, or business of
such Person.
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"Cash Purchase Price" shall mean an aggregate amount equal to Fifty
Million Dollars ($50,000,000.00) to be paid in cash by PSE as the merger
consideration payable hereunder.
"Certificate of Merger" shall have the meaning specified in Section
3.1.
"Certificates" shall mean the voting trust and/or common stock
certificates which immediately prior to the Effective Time represented
outstanding Shares of Technologies Common Stock.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any predecessor statute, and the rules and regulations promulgated thereunder.
"Common Stock" shall mean Technologies Common Stock, $.10 par value
per share.
"Constituent Corporations" shall have the meaning specified in the
Recitals hereof.
"Contracts" shall mean any unexpired or executory written agreement,
arrangement or commitment to which Technologies is a party or by which it is
bound.
"Damages" shall have the meaning specified in Section 9.2.
"Disclosure Letter" shall mean a letter from Technologies to PSE dated
the date of this Agreement and delivered to PSE in connection herewith.
"Effective Time" shall have the meaning specified in Section 3.2(b).
"Environmental Laws" shall mean all federal, state, local or foreign
laws relating to pollution or protection of the environment (including
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without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) as in effect on the date hereof, including without
limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, or industrial, toxic or
hazardous substances or wastes into the indoor or outdoor environment, including
without limitation, ambient air, soil, surface water, ground water, wetlands,
subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder, all as in effect on or prior to the Closing Date.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" shall mean the Escrow Agreement by and among PSE,
the Shareholders, the Shareholders Representative, and NationsBank, N.A., a
banking corporation with offices in the State of Maryland, as "Escrow Agent", a
copy of which is attached hereto as Exhibit A.
"Executive Officers" means, with respect to any corporation, the
Chairman of the Board of Directors, the President, any executive or senior vice
president, and the Treasurer of such corporation, and "Executive Officer" means
any of the foregoing individuals.
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"Financial Statements" shall mean the Audited Statements and the
Interim Statements.
"GAAP" shall mean generally accepted accounting principles as
practiced in the United States, consistently applied from time to time.
"Governmental Action" shall mean the making of any filing or
registration with, the giving of any notice to or the obtaining of any permit,
authorization, consent or approval of any public or governmental body or
authority.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammables, explosives, radioactive materials, friable
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls (PCBs), (b)
any chemicals or other materials or substances as included in the definition of
"hazardous substance", "hazardous waste", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants", "pollutants" or words of similar import under any
Environmental Law; and (c) any other chemical or other material or substance,
exposure to which is now prohibited, limited or regulated under any
Environmental Law.
"Indemnified Party" shall have the meaning specified in Section 9.4.
"Indemnitors" shall mean the Shareholders (other than PSE) who hold as
of the Closing Date outstanding Shares of Technologies Common Stock.
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"Interim Balance Sheet" shall have the meaning specified in Section
5.4.
"Interim Balance Sheet Date" shall have the meaning specified in
Section 5.4.
"Interim Income Statement" shall have the meaning specified in Section
5.4.
"Interim Statements" shall have the meaning specified in Section 5.4.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean actual knowledge of each Executive Officer
based on reasonable inquiry of the books, records and key employees and advisors
of Technologies.
"Letter of Credit" shall mean an irrevocable, non-transferable,
standby letter of credit issued by National City Bank to secure payment of the
Cash Purchase Price on January 4, 1996.
"Liens" shall mean all liens, pledges, encumbrances, security
interests, mortgages, community property rights or other adverse claims against
title.
"Material Adverse Effect" shall mean a material adverse effect on the
Business Condition of Technologies.
"Maximum Indemnification Obligation" shall mean the maximum aggregate
liability of the Indemnitors for Indemnification Obligations hereunder, which
maximum aggregate liability shall be equal to the escrow fund established
pursuant to the Escrow Agreement except as otherwise specifically provided.
"Merger" shall have the meaning specified in the Recitals hereof.
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"Merger Share Certificate" shall have the meaning specified in Section
4.4(a).
"Merger Subsidiary" shall have the meaning specified in the opening
paragraph hereof.
"Net Adjusted Cash Payment Per Share" shall mean that amount per share
equal to (x) the sum of (i) the Cash Purchase Price, minus (ii) the amount of
$2,000,000 deposited by PSE with the Escrow Agent under the Escrow Agreement,
divided by (y) 50,000.
"Net Worth" shall mean the net worth of Technologies at and as of the
Closing Date, as set forth on the Audited Balance Sheet; provided, however,
that, for purposes hereof: (i) such Net Worth shall exclude Technologies'
profits (if any) for November, 1995; (ii) there shall be no adjustment to such
net worth as a result of the book-to-physical inventory reconciliation described
in Section 3.3(a) unless such book-to-physical inventory reconciliation exceeds
a plus or minus $200,000, in which event, such Net Worth shall be adjusted up or
down, as the case may be, by such excess; (iii) no inventory or trade accounts
receivable reserves, other than those already included in Technologies' October
31, 1995 balance sheet (which reserves shall remain unchanged) shall be included
in calculating such Net Worth; and (iv) such Net Worth shall exclude any unusual
or non-recurring adjustments in November requested by PSE outside of the
ordinary course of business.
"Ownership Liabilities" shall mean any out-of-pocket loss, cost,
damage or expense paid or incurred by PSE or the Surviving Corporation after the
Closing Date arising directly from any misrepresentation or
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breach of warranty of any of the Shareholders in Article 5-A of this Agreement.
"PSE" shall have the meaning specified in the opening paragraph
hereof.
"Permits" shall have the meaning specified in Section 5.20.
"Permitted Liens" shall mean (u) Liens in favor of NationsBank, N.A.,
Mellon Bank and Chase Bank of Maryland, Technologies' senior lenders, (v) Liens
for current taxes, assessments or other governmental charges due but not yet
payable as of the applicable date, or the validity of which is being contested
in good faith by appropriate proceedings with appropriate reserves therefor
reflected in the Financial Statements, (w) Liens arising by operation of law in
the ordinary course of business, such as mechanics' liens, materialmen's liens,
carriers' liens, warehouseman's liens, and similar liens, (x) deposits made by
Technologies in the ordinary course of business to secure its obligations under
worker's compensation, unemployment insurance, social security and similar laws,
(y) Liens which are described in Schedule 5.7 of the Disclosure Letter and (z)
Liens securing the performance of leases entered into in the ordinary course of
business which, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
"Person" shall mean any individual, partnership, joint venture,
corporation, limited liability company, bank, trust, unincorporated organization
or other entity.
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"Post-Closing Distributions" shall mean (i) the distributions
specified in Section 4.3(c), and (ii) the distributions made pursuant to Section
8 of the Escrow Agreement.
"Pro Rata Share" shall mean, with respect to any Shareholder of
Technologies Common Stock (other than PSE), that percentage derived by dividing
the number of shares of Technologies Common Stock held of record by such
Shareholder immediately prior to the Merger by 50,000; the Pro Rata Share of
each such Shareholder as of the date of this Agreement (assuming the Merger was
effected on this date) being set forth on the Shareholders signature page
hereto.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including without limitation, the movement of
Hazardous Materials through the ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserves" shall mean an amount equal to Two Hundred Thousand Dollars
($200,000.00) as an appropriate reserve for expenses of the Shareholders
Representative incurred in connection with his duties hereunder and for which
the Shareholders Representative may be or become responsible following the
Effective Time.
"Shareholders Representative" shall have the meaning specified in the
opening paragraph hereof and shall include any successor duly appointed in
accordance with Section 4.5 hereof.
"Shareholders" shall have the meaning specified in the opening
paragraph hereof.
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"Shareholder" shall mean one of the shareholders (other than PSE) of
Technologies Common Stock prior to the Merger.
"Shareholders' Agreements" shall have the meaning specified in Section
5.15(a), which Agreements shall be terminated on or prior to the Closing Date.
"Shares" shall mean shares of Common Stock.
"Subsidiary" shall mean, when used with reference to any Person, any
corporation more than 50% of the voting power of the outstanding voting
securities of which are directly or indirectly owned by such Person.
"Surviving Corporation" shall have the meaning specified in Section
2.1.
"Tax Liability" shall mean any Tax, interest, penalty or other loss,
cost, damage or expense paid or incurred by PSE or the Surviving Corporation
(including but not limited to reasonable attorney's and accounting fees) arising
from any misrepresentation or breach of warranty of Technologies in Section 5.16
of this Agreement.
"Taxes" shall mean (A) all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, or other taxes of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority (domestic or foreign) upon any Person with respect to all
periods or portions thereof ending on or before the Effective Time and/or (B)
any liability of any Person for the payment of any amounts
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of the type described in the immediately preceding clause (A) as a result of
being a member of an affiliated or combined group.
"Tax" shall mean any of the Taxes.
"Technologies" shall have the meaning specified in the Recitals
hereof.
"Technologies Transaction Expenses" shall mean (subject to the
exclusions set forth below) the fees, costs and expenses incurred or reasonably
estimated to be incurred by Technologies from April 1, 1995 through the
Effective Time and, to the extent Technologies is obligated for payment of the
fees, costs and expenses of any Shareholders, by the Shareholders, which are
related to the transactions contemplated by this Agreement, including, without
limitation, (i) the fees and expenses of Latham & Watkins, legal counsel engaged
by Technologies with respect to this Agreement and the transactions contemplated
hereby, (ii) the fees and expenses of any investment banking firm or financial
advisor (but excluding any such fees and expenses paid or accrued prior to
9/30/95) engaged by Technologies or its Board of Directors or Shareholders in
connection with this Agreement or the transactions contemplated hereby, and
(iii) the fees and expenses for other legal, accounting (but excluding the Ernst
& Young audit of the Audited Balance Sheet) and other professional services (if
any) rendered to Technologies or the Shareholders after September 30, 1995 and
prior to the Effective Time or to the Shareholders Representative at any time
and in either case directly related to the transactions contemplated by this
Agreement.
"Warranties" shall have the meaning specified in Section 5.26.
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ARTICLE 2
The Merger and Related Matters
2.1 Merger. In accordance with the Act, Merger Subsidiary shall, at
the Effective Time, be merged with and into Technologies and Technologies shall
be the surviving corporation (in its capacity as surviving corporation being
sometimes hereinafter called the "Surviving Corporation") and shall continue to
be a Maryland corporation.
2.2 Name of Surviving Corporation. The name of the Surviving
Corporation shall be "Pioneer-Standard of Maryland, Inc."
2.3 Articles of Incorporation and By-laws. At the Effective Time, the
Articles of Incorporation of Technologies, as in effect immediately before the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation and shall continue to be its Articles of Incorporation until amended
or changed as provided by the Act. The By-laws of Merger Subsidiary, as in
effect immediately before the Effective Time, shall be the By-laws of the
Surviving Corporation until amended as provided therein, in the Articles of
Incorporation or by the Act.
2.4 Directors and Officers. (a) From and after the Effective Time, the
persons designated by PSE in writing before the Effective Time shall be the
directors and officers of the Surviving Corporation, to serve in each case until
their respective successors shall have been duly elected and shall have duly
qualified, and (b) if at the Effective Time a vacancy shall exist, it may be
filled in the manner provided in the By-laws of the Surviving Corporation.
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2.5 Certain Effects of the Merger. At the Effective Time, (i) Merger
Subsidiary shall be merged into Technologies; (ii) the separate existence of
Merger Subsidiary shall cease; (iii) the Surviving Corporation shall have all
the rights, privileges, immunities and powers, and shall be subject to all of
the duties and liabilities, of a corporation organized under the Act; (iv) as
the Surviving Corporation, shall thereupon and thereafter possess all the
rights, privileges, immunities and franchises, of a public as well as a private
nature, of the Constituent Corporations; (v) all property, real, personal and
mixed, and all debts liabilities or other obligations due on whatever account,
and all and every other interest of or belonging to or due to, and every other
liability of, either of the Constituent Corporations shall be deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and (vi) the title to any real estate, or any interest therein, vested in
either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thence forth
be responsible and liable for all the liabilities and obligations of the
Constituent Corporations; and any claim existing or action or proceeding pending
by or against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place or the Surviving Corporation may be substituted in
its place. The Merger shall have all of the other effects specified in Section
3-114 of the Act, and neither the rights of creditors nor any liens upon the
property of either of the Constituent Corporations shall be impaired by the
Merger.
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2.6 Further Action. At any time, or from time to time, after the
Effective Time, the last acting officers of Merger Subsidiary or the
corresponding officers of the Surviving Corporation may, in the name of Merger
Subsidiary, execute and deliver all such proper deeds, assignments, and other
instruments and take or cause to be taken all such further or other action as
the Surviving Corporation may deem necessary or desirable in order to vest,
perfect or confirm in the Surviving Corporation title to and possession of all
property, rights, privileges, powers, franchises, immunities and interests of
Merger Subsidiary and otherwise to carry out the purposes of this Agreement.
ARTICLE 3
Closing, Filing, Effectiveness
3.1 Closing and Closing Date. The Constituent Corporations shall duly
execute and verify the certificate of merger relating to the Merger (the
"Certificate of Merger") in accordance with the Act at the offices of Piper &
Marbury, Baltimore, Maryland, at 10:00 A.M., local time, on the Closing Date,
which shall be the date of this Agreement.
3.2 Filing and Effective Time.
(a) On the Closing Date, copies of the Certificate of Merger, so
executed and verified, shall be delivered to the Secretary of State of the State
of Maryland for filing; and
(b) the Merger shall become effective upon the acceptance for
filing of the Certificate of Merger by the Maryland Secretary of State (the date
and time of such event being the date of this Agreement and being herein called
the "Effective Time").
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3.3 Audited Balance Sheet.
(a) An audited balance sheet of Technologies as of the Closing
Date (the "Audited Balance Sheet") shall be prepared by the Surviving
Corporation and audited by Ernst & Young. The Audited Balance Sheet shall be
prepared in accordance with GAAP, using the same accounting methods, policies,
practices and procedures (with consistent classifications, judgments and
valuations and estimation methodologies) used to prepare the Audited Statements
and the Interim Statements. PSE will cause Technologies to prepare and submit to
Ernst & Young all information and to provide to Ernst & Young all assistance
which Ernst & Young may reasonably request in connection with their audit of the
Audited Balance Sheet. In addition, to facilitate the calculation of the Net
Worth of Technologies, PSE and Technologies shall cause to be performed a
physical inventory and reconciliation to the gross inventory reflected on the
books of Technologies on the Closing Date.
(b) PSE will give the Audited Balance Sheet, together with Ernst &
Young's report thereon and the calculation of Technologies' Net Worth, to the
Shareholders Representative on or before May 31, 1996. The Shareholders
Representative shall have a period of thirty (30) days to review the Audited
Balance Sheet and the Net Worth calculation.
(c) If the Shareholders Representative agrees with the Audited
Balance Sheet and the Net Worth calculation, or does not give written notice of
any disagreement within such thirty (30) day period, then within ten (10)
business days after the Shareholders Representative
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advises PSE that the Audited Balance Sheet and Net Worth calculation is
acceptable or such thirty (30) day period expires, whichever is earlier, the
Shareholders Representative shall authorize the Escrow Agent in writing to pay
PSE from the escrow fund, as an adjustment to the Cash Purchase Price, fifty
percent (50%) of the amount (if any) by which the Net Worth at the Closing Date
is less than $36,032,000. In connection with the Shareholders Representative's
review of the Audited Balance Sheet, PSE and the Surviving Corporation shall
provide the Shareholders Representative and his accountants full access to the
records of the Surviving Corporation and the workpapers of Ernst & Young
prepared in connection with their audit.
(d) If the Shareholders Representative does not agree with the
Audited Balance Sheet or the Net Worth calculation, then within thirty (30) days
of the date when the Audited Balance Sheet is given to the Shareholders
Representative he shall give notice of his disagreement to PSE and list the
areas of disagreement. The parties shall work in good faith to try to resolve
these differences. If, within ten (10) business days, the matter is not
resolved, then the parties agree to select a mutually-acceptable independent
public accounting firm to review each issue in dispute. The independent
accounting firm shall provide a written opinion covering each issue in dispute,
and such opinion shall be binding on both parties. Each party shall pay one-half
of the independent accounting firm's fees and expenses, with the Shareholders
Representative's one-half being paid from the escrow fund. The adjustments set
forth in Section 3.3(a) shall then be made
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to the extent necessary based on the decision of such independent accounting
firm.
(e) The adjustments set forth in this Section 3.3 shall be the
exclusive remedy for any breach or inaccuracy (or alleged breach or inaccuracy)
of the representations set forth in Sections 5.27, 5.28 and 5.29, and in Section
5.30 (as it relates to the foregoing Sections).
ARTICLE 4
Status and Change of Shares; Payment and Distribution;
Shareholders Representative
4.1 Merger Subsidiary Stock. Each share of common stock of Merger
Subsidiary outstanding at the Effective Time shall by virtue of the Merger be
changed into one share of the Common Stock of the Surviving Corporation.
4.2 Technologies Common Stock.
At the Effective Time:
(a) each share of Technologies Stock owned by PSE immediately
prior to the Effective Time shall automatically be cancelled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto;
(b) each share of Technologies Common Stock issued and outstanding
at the Effective Time and owned by the Shareholders shall, by virtue of the
Merger, be changed into the right to receive on January 4, 1996 (i) from PSE, by
PSE's payment (which shall be secured by the Letter of Credit) and delivery to
the Shareholders Representative for the account of the Shareholder of such
share, cash in an amount equal to the amount determined under 4.3(a)(iii) on a
per
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share basis, and (ii) from the Shareholders Representative, a Pro Rata Share of
any Post-Closing Distribution;
(c) PSE shall execute and deliver the Escrow Agreement which shall
provide that on January 4, 1996, PSE shall deposit $2,000,000 of the Cash
Purchase Price with the Escrow Agent to establish the escrow fund under and
pursuant to the terms of the Escrow Agreement; and
(d) all voting trust certificates and Technologies stock
certificate No. 104 representing the Shareholders 50,000 shares of Technologies
Common Stock shall be surrendered, properly endorsed for transfer or with a
stock power attached, and cancelled, and all rights in respect of outstanding
shares of Shareholders Technologies Common Stock shall cease to exist, other
than the right to receive the consideration described herein.
4.3 Payment of Cash Purchase Price; Post-Closing Distributions.
(a) On January 4, 1996, upon surrender of the Letter of Credit by
the Shareholders Representative to PSE, PSE shall wire transfer to the
Shareholders Representative in immediately available funds an amount equal to
the Cash Purchase Price, minus an amount equal to the total of all Shareholder
indebtedness to Technologies set forth in Schedule 5.21, minus the $2,000,000
escrow fund of the Cash Purchase Price to be deposited in escrow pursuant to
Section 4.2(c). On January 4, 1996, the Shareholders Representative shall:
(i) set aside from the wire transfer funds in an account
established by the Shareholders Representative an amount equal to
the Reserves;
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(ii) pay from the wire transfer funds any Technologies
Transaction Expenses in excess of $50,000 then due and payable
and/or reimburse Technologies for any such Expenses previously
paid by Technologies; and
(iii) pay from the wire transfer funds to each Shareholder of
Technologies Common Stock who has surrendered the Certificate(s)
representing the Shares formerly held by him in accordance with
Sections 4.3(b) and 4.4, an amount equal to the product of (X) the
Net Adjusted Cash Payment Per Share times (Y) the number of Shares
of Technologies Common Stock held by such Shareholder immediately
prior to the Effective Time, less (i) a pro rata share of the
Technologies Transaction Expenses in excess of $50,000, and (ii) a
pro rata share of the Reserve, and less an amount equal to any
indebtedness owed by such Shareholder to Technologies set forth in
Schedule 5.21 (which indebtedness shall be deemed fully paid as of
January 4, 1996).
(b) On January 4, 1996, the Shareholders Representative shall
promptly distribute to each Shareholder who has surrendered his Certificate(s),
in accordance with the distribution instructions of such Shareholder in his
letter of transmittal surrendering the same, the amount of cash into which the
aggregate number of shares of Technologies Common Stock previously represented
by such Certificate or Certificates so surrendered shall have been converted
pursuant to this Agreement, without interest. If delivery of any such cash is to
be made to a Person other than the Shareholder in whose name a Certificate is
registered, it shall be a further condition to such
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<PAGE> 24
payment that the Certificate shall, upon surrender thereof, be properly endorsed
or otherwise in proper form for transfer to such other Person and that the
Shareholder requesting such payment shall have paid any transfer and other taxes
required by reason of such payment in a name of a Person other than that of such
Shareholder, or shall have established to the reasonable satisfaction of PSE
that such tax either has been paid or is not payable.
(c) From time to time and at any time following January 4, 1996,
as the Shareholders Representative may determine in his sole discretion, any or
all Reserves not theretofore paid or applied by the Shareholders Representative
pursuant to Section 4.5 hereof shall be distributed among the Shareholders
according to their Pro Rata Share.
4.4 Surrender of Certificates.
(a) Technologies shall immediately provide to each Shareholder a
form of letter of transmittal to be used for each Certificate to be surrendered
and cancelled pursuant to Section 4.2, together with instructions for use
therein in effecting the surrender of Certificates and receiving the Net
Adjusted Cash Payment Per Share in exchange therefor.
(b) After the Effective Time, each Shareholder shall cease to have
any rights with respect to shares of Technologies Common Stock represented by
surrendered Certificates. The Shareholders shall not be entitled to receive
interest on any of the cash to be received in the Merger. The Shareholders
Representative shall promptly cancel each such Certificate and deliver each such
cancelled Certificate to the Surviving Corporation on the Closing Date.
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(c) Each outstanding Certificate which is not surrendered to the
Shareholders Representative in accordance with the procedures provided for
herein shall, after the Effective Time, until duly surrendered to the
Shareholders Representative, be deemed to evidence ownership of the right to
receive the amount of cash into which such Technologies Common Stock shall have
been converted. After the Effective Time of the Merger, there shall be no
further transfer on the records of Technologies of Certificates and if such
Certificates are presented to Technologies for transfer, they shall be cancelled
against delivery of the cash as hereinabove provided.
(d) PSE and the Shareholders Representative shall be entitled to
rely upon the stock transfer books of Technologies to verify the identity of
those Persons entitled to receive consideration specified in this Agreement,
which books shall be conclusive with respect thereto. In the event of a dispute
with respect to ownership of Technologies Common Stock represented by any
Certificate, PSE shall be entitled to deposit any consideration represented
thereby with the Shareholders Representative and the Shareholders Representative
shall be further entitled to deposit any such consideration with any court of
appropriate jurisdiction and both PSE and the Shareholders Representative shall
thereafter be relieved with respect to any claims thereto.
(e) Any Shareholder who has not theretofore complied with this
Article 4 shall, after January 4, 1996, look only to the Shareholders
Representative for payment of his cash pursuant to this Agreement without any
interest thereon. Notwithstanding the foregoing, none of
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PSE, the Shareholders Representative, or any other Person shall be liable to any
former holder of shares of Technologies Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
4.5 Shareholders Representative.
(a) Each Shareholder hereby irrevocably designates and appoints
the Shareholders Representative to be the representative of each such
Shareholder for the purposes of (i) receiving the Cash Purchase Price, from PSE
(less the deductions set forth in Section 4.3(a)), (ii) paying the Technologies
Transaction Expenses in excess of $50,000, (iii) establishing, holding, paying
and, to the extent applicable, distributing the Reserves, (iv) distributing the
Net Adjusted Cash Payment Per Share to each Shareholder, less the deductions set
forth in Section 4.3(a)(iii), (v) investigating, defending, negotiating and
arbitrating any other claim for indemnification by PSE or the Surviving
Corporation hereunder, (vi) paying any Indemnification Obligation from the
escrow fund established under the Escrow Agreement, (vii) distributing amounts
released from the escrow fund established under the Escrow Agreement, and (viii)
taking any other actions which the Shareholders Representative deems in his sole
discretion to be necessary or appropriate to carry out and comply with the terms
of this Agreement. PSE, Merger Subsidiary and the Surviving Corporation shall
not be responsible or liable in any manner for any actions taken or omitted to
be taken by the Shareholders Representative, including but not limited to the
obligation of the Shareholders Representative to pay to
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<PAGE> 27
the Shareholders the amounts received by it and due to the Shareholders pursuant
to this Agreement, and each Shareholder covenants, severally and not jointly
with and for the benefit of PSE, Merger Subsidiary, the Surviving Corporation
and the other Shareholders, that such Shareholder shall not assert any claims
against PSE, Merger Subsidiary or the Surviving Corporation for or with respect
to any acts or omissions of the Shareholders Representative, and each
Shareholder shall, severally and not jointly with the other Shareholders,
indemnify and hold harmless each of PSE, Merger Subsidiary, the Surviving
Corporation from any loss, expense or damage resulting from or arising out of
such Shareholder's breach of the foregoing covenant. Notwithstanding anything to
the contrary contained in this Agreement, the Shareholders' indemnity
contemplated by this Section 4.5 shall not be included within or limited by the
provisions of Section 9.3 hereof including, but not limited to, the Maximum
Indemnification Obligation.
(b) The Shareholders Representative hereby accepts the appointment
by the Shareholders contemplated herein and agrees to take such actions as the
Shareholders Representative in his sole discretion shall deem appropriate to
accomplish the purposes, enforce the rights and protect the interests of the
Shareholders under this Agreement so that the Shareholders may receive the full
benefit thereof.
(c) Upon receipt of the Cash Purchase Price (less the deductions
specified in Section 4.3(a) hereof), the Shareholders Representative shall
promptly distribute the cash to the Shareholders subject to and in accordance
with this Article 4. The Shareholders
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Representative is authorized to take such additional action as in the sole
judgment of the Shareholders Representative is necessary or advisable to
accomplish the purposes, enforce the rights and protect the interests of the
Shareholders under this Agreement, including the authority to investigate,
negotiate, prosecute and defend, and to resolve and settle by arbitration or
otherwise, any claim of or against the Shareholders, or the Shareholders
Representative, under this Agreement, to waive, compromise or release any rights
of the Shareholders under this Agreement, upon any evidence deemed to be
sufficient by the Shareholders Representative. In the administration of his
powers and duties hereunder, the Shareholders Representative is authorized to
employ or contract for services of financial advisors, consultants, accountants,
attorneys and other professionals and experts, and to employ or contract for
clerical and other administrative assistance and to make payments from the
Reserves of all reasonable fees for services or expenses in any manner thus
incurred. As soon as is practicable after receipt of notice of any claim for
indemnification from PSE under this Agreement, or the occurrence of any other
event under this Agreement which in the sole judgment of the Shareholders
Representative materially adversely affects the Shareholders, the Shareholders
Representative shall give written notice thereof to each of the Shareholders.
(d) The Shareholders Representative shall be entitled to withhold
from distribution and maintain the Reserves for such reasonable period of time
as the Shareholders Representative may determine in his sole discretion, and to
pay from the Reserves any
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<PAGE> 29
out-of-pocket fees, costs and expenses incurred by him in the discharge of his
responsibilities hereunder.
(e) No provision of this Agreement shall be construed to relieve
the Shareholders Representative from liability for his own gross negligence or
his own willful misconduct. Notwithstanding the foregoing, however,
(i) the Shareholders Representative shall not be liable for
any error of judgment made in good faith nor any action taken or
omitted to be taken by him in good faith and reasonably believed
by him to be within the discretion or powers conferred upon him or
in good faith omitted to be taken by him because such action is
reasonably believed to be beyond the discretion or powers
conferred upon him, or taken pursuant to any direction or
instruction under this Agreement or omitted to be taken for any
reason or the lack of direction or instruction required for such
action, or be responsible for the consequences of any error of
judgment reasonably made by him;
(ii) the Shareholders Representative shall not be liable
with respect to any action taken or omitted to be taken at the
direction of Shareholders holding more than two-thirds of 50,000
Shares of Technologies Common Stock immediately prior to the
Effective Time of the Merger;
(iii) the Shareholders Representative need not take any
action if he shall have been advised in writing by independent
counsel that such action is contrary to law or this Agreement (as
the same may be from time to time amended) or is likely to
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result in liability to the Shareholders Representative in his
individual capacity;
(iv) no provision of this Agreement shall require the
Shareholders Representative to expend or risk his own funds or
otherwise incur any financial liability in the performance of any
of his duties hereunder, or in the exercise of any of his rights
or powers, unless he has been furnished with indemnity from the
Shareholders in form and substance satisfactory to the
Shareholders Representative;
(v) the Shareholders Representative may rely, and shall be
protected in acting or in refraining from acting in reliance, upon
any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order or other paper or document
believed by him to be genuine and to have been signed or presented
by the proper party or parties and shall not be bound to make any
investigation into any of the matters contained in any of the
foregoing; and
(vi) the Shareholders Representative may consult with
professionals to be selected by him and the Shareholders
Representative shall not be liable for any action taken or omitted
to be taken by him in accordance with the advice of such
professionals.
(f) All moneys and other assets received by the Shareholders
Representative shall, until distributed or paid over as herein provided, be held
in trust for the benefit of the Shareholders and invested in U.S. government
obligations or money-market funds invested
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primarily in U.S. government obligations. The Shareholders Representative shall
be under no liability for interest or for producing income on any moneys
received by the Shareholders Representative hereunder and held for distribution
or payment to the Shareholders, except as such interest shall actually be
received by the Shareholders Representative. The Shareholders Representative
shall provide to the Shareholders on an annual basis an accounting (unaudited)
of the Reserves and a status report in narrative form regarding existing claims
and contingencies against which the Reserves are being retained as requested.
(g) The Shareholders Representative shall be entitled to
reimbursement from the Reserves for all reasonable out-of-pocket expenses
incurred in connection with the performance of his duties hereunder.
(h) The Shareholders Representative shall be indemnified by the
Shareholders, and shall be entitled to reimbursement from the Shareholders
against and from any and all loss, liability, expense or damage which the
Shareholders Representative may sustain in good faith and without gross
negligence or willful misconduct in the exercise and performance of any of the
powers and duties of the Shareholders Representative under this Agreement. The
provisions of this Section shall survive termination of this Agreement and shall
remain available to any former Shareholders Representative replaced or resigning
under Section 4.5(i).
(i) The Shareholders Representative may resign by giving not less
than sixty (60) days prior written notice thereof to the
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Shareholders. Such resignation shall become effective on the day specified in
such notice or upon the appointment of a successor and the acceptance by such
successor of such appointment, whichever is earlier. The Shareholders
Representative may be removed at any time, with or without cause, by action of
Shareholders holding (immediately prior to the Effective Time) more than half of
the 50,000 Shares of Technologies Common Stock then held collectively by the
Shareholders. In the event of the Shareholders Representative's resignation or
removal, a successor Shareholders Representative shall be selected by
Shareholders holding (immediately prior to the Effective Time) more than half of
the 50,000 Shares of Technologies Common Stock then held collectively by the
Shareholders. Any successor Shareholders Representative appointed hereunder
shall execute an instrument accepting such appointment hereunder and shall file
such acceptance with PSE, and shall further agree to assume and perform the
obligations of the Shareholders Representative under the Escrow Agreement.
Thereupon, such successor Shareholders Representative shall, without any further
act, become vested with all the estates, properties, rights, powers, trusts and
duties of his hereunder with like effect as if originally named herein,
including without limitation, any remaining Reserves. The resigning or removed
Shareholders Representative shall cooperate in all respects to transfer his
estates, properties, rights, powers, trusts and duties hereunder to such
successor Shareholders Representative; and the indemnifications in Section
4.5(h) shall continue to apply to such resigned or removed Shareholders
Representative.
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(j) Each Shareholder hereby authorizes the Shareholders
Representative to pay to Mr. Jim Jones that portion of the amount to which such
Shareholder is entitled under Section 4.3(a)(iii) that will satisfy the
indebtedness of such Shareholder to Mr. Jones set forth on Schedule 4.5(j) of
the Disclosure Letter.
ARTICLE 5
Representations and Warranties of Technologies
Technologies represents and warrants to PSE and Merger Subsidiary
that, except as set forth in the Disclosure Letter:
5.1 Corporate Status.
Technologies is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland and is qualified
and authorized to do business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of its business requires such
qualification, except for those jurisdictions where the failure to qualify would
not have a Material Adverse Effect. Technologies has the requisite corporate
power and authority to enter into this Agreement and perform its obligations
hereunder. Technologies has all corporate power to carry on its business as it
is now being conducted, and to own and operate the properties used in its
business. Technologies has no Subsidiaries.
5.2 Corporate Action. All corporate and shareholder actions and
proceedings necessary to be taken by or on the part of Technologies to adopt and
approve this Agreement have been duly and validly taken, and the execution,
delivery and performance of this Agreement have been duly and validly authorized
by all necessary corporate and shareholder
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action. This Agreement has been duly and validly executed and delivered by
Technologies and constitutes the legal, valid and binding obligation of
Technologies, enforceable against Technologies in accordance with and subject to
its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws from
time to time in effect affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
5.3 No Defaults. Neither the execution and delivery by Technologies of
this Agreement, the performance of its obligations hereunder, nor the
consummation of the transactions contemplated hereby is an event that, of
itself, or with the giving of notice or the passage of time or both, will (i)
conflict with the Articles or by-laws of Technologies, (ii) assuming that all of
the approvals or consents referred to on Schedule 5.11 of the Disclosure Letter
or otherwise contemplated hereby are obtained, constitute a violation of, or
conflict with or result in any breach of or any default under, or constitute
grounds for termination or acceleration of, any mortgage, indenture, lease,
contract, agreement or instrument to which Technologies is a party or by which
Technologies is bound, or result in the creation of any Lien (other than
Permitted Liens) upon any of Technologies Assets (in each case, except for those
conflicts, violations, breaches, defaults, terminations, accelerations or Liens
which either singly or in the aggregate are immaterial); or (iii) violate (A)
any judgment, decree, or order, or (B) assuming the filings, consents and
approvals referred to on Schedule 5.11 of the
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Disclosure Letter or otherwise contemplated hereby are made or obtained, any
statute, rule or regulation, in each such case, applicable to Technologies.
5.4 Financial Statements. Technologies has previously delivered to PSE
copies of (i) the balance sheets of Technologies as at March 31, 1995 and March
31, 1994 and the statements of income and cash flow of Technologies for each of
the years then ended, together with report thereon of Ernst & Young (the
"Audited Statements") and (ii) the internally prepared unaudited balance sheet
of Technologies (the "Interim Balance Sheet") as at September 30, 1995 (the
"Interim Balance Sheet Date") and the internally prepared unaudited statement of
income of Technologies for the portion of the fiscal year then ended (the
"Interim Income Statement" and collectively with the Interim Balance Sheet, the
"Interim Statements"). The Financial Statements are attached to Schedule 5.4 of
the Disclosure Letter and present fairly, in all material respects, the
financial position of Technologies as of March 31, 1995, March 31, 1994 and the
Interim Balance Sheet Date and the results of operations of Technologies for the
periods then ended, all in conformity with GAAP, except that the Interim
Statements are subject to normal year-end adjustments and do not contain the
disclosures required by GAAP to be disclosed in the notes to financial
statements. Since September 30, 1995, there has been no material change in
Technologies' method of managing its financial reserves or accruals other than
in the ordinary course of business, including, without limitation, any material
decrease in its level of financial reserves and accrual balances.
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5.5 Conduct of Business. (a) Except as set forth in Schedule 5.5(a) of
the Disclosure Letter, from March 31, 1995 to the date of this Agreement there
has been no:
(i) declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with
respect to the capital stock of Technologies;
(ii) actual or, to Technologies' Knowledge, threatened
organizational activity with respect to the establishment of a
union or any strike or significant work stoppage affecting the
business or operations of Technologies, or, to Technologies'
Knowledge, any complaint against Technologies filed with the
National Labor Relations Board, any arbitration tribunal or any
administrator of any applicable state or federal wage/hour laws or
equal employment opportunity laws;
(iii) physical damage, destruction or loss in an amount
exceeding $100,000 in the aggregate affecting any of Technologies
assets; or
(iv) change by Technologies in accounting principles or
methods except insofar as any be permitted by a change in GAAP.
(b) Except as set forth on Schedule 5.5(b) of the Disclosure
Letter, from September 30, 1995 to the date of this Agreement there has been no:
(i) material change in Technologies' method of managing its
working capital other than in the ordinary course of business,
including, without limitation, (A) any material change in its
level of inventories over the level maintained for comparable
periods
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during prior fiscal years as reasonably adjusted for changes in
sales, (B) any material change in its practice of collecting
accounts receivable or (C) any material change in its practice of
making payment upon accounts payable;
(ii) to Technologies' Knowledge, any other change which,
individually or in the aggregate, constitutes a Material Adverse
Effect;
(iii) waiver of any material rights by Technologies under any
material contract except for discounts granted to Technologies'
customers in the ordinary course of business; or
(iv) increase in total compensation paid, payable or to
become payable to any of the employees of Technologies listed on
Schedule 5.8 of the Disclosure Letter in excess of the amounts
reflected thereon, or any change in perks, benefits or other
compensation or severance arrangements affecting the employees of
Technologies (other than increases in wages and salaries made in
the ordinary course of business). 5.6 Condition of Assets. The
tangible assets of Technologies are being maintained in accordance
with the usual practices of Technologies, are in satisfactory
working condition, reasonable wear and tear excepted, and are
capable of being used for their intended purpose.
5.7 Title, Liens, etc.
(a) Schedule 5.7 of the Disclosure Letter contains a list of (i)
all items of tangible personal property owned by Technologies and used or held
for use in connection with the business or operations of
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Technologies as of the date of this Agreement, in each case to the extent such
item has a current depreciated book value in excess of $1,000, (ii) all
automobile or other vehicle leases, and (iii) all other leases of personal
property to the extent any such lease involves rental payments by Technologies
in excess of $50,000 per annum. Schedule 5.7 of the Disclosure Letter contains
descriptions of all land, leaseholds and other interests in real property and
buildings owned, leased or otherwise possessed by Technologies and used or held
for use in connection with the business and operations of Technologies, in each
case to the extent such interest involves rental payments by Technologies in
excess of $50,000 per annum.
(b) The material assets of Technologies are free and clear of all
Liens, except (i) as disclosed on Schedule 5.7 of the Disclosure Letter; (ii)
Permitted Liens; and (iii) Liens in favor of banks as set forth in Note 3 to the
Technologies March 31, 1995 Audited Financial Statements.
(c) No condemnation of any material portion of Technologies' real
property has occurred, nor has Technologies received written notice from any
governmental authority of a proposal to condemn any material portion of such
real property.
5.8 Employees.
(a) Except as disclosed on Schedule 5.8, Technologies has no
written or oral contract of employment with any of its employees which provides
for severance pay or which is not terminable at will or on notice of not longer
than thirty (30) days, nor is Technologies a party to or subject to any
collective bargaining agreements with
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respect to its employees. Schedule 5.8 contains a true and complete list of all
individuals employed by Technologies as of the date hereof whose total annual
compensation as of April 1, 1995 exceeded $75,000.
(b) Schedule 5.8 to the Disclosure Letter sets forth all "employee
benefit plans" (within the meaning of Section 3(3) of ERISA), including, without
limitation, any pension, welfare or savings plan or arrangement, or any employee
stock purchase or stock option, deferred compensation, employment, severance,
vacation or holiday pay, medical, dental, sick leave, performance, car
allowance, bonus, 401-K, profit sharing, incentive, or insurance plan or similar
plan, policy or arrangement whether or not in written form (the "Benefit Plans")
which Technologies maintains with respect to its employees. Technologies has
made available to PSE copies of each written Benefit Plan which relates to or
covers any employees of Technologies and related trust agreements as in effect
on the date hereof. Except as set forth in Schedule 5.8 of the Disclosure
Letter, no Benefit Plan is a (and Technologies is not required to contribute to
any) "multiemployer plan" (within the meaning of Section 3(37) of ERISA), and
Technologies does not maintain any plan, policy or arrangement that provides
post-retirement medical or other benefits to any employees or former employees
of Technologies, except as required by applicable law.
(c) Except as set forth in Schedule 5.8 of the Disclosure Letter,
each of the Benefit Plans is in compliance with applicable requirements of
ERISA, the Code and other applicable law, and are accrued and properly funded as
of the Closing Date. Each of the
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Benefit Plans has been administered in accordance with its terms and with
applicable legal requirements. No Benefit Plan is a "defined benefit plan"
(within the meaning of Section 3(35) of ERISA) which is subject to Title IV of
ERISA. Technologies has not engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA for which no exemption exists under Section 408
of ERISA or Section 4975(c)(1) of the Code for which no exemption exists under
Section 4975(c)(2) or (d) of the Code, nor has Technologies breached its
fiduciary responsibility with respect to any Benefit Plan which could subject
PSE or Technologies to a penalty tax or other liability under ERISA or the Code
nor, except for routine claims for benefits and except as set forth in Schedule
5.8 of the Disclosure Letter, does Technologies have any pending or to its
Knowledge threatened claim or litigation by any party with respect to the
Benefit Plans. Technologies has the right to amend or terminate, without the
consent of any other Person, any Benefit Plan which they maintain except as
prescribed by law. Technologies has no liability of any nature, whether absolute
or contingent, with respect to any Benefit Plan which was in the past maintained
by it or to which it was required to contribute or with respect to any Benefit
Plan which was in the past or is currently maintained by any other sponsor or to
which any other employer or sponsor was in the past or is currently required to
contribute.
(d) Technologies is in compliance in all material respects with
all applicable federal, state and local laws and ordinances relating to the
employment of labor, including the provisions thereof relating
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to wages, hours and the payment of social security taxes, and is not liable for
any arrears of wages or any tax relating thereto (except for currently accrued
and unpaid wages and except for currently accrued withholding, payroll,
unemployment, personal property, intangible, sales, other miscellaneous and
social security taxes payment of which is not overdue) or penalties for failure
to comply with any of the foregoing and has received no written notice to the
contrary from any governmental agency.
5.9 Litigation. Except as set forth on Schedule 5.9 of the Disclosure
Letter, there is no litigation, proceeding or investigation pending or, to the
Knowledge of Technologies, threatened against Technologies and Technologies has
not been operating under or subject to, or in default with respect to, any
order, writ, injunction or decree of any court or federal, state, municipal or
other governmental department, commission, board, agency or instrumentality,
foreign or domestic.
5.10 Brokers. There is no investment banker, broker or finder or other
Person having a claim against Technologies for a commission or brokerage fee in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby as a result of any agreement of or
action taken by Technologies or any Shareholder.
5.11 Approvals and Consents. To Technologies' Knowledge, the only
approvals or consents of, or filings to be made with, Persons not a party to
this Agreement that are required by law to be obtained or made by Technologies
or required to be obtained or made under any
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material contractual obligation of Technologies in connection with the
consummation of the transactions contemplated by this Agreement, are those which
are described in Schedule 5.11 of the Disclosure Letter.
5.12 Intellectual Properties. Set forth on Schedule 5.12 to the
Disclosure Letter is a list of all of the material United States and foreign
patents, trademark and service mark registrations, copyright registrations and
applications therefor, and all trade names and logotypes (collectively,
"Intellectual Properties") owned, used or held for use by Technologies in
connection with the business or operation of Technologies. Also set forth on
Schedule 5.12 to the Disclosure Letter is a list of all material Intellectual
Properties licensed by Technologies to others and by others to Technologies in
connection with the business or operation of Technologies. Except as disclosed
on Schedule 5.12 of the Disclosure Letter, Technologies has not received any
notice or claim that the use by Technologies of any of the Intellectual
Properties conflicts with or infringes on the rights of any other party. Except
as disclosed on Schedule 5.12 of the Disclosure Letter, Technologies is not
aware of any infringement, misappropriation or misuse of any of the Intellectual
Properties owned by Technologies by others.
5.13 Contracts. Schedule 5.13 to the Disclosure Letter lists all
material supplier and customer agreements and all other Contracts providing for
payments by or to Technologies to the extent such other Contracts impose
monetary obligations on or provide rights to Technologies of more than $100,000.
To the Knowledge of Technologies, Technologies is not in default under any such
Contract, other than
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immaterial defaults which would not (i) impose a material monetary obligation on
Technologies, or (ii) accelerate the time for payment of any material amount due
from Technologies or the performance of any material obligation of Technologies
thereunder, or (iii) give rise in favor of the other party thereto a right to
unilaterally terminate or modify any such Contract in a manner materially
adverse to Technologies.
5.14 Compliance with Laws. The operations of Technologies are being
conducted in compliance with all material federal, state, local or foreign law,
ordinance or regulation other than immaterial violations which would not impose
a monetary obligation on Technologies. Except as set forth on Schedule 5.14 of
the Disclosure Letter, since April 1, 1992, Technologies has not received any
notice from any governmental authority that the operations of Technologies are
being or have been conducted in violation of any applicable law, ordinance, or
regulation of any governmental authority.
5.15 Technologies Capitalization; Subsidiaries.
(a) The authorized capital stock of Technologies consists of
100,000 shares of Common Stock, of which there are 100,000 shares issued and
outstanding. All the issued and outstanding shares of Technologies Stock are
validly issued, fully paid and nonassessable and free of restrictions and
preemptive rights, except as contemplated by that certain Supplemental Stock
Purchase Agreement, dated as of July 24, 1986, that certain Share Purchase
Agreement, dated June 28, 1989, and that certain Voting Trust Agreement, dated
November 8, 1989, true copies of which have been provided to PSE, (collectively,
the
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"Shareholders' Agreements"). Except as indicated above, as of the date hereof,
(i) there are no shares of capital stock of Technologies authorized, issued or
outstanding and (ii) there are no outstanding subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any
character obligating Technologies to issue, transfer or sell any shares of the
capital stock of Technologies or any security convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock of
Technologies, except as provided in the above Shareholders' Agreements.
(b) Except as set forth on Schedule 5.15 of the Disclosure
Letter, Technologies does not directly or indirectly own, beneficially or of
record, any shares of any class of capital stock or any other security of or
interest in a partnership, joint venture or other legal entity, and does not
have any option or obligation to directly or indirectly acquire, beneficially or
of record, any such stock or other security of or interest in a partnership,
joint venture or other legal entity.
5.16 Tax Matters.
(a) Technologies has prepared and filed when due (as such time
may have been extended) with the appropriate federal, state and local
authorities all tax returns required to be filed by it, which tax returns were
prepared on a good faith basis, and has paid all Taxes, including interest and
penalties, in respect of all periods covered by such returns; or, if any such
Taxes for the fiscal year 1995 and that portion of the fiscal year 1996 ended on
the Closing Date had not been
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paid as of the Closing Date, the reserves, if any, for Taxes on the Audited
Balance Sheet are sufficient for all accrued and unpaid Taxes of Technologies,
including interest and penalties with respect thereto, if any, whether or not
disputed, (subject to year-end adjustments required by PSE and reasonably
acceptable to the Shareholders Representative). Except as disclosed in Schedule
5.16 of the Disclosure Letter, (i) Technologies has not executed or filed with
the IRS or any other taxing authority any agreement now in effect extending, or
having the effect of extending, the period for assessment or collection of any
income or other Taxes, (ii) Technologies is not a party to any pending action or
proceeding by any governmental authority for assessment or collection of Taxes,
(iii) Technologies has not received notification that the IRS or any other
applicable taxing authority intends to commence a review or examination or has
proposed an adjustment of any such returns, and (iv) and no claim for assessment
or collection of taxes has been asserted against Technologies. Technologies
federal income tax returns for all fiscal years ending March 31, 1992 have been
audited and/or are closed with no taxes owing to the Internal Revenue Service.
True and complete copies of all federal, state and local income or franchise tax
returns filed by Technologies for any period not yet closed by the applicable
statute of limitations have been made available to PSE for its review.
(b) Technologies is not a party to or bound by, and does not have
any obligation under, any tax sharing or similar agreement.
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5.17 Insurance. Schedule 5.17 of the Disclosure Letter sets forth a
true and complete description of all insurance policies maintained by
Technologies. Such policies have been made available to PSE for its review, are
in full force and effect and Technologies is not in default thereunder.
5.18 Environmental Matters. Except as disclosed on Schedule 5.18 of
the Disclosure Letter, to the Knowledge of Technologies:
(a) Since April 1, 1990, Technologies has not received any notice
of a material violation of Environmental Laws which relate to the use, ownership
or occupancy of real estate now or formerly owned or leased by Technologies.
(b) Since April 1, 1990, except in accordance with valid Permits
listed in Schedule 5.20 of the Disclosure Letter or with applicable
Environmental Laws, there has been no emission, spill, release or discharge into
or upon (i) the air, (ii) soils or any improvements located thereon, (iii)
surface water or ground water, or (iv) the sewer, septic system or waste
treatment, storage or disposal system servicing any real estate now owned or
leased by Technologies, or any other real estate owned or leased by Technologies
of any Hazardous Material at or from such real estate.
(c) There are no Hazardous Materials located in or on any of the
real estate now owned or leased by Technologies in violation of Environmental
Laws or that require investigation, cleanup, or corrective action.
(d) Since April 1, 1990, there has been no complaint, order,
directive, citation or notice issued to Technologies by any
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governmental authority with respect to (i) air emissions, (ii) spills, releases
or discharges to soils or any improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or disposal
systems servicing the real estate now or formerly owned or leased by
Technologies, (iii) noise emissions, (iv) solid or liquid waste disposal, (v)
the use, generation, storage, transportation or disposal of Hazardous Wastes or
(vi) other material environmental matters, in any case affecting any such real
estate which has not been adequately addressed or remediated.
(e) Technologies is in compliance in all material respects with
all applicable Environmental Laws.
5.19 Absence of Undisclosed Liabilities. Except as and to the extent
set forth on the balance sheet of Technologies included within the Audited
Statements as at March 31, 1995 (including the notes thereto), Technologies had
no liabilities or obligations, whether accrued, contingent or otherwise, other
than liabilities and obligations of a nature not required to be reflected in (or
on footnotes to) financial statements of Technologies as at such date prepared
in accordance with GAAP, consistently applied. Since March 31, 1995,
Technologies has not incurred any such liability or obligation, except for
liabilities and obligations which have been (i) incurred in the ordinary course
of business consistent with past practice and are reflected in (or in footnotes
to) financial statements of Technologies as of the date hereof, prepared in
accordance with GAAP, (ii) incurred in the ordinary course of business
consistent with past practice and are of a nature not required to be reflected
in (or in footnotes to)
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financial statements of Technologies as of the date hereof or the Closing Date
prepared in accordance with GAAP, or (iii) disclosed pursuant to the Disclosure
Letter.
5.20 Permits. Technologies owns or possesses all material licenses,
franchises, ordinances, authorizations, permits and certificates of all
governmental authorities having appropriate jurisdiction over Technologies or
its operations which are necessary to enable Technologies to continue to conduct
its business in all material respects as presently conducted (collectively,
"Permits"). Schedule 5.20 of the Disclosure Letter sets forth a list of all such
Permits.
5.21 Indebtedness to and from Officers, Directors, Shareholders and
Affiliates. Except as set forth in Schedule 5.21 of the Disclosure Letter,
Technologies is not indebted to any director, officer, Shareholder, employee or
agent of Technologies except for amounts due as normal salary, wages, bonus,
benefits or reimbursement of ordinary business expenses. Except as set forth in
Schedule 5.21, no Shareholder, director, officer, employee or agent of
Technologies is indebted to Technologies (including ordinary business expense
advances), and all such indebtedness of any Shareholder, director or officer set
forth in Schedule 5.21 of the Disclosure Letter (as updated to reflect the
outstanding balance as of the Effective Time) shall be deducted by PSE from the
Cash Purchase Price in accordance with Section 4.3(a)(iii) above.
5.22 Executive Officers, Directors and Certain Authorized Persons.
Schedule 5.22 of the Disclosure Letter sets forth a complete and accurate list
of (i) the names of all directors of Technologies,
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(ii) the names and offices of all Executive Officers of Technologies, (iii) the
names of all individuals authorized to borrow money or incur indebtedness on
behalf of Technologies, (iv) all safes, vaults and safe deposit boxes maintained
by or on behalf of Technologies and the names of all individuals authorized to
have access thereto, (v) all bank accounts of Technologies and the names of all
individuals who are authorized signatories with respect to such accounts, the
capacities in which they are authorized and the terms of the authorizations; and
(vi) all credit cards issued to employees of Technologies.
5.23 Conflicts of Interest. Except as set forth in Schedule 5.23 of
the Disclosure Letter, no Shareholder, director or officer of Technologies has
any controlling ownership interest in (i) any material item of property, real or
personal, tangible or intangible, owned, used or leased by Technologies or (ii)
any creditor, supplier, customer, or sales representative of Technologies.
Schedule 5.23 lists all material indebtedness to or Contracts with any Affiliate
of Technologies to which Technologies is a party or by which it is bound.
5.24 Customers and Suppliers.
(a) Set forth on Schedule 5.24(a) of the Disclosure Letter is a
list of Technologies' twenty-five (25) largest customers based upon sales volume
for the fiscal year to date. Except as set forth in Schedule 5.24(a), to
Technologies' Knowledge, Technologies has not received any written or verbal
communications from any such customer indicating its intention to materially
reduce its purchases from Technologies, whether by reason of the consummation of
the transactions contemplated by this Agreement or otherwise.
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(b) Set forth on Schedule 5.24(b) is a list of Technologies' five
(5) largest suppliers based upon purchase volume for the fiscal year ended March
31, 1995. Except as set forth in Schedule 5.24(b), to Technologies' Knowledge,
Technologies has not received any written or verbal communications from any such
supplier indicating its intention to materially reduce its supply to
Technologies and/or terminate any rights under supply agreements, whether by
reason of the consummation of the transactions contemplated by this Agreement or
otherwise.
(c) Set forth on Schedule 5.24(c) of the Disclosure Letter is a
reconciliation of the accounts payable balances of Technologies and the
corresponding accounts receivable balances reflected by five (5) of the top
seven (7) largest suppliers of Technologies, as disclosed in Section 5.24(b) at
June 30, 1995.
5.25 Corporate Documents, Books and Records. Complete and correct
copies of the Articles and by-laws, and all amendments thereto, of Technologies
have been previously delivered to the PSE, and no changes in said documents will
be made on or before the Effective Date. The minute books of Technologies
contain appropriate records of all meetings and consents in lieu of meetings of
the Board of Directors (and its committees) and of the voting stockholders of
Technologies. Except as reflected in such minute books, there are no minutes of
meetings or consents in lieu of meetings of the Board of Directors (and its
committees) or of the voting stockholder(s) of Technologies of a material nature
reflecting meetings held or other corporate action taken. The books and records
of Technologies have been
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properly kept and maintained in accordance with ordinary business practice.
5.26 Ordinary Warranty. Complete and accurate copies of Technologies'
forms of standard written warranties (the "Warranties") have been previously
provided to the PSE, and no material changes have been or will be made to the
Warranties prior to the Closing Date. Except for the Warranties, and except as
disclosed on Schedule 5.26 of the Disclosure Letter, Technologies has not issued
any other written warranties with respect to products it sells. Schedule 5.26 to
the Disclosure Letter contains an accounting of the ordinary warranty expenses
for Technologies for the last two completed fiscal years. The current warranty
expense reserve shown on Schedule 5.26 as of the Interim Balance Sheet Date is
an adequate reserve established in accordance with GAAP and the past practices
of Technologies for all pending known ordinary warranty claims as of such date.
5.27 Inventory. All inventory of Technologies existing as of the
Closing Date is valued at the lower of acquisition cost (less any price
reductions granted by a manufacturer or supplier that reduce acquisition cost to
the manufacturer's or supplier's current published book cost) or market, in
accordance with GAAP. Except as may be reflected in reserves therefor in the
Audited Statements or Interim Balance Sheet, or as otherwise disclosed on
Schedule 5.27 of the Disclosure Letter:
(a) There is no part (as identified by a specific part number) in
Technologies' inventory as of the Closing Date with a receipt date of one (1)
year or greater prior to August 31, 1995, for which there
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has been no sales within the twelve (12) month period ending on August 31, 1995;
and
(b) All inventory of Technologies existing as of the Closing Date
(or which is subject to outstanding customer return commitments) is returnable
to the manufacturer or supplier (as determined by the manufacturer's or
supplier's written return policy and the written Contract in effect between the
manufacturer or supplier and Technologies), except for inventory committed to a
specific customer Contract where the Contract provides that the customer shall
assume full liability and ownership rights of such inventory with regard to
order cancellations or reschedules, changes to any bills of material or
termination of the Contracts.
5.28 Accounts Receivable. Except as set forth on Schedule 5.28 of the
Disclosure Letter, all accounts receivable of Technologies to be included on the
Audited Balance Sheet, including net debit balances from payees, are, except to
the extent of reserves to be reflected on the Audited Balance Sheet, believed by
Technologies in good faith to be (i) valid, genuine and subsisting, and
collectable within nine (9) months from the date hereof, (ii) the obligations of
persons believed by Technologies to be commercially responsible, and (iii) are
subject to no asserted counterclaims, defenses or setoffs.
5.29 Net Worth. As of the Closing Date, the Net Worth of Technologies,
excluding November profits, shall be at least $36,032,000, which was the net
worth of Technologies as reflected on its October 31, 1995 balance sheet
previously provided to PSE.
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5.30 Material Facts. No representation or warranty made by
Technologies in this Agreement contains any untrue statement of a material fact,
or omits any material fact necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE 5-A
Representations and Warranties and Covenants of Shareholders
Each of the Shareholders severally (and not jointly) represents and
warrants as follows:
5A.1 Ownership. With respect to the Shares of Technologies Common
Stock owned by such Shareholder, that such Shareholder owns all of such Shares
free and clear of any liens, charges, encumbrances and security interests other
than the Shareholders' Agreements, and that such Shareholder has full right,
authority and capacity to enter into this Agreement and perform his obligations
hereunder.
5A.2 Enforceability. This Agreement and the Escrow Agreement have been
duly and validly executed and delivered by such Shareholder and such execution
and delivery does not (i) conflict with or result in any violation by such
Shareholder of any judgment, decree, award, order, statute, rule or regulation
applicable to such Shareholder or to the Technologies Common Stock held by such
Shareholder, (ii) conflict with, violate or result in any breach of any
agreement or instrument to which such Shareholder is a party or by which such
Shareholder is bound, or constitute a default thereunder, or (iii) result in the
creation of any right, lien, security interest, claim, charge, restriction or
encumbrance of any kind or nature
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against or with respect to the Technologies Common Stock held by such
Shareholder.
5A.3 Conflicts of Interest. Such Shareholder or any entity controlled
by such Shareholder: (i) does not own, directly or indirectly, in whole or in
part, any tangible or intangible property which Technologies is using or the use
of which is necessary for the conduct of the business of Technologies
(including, without limitation, any real estate, buildings, machinery,
equipment, permit, patent, trade secret or confidential information), other than
items of tangible personal property owned by any such Shareholder who is an
employee of Technologies and which items are of immaterial value, and (ii)
except for the potential claim disclosed on Schedule 5A.3 of the Disclosure
Letter, does not have any cause of action pending or threatened against
Technologies (excluding any cause of action that may arise in favor of such
Shareholder against PSE, Merger Subsidiary or the Surviving Corporation as a
result of any breach by PSE, Merger Subsidiary or the Surviving Corporation of
this Agreement).
5A.4 Consents. Except for filings, approvals or other actions
described in this Agreement, no authorization, approval, consent or order of, or
registration, declaration or filing with, any court, governmental body or agency
or other public or private body, entity or Person is required in connection with
the execution, delivery and performance of this Agreement or Escrow Agreement by
such Shareholder which has not been made, filed or obtained.
5A.5 Noninterference. Each of the following Shareholders: Bruce
Tucker, Jay Ross, Ken Ball, Mike Baron, John Wagener, Fred Hammett,
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Tim Miyakusu, Kevin Mooney, Chuck Rybos, Don Akery, Roger Elliott, Bob Farley,
and Rick Mackey covenant and agree that for a period of two (2) years after the
Closing Date he will not induce, attempt to induce, or assist others in inducing
or attempting to induce any employee of Technologies to terminate his or her
relationship with Technologies.
ARTICLE 6
Representations and Warranties of PSE and Merger Subsidiary PSE and
Merger Subsidiary jointly and severally represent and warrant to Technologies as
follows:
6.1 Corporate Status; Capitalization.
(a) PSE is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Ohio. PSE has the requisite
corporate power and authority to enter into this Agreement and the Escrow
Agreement, to perform its obligations under such Agreements, and to carry on its
business as it is now being conducted.
(b) Merger Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland. Merger
Subsidiary has the requisite corporate power and authority to enter this
Agreement and perform its obligations hereunder. Merger Subsidiary has conducted
no business prior to the date hereof.
6.2 Corporate Action. All corporate and shareholder actions and
proceedings necessary to be taken by or on the part of PSE and Merger Subsidiary
to adopt and approve this Agreement and the Escrow Agreement have been duly and
validly taken, and the execution,
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delivery and performance of this Agreement and the Escrow Agreement have been
duly and validly authorized by all necessary corporate and shareholder action,
and do not require the further approval of any holders of any indebtedness or
obligations of PSE or Merger Subsidiary. This Agreement and the Escrow Agreement
have been duly and validly executed and delivered by PSE and Merger Subsidiary,
and this Agreement and the Escrow Agreement constitute the legal, valid and
binding obligations of PSE and Merger Subsidiary (as applicable), enforceable
against PSE and Merger Subsidiary (as applicable) in accordance with and subject
to their terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws from
time to time in effect affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
6.3 No Defaults. Neither the execution and delivery by PSE and Merger
Subsidiary of this Agreement and the Escrow Agreement, the performance of their
respective obligations hereunder or thereunder, nor the consummation of the
transactions contemplated hereby or thereby, is an event that, of itself, or
with the giving of notice or the passage of time or both, will (i) conflict with
the Articles or Code of Regulations or by-laws of PSE or Merger Subsidiary, (ii)
constitute a violation of, or conflict with or result in any breach of or any
default under, or constitute grounds for termination or acceleration of, any
mortgage, indenture, lease, contract, agreement or instrument to which PSE or
Merger Subsidiary is a party or by which PSE or Merger Subsidiary is bound, or
result in the
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creation of any Lien upon any of its assets, or (iii) violate (A) any judgment,
decree, or order, or (B) any statute, rule or regulation, in each such case,
applicable to PSE or Merger Subsidiary.
6.4 Brokers. There is no investment banker, broker or finder or other
Person having a claim against PSE or Merger Subsidiary for a commission or
brokerage fee (other than in connection with a fairness opinion to PSE's Board
of Directors) in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby as a result of any
agreement of or action taken by PSE or Merger Subsidiary.
6.5 Litigation. There is no litigation, proceeding or investigation
pending or, to PSE's or Merger Subsidiary's Knowledge, threatened against either
of them which could reasonably be expected to affect the ability of either PSE
or Merger Subsidiary to carry out fully the transactions contemplated by this
Agreement.
6.6 Funds. PSE has financing arrangements unconditionally available
for the purpose of paying the Cash Purchase Price on January 4, 1996, which will
unconditionally be paid without setoff or deduction whatsoever except as
expressly provided in Section 4.3(a).
6.7 Approvals and Consents. Except for the filing of the Certificate
of Merger with the Maryland Secretary of State pursuant to the Act, no
Governmental Action and no consents or approvals of or filings or registrations
with any third party are necessary in connection with (A) the execution and
delivery by PSE and Merger Subsidiary of this Agreement and the Escrow Agreement
and (B) the
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consummation by PSE and Merger Subsidiary of the Merger and the other
transactions contemplated hereby.
6.8 Business of Merger Subsidiary. Merger Subsidiary has not engaged
in any business activities or entered into any transaction except in connection
with this Agreement and the performance by Merger Subsidiary of its obligations
hereunder.
6.9 Material Facts. No representation or warranty made by PSE or
Merger Subsidiary in this Agreement contains any untrue statement of a material
fact, or omits any material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE 7
Certain Obligations of PSE and Merger Subsidiary
Prior to or on the Closing Date, PSE and/or Merger Subsidiary has
caused the following conditions to be fulfilled:
7.1 Opinions of Counsel. PSE and Merger Subsidiary have delivered to
Technologies opinion(s) of counsel to PSE and Merger Subsidiary, dated the
Closing Date, in the form attached to this Agreement as Exhibit B.
7.2 Deliveries. PSE and Merger Subsidiary have delivered to the
Shareholders Representative and the Escrow Agent:
(a) Certified copies of resolutions, duly adopted by each of PSE's
and Merger Subsidiary's Board of Directors, and by PSE as the sole stockholder
of Merger Subsidiary, which shall be in full force and effect on the Closing
Date, authorizing the execution, delivery and performance by PSE and Merger
Subsidiary of this Agreement and the
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Escrow Agreement and the consummation of the transactions contemplated hereby
and thereby; and
(b) Such other documents or payments as are required to be
delivered or paid by PSE or Merger Subsidiary pursuant to this Agreement.
7.3 Vote of Technologies Common Stock. PSE has voted its 50,000 Shares
of Technologies Common Stock owned of record by PSE in favor of the Merger.
7.4 Letter of Credit. PSE has delivered the Letter of Credit to the
Shareholders Representative.
7.5 Noncompetition Agreements. PSE shall have delivered or caused to
be delivered to each of Bruce S. Tucker and Jay S. Ross, a Noncompetition
Agreement, in mutually agreeable form.
ARTICLE 8
Certain Obligations of Technologies
Prior to or on the Closing Date, Technologies has caused the following
conditions to be fulfilled:
8.1 Opinions of Counsel. Technologies has delivered to PSE an opinion
of counsel to Technologies, dated the Closing Date, in the form attached to this
Agreement as Exhibit C.
8.2 Deliveries. Technologies has delivered to PSE or Merger
Subsidiary:
(a) Certified copies of resolutions, duly adopted by the Board of
Directors and Shareholders of Technologies, which shall be in full force and
effect on the Closing Date, authorizing the execution, delivery and performance
by Technologies of this Agreement and the
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Escrow Agreement and the consummation of the transactions contemplated hereby;
(b) Certificate No. 104 for 50,000 Shares of Technologies Common
Stock registered in the name of Bruce S. Tucker and James A. Jones, Sr., Voting
Trustees, with duly executed stock powers;
(c) Agreements of the parties to the Shareholders' Agreements
cancelling the Shareholders' Agreements on or prior to the Closing Date;
(d) Such other documents or payments as are required to be
delivered or paid by Technologies pursuant to this Agreement; and
(e) Written resignations of Bruce Tucker and Jay Ross as Directors
of Technologies and written resignations of all elected or appointed Officers of
Technologies.
8.3 No Dissenting Shares. No dissenters' rights have been properly
perfected and not withdrawn or forfeited under applicable law by any Shareholder
with respect to the Merger.
8.4 Vote of Technologies Common Stock. Each Shareholder has voted his
Shares of Technologies Common Stock, owned of record or beneficially in favor of
the Merger, and Bruce S. Tucker and Jay S. Ross, as the current Voting Trustees
under the Voting Trust referred to in Section 5.15(a), shall have voted in favor
of the Merger the 50,000 Shares of Technologies Common Stock owned of record and
represented by stock certificate No. 104.
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<PAGE> 61
ARTICLE 9
Survival of Representations and Warranties; Indemnification
9.1 Survival.
(a) Except with respect to (i) Tax Liabilities and (ii) Ownership
Liabilities, all representations and warranties and the related indemnities
contained in this Agreement (whether by PSE or Technologies), shall survive the
Effective Time of the Merger, until May 31, 1996, provided that if at the
expiration of such period the Shareholders Representative shall have received
from PSE, or PSE shall have received from the Shareholders Representative on the
other hand, written notice of a claim with respect to an alleged breach of any
such representation or warranty or covenant (other than in respect of Tax
Liabilities or Ownership Liabilities), stating with particularity the applicable
provisions of this Agreement so breached and providing in reasonable detail all
relevant facts then known to PSE on the one hand, or the Shareholders
Representative on the other hand, with respect to such breach, the applicable
representation, warranty or covenant, and the related indemnity, will not expire
with respect to such claim until such claim has been resolved in accordance with
this Agreement.
(b) The representations and warranties of the Shareholders set
forth in Sections 5-A.1 to 5-A.4, the covenant of each Shareholder set forth in
Section 4.5(a), and the related indemnity for Ownership Liabilities contained in
Section 9.2, shall survive indefinitely the Effective Time of the Merger.
57
<PAGE> 62
(c) The representations and warranties of Technologies set forth
in Section 5.16, and the related indemnity for Tax Liabilities contained in
Section 9.2, shall survive the Effective Time of the Merger until December 31,
1998. Neither PSE nor the Surviving Corporation shall consent to the extension
of, or take any other action to extend, any applicable statute of limitations
with respect to such tax year without the prior written consent of the
Shareholders Representative.
9.2 Indemnification of PSE.
(a) Subject to the limitations contemplated by Section 9.3 below,
PSE shall be entitled to indemnification solely out of the escrow fund
established pursuant to the Escrow Agreement, in the manner and to the extent
contemplated by this Article 9, for any (i) Tax Liabilities, and (ii) other
out-of-pocket loss, cost, damage or expense (including, but not limited to,
reasonable attorneys and accounting fees) actually paid or incurred by PSE or
the Surviving Corporation, less any insurance proceeds payable in connection
therewith, and arising from any misrepresentation or breach of warranty or
covenants of Technologies in this Agreement, other than Sections 5.27, 5.28,
5.29 and 5.30 (as it relates to the foregoing Sections), as to which the
provisions of Section 3.3 hereof provide the exclusive remedy (collectively
referred to herein as "Damages").
(b) Each Shareholder shall indemnify and hold harmless PSE for any
Ownership Liabilities attributable to such Shareholder. PSE's sole recourse for
indemnification against Ownership Liabilities shall
58
<PAGE> 63
be against the Shareholder to whom such Ownership Liability is attributable.
9.3 Limitations as to Indemnification Obligation.
(a) Indemnification for Ownership Liabilities and Tax Liabilities
shall be from the first dollar, without regard to the Basket (as hereinafter
defined). Such indemnification shall be for the full amount of the Damages
resulting therefrom, and shall not be reduced on any percentage basis. In
addition, indemnification shall be made for Tax Liabilities regardless of any
disclosures relating thereto in the Disclosure Letter (e.g., disclosure of a tax
audit in the Disclosure Letter shall not prevent indemnification for Tax
Liabilities resulting from any such audit).
(b) There shall be no liability with respect to any other
indemnification obligation unless and until the total of all Damages (exclusive
of Ownership Liabilities and Tax Liabilities) exceeds $250,000 (the "Basket"),
at which time liability shall exist only with respect to fifty percent (50%) of
all such Damages, from the first dollar of such Damages, without regard to the
Basket (subject, however, to the limitations contemplated by Sections 9.3(b),
(c) and (d)).
(c) There shall not be liability for any individual claim for
Damages, and no individual claim for Damages shall be included in the
calculation of the Basket, unless the matter involved is a claim of $10,000 or
more.
(d) Notwithstanding anything to the contrary in this Agreement, no
Shareholder shall have any individual liability for Damages or any
59
<PAGE> 64
other claim arising from or related to this Agreement, it being agreed that
PSE's and the Surviving Corporation's sole recourse for such Damages shall be to
the escrow fund established pursuant to the Escrow Agreement, except that each
Shareholder shall be fully responsible for any Ownership Liabilities
attributable to such Shareholder (but no Shareholder shall be responsible for
any Ownership Liabilities attributable to any other Shareholder and no recourse
may be had against the escrow fund for such Ownership Liabilities).
(e) Notwithstanding anything to the contrary contained in this
Agreement, PSE shall not be entitled to any indemnification under Section 9.2
for any (i) loss, cost, damage or expense (including but not limited to
attorney's fees)with respect to items reserved against, or appearing as a
liability, on the Audited Balance Sheet, or (ii) loss, cost, damage or expense
(including, but not limited to attorneys' fees) paid or incurred by PSE or the
Surviving Corporation in connection with any litigation, suit or similar
proceeding (x) disclosed on Schedule 5.9 of the Disclosure Letter or (y) arising
in the ordinary course of business after the Closing Date based on or arising
out of or in connection with any event(s) occurring or condition(s) existing on
or before the Closing Date, except to the extent Technologies had Knowledge of
any threatened litigation, suit, or similar proceeding described in clause (y)
above on or prior to the Closing Date and failed to disclose such litigation,
suit or proceeding to PSE.
(f) From and after the Effective Time, the rights of PSE to
indemnification pursuant to this Article 9 shall be the sole and
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<PAGE> 65
exclusive remedy of PSE and the Surviving Corporation for any representation,
warranty or covenant set forth in this Agreement, other than the representations
and warranties set forth in Sections 5.27, 5.28, 5.29 and 5.30 (as it relates to
the foregoing Sections) as to which the adjustment set forth in Section 3.3
provides the exclusive remedy.
9.4 Notice and Settlement of Claims of PSE and Surviving Corporation;
Arbitration. If PSE (the "Indemnified Party") or the Surviving Corporation
suffers or incurs any Damages (other than Damages with respect to Tax
Liabilities or third party claims covered by Section 9.6), and if a claim for
indemnification in respect thereof is to be made under Section 9.2, the
Indemnified Party shall give notice to the Shareholders Representative within
ninety (90) days of PSE acquiring actual knowledge thereof (other than
third-party claims for which PSE seeks indemnification, with respect to which
PSE shall provide prompt written notice as soon as practicable, and in any event
within thirty (30) days of obtaining Knowledge thereof), describing such
Damages, the amount thereof, if known, and the method of computation of such
Damages, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which a breach has occurred and such
Damages have been suffered or incurred. Promptly after any such notice has been
given the parties shall endeavor to resolve any disputes with respect to the
matters set forth in such notice. If the Shareholders Representative and the
Indemnified Party cannot reach agreement within sixty (60) days after such
notice has been given, then the matter shall be submitted
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<PAGE> 66
promptly to binding arbitration to be held in Baltimore, Maryland under rules
and procedures of the American Arbitration Association applicable to commercial
transactions as then in effect ("Arbitration").
9.5 Notice and Settlement of Tax Liabilities and Damages.
(a) Upon receipt by PSE of written notice of a claim by a
governmental authority which may give rise to a Tax Liability, PSE shall give
notice of such claim within thirty (30) days to the Shareholders Representative.
The Indemnified Party and the Shareholders Representative shall cooperate with
each other in the conduct of any audit or other proceeding involving PSE or the
Surviving Corporation, provided that if within thirty (30) days the Shareholders
Representative acknowledges in writing to PSE and the Escrow Agent
responsibility for paying any Damages resulting from Tax Liability, the
Shareholders Representative shall have the right to control, at the
Shareholders' expense, the resolution of any such audit or settlement for which
any Damages resulting from any Tax, interest or penalties shall be indemnifiable
hereunder, and PSE or the Surviving Corporation shall promptly empower (by power
of attorney or such other documentation as is reasonably necessary) such
representatives of the Shareholders Representative as the Shareholders
Representative may designate to represent the Shareholders in such proceeding,
but provided, further that the Indemnified Party shall be fully advised as to
the status of any such matter and the Shareholders Representative shall have no
authority or right to bind the Indemnified Party without its written consent
with respect to any
62
<PAGE> 67
future action or tax position. If control of the defense is assumed by the
Shareholders Representative as provided above, neither the Indemnified Party nor
the Surviving Corporation shall have any right to settle any such claim without
the prior written consent of the Shareholders Representative, which shall not be
unreasonably withheld. Any dispute regarding an Indemnification Obligation on
account of Damages resulting from any Tax Liabilities shall be submitted to
Arbitration.
(b) Claims by PSE for indemnification pursuant to this Article 9
shall be reduced by any Taxes of Technologies paid on or before the date hereof
that are refunded to Technologies (or the Surviving Corporation) on or before
December 31, 1998.
9.6 Notice and Settlement of Other Third-Party Claims. Upon receipt by
PSE of notice of the commencement of any action brought by a third party which
is indemnifiable under Section 9.2 (other than on account of Tax Liabilities),
PSE shall give prompt notice thereof to the Shareholders Representative. Unless
otherwise provided below, the Indemnified Party shall have the right to defend
and settle any third party claim subject to consultation with the Shareholders
Representative, provided that if the Shareholders Representative acknowledges in
writing to PSE and the Escrow Agent responsibility for such third party claim,
except for claims involving a Technologies customer or supplier which shall
always be defended and controlled by PSE (at the expense of PSE), the
Shareholders Representative may assume the defense of any such third party claim
(not involving a Technologies customer or supplier) against the Indemnified
Party with
63
<PAGE> 68
counsel reasonably satisfactory to such Indemnified Party and, after notice from
the Shareholders Representative to such Indemnified Party) of its election so to
assume the defense thereof, the Indemnified Party shall not be entitled to
reimbursement for any fees of other counsel or any other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof, and
neither the Indemnified Party nor the Surviving Corporation shall agree to
settle any such third-party claim without the prior written consent of the
Shareholders Representative, which shall not be unreasonably withheld. If the
control or defense is not assumed by the Shareholders Representative as provided
above, PSE and the Surviving Corporation shall prosecute the defense of such
claim in good faith with the same level of diligence and effort as if the
potential liability arising from such claim was for its own account. Any dispute
regarding an Indemnification Obligation on account of third party claims covered
by this Section 9.7 shall be submitted to Arbitration.
9.7 No Waiver for Notices. The Indemnified Party shall not have waived
its right to indemnification under this Agreement merely by providing notice of
such a claim outside of the time limits set forth in Sections 9.4, 9.5 and 9.6
hereof, except to the extent such a delay has a material adverse effect on the
Damages (whether in type or amount) suffered by the Shareholders or materially
prejudices the rights of the Shareholders in respect thereof, except that no
claim may be made by the Indemnified Party i) after December 15, 1996 for
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<PAGE> 69
any Damages other than Tax Liabilities, and (ii) after December 31, 1998 for Tax
Liabilities.
9.8 Indemnification by PSE. PSE shall indemnify and hold harmless the
Shareholders for any out-of-pocket loss, cost, damage or expense (including, but
not limited to, reasonable attorneys' fees) actually paid by the Shareholders or
the Shareholders' Representative on their behalf and arising directly from any
misrepresentation or breach of warranty of PSE or Merger Subsidiary in this
Agreement. Any claim of the Shareholders hereunder shall be treated in a manner
consistent with Section 9.4. Notwithstanding anything to the contrary contained
in this Agreement, PSE shall bear liability for any such loss, cost, damage or
expense or any other claim arising from or related to this Agreement only up to
an amount equal to the Cash Purchase Price.
ARTICLE 10
Miscellaneous
10.1 Expenses. The Shareholders shall bear all of Technologies
Transaction Expenses in excess of $50,000, and PSE or the Surviving Corporation
shall bear all other expenses incurred in connection with the transactions
contemplated by this Agreement; provided, however, that fees and expenses of the
arbitration in any Arbitration shall be borne one-half by PSE and one-half out
of the escrow fund established under the Escrow Agreement.
10.2 Assignments. No party hereto may assign any of its rights or
delegate any of its duties hereunder without the prior written consent of the
other parties, and any such attempted assignment or delegation without such
consent shall be void.
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<PAGE> 70
10.3 Further Assurances. From time to time prior to, at and after the
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request in connection with carrying out and effectuating the intent and purpose
hereof and all transactions and things contemplated by this Agreement,
including, without limitation, the execution and delivery of any and all
confirmatory and other instruments in addition to those to be delivered on the
Closing Date, and any and all actions which may reasonably be necessary or
desirable to complete the transactions contemplated hereby.
10.4 Public Announcement. Except as required by law, neither party
shall make any press release or other public announcement concerning the
transactions contemplated by this Agreement without the express written consent
of the other parties (which shall not be unreasonably withheld) and the parties
shall use their reasonable best efforts to cause a mutually agreeable release or
announcement to be issued.
10.5 Notices. Notices and other communications provided for herein
shall be in writing (which shall include notice by facsimile transmission) and
shall be delivered in person or by nationally recognized overnight courier
service (or if by facsimile communications equipment of the sending party
hereto, transmitted by such equipment), addressed as follows:
If to Technologies or the Shareholders Representative:
Bruce S. Tucker
15810 Gaither Drive
Gaithersburg, Maryland 20877
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<PAGE> 71
with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004
Attention: Bruce E. Rosenblum, Esq.
If to PSE and Merger Subsidiary:
Pioneer Standard Electronics, Inc.
4800 East 131st Street
Cleveland, Ohio 44105
Attn: James L. Bayman, President and CEO
With a copy to:
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attn: William A. Papenbrock, Esq.
or to such other address as a party may from time to time designate in writing
in accordance with this Section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
10.6 Captions. The captions of Sections of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any of the provisions of this Agreement.
10.7 Law Governing. This Agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of Maryland.
10.8 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be amended, modified or waived
only by a written instrument executed by all of the parties hereto. The failure
of any party at any time or times to require performance of any provision of
this Agreement shall in no manner
67
<PAGE> 72
affect the right of such party at a later date to enforce the same. No waiver by
any party of any condition or the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any other
provision, term, covenant, representation, or warranty of this Agreement.
10.9 Counterparts. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding on the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
10.10 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, constitutes the entire Agreement between the parties and
supersedes and cancels any and all prior agreements between them relating to the
subject matter hereof.
10.11 Access to Books and Records. After the Effective Time, PSE and
the Surviving Corporation shall upon the Shareholders Representative's written
request, in connection with any determination of Damages or Indemnification
Obligation, or the defense or settlement of any Tax Liabilities, Ownership
Liabilities, or other third party claims, (i) provide to the Shareholders
Representative and other authorized representatives of the Shareholders
Representative access, during normal business hours upon reasonable advance
notice, to any and all documents and other information of the Surviving
Corporation deemed relevant by PSE, (ii) make available to the Shareholders
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<PAGE> 73
Representative and its authorized representatives, at no expense to the
Shareholders Representative or the Shareholders (other than reimbursement of
reasonable travel, lodging, food and other out-of-pocket expenses), personnel of
the Surviving Corporation deemed appropriate by PSE to consult with such persons
and to testify at appropriate proceedings, and (iii) make available for
inspection and copying by the Shareholders Representative and its authorized
representatives at the Shareholders' expense, true and complete copies of any
documents relating to the foregoing.
10.12 Schedules and Amendments to Schedules. Any information disclosed
on any Schedule hereto or the Financial Statements shall be deemed fully
disclosed for the purposes of all the Schedules hereto and all purposes hereof.
10.13 Releases. On or before the thirtieth (30th) day after the
Closing Date, each of Bruce Tucker, Jay Ross, Ken Ball, Mike Baron, John
Wagener, Chuck Rybos, Jim Jones, and Fred Hammet shall deliver to PSE an
executed Waiver and Release, in form and substance satisfactory to PSE, executed
by each such person no sooner than the twenty-second (22nd) day after their
respective receipt thereof and by which each such person shall waive and release
any and all claims which he has or may have against PSE and/or Technologies and
their respective parents, subsidiaries, divisions, and affiliated businesses,
together with their respective officers, directors, shareholders, management,
agents, employees, representatives, and attorneys, arising out of or relating to
any acts or omissions, known or unknown, occurring on or before the effective
date of each respective Waiver and Release,
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<PAGE> 74
including, but not limited to, claims or demands relating or pertaining to
employment discrimination, failure to hire and/or rehire, and any claims
pertaining to and/or arising under the federal Worker Adjustment and Retraining
Notification Act ("WARN"), as amended, and the implementing regulations
promulgated thereunder.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 75
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
this Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
PIONEER-STANDARD ELECTRONICS, INC.
By: /s/ James L. Bayman
----------------------------------------------------
Its: President and Chief Executive Officer
PIONEER-STANDARD OF MARYLAND, INC.
By: /s/ James L. Bayman
----------------------------------------------------
Its
----------------------------------------------------
PIONEER/TECHNOLOGIES GROUP, INC.
By:
----------------------------------------------------
Its: President and Chief Executive Officer
SHAREHOLDERS REPRESENTATIVE
/s/ Bruce S. Tucker
-------------------------------------------------------
Bruce S. Tucker
(Signatures of all Shareholders continued on next page.)
71
<PAGE> 76
<TABLE>
<CAPTION>
PRO PRO
RATA RATA
SHARES % SHARES %
------ ---- ------ ----
<S> <C> <C> <C> <C> <C>
- ---------------------- ---------------------
Bruce S. Tucker 14,147 28.2940 Donald Akery 495 .9900
---------------------
Jef Allen 495 .9900
- ---------------------- ---------------------
Jay S. Ross 8,000 16.0000 Roger Elliott 495 .9900
- ---------------------- ---------------------
Kenneth Ball 4,885 9.7700 Robert Farley 495 .9900
- ---------------------- ---------------------
Michael L. Baron 4,885 9.7700 David Ernst 490 .9800
- ---------------------- ---------------------
John H. Wagener 4,885 9.7700 Robert J. Dulmage 415 .8300
- ---------------------- ---------------------
Robert F. Hammett 3,339 6.6780 Richard C. Mackey 365 .7300
- ---------------------- ---------------------
Harold C. Jeffers 1,522 3.0440 David S. Coleman 340 .6800
- ---------------------- ---------------------
Timothy Miyakusu 1,009 2.0180 Richard S. Crouch 307 .6140
- ---------------------- ---------------------
Kevin P. Mooney 708 1.4160 Michael Ezekiel 304 .6080
- ---------------------- ---------------------
Anthony R. DeMichael 556 1.1120 Allen Hawse 304 .6080
- ---------------------- ---------------------
Charles G. Rybos 535 1.0700 Saul S. Levine 304 .6080
- ---------------------- ---------------------
Peter J. Coleman 516 1.0320 Donald Clubbs 204 .4080
</TABLE>
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<PAGE> 77
EXHIBITS
A. Escrow Agreement
B. Opinion of Counsel for PSE and Merger
Subsidiary
C. Opinion of Counsel for Technologies
D. Form of Employment Agreement
73
<PAGE> 1
CREDIT AGREEMENT
DATED AS OF NOVEMBER 29, 1995
AMONG
PIONEER-STANDARD ELECTRONICS, INC., AND
PIONEER-STANDARD OF MARYLAND, INC.,
AS BORROWERS,
AND
THE BANKS IDENTIFIED ON THE SIGNATURE PAGES HERETO,
AS LENDERS,
AND
NATIONAL CITY BANK,
AS AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ................................................................. 1
ARTICLE I DEFINITIONS ................................................ 1
ARTICLE II THE CREDIT ................................................. 17
2.1 Commitment ..................................................... 17
2.2 Final Principal Payment ........................................ 17
2.3 Ratable Loans .................................................. 17
2.4 Applicable Margins ............................................. 17
2.5 Commitment Fee; Closing Fee; Interim Letter of
Credit Fee ..................................................... 18
2.6 Other Fees ..................................................... 19
2.7 Minimum Amount of Loans ........................................ 19
2.8 Interest Payable on the Loans .................................. 19
(a) Initial Interest ........................................... 19
(b) Method of Selecting Rate Options and Interest
Periods .................................................... 19
(c) Determination of Adjusted Base Rate ........................ 20
(d) Monthly Installments ....................................... 20
(e) Interest on Overdue Payments; Default
Interest Rate .............................................. 21
2.9 Repayments and Prepayments of Principal ........................ 22
(a) Optional Prepayments ....................................... 22
(b) Mandatory Prepayments ...................................... 22
(c) Application of Prepayments ................................. 22
(d) Maturity ................................................... 22
(e) Notice of Prepayments of Principal ......................... 23
(f) Reduction in Commitment .................................... 23
2.10 Payments and Computations ...................................... 23
(a) Time and Place of Payments ................................. 23
(b) Application of Funds ....................................... 24
(c) Payments on Business Days .................................. 24
(d) Computation of Interest .................................... 25
2.11 Payments to be Free of Deductions .............................. 25
2.12 Use of Proceeds ................................................ 25
2.13 LIBOR Break Funding Cost; CD Break Funding Cost ................ 26
2.14 Additional Costs ............................................... 26
2.15 Indemnification of Losses ...................................... 29
2.16 Statements by Agent or any Lender .............................. 29
2.17 Borrowing Notices; Telephonic Notices........................... 29
2.18 Notes; Telephonic Notices....................................... 30
2.19 Lending Installations........................................... 31
2.20 Non-Receipt of Funds by Agent................................... 31
2.21 Withholding Tax Exemption....................................... 31
2.22 The Interim Letter of Credit.................................... 32
ARTICLE III CONDITIONS PRECEDENT........................................ 35
3.1 Initial Advance................................................. 35
3.2 Each Advance.................................................... 37
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................. 38
4.1 Existence....................................................... 38
4.2 Authorization and Validity...................................... 38
4.3 No Conflict, Government Consent................................. 38
4.4 Financial Statements-- Material Adverse Change.................. 39
4.5 Tax............................................................. 39
4.6 Litigation and Contingent Obligations........................... 39
4.7 Subsidiaries.................................................... 39
4.8 ERISA........................................................... 39
4.9 Accuracy of Information......................................... 40
4.10 Regulation U.................................................... 40
4.11 Material Agreements............................................. 40
4.12 Compliance with Laws............................................ 40
4.13 Ownership of Properties......................................... 41
4.14 Investment Company Act.......................................... 41
4.15 Public Utility Holding Company Act.............................. 41
4.16 Solvency........................................................ 41
4.17 Insurance....................................................... 41
4.18 Environmental Matters........................................... 42
ARTICLE V COVENANTS................................................... 43
5.1 Financial Reporting............................................. 43
5.2 Prohibited Uses of Proceeds..................................... 45
5.3 Notice of Default............................................... 45
5.4 Conduct of Business............................................. 45
5.5 Taxes........................................................... 46
5.6 Insurance....................................................... 46
5.7 Compliance with Laws............................................ 46
5.8 Maintenance of Properties....................................... 46
5.9 Inspection...................................................... 46
5.10 Maintenance of Status........................................... 47
5.11 Merger; Sale of Assets.......................................... 47
5.12 Delivery of Subsidiary Guaranties............................... 47
5.13 Sale and Leaseback.............................................. 47
5.14 Acquisitions and Investments.................................... 47
5.15 Liens........................................................... 48
5.16 Affiliates...................................................... 49
5.17 Additional Indebtedness and Financial
Undertakings.................................................... 50
5.18 Litigation...................................................... 50
5.19 Further Assurances.............................................. 50
5.20 Current Ratio................................................... 50
5.21 Consolidated Tangible Net Worth................................. 50
5.22 Working Capital................................................. 51
5.23 Capital Expenditures............................................ 51
5.24 Leverage Ratio.................................................. 51
5.25 Fixed Charge Coverage Ratio..................................... 51
5.26 Investment and Loan Limit....................................... 51
5.27 Acquisition Limit............................................... 51
5.28 Environmental Matters........................................... 51
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VI DEFAULTS.................................................... 52
6.1 Nonpayment of Principal......................................... 52
6.2 Nonpayment of Other Obligations................................. 52
6.3 Certain Breaches................................................ 52
6.4 Representations and Warranties.................................. 53
6.5 Other Breaches.................................................. 53
6.6 Defaults on Indebtedness........................................ 53
6.7 Bankruptcy, etc................................................. 53
6.8 Appointment of Receiver......................................... 53
6.9 Condemnation.................................................... 54
6.10 Judgments....................................................... 54
6.11 ERISA Withdrawal................................................ 54
6.12 ERISA Reorganization............................................ 54
6.13 Other Defaults.................................................. 54
ARTICLE VII ACCELERATION, WAIVERS, AMENDMENTS AND
REMEDIES.................................................... 55
7.1 Acceleration.................................................... 55
7.2 Amendments & Waivers............................................ 55
7.3 Preservation of Rights.......................................... 56
ARTICLE VIII GENERAL PROVISIONS.......................................... 56
8.1 Survival of Representations..................................... 56
8.2 Governmental Regulation......................................... 56
8.3 Tax............................................................. 56
8.4 Heading......................................................... 56
8.5 Entire Agreement................................................ 56
8.6 Several Obligations Benefits of This Agreement.................. 57
8.7 Expenses; Indemnification....................................... 57
8.8 Numbers......................................................... 57
8.9 Accounting...................................................... 57
8.10 Severability of Provisions...................................... 57
8.11 Nonliability of Lenders......................................... 58
8.12 CHOICE OF LAW................................................... 58
8.13 CONSENT TO JURISDICTION......................................... 58
8.14 WAIVER OF JURY TRIAL............................................ 58
ARTICLE IX AGENT....................................................... 58
9.1 Appointment..................................................... 58
9.2 Powers.......................................................... 59
9.3 General Immunity................................................ 59
9.4 No Responsibility for Loans, Recitals, etc...................... 59
9.5 Action on Instructions of Lenders............................... 59
9.6 Employment of Agents and Counsel................................ 59
9.7 Reliance on Documents; Counsel.................................. 60
9.8 Agent's Reimbursement and Indemnification....................... 60
9.9 Rights as a Lender............................................... 60
9.10 Lender Credit Decision.......................................... 60
9.11 Successor Agent................................................. 61
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE X SETOFF; RATABLE PAYMENTS.................................... 61
10.1 Setoff.......................................................... 61
10.2 Ratable Payments................................................ 62
ARTICLE XI BENEFIT OF AGREEMENT; ASSIGNMENT;
PARTICIPATIONS.............................................. 62
11.1 Successors and Assigns.......................................... 62
11.2 Participations.................................................. 62
11.2.1 Permitted Participants; Effect......................... 62
11.2.2 Voting Rights.......................................... 63
11.2.3 Benefit of Setoff...................................... 63
11.3 Assignments..................................................... 63
11.3.1 Permitted Assignments.................................. 63
11.3.2 Prior Consent.......................................... 64
11.3.3 Effective Date......................................... 64
11.4 Dissemination of Information.................................... 65
11.5 Tax Treatment................................................... 65
ARTICLE XII NOTICES; NATURE OF OBLIGATIONS.............................. 65
12.1 Giving Notice................................................... 65
12.2 Change of Address............................................... 65
12.3 Nature of Borrower's Obligations and Modification
Thereof......................................................... 65
ARTICLE XIII COUNTERPARTS................................................ 67
</TABLE>
SCHEDULES
Schedule 1 Subsidiaries of Borrowers
Schedule 2 Permitted Liens
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Subsidiary Guaranty
EXHIBIT C Form of Borrowing Notice
EXHIBIT D Form of Borrowers Counsel Opinion
EXHIBIT E Form of Guarantor's Counsel Opinion
EXHIBIT F Form of Written Money Transfer Instructions
EXHIBIT G Form of Financial Compliance Certificate
EXHIBIT H Form of Notice of Assignment
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<PAGE> 6
CREDIT AGREEMENT
This Agreement, dated as of November 29, 1995, is among Pioneer-Standard
Electronics, Inc., an Ohio corporation, Pioneer-Standard of Maryland, Inc., a
Maryland corporation, and their respective successors and assigns (sometimes
collectively, "Borrowers" and sometimes individually, a "Borrower"), National
City Bank, a national banking association, and the several banks, financial
institutions and other entities from time to time parties to this Agreement
(sometimes collectively, "Lenders" and sometimes individually, a "Lender"), and
National City Bank, not individually, but as "Agent".
RECITALS
A. Borrowers are primarily engaged in the business of distributing
industrial and consumer electronic products.
B. Pioneer-Standard Electronics, Inc., is listed on the National
Association of Securities Dealers Incorporated stock exchange ("NASDAQ").
C. Borrowers have requested that Lenders make loans available to
Borrowers pursuant to the terms of this Agreement, and that Agent act as
administrative agent for Lenders. Agent and Lenders have agreed to do so.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which any Borrower (i)
acquires any business as a going concern or all or substantially all of the
assets of any firm, corporation or division thereof, whether through purchase of
assets or stock, merger or otherwise or (ii) directly or indirectly acquires (in
one transaction or as the most recent transaction in a series of transactions)
at least a majority (in number of votes) of the securities of a corporation
which have ordinary voting power for the election of directors (other than
securities having such power only by reason of the happening of a contingency)
or a majority (by percentage or voting power) of the outstanding partnership
interests of a partnership.
"Additional Facilities" means (a) a short-term money market line of credit
in the maximum principal amount of $40,000,000 to be
<PAGE> 7
loaned to Borrowers by Lenders, to be used by Borrowers for short-term overnight
borrowing needs, (b) a $10,000,000 line of credit facility for foreign exchange
purchases/sales, made available by any Lender to the Company and (c) a
$10,000,000 line of credit facility for foreign exchange purchases/sales, made
available by any Lender to Canada.
"Advance" means a borrowing hereunder consisting of the aggregate amount of
the several Loans made by Lenders to Borrowers of the same Type, including any
draws made under the Interim Letter of Credit.
"Affected Lender" is defined in Section 2.14(d).
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person
whether through ownership of stock, by contract or otherwise.
"Agent" means National City Bank in its capacity as agent for Lenders
pursuant to Article IX, and not in its individual capacity as a Lender, and any
successor Agent appointed pursuant to Article IX.
"Aggregate Measured Credit Risk" means, as at any time during the pendency
of this Agreement that an interest rate exchange agreement or interest rate
option agreement is in effect, the amount determined by the Agent in accordance
with the terms of such interest rate exchange agreement or interest rate option
agreement as being Borrower's measured credit risk thereunder at such time.
"Aggregate Commitment" means the aggregate of the Commitments of all
Lenders.
"Agreement" means this Credit Agreement, as it may be amended or modified
and in effect from time to time.
"Applicable Margin" means the applicable margin determined by reference to
the table in Section 2.4 used in calculating the interest rate applicable to the
various Types of Advances, which shall vary from time to time in accordance with
Section 2.4.
"Applicable Law" means collectively, all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions affecting the Borrowers, whether now or
hereafter enacted and in force.
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<PAGE> 8
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Financial Officer" means any vice president or treasurer of
either of the Borrowers, acting singly.
"Authorized Officer" means the Vice President/Treasurer or Internal Auditor
of the Company, acting singly.
"Base Rate Applicable Margin" means, as of any date, the Applicable Margin
in effect on such date with respect to Base Rate Loans.
"Base Rate" or "Prime Rate" means the fluctuating rate of interest which is
publicly announced from time to time by Agent at its Head Office as being its
"prime rate" or "base rate" thereafter in effect, with each change in the Base
Rate automatically, immediately and without notice being reflected in the
fluctuating interest rate thereafter applicable hereunder, it being
specifically acknowledged that the Base Rate is not necessarily the lowest rate
of interest then available from Agent on fluctuating-rate loans.
"Base Rate Loan" means a Loan which bears interest at the Base Rate.
"Borrowers", or individually, a "Borrower" means Pioneer-Standard
Electronics, Inc. (the "Company"), an Ohio corporation, Pioneer-Standard of
Maryland, Inc. ("Maryland"), a Maryland corporation, and the Company's and
Maryland's respective successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8(b).
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Advances a day (other than a Saturday or Sunday) on which banks
generally are open in Cleveland, Ohio.
"Canada" means Pioneer-Standard Canada Inc., a Canadian corporation.
"Capital Expenditures" means any and all amounts invested, expended or
incurred (including by reason of Capitalized Lease Obligations) incurred by a
Borrower in respect of the purchase, acquisition, improvement, renovation or
expansion of any properties or assets of Borrowers, including, without
limitation, expenditures required to be capitalized in accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital
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<PAGE> 9
stock of a corporation, any and all equivalent ownership interests in a Person
which is not a corporation and any and all warrants or options to purchase any
of the foregoing.
"Capitalized Lease" of a Person means any lease of Property imposing
obligations on such Person, as lessee thereunder, which are required in
accordance with GAAP to be capitalized on a balance sheet of such Person.
"Cash Equivalents" means, as of any date, (i) securities issued or directly
and fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than one year from such
date, (ii) time deposits and certificates of deposit having maturities of not
more than one year from such date and issued by any domestic commercial bank
having (A) senior long-term unsecured debt rated at least A or the equivalent
thereof by S&P or A2 or the equivalent thereof by Moody's and (B) capital and
surplus in excess of $500,000,000, and (iii) commercial paper rated at least A-1
or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moody's and
in either case maturing within 90 days from such date.
"CD Applicable Margin" means, as of any date with respect to any CD
Interest Period, the Applicable Margin in effect for such CD Interest Period as
determined in accordance with Section 2.4 hereof.
"CD Break Funding Costs" means an amount sufficient to reimburse each
Lender for any and all loss, cost or expense actually incurred by the Lender as
the result of the occurrence of any CD Break Funding Event, determined by
multiplying the amount of the principal prepayment hereunder by the difference,
if any, between, (x) NCB's Certificate of Deposit Rate for a term then available
closest to the remaining duration of the Interest Period for the principal sum
being prepaid, and for an amount comparable to such principal sum, and (y) the
CD Rate (less the CD Applicable Margin) in effect for the principal sum being so
prepaid, immediately prior to the prepayment of such sum, all as determined as
of the date of occurrence of the CD Break Funding Event.
"CD Break Funding Event" means any of the events or occurrences set forth
in Sections 2.13(a) or 2.13(b).
"CD Interest Period" means, with respect to a CD Rate Loan, a period of
between 30 to 180 days, inclusive, selected by Borrowers commencing on a
Business Day selected by Borrowers pursuant to this Agreement. Such CD Interest
Period shall end on (but exclude) the last day of the period. If a CD Interest
Period would otherwise end on a day which is not a Business Day, such CD
Interest Period shall end on the next succeeding Business Day.
"CD Rate" means NCB's Certificate of Deposit Rate for the applicable CD
Interest Period, as determined on the first day of
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<PAGE> 10
such CD Interest Period, plus for each fiscal quarter, the CD Applicable Margin.
"CD Rate Loan" means a Loan which bears interest at the CD Rate.
"Change In Control" means, with respect to any Person, the transfer of the
ownership or control (in one transaction or as the most recent transaction in a
series of transactions) of (i) 10% or more of any class of voting securities (or
other ownership interests) of the controlled Person or (ii) such number of
voting securities (or other ownership interests) of the controlled Person that
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person whether through ownership of
stock, by contract or otherwise a majority, or (iii) with respect to any company
whose stock is publicly traded on a securities exchange, the solicitation for
proxies in connection with the election of the board of directors at a meeting
of shareholders.
"Closing Date" means the date of this Agreement.
"Closing Fee" is defined in Section 2.5(b).
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment Fee" is defined in Section 2.5(a).
"Commitment" means, for each Lender, the obligation of such Lender to make
Loans not exceeding the amount set forth opposite its signature below or as set
forth in any Notice of Assignment relating to any assignment that has become
effective pursuant to Section 11.3.2, as such amount may be modified from time
to time pursuant to the terms hereof.
"Condemnation" is defined in Section 6.9.
"Consolidated Debt Service" means, for any period, (a) Consolidated
Interest Expense for such period plus (b) the aggregate amount of scheduled
principal payments of Indebtedness (excluding any unaccelerated Indebtedness
arising under this Facility) required to be made during such period by Borrowers
or any of their Subsidiaries.
"Consolidated Funded Debt" means as of any date of determination, all
Indebtedness for Borrowed Money of Borrowers and their Subsidiaries outstanding
at such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the amount of
interest expense of Borrowers and their Subsidiaries for such period on the
aggregate principal amount of their
-5-
<PAGE> 11
Indebtedness, determined on a consolidated basis in accordance with GAAP plus
any capitalized interest which accrued during such period.
"Consolidated Net Income" means, for any period, consolidated net income
(or loss) of Borrowers and their Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any other Person accrued prior to the
date it becomes a Subsidiary of Borrowers or is merged into or consolidated with
the Borrowers or any of its Subsidiaries and (b) the undistributed earnings of
any Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the
terms of any contractual obligation or requirement of law applicable to such
Subsidiary.
"Consolidated Outstanding Indebtedness" means, as of any date of
determination, all Indebtedness of Borrowers and their Subsidiaries outstanding
at such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Stockholder's Equity" means, as of any date of determination,
an amount equal to the sum of the following amounts appearing on the
consolidated balance sheet of Borrowers and their Subsidiaries: (i) all equity
as calculated in accordance with GAAP, and (ii) all indebtedness which is
subordinate (to the satisfaction of the Agent) to Indebtedness arising under
this Agreement.
"Consolidated Tangible Net Worth" means, as of any date of determination,
an amount equal to Consolidated Stockholder's Equity minus the sum of (i) any
surplus resulting from any write-up of assets subsequent to September 30, 1995,
(ii) goodwill, including any amounts, however designated on a consolidated
balance sheet of Borrowers, representing the excess of the purchase price paid
for assets or stock over the value assigned to them on the books of Borrowers,
(iii) patents, trademarks, trade names and copyrights, (iv) any amount at which
shares of capital stock of a Borrower appear as an asset on such Borrowers'
consolidated balance sheet, and (v) any other amount in respect of an intangible
that should be classified as an asset on Borrowers' consolidated balance sheet
in accordance with GAAP.
"Contingent Obligation" means any direct or indirect liability, contingent
or otherwise, with respect to any indebtedness, lease, dividend, letter of
credit, banker's acceptance or other obligation of another Person incurred to
provide assurance to the obligee of such obligation that such obligation will be
paid or discharged, that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof. Contingent Obligations shall include, without
limitation, (i) the direct or indirect guaranty, endorsement (otherwise than for
collection or deposit in the ordinary course of
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<PAGE> 12
business), co-making, discounting with recourse or sale with recourse by any
Person of the obligation of another Person; (ii) any liability for the
obligations of another Person through any agreement (contingent or otherwise)
(A) to purchase, repurchase, or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or discharge of such
obligation (whether in the form of loans, advances, stock purchases, capital
contributions, or otherwise), (B) to maintain the solvency of any balance sheet
item, level of income or financial condition of another, or (C) to make
take-or-pay, pay-or-play, or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, if in the case of
any agreement described under subclauses (A), (B) or (C) of this sentence the
purpose or intent thereof is to provide the assurance described above. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with Borrowers or any of their Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Current Assets" means, as of any date of determination, all current assets
of Borrowers and their Subsidiaries, determined on a consolidated basis in
accordance with GAAP.
"Current Liabilities" means, as of any date of determination, all current
liabilities of Borrowers and their Subsidiaries determined on a consolidated
basis in accordance with GAAP; provided, however, that Current Liabilities shall
not include the principal amount of Loans made hereunder unless and until the
earlier to occur of (a) the Facility Termination Date, and (b) a Default.
"Current Portion of Long Term Debt" means, for each fiscal year of
Borrowers, scheduled principal payments (excluding any unaccelerated
Indebtedness arising under this Facility), on Indebtedness for Borrowed Money.
"Current Ratio" means the ratio of Current Assets to Current Liabilities.
"Default" means an event of Default described in Article VI.
"Default Interest Rate" means an annual rate of interest equal to the
lesser of (i) two percent (2.0%) above the Base Rate; or (2) the maximum rate of
interest which may be lawfully charged in respect of the Obligations.
"Deferred lnterest" means an amount equal to the difference, if any,
between interest payable pursuant to Sections 2.4, 2.8(a), and 2.8(d) and
interest actually paid, for the period following
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<PAGE> 13
expiration of the Initial Interest Period during which financial statements for
the quarter ending March 31, 1996, were unavailable, and includes interest on
such difference.
"EBITDA" means, for any period, the sum of Borrowers' and their
Subsidiaries' Consolidated Net Income, increased by the sum for such period of
interest expense, income and franchise tax expense, amortization and
depreciation, non-recurring extraordinary expenses (in each case as determined
in accordance with GAAP) which was deducted in determining Consolidated Net
Income for such period.
"Environmental Laws" means any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect, in each case to the extent the
foregoing are applicable to Borrowers or any of their Subsidiaries or any of
their respective assets or Properties.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Existing Facilities" means the $100,000,000 revolving loan facility for
which NCB is agent, and any other existing facility between Technologies and any
Lender.
"Facility Termination Date" means November 29, 1997; provided, however,
that if the initial Borrowing Notice is not delivered to Agent as provided in
Section 2.8(b) prior to November 14, 1995, the Facility Termination Date shall
be November 15, 1995.
"Financial Undertaking" of a Person means (i) any repurchase obligation or
liability of such Person or any of its Subsidiaries with respect to accounts or
notes receivable sold by such Person or any of its Subsidiaries, (ii) any sale
and leaseback transactions which do not create a liability on the consolidated
balance sheet of such Person, (iii) any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheet of such Person, or (iv)
interest rate exchange agreements and interest rate options; provided, however,
Financial Undertaking shall not include any agreement, device or arrangement
(not otherwise described in (iv), above), that is designed to protect a Borrower
from the fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange transactions,
including, forward currency exchange agreements, interest rate cap or collar
protection agreements, or forward rate currency options.
-8-
<PAGE> 14
"Fixed Charge Coverage Ratio" means, as of any date of determination, the
ratio of (a) the sum of Consolidated Net Income (after taxes) plus Consolidated
Interest Expense, to (b) Consolidated Debt Service. All components of the Fixed
Charge Coverage Ratio Shall be annualized for the following three periods: (i)
July 1, 1995, through September 30, 1995; (2) July 1, 1995, through December 31,
1995; and (iii) July 1, 1995, through March 31, 1996; provided, however, Current
Portion of Long Term Debt (a component of Consolidated Debt Service), shall be a
fixed annual amount. "Annualized" as used herein shall mean: (A) for one quarter
the ratio of (i) the product of (y) the sum of Consolidated Net Income plus
Consolidated Interest Expense times (z) four (4) divided by (ii) the sum of (y)
the product of Consolidated Interest Expense multiplied by four (4) plus (z) the
Current Portion of Long Term Debt; (B) for two cumulative quarters the ratio of
(i) the product of (y) the sum of Consolidated Net Income plus Consolidated
Interest Expense times (z) two (2) divided by (ii) the sum of (y) the product of
Consolidated Interest Expense multiplied by two (2) plus (z) the Current Portion
of Long Term Debt; and (C) for three cumulative quarters the ratio of (i) the
quotient of (y) the sum of Consolidated Net Income plus Consolidated Interest
Expense divided by (z) three (3) times (ii) four (4) divided by the sum of the
quotient of the sum of Consolidated Interest Expense divided by three (3) times
four (4) plus the Current Portion of Long Term Debt.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.1;
provided, however, that if there shall be any change in accounting principles
from GAAP as in effect at the Closing Date, then the Required Lenders and the
Borrowers shall make such adjustments to the financial covenants affected
thereby by reference to the official interpretations of GAAP by The Financial
Accounting Standards Board, its predecessors and successors or as are mutually
determined in good faith to be appropriate to reflect such changes so that the
criteria for evaluating the financial condition and operations of the Borrowers
shall be the same after such changes as if such changes had not been made.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Head Office" means, in relation to Agent, the head office of National City
Bank, located at 1900 East Ninth Street, Cleveland, Ohio, 44114, or such other
office as may be designated as such by written notice to Borrowers and Lenders
by National City Bank or any successor Agent.
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<PAGE> 15
"Indebtedness" means, in relation to any Person, at any time, all of the
obligations of such Person which, in accordance with GAAP, would be classified
as indebtedness upon a balance sheet (including any footnote thereto) of such
Person prepared at such time, and in any event shall include, without
limitation:
(i) all indebtedness of such Person arising or incurred under or in
respect of (A) any guaranties (whether direct or indirect) by such Person
of the indebtedness, obligations or liabilities of any other Person, or (B)
any endorsement by such Person of any of the indebtedness, obligations or
liabilities of any other Person (otherwise than as an endorser of
negotiable instruments received in the ordinary course of business and
presented to commercial banks for collection of deposit), or (C) the
discount by such Person, with recourse to such Person, of any of the
indebtedness, obligations or liabilities of any other Person;
(ii) all indebtedness of such Person arising or incurred under or in
respect of any agreement, contingent or otherwise made by such Person (A)
to purchase any indebtedness of any other Person or to advance or supply
funds for the payment or purchase of any indebtedness of any other Person
or (B) to purchase, sell or lease (as lessee or lessor) any property,
products, materials or supplies or to purchase or sell transportation or
services, in each such case if primarily for the purpose of enabling any
other Person to make payment of any indebtedness of such other Person or to
assure the owner or holder of such other Person's indebtedness against
loss, regardless of the delivery or non-delivery of the property, products,
materials or supplies or the furnishing or non-furnishing of the
transportation or services, or (C) to make any loan, advance, capital
contribution or other investment in any other Person for the purpose of
assuring a minimum equity, asset base, working capital or other balance
sheet condition for or as at any date, or to provide funds for the payment
of any liability, dividend or stock liquidation payment, or otherwise to
supply funds to or in any manner invest in any other Person;
(iii) all indebtedness, obligations and liabilities secured by or arising
under or in respect of any Lien, upon or in Property owned by such Person,
even though such Person has not assumed or become liable for the payment of
such indebtedness, obligations and liabilities;
(iv) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to Property acquired by
such Person, even though the rights and remedies of the seller or lender
(or lessor) under such agreement in the event of default are limited to
repossession or sale of such Property; and
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<PAGE> 16
(v) all indebtedness arising or incurred under or in respect of any
Contingent Obligation.
"Indebtedness for Borrowed Money" means at any time, all Indebtedness
required by GAAP to be reflected as such on each Borrower's balance sheet,
including as appropriate, all Indebtedness (i) in respect of any money borrowed
(including pursuant to this Agreement, and any money borrowed under the
Additional Facilities); (ii) under or in respect of any Contingent Obligation
(whether direct or indirect) of any money borrowed; (iii) evidenced by any loan
or credit agreement, promissory note, debenture, bond, guaranty or other similar
written obligation to pay money; or (iv) arising under Capitalized Leases.
"Initial Advance" means the first Advance made hereunder.
"Initial Borrowing Date" means the date on which the first Advance is
made hereunder.
"Initial Interest Period" means the six month period following the Initial
Borrowing Date.
"Interest Period" means a CD Interest Period or a LIBOR Interest Period.
"Interim Letter of Credit" means an irrevocable standby letter of credit
and the Reimbursement Agreement executed in connection therewith, issued by
Agent and participated in by Lenders in accordance with their respective Pro
Rata Shares and expires January 12, 1996. The face amount of the Interim Letter
of Credit shall reduce the available Aggregate Commitment.
"Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade),
contribution of capital by such Person to any other Person or any investment in,
or purchase or other acquisition of, the stock, partnership interests, notes,
debentures, or other securities of any other Person made by such Person.
"Late Charge" means with respect to any delinquent payment of principal or
interest hereunder, a fee that is equal to the greater of Five Hundred and
00/100 Dollars ($500.00) or three percent (3%) of the delinquent payment,
charged to Borrowers or added to the unpaid balance of the Notes whenever any
payment of principal or interest is not paid when due.
"Lenders" means the lending institutions listed on the signature pages of
this Agreement, their respective successors and assigns and any other lending
institutions that subsequently become parties to this Agreement.
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<PAGE> 17
"Lending Installations" means with respect to a Lender, any office branch
subsidiary or affiliate of such Lender.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Letter of Credit Fee" is defined in Section 2.5(c).
"Leverage Ratio" means Consolidated Outstanding Indebtedness divided by
Consolidated Tangible Net Worth.
"LIBOR Applicable Margin" means, as of any date with respect to any LIBOR
Interest Period, the Applicable Margin in effect for such LIBOR Interest Period
as determined in accordance with Section 2.4 hereof.
"LIBOR Break Funding Costs" means an amount sufficient to reimburse each
Lender for any and all loss, cost or expense actually incurred by the Lender as
the result of the occurrence of any LIBOR Break Funding Event, determined by
multiplying the amount of the principal prepayment hereunder by the deficiency,
if any, between, (x) LIBOR for a term then available closest to the remaining
duration of the Interest Period for the principal sum being prepaid, and for an
amount comparable to such principal sum, and (y) the LIBOR Rate in effect for
the principal sum being so prepaid, immediately prior to the prepayment of such
sum, all as determined as of the date of occurrence of the LIBOR Break Funding
Event.
"LIBOR Break Funding Event" means any of the events or occurrences set for
forth in Sections 2.13(a) or 2.13(b).
"LIBOR Interest Period" means a period of one, two, three or six months
commencing on a Business Day selected by Borrowers pursuant to this Agreement.
Such LIBOR Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three or six months thereafter, provided,
however, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such LIBOR Interest Period shall end on
the last Business Day of such next, second, third or sixth succeeding month. If
a LIBOR Interest Period would otherwise end on a day which is not a Business
Day, such LIBOR Interest Period shall end on the next succeeding Business Day;
provided, however, that if said next succeeding Business Day falls in a new
calendar month, such LIBOR Interest Period shall end on the immediately
preceding Business Day.
"LIBOR Rate Loan" means a Loan which bears interest at a LIBOR Rate.
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<PAGE> 18
"LIBOR Rate" means one, two, three or six-month London InterBank Offered
Rate (for dollars), adjusted for statutory reserves, if applicable ("LIBOR")
plus for each fiscal quarter, the LIBOR Applicable Margin.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.
"Loan Documents" means this Agreement, the Notes, and any other document
from time to time evidencing or securing indebtedness incurred by Borrowers
under this Agreement, as any of the foregoing may be amended or modified from
time to time.
"Material Adverse Change" means a material adverse change with respect to
(i) the business, Property, condition (financial or otherwise), results of
operations, or prospects of Borrowers and their Subsidiaries taken as a whole,
(ii) the ability of Borrowers to perform their obligations under the Loan
Documents, or (iii) the validity or enforceability of any of the Loan Documents
or the rights or remedies of Agent or Lenders thereunder.
"Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and ureaformaldehyde insulation.
"Merger Documents" is defined in Section 3.1.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which Borrowers or any member
of the Controlled Group is a party to which more than one employer is obligated
to make contributions.
"NCB" means National City Bank, a national banking association.
"Note" means a promissory note, in substantially the form of Exhibit A
hereto, duly executed by Borrowers and payable to the order of a Lender in the
amount of its Commitment, including any
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<PAGE> 19
amendment, modification, renewal or replacement of such promissory note.
"Notice of Assignment" is defined in Section 11.3.3.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of Borrowers to Lenders or to any Lender,
Agent or any indemnified party hereunder arising under the Loan Documents.
"Participant" means a participant under Section 11.2.1.
"Payment Date" means, with respect to the payment of interest accrued on
any Base Rate Loan, the last day of each calendar month, and, with respect to
the payment of interest accrued on any CD Rate Loan or LIBOR Rate Loan, the last
day of the CD Interest Period or LIBOR Interest Period, as the case may be,
except that for any CD Interest Period in excess of 90 days and any LIBOR
Interest Period in excess of three months, interim payments shall be made every
ninetieth day and the last day of every third month, respectively.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Liens" are defined in Section 5.15.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which Borrowers or any member of the Controlled Group may have any
liability.
"Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.
"Pro Rata Share" means, in relation to any particular item, the share of
any Lender in such item, which shall be in the same proportion which the
Commitment of a Lender bears to the Aggregate Commitment, net of any and all
charges or fees due and payable to Agent under the Loan Documents.
"Purchasers" is defined in Section 11.3.1.
"Purchase Money Security Interest" is defined in Section 5.15(iv).
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<PAGE> 20
"Rate Option" means the CD Rate, the Base Rate or the LIBOR Rate.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"Required Lenders" means those Lenders whose aggregate Pro Rata Shares of
the outstanding Advances equal or exceed sixty-six and two-thirds percent
(66-2/3%) of the aggregate amount of the outstanding Advances, or, in the event
that there are no Advances outstanding, those Lenders having sixty-six and two
thirds percent (66-2/3%) of the Aggregate Commitment.
"Reserve Requirement" means, with respect to a CD Interest Period or a
LIBOR Interest Period, the maximum aggregate reserve requirement (including all
basic, supplemental, marginal and other reserves) which is imposed under
Regulation D on new non-personal time deposits of $100,000 or more with a
maturity equal to that of such CD Interest Period or on Eurocurrency liabilities
(in the case of LIBOR Rate Loans).
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by Borrowers or any member
of the Controlled Group for employees of Borrowers or any member of the
Controlled Group.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or
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<PAGE> 21
by such Person and one or more of its Subsidiaries, or (ii) any partnership,
association, joint venture or similar business organization more than 50% of the
ownership interests having ordinary voting power of which shall at the time be
so owned or controlled. Unless otherwise expressly provided, all references
herein to a "Subsidiary" shall mean a Subsidiary of any Borrower.
"Subsidiary Guarantor" means each Subsidiary of any Borrower party to the
Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guaranty to be executed and delivered by
each Substantial Subsidiary of each Borrower including, but not limited to,
Canada, substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified from time to time.
"Substantial Portion" means, with respect to the Property of the Borrowers
and their Subsidiaries, Property which (i) represents more than 2% of the
consolidated assets of the Borrowers and their Subsidiaries as would be shown in
the consolidated financial statements of the Borrowers and their Subsidiaries as
at the beginning of the twelve-month period ending with the month in which such
determination is made.
"Substantial Subsidiary" means any Subsidiary (other than Technologies and
Canada) that has received funding from a Borrower in excess of $100,000 or any
Subsidiary which receives funding from the Company such that the Borrower's
aggregate funding to all Subsidiaries (other than Technologies and Canada) after
the Closing Date exceeds $500,000.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Technologies" means Pioneer/Technologies Group, Inc., a Maryland
corporation.
"Technologies Acquisition" means the merger whereby Maryland will acquire
Technologies via a reverse cash-out merger. Technologies will be the survivor
and will immediately change its name to Maryland.
"Transferee" is defined in Section 11.4.
"Type" means, with respect to any Loan, its nature as a LIBOR Rate Loan,
Base Rate Loan or CD Rate Loan.
"Unfunded Liabilities" means the amount (if any) by which the present value
of all vested nonforfeitable benefits under all Single Employer Plans exceeds
the fair market value of all such Plan assets allocable to such benefits, all
determined as of the then most recent valuation date, for such Plans.
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<PAGE> 22
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
"Working Capital" means Current Assets minus Current Liabilities.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
THE CREDIT
2.1 Commitment. From and including the date of this Agreement and prior
to the Facility Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make Loans to Borrowers from time to
time in amounts not to exceed in the aggregate at any one time outstanding the
amount of its Commitment, and on the Closing Date, the Agent agrees to issue the
Interim Letter of Credit; provided, however, that in no event shall the
Aggregate Commitment hereunder exceed $200,000,000; and in no event shall Loans
made to or for the benefit of Maryland and Technologies, together, or
individually, exceed $75,000,000. Subject to the terms of this Agreement,
Borrowers may borrow, repay and reborrow at any time prior to the Facility
Termination Date. The Commitments to lend hereunder shall expire on the Facility
Termination Date.
2.2 Final Principal Payment. Any outstanding Loans and all other unpaid
Obligations shall be paid in full by Borrowers on the Facility Termination Date.
2.3 Ratable Loans. Each Advance hereunder shall consist of Loans made
from the several Lenders ratably in accordance with their Pro Rata Share of the
Aggregate Commitment.
2.4 Applicable Margins. The CD Applicable Margin, Base Rate Applicable
Margin and LIBOR Applicable Margin shall be calculated based on the following
performance grid (pricing is based on the higher of the rates resulting from
independent application of the first two columns and is adjusted on the day
following the last day of the Initial Interest Period, and
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<PAGE> 23
thereafter on the first day of each calendar quarter, based on annualized
results (i.e., the ratio of (a) the product of (i) the sum of Consolidated Net
Income plus Consolidated Interest Expense for such quarter multiplied by four
(4) divided by (b) the sum of (i) the product of Consolidated Interest Expense
multiplied by four plus (ii) the Current Portion of Long Term Debt) for the
immediately preceding quarter; provided, however, that in the case of the
adjustment following the Initial Interest Period, the Applicable Margin shall be
determined using annualized results for the quarter ending March 31, 1996. If
upon the expiration of the Initial Interest Period financial statements are not
yet available for the quarter ending March 31, 1996, Borrowers shall continue to
pay interest at the interest rate in effect at the expiration of the Initial
Interest Period and, upon delivery of such statements, an amount equal to
Deferred Interest, if any, shall be immediately due and payable). To the extent
that, as of an adjustment date, Borrowers have not provided to Agent information
necessary to apply the performance grid, interest shall be payable retroactively
upon receipt of such information and calculation by Agent. In such event,
Borrowers shall continue to pay interest at the interest rate and on the Payment
Dates in effect for the preceding quarter and the parties shall adjust for the
difference between interest payable and interest actually paid, when information
to apply the performance grid is available.
<TABLE>
<CAPTION>
===============================================================================
Fixed Charge Consolidated LIBOR + CD + Prime +
Coverage Funded
Debt/EBITDA
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
less than 2.0x greater than 112.5 bps 125 bps 0 bps
4.0x
- -------------------------------------------------------------------------------
greater than or less than or 100.0 bps 112.5 bps 0 bps
equal to 2.0x but equal to 4.0x
less than 3.0x but greater than
3.5x
- -------------------------------------------------------------------------------
greater than or less than or 87.5 bps 100 bps 0 bps
equal to 2.5x but equal to 3.5x
less than 3.0x but greater than
3.0x
- -------------------------------------------------------------------------------
greater than or less than or 75.0 bps 87.5 bps 0 bps
equal to 3.0x but equal to 3.0x
less than 3.5x but greater than
2.5x
- -------------------------------------------------------------------------------
greater than or less than or 62.5 bps 75 bps 0 bps
equal to 3.5x equal to 2.5x
===============================================================================
</TABLE>
* bps = basis points
2.5 Commitment Fee; Closing Fee; Interim Letter of Credit Fee. (a)
Borrowers agree to pay to Agent for the account of
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<PAGE> 24
each Lender a commitment fee (the "Commitment Fee") calculated at the rate of
0.25% per annum on the daily unborrowed portion of such Lender's Commitment from
the Closing Date to and including the Facility Termination Date, payable
quarterly in arrears on the first day of each calendar quarter hereafter
beginning January 2, 1996, and on the Facility Termination Date.
(b) Borrowers further agree to pay to Agent for the account of each
Lender a closing fee (the "Closing Fee") in the aggregate amount of $125,000.
Borrowers have heretofore paid to Agent for the account of each Lender one-half
of the Closing Fee ($62,500), and Borrowers shall pay the remaining one-half of
the Closing Fee ($62,500), to Agent for the account of each Lender on the
Closing Date.
(c) Borrowers further agree to pay to Agent for the account of each
Lender a letter of credit fee (the "Letter of Credit Fee") in the aggregate
amount of $44,792.00, payable on the Closing Date.
2.6 Other Fees. Borrowers agree to pay all fees payable to Agent pursuant
to the Interim Letter of Credit or a separate letter agreement.
2.7 Minimum Amount of Loans. Base Rate Loans and CD Rate Loans shall be
in the minimum amount of $5,000,000, and in multiples of $1,000,000 if in excess
thereof. LIBOR Rate Loans shall be in the minimum amount of $10,000,000, and in
multiples of $1,000,000 if in excess thereof.
2.8 Interest Payable on the Loans.
(a) Initial Interest. Notwithstanding any other provision hereof,
all Advances hereunder made pursuant to a Borrowing Notice delivered by
Borrowers on or before May 29, 1996, and all Advances made pursuant to a draw on
the Interim Letter of Credit shall consist of Loans bearing interest until and
including the last day of the Initial Interest Period, at a deemed Applicable
Margin as follows, as selected by Borrowers:.
(i) For LIBOR Rate Loans: .625%; or
(ii) For CD Rate Loans: .75%; or
(iii) For Base Rate Loans: 0%.
As of the day following the last day of the Initial Interest Period, and
notwithstanding any Interest Period then in effect, Applicable Margins shall be
determined by reference to the table in Section 2.4 hereof.
(b) Method of Selecting Rate Options and Interest Periods.
(i) Borrowers shall select the Rate Option for each
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<PAGE> 25
Advance and shall select the Interest Period applicable to each CD Rate Loan and
LIBOR Rate Loan from time to time, by delivery to Agent of an irrevocable notice
in the form of Exhibit C hereto (a "Borrowing Notice"), or by telephonic notice
to Agent ("Telephonic Notice"), followed by a same day (which shall mean prior
to 5:00 p.m. Cleveland, Ohio, time) written Borrowing Notice delivered to Agent
via facsimile. Such Borrowing Notice shall indicate the name of the particular
Borrower to or for the benefit of which such Advance shall be made.
(ii) Each CD Rate Loan and LIBOR Rate Loan shall bear interest from and
including the first day of the Interest Period applicable thereto until (but not
including) the last day of such Interest Period at the interest rate determined
as applicable to such Loan. Borrowers shall select Interest Periods with respect
to CD Rate Loans and LIBOR Rate Loans so that it is not necessary to pay such
Loan prior to the last day of the applicable Interest Period in order to repay
the Loans on the Facility Termination Date. Provided that no Default shall have
occurred and be continuing, Borrowers may elect to continue a Loan as a CD Rate
Loan or LIBOR Rate Loan, as the case may be, by giving irrevocable written,
telephonic or telegraphic notice thereof to Agent not more than ten (10) nor
less than three (3) Business Days prior to the last day of the then-current
Interest Period for such Loan, specifying the duration of the succeeding
Interest Period therefor. If Agent does not receive timely notice of such
election, Borrowers shall be deemed to have elected to convert such Loan to a
Base Rate Loan at the end of the then-current Interest Period. Provided that no
Default shall have occurred and be continuing, Borrowers may, on any Business
Day, convert any outstanding Base Rate Loan, or portion thereof, into a CD Rate
Loan or a LIBOR Rate Loan in the same aggregate principal amount. If Borrowers
desire to convert a Base Rate Loan, it shall give Agent prior written or
telephonic notice not more than ten (10) nor less than three (3) Business Days
prior to the requested conversion date, which notice shall specify the duration
of the Interest Period applicable thereto.
(c) Determination of Adjusted Base Rate. Agent shall determine the
Base Rate in effect from time to time. Any change in the Base Rate shall, for
all purposes of this Agreement and the other Loan Documents, become effective on
the effective date of such change in the Base Rate as announced by Agent in
accordance with Agent's customary practices.
(d) Monthly Installments.
(i) Borrowers shall pay to Agent, for the account of Lenders in
accordance with their respective Pro Rata Share, monthly in
arrears on the last Business Day of each month beginning with
the month following the month in which the Closing Date occurs,
interest on the outstanding principal amount of the Base Rate
Loans at the
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<PAGE> 26
annual rate equal to the Base Rate plus the Base Rate
Applicable Margin; provided, however, that if Borrowers elect,
pursuant to the final paragraph of Section 2.4(a), to convert a
Base Rate Loan, or any portion thereof, to a CD Rate Loan or a
LIBOR Rate Loan, Borrowers shall pay to Agent, for the account
of Lenders in proportion to their respective Commitments, all
accrued but unpaid interest on such Base Rate Loan, or that
portion thereof which is being so converted, for the period
commencing on the date of the last payment date under this
paragraph 2.8(d)(i) and concluding on the day immediately
preceding the first day of the Interest Period for the CD Rate
Loan or the LIBOR Rate Loan into which such Base Rate Loan is
converted.
(ii) Borrowers shall pay to Agent, for the account of Lenders in
accordance with their Pro Rata Share, in arrears, interest on
the outstanding principal amount of the CD Rate Loans and the
LIBOR Rate Loans at the annual rate equal to the CD Rate or the
LIBOR Rate, as applicable. Such interest shall be due and
payable on the last Business Day of the applicable Interest
Period of ninety (90) days or less, for all other CD Rate Loans
and LIBOR Rate Loans, interest shall be payable, in arrears as
aforesaid, on (x) that Business Day which is ninety (90) days
after the beginning of the Interest Period for such Loans; and
(y) on the final day of the Interest Period therefor.
(e) Interest on Overdue Payments; Default Interest Rate. If any payment of
principal or interest is not paid when due, or prior to the expiration of the
applicable period of grace (if any) therefor, Agent may charge and collect from
Borrowers, or may add to the unpaid balance of the Notes, a Late Charge. Any
Late Charge charged and collected by the agent shall be distributed to Lenders
in proportion to their respective Commitments. No failure by Agent to charge or
collect any Late Charge in respect of any delinquent payment shall be considered
to be a waiver by Agent or Lenders of any rights they may have hereunder,
including without limitation the right subsequently to impose a Late Charge for
such delinquent payment or to take such other actions as may then be available
to them hereunder or at law or in equity, including but not limited to the right
to terminate the Commitments and/or to accelerate the Obligations pursuant to
the terms hereof. If the Notes have been accelerated pursuant to this Agreement
or if a Default hereunder or under any other Loan Document shall have occurred
and be continuing, the outstanding principal balance of the Indebtedness
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<PAGE> 27
advanced under this Agreement, together with all accrued interest thereon and
any and all other Obligations, shall bear interest from the date on which such
amount shall have first become due and payable to the date on which such amount
shall be paid (whether before or after judgment) at the Default Interest Rate.
Interest at the Default Interest Rate will continue to accrue and will (to the
extent permitted by applicable law) be compounded daily until the Obligations in
respect of such payment are discharged (whether before or after judgment).
2.9 Repayments and Prepayments of Principal.
(a) Optional Prepayments. Without derogating from the mandatory
prepayment requirements contained in Section 2.9(b) hereof, Borrowers may prepay
the principal of the Loans in full or in part at any time and from time to time
upon payment to Agent of all accrued interest to the date of payment; provided,
however, that (i) all partial payments of principal shall be in an amount equal
to or greater than One Hundred Thousand Dollars ($100,000.00); and (ii) all
Loans may be prepaid without penalty or premium. If Borrowers shall prepay any
Loan which is a LIBOR Rate Loan or a CD Rate Loan on a day other than the final
day of the applicable Interest Period therefor, such prepayment must include an
amount equal to all of Lenders' aggregate LIBOR Break Funding Costs or CD Break
Funding Costs, respectively, applicable to or resulting from such prepayment in
accordance with Section 2.9, below.
(b) Mandatory Prepayments. If at any time the aggregate principal
balance of all Loans made hereunder exceeds the aggregate amount of the
Commitments Borrowers shall immediately prepay an amount equal to such excess.
(c) Application of Prepayments. Any prepayment of the Obligations shall
be applied by Agent as set forth in Section 2.10 hereof. To the extent that
such payment, repayment or prepayment shall be applied to a CD Rate Loan or a
LIBOR Rate Loan, Agent shall retain such amount until the expiration of the
Interest Period applicable to such Loan, and, shall apply such payment at such
time so as to minimize the LIBOR Break Funding Costs or CD Break Funding Costs
applicable to such payment, repayment or prepayment, unless otherwise instructed
by Borrowers to pay, repay or prepay such Loan and nonetheless incur the
applicable LIBOR Break Funding Cost or CD Break Funding Cost.
(d) Maturity. Subject to the terms and conditions of
this Agreement, Borrowers will be entitled to reborrow all or any
part of the principal of the Notes repaid or prepaid prior to the
termination of the Commitments. The Commitments shall terminate,
and all of the Indebtedness evidenced by each Note shall, if not
sooner paid, be in any event absolutely and unconditionally due and
payable in full by Borrowers, on the Facility Termination Date.
-22-
<PAGE> 28
(e) Notice of Prepayments of Principal. Borrowers will provide Agent
at least (1) one Business Day's advance, written notice of their intention to
make any voluntary prepayment of principal. Such notice shall be irrevocable
and shall specify the date of prepayment and the aggregate amount to be paid.
(f) Reduction in Commitment. Provided there is not then any Default or
Unmatured Default hereunder or any other Loan Document, Borrowers may, upon and
subject to the terms and conditions set forth in this Section 2.9(f), elect
permanently to reduce the Aggregate Commitment by providing Agent and each
Lender with not less than thirty (30) days' prior written notice of its election
to do so. Such notice shall specify the date on which such reduction is
intended to become effective and the amount to which Borrowers would propose to
reduce the Aggregate Commitment. Provided that Borrowers shall, on or prior to
the effective date for such reduction specified in such notice, have made such
payments or prepayments as may be necessary to cause the outstanding balance of
all Loans to Borrowers to be reduced to an amount equal to or less than the
amount of the Aggregate Commitment (giving effect to the proposed reduction
thereof contemplated in Borrowers' notice), the Aggregate Commitment shall, on
the date specified in Borrowers' notice, be reduced to the amount stipulated in
Borrowers' notice. In the event that Borrowers shall elect to reduce the
Aggregate Commitment as aforesaid, each Lender's commitment shall be reduced,
pro rata, to reflect any such reduction in the Aggregate Commitment, and the
amount of the Commitment Fee payable during the fiscal quarter in which such
reduction shall become effective shall be calculated so as to give effect to
such reduction, as of the effective date thereof, on a per diem basis. Each
reduction in the amount of the Aggregate Commitment effected pursuant to this
Section 2.9(f) shall be in a multiple of Five Million Dollars ($5,000,000), and
the minimum reduction shall be Twenty-Five Million Dollars ($25,000,000). Each
reduction in the amount of the Aggregate Commitment shall be permanent.
Borrowers may exercise their right permanently to reduce the amount of the
Aggregate Commitment not more frequently than twice during any six-month period.
Borrowers shall pay all reasonable costs and expenses of Agent (including,
without limitation, reasonable attorney's fees) incurred in connection with the
exercise of Borrowers' rights under this Section 2.9(f).
2.10 Payments and Computations.
(a) Time and Place of Payments. Each payment to be made by Borrowers
under this Agreement or any other Loan Documents shall be made directly to Agent
at its Head Office, not later than 12:00 noon Cleveland time, on the due date of
each such payment, in immediately available and freely transferrable funds. Any
payment received after such time will be deemed to have been received on the
next Business Day. Agent will, on the same Business Day that it receives (or is
deemed to receive, as aforesaid) each such payment, cause to be distributed to
each Lender, in immediately
-23-
<PAGE> 29
available and freely transferrable funds, such Lender's Pro Rata Share of each
such payment received by Agent.
(b) Application of Funds. Notwithstanding anything herein to the
contrary, the funds received by Agent with respect to the Obligations shall be
applied as follows:
(i) No Default. Provided that the Notes have not been accelerated
pursuant to Section 7.1, below, and provided further that no Default
or Unmatured Default hereunder or under any Loan Document shall have
occurred and be continuing at the time that Agent receives such
funds, in the following manner: (a) first, to the payment of all
fees, charges, and other sums (other than principal and interest)
then due and payable to Agent or Lenders under the Notes, this
Agreement or the other Loan Documents (including, without limitation,
any LIBOR Break Funding Costs or CD Break Funding Costs which may
then be payable); (b) second, to the payment of all accrued but
unpaid interest at the time of such payment in accordance with each
Lender's Pro Rata Share; and (c) third, to the payment of principal
of the Notes in accordance with Lender's Pro Rata Shares.
(ii) Default. If the Notes have been accelerated pursuant to Section
7.1, or if a Default hereunder shall have occurred and be continuing
hereunder or under the Notes or any of the other Loan Documents at
the time Agent receives such funds, in the following manner: (a)
first to the payment or reimbursement of Lenders and Agent for all
costs, expenses, disbursements and losses which shall have been
incurred or sustained by Lenders or Agent in or incidental to the
collection of the Obligations owed by Borrowers hereunder or the
exercise, protection, or enforcement by Lenders or Agent of all or
any of the rights, remedies, powers and privileges of Lenders and
Agent under this Agreement, the Notes, or any of the other Loan
Documents and in and towards the provision of adequate indemnity to
Agent and any of Lenders against all taxes or Liens which by law
shall or may have priority over the rights of Agent or Lenders in and
to such funds; and (b) second to the payment of all of the
Obligations in accordance with Section 2.10(b)(i) above.
(c) Payments on Business Days. If any sum would (but for the provisions
of this Section 2.10(c)) become due and payable on any day which is not a
Business Day, then such sum shall become due and payable on the next succeeding
Business Day, and interest
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<PAGE> 30
payable on such sum shall continue to accrue and shall be adjusted by Agent
accordingly.
(d) Computation of Interest. All computations of interest payable
under this Agreement, the Notes, or any of the other Loan Documents shall be
computed by Agent on the basis of the actual principal amount outstanding on
each day during the payment period, and shall be calculated with reference to
the actual number of days elapsed during such period on the basis of a year
consisting of three hundred and sixty (360) days. The daily interest charge
shall be one three-hundred-sixtieth (1/360th) of the annual interest amount.
Each determination of any interest rate by Agent shall be conclusive and binding
on Borrowers in the absence of manifest error. Absent manifest error, a
certificate or statement signed by an authorized officer of the Agent shall be
conclusive evidence of the amount of the Obligations due and unpaid as of the
date of such certificate or statement.
2.11 Payments to be Free of Deductions. Each payment to be made by
Borrowers under this Agreement, any Note, or any of the other Loan Documents
shall be made in accordance with Section 2.10 hereof, without set-off, deduction
or counterclaim whatsoever, and free and clear of taxes, levies, imposts,
duties, charges, fees, deduction, withholdings, compulsory loans, restrictions
or conditions of any nature now or hereafter imposed or levied by any
governmental or taxing authority, unless Borrowers are compelled by law to make
any such deduction or withholding. In the event that any such obligation to
deduct or withhold is imposed upon Borrowers with respect to any such payment:
(a) Borrowers shall be permitted to make the deduction or withholding required
by law in respect of the said payment, and (b) there shall become and be
absolutely due and payable by Borrowers to Agent or such Lender on the date on
which the said payment shall be due and payable, and Borrowers hereby promise to
pay to Agent or such Lender on such date, such additional amount as shall be
necessary to enable Agent or such Lender to receive the same net amount which
Agent or such Lender would have received on such due date had no such obligation
been imposed by law. Notwithstanding any provision of this Section 2.11 to the
contrary, the foregoing provisions of this Section 2.11 shall not apply in the
case of any deductions or withholding made (y) in respect of taxes charged upon
or by reference to the overall net income, profits or gains of Agent or any
Lender, or (z) failure by a Lender to comply with Section 2.21.
2.12 Use of Proceeds. Borrowers represent, warrant and covenant to
Agent and to each Lender that all proceeds of the Advances shall be used by
Borrowers only for the following purposes: (i) the Technologies Acquisition,
(ii) refinancing existing Indebtedness for Borrowed Money, (iii) Working Capital
needs, and (iv) Acquisitions, to the extent expressly permitted under this
Agreement and (v) except as expressly limited in this Agreement, general
corporate purposes.
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2.13 LIBOR Break Funding Cost; CD Break Funding Cost. Borrowers shall pay
to Agent, for the ratable benefit of each Lender, the LIBOR Break Funding Costs
or CD Break Funding Costs that Agent determines are attributable to:
(a) any payment (including, without limitation, any payment resulting
from the acceleration of the Loans pursuant to this Agreement or any Loan
Document), repayment, mandatory or optional prepayment, or conversion of a LIBOR
Rate Loan or CD Rate Loan for any reason on a date other than the last day of
the Interest Period for such LIBOR Rate Loan or CD Rate Loan; or
(b) any failure by Borrowers for any reason to borrow a LIBOR Rate Loan
or CD Rate Loan on the date for such borrowing specified in the relevant notice
of borrowing or Borrowing Notice given pursuant to this Agreement.
2.14 Additional Costs.
(a) Notwithstanding any conflicting provisions of this Agreement to the
contrary, if any applicable law, rule or regulation not in effect as of the date
hereof shall (i) subject Agent or any Lender to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to any Loan,
this Agreement, any Note, or any of the other Loan Documents or the payment by
Borrowers of any amounts payable to Agent or any Lender hereunder or thereunder
(other than taxes charged upon or by reference to the overall net income,
profits or gains of Agent or any Lender or taxes charged with respect to any
Lender's failure to comply with Section 2.21 hereof); or (ii) materially change,
in the reasonable opinion of the party so affected, the basis of taxation (other
than changes in tax rates applicable to taxes charged upon or by reference to
the overall net income, profits or gains of Agent or any Lender or taxes charged
with respect to any Lender's failure to comply with Section 2.21 hereof) of
payments to Agent or any Lender of the principal of or the interest on any Note
or any other amounts payable to Agent or any Lender under this Agreement, or any
of the other Loan Documents; or (iii) impose or increase or render applicable
any special or supplementary special deposit or reserve or similar requirements
(whether or not having the force of law) against assets held by, or deposits in
or for the account of, or any eligible liabilities of, or loans by any office or
branch of, Agent or any Lender; or (iv) impose on Agent or any Lender any other
condition or requirement with respect to this Agreement, any Note, or any of the
other Loan Documents, and if the result of any of the foregoing is (A) to
increase the cost to Agent or any Lender of making, funding or maintaining all
or any part of the principal of the Loans, or (B) to reduce the amount of
principal, interest or any other sum payable by Borrowers to Agent or any Lender
under this Agreement, any Note, or any of the other Loan Documents, or (C) to
require Agent or any Lender to make any payment or to forego any interest or
other sum payable by Borrowers to Agent or any Lender under this Agreement, any
Note, or any of the other Loan
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Documents, the amount of which payment or foregone interest or other sum is
measured by or calculated by reference to the gross amount of any sum receivable
or deemed received by Agent or any Lender from Borrowers under this Agreement,
any Note, or any of the other Loans Documents, then, and in each such case,
Borrowers will pay to Agent for Agent or the account of a Lender, as the case
may be, within sixty (60) days of written notice by Agent or such Lender, such
additional amounts as will (in the reasonable opinion of Agent or such Lender,
as the case may be) be sufficient to compensate Agent or such Lender for such
sum.
(b) If any present or future applicable law, rule or regulation shall
make it unlawful for any Borrowers to perform any one or more of its agreements
or Obligations under this Agreement, any Note, or any of the other Loan
Documents, then the obligations of Lenders under their respective Commitment
shall terminate immediately. If any present or future applicable law, rule or
regulation shall make it unlawful for any Borrowers to perform any one or more
of its agreements or obligations under this Agreement, any Note, or any of the
other Loan Documents, and Agent, or any Lender shall at any time determine
(which reasonable determination shall be conclusive and binding on Borrowers)
(i) that, as a consequence of the effect or operation (whether direct or
indirect) of any such applicable law, rule or regulation, any one or more of the
rights, remedies, powers or privileges of Agent or any Lender under or in
respect of this Agreement, any Note, or any of the other Loan Documents shall be
or become invalid, unenforceable, or materially restricted; and (ii) that all or
any one or more of the rights, remedies, powers and privileges so affected are
of material importance to Agent or any Lender (as determined by the party so
affected), then Agent shall, at the direction of the Required Banks, by giving
notice to Borrowers, declare all of the Obligations, including, without
limitation, the entire unpaid principal of the Notes, all of the unpaid interest
accrued thereon and any and all other sums due and payable by Borrowers to Agent
or Lenders under this Agreement, any Note, and any of the other Loan Documents,
to be immediately due and payable, and, thereupon, such Obligations shall (if
not already due and payable) forthwith become and be due and payable without
further notice or other formalities of any kind, all of which are hereby
expressly waived.
(c) If Agent or any Lender shall reasonably determine that any law, rule
or regulation not in effect as of the date hereof regarding capital adequacy, or
in the event of any change in any existing such law, rule or regulation or in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by any Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
such authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on such Lender's capital, as a consequence of its
obligations hereunder, to a level below that which such Lender could have
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achieved but for such adoption, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy) by any amount deemed by
such Lender to be material, then Borrowers shall pay to such Lender within sixty
(60) days of written notice by such Lender such amount or amounts, in addition
to the amounts payable under the provisions of this Agreement or any other Loan
Document, as will compensate such Lender for such reduction. Determinations by
any Lender of the additional amount or amounts required to compensate such
Lender in respect of the foregoing shall be presumptively correct absent
manifest error. In determining such amount or amounts, each Lender may use in
good faith any reasonable averaging and attribution methods of general
application.
(d) Each Lender agrees, that upon the occurrence of any event giving rise
to the operation of Section 2.11, or (a)-(c) of this Section 2.14 with respect
to such Lender, it will, to the extent permitted by Applicable Law or by the
relevant governmental authority, in consultation with the Agent, for a period of
thirty (30) days endeavor in good faith to avoid or minimize the increase in
costs or reduction in payments resulting from such event (including, but not
limited to, endeavoring to change its Lending Installation); providing, however,
that such avoidance or minimization can be made in such a manner that such
Lender, in its sole determination, suffers no economic, legal or regulatory
disadvantage. If any Lender (an "Affected Lender") shall make a demand for
payment under any of such Sections, and Borrowers shall find a Lender or an
assignee which offers in writing to purchase the Commitments and Advances of
such Affected Lender without recourse at par on a specified date, together with
accrued and unpaid interest and commitment fees thereon to the date of purchase,
and tenders the purchase price of such Commitments and Advances on such
specified date, and if, in the reasonable opinion of such Affected Lender, its
acceptance of such offer would be permitted under Applicable Law and all
relevant governmental authorities and would not result in its suffering any
economic, legal, or other regulatory disadvantage, then Borrowers shall be
excused from the payment of the increased costs claimed by such Affected Lender
under any of such Sections accruing after the first interest payment date
pursuant to Section 2.18 for each Advance of such Affected Lender following such
specified date, if the Affected Lender demanding payment under either such
Section declines such purchase offer. If such Affected Lender accepts such
purchase offer, upon consummation of such purchase offer such Affected Lender
shall cease to be a party hereto. Except as provided in the immediately
preceding sentence, nothing in this Section 2.14(d) shall affect or postpone the
obligations of Borrowers to make payments as provided hereunder. Any reasonable
expenses incurred by such Affected Lender under this Section 2.14(d) shall be
paid by the Borrowers upon delivery by such Affected Lender to Borrowers of a
certificate as to the amount of such expenses, which certificate shall be
conclusive and binding, in absence of manifest error.
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(e) For purposes of this Section 2.14, "laws, rules and regulations not in
effect on the date hereof" or similar words shall be deemed to include future
interpretations of existing laws, rules and regulations.
2.15 Indemnification of Losses. Without derogating from any of the other
provisions of this Agreement or any of the other Loan Documents Borrowers hereby
absolutely and unconditionally agree to indemnify Agent and each Lender, upon
demand at any time and as often as the occasion therefor may require, against
any and all claim, demands, suits, actions, damages, losses, costs, expenses and
all other liabilities whatsoever which Agent or any Lender or any of their
respective directors or officers may sustain or incur as a consequence of, on
account of, in relation to or in any way in connection with (a) any failure by
Borrowers to pay, punctually on the due date thereof, any amount payable under
this agreement, any Note, or any of the other Loan Documents beyond the
expiration of the period of grace (if any) applicable thereto, or (b) the
acceleration of the maturity of any of the Obligations, or (c) any failure by
any Borrower to perform or comply with any of the terms and provisions of this
Agreement, any Note or any of the other Loan Documents. Such claims, demands,
suits, actions, damages, losses, costs, expenses shall include, without
limitation (i) any costs incurred by Agent or any lender in carrying funds to
cover any overdue principal, overdue interest or any other overdue sums payable
by Borrowers under this Agreement, any Note or any of the other Loan Documents;
(ii) any interest payable by Agent or any Lender in order to carry the fund
referred to in clause (i) of this Section 2.15; and (iii) any losses (but
excluding losses of anticipated profit) incurred or sustained by Agent or any
Lender in liquidating or re-employing funds acquired from third parties to make,
fund or maintain all or any part of the Loans.
2.16 Statements by Agent or any Lender. A certified statement signed by an
officer of Agent or any Lender setting forth any additional amount required to
be paid by Borrowers to Agent or such Lender (together with supporting
documentation setting forth in reasonable detail an explanation of the basis for
requesting payment of such amount), respectively, under Section 2.14 and 2.15
hereof shall be submitted by Agent or such Lender to Borrowers in connection
with each demand made at any time by Agent (with copies thereof delivered to
each other Lender) or such Lender under either of such Sections. A claim by
Agent or any Lender for all or any part of any additional amounts required to be
paid by Borrowers under Section 2.14 and 2.15 hereof may be made before or after
any payment to which such claim relates. Each such statement shall, in the
absence of manifest error, constitute presumptive evidence of the additional
amount required to be paid to Agent or such Lender.
2.17 Borrowing Notices; Telephonic Notices. (a) All requests for draws,
advances, or disbursements of Loan proceeds shall be made by and on behalf of
Borrowers in writing on a Borrowing Notice, or by Telephonic Notice. All
Telephonic Notices,
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must be followed by same day (which shall mean prior to 5:00 p.m., Cleveland,
Ohio, time) written Borrowing Notice delivered to Agent via facsimile. Borrowing
Notices may be transmitted to Agent at its Head Office via fax or telecopy,
provided that Borrowers immediately notify Agent by telephone of such
transmission. Each Borrowing Notice for Base Rate Loans shall be transmitted to
and received by Agent, or each Telephonic Notice shall be received by telephone
by Agent, not later than 12:00 p.m. Cleveland, Ohio, time not more than ten (10)
Business Days nor less than one (1) Business Day before the Borrowing Date of
each Base Rate Loan and not more than ten (10) Business Days nor less than three
(3) Business Days before the Borrowing Date for each CD Rate Loan or LIBOR Rate
Loan. All Borrowing Notices shall be accompanied by such documents, reports and
other materials as may be reasonably necessary to enable Agent (and each Lender)
to confirm that the conditions precedent to the disbursement of such requested
Loan have been satisfied.
(b) Agent shall notify Lenders promptly by telephone of its receipt of
Borrower's Borrowing Notice, but in no event shall Agent notify Lenders later
than 5:00 p.m. Cleveland time, on the day on which Agent actually receives the
applicable Borrowing Notice. In addition, Agent shall provide each Lender with
a copy of each such Borrowing Notice, together with all accompanying materials,
promptly upon Agent's receipt thereof, and shall in addition provide each Lender
with a statement showing Agent's calculation of its respective Pro Rata Share of
the Advance so requested. Each Lender will, upon receiving notice from Agent of
Borrower's Borrowing Notice, become and be obligated to place at the disposal of
Agent, not later than 10:00 a.m., Cleveland time, on the Borrowing Date set
forth on such Borrowing Notice, an aggregate amount in dollars equal to such
Lender's Pro Rata Share multiplied by the amount of the Advance requested. The
payment by each Lender of such aggregate amount shall be made to Agent at
Agent's Head Office in immediately available and freely transferrable funds.
(c) Agent shall disburse the proceeds of each Loan to Borrowers, in
immediately available funds not later than noon, Cleveland time, on the
Borrowing Date described therefor, provided that: (x) Borrowers shall have
provided Agent with a Borrowing Notice for such Advance as and when provided
above; (y) all of the conditions precedent applicable to such Advance shall be
satisfied as at the Closing Date or such later Borrowing Date as may be
applicable to such Loan; and (z) each Lender shall fund the amount equal to its
Loan as provided in Section 2.17(b), above.
2.18 Notes; Telephonic Notices. Each Lender is hereby authorized to record
the principal amount of each of its Loans and each repayment on the schedule
attached to its Note, provided, however, that the failure to so record shall not
affect Borrowers' obligations under such Note. Borrowers hereby authorize
Lenders and Agent to extend, convert or continue Loans, effect selections
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of Types of Advances and to transfer funds based on telephonic notices made by
any person or persons Agent or any Lender in good faith believes to be acting on
behalf of Borrowers. Borrowers agree to deliver promptly to Agent a written
confirmation, if such confirmation is requested by Agent or any Lender, of each
telephonic notice signed by an Authorized Officer. If the written confirmation
differs in any material respect from the action taken by Agent and Lenders, the
records of Agent and Lenders shall govern absent manifest error.
2.19 Lending Installations. Each Lender may book its Loans at any Lending
Installation selected by such Lender and may change its Lending Installation
from time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Lender for the benefit
of such Lending Installation. Each Lender may, by written or telex notice to
Agent and Borrowers, designate a Lending Installation through which Loans will
be made by it and for whose account Loan payments are to be made.
2.20 Non-Receipt of Funds by Agent. Unless Borrowers or a Lender, as the
case may be, notifies Agent prior to the date on which it is scheduled to make
payment to Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii)
in the case of Borrowers, a payment of principal, interest or fees to Agent for
the account of Lenders, that it does not intend to make such payment, Agent may
assume that such payment has been made. Agent may, but shall not be obligated
to, make the amount of such payment available to the intended recipient in
reliance upon such assumption. If such Lender or Borrowers, as the case may be,
has not in fact made such payment to Agent, the recipient of such payment shall,
on demand by Agent, repay to Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the date
such amount was so made available by Agent until the date Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by
Borrowers, the interest rate applicable to the relevant Loan.
2.21 Withholding Tax Exemption. At least five Business Days prior to the
first date on which interest or fees are payable hereunder for the account of
any Lender, each Lender that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each
Borrower and Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes. Each Lender
which so delivers a Form 1001 or 4224 further undertakes to deliver to each
Borrower and Agent two additional copies of such form (or a successor form) on
or before the date that such form expires (currently, three successive
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calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by Borrowers or Agent, in each
case certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises Borrowers and Agent that it is
not capable of receiving payments without any deduction or withholding of United
States federal income tax.
2.22 The Interim Letter of Credit.
(a) Payment in Certain Circumstances. Upon the occurrence of an
Event of Default and the acceleration of the maturity of the Loans or, if
payment is not then due to the beneficiary under the Interim Letter of Credit,
Agent shall not pay the beneficiary under the Interim Letter of Credit prior to
the date for payment specified thereunder. Agent, may, however, provide for the
deposit of funds in an account to secure payment to the beneficiary, and any
funds so deposited shall be paid to such beneficiary (subject to the
satisfaction of all conditions to such payment), or returned to the Agent for
distribution to the Banks (or, if all Obligations then shall have been
indefeasibly paid in full, to the Company) if no payment to such beneficiary has
been made and if the final date available for drawings under the Interim Letter
of Credit has passed. Each payment or deposit of funds by the Agent as provided
in this paragraph shall be treated for all purposes of this Agreement as a
drawing duly honored by the Agent under the Interim Letter of Credit and an
Advance under this Agreement.
(b) Termination of Credit Commitments. If for any reason the obligations
of the Lenders to make Loans hereunder shall terminate when the Interim Letter
of Credit is outstanding, Borrowers shall, in addition to their repayment
obligations hereunder, immediately deposit with Agent an amount, in cash, equal
to the face amount of the Interim Letter of Credit.
(c) Payment by Banks. If Borrowers shall fail to reimburse the Agent as
and when required above for the amount of any drawing honored by the Agent under
the Interim Letter of Credit, the Agent shall promptly notify each Bank of the
unreimbursed amount of such drawing and of such Bank's respective Pro Rata Share
thereof. Each Bank shall make available to the Agent an amount equal to its
respective Pro Rata Share of such unreimbursed drawing, in immediately available
funds, at the office of the Agent specified in such notice, not later than 12:00
P.M.
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(Cleveland time) on the first Business Day after such Bank's receipt of such
notice from the Agent. If any Bank fails to make available to the Agent the
amount of such Bank's Pro Rata Share of such unreimbursed drawing, the Agent
shall be entitled to recover such amount on demand from such Bank, together with
interest at the customary rate set by the Agent for the correction of errors
among banks. Nothing in this provision shall prejudice the right of any Bank to
recover from the Agent any amounts made available by such Bank to the Agent
pursuant to this provision in the event that it is determined by a court of
competent jurisdiction that the payment with respect to the Interim Letter of
Credit by the Agent in respect of which payment was made by the Agent
constituted gross negligence or willful misconduct on the part of the Agent. The
Agent shall distribute to each other Bank which has paid all amounts payable by
it under this Section 2.22(c) with respect to the Interim Letter of Credit such
other Bank's Pro Rata Share of all payments received by the Agent from Borrowers
in reimbursement of drawings honored by the Agent under the Interim Letter of
Credit when such payments are received.
(d) Obligations Absolute. The obligation of Borrowers to reimburse the
Agent for drawings made under the Interim Letter of Credit and the obligations
of the Banks under Section 2.22(c) shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following:
(i) any lack of validity or enforceability of the Interim Letter of
Credit;
(ii) the existence of any claim, setoff, defense or other right
which Borrowers may have at any time against a beneficiary or any
transferee of the Interim Letter of Credit (or any persons or entities for
whom any such transferee may be acting), the Agent, any Bank or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between Borrowers and the beneficiary for which the Interim
Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document presented
under the Interim Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by the Agent under the Interim Letter of Credit against
presentation of a demand, draft or certificate or other document which does
not comply with the terms of the Interim Letter of Credit, provided that
such payment does not constitute gross negligence or willful misconduct of
the Agent;
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(v) any other circumstance or occurrence whatsoever, which is
similar to any of the foregoing; or
(vi) the fact that a default or an Event of Default shall have
occurred and be continuing.
(e) Indemnification: Nature of the Agent's Duties. In addition to
amounts payable as elsewhere provided in this Section 2.22, and without limiting
any other indemnification provided for in this Agreement, Borrowers agree to
protect, indemnify, pay and save the Agent harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) which the Agent may incur or be subject
to as a consequence, direct or indirect, of (i) the issuance of the Interim
Letter of Credit, other than as a result of the gross negligence or willful
misconduct of the Agent as determined by a court of competent jurisdiction, or
(ii) the failure of the Agent to honor a drawing under the Interim Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or governmental authority. As
between Borrowers and the Agent, Borrowers assume all risks of the acts and
omissions of, or misuse of the Interim Letter of Credit by, the respective
beneficiaries thereof. In furtherance and not in limitation of the foregoing,
the Agent shall not be responsible for: (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Interim Letter of
Credit, even if any of the foregoing should in fact prove to be invalid,
insufficient, inaccurate, fraudulent or forged in any respect; (ii) the validity
or insufficiency of any instrument transferring or assigning or purporting to
transfer or assign the Interim Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary of
the Interim Letter of Credit to comply fully with conditions required in order
to draw thereupon; (iv) the errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telecopy,
telex or otherwise, whether or not they be in cipher; (v) the errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under the Interim
Letter of Credit or any proceeds thereof; (vii) the misapplication by the
beneficiary of the Interim Letter of Credit of the proceeds of any drawing under
such Interim Letter of Credit; and (viii) for any consequences arising from
causes beyond the control of the Agent. None of the above shall affect, impair,
or prevent the vesting of any of the Agent's rights or powers hereunder. In
determining whether to pay under the Interim Letter of Credit, the Agent shall
be responsible only to determine that the documents and certificates required to
be delivered under the Interim Letter of Credit have been delivered and that the
same comply on their face with the requirements of the Interim Letter of Credit.
Borrowers
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shall have no obligation to indemnify the Agent in respect of any liability
incurred by the Agent arising solely out of the gross negligence or willful
misconduct of the Agent, as determined by a court of competent jurisdiction, or
out of the wrongful dishonor by the Agent of a proper demand for payment made
under the Interim Letter of Credit.
ARTICLE III
CONDITIONS PRECEDENT
3.1 Initial Advance. Lenders shall not be required to make the Initial
Advance hereunder unless (a) Borrowers shall have paid all fees due and payable
to Lenders and Agent hereunder, (b) the initial Borrowing Notice is delivered to
the Agent on or before November 29, 1995, (c) the proceeds of the Initial
Advance are sufficient to and are used for the payoff and termination of the
Existing Facilities, (d)(i) five (5) Business Days prior to the Technologies
Acquisition, the Company shall have provided in writing to Agent a detailed list
certified by an Authorized Financial Officer, of the amount and kind of all
consideration being paid by the Company and or Maryland in connection with the
Technologies Acquisition, and (ii) each Lender, in its sole discretion, has
approved the contents of Borrower's notice (the Agent shall respond in writing
to the Company within five (5) Business Days of receiving the Company's original
notice as to Lenders' approval or disapproval; in the event that any Lender
disapproves of the amount and kind of consideration being paid by the Company
and or Maryland in connection with the Technologies Acquisition, this Agreement
shall terminate with respect to such Lender as of the date of Agent's notice of
disapproval to the Company), (e) the closing of the Technologies Acquisition
shall have occurred on or before November 30, 1995, in accordance with the terms
and conditions of documents and instruments (the "Merger Documents") that have
been reviewed and approved by Agent and Agent's counsel, and (f) Borrowers shall
have furnished to Agent, with sufficient copies for Lenders, the following:
(i) The duly executed originals of the Loan Documents, including
the Notes, payable to the order of each of Lenders, and this
Agreement and a Subsidiary Guaranty from Canada;
(ii) A certificate of good standing for each Borrower and Canada,
certified by the appropriate governmental officer, and foreign
qualification certificates, certified by the appropriate
governmental officer, for each jurisdiction where the failure to
so qualify or be licensed (if required) could reasonably be
expected to result in a Material Adverse Change;
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(iii) Copies, certified by an officer of each Borrower and Canada, of
each of the Borrower's formation documents (including by-laws
or code of regulations), together with all amendments thereto;
(iv) An incumbency certificate, executed by an officer of each
Borrower and Canada, which shall identify by name and title and
bear the signature of the Persons authorized to sign the Loan
Documents and the Subsidiary Guaranty, respectively, and to
make borrowings hereunder on behalf of each Borrower, upon
which certificate Agent and Lenders shall be entitled to rely
until informed of any change in writing by each Borrower or
Canada;
(v) Copies, certified by the Secretary or Assistant Secretary, of
each Borrower's and Canada's Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed necessary
by counsel for any Lender) authorizing, as the case may be, the
Advances provided for herein and the execution, delivery and
performance of the Loan Documents or the Subsidiary Guaranty to
be executed and delivered by each Borrower and Canada
hereunder;
(vi) A written opinion of each Borrower's and Canada's counsel,
addressed to Lenders in substantially the form of Exhibit D and
Exhibit E hereto;
(vii) A certificate, signed by an officer of each Borrower, stating
that on the initial Borrowing Date no Default or Unmatured
Default has occurred and is continuing and that all
representations and warranties of each Borrower are true and
correct as of the initial Borrowing Date;
(viii) The most recent financial statements of the Company and a
certificate from an officer of the Company stating that no
material adverse change in the Company's financial condition
has occurred since September 30, 1995;
(ix) UCC financing statement, judgment, and tax lien searches with
respect to each Borrower from the State of Ohio, from the state
of Maryland with respect to Technologies and Maryland and from
the province of Ontario with respect to Canada;
(x) A certificate, signed by an officer of each Borrower, stating
that all judgments against each Borrower have been satisfied,
and that all liens or encumbrances on any Property of any
Borrower have
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been released, other than liens permitted pursuant to Section
5.15;
(xi) Written money transfer instructions, in substantially the form
of Exhibit F hereto, addressed to Agent and signed by an
Authorized Officer, together with such other related money
transfer authorizations as Agent may have reasonably requested;
(xii) An original counterpart of the articles of merger relating to
the Technologies Acquisition and any other documents or
instruments relating thereto requested by Agent or any Lender,
and a certificate of an Authorized Financial Officer stating
that the Technologies Acquisition occurred in accordance with
the terms of the Merger Documents;
(xiii) Immediately following the closing of the Technologies
Acquisition, a resolution of the new board of directors of the
surviving corporation acknowledging its obligations as a
Borrower under this Agreement; and
(xiv) Such other documents as any Lender or its counsel may have
reasonably requested, the form and substance of which documents
shall be acceptable to the parties and their respective
counsel.
3.2 Each Advance. Lenders shall not be required to make any Advance
unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default;
(ii) The representations and warranties contained in Article IV are
true and correct in all material respects as of such Borrowing
Date with respect to each Borrower and to any Subsidiary in
existence on such Borrowing Date, except to the extent any such
representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty
shall be true and correct in all material respects on and as of
such earlier date;
(iii) All legal matters incident to the making of such Advance shall
be satisfactory to Lenders and their counsel; and
(iv) Borrowers have provided to Lenders, Borrowers latest audited
annual financial statements and unaudited partial year
financial statements (all
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such financial statements to be prepared with the specified detail
required in Section 5.1 hereof).
Each Borrowing Notice with respect to each such Advance shall constitute a
representation and warranty by Borrowers that the conditions contained in
Sections 3.2(i) and (ii) have been satisfied.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrowers represent and warrant to Lenders that:
4.1 Existence. The Company is a corporation duly organized and
validly existing under the laws of the State of Ohio, having its principal place
of business in Garfield Heights, Ohio; and Maryland is a corporation duly
organized and validly existing under the laws of the State of Maryland, having
its principal place of business in Gaithersburg, Maryland; and each has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted. Each Borrower's Subsidiaries are duly incorporated,
validly existing and in good standing under the laws of their jurisdiction of
incorporation and have all requisite authority to conduct its business in each
jurisdiction in which their business is conducted.
4.2 Authorization and Validity. Each Borrower has the power and
authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery by each Borrower
of the Loan Documents and the performance of its obligations thereunder have
been duly authorized by proper proceedings, and the Loan Documents constitute
legal, valid and binding obligations of each Borrower enforceable against each
Borrower in accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
4.3 No Conflict, Government Consent. Neither the execution and
delivery by each Borrower of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on each Borrower or any of its Subsidiaries or each
Borrower's or any Subsidiary's articles of incorporation or bylaws, or the
provisions of any material indenture, material instrument or material agreement
to which each Borrower or any of its Subsidiaries is a party or is subject, or
by which it, or its Property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or on the
Property of the Borrower or a Subsidiary pursuant to the terms of any such
indenture, instrument or agreement. No
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order, consent, approval, license, authorization, or validation of, or filing,
recording or registration with, or exemption by, any governmental or public body
or authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of, or the
legality, validity, binding effect or enforceability of, any of the Loan
Documents.
4.4 Financial Statements-- Material Adverse Change. The September 30,
1995 financial statements of Borrowers and their Subsidiaries heretofore
delivered to Lenders were prepared in accordance with GAAP in effect on the date
such statements were prepared and fairly present the financial condition and
operations of Borrowers and their Subsidiaries at such date and the consolidated
results of their operations for the period then ended. Since September 30, 1995
there has been no change in the business, Property, prospects, condition
(financial or otherwise) or results of operations of Borrowers and their
Subsidiaries which could reasonably be expected to result in a Material Adverse
Change.
4.5 Tax. Borrowers and their Subsidiaries have filed all United
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by Borrowers or any of their Subsidiaries except such taxes,
if any, as are being contested in good faith and as to which adequate reserves
have been provided. No tax liens have been filed and no claims are being
asserted with respect to any such taxes. The charges, accruals and reserves on
the books of Borrowers and their Subsidiaries in respect of any taxes or other
governmental charges are adequate.
4.6 Litigation and Contingent Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry: pending or, to
the knowledge of any of their officers, threatened against or affecting
Borrowers or any of their Subsidiaries which could reasonably be expected to
result in a Material Adverse Change. Borrowers have no material Contingent
Obligations not provided for or disclosed in the financial statements referred
to in Section 5.1.
4.7 Subsidiaries. Schedule 1 hereto contains an accurate list of
all of the presently existing Subsidiaries of each Borrower setting forth their
respective jurisdictions of incorporation and the percentage of their respective
capital stock owned by each Borrower or other Subsidiaries. All of the issued
and outstanding shares of capital stock of such Subsidiaries have been duly
authorized and issued and are fully paid and nonassessable.
4.8 ERISA. The Unfunded Liabilities of all Single Employer Plans do
not in the aggregate exceed $1,000,000. Neither Borrowers nor any other member
of the Controlled Group has
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incurred, or is reasonably expected to incur, any withdrawal liability to
Multiemployer Plans in excess of $250,000 in the aggregate. Each Plan complies
in all material respects with all applicable requirements of law and
regulations, no Reportable Event has occurred with respect to any Plan, neither
Borrowers nor any other member of the Controlled Group have withdrawn from any
Plan or initiated steps to do so, and no steps have been taken to reorganize or
terminate any Plan.
4.9 Accuracy of Information. All factual information heretofore or
contemporaneously furnished by or on behalf of Borrowers or any of their
Subsidiaries to Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of Borrowers or any of their
Subsidiaries to Agent or any Lender will be, true and accurate in all material
respects (taken as a whole) on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary to
make such information (taken as a whole) not misleading at such time.
4.10 Regulation U. No Borrower holds any margin stock (as defined in
Regulation U).
4.11 Material Agreements. No Borrower nor any of their respective
Subsidiaries is a party to any agreement or instrument or subject to any charter
or other corporate restriction which could reasonably be expected to result in a
Material Adverse Change. No Borrower nor any of their respective Subsidiaries
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in (i) any agreement to which it
is a party, which default could reasonably be expected to result in a Material
Adverse Change or (ii) any agreement or instrument evidencing or governing
Indebtedness.
4.12 Compliance with Laws. Each Borrower and its Subsidiaries has
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses, and ownership of their respective Property, the non-compliance with
which could reasonably be expected to result in a Material Adverse Change. No
Borrower nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable federal, state and local environmental, health and safety statutes
and regulations or the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of any toxic or
hazardous waste or substance into the environment, which non-compliance or
remedial action could reasonably be expected to result in a Material Adverse
Change.
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4.13 Ownership of Properties. Except as set forth on Schedule 2
hereto, on the date of this Agreement, Borrowers and their Subsidiaries will
have good title, free of all Liens other than those permitted by Section 5.15,
to all of the Property and assets reflected in the financial statements as owned
by it.
4.14 Investment Company Act. No Borrower nor any of their respective
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
4.15 Public Utility Holding Company Act. No Borrower nor any of their
respective Subsidiaries is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.16 Solvency. (i) Immediately after the Closing Date and immediately
following the making of each Loan and after giving effect to the application of
the proceeds of such Loans, (a) the fair value of the assets of Borrowers and
their Subsidiaries on a consolidated basis, at a fair valuation, will exceed the
debts and liabilities, subordinated, contingent or otherwise, of Borrowers and
their Subsidiaries on a consolidated basis; (b) the present fair saleable value
of the Property of Borrowers and their Subsidiaries on a consolidated basis will
be greater than the amount that will be required to pay the probable liability
of Borrowers and their Subsidiaries on a consolidated basis on their debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) Borrowers and their
Subsidiaries on a consolidated basis will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) Borrowers and their
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.
(ii) Borrowers do not intend to, or to permit any of their Subsidiaries to,
and does not believe that they or any of their Subsidiaries will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by them or any such Subsidiary and
the timing of the amounts of cash to be payable on or in respect of their
Indebtedness or the Indebtedness of any such Subsidiary.
4.17 Insurance. Borrowers and their Subsidiaries carry insurance on
their businesses with financially sound and reputable insurance companies, in
such amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged
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in similar businesses in localities where Borrowers and their Subsidiaries
operate, including, without limitation:
(i) Property and casualty insurance (including coverage for flood
and other water damage for any Property located within a
100-year flood plain) in the amount of the replacement cost of
the improvements at the Property;
(ii) Comprehensive general liability insurance in the amount of
$20,000,000 per occurrence.
4.18 Environmental Matters. Each of the following
representations and warranties is true and correct on and as of the Closing Date
except to the extent that the facts and circumstances giving rise to any such
failure to be so true and correct, in the aggregate, could not reasonably be
expected to result in a Material Adverse Change:
(a) To the best knowledge of Borrowers, the Property of Borrowers
and their Subsidiaries does not contain, and has not previously contained,
any Materials of Environmental Concern in amounts or concentrations which
constitute or constituted a violation of, or could reasonably give rise to
liability under, Environmental Laws.
(b) To the best knowledge of Borrowers, the Property of Borrowers
and their Subsidiaries and all operations of such Property are in
compliance, and have in the last two years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or
about the Property of Borrowers and their Subsidiaries, or violation of any
Environmental Law with respect to the Property of Borrowers and their
Subsidiaries.
(c) Neither Borrowers nor any of their Subsidiaries have received
any notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of their Property, nor does any
Borrower or their respective Subsidiaries have knowledge or reason to
believe that any such notice will be received or is being threatened.
(d) To the best knowledge of Borrowers, Materials of Environmental
Concern have not been transported or disposed of from any Property of
Borrowers and their Subsidiaries in violation of, or in a manner or to a
location which could reasonably give rise to liability under, Environmental
Laws, nor have any Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any of the Property of
Borrowers and their Subsidiaries in
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violation of, or in a manner that could give rise to liability under, any
applicable Environmental Laws.
(e) No judicial proceedings or governmental or administrative
action is pending, or, to the knowledge of any Borrower or their respective
Subsidiaries, threatened, under any Environmental Law to which the Borrower
or any of its Subsidiaries is or will be named as a party with respect to
any Property of Borrowers and their Subsidiaries nor are there any consent
decrees or other decrees, consent orders, administrative order or other
orders, or other administrative of judicial requirements outstanding under
any Environmental Law with respect to any Property of Borrowers and their
Subsidiaries.
(f) To the best knowledge of each Borrower, there has been no
release or threat of release of Materials of Environmental Concern at or
from any Property of Borrowers or their Subsidiaries, or arising from or
related to the operations of Borrowers and their Subsidiaries in connection
with any Property in violation of or in amounts or in a manner that could
give rise to liability under Environmental Laws.
ARTICLE V
COVENANTS
During the term of this Agreement, unless Lenders shall otherwise consent
in writing:
5.1 Financial Reporting. Each Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with GAAP, and furnish to Lenders:.
(i) As soon as available, but in any event not later than 45 days
after the close of each fiscal quarter, for the Company and its
Subsidiaries, an unaudited consolidated and consolidating
balance sheet as of the close of each such period and the
related unaudited consolidated and consolidating statements of
income and retained earnings for such period and the portion of
the fiscal year through the end of such period and of year to
date cash flows of the Company and its Subsidiaries, all
certified by an Authorized Financial Officer;
(ii) As soon as available, but in any event not later than 45 days
after the close of each fiscal quarter, for the Company and its
Subsidiaries, related reports in form and substance
satisfactory to Lenders, all certified by the Company's
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Authorized Financial Officer, a statement detailing
Consolidated Outstanding Indebtedness;
(iii) As soon as available, but in any event not later than 90 days
after the close of each fiscal year, for the Company and its
Subsidiaries, (i) audited financial statements, including a
consolidated balance sheet as at the end of such year and the
related consolidated statements of income and retained earnings
and of cash flows for such year, setting forth in comparative
form the figures for the previous year, reported on without a
"going concern" or like qualification or exception, by Ernst &
Young, LLP (or other independent certified public accountants
of nationally recognized standing acceptable to (Agent), and
(ii) unaudited financial statements, including a consolidating
balance sheet as at the end of such year and the related
consolidating statements of income and retained earnings and of
cash flow for such year;
(iv) As soon as available, but in any event not later than 90 days
after the close of each fiscal year, for each Borrower and its
Subsidiaries, the following related reports in form and
substance satisfactory to Lenders, all certified by the
entity's Authorized Financial Officer: a statement of
Consolidated Outstanding Indebtedness;
(v) Together with the quarterly and annual financial statements
required hereunder, a compliance certificate in substantially
the form of Exhibit G hereto signed by an Authorized Officer
showing the calculations and computations necessary to
determine compliance with the financial covenants set forth in
this Agreement and stating that no Default or Unmatured Default
exists, or if any Default or Unmatured Default exists, stating
the nature and status thereof;
(vi) As soon as possible and in any event within 10 days after a
Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by an Authorized
Financial Officer of any Borrower, describing said Reportable
Event and the action which any Borrower proposes to take with
respect thereto;
(vii) As soon as possible and in any event within 10 days after
receipt by a Borrower, a copy of (a) any notice or claim to the
effect that a Borrower or any of its Subsidiaries is or may be
liable to any Person as a result of the release by any
Borrower,
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any of its Subsidiaries, or any other Person of any toxic or
hazardous waste or substance into the environment, which could
reasonably be expected to result in a Material Adverse Change
and (b) any notice alleging any violation of any federal, state
or local environmental, health or safety law or regulation by
any Borrower or any of its Subsidiaries, which, in either case,
could reasonably be expected to result in a Material Adverse
Change;
(viii) Promptly upon the furnishing thereof to the shareholders of
each Borrower, copies of all financial statements, reports and
proxy statements so furnished;
(ix) Within three (3) business days after due to the SEC, copies of
all registration statements and annual, quarterly, monthly or
other reports and any other public information which each
Borrower or any of its Subsidiaries files with the Securities
Exchange Commission; and
(x) Such other information (including, without limitation,
financial statements for each Borrower and nonfinancial
information) as Agent may from time to time reasonably request.
5.2 Prohibited Uses of Proceeds. Borrowers will not nor will it
permit any Subsidiary to, use any of the proceeds of the Advances (i) to
purchase or carry any "margin stock" (as defined in Regulation U), or (ii) for
any purpose that shall be a violation of Regulation U, or regulations G, T and X
of the Board of Governors of the Federal Reserve System or for any other purpose
violative of any rule or regulation of such Board.
5.3 Notice of Default. Each Borrower will give, and will cause
each of its Subsidiaries to give, notice in writing to Lenders of the occurrence
of any Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to result in a Material Adverse
Change, promptly upon (but in no event later then ten (10) Business Days after)
such occurrence or development.
5.4 Conduct of Business. Each Borrower will do, and will cause
each of its Subsidiaries to do, all things necessary to remain duly incorporated
or duly qualified, validly existing and in good standing as a corporation,
general partnership, limited partnership or limited liability company, as the
case may be, in its jurisdiction of incorporation/formation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted and to carry on and conduct its business in substantially
the same manner as it is presently
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conducted and, specifically, no Borrower nor their respective Subsidiaries may
undertake any significant business other than the manufacture or distribution of
industrial and consumer electronic products or related consulting or support
services.
5.5 Taxes. Each Borrower will pay, and will cause each of its
Subsidiaries to pay, when due all taxes, assessments and governmental charges
and levies upon it of its income, profits or Property, except those which are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been set aside.
5.6 Insurance. Each Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurance
companies, insurance in such amounts, with such deductibles and covering such
risks as are customarily carried by companies engaged in similar businesses in
localities where Borrowers and their Subsidiaries operate, including, without
limitation:
(i) Property and casualty insurance (including coverage for flood
and other water damage for any Property located within a
100-year flood plain) in the amount of the replacement cost of
the improvements at the Property; and
(ii) Comprehensive general liability insurance in the amount of
$20,000,000 per occurrence.
5.7 Compliance with Laws. Each Borrower will, and will cause each
of its Subsidiaries to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, the
non-compliance with which could reasonably be expected to result in a Material
Adverse Change.
5.8 Maintenance of Properties. Except as permitted pursuant to
Section 5.11 of this Agreement, each Borrower will, and will cause each of its
Subsidiaries to, do all things necessary to maintain, preserve, protect and keep
its Property in good repair, working order and condition, ordinary wear and tear
excepted, and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times.
5.9 Inspection. Borrowers will, and will cause each of their
Subsidiaries to, permit Agent and each Lender , by its respective
representatives and agents, to inspect any Property, corporate books and
financial records of each Borrower and each of its Subsidiaries, to examine and
make copies of the books of accounts and other financial records of each
Borrower and each of its Subsidiaries, and to discuss the affairs, finances and
accounts of each Borrower and each of its Subsidiaries, and to be advised as
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to the same by their respective officers at such reasonable times and intervals
as Agent may designate (provided, however, that any inspection by a Lender shall
be arranged by Agent).
5.10 Maintenance of Status. Each Borrower shall remain a
corporation validly existing and in good standing in the state of its
incorporation and the Company shall at all times remain a corporation listed and
in good standing on NASDAQ or other national securities exchange. The Company
shall not permit a Change in Control to occur with respect to Maryland or
Technologies.
5.11 Merger; Sale of Assets. Other than the Technologies
Acquisition, no Borrower will, nor will it permit any of its Subsidiaries to,
enter into any merger, consolidation, reorganization or liquidation or transfer
or otherwise dispose of all or a Substantial Portion of its Property or
business, unless approved in advance by Lenders.
5.12 Delivery of Subsidiary Guaranties. Each Borrower shall
promptly notify Agent of any planned formation or acquisition of any Substantial
Subsidiary. Within 10 days after any Borrower forms or acquires any Substantial
Subsidiary, that Borrower shall cause such Substantial Subsidiary to execute and
deliver to Lenders' a guaranty agreement (together with such other documents as
Lenders shall reasonably request) whereby such Substantial Subsidiary agrees
that it shall be jointly and severally liable for all Obligations of that
Borrower under the Loan Documents. The guaranty agreement and such other
documents each shall be in form and substance satisfactory to Lenders.
5.13 Sale and Leaseback. Each Borrower will not, nor will it permit
any of its Subsidiaries to, sell or transfer all or a Substantial Portion of its
Property in order to concurrently or subsequently lease as lessee such or
similar Properties.
5.14 Acquisitions and Investments. Each Borrower will not, nor will
it permit any Subsidiary to, make or suffer to exist any Investments (including,
without limitation, loans and advances to, and other Investments in,
Subsidiaries), or commitments therefor, or create any Subsidiary or become or
remain a partner in any partnership or joint venture, or make any Acquisition of
any Person, except:
(i) Cash Equivalents;
(ii) up to $10,800,000 investment in Canada, other existing
Investments in Subsidiaries and joint ventures, and other
Investments in existence on the date hereof and described in
Schedule "1" hereto;
(iii) acquisitions permitted pursuant to Section 5.27;
(iv) mergers permitted pursuant to Section 5.11;
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(v) investments and loans permitted under Section 5.26; and
(vi) investments and loans from either Borrower to the other so long
as the source of such investments or loans is not a Loan or
Advance hereunder and such investment or loan would cause
borrowings hereunder to exceed the limits contained in Section
2.1.
5.15 Liens. Each Borrower will not, nor will it permit any of its
Subsidiaries to, create, incur, or suffer to exist any Lien in, of or on any
Property of it or any of its Subsidiaries, except:
(i) with respect to Property consisting of real property under the
laws of the state where such Property is located, any tax lien,
or any lien securing workers' compensation or unemployment
insurance obligations, or any mechanic's, carrier's or
landlord's lien, or any lien arising under ERISA, or any
security interest arising under article four (bank deposits and
collections) or five (letters or credit) of the Uniform
Commercial Code, or any security interest or other lien similar
to the foregoing, EXCEPT that this clause (i) shall apply only
to (A) the extent that the aggregate of such liens does not
exceed $1,000,000, and (B) security interests and other liens
arising by operation of law (whether statutory or common law)
and in the ordinary course of business and shall not apply to
any security interest or other lien that secures any
Indebtedness for Borrowed Money or any Contingent Obligation or
any obligation that is in material default in any manner (other
than any default contested in good faith by timely and
appropriate proceedings effective to stay enforcement of the
security interest or other lien in question);
(ii) zoning or deed restrictions, public utility easements, minor
title irregularities and similar matters having no adverse
effect as a practical matter on the ownership or use of any of
the properties or interfere with use thereof in the business of
the Borrower or its Subsidiaries;
(iii) with respect to Property consisting of real property under the
laws of the state where such Property is located, any lien
securing or given in lieu of surety, stay, appeal or
performance bonds, or securing performance of contracts or bids
(other than contracts for the payment of money borrowed), or
deposits required by law or governmental
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regulations or by any court order, decree, judgment or rule or
as a condition to the transaction of business or the exercise
of any right, privilege or license, EXCEPT that this clause
(iii) shall not apply to (A) the extent that the aggregate of
such liens exceeds $1,000,000, and (B) any lien or deposit
securing any obligation that is in material default in any
manner (other than any default contested in good faith by
timely and appropriate proceedings effective to stay
enforcement of the security interest or than lien in question);
(iv) any mortgage, security, interest or other lien (each a
"Purchase Money Security Interest") which is created or assumed
in purchasing, constructing or improving any real property or
equipment to which any property is subject when purchased,
PROVIDED, that (A) the Purchase Money Security Interest shall
be confined to the aforesaid property, (B) the indebtedness
secured thereby does not exceed the total cost of the purchase,
construction or improvement and (C) any such indebtedness, if
repaid in whole or in part, cannot be reborrowed;
(v) any lease other than any Capitalized Lease (it being agreed
that a Capitalized Lease is a lien rather than a lease for the
purposes of this Agreement) so long as the aggregate annual
rentals of all such leases do not exceed Ten Million Dollars
($10,000,000);
(vi) any financing statement perfecting a security interest that
would be permissible under this subsection; and
(vii) liens existing on the date hereof and described on Schedule 2
hereof.
Liens permitted pursuant to this Section 5.15 shall be deemed to be "Permitted
Liens".
5.16 Affiliates. Except as permitted pursuant to Section 5.2,
no Borrower will, nor will it permit any of its Subsidiaries to, enter into any
transaction (including, without limitation, the purchase or sale of any Property
or service) with, or make any payment or transfer to, any Affiliate except in
the ordinary course of business and pursuant to the reasonable requirements of
each Borrower's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to that Borrower or such Subsidiary than that Borrower or such
Subsidiary would obtain in a comparable arm's-length transaction.
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5.17 Additional Indebtedness and Financial Undertakings. No Borrower
will enter into or remain liable upon, nor will it permit any Subsidiary to
enter into or remain liable upon, any Financial Undertaking, nor will any
Borrower or their respective Subsidiaries incur Indebtedness for Borrowed Money
(other than Indebtedness for Borrowed Money which is incurred under this
Agreement or the Additional Facilities) (a) in any instance in the aggregate, on
a consolidated basis, exceeding $100,000,000, and (b) in any amount if such
Indebtedness has a scheduled maturity, either contingent or otherwise, prior to
November 15, 1997, and (c) that consists of interest rate exchange agreements or
interest rate option agreements, that in the aggregate, at any time, creates an
Aggregate Measured Credit Risk in excess of $7,500,000.
5.18 Litigation. Borrowers shall furnish or cause to be furnished to
Agent, promptly (and, in any event, within five (5) Business Days) after any
Borrower or their respective Subsidiaries shall have first become aware of the
same, a written notice setting forth full particulars of and what action any
Borrower or their respective Subsidiaries is taking or proposes to take with
respect to (a) any final judgment in an amount exceeding One Million Dollars
($1,000,000) rendered against any Borrower or any Affiliate of any Borrower; (b)
the commencement or institution of any legal or administrative action, suit,
proceeding or investigation by or against any Borrower in or before any court,
governmental or regulatory body, agency, commission, or official, board of
arbitration or arbitrator, the outcome of which could reasonably be expected to
result in a Material Adverse Change; or (c) the occurrence of any adverse
development not previously disclosed by any Borrower to Agent in writing, in any
such action, suit, proceeding or investigation.
5.19 Further Assurances. Borrowers will execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, any and all such
further assurances and other agreements or instruments, and take or cause to be
taken all such other action, as shall be reasonably requested by Agent from time
to time in order to give full force and effect to the Loan Documents.
5.20 Current Ratio. Borrowers shall maintain, at all times, a
Current Ratio in excess of 1.7 to 1.
5.21 Consolidated Tangible Net Worth. Borrowers shall have a
Consolidated Tangible Net Worth of not less than $85,000,000 at Closing.
Thereafter, Borrowers shall maintain, at all times, a Consolidated Tangible Net
Worth equal to $85,000,000 plus (i) 100% of the net proceeds to Borrowers of any
equity offering; and (ii) an amount equal to: (a) a minimum of 50% of positive
Consolidated Net Income, if any, per calendar quarter through March 31, 1996,
and (b) a minimum of 75% of positive Consolidated Net Income, if any, per
calendar quarter thereafter; provided, however, that no adjustments shall be
made as a consequence of any loss.
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5.22 Working Capital. Borrowers shall have and maintain at all times
until March 31, 1997, Working Capital of $175,000,000. From and after April 1,
1997, Borrowers shall maintain at all times, Working Capital of $190,000,000.
5.23 Capital Expenditures. Capital Expenditures for Borrowers, on a
consolidated basis, shall not exceed $25,000,000 for Borrowers' fiscal year
ending March 31, 1996, and $20,000,000 for fiscal years ending March 31, 1997
and thereafter.
5.24 Leverage Ratio. The Leverage Ratio shall not exceed 4.75 to 1.00
at any time during the period commencing on the Closing Date, and ending on
March 31, 1996, 4.25 to 1.00 at any time during the period commencing April 1,
1996, and ending on March 31, 1997, and 3.00 to 1.00 at any time during the
period commencing on April 1, 1997, and thereafter.
5.25 Fixed Charge Coverage Ratio. Borrowers shall maintain a Fixed
Charge Coverage Ratio of no less than the following, during each of the
following periods:.
(i) At all times during the period commencing July 1, 1995, and
ending September 30, 1995, not less than 1.5x to 1.0.
(ii) At all times during the period commencing July 1, 1995, and
ending December 31, 1995, not less than 1.75X to 1.0.
(iii) At all times during the period commencing July 1, 1995, and
ending March 31, 1996, not less than 2.0x to 1.0.
(iv) Beginning with the quarter ending June 30, 1996, and every
quarter thereafter, not less than 2.0x to 1.0 on a rolling
four-quarter basis.
5.26 Investment and Loan Limit. Neither the Company, Technologies nor
Maryland, nor any of their Subsidiaries, together or individually, directly or
indirectly, in any instance or in the aggregate over time may: (a) invest in any
manner more than $10,800,000 in Canada, or (b) loan more than an aggregate
principal amount of $25,000,000 to Canada.
5.27 Acquisition Limit. Neither Borrowers nor any of their
Subsidiaries shall fund the Acquisitions of Persons, or offer for, any Capital
Stock of Persons, to the extent the aggregate consideration (including
contingent consideration) of all such Acquisitions made after the Closing Date
and until the Facility Termination Date would exceed $2,000,000.
5.28 Environmental Matters. Each Borrower and its Subsidiaries shall:
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(a) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws, except
to the extent that (i) the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not be reasonably
expected to result in a Material Adverse Change, or (ii) that Borrowers have
determined in good faith that contesting the same is not in the best interests
of that Borrower and its Subsidiaries and the failure to contest the same could
not be reasonably expected to result in a Material Adverse Change.
(b) Defend, indemnify and hold harmless Agent and each Lender, and their
respective employees, agents, officers and directors from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of, noncompliance with
or liability under any Environmental Laws applicable to the operations of that
Borrower, its Subsidiaries or its Property, or any orders, requirements or
demands of Governmental Authorities related thereto, including, without
limitation, attorney's and consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the extent that
any of the foregoing arise out of the gross negligence or willful misconduct of
the party seeking indemnification therefor. This indemnity shall continue in
full force and effect regardless of the termination of this Agreement.
ARTICLE VI
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
6.1 Nonpayment of Principal. Nonpayment of any principal payment on
any Note when due.
6.2 Nonpayment of Other Obligations. Nonpayment of interest upon any
Note or of any Commitment Fee or other payment Obligations under any of the Loan
Documents within three (3) Business Days after the same becomes due.
6.3 Certain Breaches. The breach of any of the terms or provisions of
Sections 5.2, 5.6, 5.7 and 5.9 through 5.28.
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6.4 Representations and Warranties. Any representation or warranty
made or deemed made by or on behalf of each Borrower or any of its Subsidiaries
to Lenders or Agent under or in connection with this Agreement, any Loan, or any
certificate or information delivered in connection with this Agreement or any
other Loan Document shall be materially false on the date as of which made.
6.5 Other Breaches. The breach by any Borrower (other than a breach
which constitutes a Default under any other section of this Article VI) which
constitutes a Default under any of the terms or provisions of this Agreement
which is not remedied within fifteen (15) days after written notice from Agent
or any Lender.
6.6 Defaults on Indebtedness. Failure of any Borrower or any of their
respective Subsidiaries to pay any of its respective Indebtedness when due; or
the default by any Borrower or any of their respective Subsidiaries in the
performance of any term, provision or condition contained in any agreement, or
any other event shall occur or condition exist which causes or permits any
Indebtedness of any Borrower or any of their respective Subsidiaries to be due
and payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the stated maturity thereof; provided, however, that it shall
not be a default under this Section 6.6 if Borrowers shall be in default with
respect to Indebtedness arising from Indebtedness other than Indebtedness for
Borrowed Money in an aggregate amount not exceeding One Million Dollars
($1,000,000).
6.7 Bankruptcy, etc. Any Borrower or any of their respective
Subsidiaries shall (i) have an order for relief entered with respect to it under
the Federal bankruptcy laws as now or hereafter in effect, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any of its Property, (iv) institute any
proceeding for an order for relief under the Federal bankruptcy laws as now or
hereafter in effect or to adjudicate it as a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it, (v) take any corporate action to authorize or effect any of the foregoing
actions set forth in this Section 6.7, (vi) fail to contest in good faith any
appointment or proceeding described in Section 6.8 or (vii) not pay, or admit in
writing its inability to pay, its debts generally as they become due.
6.8 Appointment of Receiver. A receiver, trustee, examiner,
liquidator or similar official shall be appointed for any Borrower or their
respective Subsidiaries or any of their respective Property, or a proceeding
described in Section 6.7(iv)
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shall be instituted against such Borrower or any such Subsidiary and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of thirty (30) consecutive days.
6.9 Condemnation. Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of any Borrower and their
respective Subsidiaries which, when taken together with all other Property of
such Person so condemned, seized, appropriated, or taken custody or control of,
during the twelve-month period ending with the month in which any such
Condemnation occurs, could reasonably be expected to result in a Material
Adverse Change on such Borrower or Subsidiary.
6.10 Judgments. Any Borrower or any of their respective Subsidiaries
shall fail within sixty (60) days to pay, bond or otherwise discharge any
judgments or orders for the payment of money in an amount which, when added to
all other judgments or orders outstanding against Borrowers or any Subsidiary
would exceed $1,000,000 in the aggregate, which have not been stayed on appeal
or otherwise appropriately contested in good faith.
6.11 ERISA Withdrawal. Any Borrower or any other member of the
Controlled Group shall have been notified by the sponsor of a Multiemployer Plan
that it has incurred withdrawal liability to such Multiemployer Plan in an
amount which, when aggregated with all other amounts required to be paid to
Multiemployer Plans by Borrowers or any other member of the Controlled Group as
withdrawal liability (determined as of the date of such notification), exceeds
$250,000 or requires payments exceeding $100,000 per annum.
6.12 ERISA Reorganization. Any Borrower or any other member of the
Controlled Group shall have been notified by the sponsor of a Multiemployer Plan
that such Multiemployer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of that Borrower and the other
members of the Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan years of each such Multiemployer Plan immediately preceding the
plan year in which the reorganization or termination occurs by an amount
exceeding $250,000.
6.13 Other Defaults. The occurrence of any default under any Loan
Document or the breach of any of the terms or provisions of any Loan Document,
which default or breach continues beyond any period of grace therein provided.
ARTICLE VII
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ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
7.1 Acceleration. If any Default described in Section 6.7 or 6.8
occurs with respect to any Borrower, the obligations of Lenders to make Loans
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of Agent or
any Lender. If any other Default occurs, the Agent may, with the concurrence of
the Required Lenders, terminate or suspend the obligations of Lenders to make
Loans hereunder, or declare the Obligations to be due and payable or both,
whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which each Borrower
hereby expressly waives.
If, within ten (10) days after acceleration of the maturity of the
Obligations or termination of the obligations of Lenders to make Loans hereunder
as a result of any Default (other than any Default as described in Section 6.7
or 6.8 with respect to any Borrower) and before any judgment or decree for the
payment of the Obligations due shall have been obtained or entered, each Lender
(in their sole discretion) shall so direct, Agent shall, by notice to that
Borrower, rescind and annul such acceleration and/or termination.
7.2 Amendments & Waivers. Subject to the provisions of this Article
VII., the Required Lenders (or Agent with the consent in writing of Lenders) and
Borrowers may enter into agreements and waivers supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of Lenders or Borrowers hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement or
waiver shall, without the consent of each Lender affected thereby:
(i) Extend the Facility Termination Date or forgive all or any
portion of the principal amount of any Loan or accrued interest
thereon or the Commitment Fee, reduce the Applicable Margins or
the underlying interest rate options or extend the time of
payment of such interest or Commitment Fees.
(ii) Release any Subsidiary from the Subsidiary Guaranty.
(iii) Increase the amount of the Commitment of any Lender hereunder.
(iv) Permit any Borrower to assign its rights under this Agreement.
(v) Amend this Section 7.2.
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No amendment of any provision of this Agreement relating to Agent shall be
effective without the written consent of Agent.
7.3 Preservation of Rights. No delay or omission of Lenders or Agent
to exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
Borrowers to satisfy the conditions precedent to such Loan shall not constitute
any waiver or acquiescence. Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise of any
other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by Lenders required pursuant to Section 7.2, and then only to
the extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be available
to Agent and Lenders jointly until the Obligations have been paid in full.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations. All representations and warranties
of Borrowers contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.
8.2 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
Borrowers in violation of any limitation or prohibition provided by any
applicable statute or regulation.
8.3 Tax. Any taxes (excluding federal income taxes on the overall net
income of any Lender and taxes resulting from a Lenders failure to comply with
Section 2.21) or other similar assessments or charges made by any governmental
or revenue authority in respect of the Loan Documents shall be paid by
Borrowers, together with interest and penalties, if any.
8.4 Heading. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
8.5 Entire Agreement. The Loan Documents embody the entire agreement
and understanding among Borrowers, Agent and Lenders and supersede all prior
commitments, agreements and understandings among Borrowers, Agent and Lenders
relating to the subject matter thereof.
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8.6 Several Obligations Benefits of This Agreement. The respective
obligations of Lenders hereunder are several and not joint and no Lender shall
be the partner or agent of any other (except to the extent to which Agent is
authorized to act as such). The failure of any Lender to perform any of its
obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
8.7 Expenses; Indemnification. Borrowers shall reimburse Agent for
any costs, internal charges and out-of-pocket expenses (including, without
limitation, all expenses of Agent's due diligence investigation of Borrowers,
syndication expenses, travel expenses, reasonable fees for consultants and fees
and reasonable expenses for attorneys for Agent, which attorneys may be
employees of Agent) paid or incurred by Agent in connection with the amendment,
modification, and administration of the Loan Documents. Borrowers also agree to
reimburse Agent and Lenders for any costs, internal charges and out-of-pocket
expenses (including, without limitation, all fees and reasonable expenses for
attorneys for Agent and Lenders, which attorneys may be employees of Agent or
Lenders) paid or incurred by Agent or any Lender in connection with the
collection and enforcement of the Loan Documents (including, without limitation,
any workout). Borrowers further agree to indemnify Agent and each Lender, its
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not Agent or any
Lender is a party thereto) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, any Property, the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder. The obligations of
Borrowers under this Section shall survive the termination of this Agreement.
8.8 Numbers. All statements, notices, closing documents, and requests
hereunder shall be furnished to Agent with sufficient counterparts so that Agent
may furnish one to each of Lenders.
8.9 Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP, except that any
calculation or determination which is to be made on a consolidated basis shall
be made for Borrowers and all their Subsidiaries, including those Subsidiaries,
if any, which are unconsolidated on Borrowers' official financial statements.
8.10 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be
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inoperative, unenforceable, or invalid without affecting the remaining
provisions in that jurisdiction or the operation, enforceability, or validity of
that provision in any other jurisdiction, and to this end the provisions of all
Loan Documents are declared to be severable.
8.11 Nonliability of Lenders. The relationship between Borrowers, on
the one hand, and Lenders and Agent, on the other, shall be solely that of
borrowers and lender. Neither Agent nor any Lender shall have any fiduciary
responsibilities to Borrowers. Neither Agent nor any Lender undertakes any
responsibility to Borrowers to review or inform Borrowers of any matter in
connection with any phase of any Borrower's business or operations.
8.12 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN TH0SE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF OHIO, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
8.13 CONSENT TO JURISDICTION. EACH BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR OHIO
STATE COURT SITTING IN CUYAHOGA COUNTY IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS AND EACH BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
IMPAIR THE RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY
BORROWER AGAINST AGENT OR ANY LENDER OR ANY AFFILIATE OF Agent OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CUYAHOGA COUNTY, OHIO.
8.14 WAIVER OF JURY TRIAL. EACH BORROWER, AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
ARTICLE IX
AGENT
9.1 Appointment. National City Bank is hereby appointed Agent
hereunder and under each other Loan Document, and each of Lenders irrevocably
authorizes Agent to act as the agent of such Lender. Agent agrees to act as such
upon the express conditions
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contained in this Article IX. Agent shall not have a fiduciary relationship in
respect of Borrowers or any Lender by reason of this Agreement.
9.2 Powers. Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. Agent
shall have no implied duties to Lenders, or any obligation to Lenders to take
any action thereunder except any action specifically provided by the Loan
Documents to be taken by Agent.
9.3 General Immunity. Neither Agent nor any of its directors,
officers, agents or employees shall be liable to Borrowers, Lenders or any
Lender for any action taken or omitted to be taken by it or them hereunder or
under any other Loan Document or in connection herewith or therewith except for
its or their own gross negligence or willful misconduct.
9.4 No Responsibility for Loans, Recitals, etc. Neither Agent nor any
of its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (iii) the satisfaction of any condition specified in Article IV, except
receipt of items required to be delivered to Agent; (iv) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith; or (v) the value, sufficiency,
creation, perfection or priority of any interest in any collateral security.
Agent shall have no duty to disclose to Lenders information that is not required
to be furnished by Borrowers to Agent at such time, but is voluntarily furnished
by Borrowers to Agent (either in its capacity as Agent or in its individual
capacity).
9.5 Action on Instructions of Lenders. Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of Lenders and on all holders of Notes.
Agent shall be fully justified in failing or refusing to take any action
hereunder and under any other Loan Document unless it shall first be indemnified
to its satisfaction by Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.
9.6 Employment of Agents and Counsel. Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and
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shall not be answerable to Lenders, except as to money or securities received by
it or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Agent shall be entitled
to advice of counsel concerning all matters pertaining to the agency hereby
created and its duties hereunder and under any other Loan Document.
9.7 Reliance on Documents; Counsel. Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by Agent, which counsel may
be employees of Agent.
9.8 Agent's Reimbursement and Indemnification. Lenders agree to
reimburse and indemnify Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by Borrowers for which Agent is
entitled to reimbursement by Borrowers under the Loan Documents, (ii) for any
other expenses incurred by Agent on behalf of Lenders, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan
Documents and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against Agent in any way relating to or arising out of the Loan Documents or any
other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of any
such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of Agent. The obligations of Lenders under this Section 9.8 shall
survive payment of the Obligations and termination of this Agreement.
9.9 Rights as a Lender. In the event Agent is a Lender, Agent shall
have the same rights and powers hereunder and under any other Loan Document as
any Lender and may exercise the same as though it were not Agent, and the term
"Lender" or "Lenders" shall, at any time when Agent is a Lender, unless the
context otherwise indicates, include Agent in its individual capacity. Agent may
accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with Borrowers or any of their
Subsidiaries in which Borrowers or such Subsidiary is not restricted hereby from
engaging with any other Person. Agent, in its individual capacity, is not
obligated to remain a Lender.
9.10 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements prepared by Borrowers and such other documents and
information as it has deemed
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appropriate, made its own credit analysis and decision to enter into this
Agreement and the other Loan Documents. Each Lender also acknowledges that it
will, independently and without reliance upon Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents.
9.11 Successor Agent. Agent may resign at any time by giving written
notice thereof to Lenders and Borrowers, such resignation to be effective upon
the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, Lenders shall have the right to
appoint, on behalf of Borrowers and Lenders, a successor Agent. If no successor
Agent shall have been so appointed by Lenders within thirty days after the
resigning Agent's giving notice of its intention to resign, then the resigning
Agent may appoint, on behalf of Borrowers and Lenders, a successor Agent. If
Agent has resigned and no successor Agent has been appointed, Lenders may
perform all the duties of Agent hereunder and Borrowers shall make all payments
in respect of the Obligations to the applicable Lender and for all other
purposes shall deal directly with Lenders. No successor Agent shall be deemed to
be appointed hereunder until such successor Agent has accepted the appointment.
Any such successor Agent shall be a commercial bank having capital and retained
earnings of at least $50,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent. Upon the effectiveness of the resignation of Agent, the
resigning Agent shall be discharged from its duties and obligations hereunder
and under the Loan Documents. After the effectiveness of the resignation of an
Agent, the provisions of this Article X shall continue in effect for the benefit
of such Agent in respect of any actions taken or omitted to be taken by it while
it was acting as Agent hereunder and under the other Loan Documents.
ARTICLE X
SETOFF; RATABLE PAYMENTS
10.1 Setoff. In addition to, and without limitation of, any rights of
Lenders under applicable law, if any Borrower becomes insolvent, however
evidenced, or any Default occurs, any and all deposits (including all account
balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender to
or for the credit or account of Borrowers may be offset and applied toward the
payment of the Obligations owing to such Lender, whether or not the Obligations,
or any part hereof, shall then be due.
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10.2 Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans in a greater proportion than that received
by any other Lender, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
ARTICLE XI
BENEFIT OF AGREEMENT; ASSIGNMENT; PARTICIPATIONS
11.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of Borrowers and
Lenders and their respective successors and assigns, except that (i) Borrowers
shall not have the right to assign their rights or obligations under the Loan
Documents and (ii) any assignment by any Lender must be made in compliance with
Section 11.3. Notwithstanding clause (ii) of this Section, any Lender may at any
time, without the consent of Borrowers or Agent, assign all or any portion of
its rights under this Agreement and its Notes to a Federal Reserve Bank;
provided, however, that no such assignment shall release the transferor Lender
from its obligations hereunder. Agent may treat the payee of any Note as the
owner thereof for all purposes hereof unless and until such payee complies with
Section 11.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with Agent. Any assignee or
transferee of a Note agrees by acceptance thereof to be bound by all the terms
and provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
11.2 Participations.
11.2.1 Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks, financial institutions, pension funds,
or any other funds or entities participating interests in any Loan owing
to such Lender, any Note held by such Lender, any Commitment of such
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Lender or any other interest of such Lender under the Loan Documents. In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall
remain the holder of any such Note for all purposes under the Loan
Documents, all amounts payable by Borrowers under this Agreement shall be
determined as if such Lender had not sold such participating interests,
and Borrowers and Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under
the Loan Documents.
11.2.2 Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable
with respect to any such Loan or Commitment or postpones any date fixed
for any regularly scheduled payment of principal of, or interest or fees
on, any such Loan or Commitment or releases any Subsidiary from the
Subsidiary Guaranty.
11.2.3 Benefit of Setoff. Each Borrower agrees that each Participant
shall be deemed to have the right of Setoff provided in Section 10.1 in
respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents,
provided that each Lender shall retain the right of setoff provided in
Section 10.1 with respect to the amount of participating interests sold to
each Participant. Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in Section 10.1,
agrees to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in accordance
with Section 10.2 as if each Participant were a Lender.
11.3 Assignments.
11.3.1 Permitted Assignments. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time assign
to one or more banks, financial institutions, pension funds, or any other
funds or entities ("Purchasers") all or any portion of its rights and
obligations under the Loan Documents. Such assignment shall be
substantially in the form of Exhibit H hereto or in such other form as may
be agreed to by the parties thereto. The consent of Agent shall be
required prior to an assignment
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becoming effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof. Such consent shall not be unreasonably withheld.
11.3.2 Prior Consent. Notwithstanding Section 11.3.1, Lenders may not
assign rights and obligations under the Loan Documents to a Purchaser
without the prior written consent of Borrowers if any of the following
would occur: (i) an assignment of less than five (5%) of the Aggregate
Commitment as of the date of such assignment, (ii) the proposed purchaser
is a financial institution not organized under the laws of a state or of
the United States (unless such institution is an affiliate of the
transferring Lender), or (iii) such transfer would result in Borrowers
incurring increased payments pursuant to Section 2.11; provided, however,
that, if at the time of the proposed assignment either Borrower is the
subject of a proceeding referenced in Section 6.7 or 6.8, or any Default
shall have occurred, the Borrowers consent shall not be required and any
Lender may consummate an assignment notwithstanding the requirements of
clauses (i), (ii) or (iii) of this Section 11.3.2.
11.3.3 Effective Date. Upon (i) delivery to Agent of a notice of
assignment, substantially in the form attached as Exhibit 1 to Exhibit H
hereto (a "Notice of Assignment"), together with any consents required by
Section 11.3.2, and (ii) payment of a $2,500 fee to Agent for processing
such assignment (provided, however, that if such assignment shall be made
to an Affiliate of Lender, then Lender shall not be required to pay such
fee to Agent), such assignment shall become effective on the effective
date specified in such Notice of Assignment. The Notice of Assignment
shall contain a representation by the Purchaser to the effect that none of
the consideration used to make the purchase of the Commitment and Loans
under the applicable assignment agreement are "plan assets" as defined
under ERISA and that the rights and interests of the Purchaser in and
under the Loan Documents will not be "plan assets" under ERISA. On and
after the effective date of such assignment, such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan Document
executed by Lenders and shall have all the rights and obligations of a
Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no further consent or action by the Borrower,
Lenders or Agent shall be required to release the transferor Lender with
respect to the percentage of the Aggregate Commitment and Loans assigned
to such Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 11.3.2, the transferor Lender, Agent and
Borrowers shall make appropriate arrangements so that replacement Notes
are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case
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in principal amounts reflecting their Commitment, as adjusted pursuant to
such assignment.
11.4 Dissemination of Information. Borrowers authorize each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of Borrowers and their Subsidiaries.
11.5 Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other-than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.21.
ARTICLE XII
NOTICES; NATURE OF OBLIGATIONS
12.1 Giving Notice. Except as otherwise permitted by Section 2.17
with respect to borrowing notices, all notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the log of telexes).
12.2 Change of Address. Borrowers, Agent and any Lender may change
the address for service of notice upon it by a notice in writing to the other
parties hereto.
12.3 Nature of Borrower's Obligations and Modification Thereof. THE
OBLIGATIONS OF BORROWERS UNDER THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS ARE JOINT AND SEVERAL. The obligations of Borrowers under this
Agreement are absolute and unconditional and shall be irrevocable. Borrowers
agree that their obligations hereunder shall not be impaired, modified, changed,
released or limited in any manner whatsoever by any impairment, modification,
change, release or limitation of the liability of any of Borrowers by any
bankruptcy case or by any stay or other legal impediment in or arising from the
operation of any present or future provision of the Bankruptcy Code or other
similar state or federal statute, or from the decision of any court. Borrowers
agree that Lenders may, in their discretion, (i) release,
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discharge, compromise or settle with, or grant indulgences to, refuse to proceed
or take action against, any Borrower with respect to its respective obligations
under this Agreement, (ii) release, surrender, modify, impair, exchange,
substitute or extend the period or duration of time for the performance,
discharge or payment of, refuse to enforce, compromise or settle its respective
lien, security interest, pledge or assignment against, any and all deposits or
other property or assets on which Lenders may have a lien, security interest,
pledge or assignment or which secures any of the obligations of Borrowers under
this Agreement, and (iii) amend, modify, alter or restate, in accordance with
their respective terms, this Agreement or any of the Loan Documents or
otherwise, accept deposits or other property from, or enter into transactions of
any kind or nature with, Borrowers. Each of Borrowers confirms that it will be
directly or indirectly benefitted by the Loan and any and all other Advances
under this Agreement or any of the Loan Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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ARTICLE XIII
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by each Borrower, Agent and Lenders and each
party has notified Agent by telex or telephone, that it has taken such action.
IN WITNESS WHEREOF, Borrowers, Lenders and Agent have executed this
Agreement as of the date first above written.
PIONEER-STANDARD ELECTRONICS, INC.
By: /s/ John V. Goodger
-------------------------------
Print Name: John V. Goodger
Title: Vice President
4800 East 131st Street
Garfield Heights, Ohio 44105
phone: 216 587-3600
facsimile: 216 587-3563
Attention: John V. Goodger
PIONEER-STANDARD OF MARYLAND, INC.
By: /s/ John V. Goodger
-------------------------------
Print Name: John V. Goodger
Title: Treasurer
c/o Pioneer-Standard
Electronics, Inc.
4800 East 131st Street
Garfield Heights, Ohio 44105
phone: 216 587-3600
facsimile: 216 587-3563
Attention: John V. Goodger
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<PAGE> 73
Commitments
<TABLE>
<S> <C>
$75,000,000 NATIONAL CITY BANK,
Individually and as
Agent
By: /s/ A. J. DiMare
-------------------------------
Print Name: A. J. DiMare
-----------------------
Title: Vice President
----------------------------
Via Hand Delivery
National City Bank
National City Center, 10th
Floor
1900 East Ninth Street
Cleveland, Ohio 44114
Via U.S. Mail
National City Bank
P. O. Box 5756
Cleveland, Ohio 44101-0756
Attention: Anthony J. DiMare
Vice President
</TABLE>
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<PAGE> 74
<TABLE>
<S> <C>
$55,000,000 SOCIETY NATIONAL BANK
By: /s/ Michael J. Jackson
-------------------------------
Print Name: Michael J. Jackson
-----------------------
Title: Vice President
----------------------------
Via Hand Delivery
Society National Bank
Large Corporate Group
127 Public Square
Cleveland, Ohio 44114-1306
Via U.S. Mail
Society National Bank
Large Corporate Group
127 Public Square
Cleveland, Ohio 44114-1306
Attention:
------------------------
Michael J. Jackson
$25,000,000 NATIONSBANK OF TEXAS, N.A.
By: /s/ Stan W. Reynolds
-------------------------------
Print Name: Stan W. Reynolds
-----------------------
Title: Vice President
----------------------------
Via Hand Delivery
NationsBank of Texas, N.A.
Technology Corporate
Finance Group
901 Main Street, 67th Floor
Dallas, Texas 75202-1000
Via U.S. Mail
NationsBank of Texas, N.A.
Technology Corporate
Finance Group
901 Main Street, 67th Floor
Dallas, Texas 75202-1000
Attention:
------------------------
Stan W. Reynolds
</TABLE>
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<PAGE> 75
<TABLE>
<S> <C>
$32,000,000 MELLON BANK, N.A.
By: /s/ Mark F. Johnston
-------------------------------
Print Name: Mark F. Johnston
-----------------------
Title: AVP
----------------------------
Via Hand Delivery
Mellon Bank, N.A.
One Mellon Bank Center
Grant Street, Room 4530
Pittsburgh, PA 15258-0001
Via U.S. Mail
Mellon Bank, N.A.
One Mellon Bank Center
Grant Street, Room 4530
Pittsburgh, PA 15258-0001
Attention:
------------------------
Mark Johnston
$13,000,000 STAR BANK, N.A.
By: /s/ John D. Barrett
-------------------------------
Print Name: John D. Barrett
-----------------------
Title: Vice President
----------------------------
Via Hand Delivery
Star Bank, N.A.
1350 Euclid Avenue, Suite 220
Cleveland, Ohio 44115
Via U.S. Mail
Star Bank, N.A.
1350 Euclid Avenue, Suite 220
Mail Location 4432
Cleveland, Ohio 44115
Attention:
------------------------
John D. Barrett
</TABLE>
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<PAGE> 1
EXHIBIT A
Execution Copy
ESCROW AGREEMENT
THIS AGREEMENT is entered into this 30th day of November, 1995, by and
among (i) PIONEER-STANDARD ELECTRONICS, INC., an Ohio corporation ("PSE"), (ii)
the holders (other than PSE) of 50,000 of the outstanding shares of capital
stock of Pioneer/Technologies Group, Inc., a Maryland corporation
("Technologies") (hereinafter collectively referred to as the "Shareholders"),
(iii) Bruce S. Tucker (or any subsequent Shareholders Representative appointed
pursuant to the terms of the Merger Agreement, as hereinafter defined) as the
Shareholders Representative ("Shareholders Representative"), and (iv)
NationsBank, N.A., as Escrow Agent, a banking corporation with offices located
in the State of Maryland (the "Escrow Agent").
WITNESSETH:
WHEREAS, the Shareholders and PSE have entered into a Plan and
Agreement of Merger, dated as of the date hereof (the "Merger Agreement"),
providing for the acquisition by PSE from the Shareholders of all of the 50,000
issued and outstanding shares of Common Stock, $.10 per share par value (the
"Shares"), of Technologies which are owned by the Shareholders; and
WHEREAS, the Merger Agreement (a copy of which has been delivered to
the Escrow Agent) provides for the establishment of an escrow into which a
portion of the purchase price will be funded,
<PAGE> 2
to be released to the Shareholders (via the Shareholders Representative)
contingent upon the accuracy of the representations and warranties of
Technologies in the Merger Agreement and the observance and compliance by
Technologies of its obligations under the Merger Agreement, and from which PSE
is entitled to indemnification for certain matters; and
WHEREAS, the parties desire to establish this escrow to comply with the
terms of the Merger Agreement; and
WHEREAS, the Merger Agreement provides for the appointment by the
Shareholders of the Shareholders Representative to act on behalf of the
Shareholders in connection with this Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. The Escrow Fund.
Reference hereby is made to Article 9 of the Merger Agreement
for a statement of PSE's right to seek indemnification from the Escrow Fund (as
hereinafter defined). Pursuant to the terms of the Merger Agreement, a portion
of the purchase price thereunder, in the amount of $2,000,000 (the "Escrow
Fund"), shall be deposited with the Escrow Agent on January 4, 1996. Such Escrow
Fund shall be released to the Shareholders (via the Shareholders Representative)
in accordance with the terms of this Escrow Agreement, contingent upon the
accuracy of the representations and
2
<PAGE> 3
warranties of Technologies in the Merger Agreement and the observance and
compliance by Technologies with its obligations under the Merger Agreement, and
subject to indemnification of PSE from the Escrow Fund for certain matters. The
Escrow Fund shall be available to indemnify PSE to the extent provided herein,
subject to the terms of the Merger Agreement, against and with respect to any
proven loss, damage, liability or expense to which PSE is entitled to
indemnification from the Escrow Fund, as set forth in the Merger Agreement. The
Escrow Fund shall be disbursed in accordance with Section 8 hereof.
2. Receipt of Escrow Fund Acknowledged by Escrow Agent.
The Escrow Agent shall acknowledge receipt of the $2,000,000
deposited as the Escrow Fund in writing to PSE and the Shareholders
Representative upon receipt of such funds from PSE on January 4, 1996.
3. Authority of Escrow Agent and Shareholders Representative.
PSE and Shareholders hereby authorize the Escrow Agent, and
the Escrow Agent hereby agrees, to hold, transfer and deliver the funds in the
Escrow Fund in accordance with and subject to the terms and conditions of this
Agreement, and Shareholders hereby further authorize and direct the Escrow Agent
to rely upon the terms and provisions of Section 4.5 of the Merger Agreement,
captioned Shareholders Representative, which are incorporated herein by
reference, pursuant to which Bruce S. Tucker is appointed as the Shareholders
Representative with respect to this Agreement.
3
<PAGE> 4
4. Investment of Escrow Funds.
The funds deposited in the Escrow Fund shall be invested by
the Escrow Agent at the written direction of the Shareholders Representative in
(a) treasury bills or notes of the United States, (b) tax-exempt obligations of
the state of Maryland or any subdivision hereof carrying the highest quality
credit rating of any nationally-recognized rating agency, or (c) any other
money-market investment if such money-market fund is invested primarily in U.S.
government obligations, PROVIDED, that no such investment shall mature more than
ninety (90) days after the date when made. The Escrow Agent shall be under no
obligation to the Shareholders Representative or to PSE with respect to
investments so designated. Any income earned by investment of the funds in the
Escrow Fund shall be accounted for by the Escrow Agent in a written monthly
statement to the parties hereto and distributed by the Escrow Agent
semi-annually in accordance with its customary banking practices to the
Shareholders Representative.
5. Indemnification of PSE From Escrow Fund.
If PSE shall have any claim for which it seeks indemnification
provided for in Article 9 of the Merger Agreement, PSE shall notify the
Shareholders Representative and the Escrow Agent thereof in writing, and include
in such notice a description in reasonable detail of all the facts upon which
such claim is based and the amount thereof (an "Indemnification Claim"). PSE and
the Shareholders Representative shall act in good faith in dealing
4
<PAGE> 5
with any matter which may give rise to a claim for indemnification or
reimbursement from the Escrow Fund.
6. Payment of Indemnification From Escrow Fund Without Objection
From Shareholders Representative.
If the Escrow Agent is notified by PSE that no written
objection was made by the Shareholders Representative within thirty (30) days
from the date of receipt of an Indemnification Claim by the Shareholders
Representative and unless the Escrow Agent otherwise receives a written notice
of objection from the Shareholders Representative as provided in Section 7 of
this Agreement within said thirty (30) day period after receipt of such
Indemnification Claim by the Shareholders Representative, the Escrow Agent shall
disburse to PSE that portion of the Escrow Fund specified in the Indemnification
Claim of PSE pursuant to the terms of the Indemnification Claim. The amount
disbursed shall include the income earned on such funds from the date of the
Indemnification Claim pursuant to Section 5 of this Agreement to the date of
disbursement.
7. Obligation of Escrow Agent Upon Notice of Objection to
Indemnification by Shareholders Representative.
Any objection by the Shareholders Representative to an
Indemnification Claim must be received by the Escrow Agent within the time
period set forth in Section 6 of this Agreement, and such objection shall state
with reasonable specificity the basis for the objection. If the Shareholders
Representative objects to a disbursement to indemnify PSE from the Escrow Fund,
the Escrow Agent shall segregate the amount specified in the notice
5
<PAGE> 6
of objection, and hold the same in accordance with the terms of this Agreement
until either (i) the rights of the Shareholders Representative and PSE thereto
have been agreed upon in writing by the Shareholders Representative and PSE and
such writing has been delivered to the Escrow Agent, (ii) the Escrow Agent
receives a written notice executed by PSE and the Shareholders Representative
stating that the claim has been settled by Arbitration (as defined in the Merger
Agreement) and directing disbursement, or (iii) a final certified order has been
received from a court having jurisdiction over the subject matter and
adjudicating such claim in accordance with the terms hereof, which order is no
longer subject to appeal, requiring any payment from the Escrow Fund in respect
of such claim.
8. Termination of Escrow Fund and Disbursement of Funds.
(a) At such time as the adjustments, if any, described in
Section 3.3 of the Merger Agreement have been determined (by mutual agreement or
dispute resolution), and payments, if required, have been made to PSE in
accordance therewith (the "Adjustment Date"), the Escrow Agent shall deliver to
the Shareholders Representative by wire transfer to an account designated in
writing by the Shareholders Representative an amount that is equal to (i)
$1,500,000, plus all amounts earned thereon and not already distributed pursuant
to this Agreement, minus (ii) an amount equal to the payments, if any, made from
the Escrow Fund to PSE (or any independent accountant or other party if dispute
resolution is required) in accordance with Section 3.3 of
6
<PAGE> 7
the Merger Agreement, minus (iii) all amounts distributed to PSE on or prior to
May 31, 1996, in satisfaction of Indemnification Claims, minus (iv) an amount
equal to the aggregate amount of all Indemnification Claims pending as of May
31, 1996. With respect to any amount specified in clause (iv), above, that
remains in escrow after the Adjustment Date, pending resolution of an
Indemnification Claim, any portion of such amount not distributed to PSE after
resolution of such Indemnification Claim in accordance with Sections 6 and 7 of
this Agreement shall promptly be distributed to the Shareholders Representative
upon such resolution. After May 31, 1996, except for pending Indemnification
Claims, if any, PSE shall be entitled to seek indemnification from the Escrow
Fund only for Tax Liabilities, and shall have no right to indemnification from
the Escrow Fund for any other matter.
(b) On December 31, 1998, the Escrow Agent shall deliver by
wire transfer to an account designated in writing by the Shareholders
Representative all remaining funds held in the Escrow Fund that are not subject
to the resolution of a pending Indemnification Claim (whether such
Indemnification Claim was pending as of May 31, 1996, and is still unresolved,
or whether such Indemnification Claim was asserted thereafter with respect to
Tax Liabilities). With respect to any amount that remains in escrow after
December 31, 1998, pending resolution of an Indemnification Claim, any portion
of such amount not distributed to PSE upon resolution of such Indemnification
Claim in accordance with Sections 6 and 7 of this Agreement shall promptly be
7
<PAGE> 8
distributed to the Shareholders Representative upon such resolution.
(c) With respect to any amount that is required to be
distributed pursuant to this Section 8, at the time such amount is to be
distributed (whether at the Adjustment Date, December 31, 1998, or upon
resolution of a pending Indemnification Claim), PSE and the Shareholders
Representative shall promptly, following the date such amount is to be
distributed or upon the resolution of such pending Indemnification Claim,
execute all instructions to the Escrow Agent necessary to ensure prompt
distribution to PSE and/or the Shareholders Representative, as applicable, of
the respective portions of any amounts of the Escrow Fund to which they are
entitled under this Section 8.
(d) All amounts distributed to the Shareholders
Representative, less any unpaid costs and expenses incurred by the Shareholders
Representative in his capacity as such and not covered by the Reserves (as
defined in the Merger Agreement), and any reasonable reserves for such costs or
expenses deemed necessary by the Shareholders Representative (which the
Shareholders Representative will be entitled to retain), shall be promptly
distributed by the Shareholders Representative to the Shareholders on a pro rata
basis, as set forth in Section 4.2(b)(ii) of the Merger Agreement.
8
<PAGE> 9
9. Notice.
All notices or other communications required to be given
hereunder shall be in writing and shall be deemed to be given if delivered by
hand or mailed, certified or registered mail, postage prepaid, to the parties at
the following addresses (or at such other address for a party as shall be
specified by notice given pursuant hereto):
If to PSE to:
Pioneer-Standard Electronics, Inc.
4800 East 131st Street
Cleveland, OH 44105
Attention: James L. Bayman, President and CEO
With a copy of such Notice to:
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, OH 44114-2688
Attention: William A. Papenbrock, Esq.
If to the Shareholders Representative to:
Bruce S. Tucker
c/o Pioneer-Standard of Maryland, Inc.
15810 Gaither Drive
Gaithersburg, MD 20877
With a copy of such Notice to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004
Attention: Bruce E. Rosenblum, Esq.
If to Escrow Agent to:
NationsBank, N.A.
1501 Pennsylvania Avenue, N.W.
Washington, D.C. 20090
Attention: Michael Flynn
9
<PAGE> 10
Any notice or other communication hereunder shall not be deemed to have been
received until actually received.
10. Cost and Expenses.
The costs and expenses (other than legal fees of the
Shareholders) of establishing and maintaining the Escrow Fund hereunder,
including fees and expenses of the Escrow Agent, shall be borne by PSE. The
annual escrow fee to be charged by the Escrow Agent shall be an amount equal to
twenty basis points of the original Escrow Fund (i.e., based upon the original
Escrow Fund of $2,000,000, such escrow fee shall be $4,000 per year).
11. Rights and Obligations of Escrow Agent.
(a) The duties of the Escrow Agent are only such as are
herein specifically provided, and it shall incur no liability whatever except
for gross negligence, willful misconduct or failure to have acted in good faith.
(b) The Escrow Agent shall not be required to defend any
legal proceedings which may be instituted against it (other than legal
proceedings based upon the alleged gross negligence or willful misconduct of the
Escrow Agent or its failure to have acted in good faith) in respect of the
subject matter of this Agreement unless requested so to do by PSE and the
Shareholders Representative, and with respect thereto the Escrow Agent shall be
indemnified to its satisfaction against the cost and expense of such defense.
The Escrow Agent shall not be required to institute legal proceedings of any
kind. It shall have no responsibility for the genuineness or validity of any
document or
10
<PAGE> 11
other item deposited with it or presented to it pursuant to this Agreement, and
it shall be fully protected in acting in accordance with any written
instructions given to it hereunder and believed by it to have been signed by the
proper parties.
(c) The Escrow Agent shall be entitled to indemnification
for, and be held harmless against, any loss, liability or expense incurred
without gross negligence, willful misconduct or bad faith on the part of the
Escrow Agent, and arising out of or in connection with the acceptance or
administration of this Agreement. Any such indemnification amounts shall be paid
one-half by PSE and one-half out of the Escrow Fund.
(d) Either PSE or the Shareholders Representative may
examine the Escrow Fund during normal business hours at the office of said
Escrow Agent.
(e) This Agreement is a personal one, the duty of the Escrow
Agent being only to the parties hereto, their heirs, personal representatives or
assigns, and to no other person whomsoever.
(f) Escrow Agent may rely or act upon order or directions
signed by PSE or the Shareholders Representative, or bearing a signature or
signatures believed by it to be genuine.
(g) In case the Escrow Fund shall be attached, garnished, or
levied upon any court order, or the delivery thereof shall be stayed or enjoined
by an order of court, or any order, judgment or decree shall be made or entered
by any court order affecting the Escrow Fund, or any part thereof, said Escrow
Agent
11
<PAGE> 12
hereby is expressly authorized in its sole direction, to obey and comply with
all writs, orders or decrees so entered or issued, which it is advised by legal
counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in case said Escrow Agent obeys or complies with any such
writ, order or decree it shall not be liable to any of the parties hereto or to
any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.
(h) In case said Escrow Agent becomes involved in litigation
on account of the Escrow Fund or of this Agreement, it shall have the right to
retain counsel and the parties hereto jointly and severally agree to pay to said
Escrow Agent on demand, its reasonable charges, counsel and attorneys' fees,
disbursements, and expenses in connection with such litigation.
(i) Escrow Agent reserves the right to resign at any time by
giving written notice of resignation, specifying the effective date thereof.
Within thirty (30) days after receiving the aforesaid notice, PSE and the
Shareholders Representative agree to appoint a successor Escrow Agent to which
the Escrow Agent may distribute the property then held hereunder, and prior to
such distributions, PSE shall pay the Escrow Agent's fees, costs and expenses.
If a successor Escrow Agent has not been appointed and has not accepted such
appointment by the end of the thirty (30) day period, the Escrow Agent may apply
to a court of competent jurisdiction for the appointment of a successor Escrow
Agent, and
12
<PAGE> 13
the costs, expense and reasonable attorneys' fees which are incurred in
connection with such a proceeding shall be paid by the party or parties to the
Agreement responsible for the failure to select a successor Escrow Agent within
such thirty (30) day period.
(j) In case conflicting demands are made upon it for any
situation not addressed in this Agreement, Escrow Agent may withhold performance
of this escrow until such time as said conflicting demands shall have been
withdrawn or the rights of the respective parties shall have been settled by
court adjudication, arbitration, joint order or otherwise.
12. Governing Law.
This Agreement is being delivered in Maryland and shall be
governed by and construed in accordance with the laws of that State. It shall be
binding upon and inure to the benefit of all parties hereto, their respective
successors, assigns, heirs, executors and legal representatives.
13. Headings.
The section headings and captions appearing in this Agreement
have been inserted for convenience only, and shall be given no substantive
meaning or significance whatsoever in construing the terms and conditions of
this Agreement.
14. Severability.
If any provision of this Agreement shall be held
unenforceable, invalid or void to any extent for any reason, such provision
shall remain in force and effect to the maximum extent allowable, if any, and
the enforceability or validity of the
13
<PAGE> 14
remaining provisions of this Agreement shall not be affected thereby.
15. Amendments.
The terms of this Agreement may be altered, amended, modified
or revoked only by an instrument in writing signed by PSE and the Shareholders
Representative.
16. Construction.
Words used in the singular number may indicate the plural and
the plural may include the singular.
17. Assignment.
This Agreement shall not be assignable by any party without
the express prior written consent of all of the other parties hereto.
18. Entire Agreement.
This Agreement constitutes the entire Agreement between the
Escrow Agent and the other parties hereto in connection with the subject matter
of this escrow, and no other agreement entered into between the parties, or any
of them, shall be considered as adopted or binding, in whole or in part, upon
the Escrow Agent notwithstanding that any such other agreement may be deposited
with Escrow Agent or the Escrow Agent may have knowledge thereof.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PIONEER-STANDARD ELECTRONICS, INC.
By: /s/ James L. Bayman
----------------------------------
James L. Bayman, President and CEO
- ------------------ -------------------
Bruce S. Tucker Donald Akery
- --------------------- -------------------
Jay S. Ross Jef Allen
- --------------------- -------------------
Kenneth Ball Roger Elliott
- --------------------- -------------------
Michael L. Baron Robert Farley
- --------------------- -------------------
John H. Wagener David Ernst
- --------------------- -------------------
Robert F. Hammett Robert J. Dulmage
- --------------------- -------------------
Harold C. Jeffers Richard C. Mackey
- --------------------- -------------------
Timothy Miyakusu David S. Coleman
- --------------------- -------------------
Kevin P. Mooney Richard S. Crouch
- --------------------- -------------------
Anthony R. DeMichael Michael Ezekiel
15
<PAGE> 16
- --------------------- -------------------
Charles G. Rybos Allen Hawse
- --------------------- -------------------
Peter J. Coleman Saul S. Levine
- ---------------------
Donald Clubbs
"Shareholders"
/s/ Bruce S. Tucker
-------------------------------
Bruce S. Tucker
"Shareholders Representative"
NationsBank, N.A., as Escrow Agent
By
------------------------------------
Title
---------------------------------
"Escrow Agent"
16
<PAGE> 1
EXHIBIT 99.2
NONCOMPETITION AGREEMENT
THIS AGREEMENT is made effective as of the 30th day of November, 1995,
by and between PIONEER-STANDARD OF MARYLAND, INC., f/k/a Pioneer-Technologies
Group, Inc., a Maryland corporation, (the "Company"), and BRUCE S. TUCKER
("Executive").
WITNESSETH:
WHEREAS, pursuant to a Plan and Agreement of Merger of even date
herewith (the "Merger Agreement"), Pioneer-Standard of Maryland, Inc., a
Maryland corporation, has merged with and into the Company, whereupon the name
of the Company was changed, by virtue of such merger, from Pioneer/Technologies
Group, Inc. to Pioneer-Standard of Maryland, Inc.;
WHEREAS, the Executive, prior to such merger, was the President of the
Company and has valuable knowledge and experience pertaining to the suppliers,
customers and general business of the Company; and
WHEREAS, as a condition to the execution of the Merger Agreement and
the effectiveness of the merger contemplated thereunder, Executive and the
Company agreed to execute this Agreement and to be bound by the terms set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Executive and the Company do
hereby agree as follows;
1. Noncompetition. Executive agrees that for a period of two (2)
years, commencing December 1, 1995 and continuing through November 30, 1997 (the
"Non-Competition Period") he will not, without the prior written consent of the
Company, either directly or indirectly, operate, control, advise, be engaged or
employed by, perform any consulting services for, or otherwise represent in any
capacity, any person or entity who or which, at any time during the
Noncompetition Period, sells or distributes products similar to those sold or
distributed by the Company in those geographical areas in which the Company or
any affiliate of the Company currently conducts or has conducted such business
during the three (3) year period prior to the date hereof.
2. Nondisclosure. Executive agrees at all times to hold as secret and
confidential (unless disclosure is required pursuant to court order, subpoena in
a governmental proceeding, arbitration or pursuant to other process or
requirement of law) any and all knowledge, information, developments, trade
secrets, know-how and confidences that are proprietary to the Company, or any of
its affiliates, or its or their business, and of which he has knowledge as of
the date hereof, to the extent such
<PAGE> 2
matters have not previously been made public, are not thereafter made public or
do not otherwise become available to Executive from a third party not bound by
any confidentiality agreement with the Company ("Confidential Information").
The phrase "made public" as used in this Agreement shall apply to matters
within the domain of (a) the general public or (b) the Company's industry.
Executive agrees not to use any Confidential Information for his own benefit or
for the benefit of others or, except as provided above, disclose any of such
Confidential Information without the prior written consent of the Company,
which consent shall make express reference to this Agreement.
3. Noninterference. Executive agrees that during the Non-Competition
Period, he will not, without the prior written consent of the Company, directly
or indirectly solicit, induce or attempt to solicit or induce any employee or
supplier of the Company to terminate his or her relationship with the Company.
4. Payment. In consideration of the agreements, covenants, and
obligations of Executive set forth herein, the Company agrees to pay to
Executive the aggregate amount of Two Hundred and Thirty-Five Thousand Dollars
($235,000), to be paid during the Non-Competition Period in twenty-four (24)
monthly installments, each of which shall be payable on the last day of the
month in which it is due, commencing on December 31, 1995. The first
twenty-three (23) installments shall each be in an amount of $9,791.00, and the
final payment shall be in the amount of $9,807.00.
5. Reformation of Agreement; Severability. The parties intend this
Agreement to be enforced as written. However, in the event that any provision of
this Agreement is held by a court of competent jurisdiction to be invalid or
unenforceable as against public policy, such court shall exercise its discretion
in reforming such provision to the end that Executive shall be subject to such
restrictions and obligations as are reasonable under the circumstances and
enforceable by the Company. In the event that a provision or term of this
Agreement is found to be void or unenforceable to any extent for any reason, it
is the agreed-upon intent of the parties hereto that all remaining provisions or
terms of the Agreement shall remain in full force and effect to the maximum
extent permitted by law and the Agreement shall be enforceable as if such void
or unenforceable provision or term had never been a part hereof.
6. Notices. Any notice required to be given under the terms of this
Agreement shall be in writing and mailed to the recipient's last known address
or delivered in person. If sent by registered or certified mail, such notice
shall be effective when mailed; otherwise, it shall be effective upon delivery
to such address.
7. Assignment. No rights of any kind under this Agreement shall,
without the written consent of the non-transferring party, be transferable to
or assignable by either party. This Agreement shall be binding upon and shall
inure to the benefit of the Company and its successors and assigns.
-2-
<PAGE> 3
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Maryland, without giving effect to the
conflicts of laws principles thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
PIONEER-STANDARD OF MARYLAND, INC.
By: /s/ James L. Bayman
_____________________________________
Title:__________________________________
("Company")
/s/ Bruce S. Tucker
________________________________________
BRUCE S. TUCKER
("Executive")
-3-
<PAGE> 1
EXHIBIT 99.3
NONCOMPETITION AGREEMENT
THIS AGREEMENT is made effective as of the 30th day of November, 1995,
by and between PIONEER-STANDARD OF MARYLAND, INC., f/k/a Pioneer-Technologies
Group, Inc., a Maryland corporation, (the "Company"), and BRUCE S. TUCKER
("Executive").
WITNESSETH:
WHEREAS, pursuant to a Plan and Agreement of Merger of even date
herewith (the "Merger Agreement"), Pioneer-Standard of Maryland, Inc., a
Maryland corporation, has merged with and into the Company, whereupon the name
of the Company was changed, by virtue of such merger, from Pioneer/Technologies
Group, Inc. to Pioneer-Standard of Maryland, Inc.;
WHEREAS, the Executive, prior to such merger, was a Sr. Vice President
of the Company and has valuable knowledge and experience pertaining to the
suppliers, customers and general business of the Company; and
WHEREAS, as a condition to the execution of the Merger Agreement and
the effectiveness of the merger contemplated thereunder, Executive and the
Company agreed to execute this Agreement and to be bound by the terms set forth
herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Executive and the Company do
hereby agree as follows;
1. Noncompetition. Executive agrees that for a period of two (2)
years, commencing December 1, 1995 and continuing through November 30, 1997 (the
"Non-Competition Period") he will not, without the prior written consent of the
Company, either directly or indirectly, operate, control, advise, be engaged or
employed by, perform any consulting services for, or otherwise represent in any
capacity, any person or entity who or which, at any time during the
Noncompetition Period, sells or distributes products similar to those sold or
distributed by the Company in those geographical areas in which the Company or
any affiliate of the Company currently conducts or has conducted such business
during the three (3) year period prior to the date hereof.
2. Nondisclosure. Executive agrees at all times to hold as secret and
confidential (unless disclosure is required pursuant to court order, subpoena in
a governmental proceeding, arbitration or pursuant to other process or
requirement of law) any and all knowledge, information, developments, trade
secrets, know-how and confidences that are proprietary to the Company, or any of
its affiliates, or its or their business, and of which he has knowledge as of
the date hereof, to the extent such
<PAGE> 2
matters have not previously been made public, are not thereafter made public or
do not otherwise become available to Executive from a third party not bound by
any confidentiality agreement with the Company ("Confidential Information"). The
phrase "made public" as used in this Agreement shall apply to matters within the
domain of (a) the general public or (b) the Company's industry. Executive agrees
not to use such knowledge for his own benefit or for the benefit of others or,
except as provided above, disclose any of such Confidential Information without
the prior written consent of the Company, which consent shall make express
reference to this Agreement.
3. Noninterference. Executive agrees that during the Non-Competition
Period, he will not, without the prior written consent of the Company, directly
or indirectly solicit, induce or attempt to solicit or induce any employee of
the Company to terminate his or her relationship with the Company or in any way
interfere with such a relationship or a relationship between the Company and any
of its suppliers.
4. Payment. In consideration of the agreements, covenants, and
obligations of Executive set forth herein, the Company agrees to pay to
Executive the aggregate amount of Two Hundred and Thirty-Five Thousand Dollars
($235,000), to be paid during the Non-Competition Period in twenty-four (24)
monthly installments, each of which shall be payable on the last day of the
month in which it is due, commencing on December 31, 1995. The first
twenty-three (23) installments shall each be in an amount of $9,791.00, and the
final payment shall be in the amount of $9,807.00.
5. Reformation of Agreement; Severability. The parties intend this
Agreement to be enforced as written. However, in the event that any provision of
this Agreement is held by a court of competent jurisdiction to be invalid or
unenforceable as against public policy, such court shall exercise its discretion
in reforming such provision to the end that Executive shall be subject to such
restrictions and obligations as are reasonable under the circumstances and
enforceable by the Company. In the event that a provision or term of this
Agreement is found to be void or unenforceable to any extent for any reason, it
is the agreed-upon intent of the parties hereto that all remaining provisions or
terms of the Agreement shall remain in full force and effect to the maximum
extent permitted by law and the Agreement shall be enforceable as if such void
or unenforceable provision or term had never been a part hereof.
6. Notices. Any notice required to be given under the terms of this
Agreement shall be in writing and mailed to the recipient's last known address
or delivered in person. If sent by registered or certified mail, such notice
shall be effective when mailed; otherwise, it shall be effective upon delivery
to such address.
7. Assignment. No rights of any kind under this Agreement shall,
without the written consent of the Company, be transferable to or assignable by
Executive. This Agreement shall be binding upon and shall inure to the benefit
of the Company and its successors and assigns.
-2-
<PAGE> 3
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Maryland, without giving effect to the
conflicts of laws principles thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
PIONEER-STANDARD OF MARYLAND, INC.
By: /s/ James L. Bayman
_____________________________________
Title:__________________________________
("Company")
/s/ Bruce S. Tucker
________________________________________
BRUCE S. TUCKER
("Executive")
-3-
