UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 29, 1998
REPTRON ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Florida 33-75040 38-2081116
(State or other (Commission File Number) (IRS Employer
jurisdiction Identification No.)
of incorporation)
14401 McCormick Drive, Tampa, Florida 33626
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(813)854-2351
N/A
(Former name or former address, if changed since last report)
<PAGE>
This Report on Form 8-K contains forward-looking statements
within the meaning of that term in Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Additional written or oral forward-looking statements may
be made by the Company from time to time, in filings with the
Securities Exchange Commission or otherwise. Statements contained
herein that are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions described
above. Forward-looking statements may include, but are not
limited to, projections of revenues, income or losses, capital
expenditures, plans for future operations, the elimination of
losses under certain programs, financing needs or plans,
compliance with financial covenants in loan agreements, plans for
sale of assets or businesses, plans relating to products or
services of the Company, assessments of materiality, predictions
of future events, and the effects of pending and possible
litigation, as well as assumptions relating to the foregoing. In
addition, when used in this discussion, the words "anticipates,"
"estimates," "expects" "interests," "plans" and variations thereof
and similar expressions are intended to identify forward-looking
statements.
Forward-looking statements are inherently subject to risks
and uncertainties, some of which cannot be predicted or quantified
based on current expectations. Consequently, future events and
actual results could differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements
contained herein. Readers are cautioned not to place undue
reliance on any forward-looking statements contained herein, which
speak only as of the date hereof. The Company undertakes no
obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unexpected events.
Item 2. Acquisition or Disposition of Assets.
On May 29, 1998, Reptron Electronics, Inc. ("Company")
completed the previously announced acquisition of Hibbing
Electronics Corporation ("Hibbing"), a wholly-owned subsidary
of HECO Holding Corporation, pursuant to an Agreement and
Plan of Merger between the Company, Lake Huron Investment
Corporation, HECO Holding Corporation, OECO LLC and, for the
limited purposes specified in the agreement, John F. Lillicrop, as
shareholder representative (the "Agreement"). Hibbing, a
Minnesota corporation, is a business that provides high complexity
contract manufacturing services for low to medium volume
customers. The Company operates from two contract manufacturing
facilities, a 110,000 square foot facility at their corporate
headquarters in Hibbing, Minnesota and, through it's subsidiary,
Hibbing Electronics, Inc., another 27,000 square foot
facility in Gaithersburg, Maryland. The purchase price was $29.7
million in cash, and the assumption of approximately $11 million
in debt, and was determined through arm's-length negotiations by
the parties. The transaction was financed with proceeds from the
Company's convertible debt offering of 6.75% convertible
subordinated notes due in 2004. Hibbing will become a part of
Reptron's K-Byte Manufacturing division.
The foregoing is subject to the actual provisions of the
Agreement, which is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. It is
impracticable to provide the financial statements relative to the
acquired businesses described in Item 2 at the time this report on
Form 8-K is filed. The Registrant intends to file the required
financial statements as soon as practicable, but no later than
60 days from the date of this filing.
(b) Pro Forma Financial Information. It is impracticable
to provide the pro forma financial information relative to the
acquired business as described in Item 2 at the time this report
on Form 8-K is filed. The Registrant intends to file the require
pro forma financial information as soon as practicable, but no
later than 60 days from the date of filing.
(c) Exhibits.
(PRIVATE) Exhibit Description
Number
2.1 Agreement and Plan of Merger, dated May 6,
1998, by and among Reptron Electronics, Inc.,
Lake Huron Investment Corporation, HECO
Holding Corporation, OECO LLC and, for the
limited purposes specified in the Agreement,
John F. Lillicrop, as shareholder
representative.
2.2 Amendment No. 1 to Agreement and Plan of
Merger, dated May 28, 1998, by and among
Reptron Electronics, Inc., Lake Huron
Investment Corporation, HECO Holding
Corporation, OECO LLC, and a shareholder
representative.
2.3 Escrow Agreement, dated May 29, 1998, by and
among Reptron Electronics, Inc., HECO Holding
Corporation, OECO LLC, John F. Lillicrop and
NationsBank, N.A.
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 hereunto duly authorized.
REPTRON ELECTRONICS, INC.
(Registrant)
By: /S/MICHAEL BRANCA
Michael Branca, Chief Financial
Officer
Date: June 12, 1998
AGREEMENT AND PLAN OF MERGER
by and among
REPTRON ELECTRONICS, INC.,
LAKE HURON INVESTMENT CORPORATION,
HECO HOLDING CORPORATION,
OECO, LLC
and
______________________________,
as Shareholder Representative
<PAGE>
EXHIBIT A - Closing Expenses
EXHIBIT B - Escrow Agreement
EXHIBIT C - Form of Stock Powers
EXHIBIT D - Articles of Merger (Oregon)
EXHIBIT E - Articles of Merger (Florida)
EXHIBIT F - Amount of General Accounts Receivable Escrow Fund
EXHIBIT G - Amount of Inventory Escrow Fund and Excluded
Inventory of the Subsidiary
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated for reference purposes May 6,
1998 (this "Agreement"), is by and among Reptron Electronics, Inc., a Florida
corporation ("Reptron"), Lake Huron Investment Corporation, a Florida
corporation and a wholly-owned subsidiary of Reptron ("Huron"), HECO
Holding Corporation, an Oregon corporation (the "Company"), OECO, LLC,
a Delaware limited liability company ("OECO-LLC"), and, for the limited
purposes specified herein, ______________________as Shareholder
Representative (the "Shareholder Representative").
Background
Reptron, Huron, the Company and OECO-LLC deem it
advisable and in the best interests of their respective owners to
consummate the business combination transaction provided for in
this Agreement, in which Huron will merge with and into the
Company (the "Merger") pursuant to the laws of Florida and
Oregon. For federal income tax purposes, it is intended that the
Merger shall be treated as a taxable acquisition of the Company's
Common Stock, without par value ("Company Common Stock"), and not
as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
Prior to the consummation of the transactions
contemplated by this Agreement, generally in the order described:
(a) New OECO Corporation ("New OECO"), an Oregon corporation and
a wholly-owned subsidiary of OECO Corporation, an Oregon
corporation ("OECO"), will merge (the "New OECO Merger") with and
into OECO; (b) OECO will merge (the "OECO-DEL Merger") with and
into OECO (Delaware) Corporation, a newly formed Delaware
corporation ("OECO-DEL") and, at the time of the OECO-DEL
Merger, a wholly-owned subsidiary of the Company, pursuant to
an Agreement and Plan of Merger by and among the Company, OECO
and OECO-DEL (the "OECO-DEL Merger Agreement"), under which
shareholders of OECO will receive one share of Company Common
Stock for each share of OECO Common Stock held by them and
cancelled as a result of the OECO-DEL Merger; (c) OECO-DEL will
merge (the "OECO-LLC Merger") with and into OECO-LLC, at the
time of the OECO-LLC Merger, a limited liability company with
the Company as its sole member, pursuant to an Agreement and
Plan of Merger by and between OECO-DEL and OECO-LLC (the "OECO-
LLC Merger Agreement"); (d) OECO-LLC will assign (the
"Assignment") the stock of Hibbing Electronics Corporation, a
Minnesota corporation (the "Subsidiary"), to the Company; and
(e) the Company will distribute (the "Distribution") the
outstanding limited liability company interests (the "Units")
of OECO-LLC to its shareholders in proportion to their holdings
of Company Common Stock in exchange for a portion of their
interest in their shares of Company Common Stock (the New OECO
Merger, the OECO-DEL Merger, the OECO-LLC Merger, the
Assignment and the Distribution are, collectively, referred to
herein as the "Prior Transactions").
<PAGE>
NOW, THEREFORE, in consideration of the foregoing
premises and the respective representations, warranties,
covenants and agreements set forth in this Agreement, Reptron,
Huron, the Company, OECO-LLC and, for the limited purposes
specified herein, the Shareholder Representative, agree as
follows:
ARTICLE I
Definitions
"AAA Rules" has the meaning set forth in Section 8.12
of this Agreement.
"Affiliate" has the meaning set forth in Rule 12b-2
of the regulations promulgated under the Exchange Act.
"Affiliated Group" means any affiliated group within
the meaning of Section 1504(a) of the Code or any similar group
defined under a similar provision of state, local, or foreign
income tax law.
"Agreement" has the meaning set forth in the preamble
of this Agreement.
"Ariel" has the meaning set forth in Section 8.3 of
this Agreement.
"Ariel Accounts Receivable Escrow Fund" means the initial
deposit by Reptron of $3,000,000, pursuant to the Escrow
Agreement, together with any interest on such deposit.
"Assignment" has the meaning set forth in the Background
section of this Agreement.
"Certificates" has the meaning set forth in Section
3.2(a) of this Agreement.
"Claim Reserve Amount" has the meaning set forth in
Section 8.10 of this Agreement.
"Closing" has the meaning set forth in Section 2.2 of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.2 of
this Agreement.
"Closing Expenses" means those expenses listed on Exhibit
A of this Agreement.
"COBRA" means the Consolidated Omnibus Budget
Reconciliation Act of 1985.
"Code" has the meaning set forth in the Background section
of this Agreement.
"Company" has the meaning set forth in the preamble of this
Agreement.
<PAGE>
"Company Common Stock" has the meaning set forth in the
Background section of this Agreement.
"Competing Transaction" shall mean any of the following:
(i) any merger, consolidation, share exchange, business
combination, or other similar transaction involving the Company
or the Subsidiary; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 15% or more of the
assets of the Company or the Subsidiary, in a single transaction
or series of transactions; (iii) any tender offer or exchange
offer for 15% or more of the outstanding shares of capital stock
of the Company or the Subsidiary or the filing of a registration
statement under the Securities Act in connection therewith; (iv)
any person having acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial
ownership of, 15% or more of the then outstanding shares of
capital stock of the Company or the Subsidiary, excluding any
shareholdings existing on the date of this Agreement; or (v) any
public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing;
provided, however, a Competing Transaction shall not include any
transaction contemplated by Section 6.9 of this Agreement.
"Confidential Information" means any information
concerning the business and affairs of OECO or the Subsidiary
that is not already generally available to the public.
"Confidentiality Agreement" means that certain
confidentiality letter agreement between Reptron and J.C.
Bradford & Co. as agent for OECO dated November 11, 1997, and as
amended on January 30, 1998.
"Constituent Corporations" has the meaning set forth in
Section 2.3 of this Agreement.
"Controlled Group of Corporations" has the meaning set
forth in Section 1563 of the Code.
"Disputed Account" has the meaning set forth in Section
8.3 of this Agreement.
"Dissenters' Shares" has the meaning set forth in
Section 3.1 of this Agreement.
"Distribution" has the meaning set forth in the
Background section of this Agreement.
"Effective Time" has the meaning set forth in Section
2.1 of this Agreement.
"Eligible Ariel Account Receivable" has the meaning set
forth in Section 8.3 of this Agreement.
"Employee Benefit Plan" means any (i) nonqualified
deferred compensation or retirement plan or arrangement that is
an Employee Pension Benefit Plan, (ii) qualified defined
contribution retirement plan or arrangement that is an Employee
Pension Benefit Plan, (iii) qualified defined benefit retirement
plan or arrangement that is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (iv) Employee Welfare Benefit
Plan or material fringe benefit plan or
program, or (v) bonus, stock option, severance or termination
pay, stock purchase, stock appreciation right, restricted stock,
phantom stock or other employee benefit plan, program, agreement
or arrangement of the Subsidiary.
"Employee Pension Benefit Plan" has the meaning set
forth in Section 3(2) of ERISA.
<PAGE>
"Employee Welfare Benefit Plan" has the meaning set
forth in Section 3(1) ERISA.
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976,
and the Occupational Safety and Health Act of 1970, each as
amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface
water, ground water, or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Plans" has the meaning set forth in Section
4.10(a) of this Agreement.
"Escrow Agent" means
_________________________________________________.
"Escrow Agreement" means the Escrow Agreement in the
form attached to this Agreement as Exhibit B.
"Escrow Funds" has the meaning set forth in Section 8.4
of this Agreement.
"Escrow Termination Date" shall mean the date 15 months
following the Closing Date.
"Excess Inventory" has the meaning set forth in Section
8.3 of this Agreement.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Excluded Inventory" has the meaning set forth in
Section 8.3 of this Agreement.
"Exhibits" means the Exhibits to this Agreement.
<PAGE>
"Extremely Hazardous Substance" has the meaning set
forth in Sec. 302 of the Emergency Planning and Community Right-
to-Know Act of 1986, as amended.
"FBCA" means the Florida Business Corporation Act, as in
effect on the date of this Agreement.
"Fiduciary" has the meaning set forth in Section 3(21)
of ERISA.
"Florida Articles of Merger" has the meaning set forth
in Section 2.1 of this Agreement.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"General Accounts Receivable Escrow Fund" means the
initial deposit by Reptron of the amount set forth on Exhibit F,
pursuant to the Escrow Agreement, together with any interest on
such deposit.
"General Escrow Fund" means the initial deposit by
Reptron of $2,000,000, pursuant to the Escrow Agreement, together
with any interest on such deposit.
"Governmental Entity" means any court, quasi-judicial or
arbitral tribunal, administrative agency or commission, or other
governmental or other regulatory authority or agency (whether
federal, state, local or foreign) having appropriate
jurisdiction.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Hayes" has the meaning set forth in Section 8.3 of
this Agreement.
"HECO-MD" has the meaning set forth in Section 4.1 of
this Agreement.
"HECO-MD Common Stock" means the common stock, par value
$.01 per share, of HECO-MD.
"Huron" has the meaning set forth in the preamble to
this Agreement.
"Huron Common Stock" means the common stock, par value
$.01 per share, of Huron.
"Indemnified Party" has the meaning set forth in Section
8.3 of this Agreement.
"Intellectual Property" means (a) inventions (whether
patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) trademarks, service
marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in
connection therewith, (c) copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection
therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) trade
secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier
lists, pricing and cost information, and business and marketing
plans and proposals), (f) computer software (including data and
related documentation), (g) all other proprietary rights in any
of the foregoing, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
<PAGE>
"Inventory Escrow Fund" means the initial deposit by
Reptron of the amount set forth on Exhibit G, pursuant to the
Escrow Agreement, together with any interest on such deposit.
"Knowledge" means actual knowledge. In the case of the
Company or the Subsidiary, it includes the knowledge of the
officers and employee directors of the Company or the Subsidiary,
as applicable, after reasonable inquiry of those employees with
substantive responsibility for the subject matter of a
representation or warranty.
"Letter of Intent" means the letter agreement, dated
February 23, 1998, between Reptron and OECO, as amended on April
30, 1998.
"Liability" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any
liability for Taxes.
"Loss" means all claims, judgments, damages, penalties,
fines, costs, amounts paid in settlement, liabilities (whether
absolute or contingent, whether liquidated or unliquidated, and
whether due or to become due), obligations, taxes, losses,
expenses, and fees, including (without limitation) all attorneys'
fees and expenses, court costs, and fees and expenses of expert
witnesses, suffered or incurred by a party to this Agreement
arising from a breach by another party of a representation,
warranty, covenant or agreement set forth in this Agreement.
"Material" and "Material Adverse Effect" means any
event, change or effect on or with respect to the Subsidiary
which is materially adverse to its condition (financial or
otherwise), properties, assets (including intangible assets),
liabilities (including contingent liabilities), business, results
of operations or prospects of the subsidiary net of unexhausted
reserves as booked on December 31, 1997, insurance benefits
actually received and tax benefits actually realized.
"Material Contract" has the meaning set forth in Section
4.16 of this Agreement.
"Measuring Date" has the meaning set forth in Section
8.3 of this Agreement.
"Merger" has the meaning set forth in the Background
section of this Agreement.
"Merger Consideration" means the cash to be delivered to
the Shareholders of the Company in connection with the Merger.
<PAGE>
"Merger Filings" has the meaning set forth in Section
2.1 of this Agreement.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Most Recent Financial Statements" means the Subsidiary
Financial Statements for the fiscal year ended December 31, 1997.
"Most Recent Fiscal Year End" has the meaning set forth
in Section 4.6 of this Agreement.
"Multiemployer Plan" has the meaning set forth in
Section 3(37) of ERISA.
"Nasdaq" means the Nasdaq Stock Market's National
Market.
"New OECO" has the meaning set forth in the Background
section of this Agreement.
"New OECO Merger" has the meaning set forth in the
Background section of this Agreement.
"Note Receivable" means that certain letter agreement
dated January 30, 1997, between Medical Graphics Corporation and
the Subsidiary with respect to amounts owing by Medical Graphics
Corporation to the Subsidiary as of such date.
"OBCA" means the Oregon Business Corporation Act, as in
effect on the date of this Agreement.
"OECO" has the meaning set forth in the Background
section of this Agreement.
"OECO Common Stock" means the common stock, without par
value, of OECO.
"OECO-DEL" has the meaning set forth in the Background
section of this Agreement.
"OECO-DEL Merger" has the meaning set forth in the
Background section of this Agreement.
"OECO-LLC" has the meaning set forth in the preamble of
this Agreement.
"OECO-LLC Merger" has the meaning set forth in the
Background section of this Agreement.
"Ordinary Course of Business" means the ordinary course
of business consistent with past custom and practice (including
with respect to quantity and frequency).
<PAGE>
"Oregon Articles of Merger" has the meaning set forth in
Section 2.1 of this Agreement.
"Outstanding Receivables" has the meaning set forth in
Section 8.5 of this Agreement.
"Paying Agent" has the meaning set forth in Section 3.2
of this Agreement.
"Payment Obligations" means the aggregate amount of the
Escrow Funds on the Closing Date less any amounts subsequently
released to the Indemnified Parties pursuant to Article VIII of
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated
organization, or a Governmental Entity.
"Personnel" shall have the meaning set forth in Section
4.22 of this Agreement.
"Plans" shall have the meaning set forth in Section 4.10
of this Agreement.
"Prior Transactions" has the meaning set forth in the
Background section of this Agreement.
"Prohibited Transaction" has the meaning set forth in
Section 406 of ERISA and Section 4975 of the Code.
"Reportable Event" has the meaning set forth in Section
4043 of ERISA.
"Reptron" has the meaning set forth in the preamble of
this Agreement.
"Reptron Open Claim" has the meaning set forth in
Section 8.10 of this Agreement.
"Response Period" has the meaning set forth in Section
8.10 of this Agreement.
"Schedules" means the schedules to this Agreement.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanics', materialmens', and similar liens arising by operation
of law, (b) liens for Taxes not yet due and payable or for Taxes
that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens
arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
<PAGE>
"Service" means the United States Internal Revenue
Service.
"Shareholder Representative" has the meaning set forth
in Section 8.2 of this Agreement.
"Shareholders" shall mean the shareholders of the
Company.
"Shareholders' Meeting" has the meaning set forth in
Section 6.2 of this Agreement.
"Subsidiary" has the meaning set forth in the Background
section of this Agreement.
"Subsidiary Common Stock" means the common stock, par
value $1.00 per share, of the Subsidiary.
"Subsidiary ERISA Affiliate" means any trade or
business, whether or not incorporated, that together with the
Subsidiary would be deemed a "single employer" within the meaning
of Section 4001 of ERISA.
"Subsidiary Financial Statements" has the meaning set
forth in Section 4.6 of this Agreement.
"Subsidiary Permits" has the meaning set forth in
Section 4.13 of this Agreement.
"Surviving Corporation" has the meaning set forth in
Section 2.3 of this Agreement.
"Sypris" has the meaning set forth in Section 6.14 of
this Agreement.
"Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof for taxable periods ended on or
after December 31, 1991.
"Third Party Claim" has the meaning set forth in Section
8.8 of this Agreement.
"Threshold" has the meaning set forth in Section 8.3 of
this Agreement.
"Undisputed Account" has the meaning set forth in
Section 8.3 of this Agreement.
"Voting Debt" means any bonds, debentures, notes, or
other indebtedness having the right to vote (or convertible into
securities having the right to vote).
<PAGE>
ARTICLE II
The Merger
Section 2.1 Effective Time of the Merger. The
Merger shall become effective upon the later to occur of the
filing of articles of merger (and attached plan of merger) with
the Secretary of State of the State of Oregon in accordance
with the OBCA (the "Oregon Articles of Merger") and the filing
of articles of merger with the Secretary of State of the State
of Florida in accordance with the FBCA (the "Florida Articles
of Merger" together with the Oregon Articles of Merger, are the
"Merger Filings"). The Merger Filings shall be filed
simultaneously with the Closing. The date and time when the
Merger shall become effective is hereinafter referred to as the
"Effective Time."
Section 2.2 Closing. The closing of the
transactions contemplated by this Agreement (the "Closing")
will take place at 10:00 a.m. Pacific Time on a date to be
specified by Reptron, which shall be not later than five
business days after satisfaction of the latest to occur of the
conditions set forth in Article VII (the "Closing Date"), in
Portland, Oregon at the offices of Tonkon Torp LLP, unless
another date or place is agreed to in writing by the parties to
this Agreement. At the Closing, Reptron shall deliver checks
representing payment for the Closing Expenses and shall pay the
Merger Consideration and fully fund the Escrow Funds by wire
transfer.
Section 2.3 Effects of the Merger. At the
Effective Time: (a) the separate existence of Huron shall cease
and Huron shall be merged with and into the Company (Huron and
the Company are sometimes referred to in this Agreement as the
"Constituent Corporations" and the Company is sometimes
referred to in this Agreement as the "Surviving Corporation"),
(b) the articles of incorporation of the Company in effect
immediately prior to the Effective Time shall be the articles
of incorporation of the Surviving Corporation, as amended
pursuant to the Oregon Articles of Merger, (c) the bylaws of
the Company as in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation and
(d) the Surviving Corporation shall change its name to Lake
Huron Investment Corporation. At and after the Effective Time,
the Surviving Corporation shall possess all the assets, rights,
and privileges, and shall be subject to all the restrictions
and liabilities of each of the Constituent Corporations, all as
provided in the OBCA and the FBCA.
<PAGE>
Section 2. Directors and Officers of the Surviving
Corporation. The directors and officers of the Surviving
Corporation, from and after the Effective Time, shall be the
current directors and officers of Huron until their successors
shall have been duly elected or appointed and qualified or
until their earlier death, resignation or removal, in
accordance with the Surviving Corporation's articles of
incorporation and bylaws.
Section 2.5 Risk of Loss. Risk of loss to the
assets of the Company (including those of the Subsidiary),
however caused, up to the Effective Time, shall remain wholly
upon the Company. Such risk of loss shall shift to Reptron at
the Effective Time. If all or any part of any of the assets of
the Subsidiary suffer an impairment at or before the Effective
Time, the Subsidiary shall promptly notify Reptron, specifying
the estimated costs necessary to repair or replace any damaged
or destroyed property, the amount of insurance proceeds that
are available to make such repairs and replacements, the
estimated period of time necessary to make such repairs and
replacements, and the effect of the impairment to the assets of
the Subsidiary. If all or a material part of the assets of the
Subsidiary suffer an impairment at or before the Closing,
Reptron shall be entitled to elect either (a) to proceed to the
Closing in accordance with this Agreement, in which event all
condemnation or insurance proceeds payable with respect to the
impairment shall be owned by and payable to Reptron, or (b) to
terminate this Agreement pursuant to Section 9.1.
ARTICLE III
Conversion of Securities
Section 3.1 Conversion of Capital Stock. As of the
Effective Time, by virtue of the Merger and without any further
action on the part of any holder of shares of Company Common
Stock and without any further action on the part of any holder
of shares of Huron Common Stock:
(a) Common Stock of Huron. Each
issued and outstanding share of Huron Common Stock shall be
converted into and become one fully paid and nonassessable share
of common stock, without par value, of the Surviving Corporation.
(b) Conversion of the Company's
Shares. Each issued and outstanding share of Company Common
Stock (excluding shares converted pursuant to Section 3.1(a) and
Dissenters' Shares (as defined in subsection 3.1(c) below)) shall
be converted into the right to receive $35.12, subject to the
escrow arrangements and the Closing Expenses contemplated by
Section 3.2 of this Agreement, and such amount shall be paid in
accordance with Section 3.2 of this Agreement.
(c) Dissenters' Shares.
Notwithstanding anything in this Agreement to the contrary,
shares of Company Common Stock which are held by Shareholders who
shall have effectively dissented from the Merger and perfected
their dissenters' rights in accordance with the provisions of the
OBCA (the "Dissenters' Shares") shall not be converted into or be
exchangeable for the right to receive consideration pursuant to
Section 3.1(b) of this Agreement, but the holders thereof shall
be entitled to payment from the Surviving Corporation of the fair
value of such shares in accordance with the provisions of the
OBCA; provided, however, that if
<PAGE>
any such holder shall have effectively withdrawn or lost such
rights, pursuant to the OBCA or otherwise, his or her shares of
Company Common Stock shall thereupon be converted into and
exchangeable for, at or subsequent to the Effective Time, their
pro rata share of the aggregate consideration as determined and
paid in the manner set forth in Section 3.1(b) of this Agreement.
(d) Cancellation of the Company Common
Stock. All shares of Company Common Stock (excluding the shares
converted pursuant to Section 3.1(a) and Dissenters' Shares
referred to in Section 3.1(c)) shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to
exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto,
except the right to receive the cash paid in consideration for
such shares upon the surrender of such certificate in accordance
with Section 3.2, without interest, except as provided in Section
8.7 of this Agreement.
Section 3.2 Payment for Certificates.
(a) Payment Procedures. On the
Closing Date, the Company shall deliver or cause to be delivered
certificates representing the shares of Company Common Stock (the
"Certificates") owned by each Shareholder of the Company (except
as contemplated by Section 3.1(c) of this Agreement), accompanied
by stock powers duly signed in blank (in substantially the form
attached to this Agreement as Exhibit C), and with all revenue
stamps necessary to transfer such shares and the certificates
representing such shares affixed and cancelled and all taxes on
such transfer, if any, fully paid. Prior to the Effective Time,
the Company shall designate a business entity regularly engaged
in such work and which is reasonably satisfactory to Reptron to
act as Paying Agent with respect to the Merger (the "Paying
Agent"). In exchange for the Certificates, Reptron shall deliver
by wire transfer to the Paying Agent on behalf of the
Shareholders of the Company on the Closing Date $29,700,000, less
the sum of (v) the consideration paid by Reptron in connection
with the surrender and termination of all stock options of the
Subsidiary, (w) all supplementary compensation payments to the
executive officers of the Subsidiary, in an amount not less than
$1,590,000, (x) the aggregate amount of the Escrow Funds (which
shall be later transferred, as appropriate, in accordance with
Article VIII, to each Shareholder based on the number of shares
of Company Common Stock represented by the Certificates delivered
by the Company to Reptron on behalf of the Shareholder or
released, in accordance with Article VIII, to Reptron as a
reduction in the purchase price), (y) the Closing Expenses, and
(z) an amount equal to $35.12 multiplied by the number of
Dissenters' Shares. Until surrendered as contemplated by this
Section 3.2, each Certificate shall be deemed at all times after
the Effective Time to represent only the right to receive cash as
contemplated by Section 3.2 of this Agreement.
(b) No Further Ownership Rights in
Company Common Stock. After the Effective Time, there shall be
no further registrations of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation for any reason, they shall be
cancelled and exchanged as provided in this Article III.
(c) No interest shall accrue or be
paid on the cash payable
<PAGE>
upon the surrender of the Certificates. Any funds delivered or
made payable to the Paying Agent and not paid to former
shareholders of OECO (pursuant to their failure to surrender
their shares of Common Stock for cancellation pursuant to the
OECO-DEL Merger) within six months after the Effective Time will
be transferred by the Paying Agent to OECO-LLC, which thereafter
will act as Paying Agent, subject to the rights of former holders
of shares of OECO Common Stock who fail to surrender their
shares of OECO Common Stock for cancellation pursuant to the
OECO-DEL Merger. Any former shareholders of OECO who have not
previously surrendered their certificates of OECO Common Stock
for Certificates pursuant to the OECO-DEL Merger will thereafter
be entitled to look only to OECO-LLC in connection with their
right to receive Units of OECO-LLC and for payment of their claim
for the consideration set forth in Section 3.1, without any
interest, but will have no greater rights against OECO-LLC than
may be accorded to general creditors of OECO-LLC under applicable
law. Notwithstanding the foregoing, neither the Paying Agent nor
any party hereto shall be liable to any former shareholder of
OECO for any cash or interest delivered to a public official
pursuant to applicable abandoned property, escheat or similar
laws.
Section 3.3 Further Assurances. If at any time
after the Effective Time any further assignments or assurances
are necessary or desirable to vest or to perfect or confirm of
record in the Surviving Corporation the title to any property
or rights of either of the Constituent Corporations, or
otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby
authorized and empowered on behalf of the respective
Constituent Corporations, in the name of and on behalf of the
appropriate Constituent Corporation, to execute and deliver any
and all things necessary, appropriate or convenient to vest or
to perfect or confirm title to such property or rights in the
Surviving Corporation, and otherwise to carry out the purposes
and provisions of this Agreement.
ARTICLE IV
Representations and Warranties of the Company
The Company represents, warrants and agrees with Reptron
and Huron as follows:
Section 4.1 Organization. Each of the Company, the
Subsidiary and Hibbing Electronics Corporation - Maryland
("HECO-MD") is a corporation duly organized, validly existing,
and with active status or good standing under the laws of the
jurisdiction of its incorporation. Each of the Company, the
Subsidiary and HECO-MD has all requisite corporate power and
authority and all necessary governmental approvals to own,
lease, and operate its properties and to carry on its business
as now being conducted. Schedule 4.1 sets forth for the
Company, the Subsidiary and HECO-MD (a) its name and
jurisdiction of incorporation or organization, (b) the number
of shares of authorized capital stock of each class of its
capital stock, (c) the number of issued and outstanding shares
of each class of its capital stock, and, as to the Subsidiary,
the names of the holders thereof, the number of shares held by
each such holder and applicable certificate numbers, (d) the
number of shares of its capital stock held in treasury, and (e)
its directors and officers. Each of the Company, the
Subsidiary and HECO-MD is duly
<PAGE>
qualified or licensed to do business and is in good standing or
with active status in each jurisdiction in which the property
owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or
licensed and be in good standing or active status would not
have a Material Adverse Effect on the Subsidiary.
Section 4.2 Capitalization. As of the date of this
Agreement, the authorized capital stock of the Company consists
solely of 1,000,000 shares of Company Common Stock of which, as
of the date of this Agreement, zero (0) shares are issued and
outstanding and of which, as of the Closing Date, the number of
shares of Company Common Stock not to exceed the number agreed
to by counsel for the respective parties hereto in writing will
be issued and outstanding. As of the date of this Agreement,
except as set forth Schedule 4.2 and as agreed to by counsel
for the respective parties hereto in writing, there are no
options to acquire any shares of any class of stock of the
Subsidiary. All of the outstanding shares of Company Common
Stock, Subsidiary Common Stock and HECO-MD Common Stock are
duly authorized, validly issued, fully paid and nonassessable
and free of any preemptive or similar rights and no shares are
held in the treasury of the Company or the Subsidiary, except
as set forth on Schedule 4.2. As of the date of this
Agreement, no Voting Debt of the Company or the Subsidiary is
issued or outstanding. As of the date of this Agreement,
except as set forth on Schedule 4.2 and as agreed to by counsel
for the respective parties hereto in writing, there are no
existing options, warrants, puts, calls, subscriptions or other
rights or other agreements or commitments of any character
relating to the issued or unissued shares of capital stock of
the Subsidiary, or obligating the Subsidiary to issue,
transfer, or sell or cause to be issued, transferred, or sold,
any shares of capital stock, or other equity interests in, the
Subsidiary, or securities convertible into or exchangeable for
such shares or equity interests or obligating the Subsidiary to
grant, extend, or enter into any such option, warrant, call,
subscription or other right, agreement or commitment. As of
the date of this Agreement, except as set forth on Schedule 4.2
and as agreed to by counsel for the respective parties hereto
in writing, there are no outstanding contractual obligations of
the Subsidiary to repurchase, redeem, or otherwise acquire any
shares of capital stock of the Subsidiary. All of the
outstanding shares of Company Common Stock and Subsidiary
Common Stock were issued pursuant to available exemptions under
federal and state securities laws or all relevant statutes of
limitations have expired with respect to such issuances.
Section 4.3 Ownership of the Company; No Prior
Activities; Assets of the Company. The Company was formed
solely for the purpose of facilitating the Merger. Other than
this Agreement and the transactions contemplated hereby, and as
agreed to by counsel for the respective parties hereto in
writing, there are not as of the date hereof and there will not
be on the Closing Date any outstanding options, warrants,
calls, rights, commitments or any other agreements of any
character which the Company is a party to, or may be bound by,
requiring it to issue, transfer, sell, purchase, redeem or
acquire any shares of capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to
subscribe for or acquire, any shares of capital stock of the
Company. As of the date of this Agreement and at the Effective
Time, except for obligations or liabilities incurred in
connection with the Distribution and, as set forth on Exhibit
A, obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated
thereby and hereby, the Company has not and will not have
incurred, directly or indirectly through any subsidiary or
affiliate, any obligations
<PAGE>
or liabilities or engaged in any business or activities of any
type or kind whatsoever or entered into any agreements or
arrangements with any person. At the Effective Time, the
Company will own no assets other than all of the outstanding
capital stock of the Subsidiary.
Section 4.4 Authority. The Company has the
requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
by this Agreement. As of the Closing Date, holders of in
excess of 75% of the outstanding shares of Company Common Stock
will have approved and adopted this Agreement and such other
matters referred to in the Company's proxy materials forwarded
to its shareholders in connection therewith. As of the Closing
Date, the execution, delivery, and performance of this
Agreement and the consummation of the Merger and of the other
transactions contemplated hereby will have been duly authorized
by all necessary corporate action on the part of the Company,
and no other corporate proceedings on the part of the Company
will be necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly
executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding obligation of Reptron
and Huron, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance
or similar laws affecting the enforcement of creditors' rights
generally or by general principles of equity.
Section 4.5 Consents and Approvals; No Violations.
Except as set forth on Schedule 4.5, and except for filings,
permits, authorizations, consents, and approvals as may be
required under, and other applicable requirements of, the HSR
Act, neither the execution, delivery, or performance of this
Agreement by the Company nor the consummation by the Company of
the transactions contemplated by this Agreement nor compliance
by the Company with any of the provisions of this Agreement
will: (a) conflict with or result in any breach of any
provision of the articles of incorporation or the bylaws of the
Company or the Subsidiary, (b) require any filing with, or
permit, authorization, consent, or approval of, any
Governmental Entity, or any third party contracting with the
Subsidiary, (c) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or
both) a default which results in a material breach of any
individual contract or arrangement (or gives rise to any right
of termination, amendment, cancellation, or acceleration)
under, any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement,
or other instrument or obligation to which the Subsidiary is a
party or by which the Subsidiary or any of its properties or
assets may be bound, or (d) violate any order, writ,
injunction, decree, ruling, or materially violate any statute,
rule, or regulation applicable to the Company, the Subsidiary,
or any of their respective properties or assets.
Section 4.6 Financial Statements. Prior to the
execution of this
Agreement, the Subsidiary delivered to Reptron the audited
unconsolidated balance sheets and statements of income, changes
in shareholders' equity, and cash flows as of and for the
fiscal years ended December 31, 1993, December 31, 1994,
December 31, 1995, December 31, 1996, and the audited
consolidated balance sheets and statements of income, changes
in shareholders' equity, and cash flows as of and for the
fiscal year ended December 31, 1997 (the "Most
<PAGE>
Recent Fiscal Year End") for the Subsidiary (collectively, the
"Subsidiary Financial Statements"). The Subsidiary Financial
Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout
the periods covered thereby except as may be noted in such
financial statements, present fairly the financial condition of
the Subsidiary as of such dates and the results of operations
of the Subsidiary for such periods. At the Most Recent Fiscal
Year End, the Subsidiary owned all assets shown on the Most
Recent Financial Statements, subject to no material Security
Interests, liens, charges, mortgages, or other encumbrances
except as noted therein. All Liabilities of the Subsidiary are
reflected on the books and records of the Subsidiary and on the
Subsidiary Financial Statements in accordance with GAAP.
Section 4.7 Absence of other Subsidiaries and
Equity Interests. Other than the Subsidiary and HECO-MD, upon
the Closing, the Company will own no equity interest in any
other entity (including, without limitation, any evidence of
indebtedness convertible into equity).
Section 4.8 Absence of Certain Changes. Except as
set forth on Schedule 4.8 or as agreed to by counsel for the
respective parties hereto in writing, since the Most Recent
Fiscal Year End, no event has occurred which had or could have
a Material Adverse Effect on the Subsidiary. Without limiting
the generality of the foregoing, since that date:
(a) the Subsidiary has not sold,
leased, transferred, or assigned any of its assets, tangible or
intangible, other than for a fair consideration in the Ordinary
Course of Business;
(b) the Subsidiary has not entered
into any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving
payments by the Subsidiary outside the Ordinary Course of
Business;
(c) no party (including the
Subsidiary) has terminated or cancelled any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses) involving more than $100,000, to which
either the Subsidiary is a party or by which the Subsidiary is
bound;
(d) the Subsidiary has not imposed or
granted any Security Interest upon any of its assets, tangible or
intangible;
(e) the Subsidiary has not made any
capital expenditure (or series of related capital expenditures)
either involving more than $50,000 or outside the Ordinary Course
of Business;
<PAGE>
(f) the Subsidiary has not made any
capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related
capital investments, loans, and acquisitions) outside the
Ordinary Course of Business;
(g) the Subsidiary has not issued any
note, bond, or other debt security or created, incurred, assumed,
or guaranteed any indebtedness for borrowed money or capitalized
lease obligation involving more than $100,000;
(h) the Subsidiary has not delayed or
postponed the payment of accounts payable and other Liabilities
outside the Ordinary Course of Business;
(i) the Subsidiary has not cancelled,
compromised, waived, or released any right or claim (or series of
related rights and claims) outside the Ordinary Course of
Business;
(j) the Subsidiary has not granted any
license or sublicense of any rights under or with respect to any
Intellectual Property;
(k) there has been no change made or
authorized in the articles of incorporation or bylaws of the
Subsidiary;
(l) the Subsidiary has not issued,
sold, or otherwise disposed of any of its capital stock, or
granted any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(m) the Subsidiary has not declared,
set aside, or paid any dividend or made any distribution with
respect to its capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any of its capital
stock;
(n) the Subsidiary has not experienced
any damage, destruction, or loss (whether or not covered by
insurance) to its property in excess of $10,000;
(o) the Subsidiary has not made any
loan to, or entered into any other transaction with, any of its
directors or officers, or outside of the Ordinary Course of
Business, with any of its employees;
(p) the Subsidiary has not entered
into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any such existing
contract or agreement;
(q) the Subsidiary has not granted any
increase in base compensation to any of its directors or, outside
of the Ordinary Course of Business, to any of its officers or
employees;
<PAGE>
(r) the Subsidiary has not adopted,
amended, modified or terminated any bonus, profit-sharing,
incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees (or
taken any such action with respect to any other Employee Benefit
Plan);
(s) the Subsidiary has not made any
other change in employment terms for any of its directors,
officers, or employees;
(t) the Subsidiary has not made or
pledged to make any charitable or other contribution outside the
Ordinary Course of Business;
(u) the Subsidiary is not aware of any
labor union organizing activity, had any actual or threatened
employee strikes, work stoppages, slow-downs or lock-outs, or had
any material change in its relations with its employees, agents,
customers or suppliers;
(v) the Subsidiary has not instituted,
settled or agreed to settle any litigation, action or proceeding
before any Governmental Entity relating to it or its properties;
(w) except as disclosed on Exhibit A,
the Subsidiary has not entered into any transaction, contract or
commitment other than in the Ordinary Course of Business or paid
or agreed to pay any legal, accounting, brokerage, finder's fee,
taxes or other expenses in connection with, or incurred any
severance pay obligations by reason of, this Agreement or the
transactions contemplated hereby; and
(x) the Subsidiary has not committed
to any of the above actions.
Section 4.9 No Undisclosed Liabilities. Except as
disclosed in the Subsidiary Financial Statements or in the
Schedules to this Agreement, the Subsidiary has no outstanding
guaranties, indemnities, hold harmless agreements, covenants
not to compete or solicit customers, or covenants not to
solicit or employ persons, or matters of suretyship, or similar
instrument or agreement, and is not subject to any material
claims or liabilities, accrued, absolute, contingent or
otherwise, other than trade or business obligations incurred in
the Ordinary Course of Business since the date of the
Subsididary Financial Statements, in amounts usual and normal
both individually and in the aggregate for its business.
Section 4.10 Employee Benefits.
(a) Schedule 4.10 contains a true and
complete list of each pension, retirement, profit sharing,
deferred compensation, stock option, stock purchase, bonus,
medical, welfare, disability, severance or termination pay,
insurance or incentive plan, and each other employee benefit
plan, program, agreement or arrangement, whether funded or
unfunded, sponsored, maintained or contributed to or required to
be contributed to by the Subsidiary for the benefit of any
<PAGE>
employee or terminated employee of the Subsidiary (the "Plans").
Schedule 4.10 identifies each Plan that is an "employee benefit
plan," within the meaning of Section 3(3) of ERISA (the "ERISA
Plans").
(b) Neither the Subsidiary nor any
Subsidiary ERISA Affiliate has ever participated in or has ever
been required to contribute to or otherwise participate in any
"multi-employer plan," as defined in Sections 3(37)(A) and
4001(a)(3) of ERISA and Section 414(f) of the Code.
(c) True and complete copies of each
of the Plans and related trusts have been furnished to Reptron,
including, where applicable, the most recent financial statement
and the most recent actuarial report prepared with respect to any
of such Plans that is funded, the most recent Service
determination letter, the most recent summary plan description
and the most recent Annual Report together with a statement
setting forth any such documents which are not applicable or
cannot be furnished; and any such documents furnished and the
nature of the documents which cannot be furnished shall be
satisfactory to Reptron.
(d) With respect to each Plan intended
to be "qualified" within the meaning of Section 401(a) of the
Code, a determination letter from the Service has been received
to the effect that the Plan is qualified under Section 401 of the
Code and any trust maintained pursuant thereto is exempt from
federal income taxation under Section 501 of the Code, and
nothing has occurred or will occur through the Closing Date
(including, without limitation, the transactions contemplated by
this Agreement) which would cause the loss of such qualification
or exemption or the imposition of any penalty or tax liability.
(e) All contributions required by each
Plan or by law with respect to all periods through the Closing
Date shall have been made by such date (or provided for by the
Subsidiary by adequate reserves on its financial statements) and
no excise or other taxes have been incurred or are due and owing
with respect to the Plan because of any failure to comply with
the minimum funding standards of ERISA and the Code.
(f) Except as set forth in Schedule
4.10 of this Agreement, no "accumulated funding deficiency," as
defined in Section 302 of ERISA, has been incurred with respect
to any Plan, whether or not waived.
(g) No "reportable event" of the type
set forth in Section 4043 of ERISA has occurred and is continuing
with respect to any Plan.
(h) There are no violations of ERISA
or the Code with respect to the filing of applicable reports,
documents, and notices regarding any Plan with the Secretary of
Labor, Secretary of the Treasury, or the PBGC or furnishing such
documents to participants or beneficiaries, as the case may be.
<PAGE>
(i) No claim, lawsuit, arbitration, or
other action has been threatened, asserted, or instituted against
any Plan, any trustee or fiduciaries thereof, the Subsidiary, or
any of the assets of any trust maintained under any Plan.
(j) All amendments required to bring
any Plan into conformity with any of the applicable provisions of
ERISA and the Code have been duly adopted.
(k) Any bonding required with respect
to any ERISA Plan in accordance with applicable provisions of
ERISA has been obtained and is in full force and effect.
(l) Each Plan has been operated and
administered in accordance with its terms and the terms and the
provisions of ERISA and the Code (including rules and regulations
thereunder) applicable thereto and in practice is tax qualified
under Sections 401(a) and 501 of the Code.
(m) The trusts maintained under each
Plan intended to be "qualified" within the meaning of Section
401(a) of the Code is exempt from taxation under section 501(a)
of the Code.
(n) Neither the Subsidiary nor any
Subsidiary ERISA Affiliate has incurred nor reasonably expects to
incur, any liability to the PBGC.
(o) No "prohibited transaction," as
such term is defined in Section 4975 of the Code and Section 406
of ERISA, has occurred with respect to any Plan (and the
transactions contemplated by this Agreement will not constitute
or directly or indirectly result in such a "prohibited
transaction") which could subject the Subsidiary, any Subsidiary
ERISA Affiliate or Reptron, or any officer, director or employee
of any of the foregoing, or any trustee, administrator or other
fiduciary, to a tax or penalty on prohibited transactions imposed
by either Section 502 of ERISA or Section 4975 of the Code.
(p) No Plan is under audit by the
Service or the Department of Labor.
(q) Schedule 4.10 of this Agreement
contains a list of all Plans that are defined benefit plans
subject to title IV of ERISA. If any such plan were terminated
with a termination date of January 1, 1998, the additional Plan
contribution required of the Subsidiary or any Subsidiary ERISA
Affiliate as of that date would not exceed the amount applicable
to such Plan as set forth on Schedule 4.10.
(r) No Employee Welfare Benefit Plan
provides for continuing benefits or coverage for any participant
or beneficiary of a participant after such participant's
termination of employment, except as may be required by COBRA at
the expense of the participant or the beneficiary of the
participant.
<PAGE>
(s) Except as set forth in Schedule
4.10 of this Agreement, no individual shall accrue or receive any
additional benefits, service, or accelerated rights to payment of
benefits under any Plan as a result of the actions contemplated
by this Agreement.
(t) The Subsidiary has complied with
all of the requirements of the COBRA, Sections 601 through 608 of
ERISA, and Sections 162 and 4980B of the Code.
Section 4.11 Other Benefit Plans. Except as set
forth on Schedule 4.11, and as agreed to by counsel for the
respective parties hereto in writing, as of the date of this
Agreement, the Subsidiary is not a party to any oral or written
(a) consulting agreement not terminable on 30 days or less
notice involving the payment of more than $10,000 per annum,
(b) union or collective bargaining agreement, (c) agreement
with any executive officer or other key employee of the
Subsidiary, the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a
transaction involving the Subsidiary of the nature contemplated
by this Agreement, or agreement with respect to any executive
officer of the Subsidiary providing any term of employment or
compensation guarantee extending for a period longer than one
year, or (d) agreement or plan, including any stock option
plan, stock appreciation rights plan, restricted stock plan, or
stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
Section 4.12 Litigation. Schedule 4.12 sets forth
each instance in which the Company or the Subsidiary (i) is
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge or (ii) is a party or, to the Knowledge of
the Company or the Subsidiary, is threatened to be made a party
to, any action, suit, proceeding, hearing, or investigation of,
in, or before any Governmental Entity or arbitrator. To the
Knowledge of the Subsidiary, none of the actions, suits
proceedings, hearings, and investigations set forth on Schedule
4.12 could reasonably be expected to have a Material Adverse
Effect upon the business, financial condition, operations,
results of operations, or future prospects of the Subsidiary.
The Subsidiary has no reason to believe that any other such
action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Subsidiary.
Section 4.13 Compliance with Applicable Law. Except
as disclosed on Schedules 4.13 and 4.19 of this Agreement and
except where the failure to hold such permits, licenses,
variances, exemptions, orders, and approvals would not,
individually or in the aggregate, have a Material Adverse
Effect on the Subsidiary or HECO-MD, the Subsidiary holds all
permits, licenses, variances, exemptions, orders, and approvals
of all Governmental Entities necessary for the lawful conduct
of its business (the "Subsidiary Permits"). The Subsidiary is
in compliance with the terms of the Subsidiary Permits, except
where the failure so to comply would not have a Material
Adverse Effect on the Subsidiary. Except as disclosed on
Schedules 4.13 and 4.19, the business of the Subsidiary is not
being conducted in violation of any law, ordinance, or
regulation of any Governmental Entity, except for possible
violations that individually or in the aggregate do not, and,
insofar as reasonably can be foreseen, in the future will not,
have a
<PAGE>
Material Adverse Effect on the Subsidiary. Except as set forth
on Schedule 4.13 and 4.19, no investigation or review by any
Governmental Entity with respect to the Subsidiary is pending,
or, to the Knowledge of the Subsidiary, threatened, nor has any
Governmental Entity indicated an intention to conduct an
investigation or review.
Section 4.14 Vote Required. The affirmative vote of
in excess of 75% of the votes entitled to be cast by the
outstanding shares of the Company Common Stock pursuant to the
OBCA is the only vote of the holders of any class or series of
the Company's or the Subsidiary's capital stock necessary to
approve this Agreement and the transactions contemplated by
this Agreement.
Section 4.15 Tax Returns and Audits.
(a) For taxable periods ended on or
after December 31, 1991, each of the Company and the Subsidiary
has filed all Tax Returns that it was required to file
(specifically excluding the returns to be filed by Reptron
pursuant to Section 6.13), except where the failure to file would
not have a Material Adverse Effect. All such Tax Returns were
correct and complete in all material respects. All Taxes owed by
each of the Company and the Subsidiary as shown on such Tax
Returns have been paid and all other Taxes for taxable periods
ended on or after December 31, 1991 have been paid, except where
the failure to pay such other Taxes would not have a Material
Adverse Effect. Except as set forth on Schedule 4.15, neither
the Company nor the Subsidiary currently is the beneficiary of
any extension of time within which to file any Tax Return.
Except as set forth on Schedule 4.15, no claim has been made
since December 31, 1991 by an authority in a jurisdiction where
either of the Company or the Subsidiary does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of either
the Company or the Subsidiary that arose in connection with any
failure (or alleged failure) to pay any Tax. To the Knowledge of
the Company, for tax periods ended on or after December 31, 1988,
OECO has filed all Tax Returns that it was required to file,
except where the failure to file would not have a Material
Adverse Effect.
(b) For taxable periods ended on or
after December 31, 1991, each of the Company and the Subsidiary
has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder, or other
third party, except where the failure to so withhold and pay
would not have a Material Adverse Effect.
(c) To the Knowledge of the Company,
the Company and the Subsidiary do not expect any authority to
assess any additional Taxes with respect to any Tax Returns that
have been filed. There is no current dispute or claim concerning
any Tax Liability of the Company or the Subsidiary which was
claimed or raised by any authority in writing or in person by any
agent of such authority. Schedule 4.15 lists all federal, state,
local, and foreign income Tax Returns filed with respect to the
Company and the Subsidiary for taxable periods ended on or after
December 31, 1991, and indicates those Tax Returns that have been
audited. The Company has delivered to Reptron correct and
complete copies of all federal income Tax Returns, examination
reports, and statements of
<PAGE>
deficiencies assessed against or agreed to by either of the
Company or the Subsidiary for taxable periods ended on or after
December 31, 1991.
(d) Neither the Company nor the
Subsidiary has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, except for any such waiver or extension
that has expired and except as disclosed on Schedule 4.15.
(e) Neither the Company nor the
Subsidiary has filed a consent under Section 341(f) of the Code
concerning collapsible corporations. Neither the Company nor the
Subsidiary has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments not
deductible under Section 280G of the Code, other than payments
described by counsel for the respective parties hereto in
writing. Neither the Company nor the Subsidiary has been a
United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. Each
of the Company and the Subsidiary has disclosed on its federal
income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within
the meaning of Section 6662 of the Code. Neither the Company nor
the Subsidiary is a party to any Tax allocation or sharing
agreement. Neither the Company nor the Subsidiary (A) has been a
member of an Affiliated Group filing a consolidated federal
income Tax Return (other than a group the common parent of which
was either OECO or the Company) or (B) except as set forth on
Schedule 4.15, has any Liability for the Taxes of any Person
(other than OECO, the Company and the Subsidiary) under United
States Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(f) The unpaid Taxes of the Company
and the Subsidiary (A) did not, as of December 31, 1997,
materially exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of
the Subsidiary's Most Recent Balance Sheet (rather than in any
notes thereto) and (B) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with
the past custom and practice of the Company and the Subsidiary in
filing their Tax Returns.
(g) Schedule 4.15 sets forth the
following information in accordance with the Tax Returns as filed
by OECO, the Company and the Subsidiary as to (A) the amount of
any unused operating loss, unused net capital loss, unused
investment, foreign or other credit, or excess charitable
contribution allocable to the Company or the Subsidiary; and (B)
the amount of any deferred gain or loss allocable to the Company
or the Subsidiary arising out of any deferred intercompany
transaction as that term is used in regulations pertaining to a
Controlled Group of Corporations filing a consolidated return.
(h) The Prior Transactions will not
result in taxable gain to the Company except as may be realized
in connection with the Distribution.
<PAGE>
Section 4.16 Material Contracts. Schedule 4.16
lists the following contracts and other agreements to which the
Subsidiary is a party (each a "Material Contract") that remain
in full force and effect or may otherwise be enforced and which
are not otherwise disclosed in the Subsidiary Financial
Statements or the notes thereto or as otherwise agreed to by
counsel for the respective parties hereto in writing:
(a) any agreement (or group of related
agreements) for the lease of personal property to or from any
Person providing for lease payments in excess of $50,000 per
year;
(b) any agreement (or group of related
agreements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or
for the furnishing or receipt of services, the performance of
which shall extend over a period of more than one year;
(c) any agreement concerning a
partnership or joint venture;
(d) any agreement (or group of related
agreements) under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(e) any agreement concerning non-
solicitation or noncompetition or agreements not to hire;
(f) any currently in effect profit
sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other material plan or
arrangement for the benefit of any current or former directors,
officers, and employees;
(g) any collective bargaining
agreement;
(h) any agreement for the employment
of any individual on a full-time, part-time, consulting, or other
basis or providing severance benefits that is not terminable at
will;
(i) any agreement under which it has
advanced or loaned (or agreed to advance or loan) any amount in
excess of $5,000 to any of its directors, officers, and employees
outside the Ordinary Course of Business; or
(j) any contract of indemnity or
guarantee or agreement to hold harmless.
The Subsidiary has delivered to Reptron a correct and complete
copy of each written agreement listed on Schedule 4.16 (as
amended to date). With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full
force and effect; (B) the agreement shall continue to be legal,
valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the Merger, and to
the Knowledge of the Subsidiary, no event has
<PAGE>
occurred that with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or
acceleration, under any such agreement; and (C) to the Knowledge
of the Subsidiary, no party has repudiated any provision of any
such agreement.
Section 4.17 Real Property and Leases. (a) Schedule
4.17 lists all parcels of real property owned or leased by the
Subsidiary. With respect to each parcel of owned real
property, the Subsidiary has good and marketable title to the
real property, free and clear of any mortgage, security
interest, easement, covenant, or other restriction, except
those of record and those set forth on Schedule 4.17. With
respect to each parcel of leased real property, the lease or
sublease is legal, valid, binding, and enforceable, and in full
force and effect. To the Knowledge of the Subsidiary, all
facilities owned or leased have received all approvals of
applicable Governmental Entities (including licenses and
permits) required in connection with the operation thereof.
(b) The Subsidiary has delivered to
Reptron a true and complete copy of every lease under which the
Subsidiary is a tenant or subtenant (and for each sublease, true
and complete copies of all leases to which the sublease is
subject), and each such lease is described on Schedule 4.17 of
this Agreement.
(c) To the Knowledge of the
Subsidiary, each lease is in full force and effect and has not
been assigned, modified, supplemented, or amended except as
described on Schedule 4.17 of this Agreement, and neither the
Subsidiary, nor, to the Knowledge of the Subsidiary, the landlord
or sublandlord under any lease is in default under any of the
leases, and no circumstances or state of facts presently exists
that, with the giving of notice or passage of time, or both,
would permit the landlord or sublandlord under any lease to
terminate any such lease.
(d) Each lease sets forth the entire
agreement between the landlord or sublandlord and the Subsidiary,
and there are no amendments, oral or written, except as set forth
on Schedule 4.17 of this Agreement, and no landlord or
sublandlord has the presently exercisable right to cancel or
terminate any lease.
(e) There are no outstanding or
unsatisfied obligations of the Subsidiary to perform any
leasehold improvement or other work or to reimburse or pay for
any such work under any of the leases.
(f) There are no outstanding or
unsatisfied obligations of the Subsidiary for any leasing
commissions under any of the leases.
(g) The Subsidiary has (without
exception) a good and insurable leasehold estate to all Real
Property that it leases, free and clear of all Security Interests
except those of record and those set forth on Schedule 4.17.
<PAGE>
Section 4.18 Tangible Personal Property.
(a) Except as set forth in the
Subsidiary Financial Statements and Schedule 4.18 to this
Agreement, the Subsidiary is the sole lawful and beneficial owner
of its tangible personal property (other than tangible personal
property that the Subsidiary has the right to use in its business
pursuant to valid and enforceable contracts), free and clear of
all Security Interests, and it has good and marketable title to
all such property. All of such tangible personal property is in
good and serviceable condition, with such exceptions as arose in
the Ordinary Course of Business and could not reasonably be
expected to have a Material Adverse Effect on the Subsidiary.
(b) The depreciation schedule for the
Subsidiary, setting forth all material tangible personal property
existing on the date of this Agreement, has previously been
delivered to Reptron and is true and correct in all respects.
(c) Except as set forth on Schedule
4.18 of this Agreement, the Subsidiary has not removed or
permitted the removal of any tangible personal property from its
business premises since the Most Recent Financial Statement,
except in the Ordinary Course of Business.
Section 4.19 Environmental and Employee Safety
Matters.
(a) Except as set forth on Schedule
4.19 of this Agreement, the Subsidiary, and its predecessors and
Affiliates, other than OECO, has, to its Knowledge, after due
inquiry, complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceedings, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or
commenced against any of them alleging any failure so to comply.
Without limiting the generality of the preceding sentence, the
Subsidiary and its respective predecessors and Affiliates has, to
its Knowledge, after due inquiry, obtained and been in compliance
with all of the terms and conditions of all permits, licenses,
and other authorizations that are required under, and has
complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules,
and timetables that are contained in, all Environmental, Health,
and Safety Laws.
(b) Except as set forth on Schedule
4.19 of this Agreement, the Subsidiary does not have, to its
Knowledge, after due inquiry, any Liability (and none of the
Subsidiary, or its respective predecessors and Affiliates has, to
its Knowledge, after due inquiry, handled or disposed of any
substance, arranged for the disposal of any substance, exposed
any employee or other individual to any substance or condition,
or owned or operated any property or facility in any manner that
could form the basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Subsidiary giving rise to any Liability) for
damage to any site, location, or body of water (surface or
subsurface), for any illness of or, personal injury to any
employee or other individual, or for any reason under any
Environmental, Health, and Safety Law.
<PAGE>
(c) Except as set forth on Schedule
4.19 of this Agreement, all properties and equipment used in the
business of the Subsidiary, and its predecessors and Affiliates
have, to the Knowledge of the Subsidiary, after due inquiry, been
free of underground storage tanks, underground injection wells,
radioactive materials, asbestos, PCB's, methylene chloride,
trichloroethylene, trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(d) Except as set forth on Schedule
4.19 of this Agreement, there are no environmental reports,
assessments, audits or studies relating to the Subsidiary or to
any property currently or formerly owned, operated or leased by
the Subsidiary of which the Subsidiary has Knowledge, after due
inquiry.
Section 4.20 Intellectual Property.
(a) The Subsidiary owns or has the
right to use pursuant to license, sublicense, agreement, or
permission, all Intellectual Property necessary for or used in
the operation of the businesses of the Subsidiary as presently
conducted and as presently proposed to be conducted. Each item
of Intellectual Property owned or used by any of the Subsidiary
immediately prior to the Effective Time shall remain owned or
available for use by the Surviving Corporation and the Subsidiary
on identical terms and conditions as of the Effective Time. The
Subsidiary has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that the
Subsidiary owns or uses.
(b) Except as set forth on Schedule
4.20(d) of this Agreement, the Subsidiary has not interfered
with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties,
and the Subsidiary has never received any charge, complaint,
claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim
that the Subsidiary must license or refrain from using any
Intellectual Property rights of any third party). To the
Knowledge of the Subsidiary, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of the Subsidiary.
(c) Schedule 4.20(a) of this Agreement
identifies each trademark, copyright and patent registration that
has been issued to the Subsidiary with respect to any of its
Intellectual Property, identifies each pending trademark,
copyright or patent application or application for registration
that the Subsidiary has made with respect to any of its
Intellectual Property. Schedule 4.20(b) identifies each trade
name, trademark and service mark (whether or not registered),
used by the Subsidiary. Schedule 4.20(c) identifies each
license, agreement, or other permission that the Subsidiary has
granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The
Subsidiary has delivered to Reptron correct and complete copies
of all such trademarks, copyrights, trade names, service marks,
patents, registrations,
<PAGE>
applications, licenses, agreements, and permissions (as amended
to date) and has made available to Reptron correct and complete
copies of all other written documentation evidencing ownership
and prosecution (if applicable) of each such item.
(d) As to each item of Intellectual
Property required to be identified in Schedule 4.20:
(i) the Subsidiary possesses
all right, title, and interest in and to the item of Intellectual
Property, free and clear of any Security Interest, or other
restriction other than a license;
(ii) other than those items of
Intellectual Property required to be identified in
Schedule 4.20(c), the Subsidiary possesses all right, title, and
interest in and to the item, free and clear of any license;
(iii) the item of Intellectual
Property is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(iv) no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of the Subsidiary, is
threatened that challenges the legality, validity,
enforceability, use, or ownership of the item of Intellectual
Property; and
(v) the Subsidiary has never
agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to
the item of Intellectual Property.
(e) Schedule 4.20(e) identifies each
item of Intellectual Property that any third party owns and that
the Subsidiary uses pursuant to license, sublicense, agreement,
or permission. The Subsidiary has delivered to Reptron correct
and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect
to each item of Intellectual Property required to be identified
in Schedule 4.20:
(i) the license, sublicense,
agreement, or permission is in full force and effect;
(ii) the license, sublicense,
agreement, or permission shall continue to be legal, valid,
binding, enforceable, and in full force and effect on identical
terms following the consummation of the Merger;
(iii) the Subsidiary, as party
to the license, sublicense, agreement, or permission is not in
breach or default, and no event has occurred that, with notice of
default, would permit termination, modification, or acceleration
thereunder;
(iv) the Subsidiary, as party
to the license, sublicense,
<PAGE>
agreement, or permission, has not repudiated any provision
thereof;
(v) with respect to each
sublicense, the representations and warranties set forth in
clauses (i) through (iv) above are true and correct with respect
to the underlying license;
(vi) to the Knowledge of the
Subsidiary, the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(vii) to the Knowledge of the
Subsidiary, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of the Subsidiary, is threatened that challenges the
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(viii) the Subsidiary has not
granted any sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(f) the Subsidiary shall not, to its
Knowledge, interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued operation of
its businesses as presently conducted and as presently proposed
to be conducted.
Section 4.21 Insurance Policies. Schedule 4.21 of
this Agreement sets forth a complete and correct list and
description of the subject matter of all insurance policies
which insure the Subsidiary with respect to its business,
identifying the type of insurance, and true and complete copies
of such policies have been delivered to Reptron. The
Subsidiary has complied with all the material provisions of
such policies, and the policies are in full force and effect.
Such policies provide coverage in amounts and covering such
risks as are adequate in accordance with customary industry
practice to protect the assets and the business of the
Subsidiary.
Section 4.22 Certain Business Practices. The
Subsidiary has not made, or to the Subsidiary's Knowledge, no
officers, directors, employees, consultants or agents or
representatives (collectively, the "Personnel") of the
Subsidiary (in their capacities as such) has made, directly or
indirectly, with respect to the business of the Subsidiary, any
bribes, kickbacks, or other illegal payments or illegal
political contributions, illegal payments from corporate funds
to governmental officials in their individual capacities, or
illegal payments from corporate funds to obtain or retain
business either within the United States or abroad.
Additionally, except as set forth on Schedule 4.22 of this
Agreement, neither the Subsidiary, nor, to the Subsidiary's
Knowledge, any Personnel, know of any act or omission of the
Subsidiary or any Personnel that would constitute employment
discrimination or other discrimination under applicable law or
provide the basis for a Material employment practices claim.
Section 4.23 Brokers' Fees. Except as set forth on
Schedule 4.23 or as disclosed on Exhibit A, neither the
Subsidiary nor any of its subsidiaries or affiliates has any
Liability or obligation to pay any fees,
<PAGE>
commissions, or other compensation to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement.
Section 4.24 No Misrepresentations. None of the
representations and warranties of the Company or the Subsidiary
set forth in this Agreement or in the attached Schedules,
notwithstanding any investigation made by Reptron, contains or
will contain any untrue statement of a material fact, or omits
or will omit the statement of any material fact necessary to
render the same not misleading, either at the date of this
Agreement or at the Closing Date.
Section 4.25 Volume Adjustment Agreements. Except as
set forth on Schedule 4.25, the Subsidiary is not a party to any
agreement under which a customer of the Subsidiary has the right
to claim a credit to price, or a vendor has a right to claim an
increase in price, for product shipped as a consequence of
attaining a designated volume of sales, or failing to attain a
designated volume of purchases, as the case may be.
Section 4.26 Accounts Receivable. Except as set forth
on Schedule 4.26, the accounts receivable of the Subsidiary are
not subject to a right of set off and no account debtor of the
Subsidiary has asserted a contractual right for non-payment of
any open account receivable of the Subsidiary.
ARTICLE V
Representations and Warranties
of Reptron and Huron
Reptron and Huron represent and warrant to the Company
as follows:
Section 5.1 Organization. Each of Reptron and
Huron is a corporation duly organized, validly existing, and
has active status under the laws of the State of Florida.
Section 5.2 Authority. Reptron and Huron have the
requisite corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
by this Agreement. The execution, delivery, and performance of
this Agreement, and the consummation of the Merger and the
other transactions contemplated by this Agreement, have been
duly authorized by all necessary corporate action on the part
of Reptron and Huron and no other corporate proceeding on the
part of Reptron or Huron is necessary to authorize this
Agreement or to consummate the transactions so contemplated.
This Agreement has been duly executed and delivered by Reptron
and Huron, as the case may be, and, assuming this Agreement
constitutes a valid and binding obligation of the Company,
constitutes a valid and binding obligation of each of Reptron
and Huron, as the case may be, enforceable against them in
accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, or similar laws affecting the enforcement of
creditors' rights generally or general principles of equity.
Section 5.3. Consents and Approvals; No Violations.
Except for filings, permits, authorizations, consents, and
approvals as may be
<PAGE>
required under, and other applicable requirements of, the HSR
Act and the FBCA, neither the execution, delivery, or
performance of this Agreement by Reptron and Huron, nor the
consummation by Reptron and Huron of the transactions
contemplated hereby, nor compliance by Reptron and Huron with
any of the provisions of this Agreement will (a) conflict with
or result in any breach of any provision of the respective
articles of incorporation or bylaws of Reptron and Huron,
(b) require any filing with, or permit, authorization, consent,
or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents, or
approvals or to make such filings would not have a Material
Adverse Effect on Reptron), (c) result in a violation or breach
of, or constitute (with or without due notice or lapse of time
or both) a default (or give rise to any right of termination,
cancellation, or acceleration) under, any of the terms,
conditions, or provisions of any note, bond, mortgage,
indenture, license, lease, contract, agreement, or other
instrument or obligation to which Reptron is a party or by
which it or any of its properties or assets may be bound, or
(d) violate any order, writ, injunction, decree, statute, rule,
or regulation applicable to Reptron or Huron or any of their
properties or assets, except in the case of (c) and (d) for
violations, breaches, or defaults that would not, individually
or in the aggregate, have a Material Adverse Effect on Reptron.
Section 5.4 Financing. Reptron has sufficient cash
reserves available to complete the transactions contemplated by
this Agreement.
Section 5.5 No Misrepresentations. None of the
representations and warranties of Reptron set forth in this
Agreement or in the attached Schedules contain or will contain
any untrue statement of a material fact, or omit or will omit
the statement of any material fact necessary to render the same
not misleading, either at the date of this Agreement or at the
Closing Date.
Section 5.6 Brokers' Fees. Except as set forth on
Schedule 5.6 or as disclosed on Exhibit A, neither Reptron nor
Huron has any Liability or obligation to pay any fees,
commissions, or other compensation to any broker, finder, or
agent with respect to the transactions contemplated by this
Agreement.
ARTICLE VI
Covenants
Section 6.1 Best Efforts; Further Assurances;
Cooperation. Subject to the other provisions in this
Agreement, the parties to this Agreement shall each use all
reasonable efforts to perform their respective obligations
under this Agreement and to take, or cause to be taken or do,
or cause to be done, all things necessary, proper or advisable
under applicable law to satisfy all conditions to the
obligations of the parties under this Agreement, including
those contemplated by Section 6.9, and to cause the Merger and
the other transactions contemplated by this Agreement to be
carried out promptly in accordance with the terms of this
Agreement, and shall cooperate fully with each other and their
respective officers, directors, employees, agents, counsel,
accountants and other designees in connection with any steps
required to be taken as part of their respective obligations
under this Agreement. Provided the applicable
<PAGE)
account debtor is not in material default of any obligation
under a contract between it and the Subsidiary, and further
provided that the current ratio or net worth of the applicable
account debtor has not materially deteriorated from the Closing
Date, neither the Subsidiary, the Surviving Corporation, nor
Reptron, nor any of them, nor their successors or assigns,
shall do anything to materially and adversely effect the
collectability of any Outstanding Receivable assigned by
Reptron to a Person designated by the Shareholder
Representative pursuant to subsections 8.3(b) and 8.3(c) of
this Agreement.
Section 6.2 Shareholders' Meeting. The Company
shall (a) cause a meeting of the Shareholders to be duly called
and held as soon as reasonably practicable, or shall cause a
written consent in lieu of such meeting to be executed, for the
purpose of considering and acting upon this Agreement and all
actions contemplated hereby which require the approval of the
Shareholders (the "Shareholders' Meeting"), (b) recommend
approval of this Agreement to the Shareholders, and (c) use all
reasonable efforts to cause such meeting (or consent in lieu of
such meeting) to take place and to obtain the approval by the
Shareholders of the Merger and the other transactions
contemplated by this Agreement. The Company shall provide
copies of proposed communications to the Shareholders to
Reptron prior to mailing.
Section 6.3 Notices and Consents. The Subsidiary
will give any notices to third parties, and will use all
reasonable efforts to obtain any third party consents that are
required to be obtained under any contract to which the
Subsidiary is a party, or that Reptron reasonably may request,
in connection with the matters referred to in Section 4.5 of
this Agreement or required to be obtained under any contract.
Section 6.4 Regulatory Matters and Approvals. Each
of the parties will, and the Company will cause OECO and the
Subsidiary to, give any notices to, make any filings with, and
use all reasonable efforts to obtain any authorizations,
consents, and approvals of Governmental Entities in connection
with the matters referred to in Section 4.5 and Section 5.3 of
this Agreement. Without limiting the generality of the
foregoing, Reptron and OECO will each file any notification and
report forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the
HSR Act and will use all reasonable efforts to obtain an early
termination of the applicable waiting period.
Section 6.5 Operation of Business. The Company
will cause the Subsidiary not to engage in any practice, take
any action, or enter into any transaction outside the Ordinary
Course of Business after the execution of this Agreement.
Without limiting the generality of the foregoing, the
Subsidiary will not, without the written consent of Reptron,
which consent will not be unreasonably withheld or delayed:
(a) authorize or effect any change in
its articles of incorporation or bylaws;
(b) grant any options, warrants, or
other rights to purchase or obtain any of its capital stock or
issue, sell, or otherwise dispose of any of its capital stock,
except as agreed to by counsel for the respective parties hereto
in writing;
<PAGE>
(c) except to the extent contemplated
by this Agreement, and except for a dividend in an amount equal
to $1,300,000 to be paid by the Subsidiary to OECO prior to
completion of the Prior Transactions, declare, set aside, or pay
any dividend or distribution with respect to its capital stock
(whether in cash or in kind), or redeem, repurchase, or otherwise
acquire any of its capital stock;
(d) issue any note, bond, or other
debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation
outside the Ordinary Course of Business, except for borrowings in
an amount equal to $1,300,000 related to the payment of a
dividend by the Subsidiary to OECO prior to completion of the
Prior Transactions;
(e) grant any Security Interest upon
any of its assets outside the Ordinary Course of Business;
(f) make any capital investment in,
make any loan to, or acquire the securities or assets of, any
other Person outside the Ordinary Course of Business;
(g) make any change in employment
terms for any of its directors, officers, or employees;
(h) sell, lease, transfer, or dispose
of any of its properties or assets, waive or release any rights
or cancel, compromise, release, or assign any indebtedness owed
to it or any claims held by it, except in the Ordinary Course of
Business;
(i) fail to perform in all material
respects its obligations under Material Contracts (except those
being contested in good faith) or enter into, assume, or amend
any contract or commitment that would be a Material Contract
other than contracts to provide services entered into in the
Ordinary Course of Business;
(j) permit any insurance policy naming
it as a beneficiary or a loss payable payee to be cancelled or
terminated or any of the coverage thereunder to lapse or be
reduced prior to the Effective Time, unless the Subsidiary makes
reasonable efforts to obtain simultaneously with such termination
or cancellation replacement policies providing substantially the
same coverage on commercially reasonable terms and, if so
available, such policies are in full force and effect;
(k) enter into any union, collective
bargaining, or similar agreement; or
<PAGE>
(l) enter into any agreement to do any
of the things described in clauses (a) through (k) above.
Section 6.6 Full Access. The Subsidiary will
permit representatives of Reptron, during normal business
hours, and, without disrupting normal business operations, to
have full supervised access to all premises, properties,
personnel, books, records (including tax records), contracts,
and documents of or pertaining to the Subsidiary. Reptron will
treat and hold as such any Confidential Information it receives
from any of the Company, the Subsidiary, OECO or from other
third parties pertaining to the Subsidiary in the course of the
reviews contemplated by this Section, will not use any of the
Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason
whatsoever, agrees to return to the Subsidiary all tangible
embodiments (and all copies) thereof that are in its
possession. The Subsidiary will cause its auditing firm to
permit Reptron and its representatives, including its auditing
firm, to review the work papers of the auditing firm of the
Subsidiary relating to their examination of the Subsidiary
Financial Statements and Tax Returns. No investigation made by
or on behalf of Reptron shall affect the representations and
warranties of the Subsidiary.
Section 6.7 Notice of Developments. Each party
will give prompt written notice to the other of any adverse
development causing a Material breach of any of its own
representations and warranties in Articles IV and V above. No
disclosure by any party pursuant to this Section, however,
shall be deemed to amend or supplement the Schedules to this
Agreement or to prevent or cure any misrepresentation, breach
of warranty, or breach of covenant. Reptron will give prompt
written notice to the Company of any fact or condition or event
of which Reptron becomes aware which could constitute a
misrepresentation, breach of warranty or breach of covenant by
the Company or the Subsidiary. Notwithstanding the foregoing,
Reptron's failure to so notify the Company will not provide a
defense or right of set off to a claim asserted by Reptron for
such misrepresentation or breach with respect to damages
suffered by Reptron except and only to the extent that the
accruing of such damages could have been mitigated by such
notice.
Section 6.8 Exclusivity. From the date of this
Agreement until the Effective Time or until this Agreement is
terminated as provided in Article IX, the Company shall not,
directly or indirectly, through any officer, director, agent,
shareholder or otherwise, initiate, solicit or knowingly
encourage (including by way of furnishing information or
assistance), or take any other action to facilitate knowingly,
any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, directly or
indirectly, any Competing Transaction, or enter into or
maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing
Transaction or authorize or permit any of the officers,
directors or employees of the Company or the Subsidiary or any
investment banker, financial advisor, attorney, accountant or
other representative retained by the Company or the Subsidiary
to take any such action, and the Company shall notify Reptron
of such action orally (within one business day) and in writing
(as promptly as practicable) of all of the relevant details
relating to all inquiries and proposals which it or the
Subsidiary or any such officer, director, employee, investment
banker, financial advisor, attorney, accountant or other
representative may receive relating to any of such matters and
if such inquiry or
<PAGE>
proposal is in writing, the Company shall deliver to Reptron a
copy of such inquiry or proposal; provided, however, nothing
contained in this Section 6.8, shall prevent the Board of
Directors of the Company from considering, negotiating,
approving and recommending to the Shareholders (after
consulting with its financial advisors, and determining after
consulting with counsel that the Board of Directors is required
to do so in order to discharge properly its fiduciary duties) a
superior proposal. A "superior proposal" shall mean an
unsolicited bona fide acquisition proposal made by a third
party on terms that a majority of the members of the Company's
Board of Directors determines in their good faith reasonable
judgment (based on the advice of an independent financial
advisor) would in terms of price be materially more favorable
to the Shareholders than the transactions contemplated by this
Agreement and for which any required financing is committed or
which, in the good faith reasonable judgment of a majority of
such members (after consultation with an independent financial
advisor), is reasonably capable of being financed by such third
party. If the Company accepts a superior proposal in writing,
within five business days of such acceptance, it shall pay to
Reptron by wire transfer the sum of $1,000,000 as a termination
fee.
Section 6.9 Completion of Prior Transactions.
Prior to consummation of the Merger, the parties thereto shall
use their best efforts to complete the Prior Transactions.
Except in connection with the Distribution and except as set
forth on Exhibit A with respect to obligations or liabilities
incurred in connection with its incorporation or organization
and the transactions contemplated thereby and hereby, the
Company shall not have incurred, directly or indirectly through
any subsidiary or affiliate, any obligations or liabilities
with respect to the Prior Transactions.
Section 6.10 Public Announcements. The timing and
content of all announcements regarding any aspect of this
Agreement or the Merger to the financial community, government
agencies, employees or the general public shall be mutually
agreed upon in advance unless Reptron is advised by counsel
that any such announcement or other disclosure not mutually
agreed upon in advance is required to be made by law or
applicable Nasdaq rules.
Section 6.11 Expenses. Except as otherwise provided
in this Agreement, whether or not the Merger is consummated,
all costs and expenses (including any brokerage commissions or
any finder's or investment banker's fees and including
attorneys' and accountants' fees) incurred in connection with
this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses.
Section 6.12 Antitrust Challenges. In the event a
suit is instituted challenging the Merger as violative of the
antitrust laws, each of Reptron and the Company will use all
reasonable efforts to defend against such suit, except that the
Company shall not be required to incur legal fees in excess of
$100,000 in the defense of any such suit. Reptron and the
Company will use all reasonable efforts to take such action as
may be required by any federal or state court of the United
States, in any suit brought by a private party or Governmental
Entity challenging the Merger as violative of the antitrust
laws, in order to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order or
other order which has the effect of
<PAGE>
preventing the consummation of the Merger; provided, however,
Reptron shall not be required to agree to any divestiture by
Reptron or the Subsidiary or any of their respective
subsidiaries of any shares of capital stock or of any business,
properties or assets of Reptron or the Subsidiary or any of
their respective subsidiaries, or to the imposition of any
material limitation on the ability of Reptron, the Subsidiary
or any of their respective subsidiaries to conduct their
respective businesses or to own or exercise control of such
stock, business, properties or assets.
Section 6.13 Tax Returns. Reptron shall file the
consolidated corporate federal and state income tax return for
the Company, OECO, New OECO Corporation, the Subsidiary and HECO-
MD for the tax period commencing January 1, 1998 in such a manner
as to minimize any tax payable with respect to the Prior
Transactions. The Shareholder Representative shall have the
right to review such tax returns prior to their filing and,
provided that the changes do not result in a material increase in
the tax liability of the consolidated group which includes
Reptron and the Surviving Corporation, to require any reasonable
changes, within the law, to such tax returns which would result
in a lower amount of tax payable.
Section 6.14 Payments from Sypris Lawsuit. On or
after January 1, 1999, any payments, up to but not exceeding in
the aggregate the amount, if any, released by the Escrow Agent
to Reptron on December 31, 1998 in connection with the
termination of the Inventory Escrow Fund, received by the
Subsidiary, the Surviving Corporation or Reptron, or any of
them or their successors or assigns, in settlement of or as a
result of obtaining a judgment in the lawsuit pending on the
date of this Agreement by the Subsidiary against Sypris
Solutions, Inc., formerly known as Group Technologies
Corporation ("Sypris") shall, within five business days of
receipt, be paid by the receiving party to an account
designated by the Shareholder Representative or, after the
termination of his appointment, to OECO-LLC
Section 6.15. Payments With Respect to OECO Tax
Liability. Any refund payment received by the Subsidiary, the
Surviving Corporation or Reptron, or any of them or their
successors or assigns, due to overpayment prior to the Closing
Date of the corporate federal and state income tax payable with
respect to the operations of OECO for the taxable periods
ending on or before December 31, 1997 shall be paid by the
Subsidiary within five business days of receipt to an account
designated by OECO-LLC. Further, the amount of any positive
difference between: (i) the amount of the estimated aggregate
federal and state corporate income tax liability, as stated in
the certificate of the Chief Financial Officer of OECO-LLC and
provided to Reptron pursuant to Section 7.2(e) above, for the
Company, OECO, New OECO, OECO-DEL and OECO-LLC for the tax period
commencing January 1, 1998 and ending on the Closing Date, and
(ii) the amount of federal and state corporate income tax
allocable to the Company, OECO, New OECO, OECO-DEL and OECO-LLC
for such period as stated in the tax returns filed by Reptron
pursuant to Section 6.3, above, shall be paid by the Subsidiary
to an account designated by OECO-LLC, within five business days
of the filing of the returns. The tax calculated for the short
period ending on the Closing Date shall be determined without
taking into account the deductions attributable to the grant,
exercise or waiver of stock options by, or supplemental
compensation paid or accrued to, the employees of the Company or
the Subsidiary, and the corporate surtax exemption shall be
allocated among the members of the consolidated group consisting
of OECO, New OECO, OECO-DEL, OECO-LLC, the Company and the
Subsidiary in proportion to pre-tax income of each such entity
for such period.
<PAGE>
Section 6.16 OECO-LLC Tax Elections. The Company, on
behalf of itself and its successors and assigns, shall not cause
OECO-LLC to elect to be treated other than as a partnership for
purposes of state and federal income taxation for a period of two
years from the Closing Date.
ARTICLE VII
Conditions
Section 7.1 Conditions to the Obligations of Each
Party. The respective obligations of the Company, OECO-LLC,
Reptron, Huron and the Shareholder Representative to effect the
Merger shall be subject to the fulfillment at or prior to the
Closing of each of the following conditions (any of which may
be waived by written agreement between the parties):
(a) Company Shareholder
Approval. The Company and the Shareholders, as required by
Section 280G(b)(5)(B) of the Code and regulations thereunder,
shall approve the payments to any employee of the Subsidiary or
HECO-MD which may constitute an "excess parachute payment" as
defined under Section 280G of the Code, in order to exempt the
deduction related to any such payment from being limited under
Section 280G(a) of the Code.
(b) HSR Act. All applicable
waiting periods under the HSR Act shall have expired or been
terminated.
(c) Execution and Delivery of
Escrow Agreement. The Escrow Agreement shall have been duly
executed and delivered by all parties thereto.
(d) Opinion and Confirmation
of Arthur Andersen. The Company, Reptron and Huron shall have
received an opinion of Arthur Andersen, tax advisors to the
Company, in form and substance and with such exceptions and
limitations as shall be reasonably satisfactory to Reptron,
substantially to the effect that:
(A) Neither the
Shareholders, the Company, nor any company involved in the Prior
Transactions, should recognize gain or loss as a result of the
Prior Transactions except for any gain or loss realized and
recognized in connection with the Distribution.
(B) The consolidated
taxable income of OECO for tax years preceding January 1, 1998
should be available for the carry back of net operating losses
realized by the consolidated group consisting of the Company,
OECO, New OECO Corporation, the Subsidiary and HECO-MD.
(C) The difference
between the Merger Consideration per share and the option price
per share of the stock options granted by the Company, if
exercised prior to the Closing Date, should be deductible by the
Company for federal and state income tax purposes, as
compensation, without limitation by Section 280G of the Code, for
the taxable period beginning January 1, 1998.
<PAGE>
Section 7.2 Conditions to the Obligations of
Reptron and Huron. The consummation of the Merger is subject
to the fulfillment to the satisfaction of Reptron, prior to or
at the Closing, of each of the following conditions (any of
which may be waived by Reptron):
(a) Completion of Prior Transactions.
The Prior Transactions shall have been completed to the
reasonable satisfaction of Reptron.
(b) Consents, Authorizations, etc.
All consents, authorizations, orders and approvals of, and
filings and registrations with, any Governmental Entity (other
than the filing of the Oregon Articles of Merger and the Florida
Articles of Merger with the Secretaries of State of Oregon and
Florida, respectively) or with any other third parties (including
any third party which will have the right to terminate an
agreement with the Subsidiary) which are required for or in
connection with, the execution, delivery and performance of this
Agreement by the Company and the Subsidiary and the consummation
by the Company and the Subsidiary of the transactions
contemplated by this Agreement shall have been obtained or made.
(c) Injunction, etc. The consummation
of the Merger will not violate the provisions of any injunction,
order, judgment, decree, law or regulation applicable or
effective with respect to the Company, the Subsidiary, Reptron,
Huron or their respective officers and directors. No suit or
proceeding shall have been instituted by any person, or shall
have been threatened by any Governmental Entity, which seeks
(i) to prohibit, restrict or delay consummation of the Merger or
to limit in any material respect the right of Reptron to control
any material aspect of the business of Reptron, the Subsidiary or
the Surviving Corporation after the Effective Time, or (ii) to
subject Reptron, the Subsidiary, Huron, or their respective
directors or officers to material liability on the ground that it
or they have breached any law or regulation or otherwise acted
improperly in relation to the transactions contemplated by this
Agreement; provided, however, in the case of (ii) above, Reptron
shall have made a good faith determination that a substantial
basis exists which would support a finding of such liability
against the officers and directors of the Reptron, the Subsidiary
or Huron.
(d) Representations and Warranties.
The representations and warranties of the Company and the
Subsidiary contained in this Agreement shall have been true and
correct in all material respects at the date of this Agreement
and shall also be true and correct in all material respects at
and as of the Effective Time, except for changes contemplated in
this Agreement, with the same force and effect as if made at and
as of the Effective Time, and the Company, and the Subsidiary
shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be
performed or complied with by each of them at or prior to the
Effective Time.
<PAGE>
(e) Certificates. The Company shall
have delivered to Reptron a certificate or certificates, dated as
of the Closing Date, of the Chief Executive Officers and the
Chief Financial Officers of the Company and the Subsidiary,
respectively, to the effect that (i) they are familiar with the
provisions of this Agreement and (ii) to their Knowledge, the
conditions specified in Section 7.2(c) have been satisfied. Such
certificate shall also certify that, to the Knowledge of such
officers, there has been no violation by the Company of Sections
6.5 or 6.8 of this Agreement. With respect to the officers of
the Company, such certificate shall also specify the number of
issued and outstanding shares of Company Common Stock and the
number of shares of Company Common Stock approving the Merger.
The Company shall also have delivered to Reptron a certificate,
dated as of the Closing Date, of the Chief Financial Officer of
OECO-LLC which states: (i) (on a consolidated basis) the
estimated federal and state income tax liability for the
Company, OECO, New OECO, OECO-DEL and OECO-LLC, for the tax
period commencing January 1, 1998 and ending on the Closing
Date (The tax calculated for the short period ending on the
Closing Date shall be determined without taking into account
the deductions attributable to the grant, exercise or waiver of
stock options by, or supplemental compensation paid or accrued
to, the employees of the Company or the Subsidiary, and the
corporate surtax exemption shall be allocated among the members
of the consolidated group consisting of OECO, New OECO, OECO-
DEL, OECO-LLC, the Company and the Subsidiary in proportion to
pre-tax income of each such entity for such period.); (ii) the
Closing Expenses of such entities, the Subsidiary, and HECO-
Maryland; (iii) that attached to such certificate shall be a
true and correct schedule of the assets of OECO-LLC, inclusive
of goodwill associated with OECO-LLC, together with the
adjusted basis and an estimate of the fair market value of such
assets as of the Distribution; (iv) that as of the time
immediately prior to the Distribution, the Company was the only
member of OECO-LLC; and (v) identification of the number of
shares for which dissenters' rights were exercised with respect
to any one of the Prior Transactions, or the Merger.
(f) Opinion and Confirmation of
Counsel.
(i) Reptron and Huron shall
have received an opinion or opinions, dated as of the Closing
Date, of Tonkon Torp LLP, counsel to the Company, in form and
substance and with such exceptions and limitations as shall be
reasonably satisfactory to Reptron, substantially to the effect
that:
(A) The Company is a
corporation duly incorporated, validly existing, and has active
status under the laws of the State of Oregon and has the
corporate power and authority to own its properties and assets.
(B) The authorized
capital stock of the Company consists of 1,000,000 shares of
Company Common Stock. The issued and outstanding shares of
Company Common Stock are duly authorized, validly issued, and
fully paid and non-assessable and to the Knowledge of such
counsel, were issued pursuant to available exemptions under
federal and state securities laws or applicable statutes of
limitation have run with respect to such issuances. To the
Knowledge of such counsel, the Company has no commitments to
issue or sell any shares of its capital
<PAGE>
stock or any securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for
or acquire from the Company, any shares of its capital stock, and
no securities or obligations evidencing any such rights are
outstanding. The Company owns all of the outstanding shares of
capital stock of the Subsidiary.
(C) The Company has the
power and authority to execute and deliver this Agreement and the
agreements contemplated by this Agreement, and to consummate the
transactions contemplated hereby and thereby. This Agreement and
the Oregon Articles of Merger, the Florida Articles of Merger and
the Escrow Agreement have been duly approved by the Board of
Directors of the Company and the Merger pursuant to this
Agreement has been duly approved by the Shareholders. This
Agreement has been duly executed and delivered by the Company
and is a valid and binding agreement of the Company, enforceable
in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights
generally or by general principles of equity.
(D) The execution or
delivery by the Company of this Agreement and the performance of
its obligations under this Agreement will not (with the passage
of time or the giving of notice or both): (i) constitute a
violation of, constitute a default or require any payment under,
permit a termination of, or result in the creation or imposition
of any security interest, lien or other encumbrance or adverse
claim against, or upon the property of, the Company under (I) any
term or provision of the articles of incorporation or bylaws of
the Company, (II) any Material Contract, (III) any permit,
judgment, decree or order of any Governmental Entity that is
listed on Schedule 4.5 or that is known to such counsel or (IV)
Oregon or federal law that in the experience of such counsel is
normally applicable to transactions of the kind contemplated by
this Agreement; or (ii) create or cause the acceleration of the
maturity of, any indebtedness, obligation, or liability of the
Company that is listed on Schedule 4.17 or that is known to such
counsel.
(E) All corporate and
other actions or proceedings to be taken by OECO, OECO-DEL, OECO-
LLC and the Company to authorize and permit the Prior
Transactions and the consummation of the transactions
contemplated by this Agreement have been duly and properly taken
and the Prior Transactions have been completed in accordance with
Oregon and Delaware law. The consummation of the Prior
Transactions will not constitute a violation of, constitute a
default or require any payment under, permit a termination of, or
result in the creation or imposition of any security interest,
lien or other encumbrance or adverse claim against, or upon the
property of, the Company.
(F) Except for the
filing of the Oregon Articles of Merger and the Florida Articles
of Merger with the Secretaries of State of Oregon and Florida,
respectively, each consent, authorization, order and approval of,
and filing and registration with, any Governmental Entity
required to be made or obtained by the Company for the execution
and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement have been made or
obtained.
(G) Upon the filing of
the Oregon Articles of Merger and the Florida Articles of Merger
with the Secretaries of State of Oregon and Florida,
respectively, the Merger shall become effective in accordance
with Oregon law.
<PAGE>
(ii) Reptron and Huron shall have
received an opinion or opinions, dated as of the Closing Date, of
Oppenheimer Wolff & Donnelly, counsel to the Subsidiary, in form
and substance and with such exceptions and limitations as shall
be reasonably satisfactory to Reptron, substantially to the
effect that:
(A) The Subsidiary is a
corporation duly incorporated, validly existing, and has active
status under the laws of the State of Minnesota and has the
corporate power and authority to own its properties and assets
and to conduct its business as it is presently conducted.
(B) The performance of
the Subsidiary's obligations under this Agreement will not (with
the passage of time or the giving of notice or both): (i)
constitute a violation of, constitute a default or require any
payment under, permit a termination of, or result in the creation
or imposition of any security interest, lien or other encumbrance
or adverse claim against, or upon the property of, the Subsidiary
under (I) any term or provision of the articles of incorporation
or bylaws of the Subsidiary, (II) any Material Contract, (III)
any permit, judgment, decree or order of any Governmental Entity
that is listed on Schedule 4.5 or that is known to such counsel
or (IV) Minnesota or federal law that in the experience of such
counsel is normally applicable to transactions of the kind
contemplated by this Agreement; or (ii) create or cause the
acceleration of the maturity of, any indebtedness, obligation, or
liability of the Subsidiary that is listed on Schedule 4.17 or
that is known to such counsel.
(g) Certain Antitrust Matters. No
proceeding shall be pending or threatened with respect to the
transactions contemplated by this Agreement and no order, decree
or judgment shall have been entered or issued, which, in any such
case, would require any divestiture by Reptron or the Company or
any of their respective subsidiaries of any shares of capital
stock or of any business, properties or assets of Reptron or the
Company or any of their respective subsidiaries, or the
imposition of any material limitation on the ability of Reptron
or the Company or any of their respective subsidiaries to conduct
their respective businesses or to own or exercise control of such
stock, business, properties or assets.
(h) Dissenters' rights. Dissenters'
rights under Oregon law shall not have been perfected by holders
of in excess of 10% of the outstanding shares of Company Common
Stock in connection with the Prior Transactions or the Merger, or
under applicable law by holders of in excess of 10% of the
outstanding shares of any class of voting stock of any entity
required to vote on any of the Prior Transactions.
(i) Shareholder Approval. The Company
and the Shareholders, as required by Section 280G(b)(5)(B) of the
Code and regulations thereunder, shall approve the payments to
any employee of the Subsidiary or HECO-MD which may constitute an
"excess parachute payment" as defined under Section 280G of the
Code, in order to exempt the deduction related to any such
payment from being limited under Section 280G(a) of the Code
(j) Oregon Articles of Merger and
Florida Articles of Merger. The Company shall execute and
deliver to Reptron Oregon Articles of Merger (with attached plan
of merger) and Florida Articles of Merger, in form and substance
reasonably acceptable to Reptron, for filing with the Secretaries
of State of Oregon and Florida, respectively.
(k) Estoppel Certificates. The
Subsidiary shall deliver to Reptron an estoppel certificate of
each lessor under each lease of Real Property in form and
substance satisfactory to Reptron which describes the property
leased, the monthly or annual rental, the remaining term of the
lease, which certifies that there is not a default under the
lease, and which confirms that the lease will continue in full
force and effect after the Closing.
(l) Disposition of Options. All
options to acquire shares of Subsidiary Common Stock shall have
been terminated with consideration therefor not less than
$2,200,000 and all options to acquire shares of Company Common
Stock, if any, as identified by counsel for the respective
parties hereto in writing shall have been exercised with full
consideration therefor paid to the Company, with full releases
(to the reasonable satisfaction of Reptron) being granted to the
Company, the Subsidiary, Reptron and Huron, as applicable, by the
optionees, and with all applicable payroll tax withholding having
been made and all applicable payroll taxes having been paid.
(m) Resignations. All of the
executive officers and directors of the Company and all directors
of the Subsidiary (with respect to their service as directors)
shall have submitted their resignations.
(n) Additional Certificates, etc. The
Company and the Subsidiary shall have furnished to Reptron such
additional certificates, opinions, and other documents as Reptron
may have reasonably requested as to any of the conditions set
forth in Sections 7.1 and 7.2.
Section 7.3 Conditions to Obligations of the
Company. The consummation of the Merger is subject to the
fulfillment to the satisfaction of the Company, prior to or at
the Effective Time, of each of the following conditions (any of
which may be waived by the Company):
(a) Consents, Authorizations, etc.
All consents, authorizations, orders and approvals of, and
filings and registrations with, any Governmental Entity, (other
than the filing of the Oregon Articles of Merger and the Florida
Articles of Merger with the Secretaries of State of Oregon and
Florida, respectively) which are required for or in connection
with the execution and delivery of this Agreement by Reptron and
Huron and the consummation by Reptron and Huron of the
transactions contemplated hereby shall have been obtained or
made.
<PAGE>
(b) Injunction, etc. The consummation
of the Merger will not violate the provisions of any injunction,
order, judgment, decree, law, or regulation applicable or
effective with respect to the Company, the Subsidiary, or their
respective officers or directors. No suit or proceeding shall
have been instituted by any person, or, shall have been
threatened by any Governmental Entity, which seeks to subject the
Company, the Subsidiary, or their respective directors or
officers, to material liability on the ground that it or they
have breached any law or regulation or otherwise acted improperly
in relation to the transactions contemplated by this Agreement;
provided, however, that the Company shall have made a good faith
determination that a substantial basis exists which would support
a finding of such liability against the officers and directors of
the Company or the Subsidiary.
(c) Representations and Warranties.
The representations and warranties of Reptron and Huron contained
in this Agreement shall have been true and correct in all
respects at the date of this Agreement and shall also be true and
correct in all respects at and as of the Effective Time, except
for changes contemplated in this Agreement, with the same force
and effect as if made at and as of the Effective Time or except
where the failure of any representation or warranty to be correct
would not have a Material Adverse Effect on the ability of
Reptron to consummate the Merger; and Reptron shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective
Time.
(d) Certificate. Reptron shall have
delivered to the Company a certificate, dated as of the Closing
Date, of the Chief Operating Officer and the Chief Financial
Officer of Reptron to the effect that (i) they are familiar with
the provisions of this Agreement and (ii) to their Knowledge, the
conditions specified in Section 7.3(c) have been satisfied.
(e) Reptron Payment. Reptron shall
tender payment of the Closing Expenses, the Merger Consideration,
fully fund the Escrow Funds at the Closing pursuant to Section
2.2 of this Agreement and , prior to or on the Closing Date,
shall have made all payments to the Subsidiary or the Shareholder
Representative related to the surrender and termination of all
stock options of the Subsidiary and the Subsidiary's payment of
supplementary compensation payments to its executive officers.
(f) Opinion and Confirmation of
Reptron's Counsel.
(i) The Company shall have
received an opinion or opinions, dated as of the Closing Date, of
Holland & Knight LLP, counsel to Reptron, in form and substance
and with such exceptions and limitations as shall be reasonably
satisfactory to the Company, substantially to the effect that:
(A) Reptron and Huron are
corporations duly incorporated, validly existing, and have active
status under the laws of Florida and have the corporate power and
authority to own their respective properties and assets and to
conduct their respective businesses as they are presently
conducted.
<PAGE>
(B) Each of Reptron and
Huron has the power and authority to execute and deliver this
Agreement and the Escrow Agreement, and to consummate the
transactions contemplated hereby and thereby. This Agreement and
the Oregon Articles of Merger, the Florida Articles of Merger and
the Escrow Agreement have been duly approved by the Boards of
Directors of Reptron and Huron. This Agreement and the Escrow
Agreement have been duly executed and delivered by Reptron and
Huron and are valid and binding agreements of Reptron and Huron,
enforceable in accordance with their respective terms, except as
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally or by general principles of
equity.
(g) Articles of Merger. Reptron shall
execute and deliver Oregon Articles of Merger (with attached plan
of merger), in form and substance reasonably acceptable to the
Company, for filing with the Oregon Secretary of State.
(h) Additional Certificates, etc.
Reptron shall have furnished to the Company such additional
certificates, opinions, and other documents as the Company may
have reasonably requested as to any of the conditions set forth
in Sections 7.1 and 7.3.
ARTICLE VIII
Remedies for Breaches of this Agreement
Section 8.1 Survival of Representations, Warranties,
and Covenants. The representations, warranties, covenants,
indemnification provisions, and agreements of the Company made or
set forth in this Agreement (including the Exhibits and Schedules
to this Agreement), or in any certificate or document delivered
pursuant to this Agreement, shall survive the execution and
delivery of this Agreement, the Closing Date, the consummation of
the Merger, and any investigation made by the parties and shall
continue in full force and effect thereafter for the period
provided in this Agreement. The confidentiality provisions of
the Letter of Intent shall survive for the period of time
provided therein.
Section 8.2 Shareholder Representative.
(a) Prior to the Closing Date, the
holders of a majority of the shares of Company Common Stock
shall select a Person (the "Shareholder Representative") to act
for and on behalf of all Shareholders with respect to all
matters arising in connection with Article VIII or the Escrow
Agreement, including without limitation, the power and
authority, in his or her sole discretion, to:
(i) take any action
contemplated to be taken by the Shareholder Representative
under Article VIII or the Escrow Agreement;
(ii) negotiate, determine,
defend and settle any dispute which may arise under Article
VIII or the Escrow Agreement;
<PAGE>
(iii) agree with Reptron on
behalf of the Shareholders as to the amount of the Closing
Expenses and the amount to be deposited in each of the General
Accounts Receivable Escrow Fund and the Inventory Escrow Fund;
and
(iv) make, execute,
acknowledge and deliver any releases, assurances, receipts,
requests, instructions, notices, agreements, certificates and
any other instruments, and to generally do any and all things
and to take any and all actions which may be requisite, proper
or advisable in connection with Article VIII or the Escrow
Agreement.
(b) The holders of a majority of
shares of Company Common Stock may replace the Shareholder
Representative at any time with a substitute Shareholder
Representative who shall have all the powers and
responsibilities of the Shareholder Representative set forth in
this Article VIII.
(c) Neither the Shareholder
Representative, nor any substitute Shareholder Representative,
shall be liable to any Person for any action taken or any
omission to act in good faith in connection with the
Shareholder Representative's responsibilities as Shareholder
Representative.
(d) Promptly following his or her
selection, the Shareholder Representative, or any substitute
Shareholder Representative, shall provide Reptron with a
written certification of his or her selection and of the
address for notices to such Shareholder Representative.
Reptron may thereafter deal exclusively with the Shareholder
Representative in connection with the claims procedure in
reliance on such certification. Whenever in connection with
the provisions of this Article VIII Reptron shall receive any
certificate or other written correspondence from the
Shareholder Representative, such certificate or other written
correspondence shall be full authorization to Reptron for any
action taken or suffered in good faith by it under the
provisions of this Article VIII in reliance thereon.
Section 8.3 Indemnification.
(a) General Escrow Fund. The
Surviving Corporation and Reptron (the Surviving Corporation
and Reptron are together, along with their respective
successors and assigns, referred to herein as the "Indemnified
Parties," and each of the Surviving Corporation and Reptron
respectively, along with its respective successors and assigns,
is referred to herein as an "Indemnified Party") shall be held
harmless and indemnified exclusively by the General Escrow Fund
from and against any Loss, specifically excluding claims
arising pursuant to subsections 8.3(b), 8.3(c), 8.3(d), 8.3(e),
8.3(f) or 8.3(g) below, that the Indemnified Parties may for
any cause at any time sustain or incur (on an after-tax basis)
as a result of any misrepresentation or breach of any warranty,
covenant, agreement or obligation made by the Company or the
Subsidiary under this Agreement or in any Schedule, Exhibit,
certificate or other instrument delivered pursuant to this
Agreement; provided, however, that if the indemnification
provided pursuant to subsection 8.3(e) or 8.3(f) below
<PAGE>
proves insufficient, the Indemnified Parties shall be
indemnified by the General Escrow Fund subject to the
limitations of this Section 8.3(a).
(i) No Indemnified Party
shall be entitled to receive any indemnification payment with
respect to any claims for indemnification under this subsection
8.3(a) until the aggregate Losses for which the Indemnified
Parties would be otherwise entitled to receive indemnification
exceed $200,000 (the "Threshold"); provided, however, that
once such aggregate Losses exceed the Threshold, such
Indemnified Party shall be entitled to indemnification for the
aggregate amount of all Losses without regard to the Threshold;
and provided further, however, that such aggregate Losses shall
be determined without regard to the Materiality threshold of
any representation, warranty or covenant.
(ii) Except as provided in
subsections 8.3(b), 8.3(c), 8.3(d), 8.3(e), 8.3(f) or 8.3(g),
all representations, warranties, covenants, indemnification
provisions, and agreements of the Company and the Subsidiary
made or set forth in this Agreement (including the Exhibits and
Schedules to this Agreement) or in any certificate or document
delivered pursuant to this Agreement, shall survive the Closing
Date for a period of fifteen months.
(b) General Accounts Receivable
Escrow Fund. The Indemnified Parties shall be held harmless
and indemnified exclusively by the General Accounts Receivable
Escrow Fund from and against any loss, specifically excluding
claims arising pursuant to subsection 8.3(c), that the
Indemnified Parties may incur as a result of the
uncollectability of any account receivable of the Subsidiary
more than 90 days past due (relative to shipment date) three
business days prior to the Closing Date, any outstanding
account receivable of the Subsidiary with respect to Sypris,
any amount due to the Subsidiary with respect to any Note
Receivable and any outstanding account receivable of the
Subsidiary with respect to Hayes Microcomputer Products, Inc.,
formerly known as Access Beyond, Inc. ("Hayes"), more than 30
days past due (relative to shipment date) three business days
prior to the Closing Date. The General Accounts Receivable
Escrow Fund shall be reduced by the amount of the reserve of
the Subsidiary for bad debts as of three business days prior to
the Closing Date.
(i) Other than for any
outstanding account receivable of Sypris or the outstanding
Note Receivable, the General Accounts Receivable Escrow Fund
shall be divided into two portions for each account debtor for
which an account receivable constitutes part of the General
Accounts Receivable Escrow Fund. Those accounts receivable
against which the account debtor has not, as of the Closing
Date, asserted a contractual basis for non-payment shall be
designated as "Undisputed Accounts." Those accounts receivable
against which the account debtor has, as of the Closing Date,
asserted a contractual basis for non-payment shall be
designated as "Disputed Accounts." All payments received from
an account debtor on an account receivable constituting part of
the General Accounts Receivable Escrow Fund, notwithstanding
any proposed application of such payment to particular amounts
outstanding by such account debtor, shall first be applied to
the earliest dated invoice for Undisputed Accounts with respect
to such account debtor which gives rise to a receivable covered
by the General Accounts Receivable Escrow Fund. During the
pendency of the General Accounts Receivable Escrow
<PAGE>
Fund, the General Accounts Receivable Escrow Fund and the
Undisputed Accounts for each account debtor for which an
account receivable constitutes part of the General Accounts
Receivable Escrow Fund shall be reduced on a dollar-for-dollar
basis by the amount of any such payment received (other than
for a Disputed Account) from such account debtor by the
Subsidiary, the Surviving Corporation or Reptron, or any of
them, or their successors or assigns. If, during the pendency
of the General Accounts Receivable Escrow Fund, an account
debtor makes payment specifically applying to a Disputed
Account, the General Accounts Receivable Escrow Fund and the
Disputed Accounts for such account debtor shall be reduced on a
dollar-for-dollar basis by the amount of any such payment.
Within five business days of the receipt of any of the above
payments by the Subsidiary, the Surviving Corporation or
Reptron, or any of them, or their successors or assigns, the
Person which receives such payment shall direct the Escrow
Agent to transfer from the General Accounts Receivable Escrow
Fund and transmit to an account designated by the Shareholder
Representative payment in the amount of any such payment so
received.
(ii) On December 31, 1998,
any amount remaining in the General Accounts Receivable Escrow
Fund not previously transmitted to an account designated by the
Shareholder Representative as provided in subsection 8.3(b)(i)
shall be released by the Escrow Agent to Reptron, and Reptron
shall assign any outstanding account receivable or Note
Receivable subject to this subsection 8.3(b)(ii) to a Person
designated by the Shareholder Representative. Any such account
receivable or Note Receivable assigned by Reptron to such
Person shall be free and clear of any Security Interests of
others which arise or are created during the pendency of the
General Accounts Receivable Escrow Fund. Each such assignment
shall vest in such Person all the right, title and interest in
and to any account receivable or Note Receivable assigned. Ten
business days prior to December 31, 1998, Reptron shall notify
account debtors that payments made with respect to any account
receivable or Note Receivable subject to the General Accounts
Receivable Escrow Fund shall be transmitted to the account
designated by the Shareholder Representative from and after
such date. From and after such date, any payment received by
the Subsidiary, the Surviving Corporation or Reptron, or any of
them, or their successors or assigns, with respect to any such
account receivable or Note Receivable shall be immediately
transmitted by any such Person to the account designated by the
Shareholder Representative.
(c) Ariel Accounts Receivable Escrow
Fund. The Indemnified Parties shall be held harmless and
indemnified exclusively by the Ariel Accounts Receivable Escrow
Fund from and against any loss which the Indemnified Parties
may incur as a result of the uncollectability of any
outstanding account receivable with respect to invoices of the
Subsidiary issued to Ariel Corporation ("Ariel") pursuant to
purchase orders of Ariel accepted by the Subsidiary prior to
the Closing Date and which accounts receivable are more than 45
days past due (relative to shipment date) on the date which is
180 days after the Closing Date (an "Eligible Ariel Account
Receivable").
<PAGE>
(i) On each of the dates
which are 135 and 180 days after the Closing Date and on
December 31, 1998, the Ariel Accounts Receivable Escrow Fund
shall be reduced on a dollar-for-dollar basis by the difference
between the amount remaining in the Ariel Accounts Receivable
Escrow Fund on such date and the sum of the outstanding unpaid
invoices of the Subsidiary issued to Ariel pursuant to purchase
orders of Ariel accepted by the Subsidiary prior to the Closing
Date which are dated on or before the 135th day following the
Closing Date. Within five business days of each such date,
Reptron or the Surviving Corporation shall direct the Escrow
Agent to transfer from the Ariel Accounts Receivable Escrow
Fund and transmit to an account designated by the Shareholder
Representative the amount of any such difference. All payments
received from Ariel, notwithstanding any proposed application
of such payment to particular amounts outstanding with respect
to Ariel, shall first be applied to the earliest dated invoice
with respect to Ariel which gives rise to a receivable covered
by the Ariel Accounts Receivable Escrow Fund.
(ii) On December 31, 1998,
any amount remaining in the Ariel Accounts Receivable Escrow
Fund not previously transmitted (or to be transmitted) to an
account designated by the Shareholder Representative as
provided in subsection 8.3(c)(i) shall be released by the
Escrow Agent to Reptron, and, subject to this subsection
8.3(c)(ii), Reptron shall assign any Eligible Ariel Account
Receivable to a Person designated by the Shareholder
Representative. Any Eligible Ariel Account Receivable assigned
by Reptron to such Person shall be free and clear of any
Security Interests of others which arise or are created during
the pendency of the Ariel Accounts Receivable Escrow Fund. Any
such assignment shall vest in such Person all the right, title
and interest in and to any Eligible Ariel Account Receivable
assigned. Ten business days prior to December 31, 1998,
Reptron shall notify Ariel that payments made with respect to
any Eligible Ariel Account Receivable shall be transmitted to
the account designated by the Shareholder Representative from
and after such date. From and after such date, any payment
received by the Subsidiary, the Surviving Corporation or
Reptron, or any of them, or their successors or assigns, with
respect to any Eligible Ariel Account Receivable shall be
immediately transmitted by any such Person to the account
designated by the Shareholder Representative.
(d) Inventory Escrow Fund.
The Indemnified Parties shall be held harmless and indemnified
exclusively by the Inventory Escrow Fund from and against any
loss that the Indemnified Parties may incur with respect to the
value of the remaining Excess Inventory (as defined in the
following sentence) of the Subsidiary on December 31, 1998. As
of each Measuring Date (as defined in subsection 8.3(d)(i)
below), Excess Inventory means the sum of (y) the Subsidiary's
inventory on hand as of May 8, 1998, plus (z) the inventory on
order by the Subsidiary as of May 8, 1998, less the sum of:
(r) the inventory on hand or on order by the Subsidiary as of
May 8, 1998, (s) dedicated to a product of the Subsidiary
pursuant to customer purchase orders accepted by the Subsidiary
as of May 8, 1998, (t) set forth on Exhibit G (the "Excluded
Inventory") (specifically including inventory on order by the
Subsidiary pursuant to cancellable purchase orders or forecasts
of customers' of the Subsidiary in excess of inventory
dedicated to a product of the Subsidiary pursuant to customer
purchase orders accepted by the Subsidiary as of May 8, 1998),
(u) dedicated to a product of the Subsidiary pursuant to
<PAGE>
customer purchase orders accepted by the Subsidiary since the
previous Measuring Date, (v) returned to the supplier of such
inventory since the previous Measuring Date (less any return or
restocking charges assessed by the supplier), (w) paid for by a
customer of the Subsidiary since the previous Measuring Date,
(x) sold to a third party since the previous Measuring Date for
the full value of such inventory or, with the consent of the
Shareholder Representative, for less than the full value of
such inventory; and also less, with respect to such inventory,
(y) any payment received with respect to Excess Inventory since
the previous Measuring Date by the Subsidiary, the Surviving
Corporation or Reptron, or any of them or their successor or
assigns, in connection with the lawsuit pending on the date of
this Agreement by the Subsidiary against Sypris, and (z) any
payment received, other than pursuant to clause (w) above of
this subsection 8.3(d), since the previous Measuring Date, by
the Subsidiary, the Surviving Corporation or Reptron, or any of
them or their successor or assigns, in connection with any
other claim brought by any of them with respect to Excess
Inventory. The value of the inventory subject to the Inventory
Escrow Fund shall be the amount recorded in accordance with
GAAP on the Subsidiary's books and records with respect to such
inventory as of May 8, 1998. The value of the Excess Inventory
on the Closing Date and on each Measuring Date shall be reduced
by the reserve of the Subsidiary for obsolete inventory as of
May 8, 1998. The Inventory Escrow Fund shall be funded by
Reptron on the Closing Date in an amount which equals the value
of the Excess Inventory on May 8, 1998.
(i) On the last day of each
full month following the month of the Closing up to and
including December 31, 1998 (each such day and May 8, 1998 is
referred to herein as a "Measuring Date"), the Inventory Escrow
Fund shall be reduced on a dollar-for-dollar basis by the
difference between the value of the Excess Inventory on the
previous Measuring Date (if any) and the value of the Excess
Inventory on such Measuring Date. Within five business days of
each Measuring Date, Reptron or the Surviving Corporation shall
direct the Escrow Agent to transfer from the Inventory Escrow
Fund and transmit to an account designated by the Shareholder
Representative the amount of any such difference. The
Subsidiary shall apply inventory subject to the Inventory
Escrow Fund to customer purchase orders received by it after
the Closing Date prior to placing new purchase orders for parts
or components which are included in such inventory.
(ii) On December 31, 1998,
any amount remaining in the Inventory Escrow Fund not
previously transmitted (or to be transmitted) to an account
designated by the Shareholder Representative as provided in
subsection 8.3(d)(i) shall be released by the Escrow Agent to
Reptron, and, subject to this subsection 8.3(d)(ii), Reptron
shall, at its cost to a location within a 20-mile radius from
Hibbing, Minnesota or at the cost of the Shareholder
Representative to a location outside of a 20-mile radius from
Hibbing, Minnesota, deliver all Subsidiary inventory which
constitutes the Excess Inventory on such date to a Person
designated by the Shareholder Representative. Any
<PAGE>
inventory delivered by Reptron to such Person shall be free
and clear of any Security Interests of others which arise or
are created during the pendency of the Inventory Escrow Fund
and shall agree with the quantities provided in the final
monthly inventory report by part by customer required by
Section 8.5(a). Any such delivery shall vest in such Person
all the right, title and interest in and to any such inventory
delivered.
(e) Indemnification with
Respect to OECO Corporation Retirement Plan. The Surviving
Corporation and Reptron shall be held harmless and indemnified
by OECO-LLC from and against any loss that the Surviving
Corporation and Reptron, or either of them or their successors
and assigns, may for any cause at any time sustain or incur (on
an after-tax-basis) as a result of any underfunding of the
"OECO Corporation Retirement Plan" whenever it may arise.
(f) Indemnification with
Respect to OECO Tax Liability. The Surviving Corporation, the
Subsidiary and Reptron shall be held harmless and indemnified
by OECO-LLC from and against any payment made by, or tax
assessed against, any of them or their successors or assigns:
(i) as a result of unpaid federal or state corporate income
taxes with respect to the operations of OECO for the taxable
periods ending on or before December 31, 1997, or (ii) the
amount by which the federal or state corporate income taxes
payable with respect to the operations of the Company, OECO,
New OECO, OECO-DEL or OECO-LLC for the tax period commencing
January 1, 1998 and ending on the Closing Date, exceeds the
estimated aggregate federal and state income tax liability for
such entities for such period as stated in the certificate of
the Chief Financial Officer of OECO-LLC provided to Reptron
pursuant to Section 7.2(e) above. In determining the corporate
federal and state income tax for such entities for the period
ending on the Closing Date, no deduction shall be taken into
account which is attributable to the grant, exercise or waiver
of stock options by, or supplemental compensation paid or
accrued to, the employees of the Company or the Subsidiary, and
further, the corporate surtax exemption shall be allocated
among the members of the consolidated group consisting of OECO,
New OECO, OECO-DEL, OECO-LLC, the Company and the Subsidiary in
proportion to pre-tax income of each such entity for such
period.
(g) Indemnification with
Respect to Claims by Former OECO Shareholders. The Surviving
Corporation and Reptron shall be held harmless and indemnified
by OECO-LLC in an amount not to exceed the amount transferred
by the Paying Agent to OECO-LLC pursuant to Section 3.2(c)
above from and against any loss that the Surviving Corporation
and Reptron, or either of them or their successors and assigns,
may for any cause at any time sustain or incur (on an after-
tax-basis) as a result of claims for the consideration set
forth in Section 3.1 above by former holders of shares of OECO
Common Stock who fail to surrender their shares of OECO Common
Stock for cancellation pursuant to the OECO-DEL Merger.
Section 8.4 Each Escrow Fund as Exclusive and
Independent Remedy. The General Escrow Fund, the General
Accounts Receivable Escrow Fund, the Ariel Accounts Receivable
Escrow Fund or the Inventory Escrow Fund is the exclusive and
independent source, subject to the limitations set forth in
Section 8.3 above, from which any potential claim for
indemnification by the Indemnified Parties under this Article 8
shall be satisfied (the General Escrow Fund, the General
Accounts Receivable Escrow Fund, the Ariel Accounts Receivable
Escrow Fund and the Inventory Escrow Fund are each described
herein as an "Escrow Fund," and are, collectively, described
herein as the
<PAGE>
"Escrow Funds"); provided, however, that the indemnification
obligations of OECO-LLC described in subsections 8.3(e) and
8.3(f) may, to the extent that the assets of OECO-LLC are
insufficient to satisfy such indemnification obligations or to
the extent that OECO-LLC refuses to fulfill such
indemnification obligations with respect to a valid claim and
upon proper notice by an Indemnified Party, be provided from
the General Escrow Fund, subject to the limitations set forth
in Section 8.3(a). Any payment to an Indemnified Party from
the General Escrow Fund in connection with the indemnification
obligations of OECO-LLC described in subsections 8.3(e) and
8.3(f) shall satisfy such obligations only to the extent of
such payment. Any potential claim for indemnification by the
Indemnified Parties made against an Escrow Fund with assets
insufficient to pay such claim shall remain unsatisfied
regardless of whether, at such time, there are amounts
remaining in one or more other Escrow Funds.
Section 8.5 Cooperation with Respect to General
Accounts Receivable Escrow Fund, Ariel Accounts Receivable
Escrow Fund and Inventory Escrow Fund.
(a) Audit and Report.
During the pendency of the General Accounts Receivable Escrow
Fund, the Ariel Accounts Receivable Escrow Fund or the
Inventory Escrow Fund, or any of them, the Shareholder
Representative, in his or her sole discretion, may designate
agents who shall be permitted, from time to time, during normal
business hours, to audit the Subsidiary's records with respect
to accounts receivable or the Note Receivable subject to the
General Accounts Receivable Escrow Fund, Ariel accounts
receivable subject to the Ariel Accounts Receivable Escrow Fund
or inventory subject to the Inventory Escrow Fund (such
accounts receivable, Note Receivable and Ariel accounts
receivable are, collectively, referred to herein as the
"Outstanding Receivables"). The Subsidiary shall not less than
weekly (with respect to the inventory subject to the Inventory
Escrow Fund, not less than monthly) provide to the agent
designated by the Shareholder Representative a report detailing
payments received with respect to the Outstanding Receivables
and payments received with respect to and the disposition of
inventory subject to the Inventory Escrow Fund (and reports
detailing the Excess Inventory by part by customer) in
sufficient detail to allow such agent to determine the proper
status of the General Accounts Receivable Escrow Fund, the
Ariel Accounts Receivable Escrow Fund and the Inventory Escrow
Fund. The information in such reports shall be no more than
two days old.
(b) Collection of
Receivables and Disposition of Inventory. On the basis of such
reports and with the cooperation of the personnel of the
Subsidiary, the Shareholder Representative shall have the
authority to direct the collection of the Outstanding
Receivables and the disposition of the inventory which is
subject to the Inventory Escrow Fund. The Subsidiary, Reptron
and the Surviving Corporation shall, during the pendency of
such Escrow Funds, use all reasonable and customary efforts to
collect the Outstanding Receivables and dispose of the
inventory which is subject to the Inventory Escrow Fund.
Without the prior written consent of the Shareholder
Representative, which consent shall not be unreasonably
withheld, neither the Subsidiary, Reptron nor the Surviving
Corporation shall take any action which might interfere with
the collectability of any Outstanding Receivable or the
disposition of any inventory subject to the Inventory Escrow
Fund including, without limitation, filing suit against the
account debtor, terminating the Subsidiary's supplier
relationship with the account debtor, failing to deliver
products or
<PAGE>
provide services with respect to purchase orders of the
account debtor outstanding as of the Closing Date.
Notwithstanding the foregoing, the Subsidiary shall be under no
obligation to accept a purchase order from an account debtor
unless it is contractually obligated to do so. With respect to
the Outstanding Receivables and the inventory subject to the
Inventory Escrow Fund, without the prior written consent of the
Shareholder Representative, which consent shall not be
unreasonably withheld, neither the Subsidiary, Reptron nor the
Surviving Corporation shall compromise the invoice amount of
any such account receivable, settle the Note Receivable at less
than its stated value, nor dispose of any inventory of the
Subsidiary at less than the amount recorded in accordance with
GAAP on the Subsidiary's books and records with respect to such
inventory as of May 8, 1998.
Section 8.6 Establishment of Escrow Funds. Each
Escrow Fund shall be established by Reptron to secure the
Payment Obligations of Reptron under this Agreement and shall
be fully funded and delivered by Reptron to the Escrow Agent at
the Closing. The purchase price paid by Reptron is contingent
in an amount equal to the aggregate amount of the Escrow Funds
on the Closing Date and shall be reduced to the extent of any
release from the Escrow Funds to an Indemnified Party. The
fees payable to the Escrow Agent for maintaining the Escrow
Funds shall be paid in advance, one half by Reptron and one
half by the Shareholder Representative.
Section 8.7 Interest on Escrow Funds. All interest
paid on each Escrow Fund shall become part of such Escrow Fund
and shall serve as security for both principal and interest
with respect to amounts owed by Reptron pursuant to this
Agreement and deferred pursuant to Section 3.2(a). On the
termination date of each Escrow Fund, the balance of each
Escrow Fund, including interest thereon, shall be transmitted
by the Escrow Agent to an account designated by the Shareholder
Representative.
Section 8.8 Notice of Third Party Claims with
Respect to General Escrow Fund and Certain Indemnities.
(a) An Indemnified Party shall notify the Escrow
Agent and the Shareholder Representative in writing, with a
copy to any counsel of which the Shareholder Representative may
have notified Reptron in accordance with Section 10.2, promptly
after the assertion against the Indemnified Party of any claim
by a third party (a "Third Party Claim") in respect of which
the Indemnified Party intends to base a claim for
indemnification under subsections 8.3(a), 8.3(e), 8.3(f) or
8.3(g) above, but the failure or delay so to notify the
Shareholder Representative and any such counsel shall not
relieve the General Escrow Fund or OECO-LLC of any obligation
or liability that it may have to the Indemnified Party, except
to the extent that the Shareholder Representative demonstrates
that his or her ability to defend or resolve such Third Party
Claim is adversely affected thereby.
(b) (i) Subject to the rights and duties of any
insurer or other third party having potential liability
therefor, the Shareholder Representative shall have the right
upon written notice given to the Indemnified Party within 30
days after receipt of the notice from the Indemnified Party of
any Third Party Claim, to assume the defense or
<PAGE>
handling of such Third Party Claim at the Shareholder
Representative's sole expense, in which case the provisions of
Section 8.8(b)(ii) below shall govern.
(ii) The Shareholder Representative shall
select counsel acceptable to the Indemnified Party in
connection with conducting the defense or handling of such
Third Party Claim, and the Shareholder Representative shall
defend or handle such Third Party Claim in consultation with
the Indemnified Party and shall keep the Indemnified Party
timely apprised of the status of such Third Party Claim. The
Shareholder Representative shall not, without the prior written
consent of the Indemnified Party, agree to a settlement of any
Third Party Claim, unless the settlement provides an
unconditional release and discharge of the Indemnified Party
and the Indemnified Party is reasonably satisfied with such
discharge and release. The Indemnified Party shall cooperate
with the Shareholder Representative and shall be entitled to
participate in the defense or handling of such Third Party
Claim with its own counsel and at its own expense.
(c) (i) If the Shareholder Representative does
not give written notice to the Indemnified Party within 30 days
after receipt of the notice from the Indemnified Party of any
Third Party Claim of the Shareholder Representative's election
to assume the defense or handling of such Third Party Claim,
the provisions of Section 8.8(c)(ii) below shall govern.
(ii) The Indemnified Party may, at the
Shareholder Representative's expense (which shall be paid from
time to time by the Shareholder Representative), select counsel
in connection with conducting the defense or handling of such
Third Party Claim and defend or handle such Third Party Claim
in such manner as it may deem appropriate; provided, however,
that the Indemnified Party shall keep the Shareholder
Representative timely apprised of the status of such Third
Party Claim and shall not settle such Third Party Claim without
the prior written consent of the Shareholder Representative,
which consent shall not be unreasonably withheld. If the
Indemnified Party defends or handles such Third Party Claim,
the Shareholder Representative shall cooperate with the
Indemnified Party and shall be entitled to participate in the
defense or handling of such Third Party Claim with its own
counsel and at its expense.
Section 8.9 Notice of First Party Claims with
Respect to General Escrow Fund.
(a) If the Indemnified Party intends to seek
indemnification hereunder, other than for a Third Party Claim,
then it shall notify the Escrow Agent and the Shareholder
Representative, with a copy to any counsel of which the
Shareholder Representative may have notified Reptron in
accordance with Section 10.2, within ten days after its
discovery of facts upon which it intends to base its claim for
indemnification hereunder, but the failure or delay so to
notify the Shareholder Representative or any such counsel shall
not relieve any Escrow Fund of any obligation or liability that
it may have to the Indemnified Party, except to the extent that
the Shareholder Representative demonstrates that his or her
ability to defend or resolve such claim is adversely affected
thereby.
<PAGE>
(b) The Indemnified Party shall notify the
Shareholder Representative, with a copy to any counsel of which
the Shareholder Representative may have notified Reptron in
accordance with Section 10.2, of a Claim even though the amount
thereof plus the amount of other claims previously notified by
the Indemnified Parties aggregate less than the Threshold.
Section 8.10 Claims Procedure With Respect to
General Escrow Fund. The procedure for payment from the
General Escrow Fund to which the Indemnified Parties may become
entitled under subsections 8.3(a) above shall be as follows:
(a) Subject to the limitation that written notice
of any claim for payment from the General Escrow Fund must be
given to the Shareholder Representative, with a copy to any
counsel of which the Shareholder Representative may have
notified Reptron in accordance with Section 10.2, not later
than the Escrow Termination Date, from time to time as an
Indemnified Party determines that it is entitled to an
indemnification payment from the General Escrow Fund for a
claim under subsection 8.3(a) above, the Indemnified Party
shall give written notice of the claim in accordance with
Section 8.8 or 8.9, to the Shareholder Representative
describing in such notice the nature of the claim, the amount
thereof if then ascertainable and, if not then ascertainable,
the estimated maximum amount thereof, and the provisions in
this Agreement on which the claim is based.
(b) If the Escrow Agent and the Indemnified Party
has not received written objection to a claim in accordance
with the preceding subparagraph (a) from the Shareholder
Representative within 30 business days after notice of such
claim is delivered (the "Response Period"), the claim stated in
such notice shall be conclusively deemed to be approved by the
Shareholder Representative on behalf of the General Escrow
Fund, and the Escrow Agent shall promptly thereafter release to
the Indemnified Party from the General Escrow Fund an amount
equal in value to the amount of such claim.
(c) If, within the Response Period, the Escrow
Agent and the Indemnified Party shall have received from the
Shareholder Representative a written objection to the claim
specifying the nature of and grounds for such objection, then
such claim shall be deemed to be a "Reptron Open Claim" and the
Escrow Agent shall reserve an amount equal in value to the
amount of each such Reptron Open Claim (which amount designated
for each Reptron Open Claim is referred to herein as the "Claim
Reserve Amount").
(d) The Claim Reserve Amount for each Reptron Open
Claim shall be released by the Escrow Agent only in accordance
with either (i) a mutual agreement between Reptron and the
Shareholder Representative which shall be memorialized in
writing or (ii) a final and binding arbitration decision or
order pertaining to the Reptron Open Claim entered pursuant to
Section 8.12 below.
<PAGE>
Section 8.11 Release of General Escrow Fund. The
Escrow Agent shall hold the General Escrow Fund in accordance
with this Agreement and shall transfer all or any portion of
the General Escrow Fund only as follows:
(a) The General Escrow Fund shall be released to
an Indemnified Party in respect of a claim made by such
Indemnified Party under this Article when, and to the extent
authorized under Section 8.10 above.
(b) On the Escrow Termination Date, any amount in
the General Escrow Fund (excluding any amount in the General
Escrow Fund held in reserve pending resolution of an Open
Claim) shall be transferred to the Shareholder Representative
for distribution to the Shareholders.
(c) After the Escrow Termination Date, when a
final determination is made with respect to any Reptron Open
Claim, the portion of the General Escrow Fund then reserved for
such Reptron Open Claim releaseable to an Indemnified Party as
a result of such final determination shall be released to such
Indemnified Party, and the balance in the General Escrow Fund
after such release shall be transferred to the Shareholder
Representative for distribution to the Shareholders.
Section 8.12 Arbitration and Expenses. Any
controversies or claims arising out of or relating to this
Agreement after the Effective Time shall be fully and finally
settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the
"AAA Rules"), conducted by one arbitrator either (a) mutually
agreed upon by Reptron and the Shareholder Representative or
(b) chosen in accordance with the AAA Rules, except that the
parties thereto shall have any right to discovery as would be
permitted by the Federal Rules of Civil Procedure for a period
of 90 days following the commencement of such arbitration, and
the arbitrator thereof shall resolve any dispute which arises
in connection with such discovery. The prevailing party shall
be entitled to costs, expenses and reasonable attorneys' fees,
and judgment upon the award rendered by the arbitrator may be
entered in any court of competent jurisdiction. For purposes
of this Agreement, the prevailing party shall mean the party
who more substantially prevailed in the prosecution of the
claims asserted or the defense thereof (including prosecution
and defense of any counterclaims) as determined by the
arbitrator. Any expenses in connection with a claim of loss
hereunder, including without limitation, investigation or audit
expenses and attorneys' fees and expenses shall be borne by the
party incurring such expense other than expenses with respect
to the arbitration of any such claim which shall be paid as
provided in the preceding sentences. Arbitration proceedings
shall be conducted in Minneapolis, Minnesota.
ARTICLE IX
Termination and Abandonment
Section 9.1 Termination and Abandonment. This
Agreement and the Merger may be terminated and abandoned at any
time prior to the Effective Time:
(a) By mutual action of the Boards of Directors of
Reptron and the Company, whether before or after any action by
the Shareholders.
<PAGE>
(b) By Reptron if:
(i) any event shall have occurred as a
result of which any condition set forth in Section 7.2 is no
longer capable of being satisfied; or
(ii) there has been a breach by the Company
or the Subsidiary of any representation or warranty contained in
this Agreement that would have or would be reasonably likely to
have a Material Adverse Effect on the Subsidiary, or there has
been a Material breach of any of the covenants or agreements set
forth in this Agreement on the part of the Company or the
Subsidiary, which breach is not curable, or, if curable, is not
cured within ten days after written notice of such breach is
given by Reptron to the Company.
(iii) The Company (or its Board of Directors)
shall have authorized, recommended, proposed or publicly
announced its intention to enter into a Competing Transaction
which has not been consented to in writing by Reptron;
(iv) The Board of Directors of the Company
shall have withdrawn or materially modified its authorization,
approval or recommendation to the Shareholders with respect to
the Merger or this Agreement in a manner adverse to Reptron or
shall have failed to make such favorable recommendation; or
(v) Any person, entity or "group" (as that
term is used in Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder) (other than Reptron or
any of its affiliates) shall have (A) commenced or publicly
proposed to commence a tender offer or exchange offer for at
least 15 percent of the then total outstanding Company Common
Stock or of the Subsidiary Common Stock, or (B) solicited and
received proxies or consents sufficient to permit it to elect
directors nominated by it to a majority of the members of the
Company's Board of Directors or to block approval of the Merger
and the transactions contemplated by this Agreement by the
Shareholders.
(c) By the Company:
(i) if any event shall have occurred as a
result of which any condition set forth in Section 7.3 is no
longer capable of being satisfied
(ii) if there has been a breach by Reptron
or Huron of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have
a Material Adverse Effect on the ability of Reptron to consummate
the Merger, or there has been a Material breach of any of the
covenants or agreements set forth in this Agreement on the part
of Reptron or Huron, which breach is not curable or, if curable,
is not cured within ten days after written notice of such breach
is given by the Company to Reptron.
<PAGE>
(iv) The Board of Directors of Reptron shall
have withdrawn or materially modified its approval of the merger
or of this Agreement in a manner adverse to the Company.
(d) By Reptron or the Company if there shall have
occurred:
(i) any general suspension of, or limitation
on, trading in securities generally on Nasdaq continuing for a
period of 15 days;
(ii) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United
States continuing for a period of 15 days;
(iii) any event shall have occurred as a
result of which any condition set forth in Section 7.1 is no
longer capable of being satisfied; or
(iv) the Merger shall not have been
consummated by June 30, 1998; provided, however, the terminating
party shall not have breached in any material respect its
obligations under this Agreement in any manner which proximately
contributed to the failure of any such condition to be satisfied
or the failure to consummate the Merger.
Section 9.2 Specific Performance. The parties
acknowledge that the rights of each party to consummate the
transactions contemplated hereby are special, unique, and of
extraordinary character, and that, in the event that any party
violates or fails and refuses to perform any covenant made by
it in this Agreement, the other parties will be without
adequate remedy at law. Each party agrees, therefore, that,
in the event that it violates or fails and refuses to perform
any covenant made by it in this Agreement, the other parties so
long as it or they are not in breach of this Agreement, may, in
addition to any remedies at law, institute and prosecute an
action in a court of competent jurisdiction to enforce specific
performance of such covenant or seek any other available
equitable relief.
Section 9.3 Rights and Obligations upon
Termination. If this Agreement is terminated and abandoned as
provided in this Agreement, each party will redeliver all
documents, work papers, and other materials of any party
relating to the transactions contemplated by this Agreement,
whether obtained before or after the execution of this
Agreement, to the party furnishing the same, except to the
extent previously delivered to third parties in connection with
the transactions contemplated by this Agreement, and all
information received by any party to this Agreement with
respect to the business of any other party shall not at any
time be used for the advantage of, or disclosed to third
parties by, such party to the detriment of the party furnishing
such information; provided, however, this Section 9.3 shall not
apply to any documents, work papers, material, or information
which is a matter of public knowledge or which heretofore has
been or hereafter is published in any publication for public
distribution or filed as public information with any
Governmental Entity.
<PAGE>
Section 9.4 Expenses.
(a) Reptron Expenses. If Reptron
terminates this Agreement pursuant to Section 9.1(b) by reason of
the failure to meet the conditions of Section 7.2 due to the
knowing and intentional or negligent (i) misrepresentation, (ii)
breach of warranty or (iii) breach of any covenant or agreement
by the Company, then the Company shall pay the Expenses to
Reptron on demand, in same day funds. For purposes of this
Section 9.4, "Expenses" shall include all reasonable
out-of-pocket expenses and fees (including, without limitation,
fees and expenses payable to all investment banking firms and
their respective agents and counsel, and all fees and expenses of
counsel, accountants, experts and consultants to Reptron, the
Company or OECO, as applicable) actually incurred and documented
by Reptron, the Company or OECO, as applicable, on its behalf in
connection with the Merger.
(b) Company Expenses. If the Company
terminates this Agreement pursuant to Section 9.1(c) by reason of
Reptron's knowing and intentional or negligent failure to meet
the conditions of Section 7.3(c) or (e), then Reptron shall pay
the Expenses to the Company on demand, in same day funds. For
purposes of this subsection, the Expenses of the Company shall
include the expenses of OECO.
(c) Payment. Any payment required
pursuant to this Section 9.4 shall be made as promptly as
practicable, but in no event later than five business days after
termination of this Agreement and shall be made by wire transfer
of immediately available funds to an account designated by
Reptron or the Company, as applicable. If Reptron is entitled to
the Expenses, the Company shall pay to Reptron interest at the
rate of 10% per year on any amounts that are not paid when due,
plus all costs and expenses in connection with or arising out of
the enforcement of the obligation to pay the Expenses or such
interest. If the Company is entitled to the Expenses, Reptron
shall pay to the Company interest at the rate of 10% per year on
any amounts that are not paid when due, plus all costs and
expenses in connection with or arising out of the enforcement of
the obligation to pay the Expenses or such interest.
(d) Effect of Payment. Except as
provided in Section 9.5, upon payment of the Expenses, this
Agreement shall terminate with no further liability of Reptron or
the Company at law or equity resulting therefrom.
Section 9.5 Effect of Termination. In the event of
a termination and abandonment of this Agreement pursuant to
Section 9.1 of this Agreement, this Agreement shall immediately
become void and have no further effect, without any liability
on the part of any party to this Agreement or its respective
officers, directors or shareholders, other than the provisions
of Section 6.8, 6.10, 6.11, 9.3, 9.4 and this Section 9.5.
Notwithstanding the foregoing, nothing contained in this
Section 9.5 shall relieve any party from liability for any
prior breach of this Agreement preceding termination of this
Agreement.
<PAGE>
ARTICLE X
Miscellaneous
Section 10.1 Extension; Waiver. At any time prior
to the Effective Time, Reptron and the Company may, to the
extent legally allowed, (i) extend the time for the performance
of any of the obligations or other acts of the other, (ii)
waive any inaccuracies in the representations and warranties of
the other contained in this Agreement or in any document
delivered pursuant to this Agreement by the other, and (iii)
waive compliance with any of the agreements by the other or
conditions to such party's obligations contained in this
Agreement. Any agreement on the part of a party to this
Agreement to any such extension or waiver shall be valid only
if set forth in a written instrument signed on behalf of such
party.
Section 10.2 Notices. Every notice, consent,
demand, approval, and request required or permitted by this
Agreement will be valid only if it is in writing, delivered
personally or by telecopy, commercial courier, or United States
Express Mail, and addressed by the sender to the party who is
the intended recipient at its address set forth below or to the
address most recently designated to the other party by notice
given in accordance with this Section. A validly given notice,
consent, demand, approval, or request will be effective on the
earlier of its receipt, if delivered personally, by telecopy,
or by commercial courier, or the third day after it is
postmarked by the United States Postal Service, if it is
delivered by United States Express Mail.
(a) If to Reptron or Huron, to
Reptron Electronics, Inc.
14401 McCormick Drive
Tampa, Florida 33626
Attention: Mr. Paul J. Plante
Telecopy No.: (813) 855-1697
with a copy to
William L. Elson, Esq.
3000 Town Center
Suite 2690
Southfield, Michigan 48075
Telecopy No.: (810) 358-4425
<PAGE>
and:
Robert J. Grammig, Esq.
Holland & Knight LLP
400 North Ashley Street
Suite 2300
Tampa, Florida 33602
Telecopy No.: (813) 229-0134
(b) If to the Company or OECO-LLC, to
HECO Holding Corporation
4607 S.E. International Way
Milwaukie, Oregon 97222
Attention: Mr. John F. Lillicrop
Telecopy No.: (503) 652-4045
with a copy to:
Thomas P. Palmer, Esq.
Tonkon Torp LLP
888 S.W. Fifth Avenue, Suite 1600
Portland, Oregon 97204
Telecopy No.: (503) 972-3718
(c) If to the Shareholder Representative, to
Attention:
Telecopy No.:
Section 10.3 Table of Contents; Headings. The Table
of Contents and headings contained in this Agreement are for
convenience of reference only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the
provisions of this Agreement.
Section 10.4 Variation and Amendment. Before or after
the approval of this Agreement by the Shareholders, this
Agreement may be varied or amended at any time without action by
the Shareholders by action of the respective Boards of Directors
of the Company and Reptron and Huron; provided, however, that
except as otherwise contemplated by the proxies provided to the
Shareholder Representative by the Shareholders, any variance or
amendment made after approval of the Merger by the Shareholders
that (i) reduces the Merger Consideration or changes the form of
the Merger Consideration or (ii) changes any of the terms and
conditions of this Agreement if such change would adversely
affect the Shareholders shall be subject to the further approval
of the Shareholders. Any variation, modification or amendment to
this Agreement must be made in writing and executed by each of
the parties to this Agreement.
Section 10.5 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
terms and provisions of this Agreement will nevertheless remain
in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner adverse to any party to this Agreement. Upon any
such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties to this
Agreement will negotiate in good faith to modify this Agreement
so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions
contemplated by this Agreement are consummated to the extent
possible.
Section 10.6 Waiver. The failure of any party to this
Agreement at any time or times to require performance of any
provision of this Agreement shall in no manner affect the right
to enforce such provision. No waiver by any party of any
condition, or the breach of any term, provision, warranty,
representation, agreement or covenant contained in this Agreement
or the other agreements contemplated by this Agreement, whether
by conduct or otherwise, in any one or more instances shall be
deemed or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the
breach of any other term, provision, warranty, representation,
agreement or covenant contained in this Agreement or the other
agreements contemplated by this Agreement.
Section 10.7 No Third Party Beneficiaries; Assignment.
This Agreement shall inure to the benefit of the parties and
their respective successors and permitted assignees. Nothing in
this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity, including,
without limitation, employees not a party to this Agreement.
Except for assignments to wholly-owned Subsidiaries (direct or
indirect) of Reptron, in which event Reptron shall remain liable
for the performance of this Agreement, no transfer or assignment
(including by operation of law) of this Agreement or of any
rights or obligations under this Agreement may be made by any
party without the prior written consent of the other parties and
any attempted transfer or assignment without that required
consent shall be void. No transfer or assignment by a party of
its rights under this Agreement shall relieve it of any of its
obligations to the other parties under this Agreement.
Section 10.8 Time of the Essence; Computation of Time.
Time is of the essence of each and every provision of this
Agreement. Whenever the last day for the exercise of any right
or the discharge of any duty under this Agreement shall fall upon
Saturday, Sunday or a public or legal holiday, the party having
such right or duty shall have until 5:00 p.m. Eastern Time on the
next succeeding regular business day to exercise such right or to
discharge such duty.
<PAGE>
Section 10.9 Counterparts. This Agreement may be
executed by each party upon a separate copy, and in such case one
counterpart of this Agreement shall consist of enough of such
copies to reflect the signatures of all of the parties.
Section 10.10 Governing Law. This Agreement shall be
governed by, and construed under, the laws of Florida.
Section 10.11 Entire Agreement. This Agreement (with
its Exhibits and Schedules), the agreement between counsel for
the respective parties hereto in writing, as referred to herein,
and that certain letter agreement by and between the Shareholder
Representative and the Subsidiary with respect to deferred
payments to HECO Executives and in connection with the
cancellation of Subsidiary stock options contain, and are
intended as, a complete statement of all the terms of the
arrangements among the parties with respect to the matters
provided for, and supersede any prior or contemporaneous
agreements and understandings between the parties with respect to
those matters.
IN WITNESS WHEREOF, the parties to this Agreement have
caused this Agreement to be signed as of the date first written
above.
REPTRON: REPTRON ELECTRONICS, INC.
By: /s/Paul J. Plante
Paul J. Plante
Chief Operating Officer
HURON: LAKE HURON INVESTMENT
CORPORATION
By: /s/Paul J. Plante
Paul J. Plante
President
<PAGE>
COMPANY: HECO HOLDING CORPORATION
By: /s/John F. Lillicrop
John F. Lillicrop
President
OECO-LLC OECO, LLC
By: /s/John F. Lillicrop
John F. Lillicrop
Chief Executive Officer
<PAGE>
The Shareholder Representative hereby executes this
Agreement subject to the approval of the Shareholders and, in the
event such approval is given, solely for the purpose of agreeing
to act as the Shareholder Representative of the Shareholders for
the limited purposes set forth herein. Subject to obtaining such
shareholder approval, the Shareholder Representative hereby
represents and warrants that this Agreement has been duly and
validly executed by the Shareholder Representative and
constitutes a legal, valid and binding obligation of the
Shareholder Representative and is enforceable against the
Shareholder Representative in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law). The
Shareholder Representative is not making and shall not be held
responsible for any other representations, warranties or
covenants made in this Agreement.
SHAREHOLDER REPRESENTATIVE: /s/John F. Lillicrop
<PAGE>
EXHIBIT "A"
CLOSING EXPENSES
(1) J.C. Bradford & Co.
(2) Tonkon Torp LLP
(3) Oppenheimer Wolff & Donnelly
(4) Arthur Anderson
(5) 1997 federal and state income taxes for OECO in excess of
that as paid in with respect thereto
(6) Federal and state income taxes for OECO, New OECO, OECO-
DEL, OECO-LLC and the Company for the short period
ending on the Closing Date as identified in the Certificate of
the Chief Financial Officer of OECO-LLC provided
pursuant to Section 7.2(e)
(7) One-half of Escrow Agent's fees
(8) Paying Agent fees
(9) Transaction Expenses of OECO
(10) Payroll tax obligation of Company in connection with
exercise of Company options (if any)
(11) Shareholder Representative Fund
(12) Stoel Rives LLP
<PAGE>
EXHIBIT "B"
ESCROW AGREEMENT
<PAGE>
EXHIBIT "C"
FORM OF STOCK POWERS
<PAGE>
EXHIBIT "D"
OREGON ARTICLES OF MERGER
<PAGE>
EXHIBIT "E"
FLORIDA ARTICLES OF MERGER
<PAGE>
EXHIBIT "F"
AMOUNT OF
GENERAL ACCOUNTS RECEIVABLE ESCROW FUND
$1,776,784
<PAGE>
EXHIBIT "G"
AMOUNT OF INVENTORY ESCROW FUND
AND
EXCLUDED INVENTORY
OF THE
SUBSIDIARY
$604,798
AMENDMENT NO. 1
TO AGREEMENT AND PLAN OF MERGER
This is Amendment No. 1, dated as of May 28, 1998 (this
"Amendment"), to the Agreement and Plan of Merger, dated for
reference purposes May 6, 1998 (the "Merger Agreement"), by and
among Reptron Electronics, Inc., a Florida corporation ("Reptron"),
Lake Huron Investment Corporation, a Florida corporation and a
wholly-owned subsidiary of Reptron ("Huron"), HECO Holding
Corporation, an Oregon corporation (the "Company"), OECO, LLC, a
Delaware limited liability company ("OECO-LLC"), and a Shareholder
Representative.
W I T N E S S E T H:
WHEREAS, Reptron, Huron, the Company, OECO-LLC, and the
Shareholder Representative have agreed to amend the Merger
Agreement, subject to the terms and conditions of this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1.Definitions
Capitalized terms used but not defined herein are used as
defined in the Merger Agreement.
2.Amendments to the Merger Agreement
(a) The preamble to the Merger Agreement is hereby amended and
restated in its entirety as follows:
"This Agreement and Plan of Merger, dated for reference
purposes May 6, 1998 (this "Agreement"), is by and among
Reptron Electronics, Inc., a Florida corporation
("Reptron"), Lake Huron Investment Corporation, a Florida
corporation and a wholly-owned subsidiary of Reptron
("Huron"), HECO Holding Corporation, an Oregon
corporation (the "Company"), OECO, LLC, a Delaware
limited liability company ("OECO-LLC"), and, for the
limited purposes specified herein, John F. Lillicrop as
Shareholder Representative (the "Shareholder
Representative")."
<PAGE>
(b) The first sentence of Section 7.2(e) of the Merger
Agreement is hereby amended and restated in its entirety
to read as follows:
"The Company shall have delivered to Reptron a certificate
or certificates, dated as of the Closing Date, of the
Chief Executive Officers and the Chief Financial Officers
of the Company and the Subsidiary, respectively, to the
effect that (i) they are familiar with the provisions of
this Agreement and (ii) to their Knowledge, the conditions
specified in Section 7.2(d) have been satisfied."
(c) Section 8.2(b) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"The holders of a majority of the Units of OECO-LLC may
replace the Shareholder Representative at any time with
a substitute Shareholder Representative who shall have
all the powers and responsibilities of the Shareholder
Representative set forth in this Article VIII."
(d) Section 8.7 of the Merger Agreement is hereby amended and
restated in its entirety to read as follows:
"All interest paid on the General Escrow Fund shall
become part of the General Escrow Fund and shall serve
as security for both principal and interest with respect
to amounts owed by Reptron pursuant to this Agreement
and deferred pursuant to Section 3.2(a). On the
termination date of the General Escrow Fund, the balance
of the General Escrow Fund, including interest thereon,
shall be transmitted by the Escrow Agent to an account
designated by the Shareholder Representative. All
interest paid on each Escrow Fund other than the General
Escrow Fund shall be allocated the termination date of
such Escrow Fund between the Indemnified Parties and the
Shareholder Representative on behalf of the Shareholders
in proportion to the distributions received by the
Indemnified Parties and the Shareholder Representative
on behalf of the Shareholders from such Escrow Fund "
(e) Section 8.10(a) of the Merger Agreement is hereby amended
and restated in its entirety to read as follows:
"Subject to the limitation that written notice of any
claim for payment from the General Escrow Fund must be
given to the Escrow Agent and the Shareholder
Representative, with a copy to any counsel of which the
Shareholder Representative may have notified Reptron in
accordance with Section 10.2, not later than the Escrow
Termination Date, from time to time as an Indemnified
Party determines that it is entitled to an
indemnification payment from the General Escrow Fund for
a claim under subsection 8.3(a) above, the Indemnified
Party shall give written notice of the claim in
accordance with Section 8.8 or 8.9, to the Escrow Agent
and the Shareholder Representative describing in such
notice the nature of the claim, the amount thereof if
then ascertainable and, if not then ascertainable, the
estimated maximum amount thereof, and the provisions in
this Agreement on which the claim is based."
3.Exhibits
Attached to this Amendment are true and correct copies of all
Exhibits to the Merger Agreement.
4.Miscellaneous
Except as expressly amended and modified hereby, the Merger
Agreement is hereby reaffirmed and remains in full force and
effect. The headings contained in this Amendment are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Amendment. This Amendment may
be executed in several counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the
same instrument. This Amendment shall be governed by, and
construed under, the laws of Florida.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their respective duly authorized
representatives as of the date first above written.
REPTRON: REPTRON ELECTRONICS, INC.
By:_/s/Michael L Musto
Michael L. Musto
Chief Executive Officer
HURON: LAKE HURON INVESTMENT
CORPORATION
By: /s/Michael L. Musto
Michael L. Musto,
Chief Executive Officer
COMPANY: HECO HOLDING CORPORATION
By: /s/John F. Lillicrop
John F. Lillicrop
President
OECO-LLC: OECO, LLC
By: /s/John F. Lillicrop
John F. Lillicrop
Chief Executive Officer
SHAREHOLDER REPRESENTATIVE:
/s/John F. Lillicrop
John F. Lillicrop
ESCROW AGREEMENT
This Escrow Agreement, dated as of May 29, 1998 (this "Agreement"),
is by and among Reptron Electronics, Inc., a Florida corporation
("Reptron"), HECO Holding Corporation, an Oregon corporation (the
"Company"), OECO, LLC, a Delaware limited liability company ("OECO-LLC"),
John F. Lillicrop as Shareholder Representative (the "Shareholder
Representative") and NationsBank, N.A., as Escrow Agent (the "Escrow
Agent").
Background
Reptron and the Company are parties to an Agreement and Plan of
Merger (the "Merger Agreement") dated as of May 6, 1998 ("Exhibit A"),
pursuant to which Lake Huron Investment Corporation, a Florida corporation
and a wholly-owned subsidiary of Reptron ("Lake Huron"), will merge with
and into the Company (the "Merger") and the outstanding shares of Company
Common Stock will be converted into the right to receive $35.12 per share,
less the Escrow Funds and the Closing Expenses contemplated by Section 3.2
of the Merger Agreement. Reptron and the Company desire to appoint the
Escrow Agent to act for and on behalf of Reptron and the Company, and to
receive, in escrow, the General Escrow Fund, the General Accounts
Receivable Escrow Fund, the Ariel Accounts Receivable Escrow Fund and the
Inventory Escrow Fund. Each Escrow Fund shall be established by Reptron to
secure its Payment Obligations under the Merger Agreement and shall be
fully funded and delivered by Reptron to the Escrow Agent at the Closing.
Capitalized terms not defined herein are used as defined in the Merger
Agreement.
THEREFORE, in consideration of the mutual covenants and agreements
set forth below, the parties agree as follows:
Terms
1. Appointment and Agreement of Escrow Agent. Reptron and the
Company hereby appoint the Escrow Agent to serve as, and the Escrow Agent
hereby agrees to act as, escrow agent upon the terms and conditions of this
Agreement and Article VIII of the Merger Agreement ("Article VIII").
2. Article VIII of Merger Agreement; Conflicts. The escrow
arrangement established by the parties hereto in connection with the Merger
shall be governed by Article VIII and this Agreement. In the event of any
conflict or inconsistency between the terms and provisions of Article VIII
and the terms and provisions of this Agreement, the terms and provisions of
this Agreement shall govern.
3. Escrow Period. Each Escrow Fund shall be in existence on
the date of closing. The General Accounts Receivable Escrow Fund, the
Ariel Accounts Receivable Escrow Fund and the Inventory Escrow Fund shall
terminate at 3:00 p.m., Pacific Time, on December 31, 1998. The General
Escrow Fund shall terminate on the earlier of: (a) the date on which there
is no amount remaining in the General Escrow Fund or (b) the Escrow
Termination Date, unless at such time there is a Reptron Open Claim. If
any Reptron Open Claims exist on the Escrow Termination Date, the General
Escrow Fund shall immediately terminate upon the final distributions from
the General Escrow Fund with respect to the last such Reptron Open Claim.
<PAGE>
4. Protection of Each Escrow Fund. The Escrow Agent shall hold
and safeguard each Escrow Fund during the pendency thereof and shall hold
and dispose of each Escrow Fund only in accordance with the terms of this
Agreement and of Article VIII.
5. Obligations of Escrow Agent.
(a) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and in Article VIII, and
as set forth in any additional written escrow instructions which the Escrow
Agent may receive after the date of this Agreement which are signed by a
duly authorized officer of Reptron and the Shareholder Representative, and
may rely and shall be protected in relying or refraining from acting on any
instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be
liable for any act done or omitted hereunder as Escrow Agent while acting
in good faith.
(b) The Escrow Agent shall invest and reinvest the deposits in the
Escrow Funds, unless joint written notice to the contrary is received from
Reptron and the Shareholder Representative, in any combination of the
following or any: (a) direct obligations of the Government of the United
States or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of the government
of the United States, maturing within three months from the date of
purchase, (b) insured interest-bearing accounts or certificates of deposit
of, or time deposits with, any commercial bank that is a member of the
Federal Reserve System and is organized under the laws of the United States
or any state thereof (including without limitation, NationsBank, N.A.) and
has combined capital and surplus of at least $1 billion, and maturing
within three months from the date of purchase, or (c) interests in an
investment company or fund registered under the Investment Company Act of
1940 which invests solely in the foregoing.
(c) The Escrow Agent is hereby expressly authorized to comply with
final and non-appealable orders, judgments or decrees of any court of law,
notwithstanding any notices, warnings or other communications from any
party hereto or any other person to the contrary. In case the Escrow Agent
obeys or complies with any such final and non-appealable order, judgment or
decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance.
(d) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing or delivering
or purporting to execute or deliver this Agreement or any documents or
papers deposited or called for hereunder.
(e) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
<PAGE>
(f) In performing any duties under this Agreement or Article VIII,
the Escrow Agent shall not be liable to any party for damages, losses or
expenses, except for gross negligence or willful misconduct on the part of
the Escrow Agent. Notwithstanding any other provision of this Escrow
Agreement or any other agreement to the contrary, the Escrow Agent shall
not incur any liability for (A) any act or failure to act done or omitted
in good faith, or (B) any action taken or omitted in reliance upon any
instrument, including any written statement or affidavit provided for in
this Agreement or Article VIII, that the Escrow Agent shall in good faith
believe to be genuine, nor will the Escrow Agent be liable or responsible
for forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with
legal counsel in connection with the Escrow Agent's duties under this
Agreement and Article VIII and shall be fully protected in any action
taken, suffered, or permitted by it in good faith in accordance with the
advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf
of any party to this Agreement.
(g) If any controversy arises between parties to this Agreement, or
with any other party, concerning the subject matter of this Agreement or
Article VIII, or the terms or conditions of this Agreement or Article VIII,
the Escrow Agent will not be required to determine the controversy or to
take any action regarding it. The Escrow Agent may hold all documents and
amounts in the Escrow Funds and may wait for settlement of any controversy
by final appropriate legal proceedings or other means as, in the Escrow
Agent's discretion, the Escrow Agent believes may be required or be
reasonably appropriate, despite what may be set forth elsewhere in this
Agreement or in Article VIII. In such event, the Escrow Agent will not be
liable for damages. Furthermore, the Escrow Agent may, at its option, file
an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to
deposit with the clerk of the court all documents and amounts in the Escrow
Funds, except all costs, expenses, charges and reasonable attorney fees
incurred or likely to be incurred by the Escrow Agent due to the
interpleader action. Upon initiating such action, the Escrow Agent shall
be fully released and discharged of and from all obligations and
liabilities imposed by the terms of this Agreement and Article VIII.
(h) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold the Escrow Agent harmless
against any and all losses, claims, damages, liabilities and expenses,
including reasonable costs of investigation, attorneys' fees, and
disbursements that may be imposed on the Escrow Agent or incurred by the
Escrow Agent in connection with the performance of its duties under this
Agreement and Article VIII, including but not limited to any litigation
arising from this Agreement or Article VIII or involving the subject matter
of this Agreement or Article VIII.
6. Termination. This Agreement shall terminate on the earlier
of: (a) fifteen business days after the date on which there is no amount
remaining in the General Escrow Fund (but no earlier than fifteen business
days after December 31, 1998) or (b) fifteen business days after the Escrow
Termination Date, unless at such time there exists a Reptron Open Claim.
If Reptron Open Claims exist on the Escrow Termination Date, this Agreement
shall terminate fifteen business days after the termination of the General
Escrow Fund. The Escrow Agent may resign upon ninety days written notice.
<PAGE>
7. Expenses of Escrow Agent. Reptron and the Shareholder
Representative each agree to pay to the Escrow Agent reasonable
compensation for its services under this Agreement and Article VIII and to
reimburse the Escrow Agent for reasonable expenses incurred by it in
connection with the Agreement and Article VIII, one-half being paid by
Reptron and one-half by the Shareholder Representative.
8. Arbitration and Expenses; Governing Law. Any controversies or
claims arising out of or relating to this Agreement or Article VIII
(including, without limitation, any costs, expenses or reasonable
attorneys' fees arising in connection with such controversies or claims)
shall be subject to Section 8.12 of the Merger Agreement. This Agreement
shall be governed by, and construed under, the laws of Florida.
9. Notices. Every notice, consent, demand, approval, and request
required or permitted by this Agreement or Article VIII will be valid only
if it is in writing, delivered personally or by telecopy, commercial
courier, or United States Express Mail, and addressed by the sender to the
party who is the intended recipient at its address set forth below its
signature or to the address most recently designated to the other party by
notice given in accordance with this Section. A validly given notice,
consent, demand, approval, or request will be effective on the earlier of
its receipt, if delivered personally, by telecopy, or by commercial
courier, or the third day after it is postmarked by the United States
Postal Service, if it is delivered by United States Express Mail.
10. Headings. The headings containing in this Agreement are for
convenience of reference only, do not constitute a part of this Agreement,
and shall not be deemed to limit or affect any of the provisions of this
Agreement.
11. Integration; Modification. Together with the Merger Agreement,
this Agreement contains, and is intended as, a complete statement of all
the terms of the arrangements among the parties with respect to the matters
provided for in this Escrow Agreement, and supersedes any prior or
contemporaneous agreements and understandings between the parties with
respect to those matters.
12. Counterparts. This Agreement may be executed by each party
upon a separate copy, and in such case one counterpart of this Agreement
shall consist of enough of such copies to reflect the signatures of all of
the parties.
13. Assignment of Rights to the Escrow Funds; Assignment of
Obligations; Successors. This Agreement may not be transferred or assigned
by any party hereto by operation of law or otherwise without the prior
written consent of the other parties hereto other than the Escrow Agent
(which consent may be granted or withheld in the sole discretion of such
other parties) and any attempted transfer or assignment without such
consent shall be void. This Agreement shall be binding upon and inure
solely to the benefit of the parties hereto and their respective permitted
assigns.
<PAGE>
14. Amendments. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, Reptron,
the Shareholder Representative and (if it affects the duties and
responsibilities of the Escrow Agent) the Escrow Agent, or (b) by a waiver
in accordance with Section 15 of this Agreement.
<PAGE>
15. Extension; Waiver. Any party hereto may (a) extend the time
for the performance of any obligation or other act of any other party
hereto or (b) waive compliance by any other party with any agreement or
condition contained herein. Any such extension or waiver shall be valid
only if set forth in a written instrument signed by the party or parties to
be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of
the same term or condition, or a waiver of any other term or condition, of
this Agreement. The failure of any party to assert its rights hereunder
shall not constitute a waiver of any of such rights.
16. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon any such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated by this
Agreement are consummated to the extent possible.
17. No Third Party Beneficiaries. This Agreement shall inure to
the benefit of the parties and their respective successors and permitted
assigns. Nothing in this Agreement shall created or be deemed to create
any third party beneficiary rights in any person or entity.
18. Shareholder Representative: Power of Attorney.
(a) Upon appointment, the Shareholder Representative shall act
as agent and attorney-in-fact for each Shareholder (except such
Shareholders, if any, as shall have perfected their dissenters' rights
under Oregon Law), for and on behalf of the Shareholders, to give and
receive notices and communications, to authorize releases to an Indemnified
Party of amounts from the Escrow Funds in connection with claims by an
Indemnified Party, to object to such releases, to agree to, negotiate,
enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
the Shareholder Representative for the accomplishment of the foregoing.
Notices or communications to or from the Shareholder Representative shall
constitute notice to or from each of the Shareholders.
(b) A decision, act, consent or instruction of the
Shareholder Representative shall constitute a decision of all of the
Shareholders and shall be final, binding and conclusive upon each
Shareholder, and the Escrow Agent and Reptron may rely upon any such
decision, act, consent or instruction as being the decision, act, consent,
or instruction of each and every Shareholder.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
by each of the undersigned, as of the ___ day of May, 1998.
REPTRON ELECTRONICS, INC.
By: /s/Michael L. Musto
Michael L. Musto
Chief Executive Officer
Address for Notices:
Reptron Electronics, Inc.
14401 McCormick Drive
Tampa, Florida 33626
with a copy to:
William L. Elson, Esq.
Suite 2690
3000 Town Center
Southfield, Michigan 48075
Telecopy No.: (810) 358-4425
and:
Robert J. Grammig, Esq.
Holland & Knight LLP
Suite 2300
400 North Ashley Street
Tampa, Florida 33602
Telecopy No.: (813) 229-0134
HECO HOLDING CORPORATION
By: /s/JOHN F. LILLICROP
John F. Lillicrop
President
Address for Notices:
HECO Holding Corporation
4607 S.E. International Way
Milwaukie, Oregon 97222
Telecopy No.: (503) 652-4045
with a copy to:
Thomas P. Palmer, Esq.
Tonkon Torp LLP
888 S.W. Fifth Avenue, Suite 1600
Portland, Oregon 97204
Telecopy No.: (503) 802-2018
OECO, LLC
By: /s/JOHN F. LILLICROP
John F. Lillicrop
Chief Executive Officer
Address for Notices:
OECO, LLC
4607 S.E. International Way
Milwaukie, Oregon 97222
Telecopy No.: (503) 652-4045
with a copy to:
Thomas P. Palmer, Esq.
Tonkon Torp LLP
888 S.W. Fifth Avenue, Suite 1600
Portland, Oregon 97204
Telecopy No.: (503) 802-2018
SHAREHOLDER REPRESENTATIVE:
Address for Notices:
Telecopy No.:
<PAGE>
ESCROW AGENT:
By:
Title:
Address for Notices:
Telecopy No.:
