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EXECUTION COPY
PLAN AND AGREEMENT OF MERGER
Dated November 30, 1995
By and Among
PIONEER-STANDARD ELECTRONICS, INC.
and
PIONEER-STANDARD OF MARYLAND, INC.
and
PIONEER/TECHNOLOGIES GROUP, INC.
and
THE SHAREHOLDERS
IDENTIFIED ON THE SIGNATURE PAGES HERETO
and
BRUCE S. TUCKER, AS SHAREHOLDERS REPRESENTATIVE
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TABLE OF CONTENTS
(not part of Agreement)
Page
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ARTICLE 1 CERTAIN DEFINITIONS.......................................... 2
ARTICLE 2 The Merger and Related Matters............................... 12
2.1 Merger........................................... 12
2.2 Name of Surviving Corporation.................... 12
2.3 Articles of Incorporation and By-laws............ 12
2.4 Directors and Officers........................... 12
2.5 Certain Effects of the Merger.................... 13
2.6 Further Action................................... 14
ARTICLE 3 Closing, Filing, Effectiveness............................... 14
3.1 Closing and Closing Date......................... 14
3.2 Filing and Effective Time........................ 14
3.3 Audited Balance Sheet............................ 15
ARTICLE 4 Status and Change of Shares; Payment and
Distribution; Shareholders Representative.................... 17
4.1 Merger Subsidiary Stock.......................... 17
4.2 Technologies Common Stock........................ 17
4.3 Payment of Cash Purchase Price;
Post-Closing Distributions....................... 18
4.4 Surrender of Certificates........................ 20
4.5 Shareholders Representative...................... 22
ARTICLE 5 Representations and Warranties of
Technologies................................................. 29
5.1 Corporate Status................................. 29
5.2 Corporate Action................................. 29
5.3 No Defaults...................................... 30
5.4 Financial Statements............................. 31
5.5 Conduct of Business.............................. 32
5.6 Condition of Assets.............................. 33
5.7 Title, Liens, etc................................ 34
5.8 Employees........................................ 35
5.9 Litigation....................................... 37
5.10 Brokers.......................................... 37
5.11 Approvals and Consents........................... 38
5.12 Intellectual Properties.......................... 38
5.13 Contracts........................................ 39
5.14 Compliance with Laws............................. 39
5.15 Technologies Capitalization;
Subsidiaries..................................... 39
5.16 Tax Matters...................................... 41
5.17 Insurance........................................ 42
5.18 Environmental Matters............................ 42
5.19 Absence of Undisclosed Liabilities............... 43
5.20 Permits.......................................... 44
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5.21 Indebtedness to and from Officers,
Directors, Shareholders and
Affiliates....................................... 44
5.22 Executive Officers, Directors and
Certain Authorized Persons....................... 45
5.23 Conflicts of Interest............................ 45
5.24 Customers and Suppliers.......................... 46
5.25 Corporate Documents, Books and Records........... 46
5.26 Ordinary Warranty................................ 47
5.27 Inventory........................................ 47
5.28 Accounts Receivable.............................. 48
5.29 Net Worth........................................ 49
5.30 Material Facts................................... 49
ARTICLE 5-A Representations and Warranties and
Covenants of Shareholders.................................... 49
5A.1 Ownership........................................ 49
5A.2 Enforceability................................... 49
5A.3 Conflicts of Interest............................ 50
5A.4 Consents......................................... 50
5A.5 Noninterference.................................. 51
ARTICLE 6 Representations and Warranties of PSE
and Merger Subsidiary........................................ 51
6.1 Corporate Status; Capitalization................. 51
6.2 Corporate Action................................. 52
6.3 No Defaults...................................... 52
6.4 Brokers.......................................... 53
6.5 Litigation....................................... 53
6.6 Funds............................................ 53
6.7 Approvals and Consents........................... 54
6.8 Business of Merger Subsidiary.................... 54
6.9 Material Facts................................... 54
ARTICLE 7 Certain Obligations of PSE and Merger
Subsidiary................................................... 54
7.1 Opinions of Counsel.............................. 54
7.2 Deliveries....................................... 54
7.3 Vote of Technologies Common Stock................ 55
7.4 Letter of Credit................................. 55
7.5 Noncompetition Agreements........................ 55
ARTICLE 8 Certain Obligations of Technologies.......................... 55
8.1 Opinions of Counsel.............................. 55
8.2 Deliveries....................................... 56
8.3 No Dissenting Shares............................. 56
8.4 Vote of Technologies Common Stock................ 56
ARTICLE 9 Survival of Representations and
Warranties; Indemnification.................................. 57
9.1 Survival......................................... 57
9.2 Indemnification of PSE........................... 58
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9.3 Limitations as to Indemnification
Obligation....................................... 59
9.4 Notice and Settlement of Claims of
PSE and Surviving Corporation;
Arbitration...................................... 61
9.5 Notice and Settlement of Tax
Liabilities and Damages.......................... 62
9.6 Notice and Settlement of Other Third-
Party Claims..................................... 63
9.7 No Waiver for Notices............................ 64
9.8 Indemnification by PSE........................... 65
ARTICLE 10 Miscellaneous................................................ 65
10.1 Expenses......................................... 65
10.2 Assignments...................................... 65
10.3 Further Assurances............................... 66
10.4 Public Announcement.............................. 66
10.5 Notices.......................................... 66
10.6 Captions......................................... 67
10.7 Law Governing.................................... 67
10.8 Waiver of Provisions............................. 68
10.9 Counterparts..................................... 68
10.10 Entire Agreement................................. 68
10.11 Access to Books and Records...................... 68
10.12 Schedules and Amendments to Schedules............ 69
10.13 Releases......................................... 69
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PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER dated November 30, 1995, by and among
PIONEER-STANDARD ELECTRONICS, INC. ("PSE"), an Ohio corporation;
PIONEER-STANDARD OF MARYLAND, Inc. ("Merger Subsidiary"), a Maryland
corporation; PIONEER/TECHNOLOGIES GROUP INC., a Maryland corporation
("Technologies"); the holders of outstanding shares of capital stock of
Technologies identified on the signature pages hereto (the "Shareholders"); and
BRUCE S. TUCKER, as the Shareholders Representative hereunder (the "Shareholders
Representative"). Merger Subsidiary and Technologies are sometimes herein called
the "Constituent Corporations".
R E C I T A L S
WHEREAS, PSE presently owns of record and beneficially 50% of the
issued and outstanding Shares of Technologies Common Stock; and
WHEREAS, PSE and Merger Subsidiary wish to own 100% of the Common
Stock of Technologies by way of a merger of Merger Subsidiary with and into
Technologies; and
WHEREAS, the Constituent Corporations and PSE deem it advisable and
generally to the welfare and advantage of their respective shareholders that,
subject to the terms and conditions set forth herein, Merger Subsidiary merge
into Technologies pursuant to this Agreement and the Maryland General
Corporation Law (the "Act") with the effect that Technologies becomes a direct
wholly-owned subsidiary of PSE and the Shareholders of Technologies receive the
consideration for their Shares specified in Section 4.2 (the "Merger");
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NOW, THEREFORE, the parties hereby agree to the following terms and
conditions relating to the Merger contemplated hereby and the mode of carrying
the Merger into effect:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms have the meanings
specified or referred to in this Article 1.
"Act" shall have the meaning specified in the Recitals hereof.
"Affiliate" shall mean with respect to any Person, any entity that
directly or indirectly controls, is controlled by, or is under common control
with such Person.
"Agreement" shall mean this Plan and Agreement of Merger, as it may be
amended from time to time hereafter in accordance with the terms hereof.
"Arbitration" shall have the meaning specified in Section 9.4.
"Articles of Incorporation" shall mean Technologies's Articles of
Incorporation (Charter No. DO 173252), as amended, on file with the Secretary of
State of Maryland as of the date hereof.
"Audited Balance Sheet" shall have the meaning specified in Section
3.3.
"Audited Statements" shall have the meaning specified in Section 5.4.
"Basket" shall have the meaning specified in Section 9.3(a).
"Benefit Plans" shall have the meaning specified in Section 5.8(b)
"Business Condition" shall mean, in the case of any Person, the
financial condition, results of operations, properties, assets, or business of
such Person.
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"Cash Purchase Price" shall mean an aggregate amount equal to Fifty
Million Dollars ($50,000,000.00) to be paid in cash by PSE as the merger
consideration payable hereunder.
"Certificate of Merger" shall have the meaning specified in Section
3.1.
"Certificates" shall mean the voting trust and/or common stock
certificates which immediately prior to the Effective Time represented
outstanding Shares of Technologies Common Stock.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any predecessor statute, and the rules and regulations promulgated thereunder.
"Common Stock" shall mean Technologies Common Stock, $.10 par value
per share.
"Constituent Corporations" shall have the meaning specified in the
Recitals hereof.
"Contracts" shall mean any unexpired or executory written agreement,
arrangement or commitment to which Technologies is a party or by which it is
bound.
"Damages" shall have the meaning specified in Section 9.2.
"Disclosure Letter" shall mean a letter from Technologies to PSE dated
the date of this Agreement and delivered to PSE in connection herewith.
"Effective Time" shall have the meaning specified in Section 3.2(b).
"Environmental Laws" shall mean all federal, state, local or foreign
laws relating to pollution or protection of the environment (including
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without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) as in effect on the date hereof, including without
limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, or industrial, toxic or
hazardous substances or wastes into the indoor or outdoor environment, including
without limitation, ambient air, soil, surface water, ground water, wetlands,
subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, licenses, notices or notice letters, orders,
permits, plans or regulations issued, entered, promulgated or approved
thereunder, all as in effect on or prior to the Closing Date.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agreement" shall mean the Escrow Agreement by and among PSE,
the Shareholders, the Shareholders Representative, and NationsBank, N.A., a
banking corporation with offices in the State of Maryland, as "Escrow Agent", a
copy of which is attached hereto as Exhibit A.
"Executive Officers" means, with respect to any corporation, the
Chairman of the Board of Directors, the President, any executive or senior vice
president, and the Treasurer of such corporation, and "Executive Officer" means
any of the foregoing individuals.
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"Financial Statements" shall mean the Audited Statements and the
Interim Statements.
"GAAP" shall mean generally accepted accounting principles as
practiced in the United States, consistently applied from time to time.
"Governmental Action" shall mean the making of any filing or
registration with, the giving of any notice to or the obtaining of any permit,
authorization, consent or approval of any public or governmental body or
authority.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammables, explosives, radioactive materials, friable
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls (PCBs), (b)
any chemicals or other materials or substances as included in the definition of
"hazardous substance", "hazardous waste", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances", "toxic
pollutants", "contaminants", "pollutants" or words of similar import under any
Environmental Law; and (c) any other chemical or other material or substance,
exposure to which is now prohibited, limited or regulated under any
Environmental Law.
"Indemnified Party" shall have the meaning specified in Section 9.4.
"Indemnitors" shall mean the Shareholders (other than PSE) who hold as
of the Closing Date outstanding Shares of Technologies Common Stock.
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"Interim Balance Sheet" shall have the meaning specified in Section
5.4.
"Interim Balance Sheet Date" shall have the meaning specified in
Section 5.4.
"Interim Income Statement" shall have the meaning specified in Section
5.4.
"Interim Statements" shall have the meaning specified in Section 5.4.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean actual knowledge of each Executive Officer
based on reasonable inquiry of the books, records and key employees and advisors
of Technologies.
"Letter of Credit" shall mean an irrevocable, non-transferable,
standby letter of credit issued by National City Bank to secure payment of the
Cash Purchase Price on January 4, 1996.
"Liens" shall mean all liens, pledges, encumbrances, security
interests, mortgages, community property rights or other adverse claims against
title.
"Material Adverse Effect" shall mean a material adverse effect on the
Business Condition of Technologies.
"Maximum Indemnification Obligation" shall mean the maximum aggregate
liability of the Indemnitors for Indemnification Obligations hereunder, which
maximum aggregate liability shall be equal to the escrow fund established
pursuant to the Escrow Agreement except as otherwise specifically provided.
"Merger" shall have the meaning specified in the Recitals hereof.
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"Merger Share Certificate" shall have the meaning specified in Section
4.4(a).
"Merger Subsidiary" shall have the meaning specified in the opening
paragraph hereof.
"Net Adjusted Cash Payment Per Share" shall mean that amount per share
equal to (x) the sum of (i) the Cash Purchase Price, minus (ii) the amount of
$2,000,000 deposited by PSE with the Escrow Agent under the Escrow Agreement,
divided by (y) 50,000.
"Net Worth" shall mean the net worth of Technologies at and as of the
Closing Date, as set forth on the Audited Balance Sheet; provided, however,
that, for purposes hereof: (i) such Net Worth shall exclude Technologies'
profits (if any) for November, 1995; (ii) there shall be no adjustment to such
net worth as a result of the book-to-physical inventory reconciliation described
in Section 3.3(a) unless such book-to-physical inventory reconciliation exceeds
a plus or minus $200,000, in which event, such Net Worth shall be adjusted up or
down, as the case may be, by such excess; (iii) no inventory or trade accounts
receivable reserves, other than those already included in Technologies' October
31, 1995 balance sheet (which reserves shall remain unchanged) shall be included
in calculating such Net Worth; and (iv) such Net Worth shall exclude any unusual
or non-recurring adjustments in November requested by PSE outside of the
ordinary course of business.
"Ownership Liabilities" shall mean any out-of-pocket loss, cost,
damage or expense paid or incurred by PSE or the Surviving Corporation after the
Closing Date arising directly from any misrepresentation or
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breach of warranty of any of the Shareholders in Article 5-A of this Agreement.
"PSE" shall have the meaning specified in the opening paragraph
hereof.
"Permits" shall have the meaning specified in Section 5.20.
"Permitted Liens" shall mean (u) Liens in favor of NationsBank, N.A.,
Mellon Bank and Chase Bank of Maryland, Technologies' senior lenders, (v) Liens
for current taxes, assessments or other governmental charges due but not yet
payable as of the applicable date, or the validity of which is being contested
in good faith by appropriate proceedings with appropriate reserves therefor
reflected in the Financial Statements, (w) Liens arising by operation of law in
the ordinary course of business, such as mechanics' liens, materialmen's liens,
carriers' liens, warehouseman's liens, and similar liens, (x) deposits made by
Technologies in the ordinary course of business to secure its obligations under
worker's compensation, unemployment insurance, social security and similar laws,
(y) Liens which are described in Schedule 5.7 of the Disclosure Letter and (z)
Liens securing the performance of leases entered into in the ordinary course of
business which, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
"Person" shall mean any individual, partnership, joint venture,
corporation, limited liability company, bank, trust, unincorporated organization
or other entity.
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"Post-Closing Distributions" shall mean (i) the distributions
specified in Section 4.3(c), and (ii) the distributions made pursuant to Section
8 of the Escrow Agreement.
"Pro Rata Share" shall mean, with respect to any Shareholder of
Technologies Common Stock (other than PSE), that percentage derived by dividing
the number of shares of Technologies Common Stock held of record by such
Shareholder immediately prior to the Merger by 50,000; the Pro Rata Share of
each such Shareholder as of the date of this Agreement (assuming the Merger was
effected on this date) being set forth on the Shareholders signature page
hereto.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including without limitation, the movement of
Hazardous Materials through the ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserves" shall mean an amount equal to Two Hundred Thousand Dollars
($200,000.00) as an appropriate reserve for expenses of the Shareholders
Representative incurred in connection with his duties hereunder and for which
the Shareholders Representative may be or become responsible following the
Effective Time.
"Shareholders Representative" shall have the meaning specified in the
opening paragraph hereof and shall include any successor duly appointed in
accordance with Section 4.5 hereof.
"Shareholders" shall have the meaning specified in the opening
paragraph hereof.
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"Shareholder" shall mean one of the shareholders (other than PSE) of
Technologies Common Stock prior to the Merger.
"Shareholders' Agreements" shall have the meaning specified in Section
5.15(a), which Agreements shall be terminated on or prior to the Closing Date.
"Shares" shall mean shares of Common Stock.
"Subsidiary" shall mean, when used with reference to any Person, any
corporation more than 50% of the voting power of the outstanding voting
securities of which are directly or indirectly owned by such Person.
"Surviving Corporation" shall have the meaning specified in Section
2.1.
"Tax Liability" shall mean any Tax, interest, penalty or other loss,
cost, damage or expense paid or incurred by PSE or the Surviving Corporation
(including but not limited to reasonable attorney's and accounting fees) arising
from any misrepresentation or breach of warranty of Technologies in Section 5.16
of this Agreement.
"Taxes" shall mean (A) all net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, or other taxes of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any taxing authority (domestic or foreign) upon any Person with respect to all
periods or portions thereof ending on or before the Effective Time and/or (B)
any liability of any Person for the payment of any amounts
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of the type described in the immediately preceding clause (A) as a result of
being a member of an affiliated or combined group.
"Tax" shall mean any of the Taxes.
"Technologies" shall have the meaning specified in the Recitals
hereof.
"Technologies Transaction Expenses" shall mean (subject to the
exclusions set forth below) the fees, costs and expenses incurred or reasonably
estimated to be incurred by Technologies from April 1, 1995 through the
Effective Time and, to the extent Technologies is obligated for payment of the
fees, costs and expenses of any Shareholders, by the Shareholders, which are
related to the transactions contemplated by this Agreement, including, without
limitation, (i) the fees and expenses of Latham & Watkins, legal counsel engaged
by Technologies with respect to this Agreement and the transactions contemplated
hereby, (ii) the fees and expenses of any investment banking firm or financial
advisor (but excluding any such fees and expenses paid or accrued prior to
9/30/95) engaged by Technologies or its Board of Directors or Shareholders in
connection with this Agreement or the transactions contemplated hereby, and
(iii) the fees and expenses for other legal, accounting (but excluding the Ernst
& Young audit of the Audited Balance Sheet) and other professional services (if
any) rendered to Technologies or the Shareholders after September 30, 1995 and
prior to the Effective Time or to the Shareholders Representative at any time
and in either case directly related to the transactions contemplated by this
Agreement.
"Warranties" shall have the meaning specified in Section 5.26.
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ARTICLE 2
The Merger and Related Matters
2.1 Merger. In accordance with the Act, Merger Subsidiary shall, at
the Effective Time, be merged with and into Technologies and Technologies shall
be the surviving corporation (in its capacity as surviving corporation being
sometimes hereinafter called the "Surviving Corporation") and shall continue to
be a Maryland corporation.
2.2 Name of Surviving Corporation. The name of the Surviving
Corporation shall be "Pioneer-Standard of Maryland, Inc."
2.3 Articles of Incorporation and By-laws. At the Effective Time, the
Articles of Incorporation of Technologies, as in effect immediately before the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation and shall continue to be its Articles of Incorporation until amended
or changed as provided by the Act. The By-laws of Merger Subsidiary, as in
effect immediately before the Effective Time, shall be the By-laws of the
Surviving Corporation until amended as provided therein, in the Articles of
Incorporation or by the Act.
2.4 Directors and Officers. (a) From and after the Effective Time, the
persons designated by PSE in writing before the Effective Time shall be the
directors and officers of the Surviving Corporation, to serve in each case until
their respective successors shall have been duly elected and shall have duly
qualified, and (b) if at the Effective Time a vacancy shall exist, it may be
filled in the manner provided in the By-laws of the Surviving Corporation.
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2.5 Certain Effects of the Merger. At the Effective Time, (i) Merger
Subsidiary shall be merged into Technologies; (ii) the separate existence of
Merger Subsidiary shall cease; (iii) the Surviving Corporation shall have all
the rights, privileges, immunities and powers, and shall be subject to all of
the duties and liabilities, of a corporation organized under the Act; (iv) as
the Surviving Corporation, shall thereupon and thereafter possess all the
rights, privileges, immunities and franchises, of a public as well as a private
nature, of the Constituent Corporations; (v) all property, real, personal and
mixed, and all debts liabilities or other obligations due on whatever account,
and all and every other interest of or belonging to or due to, and every other
liability of, either of the Constituent Corporations shall be deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed; and (vi) the title to any real estate, or any interest therein, vested in
either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thence forth
be responsible and liable for all the liabilities and obligations of the
Constituent Corporations; and any claim existing or action or proceeding pending
by or against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place or the Surviving Corporation may be substituted in
its place. The Merger shall have all of the other effects specified in Section
3-114 of the Act, and neither the rights of creditors nor any liens upon the
property of either of the Constituent Corporations shall be impaired by the
Merger.
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2.6 Further Action. At any time, or from time to time, after the
Effective Time, the last acting officers of Merger Subsidiary or the
corresponding officers of the Surviving Corporation may, in the name of Merger
Subsidiary, execute and deliver all such proper deeds, assignments, and other
instruments and take or cause to be taken all such further or other action as
the Surviving Corporation may deem necessary or desirable in order to vest,
perfect or confirm in the Surviving Corporation title to and possession of all
property, rights, privileges, powers, franchises, immunities and interests of
Merger Subsidiary and otherwise to carry out the purposes of this Agreement.
ARTICLE 3
Closing, Filing, Effectiveness
3.1 Closing and Closing Date. The Constituent Corporations shall duly
execute and verify the certificate of merger relating to the Merger (the
"Certificate of Merger") in accordance with the Act at the offices of Piper &
Marbury, Baltimore, Maryland, at 10:00 A.M., local time, on the Closing Date,
which shall be the date of this Agreement.
3.2 Filing and Effective Time.
(a) On the Closing Date, copies of the Certificate of Merger, so
executed and verified, shall be delivered to the Secretary of State of the State
of Maryland for filing; and
(b) the Merger shall become effective upon the acceptance for
filing of the Certificate of Merger by the Maryland Secretary of State (the date
and time of such event being the date of this Agreement and being herein called
the "Effective Time").
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3.3 Audited Balance Sheet.
(a) An audited balance sheet of Technologies as of the Closing
Date (the "Audited Balance Sheet") shall be prepared by the Surviving
Corporation and audited by Ernst & Young. The Audited Balance Sheet shall be
prepared in accordance with GAAP, using the same accounting methods, policies,
practices and procedures (with consistent classifications, judgments and
valuations and estimation methodologies) used to prepare the Audited Statements
and the Interim Statements. PSE will cause Technologies to prepare and submit to
Ernst & Young all information and to provide to Ernst & Young all assistance
which Ernst & Young may reasonably request in connection with their audit of the
Audited Balance Sheet. In addition, to facilitate the calculation of the Net
Worth of Technologies, PSE and Technologies shall cause to be performed a
physical inventory and reconciliation to the gross inventory reflected on the
books of Technologies on the Closing Date.
(b) PSE will give the Audited Balance Sheet, together with Ernst &
Young's report thereon and the calculation of Technologies' Net Worth, to the
Shareholders Representative on or before May 31, 1996. The Shareholders
Representative shall have a period of thirty (30) days to review the Audited
Balance Sheet and the Net Worth calculation.
(c) If the Shareholders Representative agrees with the Audited
Balance Sheet and the Net Worth calculation, or does not give written notice of
any disagreement within such thirty (30) day period, then within ten (10)
business days after the Shareholders Representative
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advises PSE that the Audited Balance Sheet and Net Worth calculation is
acceptable or such thirty (30) day period expires, whichever is earlier, the
Shareholders Representative shall authorize the Escrow Agent in writing to pay
PSE from the escrow fund, as an adjustment to the Cash Purchase Price, fifty
percent (50%) of the amount (if any) by which the Net Worth at the Closing Date
is less than $36,032,000. In connection with the Shareholders Representative's
review of the Audited Balance Sheet, PSE and the Surviving Corporation shall
provide the Shareholders Representative and his accountants full access to the
records of the Surviving Corporation and the workpapers of Ernst & Young
prepared in connection with their audit.
(d) If the Shareholders Representative does not agree with the
Audited Balance Sheet or the Net Worth calculation, then within thirty (30) days
of the date when the Audited Balance Sheet is given to the Shareholders
Representative he shall give notice of his disagreement to PSE and list the
areas of disagreement. The parties shall work in good faith to try to resolve
these differences. If, within ten (10) business days, the matter is not
resolved, then the parties agree to select a mutually-acceptable independent
public accounting firm to review each issue in dispute. The independent
accounting firm shall provide a written opinion covering each issue in dispute,
and such opinion shall be binding on both parties. Each party shall pay one-half
of the independent accounting firm's fees and expenses, with the Shareholders
Representative's one-half being paid from the escrow fund. The adjustments set
forth in Section 3.3(a) shall then be made
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to the extent necessary based on the decision of such independent accounting
firm.
(e) The adjustments set forth in this Section 3.3 shall be the
exclusive remedy for any breach or inaccuracy (or alleged breach or inaccuracy)
of the representations set forth in Sections 5.27, 5.28 and 5.29, and in Section
5.30 (as it relates to the foregoing Sections).
ARTICLE 4
Status and Change of Shares; Payment and Distribution;
Shareholders Representative
4.1 Merger Subsidiary Stock. Each share of common stock of Merger
Subsidiary outstanding at the Effective Time shall by virtue of the Merger be
changed into one share of the Common Stock of the Surviving Corporation.
4.2 Technologies Common Stock.
At the Effective Time:
(a) each share of Technologies Stock owned by PSE immediately
prior to the Effective Time shall automatically be cancelled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto;
(b) each share of Technologies Common Stock issued and outstanding
at the Effective Time and owned by the Shareholders shall, by virtue of the
Merger, be changed into the right to receive on January 4, 1996 (i) from PSE, by
PSE's payment (which shall be secured by the Letter of Credit) and delivery to
the Shareholders Representative for the account of the Shareholder of such
share, cash in an amount equal to the amount determined under 4.3(a)(iii) on a
per
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share basis, and (ii) from the Shareholders Representative, a Pro Rata Share of
any Post-Closing Distribution;
(c) PSE shall execute and deliver the Escrow Agreement which shall
provide that on January 4, 1996, PSE shall deposit $2,000,000 of the Cash
Purchase Price with the Escrow Agent to establish the escrow fund under and
pursuant to the terms of the Escrow Agreement; and
(d) all voting trust certificates and Technologies stock
certificate No. 104 representing the Shareholders 50,000 shares of Technologies
Common Stock shall be surrendered, properly endorsed for transfer or with a
stock power attached, and cancelled, and all rights in respect of outstanding
shares of Shareholders Technologies Common Stock shall cease to exist, other
than the right to receive the consideration described herein.
4.3 Payment of Cash Purchase Price; Post-Closing Distributions.
(a) On January 4, 1996, upon surrender of the Letter of Credit by
the Shareholders Representative to PSE, PSE shall wire transfer to the
Shareholders Representative in immediately available funds an amount equal to
the Cash Purchase Price, minus an amount equal to the total of all Shareholder
indebtedness to Technologies set forth in Schedule 5.21, minus the $2,000,000
escrow fund of the Cash Purchase Price to be deposited in escrow pursuant to
Section 4.2(c). On January 4, 1996, the Shareholders Representative shall:
(i) set aside from the wire transfer funds in an account
established by the Shareholders Representative an amount equal to
the Reserves;
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(ii) pay from the wire transfer funds any Technologies
Transaction Expenses in excess of $50,000 then due and payable
and/or reimburse Technologies for any such Expenses previously
paid by Technologies; and
(iii) pay from the wire transfer funds to each Shareholder of
Technologies Common Stock who has surrendered the Certificate(s)
representing the Shares formerly held by him in accordance with
Sections 4.3(b) and 4.4, an amount equal to the product of (X) the
Net Adjusted Cash Payment Per Share times (Y) the number of Shares
of Technologies Common Stock held by such Shareholder immediately
prior to the Effective Time, less (i) a pro rata share of the
Technologies Transaction Expenses in excess of $50,000, and (ii) a
pro rata share of the Reserve, and less an amount equal to any
indebtedness owed by such Shareholder to Technologies set forth in
Schedule 5.21 (which indebtedness shall be deemed fully paid as of
January 4, 1996).
(b) On January 4, 1996, the Shareholders Representative shall
promptly distribute to each Shareholder who has surrendered his Certificate(s),
in accordance with the distribution instructions of such Shareholder in his
letter of transmittal surrendering the same, the amount of cash into which the
aggregate number of shares of Technologies Common Stock previously represented
by such Certificate or Certificates so surrendered shall have been converted
pursuant to this Agreement, without interest. If delivery of any such cash is to
be made to a Person other than the Shareholder in whose name a Certificate is
registered, it shall be a further condition to such
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payment that the Certificate shall, upon surrender thereof, be properly endorsed
or otherwise in proper form for transfer to such other Person and that the
Shareholder requesting such payment shall have paid any transfer and other taxes
required by reason of such payment in a name of a Person other than that of such
Shareholder, or shall have established to the reasonable satisfaction of PSE
that such tax either has been paid or is not payable.
(c) From time to time and at any time following January 4, 1996,
as the Shareholders Representative may determine in his sole discretion, any or
all Reserves not theretofore paid or applied by the Shareholders Representative
pursuant to Section 4.5 hereof shall be distributed among the Shareholders
according to their Pro Rata Share.
4.4 Surrender of Certificates.
(a) Technologies shall immediately provide to each Shareholder a
form of letter of transmittal to be used for each Certificate to be surrendered
and cancelled pursuant to Section 4.2, together with instructions for use
therein in effecting the surrender of Certificates and receiving the Net
Adjusted Cash Payment Per Share in exchange therefor.
(b) After the Effective Time, each Shareholder shall cease to have
any rights with respect to shares of Technologies Common Stock represented by
surrendered Certificates. The Shareholders shall not be entitled to receive
interest on any of the cash to be received in the Merger. The Shareholders
Representative shall promptly cancel each such Certificate and deliver each such
cancelled Certificate to the Surviving Corporation on the Closing Date.
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(c) Each outstanding Certificate which is not surrendered to the
Shareholders Representative in accordance with the procedures provided for
herein shall, after the Effective Time, until duly surrendered to the
Shareholders Representative, be deemed to evidence ownership of the right to
receive the amount of cash into which such Technologies Common Stock shall have
been converted. After the Effective Time of the Merger, there shall be no
further transfer on the records of Technologies of Certificates and if such
Certificates are presented to Technologies for transfer, they shall be cancelled
against delivery of the cash as hereinabove provided.
(d) PSE and the Shareholders Representative shall be entitled to
rely upon the stock transfer books of Technologies to verify the identity of
those Persons entitled to receive consideration specified in this Agreement,
which books shall be conclusive with respect thereto. In the event of a dispute
with respect to ownership of Technologies Common Stock represented by any
Certificate, PSE shall be entitled to deposit any consideration represented
thereby with the Shareholders Representative and the Shareholders Representative
shall be further entitled to deposit any such consideration with any court of
appropriate jurisdiction and both PSE and the Shareholders Representative shall
thereafter be relieved with respect to any claims thereto.
(e) Any Shareholder who has not theretofore complied with this
Article 4 shall, after January 4, 1996, look only to the Shareholders
Representative for payment of his cash pursuant to this Agreement without any
interest thereon. Notwithstanding the foregoing, none of
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PSE, the Shareholders Representative, or any other Person shall be liable to any
former holder of shares of Technologies Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
4.5 Shareholders Representative.
(a) Each Shareholder hereby irrevocably designates and appoints
the Shareholders Representative to be the representative of each such
Shareholder for the purposes of (i) receiving the Cash Purchase Price, from PSE
(less the deductions set forth in Section 4.3(a)), (ii) paying the Technologies
Transaction Expenses in excess of $50,000, (iii) establishing, holding, paying
and, to the extent applicable, distributing the Reserves, (iv) distributing the
Net Adjusted Cash Payment Per Share to each Shareholder, less the deductions set
forth in Section 4.3(a)(iii), (v) investigating, defending, negotiating and
arbitrating any other claim for indemnification by PSE or the Surviving
Corporation hereunder, (vi) paying any Indemnification Obligation from the
escrow fund established under the Escrow Agreement, (vii) distributing amounts
released from the escrow fund established under the Escrow Agreement, and (viii)
taking any other actions which the Shareholders Representative deems in his sole
discretion to be necessary or appropriate to carry out and comply with the terms
of this Agreement. PSE, Merger Subsidiary and the Surviving Corporation shall
not be responsible or liable in any manner for any actions taken or omitted to
be taken by the Shareholders Representative, including but not limited to the
obligation of the Shareholders Representative to pay to
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the Shareholders the amounts received by it and due to the Shareholders pursuant
to this Agreement, and each Shareholder covenants, severally and not jointly
with and for the benefit of PSE, Merger Subsidiary, the Surviving Corporation
and the other Shareholders, that such Shareholder shall not assert any claims
against PSE, Merger Subsidiary or the Surviving Corporation for or with respect
to any acts or omissions of the Shareholders Representative, and each
Shareholder shall, severally and not jointly with the other Shareholders,
indemnify and hold harmless each of PSE, Merger Subsidiary, the Surviving
Corporation from any loss, expense or damage resulting from or arising out of
such Shareholder's breach of the foregoing covenant. Notwithstanding anything to
the contrary contained in this Agreement, the Shareholders' indemnity
contemplated by this Section 4.5 shall not be included within or limited by the
provisions of Section 9.3 hereof including, but not limited to, the Maximum
Indemnification Obligation.
(b) The Shareholders Representative hereby accepts the appointment
by the Shareholders contemplated herein and agrees to take such actions as the
Shareholders Representative in his sole discretion shall deem appropriate to
accomplish the purposes, enforce the rights and protect the interests of the
Shareholders under this Agreement so that the Shareholders may receive the full
benefit thereof.
(c) Upon receipt of the Cash Purchase Price (less the deductions
specified in Section 4.3(a) hereof), the Shareholders Representative shall
promptly distribute the cash to the Shareholders subject to and in accordance
with this Article 4. The Shareholders
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Representative is authorized to take such additional action as in the sole
judgment of the Shareholders Representative is necessary or advisable to
accomplish the purposes, enforce the rights and protect the interests of the
Shareholders under this Agreement, including the authority to investigate,
negotiate, prosecute and defend, and to resolve and settle by arbitration or
otherwise, any claim of or against the Shareholders, or the Shareholders
Representative, under this Agreement, to waive, compromise or release any rights
of the Shareholders under this Agreement, upon any evidence deemed to be
sufficient by the Shareholders Representative. In the administration of his
powers and duties hereunder, the Shareholders Representative is authorized to
employ or contract for services of financial advisors, consultants, accountants,
attorneys and other professionals and experts, and to employ or contract for
clerical and other administrative assistance and to make payments from the
Reserves of all reasonable fees for services or expenses in any manner thus
incurred. As soon as is practicable after receipt of notice of any claim for
indemnification from PSE under this Agreement, or the occurrence of any other
event under this Agreement which in the sole judgment of the Shareholders
Representative materially adversely affects the Shareholders, the Shareholders
Representative shall give written notice thereof to each of the Shareholders.
(d) The Shareholders Representative shall be entitled to withhold
from distribution and maintain the Reserves for such reasonable period of time
as the Shareholders Representative may determine in his sole discretion, and to
pay from the Reserves any
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out-of-pocket fees, costs and expenses incurred by him in the discharge of his
responsibilities hereunder.
(e) No provision of this Agreement shall be construed to relieve
the Shareholders Representative from liability for his own gross negligence or
his own willful misconduct. Notwithstanding the foregoing, however,
(i) the Shareholders Representative shall not be liable for
any error of judgment made in good faith nor any action taken or
omitted to be taken by him in good faith and reasonably believed
by him to be within the discretion or powers conferred upon him or
in good faith omitted to be taken by him because such action is
reasonably believed to be beyond the discretion or powers
conferred upon him, or taken pursuant to any direction or
instruction under this Agreement or omitted to be taken for any
reason or the lack of direction or instruction required for such
action, or be responsible for the consequences of any error of
judgment reasonably made by him;
(ii) the Shareholders Representative shall not be liable
with respect to any action taken or omitted to be taken at the
direction of Shareholders holding more than two-thirds of 50,000
Shares of Technologies Common Stock immediately prior to the
Effective Time of the Merger;
(iii) the Shareholders Representative need not take any
action if he shall have been advised in writing by independent
counsel that such action is contrary to law or this Agreement (as
the same may be from time to time amended) or is likely to
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result in liability to the Shareholders Representative in his
individual capacity;
(iv) no provision of this Agreement shall require the
Shareholders Representative to expend or risk his own funds or
otherwise incur any financial liability in the performance of any
of his duties hereunder, or in the exercise of any of his rights
or powers, unless he has been furnished with indemnity from the
Shareholders in form and substance satisfactory to the
Shareholders Representative;
(v) the Shareholders Representative may rely, and shall be
protected in acting or in refraining from acting in reliance, upon
any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order or other paper or document
believed by him to be genuine and to have been signed or presented
by the proper party or parties and shall not be bound to make any
investigation into any of the matters contained in any of the
foregoing; and
(vi) the Shareholders Representative may consult with
professionals to be selected by him and the Shareholders
Representative shall not be liable for any action taken or omitted
to be taken by him in accordance with the advice of such
professionals.
(f) All moneys and other assets received by the Shareholders
Representative shall, until distributed or paid over as herein provided, be held
in trust for the benefit of the Shareholders and invested in U.S. government
obligations or money-market funds invested
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primarily in U.S. government obligations. The Shareholders Representative shall
be under no liability for interest or for producing income on any moneys
received by the Shareholders Representative hereunder and held for distribution
or payment to the Shareholders, except as such interest shall actually be
received by the Shareholders Representative. The Shareholders Representative
shall provide to the Shareholders on an annual basis an accounting (unaudited)
of the Reserves and a status report in narrative form regarding existing claims
and contingencies against which the Reserves are being retained as requested.
(g) The Shareholders Representative shall be entitled to
reimbursement from the Reserves for all reasonable out-of-pocket expenses
incurred in connection with the performance of his duties hereunder.
(h) The Shareholders Representative shall be indemnified by the
Shareholders, and shall be entitled to reimbursement from the Shareholders
against and from any and all loss, liability, expense or damage which the
Shareholders Representative may sustain in good faith and without gross
negligence or willful misconduct in the exercise and performance of any of the
powers and duties of the Shareholders Representative under this Agreement. The
provisions of this Section shall survive termination of this Agreement and shall
remain available to any former Shareholders Representative replaced or resigning
under Section 4.5(i).
(i) The Shareholders Representative may resign by giving not less
than sixty (60) days prior written notice thereof to the
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Shareholders. Such resignation shall become effective on the day specified in
such notice or upon the appointment of a successor and the acceptance by such
successor of such appointment, whichever is earlier. The Shareholders
Representative may be removed at any time, with or without cause, by action of
Shareholders holding (immediately prior to the Effective Time) more than half of
the 50,000 Shares of Technologies Common Stock then held collectively by the
Shareholders. In the event of the Shareholders Representative's resignation or
removal, a successor Shareholders Representative shall be selected by
Shareholders holding (immediately prior to the Effective Time) more than half of
the 50,000 Shares of Technologies Common Stock then held collectively by the
Shareholders. Any successor Shareholders Representative appointed hereunder
shall execute an instrument accepting such appointment hereunder and shall file
such acceptance with PSE, and shall further agree to assume and perform the
obligations of the Shareholders Representative under the Escrow Agreement.
Thereupon, such successor Shareholders Representative shall, without any further
act, become vested with all the estates, properties, rights, powers, trusts and
duties of his hereunder with like effect as if originally named herein,
including without limitation, any remaining Reserves. The resigning or removed
Shareholders Representative shall cooperate in all respects to transfer his
estates, properties, rights, powers, trusts and duties hereunder to such
successor Shareholders Representative; and the indemnifications in Section
4.5(h) shall continue to apply to such resigned or removed Shareholders
Representative.
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(j) Each Shareholder hereby authorizes the Shareholders
Representative to pay to Mr. Jim Jones that portion of the amount to which such
Shareholder is entitled under Section 4.3(a)(iii) that will satisfy the
indebtedness of such Shareholder to Mr. Jones set forth on Schedule 4.5(j) of
the Disclosure Letter.
ARTICLE 5
Representations and Warranties of Technologies
Technologies represents and warrants to PSE and Merger Subsidiary
that, except as set forth in the Disclosure Letter:
5.1 Corporate Status.
Technologies is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Maryland and is qualified
and authorized to do business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of its business requires such
qualification, except for those jurisdictions where the failure to qualify would
not have a Material Adverse Effect. Technologies has the requisite corporate
power and authority to enter into this Agreement and perform its obligations
hereunder. Technologies has all corporate power to carry on its business as it
is now being conducted, and to own and operate the properties used in its
business. Technologies has no Subsidiaries.
5.2 Corporate Action. All corporate and shareholder actions and
proceedings necessary to be taken by or on the part of Technologies to adopt and
approve this Agreement have been duly and validly taken, and the execution,
delivery and performance of this Agreement have been duly and validly authorized
by all necessary corporate and shareholder
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action. This Agreement has been duly and validly executed and delivered by
Technologies and constitutes the legal, valid and binding obligation of
Technologies, enforceable against Technologies in accordance with and subject to
its terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws from
time to time in effect affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
5.3 No Defaults. Neither the execution and delivery by Technologies of
this Agreement, the performance of its obligations hereunder, nor the
consummation of the transactions contemplated hereby is an event that, of
itself, or with the giving of notice or the passage of time or both, will (i)
conflict with the Articles or by-laws of Technologies, (ii) assuming that all of
the approvals or consents referred to on Schedule 5.11 of the Disclosure Letter
or otherwise contemplated hereby are obtained, constitute a violation of, or
conflict with or result in any breach of or any default under, or constitute
grounds for termination or acceleration of, any mortgage, indenture, lease,
contract, agreement or instrument to which Technologies is a party or by which
Technologies is bound, or result in the creation of any Lien (other than
Permitted Liens) upon any of Technologies Assets (in each case, except for those
conflicts, violations, breaches, defaults, terminations, accelerations or Liens
which either singly or in the aggregate are immaterial); or (iii) violate (A)
any judgment, decree, or order, or (B) assuming the filings, consents and
approvals referred to on Schedule 5.11 of the
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Disclosure Letter or otherwise contemplated hereby are made or obtained, any
statute, rule or regulation, in each such case, applicable to Technologies.
5.4 Financial Statements. Technologies has previously delivered to PSE
copies of (i) the balance sheets of Technologies as at March 31, 1995 and March
31, 1994 and the statements of income and cash flow of Technologies for each of
the years then ended, together with report thereon of Ernst & Young (the
"Audited Statements") and (ii) the internally prepared unaudited balance sheet
of Technologies (the "Interim Balance Sheet") as at September 30, 1995 (the
"Interim Balance Sheet Date") and the internally prepared unaudited statement of
income of Technologies for the portion of the fiscal year then ended (the
"Interim Income Statement" and collectively with the Interim Balance Sheet, the
"Interim Statements"). The Financial Statements are attached to Schedule 5.4 of
the Disclosure Letter and present fairly, in all material respects, the
financial position of Technologies as of March 31, 1995, March 31, 1994 and the
Interim Balance Sheet Date and the results of operations of Technologies for the
periods then ended, all in conformity with GAAP, except that the Interim
Statements are subject to normal year-end adjustments and do not contain the
disclosures required by GAAP to be disclosed in the notes to financial
statements. Since September 30, 1995, there has been no material change in
Technologies' method of managing its financial reserves or accruals other than
in the ordinary course of business, including, without limitation, any material
decrease in its level of financial reserves and accrual balances.
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5.5 Conduct of Business. (a) Except as set forth in Schedule 5.5(a) of
the Disclosure Letter, from March 31, 1995 to the date of this Agreement there
has been no:
(i) declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with
respect to the capital stock of Technologies;
(ii) actual or, to Technologies' Knowledge, threatened
organizational activity with respect to the establishment of a
union or any strike or significant work stoppage affecting the
business or operations of Technologies, or, to Technologies'
Knowledge, any complaint against Technologies filed with the
National Labor Relations Board, any arbitration tribunal or any
administrator of any applicable state or federal wage/hour laws or
equal employment opportunity laws;
(iii) physical damage, destruction or loss in an amount
exceeding $100,000 in the aggregate affecting any of Technologies
assets; or
(iv) change by Technologies in accounting principles or
methods except insofar as any be permitted by a change in GAAP.
(b) Except as set forth on Schedule 5.5(b) of the Disclosure
Letter, from September 30, 1995 to the date of this Agreement there has been no:
(i) material change in Technologies' method of managing its
working capital other than in the ordinary course of business,
including, without limitation, (A) any material change in its
level of inventories over the level maintained for comparable
periods
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during prior fiscal years as reasonably adjusted for changes in
sales, (B) any material change in its practice of collecting
accounts receivable or (C) any material change in its practice of
making payment upon accounts payable;
(ii) to Technologies' Knowledge, any other change which,
individually or in the aggregate, constitutes a Material Adverse
Effect;
(iii) waiver of any material rights by Technologies under any
material contract except for discounts granted to Technologies'
customers in the ordinary course of business; or
(iv) increase in total compensation paid, payable or to
become payable to any of the employees of Technologies listed on
Schedule 5.8 of the Disclosure Letter in excess of the amounts
reflected thereon, or any change in perks, benefits or other
compensation or severance arrangements affecting the employees of
Technologies (other than increases in wages and salaries made in
the ordinary course of business). 5.6 Condition of Assets. The
tangible assets of Technologies are being maintained in accordance
with the usual practices of Technologies, are in satisfactory
working condition, reasonable wear and tear excepted, and are
capable of being used for their intended purpose.
5.7 Title, Liens, etc.
(a) Schedule 5.7 of the Disclosure Letter contains a list of (i)
all items of tangible personal property owned by Technologies and used or held
for use in connection with the business or operations of
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Technologies as of the date of this Agreement, in each case to the extent such
item has a current depreciated book value in excess of $1,000, (ii) all
automobile or other vehicle leases, and (iii) all other leases of personal
property to the extent any such lease involves rental payments by Technologies
in excess of $50,000 per annum. Schedule 5.7 of the Disclosure Letter contains
descriptions of all land, leaseholds and other interests in real property and
buildings owned, leased or otherwise possessed by Technologies and used or held
for use in connection with the business and operations of Technologies, in each
case to the extent such interest involves rental payments by Technologies in
excess of $50,000 per annum.
(b) The material assets of Technologies are free and clear of all
Liens, except (i) as disclosed on Schedule 5.7 of the Disclosure Letter; (ii)
Permitted Liens; and (iii) Liens in favor of banks as set forth in Note 3 to the
Technologies March 31, 1995 Audited Financial Statements.
(c) No condemnation of any material portion of Technologies' real
property has occurred, nor has Technologies received written notice from any
governmental authority of a proposal to condemn any material portion of such
real property.
5.8 Employees.
(a) Except as disclosed on Schedule 5.8, Technologies has no
written or oral contract of employment with any of its employees which provides
for severance pay or which is not terminable at will or on notice of not longer
than thirty (30) days, nor is Technologies a party to or subject to any
collective bargaining agreements with
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respect to its employees. Schedule 5.8 contains a true and complete list of all
individuals employed by Technologies as of the date hereof whose total annual
compensation as of April 1, 1995 exceeded $75,000.
(b) Schedule 5.8 to the Disclosure Letter sets forth all "employee
benefit plans" (within the meaning of Section 3(3) of ERISA), including, without
limitation, any pension, welfare or savings plan or arrangement, or any employee
stock purchase or stock option, deferred compensation, employment, severance,
vacation or holiday pay, medical, dental, sick leave, performance, car
allowance, bonus, 401-K, profit sharing, incentive, or insurance plan or similar
plan, policy or arrangement whether or not in written form (the "Benefit Plans")
which Technologies maintains with respect to its employees. Technologies has
made available to PSE copies of each written Benefit Plan which relates to or
covers any employees of Technologies and related trust agreements as in effect
on the date hereof. Except as set forth in Schedule 5.8 of the Disclosure
Letter, no Benefit Plan is a (and Technologies is not required to contribute to
any) "multiemployer plan" (within the meaning of Section 3(37) of ERISA), and
Technologies does not maintain any plan, policy or arrangement that provides
post-retirement medical or other benefits to any employees or former employees
of Technologies, except as required by applicable law.
(c) Except as set forth in Schedule 5.8 of the Disclosure Letter,
each of the Benefit Plans is in compliance with applicable requirements of
ERISA, the Code and other applicable law, and are accrued and properly funded as
of the Closing Date. Each of the
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Benefit Plans has been administered in accordance with its terms and with
applicable legal requirements. No Benefit Plan is a "defined benefit plan"
(within the meaning of Section 3(35) of ERISA) which is subject to Title IV of
ERISA. Technologies has not engaged in a "prohibited transaction" within the
meaning of Section 406 of ERISA for which no exemption exists under Section 408
of ERISA or Section 4975(c)(1) of the Code for which no exemption exists under
Section 4975(c)(2) or (d) of the Code, nor has Technologies breached its
fiduciary responsibility with respect to any Benefit Plan which could subject
PSE or Technologies to a penalty tax or other liability under ERISA or the Code
nor, except for routine claims for benefits and except as set forth in Schedule
5.8 of the Disclosure Letter, does Technologies have any pending or to its
Knowledge threatened claim or litigation by any party with respect to the
Benefit Plans. Technologies has the right to amend or terminate, without the
consent of any other Person, any Benefit Plan which they maintain except as
prescribed by law. Technologies has no liability of any nature, whether absolute
or contingent, with respect to any Benefit Plan which was in the past maintained
by it or to which it was required to contribute or with respect to any Benefit
Plan which was in the past or is currently maintained by any other sponsor or to
which any other employer or sponsor was in the past or is currently required to
contribute.
(d) Technologies is in compliance in all material respects with
all applicable federal, state and local laws and ordinances relating to the
employment of labor, including the provisions thereof relating
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to wages, hours and the payment of social security taxes, and is not liable for
any arrears of wages or any tax relating thereto (except for currently accrued
and unpaid wages and except for currently accrued withholding, payroll,
unemployment, personal property, intangible, sales, other miscellaneous and
social security taxes payment of which is not overdue) or penalties for failure
to comply with any of the foregoing and has received no written notice to the
contrary from any governmental agency.
5.9 Litigation. Except as set forth on Schedule 5.9 of the Disclosure
Letter, there is no litigation, proceeding or investigation pending or, to the
Knowledge of Technologies, threatened against Technologies and Technologies has
not been operating under or subject to, or in default with respect to, any
order, writ, injunction or decree of any court or federal, state, municipal or
other governmental department, commission, board, agency or instrumentality,
foreign or domestic.
5.10 Brokers. There is no investment banker, broker or finder or other
Person having a claim against Technologies for a commission or brokerage fee in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby as a result of any agreement of or
action taken by Technologies or any Shareholder.
5.11 Approvals and Consents. To Technologies' Knowledge, the only
approvals or consents of, or filings to be made with, Persons not a party to
this Agreement that are required by law to be obtained or made by Technologies
or required to be obtained or made under any
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material contractual obligation of Technologies in connection with the
consummation of the transactions contemplated by this Agreement, are those which
are described in Schedule 5.11 of the Disclosure Letter.
5.12 Intellectual Properties. Set forth on Schedule 5.12 to the
Disclosure Letter is a list of all of the material United States and foreign
patents, trademark and service mark registrations, copyright registrations and
applications therefor, and all trade names and logotypes (collectively,
"Intellectual Properties") owned, used or held for use by Technologies in
connection with the business or operation of Technologies. Also set forth on
Schedule 5.12 to the Disclosure Letter is a list of all material Intellectual
Properties licensed by Technologies to others and by others to Technologies in
connection with the business or operation of Technologies. Except as disclosed
on Schedule 5.12 of the Disclosure Letter, Technologies has not received any
notice or claim that the use by Technologies of any of the Intellectual
Properties conflicts with or infringes on the rights of any other party. Except
as disclosed on Schedule 5.12 of the Disclosure Letter, Technologies is not
aware of any infringement, misappropriation or misuse of any of the Intellectual
Properties owned by Technologies by others.
5.13 Contracts. Schedule 5.13 to the Disclosure Letter lists all
material supplier and customer agreements and all other Contracts providing for
payments by or to Technologies to the extent such other Contracts impose
monetary obligations on or provide rights to Technologies of more than $100,000.
To the Knowledge of Technologies, Technologies is not in default under any such
Contract, other than
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immaterial defaults which would not (i) impose a material monetary obligation on
Technologies, or (ii) accelerate the time for payment of any material amount due
from Technologies or the performance of any material obligation of Technologies
thereunder, or (iii) give rise in favor of the other party thereto a right to
unilaterally terminate or modify any such Contract in a manner materially
adverse to Technologies.
5.14 Compliance with Laws. The operations of Technologies are being
conducted in compliance with all material federal, state, local or foreign law,
ordinance or regulation other than immaterial violations which would not impose
a monetary obligation on Technologies. Except as set forth on Schedule 5.14 of
the Disclosure Letter, since April 1, 1992, Technologies has not received any
notice from any governmental authority that the operations of Technologies are
being or have been conducted in violation of any applicable law, ordinance, or
regulation of any governmental authority.
5.15 Technologies Capitalization; Subsidiaries.
(a) The authorized capital stock of Technologies consists of
100,000 shares of Common Stock, of which there are 100,000 shares issued and
outstanding. All the issued and outstanding shares of Technologies Stock are
validly issued, fully paid and nonassessable and free of restrictions and
preemptive rights, except as contemplated by that certain Supplemental Stock
Purchase Agreement, dated as of July 24, 1986, that certain Share Purchase
Agreement, dated June 28, 1989, and that certain Voting Trust Agreement, dated
November 8, 1989, true copies of which have been provided to PSE, (collectively,
the
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"Shareholders' Agreements"). Except as indicated above, as of the date hereof,
(i) there are no shares of capital stock of Technologies authorized, issued or
outstanding and (ii) there are no outstanding subscriptions, options, warrants,
calls, rights, convertible securities or other agreements or commitments of any
character obligating Technologies to issue, transfer or sell any shares of the
capital stock of Technologies or any security convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock of
Technologies, except as provided in the above Shareholders' Agreements.
(b) Except as set forth on Schedule 5.15 of the Disclosure
Letter, Technologies does not directly or indirectly own, beneficially or of
record, any shares of any class of capital stock or any other security of or
interest in a partnership, joint venture or other legal entity, and does not
have any option or obligation to directly or indirectly acquire, beneficially or
of record, any such stock or other security of or interest in a partnership,
joint venture or other legal entity.
5.16 Tax Matters.
(a) Technologies has prepared and filed when due (as such time
may have been extended) with the appropriate federal, state and local
authorities all tax returns required to be filed by it, which tax returns were
prepared on a good faith basis, and has paid all Taxes, including interest and
penalties, in respect of all periods covered by such returns; or, if any such
Taxes for the fiscal year 1995 and that portion of the fiscal year 1996 ended on
the Closing Date had not been
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paid as of the Closing Date, the reserves, if any, for Taxes on the Audited
Balance Sheet are sufficient for all accrued and unpaid Taxes of Technologies,
including interest and penalties with respect thereto, if any, whether or not
disputed, (subject to year-end adjustments required by PSE and reasonably
acceptable to the Shareholders Representative). Except as disclosed in Schedule
5.16 of the Disclosure Letter, (i) Technologies has not executed or filed with
the IRS or any other taxing authority any agreement now in effect extending, or
having the effect of extending, the period for assessment or collection of any
income or other Taxes, (ii) Technologies is not a party to any pending action or
proceeding by any governmental authority for assessment or collection of Taxes,
(iii) Technologies has not received notification that the IRS or any other
applicable taxing authority intends to commence a review or examination or has
proposed an adjustment of any such returns, and (iv) and no claim for assessment
or collection of taxes has been asserted against Technologies. Technologies
federal income tax returns for all fiscal years ending March 31, 1992 have been
audited and/or are closed with no taxes owing to the Internal Revenue Service.
True and complete copies of all federal, state and local income or franchise tax
returns filed by Technologies for any period not yet closed by the applicable
statute of limitations have been made available to PSE for its review.
(b) Technologies is not a party to or bound by, and does not have
any obligation under, any tax sharing or similar agreement.
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5.17 Insurance. Schedule 5.17 of the Disclosure Letter sets forth a
true and complete description of all insurance policies maintained by
Technologies. Such policies have been made available to PSE for its review, are
in full force and effect and Technologies is not in default thereunder.
5.18 Environmental Matters. Except as disclosed on Schedule 5.18 of
the Disclosure Letter, to the Knowledge of Technologies:
(a) Since April 1, 1990, Technologies has not received any notice
of a material violation of Environmental Laws which relate to the use, ownership
or occupancy of real estate now or formerly owned or leased by Technologies.
(b) Since April 1, 1990, except in accordance with valid Permits
listed in Schedule 5.20 of the Disclosure Letter or with applicable
Environmental Laws, there has been no emission, spill, release or discharge into
or upon (i) the air, (ii) soils or any improvements located thereon, (iii)
surface water or ground water, or (iv) the sewer, septic system or waste
treatment, storage or disposal system servicing any real estate now owned or
leased by Technologies, or any other real estate owned or leased by Technologies
of any Hazardous Material at or from such real estate.
(c) There are no Hazardous Materials located in or on any of the
real estate now owned or leased by Technologies in violation of Environmental
Laws or that require investigation, cleanup, or corrective action.
(d) Since April 1, 1990, there has been no complaint, order,
directive, citation or notice issued to Technologies by any
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governmental authority with respect to (i) air emissions, (ii) spills, releases
or discharges to soils or any improvements located thereon, surface water,
groundwater or the sewer, septic system or waste treatment, storage or disposal
systems servicing the real estate now or formerly owned or leased by
Technologies, (iii) noise emissions, (iv) solid or liquid waste disposal, (v)
the use, generation, storage, transportation or disposal of Hazardous Wastes or
(vi) other material environmental matters, in any case affecting any such real
estate which has not been adequately addressed or remediated.
(e) Technologies is in compliance in all material respects with
all applicable Environmental Laws.
5.19 Absence of Undisclosed Liabilities. Except as and to the extent
set forth on the balance sheet of Technologies included within the Audited
Statements as at March 31, 1995 (including the notes thereto), Technologies had
no liabilities or obligations, whether accrued, contingent or otherwise, other
than liabilities and obligations of a nature not required to be reflected in (or
on footnotes to) financial statements of Technologies as at such date prepared
in accordance with GAAP, consistently applied. Since March 31, 1995,
Technologies has not incurred any such liability or obligation, except for
liabilities and obligations which have been (i) incurred in the ordinary course
of business consistent with past practice and are reflected in (or in footnotes
to) financial statements of Technologies as of the date hereof, prepared in
accordance with GAAP, (ii) incurred in the ordinary course of business
consistent with past practice and are of a nature not required to be reflected
in (or in footnotes to)
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financial statements of Technologies as of the date hereof or the Closing Date
prepared in accordance with GAAP, or (iii) disclosed pursuant to the Disclosure
Letter.
5.20 Permits. Technologies owns or possesses all material licenses,
franchises, ordinances, authorizations, permits and certificates of all
governmental authorities having appropriate jurisdiction over Technologies or
its operations which are necessary to enable Technologies to continue to conduct
its business in all material respects as presently conducted (collectively,
"Permits"). Schedule 5.20 of the Disclosure Letter sets forth a list of all such
Permits.
5.21 Indebtedness to and from Officers, Directors, Shareholders and
Affiliates. Except as set forth in Schedule 5.21 of the Disclosure Letter,
Technologies is not indebted to any director, officer, Shareholder, employee or
agent of Technologies except for amounts due as normal salary, wages, bonus,
benefits or reimbursement of ordinary business expenses. Except as set forth in
Schedule 5.21, no Shareholder, director, officer, employee or agent of
Technologies is indebted to Technologies (including ordinary business expense
advances), and all such indebtedness of any Shareholder, director or officer set
forth in Schedule 5.21 of the Disclosure Letter (as updated to reflect the
outstanding balance as of the Effective Time) shall be deducted by PSE from the
Cash Purchase Price in accordance with Section 4.3(a)(iii) above.
5.22 Executive Officers, Directors and Certain Authorized Persons.
Schedule 5.22 of the Disclosure Letter sets forth a complete and accurate list
of (i) the names of all directors of Technologies,
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(ii) the names and offices of all Executive Officers of Technologies, (iii) the
names of all individuals authorized to borrow money or incur indebtedness on
behalf of Technologies, (iv) all safes, vaults and safe deposit boxes maintained
by or on behalf of Technologies and the names of all individuals authorized to
have access thereto, (v) all bank accounts of Technologies and the names of all
individuals who are authorized signatories with respect to such accounts, the
capacities in which they are authorized and the terms of the authorizations; and
(vi) all credit cards issued to employees of Technologies.
5.23 Conflicts of Interest. Except as set forth in Schedule 5.23 of
the Disclosure Letter, no Shareholder, director or officer of Technologies has
any controlling ownership interest in (i) any material item of property, real or
personal, tangible or intangible, owned, used or leased by Technologies or (ii)
any creditor, supplier, customer, or sales representative of Technologies.
Schedule 5.23 lists all material indebtedness to or Contracts with any Affiliate
of Technologies to which Technologies is a party or by which it is bound.
5.24 Customers and Suppliers.
(a) Set forth on Schedule 5.24(a) of the Disclosure Letter is a
list of Technologies' twenty-five (25) largest customers based upon sales volume
for the fiscal year to date. Except as set forth in Schedule 5.24(a), to
Technologies' Knowledge, Technologies has not received any written or verbal
communications from any such customer indicating its intention to materially
reduce its purchases from Technologies, whether by reason of the consummation of
the transactions contemplated by this Agreement or otherwise.
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(b) Set forth on Schedule 5.24(b) is a list of Technologies' five
(5) largest suppliers based upon purchase volume for the fiscal year ended March
31, 1995. Except as set forth in Schedule 5.24(b), to Technologies' Knowledge,
Technologies has not received any written or verbal communications from any such
supplier indicating its intention to materially reduce its supply to
Technologies and/or terminate any rights under supply agreements, whether by
reason of the consummation of the transactions contemplated by this Agreement or
otherwise.
(c) Set forth on Schedule 5.24(c) of the Disclosure Letter is a
reconciliation of the accounts payable balances of Technologies and the
corresponding accounts receivable balances reflected by five (5) of the top
seven (7) largest suppliers of Technologies, as disclosed in Section 5.24(b) at
June 30, 1995.
5.25 Corporate Documents, Books and Records. Complete and correct
copies of the Articles and by-laws, and all amendments thereto, of Technologies
have been previously delivered to the PSE, and no changes in said documents will
be made on or before the Effective Date. The minute books of Technologies
contain appropriate records of all meetings and consents in lieu of meetings of
the Board of Directors (and its committees) and of the voting stockholders of
Technologies. Except as reflected in such minute books, there are no minutes of
meetings or consents in lieu of meetings of the Board of Directors (and its
committees) or of the voting stockholder(s) of Technologies of a material nature
reflecting meetings held or other corporate action taken. The books and records
of Technologies have been
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properly kept and maintained in accordance with ordinary business practice.
5.26 Ordinary Warranty. Complete and accurate copies of Technologies'
forms of standard written warranties (the "Warranties") have been previously
provided to the PSE, and no material changes have been or will be made to the
Warranties prior to the Closing Date. Except for the Warranties, and except as
disclosed on Schedule 5.26 of the Disclosure Letter, Technologies has not issued
any other written warranties with respect to products it sells. Schedule 5.26 to
the Disclosure Letter contains an accounting of the ordinary warranty expenses
for Technologies for the last two completed fiscal years. The current warranty
expense reserve shown on Schedule 5.26 as of the Interim Balance Sheet Date is
an adequate reserve established in accordance with GAAP and the past practices
of Technologies for all pending known ordinary warranty claims as of such date.
5.27 Inventory. All inventory of Technologies existing as of the
Closing Date is valued at the lower of acquisition cost (less any price
reductions granted by a manufacturer or supplier that reduce acquisition cost to
the manufacturer's or supplier's current published book cost) or market, in
accordance with GAAP. Except as may be reflected in reserves therefor in the
Audited Statements or Interim Balance Sheet, or as otherwise disclosed on
Schedule 5.27 of the Disclosure Letter:
(a) There is no part (as identified by a specific part number) in
Technologies' inventory as of the Closing Date with a receipt date of one (1)
year or greater prior to August 31, 1995, for which there
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has been no sales within the twelve (12) month period ending on August 31, 1995;
and
(b) All inventory of Technologies existing as of the Closing Date
(or which is subject to outstanding customer return commitments) is returnable
to the manufacturer or supplier (as determined by the manufacturer's or
supplier's written return policy and the written Contract in effect between the
manufacturer or supplier and Technologies), except for inventory committed to a
specific customer Contract where the Contract provides that the customer shall
assume full liability and ownership rights of such inventory with regard to
order cancellations or reschedules, changes to any bills of material or
termination of the Contracts.
5.28 Accounts Receivable. Except as set forth on Schedule 5.28 of the
Disclosure Letter, all accounts receivable of Technologies to be included on the
Audited Balance Sheet, including net debit balances from payees, are, except to
the extent of reserves to be reflected on the Audited Balance Sheet, believed by
Technologies in good faith to be (i) valid, genuine and subsisting, and
collectable within nine (9) months from the date hereof, (ii) the obligations of
persons believed by Technologies to be commercially responsible, and (iii) are
subject to no asserted counterclaims, defenses or setoffs.
5.29 Net Worth. As of the Closing Date, the Net Worth of Technologies,
excluding November profits, shall be at least $36,032,000, which was the net
worth of Technologies as reflected on its October 31, 1995 balance sheet
previously provided to PSE.
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5.30 Material Facts. No representation or warranty made by
Technologies in this Agreement contains any untrue statement of a material fact,
or omits any material fact necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE 5-A
Representations and Warranties and Covenants of Shareholders
Each of the Shareholders severally (and not jointly) represents and
warrants as follows:
5A.1 Ownership. With respect to the Shares of Technologies Common
Stock owned by such Shareholder, that such Shareholder owns all of such Shares
free and clear of any liens, charges, encumbrances and security interests other
than the Shareholders' Agreements, and that such Shareholder has full right,
authority and capacity to enter into this Agreement and perform his obligations
hereunder.
5A.2 Enforceability. This Agreement and the Escrow Agreement have been
duly and validly executed and delivered by such Shareholder and such execution
and delivery does not (i) conflict with or result in any violation by such
Shareholder of any judgment, decree, award, order, statute, rule or regulation
applicable to such Shareholder or to the Technologies Common Stock held by such
Shareholder, (ii) conflict with, violate or result in any breach of any
agreement or instrument to which such Shareholder is a party or by which such
Shareholder is bound, or constitute a default thereunder, or (iii) result in the
creation of any right, lien, security interest, claim, charge, restriction or
encumbrance of any kind or nature
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against or with respect to the Technologies Common Stock held by such
Shareholder.
5A.3 Conflicts of Interest. Such Shareholder or any entity controlled
by such Shareholder: (i) does not own, directly or indirectly, in whole or in
part, any tangible or intangible property which Technologies is using or the use
of which is necessary for the conduct of the business of Technologies
(including, without limitation, any real estate, buildings, machinery,
equipment, permit, patent, trade secret or confidential information), other than
items of tangible personal property owned by any such Shareholder who is an
employee of Technologies and which items are of immaterial value, and (ii)
except for the potential claim disclosed on Schedule 5A.3 of the Disclosure
Letter, does not have any cause of action pending or threatened against
Technologies (excluding any cause of action that may arise in favor of such
Shareholder against PSE, Merger Subsidiary or the Surviving Corporation as a
result of any breach by PSE, Merger Subsidiary or the Surviving Corporation of
this Agreement).
5A.4 Consents. Except for filings, approvals or other actions
described in this Agreement, no authorization, approval, consent or order of, or
registration, declaration or filing with, any court, governmental body or agency
or other public or private body, entity or Person is required in connection with
the execution, delivery and performance of this Agreement or Escrow Agreement by
such Shareholder which has not been made, filed or obtained.
5A.5 Noninterference. Each of the following Shareholders: Bruce
Tucker, Jay Ross, Ken Ball, Mike Baron, John Wagener, Fred Hammett,
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Tim Miyakusu, Kevin Mooney, Chuck Rybos, Don Akery, Roger Elliott, Bob Farley,
and Rick Mackey covenant and agree that for a period of two (2) years after the
Closing Date he will not induce, attempt to induce, or assist others in inducing
or attempting to induce any employee of Technologies to terminate his or her
relationship with Technologies.
ARTICLE 6
Representations and Warranties of PSE and Merger Subsidiary PSE and
Merger Subsidiary jointly and severally represent and warrant to Technologies as
follows:
6.1 Corporate Status; Capitalization.
(a) PSE is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Ohio. PSE has the requisite
corporate power and authority to enter into this Agreement and the Escrow
Agreement, to perform its obligations under such Agreements, and to carry on its
business as it is now being conducted.
(b) Merger Subsidiary is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Maryland. Merger
Subsidiary has the requisite corporate power and authority to enter this
Agreement and perform its obligations hereunder. Merger Subsidiary has conducted
no business prior to the date hereof.
6.2 Corporate Action. All corporate and shareholder actions and
proceedings necessary to be taken by or on the part of PSE and Merger Subsidiary
to adopt and approve this Agreement and the Escrow Agreement have been duly and
validly taken, and the execution,
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delivery and performance of this Agreement and the Escrow Agreement have been
duly and validly authorized by all necessary corporate and shareholder action,
and do not require the further approval of any holders of any indebtedness or
obligations of PSE or Merger Subsidiary. This Agreement and the Escrow Agreement
have been duly and validly executed and delivered by PSE and Merger Subsidiary,
and this Agreement and the Escrow Agreement constitute the legal, valid and
binding obligations of PSE and Merger Subsidiary (as applicable), enforceable
against PSE and Merger Subsidiary (as applicable) in accordance with and subject
to their terms, except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws from
time to time in effect affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
6.3 No Defaults. Neither the execution and delivery by PSE and Merger
Subsidiary of this Agreement and the Escrow Agreement, the performance of their
respective obligations hereunder or thereunder, nor the consummation of the
transactions contemplated hereby or thereby, is an event that, of itself, or
with the giving of notice or the passage of time or both, will (i) conflict with
the Articles or Code of Regulations or by-laws of PSE or Merger Subsidiary, (ii)
constitute a violation of, or conflict with or result in any breach of or any
default under, or constitute grounds for termination or acceleration of, any
mortgage, indenture, lease, contract, agreement or instrument to which PSE or
Merger Subsidiary is a party or by which PSE or Merger Subsidiary is bound, or
result in the
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creation of any Lien upon any of its assets, or (iii) violate (A) any judgment,
decree, or order, or (B) any statute, rule or regulation, in each such case,
applicable to PSE or Merger Subsidiary.
6.4 Brokers. There is no investment banker, broker or finder or other
Person having a claim against PSE or Merger Subsidiary for a commission or
brokerage fee (other than in connection with a fairness opinion to PSE's Board
of Directors) in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby as a result of any
agreement of or action taken by PSE or Merger Subsidiary.
6.5 Litigation. There is no litigation, proceeding or investigation
pending or, to PSE's or Merger Subsidiary's Knowledge, threatened against either
of them which could reasonably be expected to affect the ability of either PSE
or Merger Subsidiary to carry out fully the transactions contemplated by this
Agreement.
6.6 Funds. PSE has financing arrangements unconditionally available
for the purpose of paying the Cash Purchase Price on January 4, 1996, which will
unconditionally be paid without setoff or deduction whatsoever except as
expressly provided in Section 4.3(a).
6.7 Approvals and Consents. Except for the filing of the Certificate
of Merger with the Maryland Secretary of State pursuant to the Act, no
Governmental Action and no consents or approvals of or filings or registrations
with any third party are necessary in connection with (A) the execution and
delivery by PSE and Merger Subsidiary of this Agreement and the Escrow Agreement
and (B) the
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consummation by PSE and Merger Subsidiary of the Merger and the other
transactions contemplated hereby.
6.8 Business of Merger Subsidiary. Merger Subsidiary has not engaged
in any business activities or entered into any transaction except in connection
with this Agreement and the performance by Merger Subsidiary of its obligations
hereunder.
6.9 Material Facts. No representation or warranty made by PSE or
Merger Subsidiary in this Agreement contains any untrue statement of a material
fact, or omits any material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE 7
Certain Obligations of PSE and Merger Subsidiary
Prior to or on the Closing Date, PSE and/or Merger Subsidiary has
caused the following conditions to be fulfilled:
7.1 Opinions of Counsel. PSE and Merger Subsidiary have delivered to
Technologies opinion(s) of counsel to PSE and Merger Subsidiary, dated the
Closing Date, in the form attached to this Agreement as Exhibit B.
7.2 Deliveries. PSE and Merger Subsidiary have delivered to the
Shareholders Representative and the Escrow Agent:
(a) Certified copies of resolutions, duly adopted by each of PSE's
and Merger Subsidiary's Board of Directors, and by PSE as the sole stockholder
of Merger Subsidiary, which shall be in full force and effect on the Closing
Date, authorizing the execution, delivery and performance by PSE and Merger
Subsidiary of this Agreement and the
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Escrow Agreement and the consummation of the transactions contemplated hereby
and thereby; and
(b) Such other documents or payments as are required to be
delivered or paid by PSE or Merger Subsidiary pursuant to this Agreement.
7.3 Vote of Technologies Common Stock. PSE has voted its 50,000 Shares
of Technologies Common Stock owned of record by PSE in favor of the Merger.
7.4 Letter of Credit. PSE has delivered the Letter of Credit to the
Shareholders Representative.
7.5 Noncompetition Agreements. PSE shall have delivered or caused to
be delivered to each of Bruce S. Tucker and Jay S. Ross, a Noncompetition
Agreement, in mutually agreeable form.
ARTICLE 8
Certain Obligations of Technologies
Prior to or on the Closing Date, Technologies has caused the following
conditions to be fulfilled:
8.1 Opinions of Counsel. Technologies has delivered to PSE an opinion
of counsel to Technologies, dated the Closing Date, in the form attached to this
Agreement as Exhibit C.
8.2 Deliveries. Technologies has delivered to PSE or Merger
Subsidiary:
(a) Certified copies of resolutions, duly adopted by the Board of
Directors and Shareholders of Technologies, which shall be in full force and
effect on the Closing Date, authorizing the execution, delivery and performance
by Technologies of this Agreement and the
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Escrow Agreement and the consummation of the transactions contemplated hereby;
(b) Certificate No. 104 for 50,000 Shares of Technologies Common
Stock registered in the name of Bruce S. Tucker and James A. Jones, Sr., Voting
Trustees, with duly executed stock powers;
(c) Agreements of the parties to the Shareholders' Agreements
cancelling the Shareholders' Agreements on or prior to the Closing Date;
(d) Such other documents or payments as are required to be
delivered or paid by Technologies pursuant to this Agreement; and
(e) Written resignations of Bruce Tucker and Jay Ross as Directors
of Technologies and written resignations of all elected or appointed Officers of
Technologies.
8.3 No Dissenting Shares. No dissenters' rights have been properly
perfected and not withdrawn or forfeited under applicable law by any Shareholder
with respect to the Merger.
8.4 Vote of Technologies Common Stock. Each Shareholder has voted his
Shares of Technologies Common Stock, owned of record or beneficially in favor of
the Merger, and Bruce S. Tucker and Jay S. Ross, as the current Voting Trustees
under the Voting Trust referred to in Section 5.15(a), shall have voted in favor
of the Merger the 50,000 Shares of Technologies Common Stock owned of record and
represented by stock certificate No. 104.
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ARTICLE 9
Survival of Representations and Warranties; Indemnification
9.1 Survival.
(a) Except with respect to (i) Tax Liabilities and (ii) Ownership
Liabilities, all representations and warranties and the related indemnities
contained in this Agreement (whether by PSE or Technologies), shall survive the
Effective Time of the Merger, until May 31, 1996, provided that if at the
expiration of such period the Shareholders Representative shall have received
from PSE, or PSE shall have received from the Shareholders Representative on the
other hand, written notice of a claim with respect to an alleged breach of any
such representation or warranty or covenant (other than in respect of Tax
Liabilities or Ownership Liabilities), stating with particularity the applicable
provisions of this Agreement so breached and providing in reasonable detail all
relevant facts then known to PSE on the one hand, or the Shareholders
Representative on the other hand, with respect to such breach, the applicable
representation, warranty or covenant, and the related indemnity, will not expire
with respect to such claim until such claim has been resolved in accordance with
this Agreement.
(b) The representations and warranties of the Shareholders set
forth in Sections 5-A.1 to 5-A.4, the covenant of each Shareholder set forth in
Section 4.5(a), and the related indemnity for Ownership Liabilities contained in
Section 9.2, shall survive indefinitely the Effective Time of the Merger.
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(c) The representations and warranties of Technologies set forth
in Section 5.16, and the related indemnity for Tax Liabilities contained in
Section 9.2, shall survive the Effective Time of the Merger until December 31,
1998. Neither PSE nor the Surviving Corporation shall consent to the extension
of, or take any other action to extend, any applicable statute of limitations
with respect to such tax year without the prior written consent of the
Shareholders Representative.
9.2 Indemnification of PSE.
(a) Subject to the limitations contemplated by Section 9.3 below,
PSE shall be entitled to indemnification solely out of the escrow fund
established pursuant to the Escrow Agreement, in the manner and to the extent
contemplated by this Article 9, for any (i) Tax Liabilities, and (ii) other
out-of-pocket loss, cost, damage or expense (including, but not limited to,
reasonable attorneys and accounting fees) actually paid or incurred by PSE or
the Surviving Corporation, less any insurance proceeds payable in connection
therewith, and arising from any misrepresentation or breach of warranty or
covenants of Technologies in this Agreement, other than Sections 5.27, 5.28,
5.29 and 5.30 (as it relates to the foregoing Sections), as to which the
provisions of Section 3.3 hereof provide the exclusive remedy (collectively
referred to herein as "Damages").
(b) Each Shareholder shall indemnify and hold harmless PSE for any
Ownership Liabilities attributable to such Shareholder. PSE's sole recourse for
indemnification against Ownership Liabilities shall
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be against the Shareholder to whom such Ownership Liability is attributable.
9.3 Limitations as to Indemnification Obligation.
(a) Indemnification for Ownership Liabilities and Tax Liabilities
shall be from the first dollar, without regard to the Basket (as hereinafter
defined). Such indemnification shall be for the full amount of the Damages
resulting therefrom, and shall not be reduced on any percentage basis. In
addition, indemnification shall be made for Tax Liabilities regardless of any
disclosures relating thereto in the Disclosure Letter (e.g., disclosure of a tax
audit in the Disclosure Letter shall not prevent indemnification for Tax
Liabilities resulting from any such audit).
(b) There shall be no liability with respect to any other
indemnification obligation unless and until the total of all Damages (exclusive
of Ownership Liabilities and Tax Liabilities) exceeds $250,000 (the "Basket"),
at which time liability shall exist only with respect to fifty percent (50%) of
all such Damages, from the first dollar of such Damages, without regard to the
Basket (subject, however, to the limitations contemplated by Sections 9.3(b),
(c) and (d)).
(c) There shall not be liability for any individual claim for
Damages, and no individual claim for Damages shall be included in the
calculation of the Basket, unless the matter involved is a claim of $10,000 or
more.
(d) Notwithstanding anything to the contrary in this Agreement, no
Shareholder shall have any individual liability for Damages or any
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other claim arising from or related to this Agreement, it being agreed that
PSE's and the Surviving Corporation's sole recourse for such Damages shall be to
the escrow fund established pursuant to the Escrow Agreement, except that each
Shareholder shall be fully responsible for any Ownership Liabilities
attributable to such Shareholder (but no Shareholder shall be responsible for
any Ownership Liabilities attributable to any other Shareholder and no recourse
may be had against the escrow fund for such Ownership Liabilities).
(e) Notwithstanding anything to the contrary contained in this
Agreement, PSE shall not be entitled to any indemnification under Section 9.2
for any (i) loss, cost, damage or expense (including but not limited to
attorney's fees)with respect to items reserved against, or appearing as a
liability, on the Audited Balance Sheet, or (ii) loss, cost, damage or expense
(including, but not limited to attorneys' fees) paid or incurred by PSE or the
Surviving Corporation in connection with any litigation, suit or similar
proceeding (x) disclosed on Schedule 5.9 of the Disclosure Letter or (y) arising
in the ordinary course of business after the Closing Date based on or arising
out of or in connection with any event(s) occurring or condition(s) existing on
or before the Closing Date, except to the extent Technologies had Knowledge of
any threatened litigation, suit, or similar proceeding described in clause (y)
above on or prior to the Closing Date and failed to disclose such litigation,
suit or proceeding to PSE.
(f) From and after the Effective Time, the rights of PSE to
indemnification pursuant to this Article 9 shall be the sole and
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exclusive remedy of PSE and the Surviving Corporation for any representation,
warranty or covenant set forth in this Agreement, other than the representations
and warranties set forth in Sections 5.27, 5.28, 5.29 and 5.30 (as it relates to
the foregoing Sections) as to which the adjustment set forth in Section 3.3
provides the exclusive remedy.
9.4 Notice and Settlement of Claims of PSE and Surviving Corporation;
Arbitration. If PSE (the "Indemnified Party") or the Surviving Corporation
suffers or incurs any Damages (other than Damages with respect to Tax
Liabilities or third party claims covered by Section 9.6), and if a claim for
indemnification in respect thereof is to be made under Section 9.2, the
Indemnified Party shall give notice to the Shareholders Representative within
ninety (90) days of PSE acquiring actual knowledge thereof (other than
third-party claims for which PSE seeks indemnification, with respect to which
PSE shall provide prompt written notice as soon as practicable, and in any event
within thirty (30) days of obtaining Knowledge thereof), describing such
Damages, the amount thereof, if known, and the method of computation of such
Damages, all with reasonable particularity and containing a reference to the
provisions of this Agreement in respect of which a breach has occurred and such
Damages have been suffered or incurred. Promptly after any such notice has been
given the parties shall endeavor to resolve any disputes with respect to the
matters set forth in such notice. If the Shareholders Representative and the
Indemnified Party cannot reach agreement within sixty (60) days after such
notice has been given, then the matter shall be submitted
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promptly to binding arbitration to be held in Baltimore, Maryland under rules
and procedures of the American Arbitration Association applicable to commercial
transactions as then in effect ("Arbitration").
9.5 Notice and Settlement of Tax Liabilities and Damages.
(a) Upon receipt by PSE of written notice of a claim by a
governmental authority which may give rise to a Tax Liability, PSE shall give
notice of such claim within thirty (30) days to the Shareholders Representative.
The Indemnified Party and the Shareholders Representative shall cooperate with
each other in the conduct of any audit or other proceeding involving PSE or the
Surviving Corporation, provided that if within thirty (30) days the Shareholders
Representative acknowledges in writing to PSE and the Escrow Agent
responsibility for paying any Damages resulting from Tax Liability, the
Shareholders Representative shall have the right to control, at the
Shareholders' expense, the resolution of any such audit or settlement for which
any Damages resulting from any Tax, interest or penalties shall be indemnifiable
hereunder, and PSE or the Surviving Corporation shall promptly empower (by power
of attorney or such other documentation as is reasonably necessary) such
representatives of the Shareholders Representative as the Shareholders
Representative may designate to represent the Shareholders in such proceeding,
but provided, further that the Indemnified Party shall be fully advised as to
the status of any such matter and the Shareholders Representative shall have no
authority or right to bind the Indemnified Party without its written consent
with respect to any
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future action or tax position. If control of the defense is assumed by the
Shareholders Representative as provided above, neither the Indemnified Party nor
the Surviving Corporation shall have any right to settle any such claim without
the prior written consent of the Shareholders Representative, which shall not be
unreasonably withheld. Any dispute regarding an Indemnification Obligation on
account of Damages resulting from any Tax Liabilities shall be submitted to
Arbitration.
(b) Claims by PSE for indemnification pursuant to this Article 9
shall be reduced by any Taxes of Technologies paid on or before the date hereof
that are refunded to Technologies (or the Surviving Corporation) on or before
December 31, 1998.
9.6 Notice and Settlement of Other Third-Party Claims. Upon receipt by
PSE of notice of the commencement of any action brought by a third party which
is indemnifiable under Section 9.2 (other than on account of Tax Liabilities),
PSE shall give prompt notice thereof to the Shareholders Representative. Unless
otherwise provided below, the Indemnified Party shall have the right to defend
and settle any third party claim subject to consultation with the Shareholders
Representative, provided that if the Shareholders Representative acknowledges in
writing to PSE and the Escrow Agent responsibility for such third party claim,
except for claims involving a Technologies customer or supplier which shall
always be defended and controlled by PSE (at the expense of PSE), the
Shareholders Representative may assume the defense of any such third party claim
(not involving a Technologies customer or supplier) against the Indemnified
Party with
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counsel reasonably satisfactory to such Indemnified Party and, after notice from
the Shareholders Representative to such Indemnified Party) of its election so to
assume the defense thereof, the Indemnified Party shall not be entitled to
reimbursement for any fees of other counsel or any other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof, and
neither the Indemnified Party nor the Surviving Corporation shall agree to
settle any such third-party claim without the prior written consent of the
Shareholders Representative, which shall not be unreasonably withheld. If the
control or defense is not assumed by the Shareholders Representative as provided
above, PSE and the Surviving Corporation shall prosecute the defense of such
claim in good faith with the same level of diligence and effort as if the
potential liability arising from such claim was for its own account. Any dispute
regarding an Indemnification Obligation on account of third party claims covered
by this Section 9.7 shall be submitted to Arbitration.
9.7 No Waiver for Notices. The Indemnified Party shall not have waived
its right to indemnification under this Agreement merely by providing notice of
such a claim outside of the time limits set forth in Sections 9.4, 9.5 and 9.6
hereof, except to the extent such a delay has a material adverse effect on the
Damages (whether in type or amount) suffered by the Shareholders or materially
prejudices the rights of the Shareholders in respect thereof, except that no
claim may be made by the Indemnified Party i) after December 15, 1996 for
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any Damages other than Tax Liabilities, and (ii) after December 31, 1998 for Tax
Liabilities.
9.8 Indemnification by PSE. PSE shall indemnify and hold harmless the
Shareholders for any out-of-pocket loss, cost, damage or expense (including, but
not limited to, reasonable attorneys' fees) actually paid by the Shareholders or
the Shareholders' Representative on their behalf and arising directly from any
misrepresentation or breach of warranty of PSE or Merger Subsidiary in this
Agreement. Any claim of the Shareholders hereunder shall be treated in a manner
consistent with Section 9.4. Notwithstanding anything to the contrary contained
in this Agreement, PSE shall bear liability for any such loss, cost, damage or
expense or any other claim arising from or related to this Agreement only up to
an amount equal to the Cash Purchase Price.
ARTICLE 10
Miscellaneous
10.1 Expenses. The Shareholders shall bear all of Technologies
Transaction Expenses in excess of $50,000, and PSE or the Surviving Corporation
shall bear all other expenses incurred in connection with the transactions
contemplated by this Agreement; provided, however, that fees and expenses of the
arbitration in any Arbitration shall be borne one-half by PSE and one-half out
of the escrow fund established under the Escrow Agreement.
10.2 Assignments. No party hereto may assign any of its rights or
delegate any of its duties hereunder without the prior written consent of the
other parties, and any such attempted assignment or delegation without such
consent shall be void.
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10.3 Further Assurances. From time to time prior to, at and after the
Closing Date, each party hereto will execute all such instruments and take all
such actions as any other party, being advised by counsel, shall reasonably
request in connection with carrying out and effectuating the intent and purpose
hereof and all transactions and things contemplated by this Agreement,
including, without limitation, the execution and delivery of any and all
confirmatory and other instruments in addition to those to be delivered on the
Closing Date, and any and all actions which may reasonably be necessary or
desirable to complete the transactions contemplated hereby.
10.4 Public Announcement. Except as required by law, neither party
shall make any press release or other public announcement concerning the
transactions contemplated by this Agreement without the express written consent
of the other parties (which shall not be unreasonably withheld) and the parties
shall use their reasonable best efforts to cause a mutually agreeable release or
announcement to be issued.
10.5 Notices. Notices and other communications provided for herein
shall be in writing (which shall include notice by facsimile transmission) and
shall be delivered in person or by nationally recognized overnight courier
service (or if by facsimile communications equipment of the sending party
hereto, transmitted by such equipment), addressed as follows:
If to Technologies or the Shareholders Representative:
Bruce S. Tucker
15810 Gaither Drive
Gaithersburg, Maryland 20877
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with a copy to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, DC 20004
Attention: Bruce E. Rosenblum, Esq.
If to PSE and Merger Subsidiary:
Pioneer Standard Electronics, Inc.
4800 East 131st Street
Cleveland, Ohio 44105
Attn: James L. Bayman, President and CEO
With a copy to:
Calfee, Halter & Griswold
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114-2688
Attn: William A. Papenbrock, Esq.
or to such other address as a party may from time to time designate in writing
in accordance with this Section. All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.
10.6 Captions. The captions of Sections of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any of the provisions of this Agreement.
10.7 Law Governing. This Agreement shall be governed by, construed,
and enforced in accordance with the laws of the State of Maryland.
10.8 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be amended, modified or waived
only by a written instrument executed by all of the parties hereto. The failure
of any party at any time or times to require performance of any provision of
this Agreement shall in no manner
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affect the right of such party at a later date to enforce the same. No waiver by
any party of any condition or the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or of the breach of any other
provision, term, covenant, representation, or warranty of this Agreement.
10.9 Counterparts. This Agreement may be executed in several
counterparts, and all counterparts so executed shall constitute one agreement,
binding on the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
10.10 Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, constitutes the entire Agreement between the parties and
supersedes and cancels any and all prior agreements between them relating to the
subject matter hereof.
10.11 Access to Books and Records. After the Effective Time, PSE and
the Surviving Corporation shall upon the Shareholders Representative's written
request, in connection with any determination of Damages or Indemnification
Obligation, or the defense or settlement of any Tax Liabilities, Ownership
Liabilities, or other third party claims, (i) provide to the Shareholders
Representative and other authorized representatives of the Shareholders
Representative access, during normal business hours upon reasonable advance
notice, to any and all documents and other information of the Surviving
Corporation deemed relevant by PSE, (ii) make available to the Shareholders
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Representative and its authorized representatives, at no expense to the
Shareholders Representative or the Shareholders (other than reimbursement of
reasonable travel, lodging, food and other out-of-pocket expenses), personnel of
the Surviving Corporation deemed appropriate by PSE to consult with such persons
and to testify at appropriate proceedings, and (iii) make available for
inspection and copying by the Shareholders Representative and its authorized
representatives at the Shareholders' expense, true and complete copies of any
documents relating to the foregoing.
10.12 Schedules and Amendments to Schedules. Any information disclosed
on any Schedule hereto or the Financial Statements shall be deemed fully
disclosed for the purposes of all the Schedules hereto and all purposes hereof.
10.13 Releases. On or before the thirtieth (30th) day after the
Closing Date, each of Bruce Tucker, Jay Ross, Ken Ball, Mike Baron, John
Wagener, Chuck Rybos, Jim Jones, and Fred Hammet shall deliver to PSE an
executed Waiver and Release, in form and substance satisfactory to PSE, executed
by each such person no sooner than the twenty-second (22nd) day after their
respective receipt thereof and by which each such person shall waive and release
any and all claims which he has or may have against PSE and/or Technologies and
their respective parents, subsidiaries, divisions, and affiliated businesses,
together with their respective officers, directors, shareholders, management,
agents, employees, representatives, and attorneys, arising out of or relating to
any acts or omissions, known or unknown, occurring on or before the effective
date of each respective Waiver and Release,
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including, but not limited to, claims or demands relating or pertaining to
employment discrimination, failure to hire and/or rehire, and any claims
pertaining to and/or arising under the federal Worker Adjustment and Retraining
Notification Act ("WARN"), as amended, and the implementing regulations
promulgated thereunder.
[SIGNATURE PAGES FOLLOW]
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[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Agreement or caused
this Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
PIONEER-STANDARD ELECTRONICS, INC.
By: /s/ James L. Bayman
----------------------------------------------------
Its: President and Chief Executive Officer
PIONEER-STANDARD OF MARYLAND, INC.
By: /s/ James L. Bayman
----------------------------------------------------
Its
----------------------------------------------------
PIONEER/TECHNOLOGIES GROUP, INC.
By:
----------------------------------------------------
Its: President and Chief Executive Officer
SHAREHOLDERS REPRESENTATIVE
/s/ Bruce S. Tucker
-------------------------------------------------------
Bruce S. Tucker
(Signatures of all Shareholders continued on next page.)
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PRO PRO
RATA RATA
SHARES % SHARES %
------ ---- ------ ----
- ---------------------- ---------------------
Bruce S. Tucker 14,147 28.2940 Donald Akery 495 .9900
---------------------
Jef Allen 495 .9900
- ---------------------- ---------------------
Jay S. Ross 8,000 16.0000 Roger Elliott 495 .9900
- ---------------------- ---------------------
Kenneth Ball 4,885 9.7700 Robert Farley 495 .9900
- ---------------------- ---------------------
Michael L. Baron 4,885 9.7700 David Ernst 490 .9800
- ---------------------- ---------------------
John H. Wagener 4,885 9.7700 Robert J. Dulmage 415 .8300
- ---------------------- ---------------------
Robert F. Hammett 3,339 6.6780 Richard C. Mackey 365 .7300
- ---------------------- ---------------------
Harold C. Jeffers 1,522 3.0440 David S. Coleman 340 .6800
- ---------------------- ---------------------
Timothy Miyakusu 1,009 2.0180 Richard S. Crouch 307 .6140
- ---------------------- ---------------------
Kevin P. Mooney 708 1.4160 Michael Ezekiel 304 .6080
- ---------------------- ---------------------
Anthony R. DeMichael 556 1.1120 Allen Hawse 304 .6080
- ---------------------- ---------------------
Charles G. Rybos 535 1.0700 Saul S. Levine 304 .6080
- ---------------------- ---------------------
Peter J. Coleman 516 1.0320 Donald Clubbs 204 .4080
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EXHIBITS
A. Escrow Agreement
B. Opinion of Counsel for PSE and Merger
Subsidiary
C. Opinion of Counsel for Technologies
D. Form of Employment Agreement
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